Category Archives: Economics

Gambling Banking to Increase Savings?

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Gambling Banking

I just watched a YouTube video about gambling banking and how it might incentivize people to increase their savings. I’ve written about gambling addiction and predatory loans recently and this video brought both of those topics to my mind.

It’s highly likely that my research for those articles led the YouTube algorithm to send me this new video. In any case, I found the idea of gambling banking to be quite interesting and thought you might as well.

The Human Mind Prefers Gambling Banking

The basic idea behind gambling banking is the human mind’s propensity to prefer a low chance with a high reward more than a high chance with a low reward. Studies seem to show, and my own personal experience with people confirms, that people much prefer these types of gambles.

As a quick example. When offered a choice between a 100% chance to win five dollars and a 1% chance to win $500, people almost universally choose the later. Obviously, the math shows an equal return of investment but the allure of the high reward is much greater.

The studies cited in the video went into great depth to figure out exactly where the general cutoff point is in these mathematical models. At what reward point do people take the small amount over the large? If you’d like to learn more about those things, watch the video as I’m not going to focus on it any more. I think the results are accurate and that’s what’s important.

What is Gambling Banking?

Now, knowing that people much prefer the low chance, high reward model; a test case was setup at a banking institution. If people put a certain amount or more in their savings account, there was a small chance the bank would match that amount.

The result, according to the video, was startling. Many, many more people started putting money in at the minimum level, let’s say $5000, than the bank saw in the past. This makes sense to me.

Why is Saving so Important?

The amount of money you save is a tremendously important factor when it comes to predatory loans. People who have enough to pay for a financial emergency, a few thousand dollars, don’t have to take out high-interest loans. Thus, they don’t get into financial trouble that plagues them for the rest of the lives.

A common reason people take out such loans are car repairs. If they can’t get to work, they lose their job. A short-term loan of a few thousand dollars makes financial sense. Sadly, these are the sort of people who the bank generally will not give loans because of their poor credit rating.

Do we need Government?

This is the part of the gambling banking plan that really attracted this Libertarian. No government necessary. If the banking institution become aware of this model and realize it will result in people putting more money in the bank, they will implement it completely on their own. Banks don’t need the government to tell them how to make money.

Downside

It’s important to recognize there are very few scenarios without some downside. In this case, if people are putting more of their discretionary money into banks rather than buying luxury items, there is less spent overall.

Still, this isn’t a huge deal as the money people put into banks doesn’t just sit there. It is loaned out to others who use it.

Conclusion

Interesting study, great idea. Let’s go!

Tom Liberman

Predatory Loans in Utah

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Predatory Loans

I just read an interesting article about how a loosely regulated market allows for what can only be described as predatory loans in Utah. It’s an interesting question for me because the main rational behind allowing loans with an interest rate of up to 200% is aligned with a Libertarian ideology.

Basically, predatory loans in Utah are allowed because the legislature in that state doesn’t put a legal cap on the highest interest rate allowed. Most states do so and the Federal Government mandates active-duty service members, but no one else, cannot be charged more than 36%.

Are they Predatory Loans?

Let’s dispense with this question right away. The loans are structured in a way to trap low-income borrowers into paying back far more than they took out. The loans are absolutely predatory. Most of them come with a 90-day stipulation that if you pay it back in that amount of time the higher interest rate doesn’t apply.

They are largely taken by people in desperate situations, often an unexpected car repair. Without a car the borrower will lose their job. Without a job …. Anyway, the design is predatory, that much is certain.

The Service of the Loan

While the loans are certainly predatory, the people who take them are in desperate need and cannot get a loan legally any other way. They generally have poor credit ratings and cannot get a loan from a bank that doesn’t offer such a high interest rate. This because most states regulate an interest cap.

Banks know that such loans have a high default rate. In order to make up for that default rate, a crazy-high interest rate is charged for those that cannot repay immediately.

The people who take these loans are the same people who end up owing money to extra-legal lending sources and payday loan companies.

Different than Banks and the Government?

I’ve written about how the government itself operates like a loan-shark with ridiculous fees and escalating fines for late payments. I’ve also talked about how the government and private industry intentionally created the student loan situation in which we find ourselves.

The government intentionally bankrupted the United States Postal service largely at the behest of banks in order to take out massive loans with the never-ending interest payments.

Financial Ruin of Unpaid Predatory Loans

One of the interesting things about loans is if a bank gives issues too many that default, the bank itself goes out of business. The bank doesn’t have a pile of cash sitting in the vault. They take the money you give them in interest payments and loan it to others. If enough others fail to pay, the bank gets into trouble. Some may remember the recent housing crisis. The student loan crisis we currently face. These are directly related to too many bad loans resulting in defaults.

This is why the Utah banks in question don’t do the majority of their business in such loans. It’s a dangerous game to play.

Is Utah in the Wrong?

Is Utah wrong to allow banks to charge up to 200% interest rates for these types of loans? If the banks do not provide this service, will extra-legal loan-sharks step in? The government, with their long record of predatory behavior, is hardly an institution I trust to rein in this practice.

There is real damage, of course. A certain percentage of those who take out the loans cannot pay them back in 90 days and end up with unsustainable payments. Even if people stop paying and incur some court-ordered lesser payment plan, they suffer financial difficulties for a long time if not the rest of their lives.

Conclusion

Ok, Tom. The loans are predatory and people will suffer. But you don’t think regulating them will help. Do you have anything useful to say or was this just an intellectual exercise?

Good question. I think some problems just don’t have solutions. As long as people are poor and need money, such loans will exist, legal or illegal. It’d be nice if we didn’t have poor people. If there was a way to provide for all people in need, whether they deserve it or not, whether they’ve earned it or not. There currently is not such a system in place.

I guess my only real point here is to beware of what appears to be a simple solution to a complex problem. It can make things worse rather than better.

Tom Liberman

Tipping is Taxes at best Stealing at Worst

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Tipping is taxes

I just read an interesting article about how little restaurant workers are paid and it reminded me that tipping is taxes. I’m not certain exactly how tipping at restaurant became ubiquitous in the United States but I suspect it was nefarious from the beginning.

The article in question details how a waitress at a restaurant got a paycheck for $9.28 after working for seventy hours. That’s quite a bit below what the government considers her lowest possible wage of $2.13 an hour but apparently taxes reduced her paycheck from $150.81 to the aforementioned amount. She posted the article to illustrate why you should tip your waitstaff when dining out. I have a different take.

