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Starting in college I have pushed back against modern economic theories as wildly simplistic and insufficiently grounded in social and political realities.

Here is a link to an excellent summary of much of post-Keynes-Hayek Political Economic theorizing and application, given as a well written review of two books on the subject.

https://www.theatlantic.com/magazine/archive/2019/09/nicolas...

A key point --> the rise of economists from being dull gloomy ivory tower types to becoming titans of politics and governance.

Another --> the various shifts in corporate governance and political power echoing the different schools of empowered economists and the laws regulations and social expectations they fostered.

Here is a key passage:

Jensen agreed with Berle’s starting point: Corporate managers were unaccountable because shareholders could not restrain them. But rather than seeing a remedy in checks exerted by regulators and organized labor, Jensen proposed to overhaul the firm so that ownership and control were reunited. Executives should be rewarded more with stock and less with salary, so that they would think like shareholders and focus on the profits that shareholders wanted. Managers who failed to generate a good return would see their stock prices languish, which would create tempting takeover targets. A market for corporate control would redouble the pressure on bosses to behave like owners. Successful takeovers, in turn, would shift corporations into the hands of single, all-powerful proprietors, capable of overseeing management more effectively than scattered stockholders could. In sum, Jensen’s prescriptions inverted Berle’s. The market could be made to solve the problem of the firm. Government could pull back from regulation. Shortly after the publication of his research, the invention of junk bonds made hostile takeovers the rage. During the ’80s, more than a quarter of the companies on the Fortune 500 list were targeted. Jensen became the scholar who explained why this unprecedented boardroom bloodbath was good news for America....[then came] the collapse of Enron....Even before the 2008 crash, Jensen disavowed the transactional culture he had helped to legitimize. Holy sh!t, Jensen remembers saying to himself. Anything can be corrupted.



david fb
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Holy sh!t, Jensen remembers saying to himself. Anything can be corrupted.

The bigger fool got schooled by the biggest suckers (who bought those junk bonds).
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Starting in college I have pushed back against modern economic theories as wildly simplistic and insufficiently grounded in social and political realities.

My suspicion is "leaders" start with an agenda, and look for an economist with a theory, no matter how off the beaten path, to legitimize the agenda.

Steve
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My suspicion is "leaders" start with an agenda, and look for an economist with a theory, no matter how off the beaten path, to legitimize the agenda.

Today, that might work due to the number of crackpot wannabe speculators who want to make a killing (does Laffer ring a bell?). However, historically, that was not true. Remember "supply side economics"? It was first documented in the US in the min-1890s (as "horse and sparrow" economics). Not many economists around then (to my knowledge). Yet, the "economic theory" pushed by the right THEN was the same as today.
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It was first documented in the US in the min-1890s (as "horse and sparrow" economics).

Had not heard that term before, but I understand the idea.

Mr. David Stockman has said that supply-side economics was merely a cover for the trickle-down approach to economic policy—what an older and less elegant generation called the horse-and-sparrow theory: 'If you feed the horse enough oats, some will pass through to the road for the sparrows.'

I spend some time in Greenfield Village, in Dearborn, each summer. The Village has several horse drawn wagons to carry visitors around the Village, so there are always mounds of horse poo in the streets, and birds picking through the poo.

Steve
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Anything can be corrupted.


Anything will be corrupted. That is because people who know how to use the rules know how to use any rules.

What you have to do is tax those people so they don't hoard their gains, and then get those resources back into the real economy. Of course they will dodge taxes to a large degree, cause they know the rules and they know how to use them. So don't make that so easy.
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What you have to do is tax those people so they don't hoard their gains,

How do you hoard gains in such a way that the gains don't return to the "real" economy. And what is the real economy vs. the unreal one? Can you show me some examples?

In my view of money, a record of a debt that can be redeemed for any good or service on offer, the only way that kind of hoarding can be accomplished is by putting the money in a vault like Rico McPato does. https://www.google.com/search?q=Rico+McPato&newwindow=1&...

- If you buy anything with the money you have put the money back in the economy by creating demand

- If you deposit the money in a bank you are letting someone else create demand with your money

- If you tax the gains all you have accomplished is to transfer the buying power from the private sector to the public sector.

The Captain
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If you buy anything with the money you have put the money back in the economy by creating demand

We've been through this a dozen times. Find an intro econ book and look up "multiplier." Purchases of private islands, artwork, gold-plated toilets, etc., have much lower multipliers than purchases of, you know, regular stuff.
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Find an intro econ book and look up "multiplier."

If economists don't understand money their "intro econ books" are worthless. Back in Caracas I have wall-full of books including authors like Adam Smith, Karl Marx, Niall Ferguson, John Kenneth Galbraith (I have read more of his books than by any other economist), George Gilder, and many others. I have also read essays by Frederic Bastiat, Frank H. Knight, and many others. BTW, for a short time I was enrolled in Economics at MIT -- dominated at the time by Paul Samuelson. It's not that I'm clueless about classical economics. It's that classical economics is mostly wrong.

But on the subject of "multiplier" you don't need to study economics! I discovered quite independently that having a job gives you no multiplier, having a business does, investing in the stock market does. Thanks for the suggestion but repeating what dead white males wrote is not the answer to the issue. That's the whole point of david fb's OP!

