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Capitalism, Off topic/Off beat look @ an economic future?

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  • edited May 2015
    Maybe you guys are better at marketeer-ing than at history-onics.
  • Hi Guys,

    Wow! Capitalism as a topic for an MFO discussion doesn’t get much Bigger Picture. Our postings seldom fly at that rare an atmospheric level. It’s a tough subject.

    Winston Churchill, as usual, had a pity Capitalism observation: “The inherent vice of Capitalism is the unequal sharing of blessings; the inherent virtue of Socialism is the equal sharing of miseries”. History has demonstrated the wisdom of that observation.

    But the MFO posting title, and one of its principle contributors did suck me into reading the exchanges. I wonder if Lewis Braham is the author of the acclaimed “The House that Bogle Built” book? Regardless, the exchanges did raise some stimulating issues that intrigued me.

    Much of the discussion centered around regulation complexity and its impact on the US economy. In the back of my mind, I entertained an uneasy feeling that we are overregulated, but I had no solid facts to support that general feeling. So I went to the Internet, and recovered some numbers that might put my feelings into a statistical perspective.

    Unfortunately, most of those numbers were generated within a study sponsored by the National Association of Manufacturers (NAM), so may contain some funding biases. With that cautionary warning, here is a data dump of a few stats that put the economic impact of regulations in some context for me.

    NAM put the cost of Federal regulations annually at the 2T dollar level. State and local regulations would add to that value. The Federal budget is roughly 4T dollars. The 2014 GDP was 17.7T dollars. So regulations are 11.3% of our GDP. That’s a significant percentage and warrants scrutiny.

    NAM estimates that the annual business cost of regulations is about 20K dollars per worker. That cost is multiplied for small business operations to about 35K per employee. The median income in the US is about 44K dollars annually. Regulations must be a significant factor when a small entrepreneur considers hiring an additional worker. If regulations were reduced, some of its costs would be freed to increase wages.

    There is little doubt that complex and numerous regulations slow accumulated economic growth over time. Estimates vary, but the impact is meaningful. Another consideration is that regulators constantly increase the regulation number count without much oversight. The more and the more complex the rules, the more protected are the regulator jobs. The incentives are wrong. Good-by to some freedom.

    Late last year, Forbes had a nice summary article on this subject titled “Hairball: The Cost Of Federal Regulation To The U.S. Economy”. For an economically challenged person like myself it is easily understood. Here is a Link to it:

    http://www.forbes.com/sites/waynecrews/2014/09/10/hairball-the-cost-of-federal-regulation-to-the-u-s-economy/?&_suid=143276466492809950886983424425

    The discussion matter on this topic when done by professionals can get into the deep weeds quickly. I hope this helps to drain some of the muddy waters. After my brief dive into the regulations morass I feel even more deprived of my freedoms.

    Best Wishes.

    Edit: Well the discussion has become white (red?) hot. How unlike us!
  • Now the same people that pushed for the $15 min wage are now crying foul when businesses raise prices. That money has to come from somewhere folks.
  • edited May 2015
    @MJG, The question is should GDP growth be the only measure of a nation's economic well being when the vast majority of the populace isn't enjoying the benefits of that GDP growth because wages are too low? On an inflation-adjusted basis wages have stagnated for American workers since 1980:pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/ For the working poor the situation is worse as wages have actually declined significantly when adjusted for inflation if you look at the minimum wage. The inflation adjusted minimum wage peaked in 1968 at 10.69 an hour. Today it is $7.25. https://fas.org/sgp/crs/misc/R42973.pdf
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  • MJG
    edited May 2015
    Hi LouisBraham,

    These exchanges have accelerated to the point where the writing has passed the critical thinking.

    Some of the exchanges have focused on the fairness of receiving dividends as a form of redistribution when they were not "earned". The basic concept here is that only the worker who directly contributes to the manufacture of any product should share in its profits.

    That's just plain wrong. That's exactly the same error that Karl Marx made in Das Capital. His model did not include the cost of materials and the cost of capital. Both must be included. Ted and everyone else who invests must be compensated for delaying satisfaction. Otherwise we would spend immediately.

    Are you a professional financial writer?

    Best Wishes.

  • "World War II changed things for a while. The industrialist of the nation had banded together, because they saw the war coming. They proposed retrofitting factories from peacetime use to military use and proposed the creation of new weapons. "

    That's capitalism. As for the two largest programs of the 20th century, yes they were abysmal failures. In the case of The Great Society, the country switched from spending on infrastructure to social spending. Roads are falling apart but there are free condoms and needles available.

