China has all the money and USA doesn't have any.

Just read The end of influence : what happens when other countries have the money by Stephen S. Cohen, J. Bradf.

It says that America will not be able to wield as much power and influence on the world stage because it no longer has the money. It's mostly in debt to China.

"We Americans spent more than we earned; we consumed more than we produced. We borrowed the money to buy the stuff from the people who produced it abroad and sold it to us. We paid them in dollars; they took the dollars and lent them back to us, so we could do it again. It worked well all around. They sold more, banked the money, and felt richer; we bought more and felt prosperous." p91.

Since a huge percentage of China's riches come from USA debt, China can't let the USA fail. They're in a sort of sick, co-dependent relationship.

Countries with natural resources are not necessarily rich.

I often hear people say that Canada has a bright future because we have lots of natural resources.

Unfortunately, there's not a clear link between natural resources and wealth. Look at African countries rich in diamonds. Look at south Asian countries rich in gold.

Look at middle eastern countries rich in oil. Low standard of living and widespread poverty.

Here are two quotes supporting this statement.*

"There is a striking correlation between a country's level of human capital and its economic well-being. At the same time, there is a striking lack of correlation between natural resources and standard of living." p. 106.

"Economists believe that a rich endowment of natural resources may actually be a detriment to development." p. 222

*Source:

Naked economics: undressing the dismal science by Charles Wheelan.

Who's going to pay for the oil spill?

British Petroleum (BP) is getting a lot of heat for the latest environmental disaster. Twenty-five thousand barrels of oil are gushing into the Gulf of Mexico, every day.

I haven't been following the story very well. I did hear that President Obama said, "BP is responsible for this leak and will be paying the bill."

Really?? BP is going to pay the bill. Don't mind my skepticism, but did the wall street banks pay the bill for their shady business practices, which brought down the economy?

No, of course not. The taxpayer paid the bill.

I'm going to go out on a limb here and say that BP will not be paying the whole cleanup bill. Sure, they'll pay a little. Not all of it though.

Obama said, "We're going to do everything in our power to protect our natural resources, compensate those who have been harmed, rebuild what has been damaged and help this region persevere like it has done so many times before."

US taxpayers better hold on to their wallets.

A discussion about the 500 mile diet.

Last summer my sister was telling me about the 100 mile diet. You only eat things grown within 100 miles of your house. She said it’s good for the environment and benefits the local community and economy.

I asked her why I should spend more on food and suffer the inconvenience of not having oranges or certain fruits, so that local farmers could make more money? In other words, what’s in it for me?

We had a back and forth for awhile and then I was all motivated to post the ideas we discussed to this blog. Then I just didn't bother. I didn't feel like it.

Now one of my coworkers is telling me the same thing and I'm annoyed. She started aggressively telling me about this 100 mile diet, while I ignored her.

When she stopped talking I said. "You and I have a different mindset. I totally disagree with you."

Then she said, "Let's hear what you have to say!"

I said, "No, I'm not going to get into with you at work."

Then she went on for a few minutes about how she hates buying chicken at the supermarket and only buys organic eggs laid by free range hens.

I said, "I don't want to pay more money for inferior local food. No thanks."

She said, "It will only cost more until the infrastructure is built!"

I said a couple more things about liking eating oranges and melons in the winter. Then I turned away from her and stared at my computer. I could hear her still talking about it, all riled up.

At one point I glanced up and she was waving a banana at me.

Lesson: Don't argue with socialist co-workers about fad ideas. They'll wave a banana at you.

Are the rich really conspiring against the middle class?

I don't like it when the media exaggerates by throwing around big words like "meltdown" and "disaster". Today at the library I picked up a book called Rich Dad's conspiracy of the rich : the 8 new rules of money Robert T. Kiyosaki.

The first half of the book is about how the rich and elite have conspired to keep themselves rich. Now I recognize that people who tend to use the word "conspiracy" are a bit loony.

Do I really believe that the world's richest people gather in a room every few months and conspire to keep themselves rich? No, of course not.

But I do believe that rich people have built a complicated system of economics that is designed to preserve and increase their wealth. "Conspiracy" is just a catchy, entertaining word.

Here are the reasons we, in the middle class, are poor compared to the elite: (The explanations are mine - I'm not that far in the book to use the author's explanations yet.)

