Currencies and Centralization

Any financier will tell you that diversification of portfolios is important. You don't want to put all your capitol in any one asset (or even in any one market), because you don't want to risk being wiped out by any one plunge. The classic "Wealth without risk" business plans were all similar, and all simple: put away a little money each month, into a portfolio balanced between stocks, bonds, and other assets. Generally speaking, problems in any one market trigger a boom in other markets, so with a diversified conservative portfolio, your total assets would ride out most transitory market volatilities, and generally grow at a modest but appreciable rate.

Economic diversity is HEALTHY. This includes competition not just between businessmen and business entities, but also competition between nations, and competition between currencies. While looking through rose-colored glasses shows us a unified peaceful world with efficient energy and food markets - everyone cooperating and laughing, with enough to eat, running water, and good healthcare - the general reality is that those ideals don't work. In order for markets (including energy and food and healthcare) to be healthy, there needs to be competition. There needs to be strife. There needs to be incentive (read: objectively verifiable profit margins and dividends) for companies, markets and industries to be lean and efficient. Otherwise, they look a lot like governments: lots of talk, publicly funded, without substantial impact.

Historically speaking, Europe has been an ongoing hotbed of political and economic intrigue. Nations not necessarily at war with each other (they've long since reached consensus about where borders should be) but absolutely in competition with each other. England vs. France vs. Germany. Lean, efficient competition across the boards. And since each country had its own currency, they managed to avoid any systemic meltdown, even in the face of any number of shortages, regional crop failures, or even extended military conflict. Rough times in France? Some dry seasons in the agricultural areas? Maybe some poorly run banks, and the Franc running weak? Good news in London and Berlin! English and German firms - that are lean(er) and strong(er) - open branch offices in Paris, and governments buy up Francs on the cheap, to stockpile economic capitol for when the shoe, inevitably, shall be on the other foot. And because of that competition, the Franc regains value, French businesses have to get better or get replaced by English and German companies, and either way, the economy French economy rebounds.

The European continent, because of the intrinsic diversity of having a dozen countries with different currencies, was chaos. A paperwork and exchange rate nightmare, with rampant speculation and opportunism that made the World Cup tournament look like a game of patty-cake. But the continental economy nonetheless ran well, efficiently, and effectively. The strong were strong, because they had to be, and with weakness and slack being seized or seized upon, shit got done. The competition and strife made it ugly and distasteful, but guaranteed that a problem in any one (or any five) nations wouldn't pull the whole system down. It just meant that nations that handled their economics badly would end up with their economies being run by foreign interests.

But in the interest of working towards that rose-colored world, a lot of the strife and diversification has been intentionally done away with. Enter the Euro, the unified currency of a dozen nations, who have agreed to band together in economic unity. In effect, it was in many ways unionization of the European economy. During periods where that joint economy was strong, it was REALLY strong, since it allowed a unified push by not just individual national economies, but by most of a continent. That's a lot of industry, and when it's all running well and in the same direction, it can match any economic bloc on the planet.

The problem, of course, is that times are not always good, and when times are bad, problems in even one nation become the problem of the Union as a whole. The co-mingling has made partners where there used to exist competitors.

In the past, if things in, say, Portugal, Italy, Ireland, Greece, and Spain (PIIGS) ran into the red, and if those governments started deficit spending like there was no tomorrow, it was not really that big a deal in the grand scheme of things. It just meant that the lire, peseta, etc., lost value and got bought by investors, and that either the local economies got lean and healthy, or else got bought out and replaced by foreign interests. Companies that were competitive in competitive places (England, Germany, etc.) stepped into the game in less competitive (lazier) markets, and immediately became the best player in the local game. And, as a result, the economy improved. Individual countries would periodically stumble, but in the face of the wolves already at their national door, they got lean and pulled through, or they got bought out, and pulled through.

But no more. These days, when Portugal, Italy, Ireland, Greece, and Spain run into double-digit national deficits (which they have, even through the EU RULES say that no country shall run higher than 3% in the red), the solution is different. In the past, the wolves would drool. They would look to take over. Far from worrying, Germany and England got EXCITED when the lire or peseta ran weak, since that was an opportunity for Germans or Englishmen to make money by doing a job leaner, better, and more efficiently than the locals seemed able. They certainly didn't feel compelled to prop up and support nations that had their heads up their asses. Let those fuckers over-extend their credit and spend their own currency into worthlessness. It's THEIR currency, after all, and their ongoing inflation and other financial bullshit will just make it easier for us to buy them out and turn them around.

Except now, of course, it's not just THEIR currency. These days, when PIIGS and other nations run massively into debt, and have to conjure up a billion or so euros through drawing on credit, there is no differences between the euros being devalued and suffering from inflation in Greece, and the euros that - but for happenings in Greece - should be strong and robust in Germany or England. In order to protect the underpinning of their own economy (the euro as a currency), economically healthy places, rather than preying on stupidity and weakness - as has clearly arisen in places like Portugal, Italy, Ireland, Greece, and Spain - instead need to prop up, assist, and bail out those places from their own errors.

