The media has been working to drag our economy through the mud for the past 8 years to try and cause problems for President Bush. He's out of office now, but they are still blowing things way out of proportion to scare people half to death and create a crisis mentality to help our new president with a government takeover of private industries (as has begun with centralized banking and the auto industry).
A friend of mine sent me this new blog is for anyone who does not want to fall into the "sky is falling" mentality that's being forced on us. Like a radio personality said in the 90's and I began to practice, the country will have recessions in the normal business cycle...you can choose whether or not to participate in these recessions with your attitude.
You Can Do It
Check it out!!
Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
Tuesday, March 3, 2009
Tuesday, November 4, 2008
God Bless America...Please!
First, congrats to the Democrat party for successfully perpetrating the greatest con on the American people in the history of this nation. They ran the most liberal member of the Senate as a semi-conservative and fooled a large majority of uninformed people. Good job.
At the same time, liberal Dems in congress caused the greatest economic crisis in the banking history right before an election, not a small feat to accomplish and a very good October surprise, while receiving great amounts of cash illegally from the government run institutions that aided them.
The media did their job of covering up everything that may expose the Obama's extremist views. Of course, the Republican party also did their part by nominating a "moderate" candidate who has turned his back on his party several times in the past, too many times for many of the Republican base to stomach.
So now we have elected the most left-wing, literally socialist, government in the history of our nation while they pretended to be somewhat conservative. I think one radio host called it well when he said if Obama is elected, most of the people who voted for him will wake up a year from now and say "What the hell? This isn't what I voted for".
The irony of the whole thing is the young, economically ignorant, voters who have apparently given him the win will be affected the most by the onslaught of left-wing policies that are to come. Just out of college with no experience will not be a good place for them in an economy that, if (and I believe when) Obama holds to his true beliefs and previous voting record, will have an unemployment rate that will most likely hit double digits.
While there is always hope that Obama will actually stick to his promises, I do not count on it. The left-wing congress has already planned to have a special session to reinstate the ban on drilling in the Gulf, raise taxes, spend like drunken sailors and insitute socialist health care so they can present these bills to Obama the minute he is sworn in. He will sign most, if not all, of these bills so get ready.
We are about to get a hard and very expensive lesson in socialism. I just hope this great country is able to come back from it. For the first time in my life I actually fear my government. I fear it because it is now run by people who have said in the past they do not like America, the individual or the freedom we hold dear. I fear it because we will have a President who will be lying when he takes an oath to uphold the Constitution of the United States of America, a document which he cannot uphold since he has stated he believes it is flawed. I fear it because we now have a government that does not seek to raise people up, but instead vows to tear achievers down.
In the past it has only been a difference in who will be leading the government of the United States. This election had one candidate who will fundamentally change the structure of the United States government to take over more of our economy than we have ever seen or even thought would be possible. This candidate won and he will bring change, but it will be a change that will shake the foundation of this nation to its' core. I just hope and pray America can withstand what is coming.
Though I am afraid we will see a great deal of our freedom taken from us over the next few years, my greatest fear is for those who place all of their faith in this world. I could not imagine having to weather the coming socialist storm without my faith in God to guide me. No matter what happens, my family will be okay through all of this. But those who have no faith to lean on will be the ones we read about in the paper who just could not handle the financial stress anymore. Thankfully hard times bring a lot of people to the church so my prayer is the lost can find the true Savior through these difficult financial times.
Don't put your faith in the temporary things of this world. Put your faith in a great God who gave His Son for you and will always be there for you no matter the circumstances. We need Him to be the leader of our lives and our nation so God Bless America...Please!
At the same time, liberal Dems in congress caused the greatest economic crisis in the banking history right before an election, not a small feat to accomplish and a very good October surprise, while receiving great amounts of cash illegally from the government run institutions that aided them.
The media did their job of covering up everything that may expose the Obama's extremist views. Of course, the Republican party also did their part by nominating a "moderate" candidate who has turned his back on his party several times in the past, too many times for many of the Republican base to stomach.