I've been pondering why in the 21st Century central banks printing money has not caused inflation while mining gold and silver in Potosí caused inflation in Spain that spread to all of Europe, factoid that I picked up from one of the above mentioned authors. ;) I'm thinking that 21st Century technology is excessively deflationary to the point that pushing on a wet noodle no longer works. The inflation during the Spanish empire is explained by too much money chasing too few goods. The European economy was incapable of producing sufficient goods to absorb all that money. The 21st. Century is capable of producing all the goods that money can buy. The problem with printing money in the 21st. Century is its distribution. Giving it to banks is no good. As much as I hate to admit it, Universal Basic Income might actually work but we will need to revise our code of ethics which was developed for a time of scare productivity.

I can hardly believe I wrote the above!

The Captain
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The 21st. Century is capable of producing all the goods that money can buy.

CAN buy vs WANT to buy--big difference. Then there is the difference between PRICE and VALUE....
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I used NONE of the words CAN, WANT, PRICE, nor VALUE. I wrote, as you quoted

The 21st. Century is capable of producing all the goods that money can buy.

Try staying on topic.

The Captain
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I can hardly believe I wrote the above!

Nor can I, but I agree with the path of your reasoning from your own starting points to that statement, and I find myself similarly questioning my own long held positions. The ground is shifting quickly.

If we go UBI (and I think that is where we ought to be going because welfarism is quickly becoming dangerously political and inefficient) we need to make certain that the Basic of UBI is analyzed and implemented wisely. You want something more than arroz y frijoles, y una cuna segura? Then you better get truly creative, innovative, and industrious.


david fb
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I've been pondering why in the 21st Century central banks printing money has not caused inflation while mining gold and silver in Potosí caused inflation in Spain that spread to all of Europe, factoid that I picked up from one of the above mentioned authors. ;) I'm thinking that 21st Century technology is excessively deflationary to the point that pushing on a wet noodle no longer works. The inflation during the Spanish empire is explained by too much money chasing too few goods. The European economy was incapable of producing sufficient goods to absorb all that money. The 21st. Century is capable of producing all the goods that money can buy. The problem with printing money in the 21st. Century is its distribution. Giving it to banks is no good. As much as I hate to admit it, Universal Basic Income might actually work but we will need to revise our code of ethics which was developed for a time of scare productivity.

In 16th century Spain, money was used to buy mostly physical goods. The requirement that physical goods be produced limited supply. Redeploying labor and production capacity to provide more of one good, reduced ability to produce more of another good, so demand pushed it's price up, so prices went up for everyone.

The tax code now favors financial speculation over productive investment and labor.

There is relatively little inflation in physical goods prices in the US, because most of the loot is handed to the "job creator class", which piles it into financial products, which are both less work to profit from and more profitable.

Has you portfolio increased in value over the last few years? Mine sure has. That is where the inflation is, but because stockholders are profiting, and non-stockholders are not hurt by inflated stock prices, no-one is complaining about the inflation.

Steve
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I used NONE of the words CAN, WANT, PRICE, nor VALUE. I wrote, as you quoted

The 21st. Century is capable of producing all the goods that money can buy.

Try staying on topic.


My response is totally on topic.

The objective of capitalism is to get rich. How one does that has nothing to do with anything except the *process* of accumulating wealth (via some means). Many large fortunes have been made by selling goods/services--which, by definition, would mean including those words (CAN, WANT, PRICE, and VALUE). In many (almost all?) instances, the seller has to create a *perceived* "NEED/WANT/VALUE" by the potential buyers in order to sell the goods (think Hula Hoop as a good example). If there is no perceived value, there are no sales (and no accumulation of wealth as a result). All those TV shows/informercials pushing a wide variety of products shows there is a market for these types of sales pitches. If they did not work, they would not be able to afford being on TV.

To get back to your quote, just because something CAN be produced and made available does not mean it WILL be available. Example: Universal health care. Many WANT it--but can NOT get it.
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I have wall-full of books including authors like Adam Smith, Karl Marx, Niall Ferguson, John Kenneth Galbraith (I have read more of his books than by any other economist), George Gilder, and many others.

Niall Ferguson is an historian, one who gets many basic economic ideas wrong. George Gilder is a total whack-job. Keep trying.
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George Gilder is a total whack-job.

Do you burn books by people you don't like?

George Franklin Gilder (/'g?ld?r/; born November 29, 1939) is an American investor, writer, economist, techno-utopian advocate, and co-founder of the Discovery Institute. His 1981 international bestseller Wealth and Poverty advanced a practical and moral case for supply-side economics and capitalism during the early months of the Reagan administration. He is married to Nini Gilder, and has four children.

In the 1970s, Gilder established himself as a critic of feminism and government welfare policies, arguing that they eroded the "sexual constitution" that civilized and socialized men in the roles of fathers and providers. In the 1990s, he became an enthusiastic evangelist of technology and the Internet by several books and his newsletter, the Gilder Technology Report. He is also known as the chairman of George Gilder Fund Management, LLC.


https://en.wikipedia.org/wiki/George_Gilder


My disagreement with George Gilder is about religion and altruism.

The Captain
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In 16th century Spain, money was used to buy mostly physical goods. The requirement that physical goods be produced limited supply. Redeploying labor and production capacity to provide more of one good, reduced ability to produce more of another good, so demand pushed it's price up, so prices went up for everyone.

Classical economics 101, managing scarce resources.


There is relatively little inflation in physical goods prices in the US, because most of the loot is handed to the "job creator class", which piles it into financial products, which are both less work to profit from and more profitable.

Your hate of the "job creator class" is blinding you to the realities of the digital economy and the wealth producing power of capitalism.

