Why the President can Fire the CEO of the TVA

TVA

I just read a story about the Tennessee Valley Authority (TVA) and the fact President Trump fired its CEO and one board member. My first reaction was, what what what? How can a political entity fire the CEO of the TVA? It turns out the TVA is owned by the Federal Government although it receives no tax dollars and acts almost exclusively just like a private company. So, my second question is, what what what?

Where is my Time Travel Hat? I have to get to the bottom of this immediately. Did I leave it in the freezer again? No. In the tax document drawer? No. Ah, there it is in the Gloomhaven Box, how did it get there? Oh well, let’s see, still fits, spin three times, fancy colors, bright lights, dizzy spell, and, where am I?

Is that President Franklin Roosevelt over there? What is he saying, selfish purposes, let’s listen in: Never shall the federal government part with its sovereignty or with its control of its power resources while I’m president of the United States. Hmm, so he’s upset that public utilities are charging high prices. He wants the government to be in charge of electricity generation. Look at all the people applauding him including Republican Senator George Norris who just blocked Henry Ford from building a private dam and utility to modernize the Tennessee Valley.

I can’t believe I’m actually watching President Roosevelt signing the TVA Act which legally prevents competition in the valley. Only the government can build power plants and dams. Oh, I see, look there, in the back room, the politicians know the dams are going to flood out tens of thousands of residents, Native American sacred sites, so they are giving TVA Eminent Domain powers to simply kick people off who refuse to sell. Smart!

Oh, look there, is that Barry Goldwater and Ronald Reagan lambasting the power of the TVA and the fact government controls it instead of private industry, it sure is. Look there, they have their own police force! A net income of $1.12 billion in 2018. They’ve been profitable since 1977.

Uh oh, energy running low, flashing lights, and I’m back home. Whew. Another successful trip. What did we learn? The government shouldn’t own industries like the TVA for a number of reasons, one of them is politicians will feel free to intervene in business decisions for which they should have no authority whatsoever.

Why does President Trump have the authority to fire the CEO of the TVA? Because the government created a monopoly and crushed any chance for private industry competition.

How does the Supreme Court justify this Socialism? The Commerce Clause which allows the regulation of streams to keep them navigable and the War Powers Act because electricity is sometimes used in the creation of munitions. Seriously? I ask. Seriously?

Tom Liberman

Capitalism Changed the Name of the Washington Football Team

Capitalism Changed the Name

Make no mistake about it, capitalism changed the name of the Washington football team; not outraged Native Americans, not laws passed by politicians, not do-gooders. It was capitalism, pure and simple and that’s a good thing.

By now most sports fans, and plenty of those who are not, are aware Daniel Snyder, owner of the Washington football team capitulated to capitalistic pressure from big money sponsors of the team and finally agreed to change the name. It’s about time. The thing to remember is that Native Americans, do-gooders, and politicians have been calling for the name change for decades. Snyder vowed he would never change the name. Never is now.

Everyone knows that capitalism changed the name when nothing else could convince Snyder. Money, pure and simple. The executives at FedEx, Nike, Pepsi and other sponsors told Daniel the money was ending. Nike did more than talk, the company pulled all Washington football gear from sale. That’s what it took. Not, mealy-mouthed things like: I’m going to stop selling your gear. Listen here, Snyder, your stuff is off sale. Go look at the website. It’s gone. Big round of applause for Nike.

That’s capitalism in action. Why did enterprise companies like FedEx suddenly choose now to make it clear the time had come? Because they feared people would stop purchasing their products and using their service. It’s likely the executives at those companies probably think the old nickname is offensive but they didn’t get an epiphany last week, they got a message from consumers. They passed that message along. The name changed. Follow the money.

This is the message of Economic Liberalism, the mantra of the Libertarian. You can pass as many laws as you want but people will find a way around them. People can scream and yell all they want but only when the purchasing patterns change do we see action. And action we see.

What can we learn from the fact capitalism changed the name? That capitalism works to ensure social justice if people want social justice. We rely on politicians but forget that most politicians are elected by a tiny fraction of the population. You want justice? Convince enough people to demand it with their money and you’ll get it. No politicians can do that for you. The power is yours.

Tom Liberman

The Unwanted Shake Shack Government Loan

Shake Shack Government Loan

What does it tell you a Shake Shack Government Loan was returned? For a lot of people, it’s a gesture of goodwill by Shake Shack to the other small businesses that need the money more. That’s not the way this anti-government Libertarian sees it. The Shake Shack Government Loan was simply a way to make the company obligated to the government, the owners didn’t seek it, didn’t want it, didn’t ask for it, but got it anyway. Forcing them to return it.

I’m proud to say the Shake Shack founder is St. Louis hometown hero Danny Meyer. Yet another illustrious graduate of John Burroughs, a fine school my lack of academic prowess disqualified me from attending. That is not the point of today’s article.

Why would anyone get a loan they didn’t want or need? That’s a question you must ask yourself. Why would any entity be given a check they didn’t ask to receive? One of the main reasons is the United States Government is big on giving out loans, our entire financial system is largely based on giving out taxpayer money as loans, this money generally having to be repaid with interest that goes to friends of politicians.

The government is certainly using Covid-19 as an excuse to further entangle the interests of its patrons into every aspect of citizens life. This unwanted intrusion didn’t start with Covid-19. President Trump created a Welfarm State with ridiculous tariffs, the Post Office was intentionally bankrupted, the Airline Industry has been a government subsidy since its inception and resulted in the planned destruction of the highly successful passenger rail system, the entire horse meat industry was destroyed. This is how government operates in a Republic.

In a Republic there are limits to what government officials can do. There are Checks and Balances. This being the case, government officials must wile their insidious evil in different ways. One of the ways they do this is to make people and businesses their unwitting partners. The government is happy to loan you money, purchase your products at inflated prices, because they then become a partner in your enterprise. You owe them.

The Shake Shack government loan is just another in a long line of takeover attempts that have reduced the United States to a system of Crony Capitalism. At least Shake Shack saw through the subterfuge although many others do not.