So now we have elected the most left-wing, literally socialist, government in the history of our nation while they pretended to be somewhat conservative. I think one radio host called it well when he said if Obama is elected, most of the people who voted for him will wake up a year from now and say "What the hell? This isn't what I voted for".
The irony of the whole thing is the young, economically ignorant, voters who have apparently given him the win will be affected the most by the onslaught of left-wing policies that are to come. Just out of college with no experience will not be a good place for them in an economy that, if (and I believe when) Obama holds to his true beliefs and previous voting record, will have an unemployment rate that will most likely hit double digits.
While there is always hope that Obama will actually stick to his promises, I do not count on it. The left-wing congress has already planned to have a special session to reinstate the ban on drilling in the Gulf, raise taxes, spend like drunken sailors and insitute socialist health care so they can present these bills to Obama the minute he is sworn in. He will sign most, if not all, of these bills so get ready.
We are about to get a hard and very expensive lesson in socialism. I just hope this great country is able to come back from it. For the first time in my life I actually fear my government. I fear it because it is now run by people who have said in the past they do not like America, the individual or the freedom we hold dear. I fear it because we will have a President who will be lying when he takes an oath to uphold the Constitution of the United States of America, a document which he cannot uphold since he has stated he believes it is flawed. I fear it because we now have a government that does not seek to raise people up, but instead vows to tear achievers down.
In the past it has only been a difference in who will be leading the government of the United States. This election had one candidate who will fundamentally change the structure of the United States government to take over more of our economy than we have ever seen or even thought would be possible. This candidate won and he will bring change, but it will be a change that will shake the foundation of this nation to its' core. I just hope and pray America can withstand what is coming.
Though I am afraid we will see a great deal of our freedom taken from us over the next few years, my greatest fear is for those who place all of their faith in this world. I could not imagine having to weather the coming socialist storm without my faith in God to guide me. No matter what happens, my family will be okay through all of this. But those who have no faith to lean on will be the ones we read about in the paper who just could not handle the financial stress anymore. Thankfully hard times bring a lot of people to the church so my prayer is the lost can find the true Savior through these difficult financial times.
Don't put your faith in the temporary things of this world. Put your faith in a great God who gave His Son for you and will always be there for you no matter the circumstances. We need Him to be the leader of our lives and our nation so God Bless America...Please!
Saturday, November 1, 2008
Top Ten Reasons To Vote For Obama/Biden
...and here we go:
10) You like $4+ gasoline prices and think the recent drop in prices is just awful. You can’t wait for all new domestic exploration to stop and hope that prices can eventually get to $6/gal.
9) You believe only left-wing ideas should be allowed on radio and TV so we must censor them and all opponents must be shut down.
8) You are hoping you too can be investigated and your life destroyed because you asked a question the campaign didn’t want to hear. Just like Joe the plumber and a TV anchor in Florida.
7) You like waiting 6 months in the socialized health care system for tests to tell you if you have cancer…even though the cancer will kill you in 3 months.
6) You love knowing you voted the same way the President of Iran, the leader of Hamas, the dictator of Venezuela and every other enemy of the United States of America says they would have voted if they could.
5) You are tired of deciding where to invest your money so you would rather the government just take your 401K and stick it into social security.
4) You are excited about the United States losing a war and showing the world we don’t follow through with anything.
3) You like the fact that Fannie Mae and Freddie Mac were run into the ground while requiring banks to make bad loans sending the economy into a downward spiral. You’re especially excited that Obama was the 2nd highest recipient of campaign contributions from these government-run companies as well.
2) You are tired of only paying nearly half of your income in taxes so you can’t wait for the tax cuts of 2003 to expire and give us the largest tax increases in history. The boost in unemployment is the most exciting part of this for you.
1) You think it’s unfair that you actually have to go to work so you would rather the government take money from that guy who works 60-80 hours a week to support his/her family and give it to you so you can watch TV instead.
