Sunday, April 29, 2012
Wednesday, April 25, 2012
Link o' the Day
http://www.bobkrumm.com/blog/?p=2354
Hmm, is it ethical to apply this much calculus to a napkin sketch?
Friday, April 20, 2012
Tuesday, April 17, 2012
A government big enough to give you all you want
It's not Republican, it's not Democrat. Honestly, it's not liberal, it's not conservative ... It's economics," says Economist Art Laffer. "If you tax people who work and you pay people who don't work, don't be surprised when you get a lot of people not working. -- Art Laffer
Previously, with the help of Hauser's law, we looked at the revenue available to government through taxation.
Hauser's law neatly shows that the amount of money available to the government is nearly constant, irrespective of tax rates. If the relationship holds, the amount of revenue is always going to be about 19% of GDP. When faced with this information, wouldn't it seem appropriate to focus on increasing GDP as a way to increase revenue?
The hidden time bomb in this relationship is the realization that there is only 19% of blood that can be squeezed out of the income of the people. However, the government has ways to spend more than they take in.
But, you can also chart government spending as a function of GDP.
The spending has blown past 19 %, and may never look back. Does everyone see where this is going?
Previously, with the help of Hauser's law, we looked at the revenue available to government through taxation.
Hauser's law neatly shows that the amount of money available to the government is nearly constant, irrespective of tax rates. If the relationship holds, the amount of revenue is always going to be about 19% of GDP. When faced with this information, wouldn't it seem appropriate to focus on increasing GDP as a way to increase revenue?
The hidden time bomb in this relationship is the realization that there is only 19% of blood that can be squeezed out of the income of the people. However, the government has ways to spend more than they take in.
But, you can also chart government spending as a function of GDP.
The spending has blown past 19 %, and may never look back. Does everyone see where this is going?
Edgar the Entrepeneur
A man who gives his children habits of industry provides for them better than by giving them fortune. -- Richard Whateley
Edgar the Entrepeneur is a video cited by the Ludwig Von Mises Institute, which beautifully describes the consequences of minimum wage policies. I recommend you see it.
I have long advocated that minimum wage laws should be abolished. They are the cruelest hoax currently being perpetrated by the elected ones. I have two teenage boys neither of which, apparently, is worth $7.35/ hr. Both are good workers with many skills, but neither is employed despite many applications.
I would quickly send them both to work for a combined $7.35 an hour just to get them some experience. Each of them would be better off, as would the lucky company that could use their talents. But sadly, because of misguided public policy, the three bottom rungs on the ladder are missing.
Qui Bono? Who is this benefitting? China I suppose. China and the other growing countries that have an unlimited supply of 3 dollar labor. Unfortunately, we would rather export the jobs than allow the companies that produce the products succeed in manufacturing those goods here.
Friday, March 23, 2012
Chart of the Day #7
Article by Lance Roberts of Street Talk Advisors. He points out that austerity will be the opposite force on the growth needed to pay for the Ryan program (or most any other plan floated thus far, for that matter). I think he is right, but you have to start somewhere.
Tuesday, March 20, 2012
Friday, March 02, 2012
Oil is money
Gas is $3.77 a gallon for one reason and one reason only: It's worth it. --Wizer One-Liner #28
We've been watching carefully the energy markets now for several years, and learning about the mechanisms and challenges of the oil and gas delivery industry. There are several clear axioms emerging from this study that we'd like to share with you.
1. Peak Oil sounds like a crackpot theory, but it is a simple metric that tells a large part of the story. Oil discovery in terms of estimated volume accessible in ground has declined every year since 2006. This means one of two things: Either the world's oil companies have stopped looking, or they've stopped finding. I would be very surprised if they've stopped looking. After all, it is the one resource that enables their existence. Finding the oil is another matter. If you put the same resources on finding oil, and the return on those resources are less, then there might be a budding scarcity. That is the underlying question asked.
2. All scarce goods (which includes just about everything except sand, air, and mosquitos) are subject to the laws of economics. There is a price at which it does not pay to produce the stuff, and a price at which it does not make sense to buy it. Those numbers are closer together than you might think.
3. All economics markets for scarce goods have a price which is determined by supply and demand. On the supply side there are input costs, and for gasoline the most obvious ones are the cost of the oil itself, and the costs of delivering it to market. When the costs of extraction (i.e., the process of fracking for example) begin to rise, the willingness of the suppliers to sell it at the same low price diminishes rapidly. If the market conditions were such that $2.50 per gallon gas was remotely possible, we'd put a gas station next to the Amoco that beats him every day.