We no longer have a capitalistic system here in the United States and I suspect we won’t have a Republic for much longer either.

Tom Liberman

The Inherent Corruption of an Essential Business

Essential Business

What is an essential business? Covid-19 is forcing state and local governments across the United States to make this determination and the methodology being used once again gives me an opportunity to go on a Libertarian Rant.

Being designated an essential business means you continue to collect revenue when others cannot. This is an enormous incentive for owners to get the government to declare them an essential business. The idea is simple enough, what business must stay open in order for people to survive? Yet, the implementation, when handed to people who are susceptible to bribery, influence, and even threats becomes something entirely different.

In the world we live in, an essential business is simply one where the owners have enough influence with government officials to be declared such. I’m not picking on one business or another, frankly, they probably should be bribing and threatening local politicians to stay open as it means they continue their revenue stream when everyone else cannot.

The point is that essential is largely meaningless when government gets to define it. If we got together and talked about it or five minutes we’d come up with a pretty definitive list. Food and water, medical supplies and service, and HVAC depending on the season. As an aside, the preceding sentence demonstrates the necessity of the Oxford Comma.

Once government becomes involved, it’s all essential if you pay those making the decisions enough. All you have to do is have a friend in government and your business gains an enormous competitive advantage. Your employees can be forced to come into work and do their jobs. Now, for many employees this is a good thing although certainly some would prefer not to risk their lives doing so, that’s not really the point.

The reality of anything being an essential business at this time of Covid-19 illustrates the problem with having government make these decisions for us. If you run a business type that doesn’t have influence, you don’t get to decide for yourself if you should be open, the government makes that decision for you.

I’m not saying staying open is necessarily a good thing, if a bunch of your employees and customers get Covid-19 and die that’s horrific. I’m just saying when government decides what is an essential business rather than consumers, we get clearly non-essential businesses staying open. That’s the problem with having government make decisions for us. They force bad decisions on us. We should be free to make those bad decisions ourselves.

Tom Liberman

Planetary Economics 102 with Professor Blortstein

Planetary Economics

“Welcome to Planetary Economics 102,” said the squat figure sitting in a comfortable chair and wearing starched blue shirt that matched his azure gills nicely. “I’m professor Blortstein.” He stared at a halo of images that floated around him and waved a long appendage which caused one of them to glow a bright green.

“Yuvurl,” he said with a glance at the image which had a long and flexible neck topped by a large head and bulbous eyes. “Last semester we discussed planetary economics leading to the demise of a commodity-based currency. Please give us a recap.”

“Improved medical technology increases live birth rates and extends life in general. This obviously results in a large increase in total population. This growth cannot be matched by new discoveries of the commodity to which the currency is tied.”

“Which results in …,” said Blortstein with another wave of his appendage causing a second image, this of a young woman with bright purple skin, a narrow head, two green eyes, and an unusually large number of metallic pieces attached to her face. “Miss Mie?”

“The total economic outlay the world requires is limited by the supply of the commodity and thus growth is restricted and becomes increasingly so as populations increase. One nation, generally the most populous, begins to distribute loans not backed by the commodity.”

“Very good,” said Blortstein. “Now, what happens next?”

Mie continued with a flick of her long hair, “The nations that original enforced the commodity-based economy, generally those that emerged victorious in some particular virulent and global conflict, are pressured into withdrawing the system.”

“What causes this pressure?” said Blortstein with a wave which caused yet another image to glow green.

That student, a golden creature with a long and narrow neck and a mouth capped by a narrow and sharp beak continued, “The pressure comes in several fashions. In one case the leaders of the country who are trying to enforce the commodity-based currency realize they are falling behind because they cannot proceed with enterprise projects. Another factor is many of the large business entities within that country see the enormous profits to be had and begin investing large sums in the aforementioned country.”

“Excellent,” said Blortstein with a nod of his head. “So, now we get to the subject of this semester’s class of Planetary Economics. What happens next?” Another wave of his hand and yet another student chosen to speak.

A round-faced fellow with many freckles on his pale skin took up the conversation, “The leaders of the various countries show sensible restraint and refuse to excessively commit the nation’s treasury to a fiat currency system and growth continues but at a sustainable pace.”

The class erupted in laughter.

“Very good, Mr. Lebushi. Very good. Now, Miss Mei, do you have an alternate conjecture?

“As a crisis arises …,” she started.

“A real crisis?” asked Blortstein.

The girl smiled and shook her head with a clink-clank of her adornments. “I suppose it might be a real crisis but more like a perceived crisis or even a manufactured crisis designed to enrich the friends and backers of the leaders of the country. In any case, the nature of the crisis little matters, what is important is that the nations of the world start an inevitable splurge of spending.”

Blortstein nodded his head and smiled, “This spending quickly outpaces the economic wealth of first one nation then the next and eventually the entire system of planetary economics. The new system relies on loaned money; that is to say, money promised to be repaid but not actually in existence. Enterprise projects proceed apace, loans to the general population for shelter, mobility, and other basic needs continue as well. Debt piles up in a manner that cannot possibly be repaid.”

There was silence in the class for a moment as they waited for the professor to proceed.

“Now,” continued Blortstein. “We come to the subject of this semester’s class. What happens next? Some worlds are able navigate this treacherous period and emerge with an economy based on abundance and join the galactic community. Others are not as fortunate.”

Tom Liberman

Cheap Razor Blades Saved by the FTC

Cheap Razor Blades

******* UPDATE *****

Edgewell dropped their attempt to purchase Harry’s. Congratulations big government lovers, the FTC has saved us.

**** END ******

The Federal Trade Commission is attempting to save cheap razor blades by preventing Edgewell Personal Care from purchasing Harry’s. Harry’s sells such blades along with other products. The government apparently considers Harry’s an industry disrupter and feels the need to step in and prevent the sale, which the owner of Harry’s deems necessary because the company is not profitable.

Yay, the government has come to save my cheap razor blades. The original low-priced razor companies; Dollar Shave Club and Walker and Company, were already purchased by larger razor manufacturers leaving only Harry’s to compete against the giants.