The practical upshot, as evidenced by recent headlines: Germany and England, to avoid threat to their OWN economies, must subsidize social welfare, bureaucrat salaries, and foolish economics in Greece. Rather than a net improvement in efficiency and effectiveness, we see a net decline in efficiency and effectiveness. The strong, rather than compelling the weak to get with the program or get replaced in a preditory stance, instead are compelled to prop up the weak, and subsidize the foolishness rather than driving it out.

Socialized economics in action! Please, lets keep all semblance of this sort of shit on the other side of the pond.

Gonna need an extra thousand to make quota this month.

Our President is here in Nevada today, touting his health-care agenda at a "town-hall" meeting at Green Valley High School. Which means that traffic sucks on the entire east side of town. But otherwise nobody seems to give much of a damn. Besides healthcare, Barack is also pulling for his local boy, Harry Reid (D - Nev.), to get re-elected, but I personally think that's running neck-and-neck with the passage of national healthcare for the top spot on Barack's wish-list of miracles.

Don't think it's going to work. Anyone who knows Nevada politics knows Harry Reid is about as big a douchebag as walks the face of the earth. Which was fine when he was a token douchebag lost among a hundred milling senatorial faces. But he's been embarrassing himself enough on the news this last year that people are about as sick of him as they are of Obama. Nobody likes to back a losing horse. Even in a working class place like NV (or perhaps ESPECIALLY in a working class place like NV), lots of people are getting bored with Barack (and his pundits) telling them what a brilliant success the economic stimulus package has been. Apparently the people haven't heard that his experts are projecting 95,000 new jobs each month this year.

As for that last part, about more jobs and reduction in unemployment, the memo apparently didn't get through to places like Boeing. But don't worry. Just a bump in the road. As soon as Harry is locked in place at the top of the Senate for a few more years, and as soon as we get this healthcare thing done, economic reconstruction will be the next item on the agenda. He and Harry and Nancy are going to turn it all around. And they need your vote to make it happen.

Opportunities. Or Not.

The heart of American industry has always been small businesses. Until recently, most Americans took their diplomas and/or degrees, settled down somewhere, and spent most of their lives working at some small establishment or storefront, doing some form of skilled or semi-skilled activity. These days, of course, most Americans are or will be working for the Federal government. Our politicians naturally want to be the boss. Of everything. It's just a defect of that personality type, and always has been. In its original incarnation, our government was structured specifically to keep government from taking over our lives and economy, but what can you do? Socialistic creep, and all that. We'll build stricter controls into our next government. Which is probably not going to come until a century or so after effective space travel is discovered, but again, what can you do?

In the meantime, it is fun to keep track of ongoing jokes, and to have the occasional pipe dream. In terms of comic relief, the Obama administration has declared today that the economy is going to grow by 95,000 jobs per monthfor at least the balance of this year. This is good news, in light of double-digit unemployment from the 8.4 million jobs that have been lost since late 2007. I think this is funny since a lot of these projected jobs are not economically created, but government created. Our beloved president, beset by difficult times, he has unveiled his proposed budget, in which Barack seeks to spend $3.8 trillion. That's $3,800,000,000,000. Thirty-eight, followed by ELEVEN zeros. I sincerely hope that a lot of this money is somehow going to find its way back into the pockets of taxpayers, through some form of employment. The only other way it will get back to grass-roots taxpayers is through hand-outs, so hopefully we can do this right. Not gonna hold my breath, but here's to hoping.

Now, aside from the fact that government jobs don't really qualify as economic growth, there is a problem with this plan and this budget. Most notable is that Barack doesn't actually have that much money to spend. In fact, what he's spent exceeds what he's got by $1,560,000,000,000. For those of you following along at home, this means that for ever dollar he spends, he also has to borrow 42 cents. I understand that accounting and cash flow problems can be difficult to manage, and he certainly did inherit a lot of the problems he's facing. Still. I don't think the solution to inadequate revenues and hugely overinflated spending is a year where you PLAN to spend almost 50% more than you actually have. The per capita burden comes to about $5,000. Doesn't seem like much, but what it means is that - in addition to all of the taxes we are already paying - Barack needs us all to kick in an extra $5,000. Per person. In the entire country. To get to even. For the year. (We can deal with the outstanding national debt another time. Besides, that's nice to keep around as a reminder to the people of the wasteful spending and bad fiscal practices of prior Republican administrations.)

For comparison purposes, news stories were written in early 2008 about how the Federal deficit was projected to run to $410 billion that year. That was a big number, since the 2007 deficit had been only $162 billion. The projected 2008 numbers would threaten the then-standing all-time deficit record, set in 2004. Of $413 billion. Our politician's spending habits have resulted in deficit spending increasing by over 300%. In two years.

But the 2009 proposed budget contains good news. If we approve the President's budget, and assume another billion and a half in debt, things will get better. If we do it this way, Barack's experts say, next year's deficit will only be $1.3 trillion. See! Things are getting better! And we'll have 95,000 fewer unemployed every month, safely tucked into government jobs, where they have guaranteed healthcare, cannot be fired, and get a month's paid vacation every year! How about that, we can have national health-care after all, we just need to get everyone working for the government!