Tipping is Taxes on you

When you tip, you are paying a tax. The tax is simply the restaurant’s way of charging you less for the food up front by paying their employees ridiculously low wages. The wages for restaurant employees are so low that no one would do the job if it wasn’t for tips. Working for that pathetic a wage is simply not a feasible alternative.

At some point someone got the idea we should tip restaurant workers. As I said, I suspect it was a restaurant owner who simply didn’t want to pay workers a reasonable wage. We think of tipping as a way to compliment the staff for their service but it is merely a tax, and a big one at that. One the state and community doesn’t track. Every time you pay twenty percent extra, or more, for dining out, you are paying a tax.

You Pay Taxes on the Food Too!

Not only do you pay a tax to cover the cost of employing the staff but you also pay the government a tax to eat the food. The restaurant owner forces you to pay for their staff and then the government swoops in and gets a cut as well.

I’ve written before that I’m not opposed to taxes altogether. The government collected money from citizens to build the roads leading to the restaurant and to create the infrastructure bringing utilities to the restaurant. I don’t mind this, that’s all well and good. What I mind is paying the staff. That’s the job of the restaurant. Do I tip when I shop anywhere else?

Not only is Tipping Taxes but it’s Essentially Theft

Basically, the restaurant is stealing from the employee every time the total income is less than what the market would bear if wages were based on work rather than tips. It’s the restaurant’s way of not paying their employees.

When tips exceed the normal payment of such an employee then the restaurant is stealing from you. You are essentially overpaying the staff for the food you got. That is a determination that belongs solely to the employer, not the customer.

Stop Tipping and Start Paying a Competitive Wage

People get all angry when a new tax is floated by the government but we pay a huge rate for simply sitting down to eat food.

Naturally, if restaurants pay a fair wage to keep good employees, the cost of eating at the restaurant will go up. That’s the price of doing business. You pay your employees their worth and if you still make a profit, you stay in business. That’s capitalism.

Conclusion

Tipping is not capitalism, it’s a tax. It’s not even a stealthy, hidden tax that we don’t notice. We all know about it. Many of us pay it although some people don’t tip at all. I don’t think anyone should tip. Pay your employees their worth and charge me accordingly.

Tom Liberman

White Boy does not know about Rap Snacks

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Rap Snacks

Today I recount an interesting interaction centered around a bag of what looked to be delicious Rap Snack Salt and Vinegar Chips. I’ve written about my life of White Privilege and about the Social Divide between black and white people in the United States. Today I write about that divide in regards to snacks.

Snacks you ask? Yes, snacks. After today’s encounter, which I will detail below, I begin to wonder how many delicious snacks I’ve been missing out on.

Rap Snacks at the Hospital

I was waiting for my mother to get her blood drawn and overheard a nearby technician waxing poetic about her Salt and Vinegar chips. Now, readers, let me be clear. I love me some Salt and Vinegar chips. So, when I heard a fellow devotee of the delightful treat gushing, I interjected myself into the conversation.

We spoke for a few moments about our shared delight of Salt and Vinegar before I asked her about the brand. I did not recognize the branding on the bag as I normally get Kettle Salt and Vinegar Chips. She paused for a moment, looked at her fellow technicians, and then finally told me about Rap Snacks.

Let’s Talk about the Pause

Why did my fellow Salt and Vinegar chip enthusiast pause? I suspect it was because she was a black woman and I am a white man. She knew, or at least strongly suspected, I never heard of Rap Snacks and likely the stores I frequent won’t carry it.

What’s important to understand is she’s right, if that was indeed her thought process. Until that moment I never knew anything about Rap Snacks and I feel fairly confident they will not be on the shelves of my grocery store.

If you take a look at the image I’m using with this blog post, you’ll probably understand why I’ve never hard of Rap Snacks despite my love of all things Salt and Vinegar. I’m not exactly in the market demographic for Rap Snacks.

Expanding my Horizons

It’s a shame I’m not a targeted audience for the chips because if so, I’d almost certainly have purchased a bag. Will they be better than my normal Kettle Brand? Worse? Equal? I’m not sure one way or the other but I do know that I’m the worse for not knowing they were an option.

Now that I do know, I will go out of my way and purchase a bag. I’ll likely get them from Amazon or Target although I’m sorely tempted to drive the short distance to a store outside of my normal shopping range and purchase them there.

I wonder how much else I miss out on in life because of marketing biases. I’ll keep you informed when I manage to get my hands on a bag.

Happy Snacking!

Tom Liberman

Hard Work without Reciprocity at Twitter

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Reciprocity

The fallout from the Elon Musk’s purchase of Twitter is all over the news and a story about Musk demanding hardcore work from his employees brought to my mind the concept of reciprocity.

The idea of reciprocity is fairly simple. If you do me a favor, I feel an obligation to return that favor. It’s sort of like a personal version of the Social Contract I wrote about a while back. In this case, Musk is asking his employees to work considerably harder, whatever that means, in order to save the company.

The Reactions

While reading comments, I found that reactions largely come in two flavors. The majority of people argue hard work is expected and if the employees don’t like it, tough. Get out. On the other hand, some argue that overworking your employees is not a recipe for a successful company.

Does Musk ask for Reciprocity without Giving it?

My thoughts are probably closer to the second group but my real problem with Musk’s ultimatum is simply the expectation of reciprocity. I’m of the opinion Musk has a long record of working his employees hard and taking more than the lion’s share of the profits for himself.

He fired nearly four thousand Twitter employees largely without bothering to even look at the work they do. He fired people without notice. He implemented policies that ended doing far more harm than good.

I see no evidence Musk will reward hard-working employees who work enormous hours of overtime. If, by some miracle, Twitter begins to turn a profit, Musk will take most of the money for himself.

Working Hard with Reciprocity

Don’t get me wrong. If you work for a struggling company and have confidence the owner will work with you, reward you for your efforts, pay you when profits return; I’m all for working extra hard. If you don’t believe your boss will do so, all you’re doing is giving the boss your money. Your time is money, your money, not the boss’s money. Yours. A boss who tells you that you must work extra hours without pay and doesn’t plan on giving you a reward at the end of the day is stealing from you.

Working Hard without Reciprocity

It’s hard for me to imagine anyone thinking Musk is the sort of person who gives reciprocity. He threatened the same work hard or go bankrupt scenario with SpaceX not long ago. He ran SolarCity into bankruptcy. The much-famed Hyperloop is now abandoned along with all the people who poured their hard work into it.

The Boring company is a mess. The Gigafactory in Germany is largely unable to start because of water issues of which he was warned, long in advance. I could go on.