Let’s examine what’s really happening here. Why is Harry’s not profitable to begin with? Maybe because they sell razors so cheaply? It’s entirely possible Harry’s and the other sellers planned, from the very beginning, to sell out to the big names in industry. The principals knew their companies weren’t going to be profitable but wanted the bonanza at the end of the tunnel. If that is the case, then the FTC is preventing them from achieving this goal. It is undeniably true the owners of Harry’s want to sell and they are being prevented from doing so by the government.

The broader question, from a Libertarian perspective, does preventing the sale of Harry’s leave consumers better off? Does the government have a role to play thanks to the Anti-Trust laws established in the Constitution of the United States?

The answer is not easy to deduce. It is absolutely true that Harry’s is an industry disrupter because they sell cheap razor blades significantly below the price of the established companies. However, if their goal was to sell out in the long run, this action by the FTC actually prevents other start-ups from doing the same thing. If they can’t sell their companies and they know their business model is unsustainable, they will not bother starting up in the first place. If, on the other hand, they could make a profit selling the cheap razor blades, they would stay in business without being absorbed by a larger company.

Now, it is possible they are just poorly run businesses and blades at that price could be sold for a profit but the evidence we’ve seen so far doesn’t indicate as much. Therefore, it seems to me, the government shouldn’t be propping up companies that sell products at prices that are unsustainable simply because such is good for consumers.

This is, in essence, socialism. It’s almost as if the government themselves are selling us cheap razor blades which they purchase with our tax dollars. If I didn’t know better, I’d guess the government will eventually bail out Harry’s so they can keep selling us cheap razor blades, but, nah, that could never happen.

Tom Liberman

Tariffs on Cheap Chinese Mattresses

Cheap Chinese Mattresses

In the last few years a product called Bed-in-a-Box has roiled the United States mattress making markets and allowed for the shipping of cheap Chinese mattresses. Prior to the Bed-in-a-Box model is wasn’t particularly cost effective to ship cheap Chinese mattresses to the United States and therefore companies here largely didn’t have to deal with such competition. Now they do and they’re doing something about, petitioning the government to save them.

The Federal Government is now claiming Chinese manufacturers are Dumping cheap Chinese mattresses on the United States and Commerce Department is going to institute tariffs of over 1000% on them. Dumping is an Anti-Trust issue and actually under the purview of the United States government so they do have an argument in this case. The Commerce Department claims the Chinese are dumping their mattresses at an unreasonably low level in order to drive out competition and create a monopoly from which they will eventually raise prices and lower quality.

There are very few instances of Dumping actually doing those things. Now, it is clear when a competitor comes in with equally high-quality product at a much lower price, the established businesses will suffer. The mattress firms petitioning the Commerce Department admit the cheap Chinese mattresses are of equal quality to their own so that’s not an issue. People are getting a product they want at a price they like, that’s good for consumers and I’m sure there are plenty of people sleeping on those mattresses every night and happily so.

The question becomes if the price is intentionally low in order to drive out competition and an eventual increase in price and lowering of quality is planned. I think we need look no further than Walmart to find the answer to this question. China has been inundating the U.S. market with cheap products for decades and, while they certainly have gained a stranglehold on many markets, they haven’t increased prices once they were established, they have kept prices low. This because manufacturing in China is cheaper for a variety of economic reasons that I won’t get into today.

There is nothing wrong with good prices. That’s a good thing for consumers. It’s obviously bad for the manufacturers of mattresses in the United States but that’s what healthy competition is all about, it’s the nature of capitalism. In this case, it can be, and has been, argued that the problem isn’t solely the cheap Chinese mattresses but Bed-in-a-Box competition from other U.S. firms as well. That the Commerce Department is intentionally raising prices for consumers simply to keep an industry afloat that could not otherwise compete.

Welcome to capitalism in the United States. Like higher prices and worse? Keep voting for such.

Tom Liberman

National Park Rangers Working on Border Patrol

National Park Rangers

There’s an interesting story making the rounds about how National Park Rangers will be moving from their normal jobs to that of patrolling the border with Mexico. The reason this is being done, and has been done since last year, is because President Trump needs more money to build a Border Wall and is saving money by using employees from another department rather than hiring new Border Patrol Agents. I’m mad about this but my reasons are somewhat different than those being presented by those against this shift.

There are any number of Democrats opposed to this plan. For the most part their argument is the resources being used, that is to say National Park Rangers, are not trained to be Border Patrol agents. They are ill-equipped to do the job. In addition, National Park Rangers taken away from their normal job leads to understaffing.

Both of these things are largely true; however, the underlying problem and the disrespect both parties show for the Constitution of the United States is what bother me. I pay taxes. A lot of people pay taxes. We vote for representatives to determine how to best spend those dollars. There are going to be disputes among our elected officials as to how to spend the money and certainly I’m not going to agree with many of the decisions that are made, that being said, those decisions should be final.

When you take National Park Rangers away from their job patrolling the parks you are spending money in ways that Congress has not authorized. It’s my opinion, which I’ve written about elsewhere, that taxes should go to appropriate agencies. A gasoline tax should be spent on road and bridge infrastructure. An airline tax should be spent on our federally funded air travel industry. When we shuffle money around like this there is no longer any accountability.

Imagine you were getting married and I gave you $100 gift card to purchase a wedding present. You then sold the card to someone else for $90 and took the cash to go on a bender. I’d be angry and rightfully so. We had a contract and you reneged on it. I could take you to court and attempt to get my money back. So too should I be able to sue the government for spending my money on things not authorized by Congress.

The government has become so accustomed to moving money from one account to the other without any care of how it was actually meant to be spent that those in charge take it for granted they can do so.

In my home state of Missouri; money people spend on Lottery Tickets is supposed to go into the Education fund. I hate to be the bearer of bad news but that’s not what happens. Politicians budget no or little money for education and use lottery proceeds to fill in the gap. They are taking our tax dollars, which were largely paid via Property Taxes under the Education line item on our state tax bill, and spending it on whatever they want.

