Tea, anyone?

If you are against the fact that the current U.S. Administration plans to spend more in its budget than all other U.S. Presidents since the beginning of the country combined, consider attending a "tea party" rally. They will be staged all over the country.

Here is the link for the one in Kansas City, but it will be easy to find one in your nearest large city.

http://kansascityteaparty.wordpress.com/kansas-city-tea-parties/

A Capitalist Layoff! A tale...

A tale, gentle reader! A tale of greed, corruption, and betrayal from beyond the grave!

Well, ok, not from beyond the grave, but the rest is true.

Here in Kansas City, there is a beautiful shopping district known as the Country Club Plaza. Fashioned after a renowned shopping district in Madrid, Spain, “The Plaza” has enticed locals and tourists for years. The architecture is striking, the shops upscale, and the dining superb. The Plaza is especially popular during the Christmas season, when the buildings are all outlined in colored lights, lending a unique beauty to the already festive shops.

In Christmas of 2007, I happened to be down on the Plaza during a time when one of the shops there, Halls, had laid off a certain percentage of its workforce. Pulling to the curb on that snowy day, I spied a man braving the elements, holding up signs that urged the boycott of Halls because of “unethical business practices”.

Curious, I decided to engage him in conversation, rather than just assume his charge was true. “Hi!” I offered. “What do you want?” he snapped. I’m not kidding.

I told him I was curious about the allegations in his sign. In what unethical business practices does Halls engage?

He told me that two months ago, he had gotten hired on at Halls. He had the position of a sales associate. He told me that they knew he had kids, but had laid him off this past week, even though it’s Christmas!

I’m sure we looked like quite the pair: we both stood blinking expectantly at the other, waiting. He was waiting, I assume, for cries of commiseration, and I was waiting for him to finish his story. However, he was finished. What was unethical, evidently, was the fact that a father was being laid off at Christmas time.

To check his way of thinking, I asked him, “You don’t think that companies exist to pay salaries to employees and dispense benefits?” “No, they don’t!” he shouted triumphantly.

It took a few seconds for me to understand his meaning. Incredulous, I understood that he thought that companies SHOULD exist precisely for the benefit of the employees, to provide them with a living.

This, gentle reader, is classic Socialist thinking.

Mom and Pop evidently SHOULD come up with an idea for a business, go to the hassle of establishing a legal structure, do market research, save their money, pay a lease, pay extra taxes, and work themselves to the bone with endless hours in a thankless environment—so that they have the privilege of paying a stranger’s mortgage, his family’s food, and health care for his loved ones. What a deal—sign me up! Nothing drives an entrepreneur to create more than the burning, urgent desire to fulfill a “social obligation” to others, right?

Hogwash.

The employee benefits from a company when the company does well. That benefit comes in the form of pay, and, often, benefits, whatever they may be. But the company exists to benefit the owners of the company.

This makes Socialists very angry.

The first of two dishonest arguments that Socialists will use to decry a company’s right to employ as they see fit is the “Poor Walmart employee!” argument. I promise you, you WILL hear this, if you haven’t already.

The world’s largest retailer, Walmart (which, to the Socialist is evil because it is big) has tens of thousands of employees. The employees there applied and interviewed for a job. If they were fortunate enough to be offered the job, they were told very clearly what their pay and what benefits, if any, they would receive. By virtue of the fact that they are employees, these applicants accepted these terms.

Along come the Socialists.

They determine that these poor employees don’t make a “living wage”, whatever that means. They further demand that the employees get certain benefits, because to do otherwise would be, wait for it!, mean!

The problem with that so-called logic is that these people accepted this job within the context of this particular agreement. Unless they are being threatened with harm should they decline this job offer, it is a baseless charge to assert that they are being treated unfairly. If an employee doesn’t like the deal they agreed to, they can quit and go elsewhere.

Like someone watching a game of chess, we can easily anticipate the Socialist’s next move in response to this. They will assert that “some of these people can’t get better jobs elsewhere”. With literally hundreds of thousands of employers elsewhere, they most assuredly can. But even if that WERE true, they have the right to find a need and fulfill it themselves (preposterous—these are helpless people!), they can work multiple jobs (gasp!—how dare you! They have kids at home!), or they can pursue additional education to make themselves more valuable within their present job or more marketable to a different employer (you silver-spoon snob! They can’t afford school!).

1. Anyone who is willing to work hard enough and has enough ingenuity can find and meet a need in the marketplace. As just one example, I know someone who left the employ of Walmart and now owns a going concern cleaning houses. In a Capitalist society, not all the opportunities are glamorous, but they abound.