Conclusion

I am not telling Twitter employees how to react to this offer. That’s their business. If they believe Musk will eventually reward them for working long hours, if they think said work can somehow save Twitter, have at it. They have families, obligations, quitting is not an easy thing to do.

I’m just saying, if you give something, the other party isn’t obligated to reciprocity. In this case, I wouldn’t expect it.

Tom Liberman

My Story with Imperia Vodka

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Imperia Vodka

With the disgusting invasion of the Ukraine by Russia, a number of politicians ordered banning the sale of vodka produced in Russia. I’d like to talk about that today. I’m more of a whiskey and gin drinker but before covid one of my favorite neighborhood hangouts was Sub-Zero Vodka bar.

The thing I’d like to address today is if banning the sale of Russian Vodka is an appropriate response by various parties, the government, a tavern, my friends, and myself. It’s an interesting question for a Libertarian from the perspective of its legality and usefulness.

How I met Imperia and Hammer and Sickle Vodka

Ah, the good old days of Sub-Zero. My favorite bartender, Cailyn, introduced me to two premium vodkas, Imperia and Hammer and Sickle. Both are produced by Russian Standard. They accurately belong in the category of actual Russian vodka, unlike many of the brands being boycotted.

I spent many a pleasant hour snuggled up to the second bar sipping on icy-cold Imperia, or Hammer and Sickle when the aforementioned wasn’t in stock. The second bar because the ice top to the main bar proved more of a nuisance than a benefit, and the side bar was generally Cailyn’s station.

What if Sub-Zero was Still Open?

Sadly, Sub-Zero closed but what if I could still walk over? Would I order an Imperia? Do I think the mayor of St. Louis or the governor of Missouri should ban Russian vodka? Should the owners of Sub-Zero refuse to sell the vodka?

As complex as the question might be, my answer is pretty simple. I’d find a Ukrainian vodka to drink. That being said, if the owner continued to sell Imperia and Hammer and Sickle, I’d still patronize that establishment. I suspect, knowing what I know, they would likely stop selling it but that’s their business. I also wouldn’t give anyone else a dirty look or yell at them if they chose to order Imperia or Hammer and Sickle.

One of the important lessons I learned in my four years at the University of Idaho was not to criticize the way someone else goes about their business.

On the other hand, there is no way local, state, or federal government needs to get their sticky hands involved in the situation. It’s just not the business of government to tell me which vodka to drink or a business owner which vodka to sell.

This is what small government means. Sub-Zero can refuse to sell a brand of vodka or refuse to let me in if I’m not wearing a mask. They are a private business and the government has no business telling them what they can or cannot sell or telling them how to enforce a dress code.

What if Russian Standard hates Putin?

This is an important question. What if the owners of Russian Standard oppose Vladimir Putin and his amoral war? What if by not drinking their vodka, I actually help Putin by bankrupting those who oppose him?

This is the general problem with feel-good boycotts. When a boycott becomes some Cause Célèbre it ends up hurting many of the people it is designed to help. Meanwhile the self-righteous boycotters pat themselves on the back for a job well done. It’s a false sense of doing good when often you’re doing harm and it’s prevalent on both the Republican and Democrat sides of the aisle.

Conclusion

It’s entirely possible by not drinking Imperia or Hammer and Sickle I might be hurting a manufacturer that doesn’t support Putin. It’s also possible they are ardent Putin backers. I don’t know and I don’t care. I find what’s happening to be disgusting and wrong and I’m not drinking Russian vodka because of it.

Maybe I’ll never drink another glass of Imperia or Hammer and Sickle. That’s my business, not yours and not the government’s.

Tom Liberman

Comments on Trucking Capacity Article

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Trucking capacity

I saw an interesting headline about long haul trucking capacity. I then read the article about long-haul truck drivers being seriously under-utilized. After reading the article I got to the comments section. That’s what I want to talk about today, the comments on the article.

The comments seemed largely based on the headline rather than the article. The headline indicated some 40% of trucking capacity is not used on any given day. The part of the headline that seemed triggering for many was the person proclaiming this is an MIT expert.

What you talking about, Willis? Some MIT expert thinks he knows better than blue-collar, hard-working, good old boy trucking industry people how to run their company! Damn liberal, educated no-nothing! I’m going to give them a piece of my mind!

Overview

I admit I immediately jumped to the same conclusions as a lot of the commenters. Did the MIT expert want the truck drivers to drive more hours? Were the schedules that badly messed up? Wouldn’t the industry experts know how to properly schedule? Aren’t there laws about how much a long-haul trucker is allowed to drive in a day?

My confusion was cleared up once I took the time to read the article. A point many of the commenters failed to do. The MIT expert explains the biggest problem in trucking capacity under-utilization is loading and unloading the trucks early in the morning and late in the afternoon.

Apparently getting a truck fully loaded in a timely fashion at any other time than 9:00 a.m. to 2:00 p.m. Monday through Friday is a serious problem. This is particularly detrimental in the morning because it throws off delivery times and pick up times for loads the rest of the day.

The Comments

The comments, as you might expect, went after the MIT expert as an educated elite who didn’t have a clue about what he spoke. I read a lot of ad-hominem attacks, working-man indignation, and general you don’t know what you’re talking about comments.

Then I started to come across comments from actual long-haul truckers. These comments showed unanimous support for the MIT expert. They all confirmed the problem of loading in a timely fashion causing trucking capacity shortfalls on a massive scale. The truckers provided anecdotal evidence that rang true to my ears. They not only confirmed the MIT expert but indicated their complaints about this problem were long standing and
largely unaddressed.

Congress

The article then went on to explain what Congress planned to do about the problem. None of the solutions presented addressed the actual issue. Most of the solutions being pursued involved more drivers and more women drivers.

This is a bang for your buck issue. I’m not saying we don’t need more drivers or more women drivers. I’m saying listen to the expert and listen to the actual long-haul truckers. If you want to solve your trucking capacity problem, go after the largest issue first.

In addition, government might consider getting out of the way in regards to automated cars and trucks. Our online society is moving away from the brick-and-mortar store model. We want to order goods and have them delivered to our door. If we don’t address the capacity issue in a pragmatic and realistic way this problem is only going to get worse.

Conclusion

While the problem of trucking capacity is real, my actual goal today is to shame you armchair experts, unlike the MIT expert. You made an assumption based on a headline and didn’t bother to do any research into the actual issue.

Why didn’t you bother to read the article? You spouted off without knowing what you were talking about. Exactly what you accuse the MIT expert of doing.

My verdict? You, pompous commenter, are guilty!