Congress authorized a particular amount of money for the National Parks Service and another amount for Border Patrol. It must be illegal to simply swap money from one endeavor to the other. It cannot be anything other than that.

If you cannot get Congress members to appropriate the money you want, then you need to go back and convince them differently, not simply steal from Parks to pay Border.

Tom Liberman

The Real Value of Technology to Users

Real Value of Technology

I just followed what I imagined was a clickbait link and ended up on a fascinating article describing a difficult economic question about what is the real value of technology to its users. The problem is that nations around the world base their economic policy on things like Gross Domestic Product and Productivity Gains. Yet, we have no way to add things like using Social Media to the numbers.

The article describes recent techniques championed by MIT economist Erik Brynjolfsson. Brynjolfsson is trying to quantify how much using search engines, social media, e-mail, GPS, and other technologies add in real value to not only your life but the economic health of the nation and world. These techniques are being used by the Federal Reserve and its chairman, Jerome Powell, in an effort to more accurately determine the health of the economy and make better decision about its immediate and long-term future.

It’s my opinion these efforts are long overdue and need to be applied to any number of traditional economic indicators which are becoming less useful in the modern era. I wrote an article about the end of money and another about unemployment not long ago that consider this same idea. Things like inflation and unemployment have long been used to determine the health of the economy but I think the numbers generated by metrics today are slipping further and further from reality.

As our numbers begin to fail there rises the likelihood those determining economic decisions on a worldwide basis will be making bad choices based on poor data.

If you think there is no real value of technology then I quote the last lines of the article: How should we value the luxury of never needing to ask for directions or the peace and tranquility afforded by speedy resolution of those contentious arguments over the trivia of the moment?

I have no great insights today. I’m glad to see the people in charge are looking into such things and I’m hopeful they’ll make important gains in understanding the real value of technology.

Tom Liberman

Fake Guacamole on the Rise Because of High Priced Avocados

Fake Guacamole

If you’re like me, you love guacamole and avocados. Yum. The price for avocados is skyrocketing and this is causing a lot of pain in restaurants who use the delicious fruit in various dishes. It strikes particular hard for Mexican establishments who tend to use it across a wide array of menu items but other restaurants are suffering as well. What do they do? Use other ingredients and create Fake Guacamole.

If you weren’t against tariffs because you’re a freedom loving Libertarian who promotes open and free trade then this phrase almost certainly hits somewhere most likely even more important, your stomach. The very words Fake Guacamole should be as rage inducing as trying to Get Over It. Ok, that’s a video game reference and sometimes I just can’t help but let my inner nerd out for all to see. Well, actually, it’s pretty much always on display but I won’t get sidetracked from my mission to free you from Fake Guacamole.

I’ve written about why protectionism hurts consumers far more than it helps those industries it purports to protect so I won’t reiterate here. The results are plain to see. Avocados cost a lot more today because tariffs have exacerbated a poor harvest and increasing demand. Today’s issue is the sort of punch to the gut that I think economic philosophy and Libertarian ideology don’t impart. You, the consumer, have most likely eaten Fake Guacamole in the last few months. You are certainly paying more for what avocados you still purchase although it’s almost certain you’ve cut down on that particularly delightful and healthy food.

This is the direct result of policies that promote protectionism and their attendant tariffs. How does it feel to know you’ve been tricked? That you’ve been served something under false pretenses because politically motivated economic policies forced the restaurant to do so in order to survive? Perhaps you think it’s worth it, that the trade off is worth the horror of fake guacamole. I disagree because I see no benefit from the policies of protectionism. They are merely political rallying points to inspire a group of citizens who are not happy with the direction of government.

If you are not happy with where our government is going, more bad policies are not going help. Things are hardly perfect in the United States but don’t let that encourage you to vote for politicians who enact policies detrimental both in the short and long term. Don’t let your rabble be raised in negative ways. Demand good decisions from your leaders with your votes. They’ll listen, I promise.

Free trade means cheaper avocados and real guacamole. How can you be against that?

Tom Liberman

What Does Zero Economic Growth During Shutdown Mean?

Zero Economic Growth

Zero Economic Growth was the prediction made by the Chairman of the White House Council of Economic Advisors and that indicates something very important. It means the federal government is largely driving economic growth in the United States. Without such intervention, there is no growth. This is a complete, although inadvertent, admission that the government is far too entangled in the economy; that Socialism has completely taken over. That’s not a good thing.

Kevin Hassett is certain the Zero Economic Growth engendered by the shutdown will not have a long-term negative effect because money will pour forth from the federal government once things are settled. This is missing the entire point. Our entire economy is now dependent on taking money from taxpayers and giving it to various businesses that would not survive without it, this is socialism. We are there.

The Defense Industrial Complex, read War Machine, and everyone in it, including many of my friends and relatives at Boeing and Lockheed, would largely not have jobs without such intervention. The entire farm industry is almost completely dependent on government handouts for survival. The federal government has its noodly appendages hooked into almost every industry in the country. Education, Technology, Energy, Healthcare, you name it and the government supports it to one degree or another.

The switch from capitalism to socialism is all but complete despite any claims from Republicans to the contrary. That particular political party is probably more responsible for this turn of events than the actual socialist who clamor for it. Every time the government passes a law that supports one company over another, every time the federal government spends a single dollar, they are influencing the economy of the nation. The more money they spend, the greater the impact.

Ever since the Reagan election of 1980 it has been economic doctrine that government stimulus is needed during economic difficulties. As the money flows so does the influence it wields. When a business wants to succeed, they seek out government contracts. They tailor their proposals to the requirements meted out by the government.

Now, don’t get me wrong, the government always has, and always will, have some influence over the economic health of the United States. The point is that it shouldn’t have such an outsized reach that without it our economy will suffer Zero Economic Growth. That’s where we are at and even the Trump Administration admits it is so. The entirety of economic growth in the United States is completely dependent on the government, you heard it directly from the horse’s mouth.