This list is based on previous votes by Obama and what he said before the campaign began along with current proposals by Democrats in congress that would be passed by Obama if he were president. No false, misleading Obama campaign rhetoric was used in the formulation of this list.
10) You like $4+ gasoline prices and think the recent drop in prices is just awful. You can’t wait for all new domestic exploration to stop and hope that prices can eventually get to $6/gal.
9) You believe only left-wing ideas should be allowed on radio and TV so we must censor them and all opponents must be shut down.
8) You are hoping you too can be investigated and your life destroyed because you asked a question the campaign didn’t want to hear. Just like Joe the plumber and a TV anchor in Florida.
7) You like waiting 6 months in the socialized health care system for tests to tell you if you have cancer…even though the cancer will kill you in 3 months.
6) You love knowing you voted the same way the President of Iran, the leader of Hamas, the dictator of Venezuela and every other enemy of the United States of America says they would have voted if they could.
5) You are tired of deciding where to invest your money so you would rather the government just take your 401K and stick it into social security.
4) You are excited about the United States losing a war and showing the world we don’t follow through with anything.
3) You like the fact that Fannie Mae and Freddie Mac were run into the ground while requiring banks to make bad loans sending the economy into a downward spiral. You’re especially excited that Obama was the 2nd highest recipient of campaign contributions from these government-run companies as well.
2) You are tired of only paying nearly half of your income in taxes so you can’t wait for the tax cuts of 2003 to expire and give us the largest tax increases in history. The boost in unemployment is the most exciting part of this for you.
1) You think it’s unfair that you actually have to go to work so you would rather the government take money from that guy who works 60-80 hours a week to support his/her family and give it to you so you can watch TV instead.
This list is based on previous votes by Obama and what he said before the campaign began along with current proposals by Democrats in congress that would be passed by Obama if he were president. No false, misleading Obama campaign rhetoric was used in the formulation of this list.
Saturday, October 18, 2008
Things I'm Too Stupid To Do
I think I am an average guy, intelligent and capable of making many decisions for myself but here is a short list of things I am too stupid to do:
New things I will be too stupid to decide under an Obama presidency with a democrat controlled congress:
Get out there and vote, but make sure you decide how stupid you want the government to think you are before you press the buttons on the voting machine.
- I'm too stupid to choose what type of light bulb I should use in my home.
- I'm too stupid to decide what types of coverage I want or need in my health insurance.
- I'm too stupid to determine how much I will pay for my own health insurance throughout my life.
- I'm too stupid to plan for my future and retirement.
- I'm too stupid to determine how much money I give to help others in need.
- I'm too stupid to decide who to give that money to and trust them to do the most with it to help people.
- I'm too stupid to decide what kind of food to eat.
- I'm too stupid to decide what kind of water heater to use.
- I'm too stupid to decide what kind of toilet I have in my bathroom.
- I'm too stupid to decide where my child goes to school.
- I'm too stupid to decide if I should loan money to someone who cannot afford to pay it back.
- I'm too stupid to decide if patrons of my restaurant can smoke or not.
- I'm too stupid to decide how much the job I am giving this person is actually worth.
- I'm too stupid to determine a loan has bad terms and I should not do business with this company.
- I'm too stupid to decide how much to pay the guy who runs my company based on his performance.
- I'm too stupid to decide when my child should be taught about sex.
- I'm too stupid to decide whether or not my child should be given a condom.
- I'm too stupid to decide what kind of car to drive with things like:
- How many miles per gallon should my car get?
- Do I want 10 airbags?
- Do I want anti-lock brakes?
- Can I afford all of these things?
New things I will be too stupid to decide under an Obama presidency with a democrat controlled congress:
- I will be too stupid to decide which doctor I want to see. Universal (really Socialist) Health Care will choose your doctor and, if it is anything like Hillary Clinton's proposal, will put you in jail if you try to see a private doctor.
- I might be too stupid to decide what size house I should have. Proposals by some democrats in congress want to limit the size house YOU can have. Proposals that will not see the light of day until there is a democrat in the white house who would approve such a measure.