2. Working multiple jobs is a hassle. As with any solution to any problem it also can create other sub-problems. If there are kids, a daycare or sitter can be paid if the support of loved ones isn’t available. If the pay isn’t enough to offset daycare, there are solutions #1 and #3 here to address that.

3. Go back to school! It is a false argument to say that one can’t go back to school. Again, other hassles will be created! If one doesn’t have income to pay for school, one can get student loans and pay them back after school is completed. If one doesn’t qualify for school, one can choose to work very hard and save carefully to pay for school, and/or seek student work opportunities.
The Socialists rejects these solutions because they are difficult, and it is the responsibility of society to take away difficulties. A Capitalist seems these solutions as just that, solutions, and will pursue them with vigor, to the betterment of self and loved ones.

The second false argument a Socialist will employ in an attempt to negate a company’s right to employ as it sees fit is the old “Fat-cat greedy owner” gambit.

When a struggling small-shop owner works in his struggling small shop, Socialists swoon. Ah, the poor shopkeep! He’s fighting so hard to make it! Those big stores are putting such cruel pressures on him—we should sue them! Who will save the poor victim in the precautionary tale against Machiavellian Capitalism? If he fails, Socialists gleefully bellow from the mountaintops, like the horn-blower from a Ricola ad. “Regulation!” they cry. “Windfall profit tax!” they cry. “Rezone the area to keep them out!”; “Grass roots efforts to protect our poor shopkeep!”

However, if the shopkeep survives, he goes through a period during which he is neither canonized nor demonized. Yet once he grows beyond a certain invisible, indefinable point, he suddenly becomes the evil and greedy one from which the (other) poor shopkeep needs protection.

Life’s funny, isn’t it?

It boils down to this: when the shopkeep is struggling and therefore has no money, he is OWED by society. When he becomes successful, he OWES his material rewards to society.

A company has the right (and, indeed, if owned by the public, the moral obligation) to protect its bottom line. If it chooses to cut costs to create or simply increase profits (a dirty word to our Socialists friends), that is the company’s prerogative.

The struggling shopkeep created the business to take care of himself and his family. It is his money. He is morally, legally and ethically obligated to pay his employees in a way consistent with their agreement with one another. Profits over and above that—and other—expenses are the reward reaped by those who own.

The employees will provide shelter, food, clothing, and the life they choose for themselves and their families from their money. No business owner has the right to dictate what that employee does with their money. The reverse is also true!

And that, gentle reader, is what is just and right.

CITS Quikthot

Capitalism harnesses one of the greatest forces on earth: love.

In a Capitalist society, the government gets out of your way (ostenstibly, at least), so that you can work as hard and as smart as you are able and willing, in order to provide a better life for your family.

When the individuals do well, society does well.

Capitalism=love!

Viva la difference!

"Greed -- for lack of a better word -- is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind. And greed -- you mark my words -- will not only save Teldar Paper, but that other malfunctioning corporation called the USA." - Godon Gekko (Michael Douglas, Wall Street)

So goes the most electrifying lines of an incindiary speech delivered by Hollywood's embodiment of 80s evil, the Capitalist Gordon Gekko. Strip away the sharp braces and slicked hair, however, and you basically have what the world at large actually believes a Capitalist is. And they are close, but no fine Cuban cigar.

The world's view of Capitalism is selfishness and corruption. It is the thirst of greed slaked at the trough of self-indulgence. It is accomplishment achieved only by stepping over and standing on others. It is reckless disregard for one's fellow man, and luxuries achieved at his expense. It is evil.

Rubbish.

Capitalism, simply, is the understanding that wealth is never created, anywhere, at any time, without entrepreneurialism- without someone to see a want or a need, and to find a way to bring a solution to the marketplace. Capitalism therefore seeks to minimalize governmental obstacles (primarily taxation and undue legislation) to allow the entrepreneur to create new wealth, thereby reaping the maximum reward for those efforts. Period. Finito.

How then is such a simple and seemingly innocuous concept slandered and decried by socialist nations of Europe and leftists within the United States? It doesn't sound so bad.

WHAT ARE THE TRUE DIFFERENCES BETWEEN CAPITALISM AND SOCIALISM?