Tom Liberman

Welfarm and the Demise of the Family Farmer

Family Farmer

I just read an article written by a family farmer, Jim Goodman, who recently sold his herd of forty-five cows because economic conditions made continuing untenable. The article laments the steady demise of the family farmer in the United States and the growth of both factory farms and what the writer calls Land Barons. These are wealthy individuals who purchase smaller farms but don’t actually work on them, they own them simply as investments. While I feel sorry for Goodman, I won’t shed a tear for a group of people who vote for the bed they sleep in with unwavering devotion.

Let me explain. Welfarm caused this entire mess and Goodman acknowledges all the factors that caused the problem without once accepting the slightest bit of responsibility for it. Goodman contradicts himself in almost every paragraph. He blames ineffective government subsidies, apparently wanting more, when it is this very Welfarm that caused the oversupply he so passionately understands is the root of the issue.

The United States has a system of government that includes the Senate. The Senate doesn’t care about population. There are two senators per state and this gives rural states disproportionate power in Congress. This power has been used since the 1970s to expand a policy of get big or get out. Those who own small farms eagerly and continuously voted for politicians who perpetuated this policy as they handed out enormous sums of money to the family farmer. I need say no more than Ethanol and cheese although there are many, many more examples of this strategy.

Basically, the taxpayers of the United States have been pouring money into the pockets of farmers encouraging them to grow more and more. These policies have encouraged the family farmer to produce more milk. These policies have aided the enormous growth of factory farms. What needs to be done? Stop Welfarm. Yes, it will hurt farmers initially, I do not deny this fact. However, what will happen is output will shrink to match actual demand and only then will farmers get what Goodman says is the only thing they want, fair prices. Sadly, that’s not the only thing they want. They want tax dollars by the bushel and this dependence on government has destroyed them. They got exactly that for which they voted.

If a Libertarian Revolution is to sweep this country, and I hold out high hopes that it someday will, it will begin in rural areas only when people like Goodman recognize the policies of their picked politicians led to the destruction of the family farmer. Goodman recognizes the problem but his vote perpetuates it.

Tom Liberman

Stan Lee and Trusted Financial Advisors

Stan LeeFor the last few years a tragic story involving Stan Lee and the demise of his fortune has been sprinkling into the news one depressing story after the next. It reminds me again of why it’s so important to have a trusted financial advisor in dealing with your estate. Most people think of long term growth but quick and brutal theft is also possible when working with people of diminishing mental capacity.

Mr. Lee either created or helped create many of the fictional super hero characters for Marvel Comics in the era before they were enormous money-making movie machines. He was paid a regular salary and didn’t earn much despite his superlative creative efforts. Later, when the movies came out he did receive his just due.

As is often the case when there is a large amount of money involved, nefarious villains slither into the picture. Not men and women like Doctor Octopus, the Green Goblin, and Black Cat; but everyday people who promise to help but instead plan to steal all the money quietly and without the need for super-powers. They just lie and gain your trust, those are abilities well within the capabilities of the average person who has no conscience.

In the United States it’s not particularly easy to get someone declared incompetent so as to protect them from themselves. I discussed this idea in other blogs but the gist of it is that people did so as a way to steal money from others. In fact, many times the person coming to steal your money isn’t some stranger but a relative.

This is where it’s absolutely vital to make sure you engage a reputable financial company to handle your finances, even if you have a relatively small amount like a few hundred thousand dollars in savings. Yes, you will have to pay that company fees for their services. These services certainly include wise investing which should increase your holdings, but also protect it from those who see it as opportunity. It may seem paradoxical to trust strangers over friends and family when it comes to finances, but when those strangers handle money for a living they are less tempted to steal and more likely to protect.

As we get older we often lose our mental acuity. This is clearly what happened to Mr. Lee and since the death of his wife, who apparently guarded the finances well, much of the money was stolen. Transferred from his estate to those of supposed friends and possibly family members intent on bilking him out of his earnings.

It nearly brings me to tears to see Mr. Lee in such a condition. Paraded around and used by horrible people as they steal his money and whisper lies to a man of diminished mental capacity. Sickened is the word that comes to mind.

It’s probably too late for Mr. Lee and his money, don’t let it happen to you or the ones you love.

Tom Liberman

Amazon and Strict Liability Laws

Strict LiabilityThe judicial branch has ruled a woman named Megan Fox, who had her home destroyed in 2015 when her son’s hoverboard caught fire, is not entitled to damages under the Strict Liability laws enforced in the United States. The case is quite interesting for a number of reasons that, as a Libertarian, I’d like to examine closely.

Strict Liability law essentially mean that anyone who manufacturers, distributes, or sells a defective product is liable even if they were not negligent in causing said defect. The concept took root in California in the 1950s in a landmark legal case called Greenman v. Yuba Power Products. The idea being the individual harmed by the defective device often has little means to recover from a devastating injury. Prior to Greenman, liability required proof the user did not use the product in an unsafe manner. This sort of negative proof is extraordinarily difficult to show and cases that crisscrossed the United States ended up with horribly maimed victims unable to get even basic compensation.

This inequity meant that Strict Liability spread from state to state and is now established in federal law as well. Case closed, you might say. Amazon sold it and owes the Fox family for the damage. The problem is that Amazon didn’t really sell it or even list it, it was purchased on their Marketplace website. This allows third-party vendors to sell products directly to customers, Amazon merely being a common location where buyers and sellers can more easily find one another. Therefore, legally they are not part of the chain of liability. Case dismissed.

The company that manufactured the hoverboard is from China, maybe. The hoverboards ended up being extremely defective and there were any number of incidents. The company vanished. There is no one to sue. There are an increasing number of cases like this one and Amazon has won victory after victory in court.

The problem with finding Amazon liable in this situation is that such a law would then extend to any third party that facilitates the selling of goods from one person to another. Companies like eBay, eBid, and Bonanza would most likely have to shut their virtual doors immediately. Websites across the country would have to eliminate their classified sections. So, I think the courts ruled correctly.