Let's start with capitalism, it has lifted humanity from the hand to mouth economy of the hunter gatherer and has allowed humans to accumulate wealth beyond the minimal needs of survival. During the second half of the 20th. Century capitalism was put on steroids by the digital economy that produces wealth with a minimal number of atoms. One of George Gilder's favorite quips is to the effect of "waste abundance with glee." Gazillions of transistors each one costing practically nothing, an unlimited supply of data captured by the WWW. The digital companies surpassed the atom companies in wealth creation. The top five companies by market cap are all digital and not a single one of them is a financial entity.

https://www.visualcapitalist.com/a-visual-history-of-the-lar...

Steve, come up for air and smell the data!

There is no scarcity in the digital economy to power inflation, the lack of scarcity is what makes technology deflationary and classical economics obsolete.

The Captain
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There is no scarcity in the digital economy to power inflation, the lack of scarcity is what makes technology deflationary and classical economics obsolete.

I highly recommend Being Digital by Nicholas Negroponte, founder and chairman Emeritus of Massachusetts Institute of Technology's Media Lab, and also founder of the One Laptop per Child Association (OLPC).

https://en.wikipedia.org/wiki/Nicholas_Negroponte


Being Digital 1st Edition, Kindle Edition, by Nicholas Negroponte

https://www.amazon.com/Being-Digital-Nicholas-Negroponte-ebo...


The Captain
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I'm thinking that 21st Century technology is excessively deflationary to the point that pushing on a wet noodle no longer works.

You mean an industry where, according to Moore's Law, things get twice as powerful for half the money every 18 months is deflationary? :D I admit I've been thinking that for some time as well.
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>>Do you burn books by people you don't like?<<

George Franklin Gilder


The only screed of Gilder's I ever read was "Wealth and Poverty". There was a bit in there justifying the refusal to make a career path available to women as a waste of time, because women only work to kill time until they get married, then they will quit and start having babies.

Read "Free to Choose" at the same time. Only thing I remember from that one was Freedman blaming people being poor on their "riotous living".

The intention of both books seemed to justify the protection and maintenance of the status quo of the country being run by the white male power structure, the same white male power structure that Bill O'Reilly was going on about some years ago.

https://www.youtube.com/watch?v=ysoOB9w0tF4

My take is that Gilder and Freedman were both charlatans working to advance the economic agenda that, over the last 40 years, has gotten the US to where it is today. If your perspective is as a member of that 1% or less at the top, things have worked out wonderfully. If your perspective is as someone who spent that time working for members of that 1%, not so much.

Steve
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You mean an industry where, according to Moore's Law, things get twice as powerful for half the money every 18 months is deflationary? :D I admit I've been thinking that for some time as well.

That's part of it but the real issue is that 21st Century information technology is NOT governed by the Law of Diminishing Returns and therefore classical economics don't apply.

Read up on Law of Increasing Returns. Try economist Brian Arthur of the Santa Fe Institute and Stanford...

https://www.google.com/search?client=safari&rls=en&q...

Simply it boils down to the fact that there is no limit to creating transistors and collecting intelligence, a.k.a. data.

All the Fools who are explaining the issue in terms of Diminishing Returns and classical economics are wrong because they are using the wrong tool. New Paradigm and all that.

The Captain
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New Paradigm and all that.

Didn't Gilder get in on the "information superhighway" hype too?

Having access to great amounts of data is great. It's even better when you have the assets to use the data available. If you have no assets, you can't do much with the information.

Steve...missed an opportunity in the mid 80s: everyone coming in the store to look at computers suddenly started asking "is it IBM compatible", but I didn't have the assets to buy a block of Microsoft stock.
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My take is that Gilder and Freedman were both charlatans working to advance the economic agenda that, over the last 40 years, has gotten the US to where it is today. If your perspective is as a member of that 1% or less at the top, things have worked out wonderfully. If your perspective is as someone who spent that time working for members of that 1%, not so much.

Using terms like "charlatan" really ruins the conversation. We need to talk issues, not character traits. I met Gilder personally in Washington, DC and I can guarantee that he is no charlatan which doesn't mean he is always right. As I mentioned earlier I disagree with his views on religion and altruism. Ayn Rand had a big row with him but I don't recall what it was about.


If your perspective is as a member of that 1% or less at the top, things have worked out wonderfully. If your perspective is as someone who spent that time working for members of that 1%, not so much.

Amazing the number of victims in the middle class! Why you need a wall to keep people out is a mystery to me. Why would they want to go to such a crap hole? They could go to North Korea or Cuba and live happily ever after.


My perspective is neither 1% nor 99%, it's a ridiculous artifice. My perspective is "Look Out For Number One" and I recommend everybody else do the same. Playing victim is a losers game. I spent seven years working at (not for) big corporations, IBM, Colgate-Palmolive, and NCR where I got a good basic training. After that I followed my dreams of being a Management Consultant (I started that industry in Venezuela), selling insurance, and being independent. I pride myself in being self reliant. I try to follow my dad's advice, "whatever you do, do it well."

I recognize that there are problems but victimhood and socialism aren't the solutions.

The Captain
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captain sputters: Do you burn books by people you don't like?

I see: when your claim is shown to be baseless, you resort to off-the-wall ad hominem remarks. Reminds me of someone else.
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I disagree with his views on religion and altruism.

