Monday, September 29, 2008

Why we're not in a (economic) depression already

I've been wondering that with the largest five investment banks going under, why isn't the economy in a full tailspin already? I mean we've seen this coming for two years, and though hopefully half of the crisis is in our rearview mirror, i've been wondering why we haven't gone into a recession by now, or even a depression.

I mean, some of the major indicators are harrowing: the rate of new housing and price of new housing is dropping (but mainly driven down in over-inflated markets like cali and florida, my little neighborhood of West Philadelphia is treading water with a little bump here and there).

What's saved us? Toyota and Wal-Mart. Well, not exactly that company, but the things that make them great: lean thinking. To get what's going on, you have to understand the difference between the construction of supply chains now versus twenty years ago, and much of the change can be attributed to businesses inhaling the notion of lean thinking or JIT (just-in-time) production that was imported from Japan.

So the scenario twenty years ago was that if i was in manufacturing, and i had a couple clients, i would make large batches of products so that i had 'inventory'. Now, i had to make enough inventory so that stuff wouldn't be on back-order for 3 months, so i also had to buy space for this inventory. Now, when my main buyer went out of business, i lost thousands or millions because i had no place to sell my goods.

This may seem bad for A business, but it was even worse for the supply chain. How? Well, i then reduce my orders from my suppliers who feel the same reverberation. But, since i supplied the company that just closed its doors, i also supplied them along with my competitors and other companies who created complementary products. Now, since i got a reduction in orders, also my competitors and complementors did, so OUR supplier is now out not just the business of one business (mine) but multiple businesses (my competition and complementers).

This is a process called amplification. So a disturbance closer to the consumer end of the supply chain, amplifies its consequences down the supply chain. And vice versa . . . when the midwest suffers a drought, all the products relying on corn suffer from higher prices, and lower profit margins.

So what has changed? Wal-mart. Wal-mart got on the IT train real early, and all-in. What they did was set up a system so that their suppliers had real-time access to the current and historical rate of sales of their products. What that meant was that companies instead of creating abstract and guess-based forecasts, they could accurately predict how much an item would sell, and in what seasons, and in what quanitties. So, they no longer had to go through miniature boom-bust cycles for their inventory, they could create a relatively consistent stream of production.

If they then transmit this information to their suppliers, then their suppliers have more realistic information and goals for production. So the amplification factor is minimized or at least reduced drastically due to better communication. Two days ago i saw a graph from another blogger that charted the price of fish in coastal African markets and the volatile fluctuations, until cells phones came in. Now, fishers can call ahead to see the price of fish and can choose to go where the best price is instead of waiting to get all the way to the market and gambling on price. In the graph, the variation was about a third of what it was before!

I remember back in the early-mid nineties when i watched NBR (nightly business report) over my father's shoulder how they would report fluctuations in manufacturing. I would assume that the fluctuations aren't as volatile as before most of the economy started with this IT thing. Now, the situation is far from over, many manufacturing and a few other sectors of the economy are far from investing and/or utilizing their IT departments in such a way as to communicate back through their supply chain, but it is happening, and this fact has enabled the contraction in credit to not adversely affect the rest of the economy. Why? Because you don't need a loan for guaranteed money, you need a loan for speculative money.

Since businesses are relying less on borrowed money for their core production, what's suffering is the creation of new business, not the sustaining of old business. Well, that's my half-pence of analysis anyway
Bookmark and Share

Thursday, September 25, 2008

Better idea than i had

I was talking to a student in one of my courses and he proposed a novel idea. Instead of giving these corporations all this bailout money ($700 Billion), which would leave the average American still in debt, the government should give each taxpayer making less than $75,000 per year a check for $40,000. Now, the condition is that these taxpayers could only apply this to their debts (so no shopping at Home Depot)!

So, if this is done, instead of only the risky and swindling banks getting bailed out, we'll have millions of Americans in a better financial position with reduced and/or no debt. This would increase our basic net worth and how much money we have available to buy other stuff, hence keep the economy going! And the vulturous credit companies (mortgages and cards) would still sort-of be rescued because they'd get all this money on their balance sheet!

So, instead of bailing out just the companies, we'd be bailing out John Q. Public!

He also mentioned that in a bargain for this, the Americans trade this for higher taxes for the next 5 years. I think that's a bargain, don't you?

Send this to five people if you agree.

anotherdirtysoapbox.blogspot.com
Bookmark and Share

Wednesday, September 24, 2008

i need a bailout too

Yo, i need a bailout. My company lost 3.6 billion and all i'm getting is a 11.6 million compensation package. . . of course i'm lying, and so are they!

Really though? I've been reeling at this crisis, and there's a lot i don't get about it. We have two parallel crises on our hands. the first crisis is the home mortgage crisis, and the second is the Wall Street business credit crisis.

The supposed bailout that is being proposed on Wall Street bails out the Wall Street behemoths who bought and re-packaged bad loans to each other, and lent money based on the profits from their swindling ways. But, there doesn't seem to be a bailout being proposed for the mortgagees of the swindling sub-prime loans that were taken to be fleeced and are now left with loans they can't afford.

Now, there seems to be a real problem in the financial sector, that makes everyone nervous. But that's just the thing . . . it sounds only like its in the financial sector. I don't see how the contraction in credit will churn the economy to a grinding halt. But then again, i'm not in finance, but i do know a little bit. I just think the world economy needs a little sobering up on building a solid and stable economy versus the rampant unsubstantial 'growth' and profits that corporate business has had, while the rest of us struggle to pay our bills.