I’ll go even a bit further in that I’d like to examine the idea of getting rid of Strict Liability altogether. The base concept is companies are more easily able to absorb the costs of catastrophic injuries related to products even if it wasn’t really their fault. They can simply budget this extra cost. Everyone pays a bit more for the product to compensate those few horribly injured. This is the idea expressed by the judge in the Greenman case which drove the concept of Strict Liability to dominate state law.

In the hoverboard case news of incidents involving the devices spread across the internet via social media almost immediately. Amazon eventually sent a warning about the devices and instituted a payment plan that anticipated many returns. You might say, well, goodness, all the more need for Strict Liability but I say the opposite. This ability to research the safety of products so quickly shifts the burden back onto the consumer. If you purchase an item without doing readily available and easily obtained information about it, then anything that happens is really your responsibility.

It’s important to understand that in this case removal of Strict Liability would make no difference. The product was manufactured with obvious defects and the company that made them would be responsible no matter what. In addition, if a person uses a product in an inherently unsafe manner and his harmed, Strict Liability does not apply.

Is it time to end Strict Liability, particular for products that have been readily available for a period of time and whose potential to cause harm has been established?

I think it’s an idea worth examining. What do you think?

Is it time to rexamine Strict Liability Laws?

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Tom Liberman

Private Placement for the Casual Investor

private placementThere is a type of investment called a Private Placement that, over the last few years, has found an increasing market share in the financial world. Instead of investing in a stock or bond, a Private Placement is an investment opportunity offered to a limited group. It is sort of like Crowd Sourcing for finance.

There is nothing wrong with a Private Placement as long as it is backed by reputable investors. The problem is, more and more of these investment opportunities are really just scams. I recently read an article about a company called Woodbridge Group of Companies LLC that went bankrupt leaving a large number of investors in difficult financial situations.

The idea is simple enough. I plan on making various purchases which will generate a good amount of income. I don’t have the capital to do it. I enlist the aid of accredited investors to advertise my plan and attract investors. They give me money, I use the money on various investments, then I pay back the money as interest on the principal. After a period of time I return the principle to the investors and everyone wins.

Naturally, some people see this as a way to bilk unwary investors out of their money. They enlist others of a shady nature to do the selling and pay them excellent commissions. Eventually the investments don’t earn enough money to pay back to the investors so a Ponzi Scheme begins wherein new investors have their money transferred to previous purchasers. That’s what reportedly happened with Woodbridge.

One of the things that struck me about the Woodbridge case is they were not making outlandish claims of riches. The advertisements were offering a modest 8% return on investment which, in this Bull Market, is actually below what I’ve experienced over the last eight years or so. This level of sophistication might attract a savvier investor who is wary of get rich quick schemes. Certainly, the list of Woodbridge investors has some prominent names.

What does all this mean? For investors who don’t go through brokers, it means a lot. For people like me who use a financial advisor with an excellent track record, not so much. My advisors can spot these sorts of schemes from a mile away. Me? I wouldn’t know a good investment from a hole in the wall. I’m good at writing. That’s why I don’t do my own financials.

Something to think about if you’re considering a Private Placement.

Tom Liberman

Protectionism and the Steel Industry

steel-tariffPresident Trump plans to establish a large tariff on steel and aluminum. He is an avowed protectionist and that generally means making it more expensive for foreign companies to do business in the United States. I wrote a blog specifically about the trade in automobiles and our agreements with Mexico in January of 2017 but the situation is different enough this time that I thought I’d revisit the subject.

The basic idea behind almost any tariff is that foreign countries are engaged in supporting various industries in their nation and this gives those companies an unfair advantage over competing companies in the United States. I will not be getting into a discussion about the long-term impact of trade wars and how industry in the United States might be negatively impacted if countries choose to retaliate against our trade laws. Nor will I be talking about what constitutes unfair trade and our own transgressions in that regard. I’d like to keep today’s topic on the simple idea of the immediate impact of the tariffs.

Countries that import aluminum and steel into the United States will have to pay more in order to do business in this country. In the case of steel, a whopping twenty-five percent more. This means companies in the United States currently producing steel will gain a competitive advantage. Those companies might hire more workers and open more plants to start producing steel at a price higher than is currently being sold by those foreign countries but at a lower price than after the tariffs come into play.

Let’s imagine a steel manufacturer in a foreign country currently produces steel at a price of X. A competing company in the United States produces steel at a price of Y. X is less than Y and therefore foreign companies are selling us lots of steel. However, X is less than Y*1.25 and thus United States companies will be aided. They will benefit. That’s the main idea behind protectionism and at this point you might be nodding your head and thinking what a great idea it is. There is, as they say, a rub.

Everyone in the United States purchases and uses products with steel and aluminum in them. From soda and beer cans, to cars, to packaging, to windows, to doors, to siding, to many household items, street lighting, electrical lines, and more. Steel is used in buildings, roads, appliances, guns, cutlery, watches, surgical instruments, and more.

When the price of steel inevitably goes up because of these tariffs then everyone who uses these items, and that means everyone in the United States, every man, woman, and child, pays more. If people have to pay more for one thing then they inevitably have less money to pay for other things. Perhaps a family decides not to get their deck rebuilt or decides to pass on that Nashville vacation this year.

The case against Chinese steel has merit. It is possible the government is helping industry manufacturer steel at a price that cannot be met by U.S. steel companies. The question we must ask is who is hurt by this practice and who is helped?

The answer is quite straight forward. The companies and people in the United States who produce steel are hurt as are the taxpayers in China. The people who are helped is everyone in the United States including the steelworkers who get various products at a cheaper rate.

That’s economics. If you can get a comparable product at a cheaper price then you do so. You should do so. That’s a good thing. That good thing is what tariffs subvert. These tariffs will help a small percentage of the people in the United States, there is no doubt about that. That’s the appeal. We see an industry and want to help it, not thinking about the larger ramifications of such policies.