1) Taxes

We pay taxes to support our government, which often gives bailouts or handouts to the rich. Elites and corporations don't pay taxes cause they can hire fancy lawyers to help them find loopholes in the laws.

2) Debt

We've been told to buy things we can't afford.

3) Inflation

The rich and elite can print money through banks and monetary organizations and create complicated derivitives. If we print money, we go to jail for counterfeiting. When the banks print money, the value of the money we hold decreases.

4) Retirement

The rich and elite convinced us "Hey let us take care of your retirement. Give us your extra money and we'll make a return for you in the markets." Yeah right. We saw what happened with that in 2008.

Buying cheap stuff makes life worse. (Part 2)

A few days back I wrote about the book Cheap : the high cost of discount culture by Ellen Ruppel Shell. She said buying cheap is bad because it lowers income and surrounds us with crappy stuff.

I kept reading the book, hoping she would talk about what else was bad about buying cheap. Well, she said it "dilutes the brand" - which I don't really understand because she didn't explain it well.

She also says it makes consumers "confused" because prices change so much every day. This seems a bit weak to me.

Later she said that low food prices are bad because we become "compliant" and when food prices go up, it causes "social unrest". Um, again this sounds weak. She's not making a good case for not buying cheap stuff.

The last chapter is about China and its notorious sweatshops. Yes, they're bad. They do, however, provide income and hope to the people who live there. Would you rather work in a sweatshop for $1 a day or rummage through a garbage dump?

I imagine that most locals prefer sweatshops.

Buying cheap stuff makes life worse.

When I was younger I used to buy the cheapest possible stuff.

Now that I'm older, I like to think I'm immune from cheapness, but really I'm not. I'll often buy cheap crap and that's a problem according to Ellen Ruppel Shell in her book Cheap: the high cost of discount culture.

She says that when stores sell cheaper stuff with lower prices, it means other stores have to lower their prices to compete. This means they make less profit (because margins are smaller) and to counteract the losses they cut salaries.

So when everyone starts buying cheap stuff, salaries go down. It becomes a cycle because now people have lower salaries and they can only AFFORD cheap stuff.

In a better world everyone would buy the most expensive stuff. Salaries would start to go up.

High prices and high salaries would mean we'd probably be able to afford approximately the same amount of stuff. It's just that now all our stuff would be excellent, high quality stuff instead of crappy cheap shit made by child slaves in China.

We don't fix or make things anymore.

I can't draw worth crap and I can barely work a screwdriver. I always blamed it on my hands. But this can't be the case. I can play guitar a little and I can type 60 plus words a minute. So what's wrong with me?

I'm typical, and that's the problem according to Matthew B. Crawford. His book, Shop class as soulcraft : an inquiry into the value of work laments the fact that most people in our society can't fix or build things with our hands anymore.

We don't need to. Everything's made cheaply in China. It's easier to buy a new item than repair an old one.

Crawford says this is a shame, because building things with your hands is good. It makes us happier, we're creating real things of tangible value in the world, and the pay's not bad (now that there's a shortage of trade workers since no one wants to do that anymore.)

He contrasts this with our current "creative" economy where we sit around in our post-industrial cubicles thinking of ways of doing things "being creative", but not actually doing them.

The middle class does all the work.

The comedian George Carlin once said that the rich people make all the money, the middle class does all the work and pays all the taxes, and the poor people are there to scare the shit out of the middle class.

I'd have to agree. The middle class gets royally screwed - especially in America (also in Canada to a somewhat lesser extent.) Let's take a look.

• The middle class was told to invest all their savings and money in the markets - mutual funds, stocks, mortgages, credit etc. They paid a ton of hidden fees to the rich corporations who pay their executives millions dollars of year.
• The system collapses because the middle class finally has their back broken by debt.
• The government then takes the money the middle class pays for taxes and gives it to the rich corporations who continue to pay their executives millions dollars of year as a "bail out".
• In other words, the rich people made money on the way up and made money on the way down.

Nothing has improved in the last 10 years.

I just read an article about the economy in the States. It's about the same as it was 10 years ago.

Over the past 10 years, not one new job has been created in the private sector (but the population has grown 8%). The stock market is at about the same level, despite the government pouring billions of your tax dollars into it.