- I will be too stupid to decide how much I am willing to pay for a gallon of gasoline. Proposed price controls and windfall profits taxes will keep the price down artificially and cause huge lines for gasoline. The same thing these identical policies did in the 1970s.
- I will be too stupid to decide if I want mental health coverage in my insurance policy. This will be a requirement in your company health policy until the socialist health system can be passed whether you need it or not. Much like the requirement that every woman have maternity coverage, no matter how old or whether she can have children or not. Like all unfunded mandates, it will raise the cost of coverage for everyone, stress .
- I will be too stupid to determine it is time to foreclose on the guy I loaned money to is not going to pay me back so I can get back what I put in. The proposed "moratorium on foreclosures" will stress banks further and cause even more bank failures. It is also a very scary proposal that literally takes the companies' contracts and makes them "null and void". Other types of companies will fear the government will do the same with them so they will tighten up their requirements and really give us a credit squeeze.
Get out there and vote, but make sure you decide how stupid you want the government to think you are before you press the buttons on the voting machine.
Tuesday, September 23, 2008
Gasonomics
Since gas prices have been in the news continuously I'll start by answering the question "Why am I paying so much at the pump?" It all comes down to supply and demand, but most people don't know how we got to this point "without any warning". The warnings have been there since the '70s but we have chosen to ignore them.
Over the past several years demand for gasoline has increased tremendously. There are new economies in China and India. In China alone, between 2003 and 2004, the number of private cars grew from 5 million to 9 million. That number is expected to be about 140 million by 2020. That's only cars. Next add the new power needs from factories, office buildings and bringing electricity to new areas of these nations. The US population alone has grown from 225 million in 1980 to just over 300 million currently and half of those people own cars, live in powered homes, work, etc. Europe has grown, North Africa, South America...the list goes on. All of this growth is the reason demand has grown tremendously all over the world.
Since we have seen demand growing steadily over the past 40+ years, we have prepared for this...right? Wrong.
As the demand throughout the world grew, foreign sources of oil kept up with world demand outside of the US. The world production was able to keep up until about 2003-2004 when the exploding demand began.
So why can't we meet the demand? Mostly because of the beaurocracy and stifling by the US government. Here are the biggest contributors that tied the hands of oil companies and kept them from being able to increase supply:
1) The last time a refinery was built in the US was 1976. This is not because oil companies do not want to build any new refineries. There is so much regulation and red tape, it makes it impossible to build one and make any kind of profit. Because of this, the US not only has to import oil, we also have to import refined gasoline to meet our needs.
2) The ability to drill for oil is restricted tremendously. In 1995 Congress passed a bill to allow drilling in ANWR to retrieve its' 10.4 billion barrells of oil, but President Clinton vetoed it. The biggest complaint about the bill was "it won't make a difference for 10 years". It has been 13 years since then and look at the mess we are in. There are 1.8 trillion barrells in midwest shale oil, (that can be up to 8 times Saudi Arabia's total oil reserves available) but leases to oil companies were made off limits last year by the Democrat controlled Congress attaching a provision in the omnibus spending bill to make sure the President could not veto it. That same congress refuses to pass the ANWR bill again for the President to sign. The last place drilling is restricted is in the Gulf of Mexico. China is currently drilling with the help of Cuba in areas where American oil companies are restricted. The Congress is working on a bill now, but it still restricts drilling within 50 miles of the coast. The problem is...that's where the oil is located. They want to make it look like they are doing something while continuing to blame the oil companies and speculators.
3) We have been extremely slow moving on truly viable alternative energy sources. Nuclear energy is clean and extremely efficient. It is such a great resource, France derives nearly 80% of its' electric power from Nuclear power, but the US has not built a nuclear power plant since 1996. Wind and solar energy are still not powerful enough to make a big difference, yet those are the only "alternatives" even being considered by Congress.