Whenever I’m talking about subjects of this nature I always remember the underrated gem, Other People’s Money. Danny DeVito plays Larry Garfield and gives an impassioned speech about the last buggy whip manufacturer. If a company can’t compete, they need to get out of the business before they are totally bankrupt.

If the government steps in and increases the price of steel then United States companies will be able to sell their product in the United States but there alone. No other country will want our high-priced steel. Eventually the tariffs will fail, as they always do. Then the steel companies and you will be back where we started. The difference will be that you’ll have less money in your pocket.

That’s the facts. That why economists don’t like tariffs and protectionist policies in general. They stave off the inevitable at an enormous cost.

Do I feel pity for the steel industry and the workers? You bet I do. It’s a sad fact of life. Everyone can’t be a winner in the game. That’s the nature of the world and of economics. President Trump would be far better off using taxpayer money on retraining steel workers for industries that can compete. I’d be all for that.

I cannot, I will not support tariffs. They just don’t work.

Tom Liberman

Cryptocurrency Mania Strikes the Tea Business

cryptocurrencyInvesting in particular ways during a financial bubble, in this case Cryptocurrency, is a good way to lose a lot of money but it also gives us amazing insight into the nature of greed. If we analyze and understand human nature during these events there is money to be made. Today let’s talk about Long Island Iced Tea Corp.

That company specializes in selling non-alcoholic beverages. What, you might ask, does this have to do with cryptocurrency? Good question. The answer is nothing. Nevertheless, the officers of the company decided to change the name to Long Blockchain and claim to be refocusing on businesses using something called blockchain. This technology is an integral part of cryptocurrency. We need not understand the particulars.

Immediately upon rebranding the company stock soared to unseen heights. What this means is people saw the name change and, in the mania surrounding cryptocurrency, immediately purchased shares. Now, the money people use to buy the stock has to come from someplace. Perhaps their saving account or their child’s education fund. The assumption of the purchaser is that, like other cryptocurrency companies, the value will rise dramatically. They hope the stock price will continue to rise and they will eventually sell their shares for an enormous profit.

There is some reality to these desires. Those who buy low and sell high stand to make a lot of money. The danger is you don’t know exactly what is low or what will be high. It’s entirely possible Long Blockchain has already reached its peak price, that anyone purchasing now will lose a lot of money. This does not dissuade the speculative investor. It is something that can be taken advantage of by a wise investor.

When perception is not aligned with reality mistakes will be made. This is clearly what is happening with cryptocurrency speculation and Long Blockchain. The company is a tea company. They have an infrastructure designed to manufacture and distribute tea. They are not well-positioned to function in competition with existing blockchain companies.

Now, I will get to the point of all this. In the same way Long Blockchain knows little or nothing about blockchain technology, the average investor, you, knows little or nothing about the nuances of the market. You see something interesting and make a purchase. In the same way Long Blockchain is most likely doomed to failure, so is the average investor. The women and men who know something about investing, who can properly take into account perception and reality; are brokers. They can help you invest your money wisely. They can take advantage of misperception without so easily falling prey to it.

The lure of easy money is almost always false and the people most vulnerable are those who have the smallest disposable income. In essence, the Middle Class. The poor cannot invest at all and the wealthy have financial advisors.

You say to yourself it’s just a bit of money and there is the chance to get rich. The same applies to purchasing lottery tickets. It’s your money, do with it as you will. I’d advise you to get sound financial advice and avoid get rich quick purchases like Long Blockchain. If not, well, my financial team is happy to take your money and I’m thrilled to pay them for doing so.

Tom Liberman

The Case Against Sanctions

sanctionsWhen the leaders of a nation decide they want to act in a way the United States perceives as detrimental, the general solution is economic sanctions. The idea being that such sanctions hurt the offending nation and politicians eventually give up on their policies. What I’d like to discuss today is what really happens when we implement economic sanctions on another nation.

One of the main arguments against such sanctions is the leaders of the nation don’t suffer any impact but the average person in said country is economically disadvantaged. The argument for sanctions hopes the people will blame their government for lack of goods. Unfortunately, I think it is much more common to blame the nation imposing the sanctions. It drives a country deeper into behavior we dislike. However, this objection is the least of my troubles with sanctions.

One of the biggest problems with sanctions is that, like a sword, they cut both ways. When we limit trade with a foreign nation we are now preventing companies within the United States from making a profit by selling to willing buyers. As an example, I have a number of family members and friends who work for Boeing and they are hurt by the fact their employer cannot sell goods to quite a few countries in the world. For many companies, this is certainly the difference between growth and hiring and shrinkage and layoffs. There is no question all the economic sanctions we are currently prosecuting badly hurt industry in the United States. How much business could be, and should be, done with Cuba?

Another enormous problem is there is largely a “Don’t Ask, Don’t Tell” policy when it comes to sanctions. When we ban selling or purchasing a product from a particular nation it hardly stops such activity. It simply pushes it underground. Many of the companies and nations who supposedly support such sanctions actively work around them in a variety of ways, chief among them is simply maneuvering and repackaging product.

Basically, if we aren’t allowed to sell something to a country, that product is shipped to a third-party nation that does trade with the proscribed country and the commodity is simply packaged in a container to disguise its point of origin. And, of course, the reverse happens in purchasing such goods. The offending country ships things to a willing nation who then repackages and sells back to the United States.

The second problem leads to the third, which is the creation of a black market where criminals gain huge profits at the expense of regular consumers. The moving of these goods must be done by extralegal sources or officials who are taking bribes to perform the necessary maneuvering. Now we are empowering criminals and corrupting officials. The product should be shipping at a certain cost but the price goes up because of the sanctions. Thus, when you purchase a product that might somewhere on the supply chain pass through the country with sanctions being imposed against it, you pay an increased price.

Likewise, the illegal maneuvering to avoid sanctions leads us to the fourth problem: Enforcement. Thousands of people and billions of dollars are spent trying to prevent nations and companies from maneuvering their goods in an attempt to avoid sanctions. We have agents at ports around the world inspecting packages and trying to make sure they actually come from the country of origin the packaging claims. This costs taxpayer directly, as opposed to the more indirect cost of higher prices.