In other words, all the work that's been done in the last 10 years hasn't made anyone more prosperous. How many weekends have you worked in the last 10 years? How much stress did you have?

How many days did you show up sick because you had to get that project done? How much sleep did you lose?

All for nothing. We're at the same level as we were a decade ago. This decade has essentially been a waste. We might as well have taken the last 10 years off.

Of course you might argue that your business made small improvements in efficiency or service. You might argue that products are a little better nowadays. But the point is, you're not any richer.

The country isn't any better off in an economic sense. This means that we've all been running on the treadmill, just to maintain.

We're covered in sweat, our hearts are pounding, our legs are sore. And we haven't gone anywhere. We're huffing and puffing just to stay in the sample place.

Maybe the tens will be a better decade.

There's no such thing as a "recession".

Sorry, but "recessions" don't exist. It's just a word made up by the media to make us feel worried.

When the news is slow, a person at a newspaper says, "Hmm, what should I write about. Hey - what about the economy? I didn't get a raise this year; we must be having a recession!"

Then they phone an investor or a bank and ask if we're in a recession. The person at the bank has no idea and says, "I'll crunch some numbers and get back to you."

They look at some government statistics and type some stuff in their calculator and say, "YES! We're in a recession."

Then the newspaper prints the article, and all the other banks read it and say, "Yes we are!" because they don't want to be left out.

How do I know there's no such thing as a recession? Ask a random person to define a recession. No one will be able to. There's no definition. The Economist magazine says that it's a negative GDP two quarters in a row, but even they admit that the definition doesn't work and is outdated.
Basically a recession means we're not making as money as we should be. That's pretty vague. We can still afford food, clothes and shelter, but we can't afford amazing food, clothes and shelter.

Basically a recession means we're still super rich compared to 99% of the world and 99% of all humans who have ever lived, but we're not super super super rich. We're just plain old super rich.

Boo hoo.

One day they will suddenly announce that the "recession is over". And nothing will be any different.

Just like they said the financial system was "collapsing" and in "chaos". I just looked out the window and don't see any riots in the streets.

Here are some more observations about "recessions":

I love them because it's a break. It's a break from all that hard work making money. It means more downtime and relaxing. More layoffs etc. Less work to do.

Companies love them too because it's an excuse to layoff the slackers or sell crappy parts of the company or cut wages, etc. It's an excuse to tighten the belt.

Governments love them because it's either an excuse to spend more money (Obama's stimulus) or an excuse to cut money (BC Liberals cutting funding). Also they have the perfect excuse for when things go wrong. "The recession!" and "Things are worse than we thought!"

You never hear the word "depression" anymore. And by the way, depressions don't exist either. A few years ago a couple scientists proved that markets were too efficient nowadays for a depression. They won the Nobel prize for economics.

Recessions are good because it gets rid of the crappy employees and crappy companies. It cleans up society's trash, and lets us start all over.

So basically I'm going to enjoy this fake recession while it lasts.

The price of oil determines how rich we are.

Just finished reading Jeff Rubin's Why Your World is About to Get a Whole Lot Smaller. Rubin believes in peak oil - meaning the (still controversial) idea that the world's oil production has peaked and we will soon run out of oil.



Before this happens, however, we'll see a steady increase in the price of oil and this will fundamentally change our economy by making our world "smaller". Since gas will be so expensive, it will no longer be cost effective to ship goods and food from China. That means we'll be relying more on local farms and local companies to produce commodities. It also means higher prices.



Rubin does a great job of explaining how cheap oil subsidizes the low cost of almost everything we buy. Cheap oil means that it's better for us to buy goods from faraway, where the cost of making these goods is much lower than it would be if they were made locally.



He argues that the current economic recession started because the price of oil went up too quickly. It wasn't the sub prime mortgages. Expensive energy means slow growth and the stalling of economic development. Now that oil is cheap again, the economy will pick up. When it does, oil will skyrocket causing another recession and so on.



This to me was one of the most interesting things about the book - the connection between prosperity and cheap energy. As oil slowly becomes too expensive, people will search for a new (cheaper) energy source. If we find a cheaper energy source, expect prosperity and a high standard of living. If we don't, expect economic stagnation, high prices and a drop in our standard of living as we rely on pricey local alternatives.