We will examine, in brief, the disagreements between Socialism and Capitalism, but at its core, gentle reader, Socialists and U.S. leftists (but I repeat myself), think Capitalism is mean. Yup, mean. Just like kids on the playground, the Socialist finds the Capitalist mean; the financial bully of the playground that is the world. I know this seems odd. We are talking about an economic mechanism designed to efficiently grow wealth and calling it names, but this really IS the issue.

We'll keep coming back to that elusive concept, but let's expand on the main subpoints.

First, the Socialist firmly believes that economics is a zero-sum game. There is a limited amount of wealth in the world. If one person has $100, then the rest of the world, in toto, has $100 less to take care of its needs. A millionaire has, in essence, taken the food from the mouths of thousands of others. And Bill Gates? The devil incarnate; this man has transgressed against his fellow man so agregiously! He has taken so much from the world that he has the moral obligation (yes, obligation) to restore at least much of that wealth to the world at large. This will be called "giving back", but it isn't viewed as giving, but as duty to mankind, for if he does not, he is withholding from the less fortunate their ability to survive. After all, he took that much from the world coffers!

Capitalism, in response, recognizes that wealth, unlike energy, CAN be created, and, indeed is done so daily by new ventures. History supports this! Look at UPS, by way of example. In 1907, 19-year-old Jim Casey and 18-year-old Claude Ryan founded the American Messenger Company (the UPS forefather) in Seattle. They capitalized with $100 in debt, and lots of sweat equity. The company motto was "Best Service, and Lowest Rates", and the company delivered for 6 years on foot, by bicycle and motorcyle, until they had enough to purchase their first truck. Now, UPS is the largest package deliery company on the planet, delivering some 15 million packages daily. Some companies do business with their customers solely through UPS delivery. Because of the entreprenurial vision and effots of Casey and Ryan, millions of people are employed directly (UPS employees, company mail handlers, small company shippers), and man more indirectly (most of those people have cars they purchased, they buy clothes, they go on vacation with their kids, etc.).

Capitalism successes therefore, not only create new wealth ex nihilo, and grow the global economy, they also inspires just a few to become entrepreneurs themselves!

Second, the Socialist, burdened with his scarcity mentality still wants to do good for mankind. (Of course, Capitalists do, too, though Socialists think them incapable of that. More on that in a minute.) So, rather than find ways to grow "the pie", economically speaking, Socialists must divide the pie into even smaller slices so everyone gets some. There is suffering in every corner of the world, absolutely. But since the Socialist sees only limited resources to fight earth's ills, the money must be taken forcibly from those in possession of it, and reallocated. (The philosophy of Carl Marx was "From each according to his ability; to each according to his need". This remains the credo of Socialists today). Under "Uncle Joe" Stalin, 20 million comrades were killed because they didn't embrace this vision and contribute their due to The State. Fortunately, in most of the world today, Socialism claims your money by involuntary taxation, not the gun. But it is still forcibly taken.

Capitalists are already the single most giving people on planet earth. Compare the U.S. with, for instance, our brothers across the pond, the U.K. A quick glance at of the state of charitable giving in the United States versus that in the United Kingdom reveals a substantial philanthropy gap: ninety-five percent of U.S. households make charitable contributions compared to only thirty percent of U.K. households. In addition, cash donations to charities amount to nearly two percent of U.S. gross national product compared to only 0.7 percent in the United Kingdom.** Rough number: three times the number of Americans donate, and each donation is substatially more. Are Americans kinder or better morally? No, they care about mankind and its burdens just as much. They just have more money to give because they are freer.

Socialism in the U.K., (and the fast-growing movement in the U.S.) seeks to allow the government to determine what social causes are "worthy". These causes are usually sold to the public by politicians, justified with a straw-dog study or report written expressly to support the foregone conclusion that the need is dire and therefore society's moral imperative. Then, the legislature solves the problem it has found (and that is the insidiously encroaching purpose of politicians: to find and solve problems) by writing a law in support of it, and authorizing the mandatory tax to fund their solution.

Think of that: politicians are elected for the purpose of making changes. It doesn't matter whether or not the changes are progress, per se, though they often are, at least ostensibly. However, they simply have to change something. They are not paid to do nothing. So, they look around for problems, create furor around the issue (to highlight their personal involvement), and then use the only real weapon in their aresenal to fix it: write a law and tax to support it. When you have only a hammer in your toolbox, every problem begins to look like a nail. I digress.

So, over many years, a very small number of people (the government) is determining on behalf of the masses what they should support, then is taking their money away to do just that. Socialists are happy with this, but still want those successful to give away more, much more. Capitalists, on the other hand, still show their deep compassion in a much more impactful way than the Socialist world does, in terms of dollars. They simply resent the minority dictating what causes they MUST support.