OK, so I looked up his views on religion and altruism. What I came up with is that, in addition to being a flaming misogynist, he's a religious whack. Not really surprising as the two often go hand in hand. The doctrine of the Southern Baptist Convention is that the husband is always the head of the family and the wife is his servant. This is the same "traditional values" crap that some pols keep trying to foist on the entire population.

Steve
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Steve...missed an opportunity in the mid 80s: everyone coming in the store to look at computers suddenly started asking "is it IBM compatible", but I didn't have the assets to buy a block of Microsoft stock.

Your dad did not teach you right! I had been working at IBM for a few months when I tried to get a loan. This is how the conversation went.

Me: "Dad, I want to buy a car."

Dad: "Go right ahead!"

Me: "The problem is that I don't yet have the money."

Dad: "Anybody can buy a car with money. There is no magic to that."

End of conversation. Lesson learned.

Everybody has assets, a brain, good looks, ability to drop a ball in a hoop, cook, whatever. What they lack is good administration -- capitalist style. 😇

The Captain
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Your dad did not teach you right!

Lol. My dad was the absolute *last* person anyone should ask for financial advice, but that's another story.

I was focused on rebuilding the bank account after the drain of grad school, so, opportunity lost.

Steve
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Dad: "Go right ahead!"

Me: "The problem is that I don't yet have the money."

Dad: "Anybody can buy a car with money. There is no magic to that."

End of conversation. Lesson learned.



I didn't need to learn that lesson? I was second eldest of eight kids in a small town, we got fed and yelled at if our homework wasn't done. Other than that we headed off to school when it was open and where ever we liked on weekends and summer holidays and let them know if we wouldn't be home for supper. Just before I turned 17 I convinced my dad to give me permission to join the army at 17, he told my mom some story about joining the Militia. One of my sisters commented years later that they only noticed I wasn't there after a couple of weeks. When I left I had $50 I had earned and saved delivering news papers in town and a warrant from the Military to travel on the train including meals to get me from Marathon to Toronto recruiting station.

I must confess I never regretted that decision and held off buying my first new car until I was 23.

Anymouse
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<<Having access to great amounts of data is great. It's even better when you have the assets to use the data available. If you have no assets, you can't do much with the information.>>



The internet provides people with access to far greater amounts of misinformation than ever in history!

We have a marvelous ability to replace lies with truth.

<<Diogenes of Sinope (c. 404-323 BCE) was a Greek Cynic philosopher best known for holding a lantern (or candle) to the faces of the citizens of Athens claiming he was searching for an honest man.>>


Imagine the added difficulties Diogenes would face today!





Seattle Pioneer
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Talking about ad hominem remarks, this gentleman is not here to defend himself from yours.

George Gilder is a total whack-job.

https://boards.fool.com/i-have-wall-full-of-books-including-...

The Captain
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"horse and sparrow" economics

I had to look that one up:

Mr. David Stockman has said that supply-side economics was merely a cover for the trickle-down approach to economic policy—what an older and less elegant generation called the horse-and-sparrow theory: 'If you feed the horse enough oats, some will pass through to the road for the sparrows.'
https://en.wikipedia.org/wiki/Trickle-down_economics#Critici...
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I was focused on rebuilding the bank account after the drain of grad school, so, opportunity lost.
Steve


Oh my goodness... it sounds like you might have been one of those who pre-dug your economic future grave site, creating a monster debt pile, right out of the chute? Using a 'grad school' shovel to dig? If so, very not good planning. Sad to hear.

Does answer a lot of questions tho, and fills in some blanks.

(FWIW: Never did have Denny's father-son conversation about buying a car. Nor paying for my education for that matter. My solid schooling of hard knocks told me what the answers would be, if any. I guess I was being mentally abused before it became fashionable.)

It's amazing what an individual is capable of if one simply bears down and focuses! Great education, too!
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Oh my goodness... it sounds like you might have been one of those who pre-dug your economic future grave site, creating a monster debt pile, right out of the chute?

Good heavens, NO! I like having a cushion of several thousand in the bank, because stuff happens, like when my 36 year old central A/C packed up Friday. I have the quote from the HVAC company in hand today: $3250 for a new, poor efficiency, 13 SEER, A/C. If I would like to replace my 20 year old furnace at the same time, that's an extra $2400. While A/C is optional in Michigan, a furnace becomes mission critical in January, so I'm temped to do the entire thing, and not have to deal with HVAC issues again for the next 20 years. I have this option because I have that sort of coin readily available in the bank.

Steve
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Thank you for recommending this post to our Best of feature.
You will be able to recommend 8 more posts today. (explain this)


I'm not The Captain, but I'll give it a try:

What you have to do is tax those people so they don't hoard their gains,

How do you hoard gains in such a way that the gains don't return to the "real" economy. And what is the real economy vs. the unreal one? Can you show me some examples?


This is just a guess, but I suspect he's thinking of a Scrooge McDuck type character:
https://i.kinja-img.com/gawker-media/image/upload/s--maq2szS...

As I've pointed out before, a basement full of $100 bills and/or gold coins looses value to inflation and in any case doesn't multiply. The rich don't get richer by swimming in Krugerrands.

The difference between you and Scrooge McDuck is that you work for your money whereas Scrooge's money works for him.

The 'smart money' is invested, not hoarded. Stocks and bonds have the potential to grow wealth. Money under mattress is just lumpy.

It's done by financing the "real" economy!

Want'a buy a new house? Your bank (or credit union if you're smart) will front you the money. All you have to do is pay it back - with interest - i.e. the "real" economy.
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The difference between you and Scrooge McDuck is that you work for your money whereas Scrooge's money works for him.