Tom Liberman

Video Game Development and Cryptocurrency

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Cryptocurrency

Cryptocurrency, blockchain, and NFT technologies are in the news a great deal these days. It’s invaded the video gaming community in a big way with major gaming platforms embracing the technology. I’m not going to get into a lengthy discussion about what cryptocurrency is or is not. Nor am I interested in discussing its long-term viability as a medium of exchange.

What I will discuss today is crowd sourcing and in-game purchases used to fleece people of their money.

I’ve learned a great deal about this from various YouTube gamers like KiraTV and Callum Upton. I suggest you watch some channels dedicate to exposing this sort of scam and learn more for yourself.

What is Crowd Sourcing

Crowd sourcing is a way to generate revenue from people in order to create a product. In this case, the product is a purported video game which uses cryptocurrency, NFTs, blockchain and other buzzword technologies. The developer and associates spread information on various social media platforms touting the video game as a way to make a lot of money. People then send money to the developers in hopes of a large return.

In modern times, the developer pays influencers to promote the video game which creates a buzz and more people invest.

In-Game Purchases

Another way the developers make money in this scheme is to sell virtual product in the game. It might be plots of land, vehicles, mounts, outfits, weapons, or anything else a crafty developer purchases from an asset store. People pay money for these things.

Often times a resale market is established where one investor can sell purchased items to a second investor with the game developers taking a small percentage of each sale. All these virtual markets are established long before any game is created.

The people who jump in early hope to see a massive profit later when others pay them a premium for these items. These early investors then use social media to promote the game itself and the in-game purchases as a way to make money. This is often called Pump and Dump which I’ve written about elsewhere.

The problem is only the early purchasers take a profit because, as it becomes clear the game will fail, the market plunges and all items become worthless.

Game Fails

The windfall comes when the game fails. The developer took millions from crowd sourcing, millions more from in-game sales but after trying to create a game for any number of years, they fail. Off they sail into the sunset with your money.

The reason this is generally legal is developers spend just enough money and time to make a case they tried to develop the game in good faith. Naturally, they had no intention of creating a finished product but they only must prove in court they tried.

Conclusion

I don’t want to tell you how to invest your money. It’s your decision. I get the idea if one of these games actually comes to fruition you might make a lot of money. You won’t, even though you believe differently. Only people in on the scheme from the start or the early days will make money. Everyone else, that’s you, will lose.

I understand it’s only a few thousand dollars that you can afford to lose. Still, don’t you want to spend that money on something you’ll enjoy? A good whisky? A nice meal? A cute girl or guy? Even a long-term, low-risk investment?

Tom Liberman

Government Murdered Rail at your Expense

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Rail Baron

Your federal government is in the process of agreeing to spend at least $715 billion and as much as $3.5 trillion on infrastructure expenses. Why? Our roads, bridges, and airports are decaying. Government built a great majority of these, largely in order to promote car and airplane travel.

This enormous expense falls on taxpayers and will continue to do so for the foreseeable future. It is not just federal money but also an enormous portion of state and local expenditures. Roads and airports will never pay for themselves.

Would you like to know a form of transportation that, up until government got involved, did pay for itself? Rail.

Let’s find my Time Travel Hat and get this rant rolling!

Early Rail in the United States

Where is that thing? It’s never where I left it. Freezer? Nope. Under the bed? Nope. Ah, there it is, my Yadier Molina bobblehead put it on for some reason. All right, plop it on, spin three times, whoosh, bang and where do I find myself?

Why, it’s the nineteenth century, 1815 to be exact, as I note on a local broadsheet. A fellow named John Stevens just got a charter for the New Jersey Railroad, the first of its kind in the United States.

Spinning again, hat taking control on its own. Dizzy, fuzzy, looking around, where am I now? Trains, trains, everywhere! There are 17,800 freight locomotives carrying 23,600 tons of freight, and 22,200 passenger and it’s 1880 a mere sixty-five years since the first rail lines emerged.

How did all this expansion happen? Largely with capitalistic investment which exploded after the Civil War where the North’s superior rail network proved integral to victory. It also must be noted much of this expansion came with the racial exploitation of Chinese laborers brought to the United States expressly for this purpose.

Light Rail and Trolleys

It’s not just trains carrying passengers from one part of the country to the other but the major metropolises are building light rail systems. My hometown of St. Louis sported a fantastic trolley system that moved willing passengers for years.

Such light rail and trolley systems still exist today but greatly reduced from their prime. In New York, it is possible, and frankly preferable, to travel almost exclusively using the subway system which is the largest remaining in the United States.

The End of Passenger Rail

Gasp. Third trip and I’m about wiped out but where am I now? It’s the Turn of the Century, the Twentieth that is. It’s been a bit of a Boom-and-Bust business cycle for the rail industry but we now have 254,037 miles of track and it’s all downhill from here.

What happened? Trains work extremely well but the passenger rail system began dying for some reason. The government got overly involved is what happened.

The Federal Air Road Act of 1916 funneled $75 million tax-dollars into building roads and airports, the first of many such expenditures that continue to this day. The United States Railroad Administration nationalized the entire rail system in December of 1917.

The passenger rail system just could not compete with this enormous influx of federal, state, and local dollars designed to encourage air and car travel. It’s not really important as to why the government felt such transportation superior. There were reasons, some of them even good reason.

The Result

The passenger rail system largely died. Cars with their necessary roads and planes with their required airports took over. All built and maintained largely by tax dollars. That’s why we must spend trillions of dollars to support the crumbling infrastructure that would largely not exist if government hadn’t gotten involved.

It’s impossible to determine with any assurance what would have happened. Passenger rail was killed, that is where we find ourselves. I think it’s not farfetched to imagine a greatly expanded rail network covering much of the country by now, but that’s speculation.

The Solution

How do we fix this mess? It took us over a hundred years to get here so there is no easy solution. People are used to cars and planes. We have an enormous infrastructure of roads and airports that cannot, and should not, be dismantled. Cars will always have a place, as will planes; they are useful but capitalistic economics should drive their future.

We need to phase out tax-support for roads and planes in slow and cautious steps. Let entrepreneurs start new rail transport systems, small at first surely. Money is to be made and people want to make it.

Maybe it will take another hundred years to establish a proper equilibrium between trains, cars, and planes. One that is driven by need and profit, not by government interference. Let’s start that journey today.

Tom Liberman

The Super League might be a Harbinger for all Sport

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Super League

What is the Super League?

A group of futbol clubs in Europe hope to form a new association called the Super League. Hopefully comprised of the highest revenue teams in England, Spain, and Italy. The plan is to have twenty teams divided into two groups with a playoff scenario at the end of the season.

