septa strike | conspiracies abound

Article: Union leaders turn down “sensational” deal

Imagine my surprise when earlier today I wander down to the bus stop at 8th and Arch and wait patiently for a bus that was never going to come. Apparently, at 3am SEPTA’s largest union went on strike impacting service on all subways, buses and trollys in the city. You know… the service that over one million people rely upon every day to get to work and school.

Last I had heard was the union agreed to take a strike off the table during the World Series as long as Governor Rendell and Mayor Nutter were involved in negotiations. Not even four hours after the last pitch was thrown did the union decide to reject the offer on the table causing Rendell pull out of negotiations saying, “They just didn’t know when to declare victory.”

Let the conspiracy theories start: “Rendell and the city were just trying to avoid national embarassment during the World Series. Now that the game has moved back to the Bronx, screw ’em.”

Don’t these unions ever learn that the only people impacted during a transit workers strike are the indivdiuals who are just trying to get to around. These individuals aren’t going to get mad at management for the strike, they are going to get mad at the employees who walked out.

Let’s just hope it dosn’t take them too long to figure this out…

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the media’s perpetual misunderstanding

Article: CNN Money: Washington’s inconvenient truths

Please indulge me as I discuss another misinformed article on CNN Money / Fortune. I believe the intent of the article was to analyze the effect the recent “economic recovery” will have on the mid-term elections tomorrow. Unfortunately,  somewhere along the way someone took a seriously wrong turn…

Instead of injecting capital into banks who were unlikely to lend the money back out in such a dismal credit environment, Sinai argues the government should have supported housing prices — the root of the crisis — by directly intervening in the mortgage market.

While this statement starts off with a valid point it quickly takes a turn into incompetance. Yes, a mid-tier cause of the crisis was housing prices, however it wasn’t the housing prices were falling which was a problem, it was the fact that housing prices were way too high. The price of housing increased much too fast at an unsustainable pace due to artificial demand. (Artificial demand factors include low interest rates, Fannie Mae & Freddie Mac, and legislation encouraging lending to individuals who would not normally recieve a loan.) By supporting housing prices at a level created by artificial demand, you only serve to delay the enevitable attempt at economic equilibrium.

Of course, Fed monetary policy, which has kept interest rates at effectively zero, has also “had a significant effect on the economy,” says Sinai, producing a stock-market rally that caused wealth gains, and boosting investor confidence. And a lower dollar, he notes, has helped exports, which showed a healthy increase in last week’s GDP figures.

I’ll save for another time the problems with the way in which we measure Gross Domestic Product (GDP.) Once again, Sinai is only correct, but not for the right reasons. Fed monetary policy has had a signifigant impact on the economy, but it hasn’t resulted in the types of tangile gains to which he alludes. Yes, the dollar is low (read: weak) which helps exports but does nothing for the millions of things the United States imports every day. As a net importer the short-term result here is that we all pay more for the things we do not produce at home.

The “healthy” increase in last week’s GDP figures are the result of some one-time consumer driven incentives to make purchases in the 3rd quarter. (e.g., cash-for-clunkers, first-time home buyers tax credit, etc.) Let’s wait until the 4th quarter numbers to see how sustainable this really was.

Additionally, the Fed’s actions and their impact on the economy have not really had time to completely work their way through the system and make themselves known. I’m sure in two years we will all be feeling the effects of an inflated money supply in the prices we pay for gasoline, food and  other goods. And then we’ll know just how much the Fed’s monetary policy has helped everyday Americans.

As the economy improves, economists will give a pat on the back to Bernanke — even as they worry about inflation and what will happen when he takes his foot off the money accelerator.

Have we learned nothing? Didn’t people say this exact same thing about Greenspan back in the earlier part of the century? Aren’t we cursing him now for the period of extreme low interest rates that lead to these asset bubbles in the first place? My, how quickly we forget…

The best part of this entire article is the wonderful commentary from the Internet community at-large. People throw around the term inflation when they mean rising prices. They talk about how the stimulis has positively impacted the economy, yet provide no concrete examples other than, once again, rising asset prices with no fundamental economic growth.

Please remember, an economy largely based upon consumer spending with no underlying rise in the standard of living to support such spending is not a strong, or sustainable, economy.

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has the free market failed?

I am really tired to turning on the news or reading an article talking about the evils of the “free market” and how we need to put more regulation in place to prevent business from taking advantage of consumers.

When someone says “free market” what do they think of? We’ll, they probably think of the United States and the New York Stock Exchange. More recently, they also probably think about corruption, greed, the big banks, bailouts and absolute failure. Unfortunately, the United States doesn’t actually operate a free market. What we think of as the “free market” today is really a carefully orchestrated process which when you really think about it, no one should have tried to interfere with in the first place.

A truly free market means:

  • No Acts of Congress to make buying a house (or anything) more affordable.
  • No bailouts for Citi Bank, Bank of America, AIG and Detroit
  • No Fannie and Freddie
  • No Federal Reserve
  • No Federal “Stimulus” program aimed at restarting an unsustainable cycle of consumer spending
  • NO GOVERNMENT INVOLVEMENT IN MONETARY POLICY WHAT-SO-EVER
  • No artificially inflated housing market (prices must decline to the level at which people are able to consume them)
  • A currency which is actually based on something other than government decree (e.g., the gold standard)
  • Falling prices and a rising standard of living, just like we had before 1914

However, since we have none of that, we do not have a free market. We have a managed (and chaotic) market. Legislation is passed which misallocates resources which results in an unsustainable boom. This boom eventually busts. This bust is then followed by MORE legislation which attempts to artificially prolong the boom…