As a footnote, imagine if Bill Gates were the ultimate Socialist, and had disavowed his vast wealth at the current peak of Microsoft stock (199), returning roughly $102 billion to world coffers (where it morally belongs anyway, to the Socialst mind). Each person in the world would get approximately $6 to spend. Would that make a life-altering impact to many people? In the poorest of world countries, it would be a fantastic boon, but for most it would probably not a life-changing event. Yet since he continues to invest and grow his wealth, he was able to create the Bill and Melinda Gates Foundation to which he has so far donated roughly $30 billion, a number which continues to climb as the assets do, increasing a truly life-altering impact on many. Fewer people get more money, but the benefit continues to agument under the direction of a Capitalist.

Lastly, the other problem that Socialists have with Capitalism lies in what the Capitalists do with their money. This is intertwined in the second point, in which the Socialist wants contribution to causes to be compulsory, and wants to turn over the choice of which causes ought to be supported to the government. But, even after a mandatory money-grab in the name of compassion, there is money left over after taxation. How Capitalists spend this, and even the fact that they have it, drives the Socialist to distraction.

America has been called greedy and decadent. Despite the fact that the U.S. donates far more, through taxation and charities, to any other country in time of world-stage disasters this wicked moniker just won't go away.

The reason? Despite the current economic crisis, the vast majority of Americans live in some of the nicest houses in the nicest neighborhoods in the world. They drive, on the whole, newer cars. Dress well. Eat every meal until they are stuffed. Even those living well under the so-called poverty line have, on average, 2 color TVs, a microwave, and clean clothes. We can afford the most advanced military in the world, and our companies can offer service levels hard to beat.

This is not because Americans are smarter than any other country. Not at all. It is not because Americans are the most hard-working, although they do have a strong work ethic, on the whole. It isn't because, by chance or design, they live in the most resource-rich area of the world. The reason behind the 250ish year global success story of America can be summarized in one word: freedom.

People in the United States can become as successful as they wish, limited only by their ingenuity, their willingness to work hard, and their skill. While this means, on the whole, that the free society itself does very well, it also means that a few exceptional individuals will do exceptionally well. This makes Socialists furious, for CAPITALISTS WANT EQUALITY OF OPPORTUNITY, YET SOCIALISTS WANT EQUALITY OF OUTCOME.

The Socialist belives that the only justification for personal property is public service. The Capitalist loves him family and wishes to give them a better, and more comfortable life, and wants serve the public only in the manner chooses. So the "average" Capitalist is an outrage to the world because of their creature comforts compared to much of the (Socialist!) world. The "exceptional" Capitalist is an abomination because they are, by definition, a robber baron.

A Capitalist sees a CEO as someone who has very advanced education and skills, and worked extremely hard for years to achieve a high-stress 100-hour-a-week job that consumes their life, in exchange for excellent pay. A Socialist sees a CEO as someone who runs the company solely for their own gain (which is odd, because the Board of Directors determines if the CEO is successful and sets pay) and is evil because he makes so much more than, say, an uneducated front-line worker.

Let's summarize:

1. A Capitalist wants to create wealth based on their efforts. A Socialist thinks that wealth can't be created, only redistributed.

2. A Capitalist wants to contribute to whatever cause they choose, in the amount they choose to do so. The Socialist assumes the Capitalist has no compassion, and therefore wants to mandate contribution to pet causes. Those causes must always be chosen by the government.

3. A Capitalist wants to keep what remains of the fruits of their labor, after taxation and their voluntary charity contributions. A Socialist feels guilty and angry that inequality still exists afterwards, and seeks to seize from producers and give to non-producers.

Are you a Capitalist or a Socialist? Viva la difference!

**John Quelch & William Conner, Cost of Giving; John Quelch and William Conner Want to See U.K. Tax Laws Brought into Line With the US, Where People Give Much More Because Its Cheaper, Guardian (London), Sept. 8, 1999, at 41.

How Do Your Like Your AIG?

Capitalism took a shot across the bow this past week. The government "bailed out" AIG.

Now, on the surface, that might seem like a good thing. After all, the U.S. government loudly declared how AIG was "too important for us to let it fail".

However, the essence of capitalism, dear reader, is freedom of the individual within the marketplace; indeed, economic survival-of-the-fittest! The companies that innovate ways to do a needed function, do it well, and do it cheaply thrive. Others reinvent themselves to do so. The others simply disappear.

