Europeans Get It

In our recent economic downturn, there have been tons of workers laid off.  I recently read an article on CNN.com about european workers.  The article was about some upcoming strikes and whether european workers were lazy.  I was amazed at the intelligent comments that were made by the readers.  I expected a lot of “Hell yeah they are a bunch of lazy bums”.

We work to provide for our lifestyle and families.  What these readers say is true.  The Europeans get it, we Americans do not.  They also hit the nail on the head about workers being consumers.  When your economy is 70% consumer driven, laying off workers is extremely short-sighted. It may help your bottom line in the short run, but it just starts a downward spiral of unemployment, lower tax collections, less purchasing, and eventually laid off workers from other companies will stop buying your product pressuring you to lay off more people and perpetuate the cycle.

Here are the posts:

What we have forgotten is that workers have a second capacity. That of consumers!
Of course if the worker works more and is paid less his/her productivity goes up and the economy is more competitive.
But the same person will have less time and money available to consume, what his/her highly competitive and efficient neighbour has produced.
So it’s always easy to blame it on whatever highly paid section of the workforce, but in the long run all are in for the same treatment in order to compete.
Yeah if you ask people on the street if the economy should be more competitive they will say yes. Tell them that they should revert to the standards of living of the Chinese and I’m not sure you’ll get the same answer

Oh come on, please give us a break. The Europeans and Americans all have Strong work ethics. The problem is greedy corporations and governments that are in bed with them.

Some of the Europeans still have balls. If the people don’t look out for the people, no one else will? It’s all about the corporate profits, the profits, the profits! If corporations had their way, slavery would be legal. But since that’s out of the question, let’s move the jobs to the cheapest wages in the world. Who cares if that place happens to be China, a place where if you protest over any subject, you could be shot down. A place where they don’t even play by the “so-call” Free trade rules. So now we’re not competitive? PLEASE, What free man can complete with slave wages?

No!! Europeans value work for what it should be, i.e., a means to an end. The end is a happy and healthy life-style. As an American living in Belgium, I can attest to the work ethic of Europeans in general. It’s the Americans who have it ass-backwards.

I don’t think the labours are living in the past , they are just trying to better their jobs and save them , which is apt for any one to do. We will see that happening in US soon , protectionism will always stay , doesn’t matter how much we make the so-called progress

No their labor laws are what we should have here in the USA. This is slavery compare to them. We do not have labor law here we only worry about discrimination. I work for a company with about 60 workers. First year no vacation 2nd year 1 week and two for the rest. They told me when can I take them and just under special situation I was allowed to take two weeks together. Only twice I was able to do it in 10 years. No pension plan, 401k available but they did not contribute. Group health insurance was available but the company paid nothing. If I left on time my coworkers looked at me and asked don’t you worry you will be fired. By the way I did not swiped the floor I managed the network. We are the most productive workers in the world, my foot we work 45-50 ours and get paid $40 that’s all.

© Scott Abbott and Common Sense Musings, 2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Scott Abbott and Common Sense Musings with appropriate and specific direction to the original content.

Profit vs. Taxes

I hear a lot of people complain about taxes.  However I hear very few people complain about profit.  Without getting into the vagaries of whether each is good or bad I would like to conduct a simple exercise.  Let’s follow the money.

I go to the store and buy an item that is $100.  In my neck of the woods the sales tax is 8%.  Let us assume that this product is produced by one company, sold to a wholesaler, then sold to the retailer, then finally to the consumer.  If we follow the general rule of thumb that businesses sell their products at 100% mark up, we can assume the first company produced the item for $12.50.  It sold the item to the wholesaler for $25. The wholesaler sold to the retailer for $50 and the retailer sold it to you for $100.  I know that this amount of mark up is not always the case, but it is a good average for our example.

So even if we allow for 23% embedded tax (fairtax.org estimate), you paid $31 in tax versus $87.50 in mark up.  Or $64.50 in mark up if you subtract out the embedded taxes of $31.  It has been a while since my basic math classes but $64.50 is over twice $31.

Yes I understand that not all of the $64.50 is profit.  Part of that money goes to pay expenses and salaries.  But my point is this.  People complain about something that they actually have control over through their votes (taxes) but never udder a word of dissatisfaction over a retail distribution system that costs them over twice as much that they did not ask for, nor choose to join.

Look at it another way (and this does speak just to pure profit), add up all of the yearly profits for all businesses and compare that to all tax revenue taken in by government in a year.  Guess which number is bigger? Way bigger.  You pay much more in mark up on items, then you will ever pay in taxes, period.

© Scott Abbott and Common Sense Musings, 2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Scott Abbott and Common Sense Musings with appropriate and specific direction to the original content.

