Central Perk: 5 oct. 2013

sâmbătă, 5 octombrie 2013

Mish's Global Economic Trend Analysis

Pragmatic Look at the Debt Ceiling Debate; Who Broke Washington?

Posted: 05 Oct 2013 11:20 AM PDT

My best friend in high school, David Wise, wrote an interesting OpEd for the Baltimore Sun two days ago. I do not agree with all of it, but he does hit the nail on the head of the critical issue as to who is to blame for the default impasse.

Wise says Obama must not allow a default.

I happen to think that a default would not be catastrophic. However, that debate is moot because the odds of a default are a million-to-one, if not higher. So let's get down to the critical paragraph.

Congress has the power of the purse and the power to tax under Article 1, Section 8 of the Constitution. If Congress authorizes too much spending or permits inadequate revenue generation, it hardly makes sense that it can override the results of the exercise of these Constitutional powers by a mere statute, any more than a person who runs up credit cards purchases could try to avoid responsibility for debts by telling the credit card company that the amount exceeded some artificial total amount of debt that he has vowed not to exceed. Alan Greenspan once said in an interview: "Why do we have a debt limit in the first place? We appropriate funds, we have tax law, and one reasonably adept at arithmetic can calculate what the debt change is going to be."

Ultimate Irony

Please note the irony. Congress has full and complete constitutional power to enact spending, and it does that "too well".

Congress then attempts to enforce a ceiling on the national debt (debt that is 100% caused by Congressional overspending).

Obamacare vs. the Debt Ceiling

Obamacare is a bad bill, and I welcome attempts to modify or delay it, but given that Boehner is Prepared to Cave-In to Obama, and given that Obama is not going to sign any bill he does not like, political grandstanding is going to do nothing except make Republicans look foolish.

Tax Cuts and the Deficit

One can praise Republicans for cutting taxes. But one cannot praise Republicans for failing to cut expenses at the same time.

Wise writes ...

In 2001 the Republicans took control of the White House and both houses of Congress. At that time the U.S. budget was in surplus and the entire national debt was projected to be paid off. The Republicans proceeded to run eight straight deficits — gutting revenue collection while increasing spending — on the way to generating the first trillion-dollar budget deficit under President George W. Bush and leading the economy into the worst financial crisis since the Great Depression — all factors with which the U.S. economy is still contending.

Who Broke Washington?

It is debatable whether the U.S. budget was really in a surplus state when Bush took office. I suggest the surplus was an accounting gimmick that ignored unfunded liabilities.

Regardless, the first trillion dollar deficit did indeed occur on George Bush's watch.

And Bush wasted trillions of dollars on military spending and wars. The country is still paying the price for Bush's war-mongering stupidity.

We also pay the price for a preposterous Medicare bill passed under president Bush that added $500 billion in debt to the books. And the way that law was passed offers insight into what is truly wrong with Congress.

"The Hammer"

Please consider Who Broke Washington? 'The Hammer' Checked Every Sleazy Box

Zero-sum gain: DeLay represents a my-way-or-the-highway mind-set that is so common and corrosive in politics today. Nicknamed "The Hammer," he nurtured a reputation for enforcing party discipline and retribution against anybody who defied George W. Bush's White House. He was known to threaten disloyal Republican lawmakers: Cross him and he'd find and support GOP primary foes. To win, there seemed to be no lever that DeLay wouldn't pull. Even bribery. The House ethics committee unanimously admonished DeLay in 2004 because he "offered to endorse Representative [Nick] Smith's son in exchange for Representative Smith's vote in favor of the Medicare bill."

Runaway entitlements: That Medicare bill extended prescription drug coverage, adding more than $500 billion to the nation's debt-ridden books. President Bush thought that was a small price to pay for a reelection issue. The administration suppressed a report on the costs, an act the Government Accounting Office later called illegal. When the House voted on the bill, Democrats seemed to have defeated it after the 15-minute voting period. But DeLay froze the legislative clock for three hours while his team strong-armed lawmakers, an extraordinary breach of protocol.