4) There are currently 45 different kinds of gasoline that are required in different states. This makes the already limited number of refineries have to shut down, clean out and retool to make the next kind. These requirements come from EPA mandates by unelected officials. If there is any disruption in supply of one type of gasoline and it is not currently being produced there is a big delay while the refinery shuts down, cleans out and retools. That is what is causing the current lines at gas stations in Georgia.
So the problem with the current high gas prices all boils down to lack of supply with the government being the cause of this low supply through over-regulation and beaurocracy. You will hear politicians saying it's oil companies trying to keep the price high and make more money, but that makes no sense. The oil price is set by the world market and American oil companies are a tiny fraction of the total market. Expensive, imported oil is driving the price up. American oil companies make about 10 cents per gallon at any price so they would much rather be able to bring the price down and sell more gallons of gasoline to increase their profits. These politicians are beholden to extreme environmentalist groups who lobby them and contribute millions to their campaigns. They are only interested in re-election so that is why Congress does not pass anything that makes it easier for us to get our own oil to help bring the price down for your family. Remember that the next time you go vote.
The blame lies squarely on Congess and groups like MoveOn.org, ELF, Sierra Club and Greenpeace
Over the past several years demand for gasoline has increased tremendously. There are new economies in China and India. In China alone, between 2003 and 2004, the number of private cars grew from 5 million to 9 million. That number is expected to be about 140 million by 2020. That's only cars. Next add the new power needs from factories, office buildings and bringing electricity to new areas of these nations. The US population alone has grown from 225 million in 1980 to just over 300 million currently and half of those people own cars, live in powered homes, work, etc. Europe has grown, North Africa, South America...the list goes on. All of this growth is the reason demand has grown tremendously all over the world.
Since we have seen demand growing steadily over the past 40+ years, we have prepared for this...right? Wrong.
As the demand throughout the world grew, foreign sources of oil kept up with world demand outside of the US. The world production was able to keep up until about 2003-2004 when the exploding demand began.
So why can't we meet the demand? Mostly because of the beaurocracy and stifling by the US government. Here are the biggest contributors that tied the hands of oil companies and kept them from being able to increase supply:
1) The last time a refinery was built in the US was 1976. This is not because oil companies do not want to build any new refineries. There is so much regulation and red tape, it makes it impossible to build one and make any kind of profit. Because of this, the US not only has to import oil, we also have to import refined gasoline to meet our needs.
2) The ability to drill for oil is restricted tremendously. In 1995 Congress passed a bill to allow drilling in ANWR to retrieve its' 10.4 billion barrells of oil, but President Clinton vetoed it. The biggest complaint about the bill was "it won't make a difference for 10 years". It has been 13 years since then and look at the mess we are in. There are 1.8 trillion barrells in midwest shale oil, (that can be up to 8 times Saudi Arabia's total oil reserves available) but leases to oil companies were made off limits last year by the Democrat controlled Congress attaching a provision in the omnibus spending bill to make sure the President could not veto it. That same congress refuses to pass the ANWR bill again for the President to sign. The last place drilling is restricted is in the Gulf of Mexico. China is currently drilling with the help of Cuba in areas where American oil companies are restricted. The Congress is working on a bill now, but it still restricts drilling within 50 miles of the coast. The problem is...that's where the oil is located. They want to make it look like they are doing something while continuing to blame the oil companies and speculators.
3) We have been extremely slow moving on truly viable alternative energy sources. Nuclear energy is clean and extremely efficient. It is such a great resource, France derives nearly 80% of its' electric power from Nuclear power, but the US has not built a nuclear power plant since 1996. Wind and solar energy are still not powerful enough to make a big difference, yet those are the only "alternatives" even being considered by Congress.
4) There are currently 45 different kinds of gasoline that are required in different states. This makes the already limited number of refineries have to shut down, clean out and retool to make the next kind. These requirements come from EPA mandates by unelected officials. If there is any disruption in supply of one type of gasoline and it is not currently being produced there is a big delay while the refinery shuts down, cleans out and retools. That is what is causing the current lines at gas stations in Georgia.