The Super League founders hope to lure the top revenue teams from Germany and France. Those teams have so far resisted such attempts.

Why are they Doing it?

This league is similar to the Power Five football conferences in the NCAA and money is the driving force in both cases. In European futbol and the NCAA there is an enormous gulf between the high revenue teams and the low revenue teams.

The teams making huge amounts of money must share the wealth with the teams who don’t make nearly as much. This seeming unfairness rankles the owners of the wealthy teams and drives them into creating their own leagues, the Power Five conferences in the NCAA and now the Super League in European futbol.

This revenue gap creates an almost unbridgeable divide in the quality of the top teams as compared to the lower tier teams.

Over the last twenty years one of the proposed Super League teams won the English Premier League championship nineteen times. In the Spanish La Liga, it is eighteen out of twenty and in the Italian Serie A, it is nineteen out of twenty.

European soccer is almost no longer a competition at all. It is simply a long line of the wealthiest teams playing amongst themselves for a championship. In essence, it is already a Super League with all the other teams essentially being doormats for the top teams to crush week after week while getting a share of the revenue as payment for the shellacking.

Is it any wonder the top teams and individuals don’t want to share the wealth they generate?

Why are People Angry?

The Super League clubs are receiving general outrage from most fans as it is considered an enormous cash grab. That’s the absolute truth. Teams like Manchester United, Barcelona, and Juventus have fan bases around the world. The television contracts the league shares are almost universally driven by the most popular teams.

The fans of secondary teams in all the other leagues enjoy rivalries with the top teams. Games against Super Teams, in their enormous stadiums filled with rabid fans, generate most of the revenue for smaller franchises. The Super League teams plan on continuing playing their regular leagues but people see the writing on the wall.

Outraged by this blatant cash grab, the fans want to see the big teams punished for their behavior. Punishment such as banishment, championships rescinded, and fines.

What can be Done?

Is there a way to stop such new leagues? Is stopping them possible? There is already a strong movement to prevent the Super League. If things don’t change as far as revenue is concerned, I’m not sure how the current sports structure can hold together.

Teams from larger markets will generate more fans, more revenue, and more championships. Even in U.S. sports, where salary caps keep the competition relatively even, the vast majority of revenue comes from a few of the big city teams and everyone else is fighting for scraps.

The world is becoming more global and the idea of a Super League across countries and even continents is not going away. I get why people are angry, but I don’t see a viable way to stop the revenue generators from creating their own competitions. They just want to stop sharing their wealth with the smaller market teams.

I’m sure that’s not a conclusion most people will like.

Tom Liberman

Wind Power in the United States and China

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Wind power

Overview

The recent freeze in Texas, a law in Missouri, and wind power installations in China give me an opportunity to write a blog. Given such a chance I’m not exactly the sort inclined to turn it down.

Basically, wind power in the United States is considered a Green Agenda and largely, although certainly not completely, associated with the Democratic party. The recent freeze in Texas caused enormous power shortages and Republican politicians are using this talking point to attack wind power in general. In Texas the governor blamed frozen wind turbines and now in my beloved home state of Missouri the Republican led legislature has disallowed eminent domain to install wind power lines. Meanwhile, in China they are being installed in ever greater number and soon they will lead the world in wind power.

The Issues

Renewable energy is cleaner than fossil fuels and causes far less, although some, environmental harm. Of this there is no question. Soon wind power and other renewables will provide cheaper power to the communities that avail themselves of its use. There is some debate about this although the trend of ever cheaper wind power is difficult, but not impossible, to ignore.

Because the United States is currently embroiled in a political situation in which what is best for the country is secondary to getting elected, wind power is in the crosshairs. It’s relatively interesting because Texas is one of the leading wind power producing states and when the governor attacked that revenue source, he rather quickly walked back his statements, likely because it is generating enormous profits for powerful players in the state.

However, walking back statements can’t undo harm in our current political environment. It’s clear to me Republicans have largely decided that wind power is good election fodder and bashing it will not stop any time soon.

Wind power installations in the United States have crawled almost to a complete halt in large part because of Trump administration policies favoring coal and gas.

Missouri Law

The Missouri law is a case in point about politicizing such things. I agree eminent domain should be used sparingly and I’m not opposed to the law enacted by the legislature banning its use in bringing wind power to the state.

There are no such laws prohibiting such use for any other energy source. The Keystone Pipeline was largely built using eminent domain to steal farmer’s land in Nebraska, North and South Dakota. Likewise, eminent domain was used to steal the land being used by build a border wall in Texas and other states.

This is a clear example of politicians playing favorites for one industry or one company and subverting capitalism.

Likely Results

The result of our political climate in the United States is clear. Wind power installations will be curtailed and delayed. Meanwhile in Europe and China such installations are moving ahead with great rapidity. This will inevitably put the United States behind in power generation and the costs associated with it.

If you were going to build a large factory and the energy costs in one country were significantly cheaper there, it must play a role in your decision. If the citizens of the region where it was to be built didn’t fight it for environmental reasons, thus saving you court costs and headaches, it seems clear you would build your factory in that country.

Conclusion

The reality of the situation is wind power should survive on its own merits. I’m opposed to the government favoring one form of power generation over another because it is simple a subversion of capitalism. It’s a sad day when China appears to adhere to the capitalistic mantra with far greater fervor than the United States. When the people of the United States want government agencies to determine which business succeeds rather than natural economic forces.

Tom Liberman

What to do about China cornering Cobalt Market

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Cobalt Market

The Cobalt Market is in the news these days and this fact brings an opportunity for me to make a comparison between political philosophies of China and the United States. China is in the process of gathering an enormous share of the Cobalt Market and this presents a problem in that the element is a key component in the production of lithium-ion batteries. These batteries will drive the future of energy storage.

The fact that China now has control of a large share of the cobalt market is largely because that nation implemented a strategic, long-range plan called Belt and Road which I wrote about a few years back. Belt and Road encouraged economic ties between China and so-called third-world countries for the development of raw material. Almost fifty percent of all cobalt in the world is mined by the Democratic Republic of the Congo and this is because China invested money to build both mines and economic ties with Congo.

Belatedly, the United States realized this is a problem. Companies around the world need cobalt to produce lithium batteries and China, for the foreseeable future, has most of the mineral rights. Now comes the pertinent part of this blog. What can the United States do? There are two competing philosophies on the subject; essentially America First and Globalism.

