Gongol.com Archives: May 2013
Brian Gongol


May 5, 2013

Socialism Doesn't Work Watch out for anti-capital proposals
The White House budget proposed in April called for a limit of $3.4 million on the amount Americans could accumulate in tax-preferred retirement accounts. The budget itself is really just a statement of policy preference -- it's not going to turn into the actual budget -- but it does echo a recurrent theme of President Obama's time in office: That capital accumulation is something to be viewed with suspicion, bordering on hostility. On one hand, $3.4 million is a lot of money -- nobody should doubt that. But we're also nearly completely blind in America to how much is "enough" for retirement. Many people would say the word "millionaire" and imagine Uncle Pennybags or Uncle Scrooge. But consider this: If you wanted to get $40,000 a year in retirement income and do it just on interest payments alone (in other words, if you were trying to avoid taking anything out of your nest egg and just live on the interest), then if you had your money in "safe" 10-year Treasuries earning 1.78%, then you'd have to have more than $2.2 million in the bank. Under those conditions, "rich" doesn't really look so rich anymore. Instead of turning every saver into a villain (or a convenient target for heavy taxation), we should probably start to get really honest with ourselves. Our biggest single fiscal problem is that we can't afford to pay for the entitlement programs we've created at current rates of spending and taxation. That problem isn't going to be solved by discouraging people from saving (and thus making them more dependent upon government entitlement programs). That's the straightest path to a downward-spiralling negative-feedback loop. We will only get out of the fiscal trap by getting the economy to grow meaningfully faster than it is (3% to 5% would be ideal), and that's only done by getting people to save and invest in productive businesses. That also has the very positive effect of creating a larger class of people who don't need those entitlement programs to support them in their old age.

Business and Finance There's "official", and then there's "Google official"
Google has now shifted from calling them the "Palestinian Territories" to "Palestine". It's not a decision that bears any diplomatic standing -- Google is, after all, just an international company...not a state -- but it's worthy of note that decisions like this by commercial entities can have more impact than, say, the same change when it's done by the UN. We may very well be in an era in which the behavior of large companies (like Google) may have greater impact on the world at large than comparable behavior by true nation-states. In other words, balance sheets may matter more than armies. Nothing presently rivals the United States for global influence, and there's certainly a tier of nations (including the UK, China, Russia, and India) that are significant enough for one reason or another to merit true global influence. But if one were to rank the relative influence of the UN Member States, there's no doubt that there are several big companies that would punch well above the weights of many member countries. It's not entirely unprecedented -- the Hudson's Bay Company and the Dutch East India Company are two examples that come quickly to mind. But we may be, as some writers have suggested, in an era when many corporations transcend the powers of nation-states, and that requires thinking about them in new ways.

Computers and the Internet Thinking of investing in Facebook?
Proceed with caution. Page 15 of the company's latest earnings report tells a very interesting tale of declining operating margins. It's becoming harder for them to make a profit, even as the number of users grows. That doesn't mean they'll stop making a profit -- but the downward trend is obvious even to the untrained eye. Also of note: On page 4, they reveal that membership growth in the US, Canada, and Europe has basically ground to a halt. If you're not a member by now, you're not likely to convert. The US/Canada "population" on Facebook grew from 183 million to 195 million from the first quarter of 2012 to the first quarter of 2013. Meantime, the US population grew from 313 million to 315 million, and Canada has about 35 million people in all, growing by about 400,000 a year. So, while Facebook's membership is still growing faster than the population overall, it's really at about the saturation point -- especially if one assumes that some of those "members" are second accounts.

Computers and the Internet Productivity growth doesn't seem to be showing benefits from computers and smartphones
Either something is wrong with the data (and/or how it's being collected), or we're blowing off some of the obvious benefits that everyone can see with their own two eyes by wasting time on Angry Birds. Or something. It may also be one of those insoluble paradoxes of trying to account for what we produce without a real measurement of our overall well-being.

The United States of America Republicans can succeed by pursuing good-government policies

Business and Finance Economic well-being is the only thing that can prop up political freedom
When people go hungry, they're far more likely to let go of their civic freedoms in exchange for promises of food. That's what's at risk in Egypt right now: Having clawed their way to greater political freedom, the people are suffering from economic stagnation. That could put the political freedoms at risk if a sufficiently persuasive party or demagogue comes along, offering bread in exchange for those freedoms.

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