So the problem with the current high gas prices all boils down to lack of supply with the government being the cause of this low supply through over-regulation and beaurocracy. You will hear politicians saying it's oil companies trying to keep the price high and make more money, but that makes no sense. The oil price is set by the world market and American oil companies are a tiny fraction of the total market. Expensive, imported oil is driving the price up. American oil companies make about 10 cents per gallon at any price so they would much rather be able to bring the price down and sell more gallons of gasoline to increase their profits. These politicians are beholden to extreme environmentalist groups who lobby them and contribute millions to their campaigns. They are only interested in re-election so that is why Congress does not pass anything that makes it easier for us to get our own oil to help bring the price down for your family. Remember that the next time you go vote.
The blame lies squarely on Congess and groups like MoveOn.org, ELF, Sierra Club and Greenpeace
Thursday, September 18, 2008
In The Beginning...
...there was supply and demand. It is so important and so consistent, it is called the "Law of Supply and Demand". It is the most powerful influence on the market, but it is not taught in most schools unless you are an economics major. I'm absolutely convinced this lack of education costs our economy huge amounts of money. One quote I believe is so very true is "Ignorance costs the American economy more than anything else".
I am a big fan of Guitar Hero so I'm on their community forum occasionally for tips and I am amazed at some of the posts. There is always a new thread with several posts like this:
"GH is rippin' us off! That stupid extra guitar controller I just bought was 50 bucks! It's probably $2 worth of plastic so they shouldn't charge that much!"
The first problem with these quotes is "...I just bought..." It must not be "too expensive" or they would not have purchased it. The second problem is they don't consider the man hours put into developing that controller. Game developers are paid pretty well so it's not cheap to develop games and accessories. The third problem is nobody seems to take into account the number of hours of fun you get for that $50. Compared to most forms of entertainment, it's a cheap "per hour" cost. (Those last two don't have anything to do with the supply/demand issue, just pet peeves. ;)
All things considered, is $50 too high a price for the controller? Not when you take supply and demand into account. You can find the true "value" of something when supply = demand. If you can crank out X number of controllers a month and enough people are willing to by X number of the controllers each month at the $50 price, then that is the value.
This is the point every manufacturer or service provider wants to reach. They all try to figure out what the "magic price" is so they can maximize their profit, keep up with production and not have a bunch of unsold stock left at the end of the selling period.
If supply does not equal demand, then you get fluctuations in price both up and down.
A good example of what happens when demand far exceeds supply was the 1996 release of "Tickle Me Elmo". When that doll was first released at Christmas time, the manufacturer had no idea it would be so popular. Everybody wanted one for their kid. The stores receiving the dolls decided they would set the price at around $30 when they arrived. The word spread about how popular the doll was going to be so once the company shipped out the first batch of dolls, they were gone in a flash. Enterprising people waited hours to get in stores and get a doll. They knew the demand was so high they would surely be able to make a profit by reselling them.
Well, they were right. Since the manufacturer could barely supply half as many dolls as the people demanded, the price went through the roof. Private resellers listed the dolls on eBay and there were reports of this $30 doll selling for up to $1500! Demand was much greater than supply so the price went way up.
A good example of what happens when supply exceeds demand is Overstock.com. When companies have more supply than they can sell, they want to get it out of the warehouse and make room for another product that will sell better. To do this, they drop the price and sell it to a place like Overstock.com. Overstock.com gets such a good price on these items they can turn around and mark the price up for retail but still sell it for less than the usual retail price. Supply exceeded demand so the price dropped.
Supply and demand affects everything. It affects the retail market, the employment market, the stock market, the currency market, the tax market (yep, taxes are a market too), literally everything. That is why it is important to understand how it works and to teach our children about the greatest market force. It affects everyone, every day so if you grasp how it works you can't be fooled by rhetoric and you can make informed decisions about what is reported to you on a daily basis.