The America First philosophy is largely promoted by the Trump Administration and its nationalistic backers. They want to encourage cobalt mining in the United States to ensure a supply of the vital element. By encourage, I mean give government money, taxpayer money, to companies to build mines and refining facilities. To ease environment restrictions and pass tax breaks along to companies who do so.

The globalist policy is pushed by a variety of backers and largely suggests investing in soft power, good foreign relations with countries like Australia with proven reserves of cobalt. This policy relies on strong economic ties with allies throughout the world. This is largely the policy that China pursued with Belt and Road and which has secured them enormous mineral rights with allied nations across the globe.

It’s important to understand one of these philosophies is largely socialistic. It relies on government rewarding businesses that behave in a way it desires. It is not direct socialism but crony capitalism which in the end is probably worse than socialism. The government wants cobalt. It bribes companies to mine the element.

The other method relies on capitalism and strong ties with foreign countries. This is a policy that has driven in the United States almost since its founding. We cannot, and should not, try to be self-reliant for all things, for the simple reason that such a policy is doomed to failure.

If we have strong alliances with countries that have natural resources, we will always have a supply chain. If we rely on our government to use our tax dollars to setup a financially unsustainable source here, we are doomed to both supply problems and a forever drain on our economy.

China’s Belt and Road is the proper strategy and its one the United States pursued for over two-hundred years, with great success. Our freedom was exported throughout the world and our alliances were strong.

We can certainly attempt an America First policy and this will, eventually, produce a home built cobalt market but it will never be enough. It is an endeavor doomed to failure and socialistic to boot. I know the America First people don’t like to hear it, but you are socialist, far more dangerous, in many ways, than those who actively promote socialism.

Tom Liberman

General Salvador Cienfuegos Charges Dropped

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Cienfuegos

United States Attorney General William Barr dropped all charges against General Salvador Cienfuegos who, among other things, informed Mexican Drug Cartels who was an inside informant resulting in the murder of said person. Why did William Barr do this, well, he claims it’s because Mexico wants to charge Cienfuegos, but the real reason is to make sure that Mexican authorities continue to cooperate with the US in drug interdiction.

Let’s be clear, the United States has many, many Mexican nationals in our prisons related to drug crimes. What makes Cienfuegos special is that he has friends in high places and our completely corrupt government is happy to do them a favor.

In continuing to be clear, Cienfuegos is responsible for far more of the drug trafficking coming into the United States than a thousand low-level drug dealers. Our willingness to lock up a person selling drugs on the corner while ignoring the entire top of the supply chain is a damning indictment of those who bleat earnestly about the dangers of drugs in the United States.

I’m against the War on Drugs for any number of reasons. I don’t think we should be prosecuting this war and I think the interdiction effort has caused more harm to the citizens of the United States than any other policy of government in the history of the country.

However, if you are for the War on Drugs, if you believe this scourge must be stopped, then you should be calling for Barr to be hanged by his neck until dead, I won’t hold my breath. The reason you won’t is because you are not really invested in ending the War on Drugs. This war fills the pockets of not only Cienfuegos but law enforcement agencies throughout this country. We are completely corrupted by the money and Barr’s head is deeply in the trough.

The government takes your tax dollars by the billion and redistributes this wealth to law enforcement agencies across the country. This money is the primary way the Attorney General of the United States controls law enforcement. It is the way government bribes local officials into doing their bidding.

When Barr claims Cienfuegos will be tried and imprisoned in his own country, he is taking part in the grand deception. When Barr funnels money to law enforcement to war on drugs, they purchase equipment that allows them to crush freedom across the country, from Lafayette Square to Malheur National Wildlife Refuge.

Drugs have won, not because they are legal, but because they are illegal. We the People are losing.

Tom Liberman

Why the President can Fire the CEO of the TVA

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TVA

I just read a story about the Tennessee Valley Authority (TVA) and the fact President Trump fired its CEO and one board member. My first reaction was, what what what? How can a political entity fire the CEO of the TVA? It turns out the TVA is owned by the Federal Government although it receives no tax dollars and acts almost exclusively just like a private company. So, my second question is, what what what?

Where is my Time Travel Hat? I have to get to the bottom of this immediately. Did I leave it in the freezer again? No. In the tax document drawer? No. Ah, there it is in the Gloomhaven Box, how did it get there? Oh well, let’s see, still fits, spin three times, fancy colors, bright lights, dizzy spell, and, where am I?

Is that President Franklin Roosevelt over there? What is he saying, selfish purposes, let’s listen in: Never shall the federal government part with its sovereignty or with its control of its power resources while I’m president of the United States. Hmm, so he’s upset that public utilities are charging high prices. He wants the government to be in charge of electricity generation. Look at all the people applauding him including Republican Senator George Norris who just blocked Henry Ford from building a private dam and utility to modernize the Tennessee Valley.

I can’t believe I’m actually watching President Roosevelt signing the TVA Act which legally prevents competition in the valley. Only the government can build power plants and dams. Oh, I see, look there, in the back room, the politicians know the dams are going to flood out tens of thousands of residents, Native American sacred sites, so they are giving TVA Eminent Domain powers to simply kick people off who refuse to sell. Smart!

Oh, look there, is that Barry Goldwater and Ronald Reagan lambasting the power of the TVA and the fact government controls it instead of private industry, it sure is. Look there, they have their own police force! A net income of $1.12 billion in 2018. They’ve been profitable since 1977.

Uh oh, energy running low, flashing lights, and I’m back home. Whew. Another successful trip. What did we learn? The government shouldn’t own industries like the TVA for a number of reasons, one of them is politicians will feel free to intervene in business decisions for which they should have no authority whatsoever.

Why does President Trump have the authority to fire the CEO of the TVA? Because the government created a monopoly and crushed any chance for private industry competition.

How does the Supreme Court justify this Socialism? The Commerce Clause which allows the regulation of streams to keep them navigable and the War Powers Act because electricity is sometimes used in the creation of munitions. Seriously? I ask. Seriously?

Tom Liberman

Capitalism Changed the Name of the Washington Football Team

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Capitalism Changed the Name

Make no mistake about it, capitalism changed the name of the Washington football team; not outraged Native Americans, not laws passed by politicians, not do-gooders. It was capitalism, pure and simple and that’s a good thing.

By now most sports fans, and plenty of those who are not, are aware Daniel Snyder, owner of the Washington football team capitulated to capitalistic pressure from big money sponsors of the team and finally agreed to change the name. It’s about time. The thing to remember is that Native Americans, do-gooders, and politicians have been calling for the name change for decades. Snyder vowed he would never change the name. Never is now.