Highly trained law enforcement officials spend their days and nights trying to figure out how nations and corporations are avoiding the sanctions when they could well be doing something more useful. The amount of time and money spent trying to enforce sanctions is astronomical.

The final point of my argument against sanction is they simply do not work. The nation in question continues functioning in a fairly normal way. They continue to sell their goods to willing buyers; either nations that have not imposed sanctions or through a black market.

Sanctions apparently do no good whatsoever, cost us huge amounts of money, waste the time of highly trained professionals who could be doing something else, generally harm the average person of the offending nation thus cementing their hatred of the United States, corrupt officials, funnel money to criminals, and cause an increase in the price of the goods you purchase. Yay!

Let’s take a quick moment to look at the results if we continued to trade with nations who we consider our enemies. Our companies make a profit, the people of those nations look at us more favorably, we pay lower prices, and there is an opportunity to open lines of dialog to bring about the change we are attempting to create through sanctions.

It’s a natural reaction to want to punish nations we think are behaving poorly but a better strategy is to engage. Better for everyone.

I ask for all sanctions, to all countries, be dropped immediately.

Tom Liberman

Rick Perry and Supply and Demand

rick perrySecretary of Energy Rick Perry apparently incorrectly defined Supply and Demand while speaking to workers at a coal-fired power plant in West Virginia. What I’d like to talk about today is Perry’s understanding of the idea of Supply and Demand, not so much his mistaken understanding of the meaning.

What Perry said is this: Here’s a little economics lesson: supply and demand. You put the supply out there, and the demand will follow. The real law of Supply and Demand does not mean that, but I’m not going to get into what it really means. I’d like to discuss Perry’s actual statement, which presumably he believes.

The idea is related to something called Say’s Law. Basically, if a product is put out there, people will purchase it. It’s not exactly what Perry said but it has correlation. Say’s Law was largely meant as a way to understand how we get gluts of particular products, excess that people are not purchasing. It was generally considered correct until the Great Depression when a great supply of workers created no demand. It is now almost the opposite of current economic theories. Supply is created by demand. If people want something, others will produce it.

I don’t want to get into a complex economic dissertation here, one I am not qualified to make. It seems fairly logical to me that the very idea people will simply purchase something because it is available is nonsense. This is even more true in today’s connected world than it was around the turn of the century, primarily because people have access to far more information. They can look at competing products and decide which they want to purchase.

Now, we could talk about marketing. Certainly, that gets people to purchase products they perhaps do not need or want. Even then it is not the mere presence of the product that is driving demand. You can ask any retail store manager. If they put more of a low-selling product on the shelf, they are largely going to have extra inventory.

That’s what disturbs me about the statement. Not that Perry incorrectly defined Supply and Demand, but that he apparently thinks what he said is true. He wouldn’t have said it otherwise, unless he misspoke, which is possible. It seems to me he said what he meant to say.

Happily, it’s not a big deal, Perry is the Secretary of Energy. Wilbur Ross is the Secretary of Commerce and if he made that statement, well, then I’d be concerned. So, basically, a bit of a useless kerfuffle. Still, I learned something about economic theory, so it wasn’t a total loss.

Tom Liberman

Malaysia Steals, Australian Gifted, United States Steals

jho-low-malaysia-chronicleA fellow by the name of Jho Low worked as a financier in Malaysia. He is accused of taking money from a fund called 1Malaysia Development Berhad. He then used this money to buy jewelry for Australian actress Miranda Kerr. Now the United States has taken her jewelry as stolen property.

I suppose, on some level, I understand the general idea that someone who steals something should pay back what was stolen. The reality is that is not how the justice system works. If someone murders someone there is no way to give life back. The majority of crimes cannot be dealt with in an eye for an eye fashion. We have a criminal justice system that weighs the various crimes and assigns penalties based upon them. This is our attempt to arrive at justice.

I’m all for justice, but this sordid series of events is anything except. Let’s follow the trail from beginning to end. The Malaysian government controls 1Malaysia and puts money into the fund from revenue generated by taxes. This is money that belonged to people in Malaysia and was transferred to the government.

Now, the money was siphoned off to individuals like Low to be used not for the benefit of the people of Malaysia, but for him individually. He used this money to purchase jewelry from various suppliers. These suppliers sold him the jewelry at a fair market price in good faith. They received money for the jewelry. Said jewelry was then given to Kerr while she and Low were dating.

As a gift of tremendous value, it is treated as income. Essentially Kerr had to report these gifts and their worth to the Australian government who certainly taxed her at the appropriate rate. It is largely the same as earned income from a tax perspective.

Now the United States government has forced Kerr to turn over the jewelry to them. In addition to the jewelry they’ve seized other assets worth approximately $1.7 billion. Why the United States is involved at all is not clear to me, but I’m guessing the assets in question were purchased in the United States.

So, from what I can deduce, the government of Malaysia stole a bunch of taxpayer money from its citizens and now the United States has stolen the property purchased with this money.

What would be justice? Quite simple. Return the items to the sellers in exchange for the money paid for the goods and then give that money back to the taxpayers of Malaysia. Anybody think that’s going to happen?

Now, it certainly wouldn’t be a perfect solution as the gifts have likely depreciated since their original purchase but it would be more just.

The way things stand we simply encourage foreign governments to rinse and repeat. Steal a bunch of money from taxpayers, buy lovely things, pay taxes on the purchases, pay taxes if they are gifted, use them for a while, and then give them to the U.S. government.

All we’re doing is collecting money from the stolen goods at every step of the way. That money no more belongs to the United States than it does to me. The worst part is this isn’t unusual. Local, State, and Federal government steals from thieves all the time. They call it seizures but it’s nothing more than theft.

Will the United States pay back the taxes collected on those purchases? Will Australia? Will Malaysia? Will we give the original money back to the citizens of Malaysia? They are the only victims here and they are not recompensed in any way. Everyone else makes a profit and one or two scapegoats will spend a few years in prison.

That’s government for you.

Tom Liberman