I know that it seems very short-sighted of me to want to tell those investment bankers to go jump out of a building (see crash of 1929) but i mean, they swindle joe homebuyer and want jane taxpayer to bail them out! They robbed peter, gambled and lost, and want paul to pay for it. How ludicrous is that!?
Bookmark and Share

Friday, September 05, 2008

where do i plug in my hybrid

Living in the city has me thinking of all these articles promising and projecting plug-in hybrid vehicles in the next 10 years. My me-centric line of thinking asks: where do i plug in my hybrid.

I live in the city with no garage. So how will i insure that some young enterprising youth won't sell my outlet by the hour or use when i'm either sleeping at night or away at work. For that to work there would have to be some sort of data exchange to identify what car plugs into what outlet.

If that's the case, then i can go anywhere without overtly paying for my transportation. Why? because this little data-exhcange could be country-wide. I mean, visa is country wide, gas stations are country-wide, why not electric outlets? I would predict that some company is going to make hand-over-fist money creating little protocols and boxes for hotels and restaurants to install so that their customers can hook up to the electric grid for a small percentage (like visa).
Bookmark and Share

Thursday, September 04, 2008

Palin-drones

http://ccinsider.comedycentral.com/cc_insider/2008/09/jon-stewart-ann.html

Jon Stewart kills it. He shows how republicans did a complete 180 about the gender card. When Hillary was talking that gender stuff, they said, as Bruce Said in die hard 143: "cowboy the fuck up". When the spotlight is on Palin, they say its unfair.

Well, that's to be expected.

But its not just overt comedy shows that don't like her:
http://www.huffingtonpost.com/2008/09/03/peggy-noonan-mike-murphy_n_123647.html


But i tell you. I read a yahoo article about how Palin fits the bill for the conservative right. We've got a pentacostal (fundamentalist is one of the two words in first sentence of the wikipedia article on it), a gun nut (she hunts with AR-15s), an anti-abortion advocate (birthed a down syndrome kid) and well, apparently a snappy speaker. And to us liberal-leaning folk, her being a pick is rather foolish. But to Republicans, this is the first breath of life the McCain campaign has gotten since, well since it started.
Bookmark and Share

Tuesday, September 02, 2008

what i said elsewhere

i'm on a discussion list where it seems that i'm on the losing side of the debate team (if you count numbers) but winning in terms of analyzing issues. So, somebody posted a list of things they'd like the next prez (they're assuming its the big O) to solve. I remixed it and put it in a ranking. I modified #3 to be what i said, what's in parentheses is what he put.

lists are cool, but rankings are better:

  1. Alternative fuel source development - this comes first cuz like Barack said, you can't outsource that. Not only would that build indigenous energy sources, it would also build a technical research infrastructure (hopefully filled by #3)
  2. Equitable income distribution - i think there should be an earning cap where the highest paid person can only be paid some multiple of times as the lowest paid person in the same company (including subcontractors), options and fringe benefits included. That would be the quickest way to spread the love. I also think that there should be taxes on net worth and perhaps not income (which is only constitutional due to an amendmen). And i support the estate tax. I also think the payroll tax should be eliminated in favor of other options such as a revenue tax and/or an increased business energy tax.
  3. Rigorous Math and Science Education (precursor to developing the prosperous 21st century economy) - number one on this is to halve the number of children in a classroom. Having been a teacher, the more kids, the more complex. Simply halving the number of kids in a class would greatly enhance the ability of teachers to teach. Raising the salary of teachers but keeping them teaching so many children is just paying more for masochism, however noble we may all think. An analogy would be would you instead pay more for soldiers or invest in ways to not have to go to war? I think that a quarter of the Iraq occupation budget should go to education: specifically school construction and teacher pay, not administration nor muddled in state sieves.
  4. Social Security restructuring (to be a supplement not a source) - i think we should have an OPTION for people to put a portion of their SS against an index (like the S&P) of the stock market. That's what pretty safe investors end up doing in many 401Ks anyway. If people opt out of SS and the market tanks, then they're SOL because of their own decision. They gambled on their allowance. Tough noogies.
  5. Immigration - build the great wall of texas
  6. Restoring US world leadership in things that matter instead of war - i think a superfluous goal. The first goal is integrity, simply by getting our own stuff straight and minding less of other countries busienss would be the generator of clout on the international scene. Sufficiently doing 1-3 would satisfy most of this goal i think.
  7. Elimination of disease like Aids and Cancer - i don't know. From a evolutionary standpoint, disease is a natural part of being an organism. The problem with curing diseases is that people live longer and thereby exert more strain on the environment, so it's like robbing peter to pay paul. Being scared of your own or the mortality of others doesn't demandmoney from the government, but i support private donations and research.

Actually, i was kidding with number five, but i couldn't pass that up. In order to curb immigration we actually have to invest in some ways that make third world countries (mexico for instance) on some kind of par with the US, thus lessening the attractiveness of coming to US. On the flip side, i find it funny that people believe in human-created borders as if they are an aspect of reality and not an aspect of governmental dealmaking based on war capacity. Borders were created to tell tribes who can tax what people on what land, not necessarily who could or could not come in. Historically, the merchant class has free reign across borders, but perhaps not the peons and serfs like us (RAB).

B$

Hope for President
Bookmark and Share