Both Parties to Blame

The above article started off with "Tom DeLay didn't break Washington, but he's a living symbol of what broke it."

And that is precisely correct. Yet, Republicans blame everything on Obama and Democrats blame everything on Bush.

If you expect partisan politics out of me, you expect the wrong thing.

I suggest Obama and Bush are among the worst presidents in history. I also suggest the congressional approval rating of 19% is that low for a reason: Spending is out of control, and both political parties are to blame.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Damn Cool Pics

20 Crazy Fetishes

Posted: 04 Oct 2013 07:47 PM PDT

Very weird fetishes.

Agalmatophilia - when you're into mannequins

Oculolinctus - licking eyeballs

Forniphilia - involves behaving like a piece of furniture

Dendrophilia - it's when you're into trees. A lot.

Foot fetishism - attraction to feet

Apotemnophilia - attraction to amputees

Licking doorknobs - a Japanese trend that turned into a fetish

Plushophilia - sexual attraction to stuffed toy animals

Formicophilia - being crawled on by bugs

Paraphilic infantilism - sexual arousal based on dressing or being treated like a baby, also known as autonepiophilia

Teratophilia is when somebody is turned on by deformed or monstrous people

Vomitting is for some reason a huge turn on for many Japanese

Frotteurism - rubbing against a non-consenting person, for example in public transport

Hybristophilia - being turned on by criminals, particularly for cruel or outrageous crimes

Olfactophilia - getting drawn to or turned on to certain smells

Klismaphilia - Enemas, either giving or having

Reptilophilia - when you love your pet lizard too much

Piquerism - sexual gratification through penetration of another person by stabbing or cutting the body with sharp objects

Trichophilia - sexual obsession with hair

Seth's Blog : Understanding marginal cost

Understanding marginal cost

How much does it cost Wikipedia to have one more person read an article? How much does it cost Chanel to produce one more bottle of perfume? How about one more digital copy of a Grateful Dead concert?

The cost of the next item produced is called 'marginal cost'. It doesn't include set-up fees, rent, years of training, insurance or all the other huge costs an organization might pay. It's merely the cost of one more unit.

In a competitive, undifferentiated market, the price will generally be lowered by competitors until it is just above marginal cost. Think about that... If it costs a dollar to make something, and your competitor is selling for $1.10, then in an efficient market, you have every incentive to sell your item for a penny less than that. It's better than not selling it.

There are many implications of this, the first being the explanation of why so much stuff online is free. Free is a magical concept, the place where trial and virality live. If the marginal cost of a new user is virtually zero (and in an ad supported business, a new user is actually profitable, not a cost) then it's no surprise that it's hard to charge for your app when there are other apps that do precisely what yours does.

Big, established companies have traditionally had a difficult time understanding this concept. The market for ebooks, for example, ended up in Federal court because otherwise smart people in book publishing couldn't get their arms around the idea that their marginal cost of an ebook delivered by Amazon was precisely zero. No paper, no shipping, no ink.

Their response was to talk about all of their fixed costs (which are real, and which are important). Things like typesetting and advances and editing and promotion...

But none of those things are marginal costs. That means that someone entering the market, someone with nothing to lose, is happy to wipe out as many fixed costs as he can and then price as close to zero as he can get away with. It's not nice nor does it feel fair, but it's true and it works.

The only defense against this race to marginal cost is to have a product that is differentiated, that has no substitute, that is worth asking for by name.

If your product has a low marginal cost and a traditionally high price, particularly if it's one of a kind in its market, then you're in a great position to benefit from sampling. Which is why vodka companies are happy to sponsor parties and why cell phone companies will do almost anything to get you in the door.

Until you understand the true marginal cost of your products or services, you can't make smart decisions about pricing or customer acquisition.

Industries with zero marginal-cost products and services are inherently unstable until someone figures out how to become the king of the hill, the leader, the one worth picking because everyone else is. When that happens, the truth above about efficient markets goes away... because a market with one dominant leader isn't efficient any more.