Ratz... beat me to it...

Are trying to tell me I should take all those buck$ out of that room I added to the house years ago (complete with diving board), and deposit all that money and gold somewhere? Or invest it? Or fill-in-the blank it? Heckuva idea!

I guess we could turn the space into another bedroom. Sure will miss the great smell of all that green and gold, tho.

But what do I do with the diving board, and the observation deck? I'll figure something out.
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If your perspective is as a member of that 1% or less at the top, things have worked out wonderfully. If your perspective is as someone who spent that time working for members of that 1%, not so much.

Jealousy is the green-eyed monster which doth mock the meat it feeds on.
-- Bill Shakespeare

Don't just envy those one percenters! Join them*** so you can tell'em what you think of them over some Foie gras and champagne!

***
Work hard, learn your bosses job, learn his/her bosses job, move up the ladder or build your own ladder (business), save, invest, look down your nose at the hoi polloi.

A goal without a plan is just a wish.
-- Antoine de Saint-exupery
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Thank you for recommending this post to our Best of feature.
You will not be able to recommend any more posts today. (explain this)


Amazing the number of victims in the middle class! Why you need a wall to keep people out is a mystery to me. Why would they want to go to such a crap hole? They could go to North Korea or Cuba and live happily ever after.
...
I recognize that there are problems but victimhood and socialism aren't the solutions.


Sarcasm: it's such a beautiful thing!

What did socialists use to read at night before they had candles?
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Electricity!
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<<Diogenes of Sinope (c. 404-323 BCE) was a Greek Cynic philosopher best known for holding a lantern (or candle) to the faces of the citizens of Athens claiming he was searching for an honest man.>>

I heard he got mugged.
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Don't just envy those one percenters! Join them***

Thing is, for the economy to function, probably 95+% of people need to be willing to work for others. Dave, imagine running your store by yourself, open to close, 6-7 days/wk, 52 wks/yr. Every piece of freight comes off the truck when you do it. Every piece gets checked in and shelved when you do it. Every customer gets taken care of when you do it. You vacuum the floor and clean the toilet. I have single handed a store like that, for months at a time. You get to a point where you run out of hands and eyes. While you are trying to take care of one customer, 5 other people are shoplifting you blind. You get six people stacked up at the counter waiting for you to take their money, then they start giving up the wait, drop the merchandise and walk out. You can't get everything done during store hours, so you're working hours more after close to keep up with everything. We can't be a nation of 300M bosses. Someone needs to be willing to work for wages.

so you can tell'em what you think of them over some Foie gras and champagne!

I don't waste my money on foo foo food.

Steve
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Work hard, learn your bosses job, learn his/her bosses job, move up the ladder or build your own ladder (business), save, invest, look down your nose at the hoi polloi.


Work SMART! To quote the opposition, get a multiplier, buy stocks, get dividends, trade options...

Talking about Mexico, Mario Moreno, Cantinflas, had an odd prayer "Dear God, don't give me, put me where there is" [Diosito, no me des, ponme donde haya].

The Captain
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I've been pondering why in the 21st Century central banks printing money has not caused inflation while mining gold and silver in Potosí caused inflation in Spain that spread to all of Europe, factoid that I picked up from one of the above mentioned authors. ;) I'm thinking that 21st Century technology is excessively deflationary to the point that pushing on a wet noodle no longer works. The inflation during the Spanish empire is explained by too much money chasing too few goods. The European economy was incapable of producing sufficient goods to absorb all that money. The 21st. Century is capable of producing all the goods that money can buy. The problem with printing money in the 21st. Century is its distribution. Giving it to banks is no good. As much as I hate to admit it, Universal Basic Income might actually work but we will need to revise our code of ethics which was developed for a time of scare productivity.

Could well be something to that, but as I've mentioned before the lack of inflation shouldn't be much of a mystery. The reason is that although central banks create money out of thin air, that amount is dwarfed by the amount that private banks create. During the financial crisis, banks stopped lending, hence they stopped creating money.

You can see from the slope of the line that after the financial crisis passed, the money supply began expanding again, but at slower rate. Based on that result we would expect to see lower than typical inflation, and indeed that is exactly what we are seeing.

http://www.centerforfinancialstability.org/amfm_data.php?sta...
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Every piece of freight comes off the truck when you do it. Every piece gets checked in and shelved when you do it. Every customer gets taken care of when you do it. You vacuum the floor and clean the toilet.

Chuckle, I think my SIL with suggestions from his very clever wife figured the whole thing out. He is the one that owns the large warehouse and the business that imports a lot of stuff by sea containers and sells at trade shows then ships from the warehouse.

Early on he had problems with staff turnover, missing stock, working too many hours and on the road doing the trade shows himself. His wife suggested that he increase the salary of his dozen or so staff from $10.50 an hour to $18 (this was some years back), hire agents to do his US trade shows (he still does Atlanta and an occasional other one as well as the big one in Toronto). He rarely goes to the warehouse anymore even though he lives in Halifax, he initially leased half of it but now owns all of it and the staff has grown to 20+ including adding a couple of small businesses he bought and moved in-house.

He now pays himself a large sum from the company each year to fund his recently acquired high spending lifestyle including buying a two seat sports car (with a family of four!), a multi-million home one block from Point Pleasant Park so his dog has a place to run and leisure trips whenever he can spring his busy wife from her four (mostly related) busy careers.