How do you lose billions of dollars?

How does a bank “lose” billions of dollars?  I just do not get it.

Lets use our village to analyze this statement.  Instead of billions of dollars we will keep it simple and use the figure of $100,000.

One of our villagers, Bob, wants to build a new house.  He does not have enough money on his own to pay for all of the material and labor that it will take to build the home.  Another villager has some extra cash lying around.  We will call him the bank.  He loans the first villager the $100,000 it will take to build the house.

Bob hires a contractor to build his house.  The contractor buys the material and pays the sub contractors to actually build the house.  Bob gives the contractor $100,000.  The contractor in turn takes parts of that $100,000 and breaks it up buying various materials and paying various workers and he keeps a percentage for himself.

So lets break it down this way: contractor keeps $20,000, he buys $40,000 worth of material, and he pays four sub contractors $10,000 each for their labor.  You with me so far?  So far we have not lost any money.

At this point the contractor and sub contractors use their money to pay for goods and services to live their life (cable bill, groceries, new clothes, etc).  The material suppliers also use their money to pay bills or pay employees.  The $100,000 is still in the economy it is just dispersed around in smaller chunks.

In an unfortunate economic downturn Bob looses his job and his ability to pay back the villager that loaned him the money.  What the bank lost was not $100,000.  What it lost was Bob’s promise to pay back the $100,000.  The $100,000 filtered through the village economy and is still somewhere in that economy. It is not lost.

To look at it another way, if banks loaned out billions of dollars, that billions of dollars was spent on something.  The businesses that the money was spent on should have shown a corresponding increase of billions of dollars.  Where are those businesses in the news? Even if the money is more dispersed among multiple entities, the amount of money did not diminish, it is just more spread out and someone gained.

Or is there something else going on here like concentration of wealth?  If so much money was loaned and spent where are the corresponding increases in revenue at the businesses that received the money?

So when you hear about banks loosing billions of dollars, ask yourself “where did the money go?”

© Scott Abbott and Common Sense Musings, 2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Scott Abbott and Common Sense Musings with appropriate and specific direction to the original content.

The war on drugs

You lost!!!!!!

Get over it and quit wasting BILLIONS of taxpayer dollars a year.

While I do not condone or use illegal drugs, it is abundantly clear that the US has lost the war on drugs.  Do like other civilized countries and provide reasonable use laws, tax the hell out of it, prosecute DUI, and provide treatment not jail time.

© Scott Abbott and Common Sense Musings, 2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Scott Abbott and Common Sense Musings with appropriate and specific direction to the original content.

Entropy

A basic explanation of entropy is that everything seeks it lowest energy level.  I first learned this concept in college chemistry class.  As it was taught to me it applied to electrons, and atoms, and such.

I found this on dictionary.com:

The tendency for all matter and energy in the universe to evolve toward a state of inert uniformity.

I  began to think beyond chemistry class to the world as a whole and specifically human society.  If we are all made up of matter and energy then wouldn’t this principle apply to our societal world too?

I mean if we look at nature, plants and animals only do what is necessary to survive.  They do not expend a value resource, their time and energy, to gather more than they need to eat and sustain themselves.

The same principle can be applied to people.  In a literal sense people work to survive.  It would make sense that people follow the same principle of nature and only work enough to survive and maintain their lifestyle.

I do not see workers as lazy.  I just see them following their natural instinct.  Without the pressures of our disproportionate labor pool versus job availability, workers would seek to work to the level of their pay.  Of course when there are more available workers than jobs, getting fired can be a strong motivator to induce you to work harder than your level of compensation in lieu of not having any compensation at all.

There is strong evidence of this fact in our current recession as you hear of workers that still have a job being asked to do the jobs that used to be done by two or three other workers.  Of course they are not getting double or triple pay, but they are not in the unemployment line either. Lack of resources to survive is a strong motivator to do more with less.

If somehow things could be made equal and unemployment approach zero, we would see a totally different working world.  Employees would be able to demand more pay or less work. Someone I know made this observation of themselves “I want the most pay for the least amount of work.  Of course I could get more pay, but then I would have to work harder for it.  I am always looking for the sweet spot with a job.  A lot of pay, but minimal work so I can actually enjoy the life that my pay is providing.”

Lets try a little experiment.  If I were to walk into a shopping mall and offer someone $100,000 cash for no reason with no strings attached do you think they would respond to me by saying “No, I will not take your money unless I work enough to earn it?”  Of course not.  Their lowest expenditure of effort to get the money from me is to just accept it and move on.  I can guarantee you that is what they would do.