I hope it didn't bore you to death, but I think it's important to make sure all readers are exposed to this important concept before I get started with the actual problems we find in today's economy.
If you would like more info on supply and demand including a graph of the supply curve and demand curve check this site out http://www.netmba.com/econ/micro/supply-demand/
I am a big fan of Guitar Hero so I'm on their community forum occasionally for tips and I am amazed at some of the posts. There is always a new thread with several posts like this:
"GH is rippin' us off! That stupid extra guitar controller I just bought was 50 bucks! It's probably $2 worth of plastic so they shouldn't charge that much!"
The first problem with these quotes is "...I just bought..." It must not be "too expensive" or they would not have purchased it. The second problem is they don't consider the man hours put into developing that controller. Game developers are paid pretty well so it's not cheap to develop games and accessories. The third problem is nobody seems to take into account the number of hours of fun you get for that $50. Compared to most forms of entertainment, it's a cheap "per hour" cost. (Those last two don't have anything to do with the supply/demand issue, just pet peeves. ;)
All things considered, is $50 too high a price for the controller? Not when you take supply and demand into account. You can find the true "value" of something when supply = demand. If you can crank out X number of controllers a month and enough people are willing to by X number of the controllers each month at the $50 price, then that is the value.
This is the point every manufacturer or service provider wants to reach. They all try to figure out what the "magic price" is so they can maximize their profit, keep up with production and not have a bunch of unsold stock left at the end of the selling period.
If supply does not equal demand, then you get fluctuations in price both up and down.
A good example of what happens when demand far exceeds supply was the 1996 release of "Tickle Me Elmo". When that doll was first released at Christmas time, the manufacturer had no idea it would be so popular. Everybody wanted one for their kid. The stores receiving the dolls decided they would set the price at around $30 when they arrived. The word spread about how popular the doll was going to be so once the company shipped out the first batch of dolls, they were gone in a flash. Enterprising people waited hours to get in stores and get a doll. They knew the demand was so high they would surely be able to make a profit by reselling them.
Well, they were right. Since the manufacturer could barely supply half as many dolls as the people demanded, the price went through the roof. Private resellers listed the dolls on eBay and there were reports of this $30 doll selling for up to $1500! Demand was much greater than supply so the price went way up.
A good example of what happens when supply exceeds demand is Overstock.com. When companies have more supply than they can sell, they want to get it out of the warehouse and make room for another product that will sell better. To do this, they drop the price and sell it to a place like Overstock.com. Overstock.com gets such a good price on these items they can turn around and mark the price up for retail but still sell it for less than the usual retail price. Supply exceeded demand so the price dropped.
Supply and demand affects everything. It affects the retail market, the employment market, the stock market, the currency market, the tax market (yep, taxes are a market too), literally everything. That is why it is important to understand how it works and to teach our children about the greatest market force. It affects everyone, every day so if you grasp how it works you can't be fooled by rhetoric and you can make informed decisions about what is reported to you on a daily basis.
I hope it didn't bore you to death, but I think it's important to make sure all readers are exposed to this important concept before I get started with the actual problems we find in today's economy.
If you would like more info on supply and demand including a graph of the supply curve and demand curve check this site out http://www.netmba.com/econ/micro/supply-demand/
Wednesday, September 17, 2008
What Free Market?
It's all over the media. Stock prices are down, gas is going up, unemployment is a whopping 6%, people are spontaneously combusting, America sucks...the world is coming to an end!!
So who's to blame for all of the calamity? Well, that depends on who you want to listen to and whether or not the truth matters. According to the US House and Senate Democrats (and unfortunately some Republicans as well), the blame always seems to land squarely on the free market. It's the investors' fault, or the CEOs' fault, or Big ______s' fault(fill in the blank with any industry), or not enough regulation for those industries. The demons are the successful, demonized for wanting to make a profit. Their answer is more government control through regulation, or lately by simply bailing out and taking over the company. This mantra is amplified by the "main stream media" every single day and the problems just compound.