    Yes it has crippled the country in that respect.
  • edited May 2015
    @MJG, apparently you have managed to interpret my joke regarding Ted as serious analysis. Sorry.
  • edited May 2015
    "In the back of my mind, I entertained an uneasy feeling that we are overregulated (sic), but I had no solid facts to support that general feeling."

    Well, that sentence by MJG raises some interesting questions. First of all, it implies that there exists some defined and impartial standard by which the optimal, presumably "market-neutral" amount of regulation is to be measured. Surely if we are to classify something as "over" or "under" there must exist some optimal state which is neither. Of course no such standard exists.

    Finally, the last clause of that sentence seems to promise "solid facts to support that general feeling" [that we are over-regulated}. Unless I missed something, no such facts, solid or otherwise, were forthcoming.

    This sort of thing is just the latest in the continuing series of departures from the strict standards by which MJG judges the opinions of others, while allowing himself maximal latitude for his own observations. The ol' double-standard, yet again.

    To his credit, he does allow that a survey paid for by the NAM "may contain some funding biases"... surely a masterpiece of jovial understatement.

    He references an article in Forbes, a source long noted for it's evenhanded treatment of subject matter (that's a little joke, folks). Interestingly enough, that article, by Clyde Wayne Crews, Jr, contains the following quote: "I did keep my subtitle, On the Invalidity of All Cost of Regulation Estimates, and the Need to Compile Them Anyway."

    MJG further further states that "Regulations must be a significant factor when a small entrepreneur considers hiring an additional worker. If regulations were reduced, some of its costs would be freed to increase wages." Without any inquiry into the purpose or possible benefit of such regulations, we are assured that any savings obtained by eliminating them "would be free to increase wages". Well, yes they would, but they also would be free to increase the profit margin. Given your life experience, which of the two outcomes would you place a bet on?

    The Forbes article (more accurately, political rant) divides regulatory costs into four categories: Economic, Environmental, Occupational Safety/Heath & Homeland Security, and Tax Compliance. The article, while decrying the excessive costs of these regulations, makes no effort to explain exactly why they came into being, or why we can get along without them. Just take it all on faith, folks. Would we lie?


  • Hi Old Joe,

    In the words of your favorite President “There you go again”.

    You infrequently question the substance of my contributions; you often challenge my standards. You immediately divert your attention to a personal attack; in this instance, you charge me with a double-standard. You assume the position of judge and jury on my standards. In the words of Mel Brooks “It’s good to be the King”. But who made you King?

    Although I had no hard data when I first read this exchange this morning, I do have anecdotal experience with small business friends who are frustrated with the many regulations and compliance requirements that government layers on them. One said that she is sure that she violates some of them often because she doesn’t know them all, and they frequently change. The countless regulations make their business world miserable. That was the basis of my “uneasy feeling”.

    But I did not post immediately. I did a little research. I found the NAM numbers that allowed me to address the costs for all these regulations. They are substantial. I benchmarked them against other stats. These are the ”solid facts” that I referenced in my posting.

    Is my brief research comprehensive and all inclusive? Of course not. But it was sufficient to convince me (perhaps not anyone else) that my business friends were not exaggerating their dislike of excessive regulation. So I posted my recent discovery.

    I am definitely not opposed to regulations. Both under and over regulation cause problems. A proper balance is both hard to define and even harder to maintain because of the many vested interests, including the regulators themselves.

    Lowering the regulation requirements will reduce business costs. The business folks possibly might elect to use those savings to increase wages. Will they? Your opinion on this matter is surely as good as mine. All my small business friends are worker wellness sensitive; they really do care about their employees.

    You are certainly welcome to your opinions concerning Forbes. I don’t happen to share them. Just remember, they are only opinions. I make a point to never deny anyone the right to an opinion.

    Best Wishes.
  • edited May 2015
    "You infrequently question the substance of my contributions; you often challenge my standards"

    @MJG: Perhaps you missed it: I challenged both the substance of your post and your standards.

    "I make a point to never deny anyone the right to an opinion."

    How thoughtful and generous of you. Thank you ever so much, m'lord.
  • Pronounceth his eminence, the MJG: "If regulations were reduced, some of its costs would be freed to increase wages."

    From today's SF Chronicle: "More than 2,400 janitors at Ross Dress for Less stores in California will share $1 million in the settlement of a lawsuit that accused the retailer and its contractor of cheating them out of minimum wages and overtime."

    Righto, MJG. Tell the janitors all about "reduced regulations".

  • @LewisBraham How do we know your comments are being written by you, and not by some robot activating a narrative software package?:)
  • MJG
    edited May 2015
    Hi Old Joe,

    It’s wake-up time. It’s time for you to quit your childish nightmarish world in which I’m some sort of dictatorial ogre on MFO. Your hurtful sarcasm does not carry the day. In fact, it encourages me to post even more frequently.