The U.S. government has now declared that it will pick and choose which companies it will allow to fail! Wherein lies the incentive to be necessary, effective and cost-efficient when the government will pick of the tab for the inept? If, in fact, AIG has been "allowed" to fail-- and many companies have in our past-- even big ones, and we all lived to tell about it-- then other companies would have stepped in and competed (better services at lower costs) to grab those customers!

Yet this was only the first of three direct assaults upon individual liberty within the AIG scandal (and by scandal I do NOT mean a company that did poorly, at least recently).

The next misstep by Congress, and this is a biggie, is that they stole from you. No, I'm not an anarchist who thinks there should be no government. However, the simple fact of the matter is that a small group of people (Congress and the President) picked a company that they wanted to support, and then took tax money (YOUR money; fellow taxpayer!) and gave it to AIG!

Ironically, several political leaders went on tirades about how the American people should not be burdened with bill for poorly-run companies! Clearly, what they meant was, "Companies should be run well." I agree! But, further, they meant, "If the companies aren't run well, we will take whatever we think we need to from the pockets of Americans to offset their loss, if we like the company."

You were just pickpocketed, dear capitalist reader. You go to work to take care of your family and to provide a better life for yourself and those you love. The U.S. government took money from your piggy bank this past week and then lamented how unfair it was!

Yet the third, and most egregious assault on the capitalist foundation of this great nation was stated plainly by the chairman of the House Financial Services Committee, Barney Frank (D-MA).



He said: "I do believe that it is time for us to assert our ownership rights under this arrangement. We're the effective owners of this company. What we ought to be doing is exercising our rights as the owners to bring lawsuits to say, these people performed so badly, the magnitude of the losses were so great that we are justified in rescinding the bonuses." (emphasis added, of course).

Yes, you read it right, gentle reader. Barney Frank and some of his colleagues in Congress feel that THEY own AIG! And not only do they own it, but they have the right to control its practices!

No U.S. investor, of any company, has the right to dictate to the company how to run its day to day operations. You can't tell it what products to sell, what hours to keep, what bonuses to pay or not to pay. But Barney Frank, et al., can?

The key points again:

1. The government PICKED a company that would exempt from normal economic forces
2. The government TOOK your money to buy an 80% stake in that company
3. The government now wishes to RUN that company from Congress

I hope that your "separation of powers" alarm is blaring louder than the B9 Robot from "Lost in Space".

While each of these points raise many problematic issues (legal, constitutional, economic, and ethical), I will respond in brief:

1. If a company is poorly run, let it improve on its own or fail. Employees will find other jobs, customers will be served by companies competing even harder for that marketshare, and the sky will not fall, thank you very much Chicken Little. We'll live.
2. Congress is authorized to tax to provide for the common defense and promote the general welfare. While I pray for a Supreme Court challenge to this Congressional pilfering from your family's coffers, I say if it is proven that this step actually promoted the general welfare, then give us our shares. The company was bought with our money- give us our shares!
3. One of definitions of "governmental ownership and private control" is SOCIALISM. BUT one of the definitions of "governmental ownership and governmental control" is COMMUNISM. This is a very slippery slope we are on, my fellow Americans. If our rights can be infringed upon here, why not another step, then another?

We must be cruel to be kind! Sometimes, poorly run companies will, nay, must fail. Yet our nation will be stronger because of it. Wouldn't it be great to have fewer and fewer poorly run companies?

P.S. The company that was "too important" to be allowed to fail took one-tenth of one percent of the money it was given and used it to pay bonuses to which it was already contractually obligated. The government knew about it at the time it was given the bailout money. Now Congress is mad. If they are so important and so valuable, should Congress be mad about letting them keep the few really good performers? Hmmm...

Here we go!

Welcome, gentle reader!

Winston Churchill said, "Democracy is the worst type of government, except for all the others."

In like wise, capitalism is the worst form of socio-economics, except for all the others. This blog is dedicated to exploring capitalism.

The Law of Unintended Consequences ensures that there are many drawbacks and inquities in capitalism, as there is in any system or action in the world. Overall, however, freedom (of thought, action, the press, speech, religion, and certainly of markets) have marked the upward trend of mankind throughout human history. Capitalism, simply, is a free market.

I hope you enjoy the journey with me as we talk all things money, investing, markets, and capitalism. I aim to provide thoughtful insight, and hope you will share your comments.

Above all, I hope that you, too, will grow to love this amazing, imperfect machine: Capitalism!

Welcome to my blog.