He told me a rather amusing story (much of which I knew) Saturday. His parents wouldn't fund his university even though they could afford to do so. He started a small business selling clocks in the local mall kiosks, called it 'Clock It To Ya' and expanded it to malls all over the city ... then the province while attending St. Mary's. When he finished his business degree his dad told him he should get a real job. He applied at one of the bank branches and one of them agreed to hire him. The manager brought him in for the talk and SIL asked him which car in the parking lot was his. When the guy pointed out a rusty old Honda he walked out and went back to running and expanding Clock It To Ya. They (agents) now do trade shows in both Canada and US but a lot of the business is repeat stuff with huge chains where he is a "preferred supplier".


/about/

Clock It To Ya Inc is a Nova Scotian business operating since 1998. We import giftware and sell to stores across North America. Our main products include watches, sunglasses, jewellery, handbags, and wallets. We continuously strive to bring in new products and to update our existing lines. We are proud of the growth of our small business, now employing 20 full time workers.
Mission Statement
To provide superior products at outstanding value. Knowing that great service is anticipating problems not just reacting to them. Understanding that if our customers are not successful with our products, ultimately the company will not be successful. Continuing to improve and grow our company through the loyalty of our customers.
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... while mining gold and silver in Potosí caused inflation in Spain that spread to all of Europe ...

I can hardly believe I wrote the above!

The Captain


Me neither, especially since Potosi was the largest and purest silver mine in history ... but no mention of gold. Saw a documentary last night where scientists explain amoung other things how Potosi was created by a blast from a dying sun. The mine very much changed history.


https://curiositystream.com/video/1654/episode-2-the-age-of-...

Deep Time History
Episode 2: The Age Of Discovery


Tim <pretty good series>
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When the guy pointed out a rusty old Honda...

Maybe the banker was a firm LBYM type?

Our main products include watches, sunglasses, jewellery, handbags, and wallets.

Watches? Argh!! My fancy Seiko quit last winter, cost more to repair than it cost new. Pulled out my backup, which is a cheap watch I got 50 years ago. Discovered the cheap watch is no longer waterproof as every time I work up a sweat, moisture gets into the watch, gumming it up and making it stop.

Friends were recommending all sorts of fancy watches. One was pushing a 47mm Shinola Runwell (Shinola is a local, Detroit made, foo foo watch brand), at $500. I kept telling them I am done with fancy watches. With the advent of quartz movements, cheap watches are just as accurate as expensive ones, but without the exorbitant upkeep.

So the search was on for a cheap watch. No mechanical movements, no kinetic powered movements, no solar powered movements (kinetic and solar both use a rechargeable battery that eventually doesn't hold a charge and costs far more than a conventional battery to replace).

Found a Timex on Amazon that is the berries: conventional battery powered, analog dial, with day/date display, $44 (overhaul and rechargeable battery replacement on the Seiko was quoted at $320). The watch kept perfect time, but the day/date displays did not work. E-mailed the seller to return the defective watch for exchange for one that works. Seller is out of stock, model discontinued by Timex. He offered to refund it and sent a prepaid shipping label, so the perfectly designed, but defective and irreplaceable, watch went back via the mail yesterday.

And I am back to using the old watch that leaks.

Steve...cranky, watch issue on top of the central A/C at casa del Steve packed up last Friday
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Thank you for recommending this post to our Best of feature.

When the guy pointed out a rusty old Honda...

Maybe the banker was a firm LBYM type?



Contrary to popular opinion branch level bankers don't make much money ... at least in Canada. Corporate banker BL's salary is actually a wee bit over half of what her government employee sister makes. Of course her annual bonus is several times her salary and is based on how much she makes for the bank.

My very old Timex cost C$29.99 at Walmart, I've stopped wearing it because the velcro on the cloth strap is not reliable and the 'glass' is all scratched up. I replaced the battery 3-4 years ago after I got 6-7 years out of the first one.

I now have a water proof Marathon by Timex that was on a Lightening deal on Amazon.... found it.

https://www.amazon.ca/Timex-Marathon-Sport-T5K948009J-Digita...

I did buy a solar watch once, works great but a total PITA to set the time on it so it sits in my den to remind me to never do that again. }};-D

My retirement plan was to find out how much I had coming in and spend less than that, I'm finding that very easy to do as I've run out of stuff to buy but still have money left over. }};-D

Anymouse
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Don't just envy those one percenters! Join them***

Thing is, for the economy to function, probably 95+% of people need to be willing to work for others.

We can't be a nation of 300M bosses. Someone needs to be willing to work for wages.


Tru dat! When can you start?

Desert (always paid my employees more than min. wage) Dave
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Thank you for recommending this post to our Best of feature.

Work hard, learn your bosses job, learn his/her bosses job, move up the ladder or build your own ladder (business), save, invest, look down your nose at the hoi polloi.

Work SMART! To quote the opposition, get a multiplier, buy stocks, get dividends, trade options...


Ah, I see somebody gets it!

Desert (buys stocks, gets dividends, wouldn't know an option if it bit me.) Dave
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... so the perfectly designed, but defective and irreplaceable, watch went back via the mail yesterday.

Don't feel bad, Rush Limbaugh has issues with his Apple watches too:
https://www.google.com/search?client=safari&channel=mac_...

He gripes about them from time to time on his show.

The Apple watch concept is great: a watch that ties in with your computer, laptop, tablet etc. But the devil is in the details and, it seems, Apple hasn't gotten the details right yet.

