Not So Dismal

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Archive for the ‘Outside Sources’ Category

Of Pianos and Cars

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A great column has been published today over at Mises worth reading. As a musician myself, the subject certainly struck a chord (ha). The author looks at the rise and fall of piano production in the United States and how it compares to Detroit’s situation today. Certainly an interesting and valid analogy, proving that no particular product or good is exempt from the laws of the free market. I stand by my previous statements that providing a bridge loan to GM and Ford is a more palatable situation than printing money to cover losses on absurd, synthetic financial instruments, but Mr. Tucker does us the good deed of reminding us that less-bad is not the correct option in the long run. Excerpt and link to the full article follow below:

With the growth of this manufacturing came an explosion of shops that served the piano market all up and down the industry. Piano tuning was a big-time profession. Retail shops with pianos opened everywhere, and the sheet-music business exploded with them. Ever notice how in big cities the music stores are typically family owned and established 40, 50, and even 100 years ago? This is a surviving remnant of our industrial past.

All of this changed again in 1930, which was the last great year of the American piano. Sales fell and continued to fall when times were tough. The companies that were beloved by all Americans fell on hard times and began to go belly up one by one. After World War II the trend continued, as ever more pianos began to be made overseas.

In 1960, we began to see the first major international challenge to what was left of the US market position. Japan was already manufacturing half as many pianos as the United States. By 1970, a revolution occurred as Japan’s production outstripped the United States, and it has been straight down ever sense. By 1980, Japan made twice as many as the United States. Then production shifted to Korea. Today China is the center of world piano production. You probably see them in your local hotel bar.

Click to Continue Reading “The End of the US Piano Industry”

Written by caseyayers

10 December, 2008 at 12:06 pm

Cheap Macs Aren’t the Point

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Here’s an excellent article from Daring Fireball’s John Gruber on why the “$800 Macbook”, a concept that began as literally one man’s rumor and grew into some sort of backwards conventional wisdom, was not announced at yesterday’s Apple event. One stat in particular that is so telling as to Apple’s philosophy toward their product line: the Mac had 18% of US marketshare, but 31% of revenue share for the industry. Where others are commodities, Macs are not. This makes Apple more protected in a period of economic uncertainty like the one we face today than, say, Dell because with the Mac, it never comes down to price. “PCs” are inferior goods (in the economic sense), but Apple’s most loyal customers are the ones that have nowhere else to turn. The creatives and professionals rely heavily on the type of tools that either only exist or exist in their best forms under OS X, an operating advantage that no other company can have.

[Disclaimer: I own AAPL shares.]

Written by caseyayers

15 October, 2008 at 3:54 pm

Wesbury on Mark-to-Market

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Brian Wesbury, chief economist for FTPortfolios, has a tendency to be about twenty miles ahead of the curve and has an enviable gift when it comes to explaining complex issues in a relatively easy to understand fashion.  When you’ve seen me refer to relaxing mark to market requirements for some of the housing securities out there, this is what I mean:

Here’s something you won’t believe: Fannie Mae and Freddie Mac have not drawn a dime from the Treasury’s $200 billion facility that was created to bail them out. It was the use of mark-to-market accounting that allowed Treasury to declare them bankrupt. On a cash flow basis, they were solvent.

Mark-to-market accounting causes so much mayhem because it forces financial firms to treat all potential losses as if they were cash losses. Even if the firm does not sell at the excessively low price, and even if the net present value of current cash flows of these assets is above the market price, the firm must run the loss through its capital account. If the loss is large enough, then the firm can find itself in violation of capital requirements. This, in turn, makes it vulnerable to closure, nationalization or forced sale.

Wesbury’s suggestion could be implemented by the Securities and Exchange Commission very quickly and would do a lot more to settle the markets than writing a check with its basis in freshly-minted debt.  Full article can be found here.

Written by caseyayers

1 October, 2008 at 1:43 pm

The New Sound Money

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There’s a great article on the Wall Street Journal’s opinion page today that can be found here.  Excerpt below, but I highly recommend you read the whole thing if you’re willing to swim in some moderately-deep economic waters.  Maybe I’ll cover the subject at a more elementary level in a few days.

The whimpering is real, and justified, because it hurts to have your world come crashing down. And global financial markets are definitely crashing, even when the impact is momentarily softened through massive injections of artificial money — “artificial” because the fiat money does not represent a store of genuine value but rather an airy government claim to future wealth yet to be created.

In the aftermath of this financial catastrophe, as we sort out causes and assign blame, with experts offering various solutions — More regulation! Less complex financial instruments! — let’s not lose sight of the most fundamental component of finance. No credit-default swap, no exotic derivative, can be structured without stipulating the monetary unit of account in which its value is calculated. Money is the medium of exchange — the measure, the standard, the store of value — which defines the very substance of the economic contract between buyer and seller. It is the basic element, the atom of financial matter.

It is the money that is broken.

Written by caseyayers

30 September, 2008 at 1:02 pm