4. On the demand side, there's the growing demand of the world's fastest growing automotive markets for new sources of gasoline. The oil companies have a choice of selling the gasoline here for $3.77 or trucking it to India instead and getting $6.00 for it.
It's kind of amazing that the price is as low as it is.
What would we do if gas was $6.00 a gallon? We might alter our trajectory a bit, but we will pay it. Why? Because it is worth it. Let's look at the "real" cost of gasoline. In pure inflation terms, we've been cruising along since 1985 with an extremely low price of gasoline.
The republicans would have you believe that we can return to $2.50 gasoline. I think that is only possible in two ways: One, stop depreciating the dollar, or stop exporting as many of them as we do to OPEC. I don't think they have a realistic plan to do either.
The democrats believe that imposing some sort of forced alternative energy program is going to fix the problem. To this we offer an analogy: If you have 50 miles to go to the next gas station, and put 20 miles worth of gas into the car, how do you think that's going to turn out? If you shut off the engine of production before the oasis is reached, you don't get there at all.
Oil, and the cheap energy it provides is responsible for a remarkable period in this country's history. Inside every gadget, tool, piece of furniture, or building is enormous pools of cheap energy. It is the building block of the 20th century. In the 21st century, we are going to have to pay more for that boost. At the end of the day, would I rather pay $3.77 for a round trip to the grocery store, or would I be just as happy to walk the 20 mile round trip? No, even at $6, it's worth it.
We've been watching carefully the energy markets now for several years, and learning about the mechanisms and challenges of the oil and gas delivery industry. There are several clear axioms emerging from this study that we'd like to share with you.
1. Peak Oil sounds like a crackpot theory, but it is a simple metric that tells a large part of the story. Oil discovery in terms of estimated volume accessible in ground has declined every year since 2006. This means one of two things: Either the world's oil companies have stopped looking, or they've stopped finding. I would be very surprised if they've stopped looking. After all, it is the one resource that enables their existence. Finding the oil is another matter. If you put the same resources on finding oil, and the return on those resources are less, then there might be a budding scarcity. That is the underlying question asked.
2. All scarce goods (which includes just about everything except sand, air, and mosquitos) are subject to the laws of economics. There is a price at which it does not pay to produce the stuff, and a price at which it does not make sense to buy it. Those numbers are closer together than you might think.
3. All economics markets for scarce goods have a price which is determined by supply and demand. On the supply side there are input costs, and for gasoline the most obvious ones are the cost of the oil itself, and the costs of delivering it to market. When the costs of extraction (i.e., the process of fracking for example) begin to rise, the willingness of the suppliers to sell it at the same low price diminishes rapidly. If the market conditions were such that $2.50 per gallon gas was remotely possible, we'd put a gas station next to the Amoco that beats him every day.
4. On the demand side, there's the growing demand of the world's fastest growing automotive markets for new sources of gasoline. The oil companies have a choice of selling the gasoline here for $3.77 or trucking it to India instead and getting $6.00 for it.
It's kind of amazing that the price is as low as it is.
What would we do if gas was $6.00 a gallon? We might alter our trajectory a bit, but we will pay it. Why? Because it is worth it. Let's look at the "real" cost of gasoline. In pure inflation terms, we've been cruising along since 1985 with an extremely low price of gasoline.
If there is a danger sign in peak oil signals, it is that the adjustments will be harder to make the longer we wait. We have literally been borrowing and spending oil. Like money, it is only replenished through the hard work of people and their private organizations. And people will have to work harder now to extract the oil, just as people will have to work harder to pay down the enormous government deficit.
The republicans would have you believe that we can return to $2.50 gasoline. I think that is only possible in two ways: One, stop depreciating the dollar, or stop exporting as many of them as we do to OPEC. I don't think they have a realistic plan to do either.
The democrats believe that imposing some sort of forced alternative energy program is going to fix the problem. To this we offer an analogy: If you have 50 miles to go to the next gas station, and put 20 miles worth of gas into the car, how do you think that's going to turn out? If you shut off the engine of production before the oasis is reached, you don't get there at all.
Oil, and the cheap energy it provides is responsible for a remarkable period in this country's history. Inside every gadget, tool, piece of furniture, or building is enormous pools of cheap energy. It is the building block of the 20th century. In the 21st century, we are going to have to pay more for that boost. At the end of the day, would I rather pay $3.77 for a round trip to the grocery store, or would I be just as happy to walk the 20 mile round trip? No, even at $6, it's worth it.
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