But this does not bode well for small business. Again, small business has historically been the engine that drives the economy. These days, it is pretty much impossible to set up and run a small business. Beside the uncertainty of things like the availability of credit, the tax burdens of each employee, and the looming unknown of how much more Barack is going to require such businesses to pay for health care - not only for people who work for them, but also for most of the nation's unemployed - the administrative hurdles are overwhelming.

In terms of pipe-dreams, I have thought about opening a small business. And not just a tax write-off, but an actual business that makes things. Specifically, double-stack .45-caliber 1911 pistol frames. As I might have mentioned, the notable problem with the classically American 1911 pistol is that it only holds 8 rounds. If you could preserve the history and platform while bumping the capacity even a little, people will buy it. Ideally, come up with a design that uses most or all of the same 1911 parts (trigger assembly, slide, springs, etc.), but on a frame (the part with the handgrip) that will accept the cheap, reliable, common-place 13-round magazines already being mass-produced for the Glock 21.

In today's market, even in recession, a double-stack 1911 costs, on a good day, about $1,500. That's over three times the cost of a bare-bones GI model 1911. And almost all of the double-stack models require their manufacturer's proprietary magazines, meaning that each mag costs about $80. (A standard Glock 21 mag will run you about $25, for comparison.)

Taurus firearms has already demonstrated that it's possible to make a good 1911 pistol, complete with extra (usually very expensive) features and details, for sale in the $500-600 range. (Their PT1911 line. I own one. I like it better than I like the Kimber 1911 I paid three times as much for.) I wonder, why is nobody selling a bare-bones "entry-level" double-stack in the $600 range?

There will be some engineering and drafting problems involved in making that product, to keep the handgrip small enough to be usable, even with the fatter mags, but that seems manageable; the Glock 21 does it, after all. It could be a difficult mechanical transition from the wide Glock mag-well to a narrower rail to accept the standard 1911 action, but there are enough double-stacks out there to show that that's doable as well. Once the design is complete, we've got plenty of machine and milling equipment for sale in places like Detroit, complete with highly trained, newly-unemployed machinists to operate them. The substantial manufacturing is milling a billet of steel into the needed shape (with tight-but-not-that-tight tolerances), and then a final hand-fitting with mostly off-the-shelf 1911 parts. With CAD-driven milling machines, does it make a difference if the operator is supervising the milling of a pistol frame, instead of the turbo-charger turbines they used to makefor GM? Take a while to get business up and running, but I think it's doable, and that people will buy the product. Could be a classic American enterprise! Have an idea for a product, make it, sell it, pay your people, and maybe turn a little profit. Holy shit, almost like a real, live, free market!

The problem, of course, is the extrinsic bullshit, nearly all of it government or pseudo-government in nature. Gotta have the right tax forms and business licenses. The paperwork shouldn't take more than 6 months. Go through the permit process. An OSHA probationary period while they audit your premises. Making pistol frames, you also gotta pay the equivalent of a full-time salary so an ATF guy can be there looking over your shoulder. No, of course they can't just presume that you're following the laws you've agreed to follow. Without the inspector there regularly checking up on you, you could make even one unregistered illegal pistol, and thereby forfeit all the work you've done to get licensed, lose your business, and go to a Federal pound-me-in-the-ass prison! How are you supposed to resist that temptation without someone policing you? That of course, comes AFTER a detailed testing of your design, to be undertaken at cost to you. Please send in a prototype for approval, a blank check, and don't forget the self-addressed stamped envelope for our reply. Make it a postage-prepaid box if you want the prototype back as well. Don't call us, we'll call you.

You're going to have to provide benefits and healthcare for all your employees, and we're not quite sure how much that is going to cost, but we're working on it, and will get back to you. But be ready for a BOHICA moment when Barack unveils his plan, because he's DEFINITELY not working for your benefit, buddy. You're an evil business owner, making profit off the sweat and industry of the proletariat. He's got his eye on you. But you can fly under the radar - to a degree - if you self-police you business to affirmatively limit any success you have. You'll actually make more profit if you make less than $250,000 profit. You're not allowed to make more than that without falling into a specially-created tax-bracket that is overtly intended to bleed you dry. So if you want to stay successful and profitable, you'll need to self-limit your success and profitability.

Since you're dealing with the machine industry, you'll have to have the right operating permits and approval stamps for your machinery. And while the law does not actually require you to hire union workers, Barack is certainly working on fixing that as well. God forbid you hire your labor as cheaply as you can manage it. Again, Barack has his eye on you, and won't let your sleazy "sense of business" arguments result in giving anyone a job that Barack doesn't approve the terms of.

Et cetera, ad nauseum.

Alas, alack. Add it all up, and you really have only two alternatives these days. Either (1) You open your business in Brazil, China, Mexico, or some other place where you can avoid all that bullshit, or (2) throw up your hands in frustration, and wait from somebody else to go through all that bullshit to get the product on the market. Neither of those options results in America gaining a new small business to fill a niche that's already there.

But Barack has taken the matter under advisement, and is working on a solution that will get the economy moving again. Regulations are going to be passed. Don't worry, things will get better. Again, there's going to be 95,000 new jobs every month this year!