Everyone knows that capitalism changed the name when nothing else could convince Snyder. Money, pure and simple. The executives at FedEx, Nike, Pepsi and other sponsors told Daniel the money was ending. Nike did more than talk, the company pulled all Washington football gear from sale. That’s what it took. Not, mealy-mouthed things like: I’m going to stop selling your gear. Listen here, Snyder, your stuff is off sale. Go look at the website. It’s gone. Big round of applause for Nike.

That’s capitalism in action. Why did enterprise companies like FedEx suddenly choose now to make it clear the time had come? Because they feared people would stop purchasing their products and using their service. It’s likely the executives at those companies probably think the old nickname is offensive but they didn’t get an epiphany last week, they got a message from consumers. They passed that message along. The name changed. Follow the money.

This is the message of Economic Liberalism, the mantra of the Libertarian. You can pass as many laws as you want but people will find a way around them. People can scream and yell all they want but only when the purchasing patterns change do we see action. And action we see.

What can we learn from the fact capitalism changed the name? That capitalism works to ensure social justice if people want social justice. We rely on politicians but forget that most politicians are elected by a tiny fraction of the population. You want justice? Convince enough people to demand it with their money and you’ll get it. No politicians can do that for you. The power is yours.

Tom Liberman

The Unwanted Shake Shack Government Loan

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Shake Shack Government Loan

What does it tell you a Shake Shack Government Loan was returned? For a lot of people, it’s a gesture of goodwill by Shake Shack to the other small businesses that need the money more. That’s not the way this anti-government Libertarian sees it. The Shake Shack Government Loan was simply a way to make the company obligated to the government, the owners didn’t seek it, didn’t want it, didn’t ask for it, but got it anyway. Forcing them to return it.

I’m proud to say the Shake Shack founder is St. Louis hometown hero Danny Meyer. Yet another illustrious graduate of John Burroughs, a fine school my lack of academic prowess disqualified me from attending. That is not the point of today’s article.

Why would anyone get a loan they didn’t want or need? That’s a question you must ask yourself. Why would any entity be given a check they didn’t ask to receive? One of the main reasons is the United States Government is big on giving out loans, our entire financial system is largely based on giving out taxpayer money as loans, this money generally having to be repaid with interest that goes to friends of politicians.

The government is certainly using Covid-19 as an excuse to further entangle the interests of its patrons into every aspect of citizens life. This unwanted intrusion didn’t start with Covid-19. President Trump created a Welfarm State with ridiculous tariffs, the Post Office was intentionally bankrupted, the Airline Industry has been a government subsidy since its inception and resulted in the planned destruction of the highly successful passenger rail system, the entire horse meat industry was destroyed. This is how government operates in a Republic.

In a Republic there are limits to what government officials can do. There are Checks and Balances. This being the case, government officials must wile their insidious evil in different ways. One of the ways they do this is to make people and businesses their unwitting partners. The government is happy to loan you money, purchase your products at inflated prices, because they then become a partner in your enterprise. You owe them.

The Shake Shack government loan is just another in a long line of takeover attempts that have reduced the United States to a system of Crony Capitalism. At least Shake Shack saw through the subterfuge although many others do not.

We no longer have a capitalistic system here in the United States and I suspect we won’t have a Republic for much longer either.

Tom Liberman

The Inherent Corruption of an Essential Business

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Essential Business

What is an essential business? Covid-19 is forcing state and local governments across the United States to make this determination and the methodology being used once again gives me an opportunity to go on a Libertarian Rant.

Being designated an essential business means you continue to collect revenue when others cannot. This is an enormous incentive for owners to get the government to declare them an essential business. The idea is simple enough, what business must stay open in order for people to survive? Yet, the implementation, when handed to people who are susceptible to bribery, influence, and even threats becomes something entirely different.

In the world we live in, an essential business is simply one where the owners have enough influence with government officials to be declared such. I’m not picking on one business or another, frankly, they probably should be bribing and threatening local politicians to stay open as it means they continue their revenue stream when everyone else cannot.

The point is that essential is largely meaningless when government gets to define it. If we got together and talked about it or five minutes we’d come up with a pretty definitive list. Food and water, medical supplies and service, and HVAC depending on the season. As an aside, the preceding sentence demonstrates the necessity of the Oxford Comma.

Once government becomes involved, it’s all essential if you pay those making the decisions enough. All you have to do is have a friend in government and your business gains an enormous competitive advantage. Your employees can be forced to come into work and do their jobs. Now, for many employees this is a good thing although certainly some would prefer not to risk their lives doing so, that’s not really the point.

The reality of anything being an essential business at this time of Covid-19 illustrates the problem with having government make these decisions for us. If you run a business type that doesn’t have influence, you don’t get to decide for yourself if you should be open, the government makes that decision for you.

I’m not saying staying open is necessarily a good thing, if a bunch of your employees and customers get Covid-19 and die that’s horrific. I’m just saying when government decides what is an essential business rather than consumers, we get clearly non-essential businesses staying open. That’s the problem with having government make decisions for us. They force bad decisions on us. We should be free to make those bad decisions ourselves.

Tom Liberman

Planetary Economics 102 with Professor Blortstein

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Planetary Economics

“Welcome to Planetary Economics 102,” said the squat figure sitting in a comfortable chair and wearing starched blue shirt that matched his azure gills nicely. “I’m professor Blortstein.” He stared at a halo of images that floated around him and waved a long appendage which caused one of them to glow a bright green.

“Yuvurl,” he said with a glance at the image which had a long and flexible neck topped by a large head and bulbous eyes. “Last semester we discussed planetary economics leading to the demise of a commodity-based currency. Please give us a recap.”

“Improved medical technology increases live birth rates and extends life in general. This obviously results in a large increase in total population. This growth cannot be matched by new discoveries of the commodity to which the currency is tied.”

“Which results in …,” said Blortstein with another wave of his appendage causing a second image, this of a young woman with bright purple skin, a narrow head, two green eyes, and an unusually large number of metallic pieces attached to her face. “Miss Mie?”

“The total economic outlay the world requires is limited by the supply of the commodity and thus growth is restricted and becomes increasingly so as populations increase. One nation, generally the most populous, begins to distribute loans not backed by the commodity.”

“Very good,” said Blortstein. “Now, what happens next?”

Mie continued with a flick of her long hair, “The nations that original enforced the commodity-based economy, generally those that emerged victorious in some particular virulent and global conflict, are pressured into withdrawing the system.”

“What causes this pressure?” said Blortstein with a wave which caused yet another image to glow green.