But I can hear you now, “If what you say is true, that is why we have welfare moms and people scamming disability.  If people can get something for nothing, they will.” Remember, it is in human nature to be that way. We can moralize all we want about we would not do that, but millions of people do it everyday.  So someone is doing it.  The problem lies with not enough oversight of these programs.

There is nothing inherently wrong with people wanting a lot of compensation for little or no work.  We see it everyday with CEO’s,  sports stars, politicians, and lawsuits.  It is just strange to me that when we see it in lower or middle class workers it is called laziness.

When I see it, I call it entropy, the natural order of things.

© Scott Abbott and Common Sense Musings, 2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Scott Abbott and Common Sense Musings with appropriate and specific direction to the original content.

Village of 100

I would like to introduce you to the concept that I like to call “The village of 100 people”.  In our modern world it is easy to get lost in the huge amounts of people, products, dollars, and systems that make up our global economy.  I admit it is quite complicated and hard to wrap your head around.  Because of that most non economists just go with the flow not really understanding how these systems work.  But the way they work is crucial to you having an enjoyable, affordable, and sustainable life.

First off let me dispel the myth that it is all that complicated.  If we apply basic economic principles such as supply and demand, division of labor, and true competition and limit the size of the sample group it is quite easy to understand and see the truth.

Yes our world is huge and we are used to hearing huge numbers like billions of people and trillions of dollars.  But what if we considered only a much smaller sampling? That is where the village of 100 comes into play.  If we limit our economic system to 100 people it is much easier to understand the concepts.  We can assign them various levels of income or assets to illustrate various economic principles.  Please remember this idea as I will use this concept in many of my future posts.

In addition we must acknowledge and accept that resources are finite and limited.  It may seem like gas, or water, or food will never run out, but believe me unless properly sustained, any resource can become extinct.  In fact scarcity of resources has been a major factor in human conflict since the beginning of time.

So lets turn back the hands of time to when man first started to populate the Earth and began gathering in villages for their mutual benefit and support.  Let us use one of those villages as an example.  Let us keep it simple and we can better learn and understand the complex economic world that we live in today.

© Scott Abbott and Common Sense Musings, 2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Scott Abbott and Common Sense Musings with appropriate and specific direction to the original content.

Fairness

Life isn’t fair.  How many times have we all heard this common refrain?  I for one wish I had a dollar for every time that I have heard that phrase.

But hold on a minute.  Contrary to popular sentiment there is a group of people who we all know and love that may beg to differ with you on that statement.  That group of people would be your parents, your school teachers, your pastors, your little league coach.  The list goes on and on.

You see as children we are not told “Life isn’t fair”. In fact we are taught from a young age to practice fairness.  It is supposedly a basic fundamental pillar of our society.  Play by the rules and get rewarded.  Everyone has an equal and fair chance at winning if the rules are followed by everyone.  If we truly believe as adults that life is not fair, then why do we teach our children that it is?

If life truly is unfair why can we not just be honest with our children?  Wouldn’t that make them stronger human beings and better able to adapt to the dog eat dog world of adulthood?  When little Johnny takes Suzi’s lollipop we can just tell Suzi “Life isn’t fair. Johnny was bigger than you so that gives him the right to take your lollipop”.

The phrase “Life isn’t fair” is just a euphemism to somehow justify the inequities of our capitalist society.  It is supposed to soothe your spirit when you play by all of the rules and then all of the sudden the rules are changed on you mid stream, with no reasonable explanation.  It is supposed to placate the masses into accepting their fate in life more easily when those in power and the wealthy  change all the rules to their benefit.

Life may be unfair, but that is only because we as human beings allow it to be that way.  We allow our selfishness and greed to overwhelm our sense of right and wrong. We do not stick together and say “These are the rules and EVERYONE is going to follow them”.  I am not sure what the disconnect is that happens between childhood and adulthood that changes our attitudes from playing by the rules to I must win at all costs, but I for one believe that the world would be a much better place if fairness were practiced as we were taught as children.

© Scott Abbott and Common Sense Musings, 2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Scott Abbott and Common Sense Musings with appropriate and specific direction to the original content.

Common Sense

From dictionary.com –

–noun

sound practical judgment that is independent of specialized knowledge, training, or the like; normal native intelligence.

muse

–verb

to comment thoughtfully or ruminate upon.

“Common sense is not so common”

In my future postings I hope to elaborate on a number of subjects from the perspective of the common man.  These ideas seem pretty straight forward and logical to me.  Some readers will agree, some will disagree, but hopefully, ultimately, an open discourse will improve our lives and situations.

© Scott Abbott and Common Sense Musings, 2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Scott Abbott and Common Sense Musings with appropriate and specific direction to the original content.