(1) âThe first weak link is Europe and its debt. On average, across the continent, the debt-to-GDP ratio is about 90%.â
(2) âChina has problems. Their debt has just ballooned. Depending on whom you want to listen to, 40% to 80% of the last $6 trillion the Chinese borrowed went to pay interest on the debt they already had.â
(3) âJapan is monetizing its debt and putting it into the central bank. They are going to continue doing this at an astounding rate.â
(4) âEmerging markets are the fourth weak link. How do they dig out? They borrowed $10 trillion in dollars that they have to pay back from income earned in their local currencies. Dollar valuation can create serious problems for their debt.â
(5) âthe US dollar is the cleanest dirty shirt in the closetâ
We all know the definition of insanity: repeating the same thing over and over again expecting different results. (That is where we are with the Fed Reserve Banks and governments).
He even offered share prices for all his funds priced in gold starting in 2010 or so I think, and theyâve been getting killed.
One of the most interesting questions is what to do with fixed income in portfolios (besides short-term and hi-quality), these days. My Mom is looking at annuities at the moment and they are promising over 6%. Not that bad an investment for healthy 65 year old I think.
Sadly, they plan on large numbers of people dying. Thatâs the main way. If they take all my Momâs money and put it in 3% return AAA, 3 year corporate bonds, they wonât ârun outâ of her principal until my Momâs in her 90âs. Most people wonât live that long, so if they sell plans to lots of people, the averages work out and they can hit these numbers - and still have room for profits. For 6+ %, she has to give up any claim to the principle. Thatâs not the only option, but itâs the most recent one I looked at.
The biggest concern that I have with an annuity is who backs it. My understanding is that AIG was the largest issuer of annuities pre-2008. Then the government had to bail them out. If the issuer goes out of business or cannot meet their commitments, is it backed by the federal government in some way?
Sounds okay. Now days we do not think of inflation risks. Of course, bonds have inflation risks too. But even a real bond in a safe deposit box is liquid. The fed says they want 2% inflationâmore would actually be better for reducing the consumer and national debt. Who knows what they want or will get over a long period.
The author says he originally voted to join the EU because he likes free trade.
He voted for Brexit because of the costs of being part of the EU. These costs include:
The EU equivalent of what we call âporkâ in the US: âA Portuguese golf resort, a Bavarian hunting lodge, a virtual clone of Malmo, Sweden in the video game Second Life. A hemp farm. Puppet theatre.â
Regulations: ââŚbillions it costs British businesses to comply with often bizarre and Byzantine EU directives, such as those enforcing the curvature of bananas, banning diabetics from driving, and making it illegal to sell eggs by the dozen.â
One problem with this argument is that it is hard to quantitate regulatory costs. I am commenting on this because I may have encountered an anecdotal example today.
The P123 computer told me to buy HTZ (Hertz) today at $11 per share. But my broker would not let me buy as many shares as my port suggested. Seems my broker thinks it is now $44 per share. Looks like LYFT may have purchased or made an offer for HTZ.
So to quantitate the cost of regulations around taxi services one only needs to look at the market cap of UBER and LYFT. How much economic activity has been unleashed by the fact that UBER and LYFT have gotten around the regulations?
You could argue that UBER and LYFT are succeeding because they have leveraged smart-phone technology. But how long would it have taken for the taxi monopolies to start using these technologies? Surely competition and regulations have had an indirect affect on the adoption of this useful technologyâeven if you accept this argument.
This journalist is not an economist. And no doubt Britain will be worse off in the short term. But the author is at least smart enough to not use the term âcrony capitalismâ (sorry for the political connotation and the generally poor term).
Is this is an opportunity to quantitate the costs of one small regulation? If so, it is one small regulation but is it a small economic impact?
UK will get out of the EU, but will get into the same relationship as Norway or the Swiss, e.g. the free market between
the EU and an UK will remain.
Euro bonds will come or the euro will die (which would be a great Idea for all countries besides Germany that profits
big time from a low euro (the D-Mark would be trading much higher then the euro today).
it is interesting how all of the EU pronouncements (that matter) really come from Germany. I get the sense that the EU is really all about Germany (for several reasons). I donât mean that in a negative sense, it is more of an observation.
You hit the nail on the head Andreas. Germany is benefiting greatly from a âlow Euroâ, while Greece is suffering from a âhigh Euroâ. Meanwhile, the elite hold Greek bonds and receive an incredible return. Greece canât default on them, or so they are told. Instead they are forced into ever-increasing levels of austerity.
Canât speak for the world at large, but for New York city, itâs nearly 100% based on use of technology. NY has always had a second âtaxi-likeâ system licensed as âliveryâ services. Uber and Lyft cars have to have livery license plates and drivers need appropriate licensing. The idea with Livery is that you call a dispatch office and ask for a car, which is then dispatched under a radio system, like taxis in many places where they donât cruise on the streets. So here, itâs not really taxi vs Uber/Lyfy â itâs really livery vs. Uber/Lyft and the latter is a huge winner because itâs so much better in every way thanks to the use of technology.