    You must be really fearful of my posting’s influence to hold your vendetta for such a long tedious time. It goes way back to FundAlarm days. I remember that you even called my opening salutation, “Hi Guys”, a sexist comment. How liberal of you.

    Yes I do practice my own set of publishing standards. They include requirements for my ‘letter” format to be self-standing, to be clearly written, to have a definable purpose, to present logical conclusions, to provide supporting documentation for those conclusions, and sometimes to make general recommendations. I merely offer a post; I demand nothing. I impose no standards on anyone else. That Is far beyond my powers.

    Note that I said general recommendations. I believe I have never made a specific recommendation to buy/sell ABCDX mutual fund or to enter/exit the marketplace at any time. On numerous occasions I have correctly admitted that other MFOers have more informed insights into specific funds. On numerous occasions I have freely admitted that I’m not a market timer; I believe that forecasting market movements is an impossible task. That’s only my opinion.

    I’m a big advocate for information diversity. I’m a true believer that better investment decisions will be the reward for an open-mind when researching any opportunity. I seek both sides of the story and supporting statistics.

    I suspect that one cause of your persistent harangues is that you are victim to a confirmation bias. You don’t subscribe to my emphasis on statistical matters. You chafe when I mention Monte Carlo methods, which I likely introduced into these discussions way back in FundAlarm days. That’s okay since you and I are both free to choose our own resources. Somehow, if my choice differs from yours, that makes me a posting monster by your measure.

    I do not impose a double-standard when commenting on other folks submittals. I do prefer postings that are complete with supporting documentation over stand-alone Lone Ranger type assertions. That’s consistent with my preferences. I typically ignore postings that don’t satisfy that standard.

    Probably, in excess of 95% of my posts are positive. One goal of my posts is to introduce MFOers to useful analysis tools.

    I am rarely provoked to post negative comments. Does it happen? Yes, but only for a reason and with purpose. One reason might be for a misrepresentation of the facts or exaggerated claims. Another example might be for perceived (by me alone) falsified claims. Each rare incident is likely to be unique.

    Your charge that I apply a double-standard is merely your opinion. It is grounded on those few instances when I took exception to what a poster said. My assertion that these are rare occurrences can be verified by dividing these instances by the total number of my originating submittals (237) plus my countless contributions to other threads.

    You freely pepper the MFO Discussion board with your opinions; much more so than I do. I couldn’t care less. I’ll close with a repost of a Neil deGrasse Tyson quote. It nicely summarizes my feelings towards all opinions. Tyson said:

    “I don’t ever require that someone else share my opinion on anything. I don’t care. We live in a free country. Have whatever opinion you want. It’s your opinion. I have my opinions. I don’t care if you have my opinion.”

    It’s sad that your constant tirade directed at me is disruptive to the continuity of the many fine exchanges and thoughts expressed on this and other threads.

    I’m not the 10-foot evil giant that you make me out to be. I’m only a couple of inches over 6 feet tall and consider myself lucky to have access to the MFO resources. You grossly overestimate my influence on this Discussion board, otherwise you would simply ignore me. And that’s my honest opinion.

    Best Wishes.
  • edited May 2015
    "You grossly overestimate my influence on this Discussion board, otherwise you would simply ignore me."

    I'm sure that you'd prefer that I ignore you, so that you can prattle on without fear of challenge. Speaking of which, we've yet to see any response to my factual challenges to your first post, above. What we have seen an excess of so far is mostly just gas.
  • edited May 2015
    Deleted... (accidental double-post)
  • beebee
    edited May 2015
    Regulation is a paper tiger without enforcement.

    How many "bankster" have been brought to justice as a result of financial regulations?

    Try this sometime (because most of us never do): Get on the highway and follow the posted speed limit (follow the regulations). Watch the reaction of drivers as they frantically try to avoid you while wishing to cause you great harm (road rage). Enforcement is often no where to be found.

    Enforcement is time consuming, labor intensive and often the weakest link in reins of regulation. Without enforcement regulations are mere words on paper.
  • edited May 2015
    One of the interesting facts the author of the article that started this conversation points out is that corporations exist today not in spite of big government regulation but because of it. The idea of the modern corporation as a limited liability company and tantamount to a "person" in the eyes of the law was created in the 19th century with the passage of the Joint Company Stock Act in 1856 in England and subsequently in the U.S. in the 1890s. New Jersey was the first to pass its own corporate laws to attract business. In other words regulations were created to foster business not hinder it. The idea that our current corporations would just be better off without regulation is a convenient fiction for libertarians when the fact is such legal entities do not exist in nature and just organically develop but were created and fostered by state regulators. Sad to say Microsoft and Exxon just wouldn't spring up naturally during caveman times. Government created a legal entity that allowed them to protect their executives and shareholders from legal liability and to become a stakeholder in our society. The problem I have is when libertarians complain there is "too much regulation," what they really mean is that there isn't enough regulation favoring business at the exclusion of the other stakeholders in our society--consumers, labor and environmental NGOs. Saying each is a participant and deserves a say is not communist. It's recognizing that business should have a voice in our society, but it shouldn't be the only voice drowning out all the others. Some sort of balance between the stakeholders should be the goal.
  • edited May 2015
    Excerpts from an Associated Press news article as printed in this morning's San Francisco Chronicle:

    "Rules clarified to protect drinking water, streams"

    "Drinking water for 117 million Americans will be protected under new rules." "The rules... are designed to clarify which small waterways fall under federal protection, after two Supreme Court rulings had left the reach of the Clean Water Act uncertain." "...the waters protected would be those with a "direct and significant" connection to larger bodies of water downstream which are already protected." "The new rules say a tributary must show evidence of flowing water to be protected." "The regulations would kick in... only if a business or landowner took steps to pollute or destroy those waters."

    [The EPA] "said that the regulations don't create any new [rules] for agriculture." "...our goal is to stay out of agriculture's way." "Major economic sectors, from manufacturing and energy production to agriculture, food service, tourism and recreation depend on clean water to function and flourish".


    Seems reasonable, yes?

    But House speaker Boehner called the rules "a raw and tyrannical power grab". "They would send landowners, small businesses, and manufacturers on the road to a regulatory and economic hell."

    So there we have a contemporary disagreement over the benefits of regulation. Is the desire to maintain safe and clean drinking water reasonable, or an example of "over-regulation"?

    I'd be especially interested to see how @MJG's "uneasy feeling that we are over-regulated" evaluates this situation.


    Note: the excerpts quoted above were edited for brevity. The facts and tone of the article have not been altered.

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  • Maurice,

    Yeah, I was thinking of other bogus fake-choice things here (zero regulation! overregulation!). But anyone who seriously believes and says, as you do

    >> the New Deal was a failure and the Great Society was a disaster.

    can be safely classified as low-information in all historical respects. PC has nothing to do with it; maybe more not talking with grandparents and greatgrandparents, or not reading? Dunno.

    I do like historyonics.
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  • >> >> the New Deal was a failure and the Great Society was a disaster.
    >> My intent is to discuss issues.
    >> live up to what I consider to be good standards.

    Go for it. Good standards presumably means substantiation, all that good stuff.
  • edited May 2015
    Not certain what sort of "standard" allows an unsupportable statement such as "the New Deal was a failure".

    This may be a belief that some hold; it certainly is not a supportable historical fact.

    "the New Deal was a failure"
    "My intent is to discuss issues."
    "I'm out of this topic now."

    Another great example of hit and run. An easy out for some MFO folks.
  • edited May 2015
    @DavidMoran: Hey! I said that first, you turkey.:)

    Is ok.
  • my bad, sensei, too busy skimming:(
  • edited May 2015
    Old_Joe said:

    Not certain what sort of "standard" allows an unsupportable statement such as "the New Deal was a failure".

    This may be a belief that some hold; it certainly is not a supportable historical fact.

    "the New Deal was a failure"
    "My intent is to discuss issues."
    "I'm out of this topic now."

    Another great example of hit and run. An easy out for some MFO folks.

    Eh, I'm not sure it's an easy out as much as it is more saying "why bother?" to a conversation that won't be productive and will probably result in being insulted (and I think perhaps that's what Maurice was getting at.) As for a fair amount of non-investment related conversations here, I've really decided to just stop as it's pretty futile and often becomes less than civil (see some aspects of this thread.)

    I mean, I don't really care either way, just sayin' what I view.
  • edited May 2015
    @Scott: Well, I can certainly understand not wanting to "bother with a conversation that won't be productive and will probably result in being insulted". And indeed you do practice that, and probably to your advantage, too.

    But that's hardly the same as entering a discussion, taking a quick and dirty shot, and then exiting before there's return fire. That's just Hit and Run, or as JohnChisum put it so nicely, "a drive by posting".

    Nor is it the same as constructing monumental masses of verbiage, proposing statements of dubious value, accuracy, or relevancy, and then leveling accusations of "evil" and "shameful" behavior as a smokescreen to avoid an intelligent response to the challenges.

    You're quite right, and if I had any sense I should just ignore this stuff also. But I do have an unfortunate fondness for factual information, and tend to get irritated when force-fed total baloney.

    Regards- OJ
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