Me, I don't wear a wristwatch 'cause I have a cheep flip phone which gives me the date, day of the week and time.
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My very old Timex cost C$29.99 at Walmart, I've stopped wearing it because the velcro on the cloth strap is not reliable and the 'glass' is all scratched up. I replaced the battery 3-4 years ago after I got 6-7 years out of the first one.

Watch straps are replaceable, at least on proper watches with a cast metal case. The crystal on my 50 year old Caravelle (cheap Bulova) is very scratched and has a large crack in it, because Caravelles didn't get the mineral crystals that are apparently SOP on analog watches now. One link on the Caravelle's expansion band had worn to the point where it kept coming apart. Picked up a Timex at the Salvation Army store that didn't work well, but the expansion band on it fits the Caravelle perfectly. Summer is almost over. As soon as I stop sweating, the Caravelle will not have it's moisture problem, and I may as well keep using it through the winter.

I now have a water proof Marathon by Timex that was on a Lightening deal on Amazon.... found it.

It's digital. I prefer analog watches.

Maybe the reason old buggers have a reputation for being set in their ways is that, after 50-60 years, they are done experimenting because they found what they like, and works for them, and just want that. I want a watch that looks like every other watch I have had for the last 50 years, because that is what works.

My retirement plan was to find out how much I had coming in and spend less than that, I'm finding that very easy to do as I've run out of stuff to buy but still have money left over. }};-D

Same here. Never bite into principle. Pull some from the IRA each year, live off that and SS, while the divies accumulate in the cash account. At the end of the year, take any surplus from that year's IRA distribution, add that to the accumulated divis in the cash account, and buy something else that pays divis.

I was going to buy a Fiat 500 Cabrio, just for the halibut. Had the car reserved and all the docs written up Thursday. Then the A/C at home packed up Friday. Cancelled the order for the Fiat, because spending would have exceeded income for the year. If you haven't driven a 500, especially an earlier one, before they stiffened the suspension, they are a blast. It's like driving a really fast golf cart.

Here's a pic of the 500 Cabrio. https://images.hgmsites.net/lrg/2012-fiat-500_100347571_l.jp...

Steve
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Tru dat! When can you start?

I'm done "starting". I'm a "job creator" now: head over to Tim Horton's or Wendy's for lunch about every other day, creating "jobs" for fast food staff.

Steve
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Rec for good taste in cars. ;)

I hope they make an EV version of that.
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"Maybe the reason old buggers have a reputation for being set in their ways is that, after 50-60 years, they are done experimenting because they found what they like, and works for them, and just want that. I want a watch that looks like every other watch I have had for the last 50 years, because that is what works."

Not to pick on you, but that is why there should be an upper age limit on elected officials.
It's not just the watch, it's pretty much everything that the oldsters want to remain the same. That's fine in personal life, but not for the country.

Things change - and they don't change back.

Just stay out of the way...
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I'm thinking that 21st Century technology is excessively deflationary to the point that pushing on a wet noodle no longer works.

If I remember correctly, Adam Smith's book The Wealth of Nations (coincidentally published in 1776) included an estimate that over the prior few centuries there had been a natural deflation rate of about 1% per year due to improving technology.

That was when circa 95% of the workforce was fully occupied in growing and harvesting food (with a significant assist from people who weren't considered part of the workforce).

Over the past quarter-century or so, I think the natural rate of deflation due to improving technology has been significantly higher.

As one example: in preparation for retirement to a motorhome in 2010, my lady and I disposed (by various means) of about 800 books. We had paid, on average, probably about $7 each for those books. And the bookshelves, six of them (we needed more but had nowhere to put them), cost us about $50 each. Now I have over 800 books, while my lady has over 1000 with very little overlap between the two collections - at an average cost of probably under $0.20 (both of us got lots of free books). We have no bookshelves at all, but our e-reader devices, one each, also cost about $50 each. That's a drop in total cost from $5900 to $460 - for twice as many books.

Assuming this is representative of books in general and happened entirely between 2010 and now, the nominal deflation rate in this niche of the economy was in the vicinity of 8% per year... in the face of the currency decreasing in value due to inflation, so the natural deflation rate was probably in the vicinity of 10%.
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It's digital. I prefer analog watches.

Can't put analog watches on 24 hour time which is what I use.

Spent most of my morning reinstalling Win 10 and all the associated crap in wife's desktop. I had mostly forgotten how painful that can be. }};-@


I was going to buy a Fiat 500 Cabrio, just for the halibut.

Why would anyone buy a car just because someone throws in some smelly fish? }};-D

Tim <not really much of a car guy>
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"As one example: in preparation for retirement to a motorhome in 2010, my lady and I disposed (by various means) of about 800 books. We had paid, on average, probably about $7 each for those books. And the bookshelves, six of them (we needed more but had nowhere to put them), cost us about $50 each. Now I have over 800 books, while my lady has over 1000 with very little overlap between the two collections - at an average cost of probably under $0.20 (both of us got lots of free books). We have no bookshelves at all, but our e-reader devices, one each, also cost about $50 each. That's a drop in total cost from $5900 to $460 - for twice as many books.