The biggest culprit in ALL of this has been the ever expanding, and completely misguided Federal Government. The (hopefully) well-meaning yet continual intrusion into the lives of individual citizens and organizations has caused a serious misallocation of resources and risk. Every-time a subsidy or tax is placed on something a decision is made by investors and consumers. Subsidize or tax something too much a misallocation of resources occurs. For example, provide a subsidy on corn and all of the nations farmers will produce corn, even when it wasn’t profitable before. Next thing you know, corn is in everything because it is suddenly cheaper than other alternatives. Take a look at the food you eat and the products you put in your car, more likely-than-not whatever you consumed today probably contained a good portion of corn-product in it. (Ethanol, Corn Syrup, Corn Starch v. Gasoline, Sugar, Flour)

How about another example? Lower interest rates to zero (a range they would not normally be in if the market dictated terms) and suddenly it becomes very cheap to invest in long-term projects such as buying a house or expanding machinery in a mill. The problem is, everyone now makes the mis-informed decision to take on these large scale investments, however the underlying economic fundamentals are not there. Meaning, there are only so many resources which can be consumed at any given time. Eventually the number of houses, or number of machines you can put in your plant will run out creating scarcity where they never should have been any. This in turn raises prices to a level they should never have been at. With no underlying economic fundamentals to support this artificial growth and inflation, and with a limited number of dollars to go after certain things eventually it will all come crashing down. So, we can see here where a simple thing like trying to stimulate the economy by setting an artificial interest rate, eventually causes collapse. Had the economy been allowed to set its own interest rates and prices, everyone would have been better off.

We were told since children that the business cycle is part of what a free market means. And that we need good economic stewardship (read: regulation) in-order to prevent the bust. One thing is for certain, you can not eliminate the boom-bust cycle without eliminating the factors which cause this cycle. Get over the notion that inflation is just something caused by rising oil prices and deflation is the devil. Rising prices are the result of the managed monetary policy put in place by the Federal Reserve. (i.e., Too much cheap money chasing too few actual goods and services.)

Everything world governments have done to date only serves to prolong the eventual day of reckoning. Suddenly those commercials where people are paid in gum (something tangible) don’t seem like such a bad idea.

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pyt

I trekked out to Northern Liberties last night to try out the Royal with Cheese from PYT (Pick Your Topping.) I had trouble getting a cab so I ended up walking, which wasn’t bad. It only took about 25 minutes from my place to the Piazza.

Honestly, I have to say that this is the best burger I have had in Philly so far. Its got just the right amount of “juicy”, American cheese, and Martin’s Potato roll. Not to mention the fact that their “special sauce” is nice and unique. There are some nice little chopped up sautéed red onions. Oh man, I could go for another one right now. I’m pretty sure if you ate that burger five times a week you would be making a nice trip to the cardiologist in short order.

Another interesting tid-bit about PYT is that if you go to the back of the unisex bathroom and enter the unassuming, “looks like a storage closet” door, you’ll enter the back-room club with a live DJ. Pretty unique for a burger joint.

While there, I was convinced that I had to try their Pickle Shot. This particular concoction is basically a shot of whiskey chased by a shot of pickle juice. Personally, I hate pickles and I was also pretty sure I hate pickle juice. Everyone at the table and the waitress managed to convince me that it would be the best thing I ever had. So I tried it, and as predicted I almost gagged on the pickle juice. Although everyone else said that it covered up the burn of the whiskey quite nicely. The shot was only $3, so if you just want some cheap whiskey, you might as well order that.

All in all, even though the pictures on the wall of people eating overly gooey burgers are incredibly disgusting and the pickle shot was the worst idea in the world, they make a pretty damn good burger which in the end is what I was looking for. I will definitely be back.

Between Shake Shack, PYT, Square Burger and Cavanaugh’s I think I am developing a new found love for the cheeseburger. I’m not saying I want to be one of those people who wants to try every burger in every state in the union, but I really do enjoy a good one 🙂

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really?

Did I miss a full moon or something? What is up with the world this week?

An ecclectic collection of world leaders headed to NY today to drone on and on about how much they hate the US at the UN.

Michael Moore goes on the talk show circuit to discuss his new movie about how he hates capitalism. He also hopes you won’t mind parting with $10 to go see it in the big movie, corporate movie theaters where it’s debut is planned.

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flu shots, $24.99!

Retailers to offer seasonal flu shot

Nothing like companies capitalizing on the confusion and fear H1N1 will offer us this fall. Oh, not to mention the fact that this thing will probably mutate into some crazy strain based on the fact that everyone decided to stop off at their local Walgreens to pick up a quick vaccination!

God bless America.

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health insurers

Health insuranres asked to detail executive pay

I can just see it now, Ronald Williams, CEO of Aetna makes $8.4m per year while poor Grandma is $1m in debt due to an emergency medical procedure while she was uninsured.

Once again we have an example of Congress trying to stir up a riot related to a symptom when they should really be looking at the root cause of why Grandma’s is really in this predicament.

Was it because the hospital and doctors charged a rediculous fee for their services? Perhaps that was due to the fact that those malpractice insurance companies charge insane premiums to their members which is ultimately due to the fact that we have an overly letigious society.

Maybe to really fix things we have to start at the real reason all of this stuff costs so damn much. How about passing some legislation capping the amount of money patients and their families can receive as part of a malpractice claim. And then, perhaps we cap the limits on the premiums malpractice firms can charge their members for  specific levels of liability. This isn’t exactly a pro-market solution to the problem, however if we are going to meddle with something, how about we at least try and fiddle with the root of the problem.

Don’t even get me started on the privacy issues and unnecessary hassle listing every private citizen employed by these companies who makes more than 500k/year raises just to satisfy the whim of our Congress.

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