With all of the regulation that has been thrown on the private sector the "Free Market" is no longer free to work. Instead we end up with a semi-socialized market where the government tries to micro-manage the entire economy by centralizing control over as much as possible. We want a completely risk-free market with no ups and downs so the micro-management gets tighter and tighter. This ties the hands of the market not allowing it to self-correct in the normal business cycle which eventually results in a much worse correction when it finally gets to the saturation point. I'm not a believer in a complete "hands-off" market so please don't think I'm saying zero regulation would make everything just fine.
So with this in mind, whose' fault is this current situation we find ourselves in? It's our fault. Before you pop a few expletives at me and disappear for blaming you, please hear me out.
Here are three of my reasons:
1) For years we have put up with an education system (also centralized) that teaches very little, if anything at all, about real economics. Sure, they teach you how to balance a checkbook and go grocery shopping, but that's about it. This lack of economic education makes us vulnerable to all of the propaganda that is thrown our way. Some of the comments made by leaders of the United States House and Senate are laughable to anyone who has studied basic economics, but they sound good to most people.
2) We play the class warfare game. We used to long to be like that successful person we saw on TV. Now most of us want to punish the successful to cut them down to size. Instead of asking "how can I do that?" we demand it be taken away from them by force to "level the playing field".
3) The final reason it's our fault is the lack of respect for our duty to vote. In most local elections, 10% turnout is high even though those people have the most control over our communities. 35% is good for a mid-term national election and 50% for the presidential election. We are neglecting our duty so we "get what we pay for".
Since the school systems don't teach the basics, I'm going to attempt to explain the economics behind a few of the problems we are currently experiencing. Over the next several posts I'll talk about economics of gas/oil, housing, banking and general economics.
Stay tuned...
So who's to blame for all of the calamity? Well, that depends on who you want to listen to and whether or not the truth matters. According to the US House and Senate Democrats (and unfortunately some Republicans as well), the blame always seems to land squarely on the free market. It's the investors' fault, or the CEOs' fault, or Big ______s' fault(fill in the blank with any industry), or not enough regulation for those industries. The demons are the successful, demonized for wanting to make a profit. Their answer is more government control through regulation, or lately by simply bailing out and taking over the company. This mantra is amplified by the "main stream media" every single day and the problems just compound.
With all of the regulation that has been thrown on the private sector the "Free Market" is no longer free to work. Instead we end up with a semi-socialized market where the government tries to micro-manage the entire economy by centralizing control over as much as possible. We want a completely risk-free market with no ups and downs so the micro-management gets tighter and tighter. This ties the hands of the market not allowing it to self-correct in the normal business cycle which eventually results in a much worse correction when it finally gets to the saturation point. I'm not a believer in a complete "hands-off" market so please don't think I'm saying zero regulation would make everything just fine.
So with this in mind, whose' fault is this current situation we find ourselves in? It's our fault. Before you pop a few expletives at me and disappear for blaming you, please hear me out.
Here are three of my reasons:
1) For years we have put up with an education system (also centralized) that teaches very little, if anything at all, about real economics. Sure, they teach you how to balance a checkbook and go grocery shopping, but that's about it. This lack of economic education makes us vulnerable to all of the propaganda that is thrown our way. Some of the comments made by leaders of the United States House and Senate are laughable to anyone who has studied basic economics, but they sound good to most people.
2) We play the class warfare game. We used to long to be like that successful person we saw on TV. Now most of us want to punish the successful to cut them down to size. Instead of asking "how can I do that?" we demand it be taken away from them by force to "level the playing field".
3) The final reason it's our fault is the lack of respect for our duty to vote. In most local elections, 10% turnout is high even though those people have the most control over our communities. 35% is good for a mid-term national election and 50% for the presidential election. We are neglecting our duty so we "get what we pay for".
Since the school systems don't teach the basics, I'm going to attempt to explain the economics behind a few of the problems we are currently experiencing. Over the next several posts I'll talk about economics of gas/oil, housing, banking and general economics.
Stay tuned...
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