The regulatory edge uber/lyft have come from such things as pooling and surge pricing, but ex the technology, that wouldnât be enough to get them the strong foothold they have. To the extent uber/lyft are able to capture businesses from taxis, itâs becasue of what any of the old livery services could have done had they been better users of technology.
The regulatory debate per se is actually very complicated. A lot of regulation has nothing to do with government. A couple of weeks ago, my wifeâs friend flew in for a visit from China and arrived in Newark Airport. I had them come in to Manhattan via Uber rather than regular taxi because Uber is more tightly âregulated.â Thereâs an exact computer record of who the driver is and the exact route that was taken, both of which I felt would be safer for passengers who had no idea how to go from point A to point B. I saw the extra layer of regulation as a big plus, especially when crossing a state line â we traded split NY/NJ jurisdiction over problems to a single Uber corporate jurisdiction over problems.
Generally, regulation is a good thing. The pioneering case in the U.S. os McPherson v Buick, an early 1900s case in which the purchaser of a car sued Buick after the car went dead quickly after he purchased it new. Buick won the case saying the customer didnât buy anything from them and that he had to sue the dealer. The dealer won because it didnât do anything bad in the making of the car. So in the pure free market setup, the customer was screwed â until Benjamin Cardozo wrote an opinion on appeal imposing liability on Buick and pretty-much inventing product liability law.
Thatâs an example of how horrible life would be in our complex world be if regulation didnât exist to fix things that fall between cracks. The problem, though, is regulation thatâs run out of control. It sounds like thatâs happening in the EU. I know itâs happening here â and elsewhere (âThe Mystery of Capitalâ by Hernando de Soto is a fascinating read; itâs not the quantity of regulation, itâs the type).
Whatever the exact story is $1 million seems like a barrier to entry. And the number of medallions is strictly limited (according to these articles) resulting in an artificially low supply (oligopoly). There may be classic economic costs resulting from this regulation.
I donât know if it will be good or bad long-term for the workers / users.
I donât think driverâs working in Medallion taxis had a great life, but I also donât think you can have a regulation requiring buying medallions and then allow a company to come in and operate without them - of course thatâs unfair and an unfair advantage. So, thatâs an issue. Excessive regulation sucks, so does arbitrarily changing regulations.
But in terms of how it works / fees, Uber has raised billions of dollars. They are using that money to âbuy market shareâ, through advertising and higher driver salaries and little / no profitability. Once they take over a market and attract the best drivers and put comp. out of business, they will drive down driver rates significantly and raise fare rates. Itâs inevitable. If they can claim enough market share.
Once they can eliminate drivers completely with self-driving cars (Lyft is testing this in NYC already), they will be able to be even more profitable.
But their drivers are also part-time, younger and many are college educated. They pay for their own cars and insurance, etc.
So, we have taken full time taxi drivers struggling to live and stripped away / increased competition to their jobs in many cases (with no employment options). They are now fighting with college educated kids who are taking âfreelance gigsâ at hourly part-time work - why? Because those college kids are unemployed or underemployed. http://www.newsweek.com/2015/06/05/millennial-college-graduates-young-educated-jobless-335821.html
And all the profits accruing to a very small number of people. If you look at the ratio of âMarket Capâ to employees, itâs off the charts for Uber. I had this somewhere, but canât find it right now.
I donât think these are good trends for many working class people or the economy as a whole.
Yes, thatâs an example of regulation at its worst . . . well, maybe a close tie with the curvature of bananas (Iâd love to have been a fly on the wall in the conference room when that was discussed).
But actually, Uber canât compete full fledged. They are not allowed to pick up in response to street hails, and in Manhattan, thatyâs the main way taxis are obtaied. As to the call-in livery version, Uber is under the same regulations as the old liveries. And now, theyâve been forced to accept a quasi union of drivers. Venture capitalists are learning they canât run things as they like in NYC, or where, in the words of Ted Cruz, there are âNew York values.â Seems, though, like they understand thius and have read the manyual for doing business in NY (âThe Art of the Dealâ â actually a better book than many realize since it was written when Trhump was living in a prior incarnation) and are figuring out how to bargain.
Iâm not sure the pay/hour in the article that Tom linked to is correct, if anything way overestimated (after all it is UBER propaganda). I have heard that wages could be on the order of $9/hr before expenses such as wear and tear on the car, and then one has to consider that most insurance companies wonât honor payouts once they figure out that the driver is working for UBER.
As for regulations versus technology, sure UBER is making better use of technology, but they are also bypassing labor laws by claiming it is a ride-sharing app.
As for the drivers themselves, I think this type of job is our future because it sidesteps all of the employer discrimination going on in a flooded job market.