That student, a golden creature with a long and narrow neck and a mouth capped by a narrow and sharp beak continued, “The pressure comes in several fashions. In one case the leaders of the country who are trying to enforce the commodity-based currency realize they are falling behind because they cannot proceed with enterprise projects. Another factor is many of the large business entities within that country see the enormous profits to be had and begin investing large sums in the aforementioned country.”

“Excellent,” said Blortstein with a nod of his head. “So, now we get to the subject of this semester’s class of Planetary Economics. What happens next?” Another wave of his hand and yet another student chosen to speak.

A round-faced fellow with many freckles on his pale skin took up the conversation, “The leaders of the various countries show sensible restraint and refuse to excessively commit the nation’s treasury to a fiat currency system and growth continues but at a sustainable pace.”

The class erupted in laughter.

“Very good, Mr. Lebushi. Very good. Now, Miss Mei, do you have an alternate conjecture?

“As a crisis arises …,” she started.

“A real crisis?” asked Blortstein.

The girl smiled and shook her head with a clink-clank of her adornments. “I suppose it might be a real crisis but more like a perceived crisis or even a manufactured crisis designed to enrich the friends and backers of the leaders of the country. In any case, the nature of the crisis little matters, what is important is that the nations of the world start an inevitable splurge of spending.”

Blortstein nodded his head and smiled, “This spending quickly outpaces the economic wealth of first one nation then the next and eventually the entire system of planetary economics. The new system relies on loaned money; that is to say, money promised to be repaid but not actually in existence. Enterprise projects proceed apace, loans to the general population for shelter, mobility, and other basic needs continue as well. Debt piles up in a manner that cannot possibly be repaid.”

There was silence in the class for a moment as they waited for the professor to proceed.

“Now,” continued Blortstein. “We come to the subject of this semester’s class. What happens next? Some worlds are able navigate this treacherous period and emerge with an economy based on abundance and join the galactic community. Others are not as fortunate.”

Tom Liberman

Cheap Razor Blades Saved by the FTC

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Cheap Razor Blades

******* UPDATE *****

Edgewell dropped their attempt to purchase Harry’s. Congratulations big government lovers, the FTC has saved us.

**** END ******

The Federal Trade Commission is attempting to save cheap razor blades by preventing Edgewell Personal Care from purchasing Harry’s. Harry’s sells such blades along with other products. The government apparently considers Harry’s an industry disrupter and feels the need to step in and prevent the sale, which the owner of Harry’s deems necessary because the company is not profitable.

Yay, the government has come to save my cheap razor blades. The original low-priced razor companies; Dollar Shave Club and Walker and Company, were already purchased by larger razor manufacturers leaving only Harry’s to compete against the giants.

Let’s examine what’s really happening here. Why is Harry’s not profitable to begin with? Maybe because they sell razors so cheaply? It’s entirely possible Harry’s and the other sellers planned, from the very beginning, to sell out to the big names in industry. The principals knew their companies weren’t going to be profitable but wanted the bonanza at the end of the tunnel. If that is the case, then the FTC is preventing them from achieving this goal. It is undeniably true the owners of Harry’s want to sell and they are being prevented from doing so by the government.

The broader question, from a Libertarian perspective, does preventing the sale of Harry’s leave consumers better off? Does the government have a role to play thanks to the Anti-Trust laws established in the Constitution of the United States?

The answer is not easy to deduce. It is absolutely true that Harry’s is an industry disrupter because they sell cheap razor blades significantly below the price of the established companies. However, if their goal was to sell out in the long run, this action by the FTC actually prevents other start-ups from doing the same thing. If they can’t sell their companies and they know their business model is unsustainable, they will not bother starting up in the first place. If, on the other hand, they could make a profit selling the cheap razor blades, they would stay in business without being absorbed by a larger company.

Now, it is possible they are just poorly run businesses and blades at that price could be sold for a profit but the evidence we’ve seen so far doesn’t indicate as much. Therefore, it seems to me, the government shouldn’t be propping up companies that sell products at prices that are unsustainable simply because such is good for consumers.

This is, in essence, socialism. It’s almost as if the government themselves are selling us cheap razor blades which they purchase with our tax dollars. If I didn’t know better, I’d guess the government will eventually bail out Harry’s so they can keep selling us cheap razor blades, but, nah, that could never happen.

Tom Liberman

Tariffs on Cheap Chinese Mattresses

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Cheap Chinese Mattresses

In the last few years a product called Bed-in-a-Box has roiled the United States mattress making markets and allowed for the shipping of cheap Chinese mattresses. Prior to the Bed-in-a-Box model is wasn’t particularly cost effective to ship cheap Chinese mattresses to the United States and therefore companies here largely didn’t have to deal with such competition. Now they do and they’re doing something about, petitioning the government to save them.

The Federal Government is now claiming Chinese manufacturers are Dumping cheap Chinese mattresses on the United States and Commerce Department is going to institute tariffs of over 1000% on them. Dumping is an Anti-Trust issue and actually under the purview of the United States government so they do have an argument in this case. The Commerce Department claims the Chinese are dumping their mattresses at an unreasonably low level in order to drive out competition and create a monopoly from which they will eventually raise prices and lower quality.

There are very few instances of Dumping actually doing those things. Now, it is clear when a competitor comes in with equally high-quality product at a much lower price, the established businesses will suffer. The mattress firms petitioning the Commerce Department admit the cheap Chinese mattresses are of equal quality to their own so that’s not an issue. People are getting a product they want at a price they like, that’s good for consumers and I’m sure there are plenty of people sleeping on those mattresses every night and happily so.

The question becomes if the price is intentionally low in order to drive out competition and an eventual increase in price and lowering of quality is planned. I think we need look no further than Walmart to find the answer to this question. China has been inundating the U.S. market with cheap products for decades and, while they certainly have gained a stranglehold on many markets, they haven’t increased prices once they were established, they have kept prices low. This because manufacturing in China is cheaper for a variety of economic reasons that I won’t get into today.

There is nothing wrong with good prices. That’s a good thing for consumers. It’s obviously bad for the manufacturers of mattresses in the United States but that’s what healthy competition is all about, it’s the nature of capitalism. In this case, it can be, and has been, argued that the problem isn’t solely the cheap Chinese mattresses but Bed-in-a-Box competition from other U.S. firms as well. That the Commerce Department is intentionally raising prices for consumers simply to keep an industry afloat that could not otherwise compete.

Welcome to capitalism in the United States. Like higher prices and worse? Keep voting for such.

Tom Liberman