Assuming this is representative of books in general and happened entirely between 2010 and now, the nominal deflation rate in this niche of the economy was in the vicinity of 8% per year... in the face of the currency decreasing in value due to inflation, so the natural deflation rate was probably in the vicinity of 10%. "

I had a nice collection of telegraph and early telecom books - starting in the early 1800s and going up through about 1950. I had 300 different titles on the telegraph, including lots of very rare (now) technology books - some of which I paid some big bucks for. Enjoyed it for quite a while. There was a great time when smaller book stores came on-line for the first time through the book selling sites. Volumes that had sat undiscovered where available for purchase and quickly snapped up by people like me - and a very small group of collectors.

I probably had over $10,000 in my collection and it took two large book cases and bore to store it all. It was fun 'collecting' and I had probably thousands of hours invested in finding and getting the books, including many trips to small book stores along the way still not on the web. That was from about 1990-2010

Then the 'print on demand' sites and the folks who were copying and putting on line all the old, out of copyright books from major libraries all over the country appeared. Now, either you could find an 1870s text either on line to read for free, or pay maybe $20-30 for a reprint on demand.

There's also a 'collector curve'. People tend to collect things that they had in their youth primarily. As folks age, the collector curve moves. 20-30 years ago, cars from the 1950s commanded a premium as older folks who got the kids through college now had some money for hobbies including that '57 Chevy. Then the curve moved to the 1960s with muscle cars. Now the peak year is the muscle cars of the 1970s......

Millenials tend not to collect 'anything' but 'memories' these days.

I wound up selling my collection for about half of what I had in it about 12 years ago and was happy to get that. Since then, I go to the Antique Wireless Association Convention in Rochester, and book sales have plummeted. Only a few are still collecting books and paper and it's mostly very specific things that get sold - like Atwater Kent collectors buying a catalog or similar.

Same with 'records' - unless you have a 'rare' album, you can't give them away. The library sale each year won't take either vinyl records or CDs. No one buys them. Or VHS tapes. Even most magazines other than National Geographic or Playboy. You could have thousands in your record collection, and most likely it's worth zero.

The price of 'information' and entertainment has plummeted by hundreds of percent. (unless you sign up for 200 channels of cable each month).....

t.
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I hope they make an EV version of that.

Fiat does make an EV version of the 500 hatchback. They lose so much money on them that Marchionne pleaded with people to not buy them. There are oodles of used 500es on Carvana. The next gen 500 will be EV only, while production, in Europe, of the current gen 500, will continue for those who want an engine. Of course, what, if anything, Fiat offers in the US in the future remains an open question.

Steve
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I was going to buy a Fiat 500 Cabrio, just for the halibut. Had the car reserved and all the docs written up Thursday.


Oh, is a Lemon Alert a good thing?

Tim <puts lemon juice in his drinking water>

https://www3.forbes.com/business/37-new-cars-to-avoid/8/

37 New Cars to Avoid

Forbes Auto Contributor Business
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37 New Cars to Avoid

Oh yeah, we've all heard it "Feeble Italian Attempt at Transportation". But there is a bit of anecdotal information out there that some of the 500s are OK, especially after the first year of production.

This guy started doing annual updates on his 500 when he bought it new in 2012. The car finally went away after more than seven years and 70K miles, as he needed the garage space for some other cars he wanted. Among the virtues that he enjoyed was how reliable the car was.

What I’ve Learned About My Fiat 500 After 8 Years

https://www.youtube.com/watch?v=j_VaG3baQjY

I would not have put many miles on it anyway, just putz around town, like some people use a Micra for, but the Micra isn't sold in the US. The Chevy Sonic is sold here, but, from the data I have seen, the Fiat is considerably more reliable than the Chevy. My VW, also more reliable than the manufacturer's reputation, is still king of the road trip.

Steve
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I've bolded the crucial parts of your reply.

Could well be something to that, but as I've mentioned before the lack of inflation shouldn't be much of a mystery. The reason is that although central banks create money out of thin air, that amount is dwarfed by the amount that private banks create. During the financial crisis, banks stopped lending, hence they stopped creating money.

In essence you are saying that the Fed is too puny to govern the economy, that fractional reserve banking is a much more powerful force. One can think of fractional reserve banking as a money marketplace, those who have a supply of money bring it to market (to banks), and those who need it buy it from banks. Let's not get into the moral hazard aspect of banking for the moment assuming it is perfectly regulated.

Some have criticized fractional reserve banking, want to ban it, and have super government agency centrally manage it. Central planning has worked so well in the past.... Sorry.... It would be one more step away from free markets to a socialized economy. Right now I'm trying to change my mailing address in the US so that my credit card is sent to Portugal instead of to Venezuela. Uncle Sam is so scared out of its pants that there is a whole lot of new regulation on top of old regulation to try to prevent money laundering. If Uncle Sam legalized drugs and shut down the losing war against drugs, 90% of dirty money would not exist. So yes, make another agency to centrally manage the unmanageable.


Back on topic...

You can see from the slope of the line that after the financial crisis passed, the money supply began expanding again, but at slower rate. Based on that result we would expect to see lower than typical inflation, and indeed that is exactly what we are seeing.

The rate of expansion can have multiple causes, the volume of deposits, reserve requirements (a powerful tool the Fed could use manage the money supply without centralizing the market for money), or the need for capital. The digital technology (cloud computing - SaaS) is much less capital intensive than heavy industry and that can be part of the deflationary force of technology. If this third option is the one in play, interest rates plummet, the cost of money decreases while the yield of well invested money increases. This would certainly account for the growing disparity between hand-to-mouth and well-heeled.

The way up is by living below your means to accumulate capital and invest it well. Paycheck to paycheck is guaranteed stagnation.

The Captain
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