Oversons' Overview

I forgot to post this one in a timely manner.

November 13, 2009 

Here is what I wanted to say at the end of last night’s class.  It is better in writing anyway.  Once you read this, you can say, “Jim is a ____________.” I’m something, but not sure what.  Without looking it up, is it “pragmatist”?  Or just “oddball?”

I was a practicing CPA for 30 years.  I was involved in thousands of corporations over the years.  From very small to one I very nearly took public.  Had several meetings on Wall Street.  Why I pulled the plug on that one at the very last second is an interesting story.  Let me know if you ever want to hear it.  I was an owner in a couple dozens of them.  I formed hundreds.

A corporation is just a piece of paper.  One or more people get together to be the owners.  A corporation is a Certificate of Incorporation you get back from the State Corporation Commission once you file your Application.  It is one of many forms of legal entities one can choose from.  Sometimes a corporation is the right form, sometimes (for example) a limited liability company is the right form.

I never dealt with a single corporation over the years where the owners were interested in anything other than having a really good product that they could market and sell at the highest profit possible with the least amount of overhead costs.  And take the most money out they possibly could.  Not one ever made any charitable contributions of any form.  Political contributions, yes, when it would help them.  From makers of those barriers that horses jump over in competitions to a company that prosecuted the largest single masonry contract in history to one of the nation’s largest house builders in the 1970’s.  I never really had much respect for many owners of any entities I worked with.  It was all greed and power.  Many of them begrudged having to pay their employees anything.

Once a corporation is formed, whether very small or gigantic, it only projects the business plans of the “managers.”  A Board of Directors is formed, they hire the officers, define their duties, set their pay and away it goes. 

“Corporations” are not evil.  But the people who run them can be.  When a corporation is large and has access to large amounts of cash, it brings out the worst (usually) and best (occasionally) in people.   Our culture has changed such that the over-use of power and hoarding of cash is apparently quite acceptable.   Think of Donald Trump.  Admired for being a ruthless, successful businessman.  And like Madonna said, its “A material world.” Corporations only reflect the personalities and morals of the people who run them.  I object when anyone says “a corporation is…..”   They only do what people make them do.

Instead of a study of the evil of giant corporations, the issue should be a study of the darkness (like what John Riggins said about Daniel Snyder) in men’s hearts.  Is that sociology?    How did it come to be that people admire others who flaunt power and wealth?    

Jim Overson

Ford On The Upswing

For those of you who read, “Wheels For the World,” did you feel that you felt rather dragged into the Ford culture?  I did.  I felt like I was cheering for Ford when they worked their way out of really difficult situations.  They always seemed to make the right move. 

In the news today, Ford reported that it made nearly a billion dollars net profit in the third quarter this year.  Way to go!  Old Henry would be proud of you.  Not only were you the only one of the big three who didn’t take any bailout money, you found a way to cut costs, improve operations, close plants, etc in order to make a billion dollars.   

November 3, 2009 

There was an interesting op-ed piece in the November 2 Washington Post by Robert J. Samuelson, “Could America Go Broke?”

“The idea that the government of a major advanced country would default on its debt….was, until recently, a preposterous proposition.”

I know that this is something I am very concerned about in this country.  I feel that the multi-trillion dollar plans that President Obama is pursuing are totally irresponsible.  What is it the USA would do if China went into an economic slump or something occurred between our countries that caused a major rift between us, and China stopped buying up all of our new bond sales?  And what if China refused to take new bonds in exchange for old bonds as they come due?

In the article, Samuelson said that Japan has moved from a budget deficit in 2009 of 10%, but its debt is 200% of its GDP.  Wow.  How many years will it take to pay off this debt?  Especially if new debt is incurred each year.  My calculations as a CPA are, it will take eternity plus 2 years.

And as more and more debt is needed, or old issues come up and have to be replaced with new debt, interest rates could really soar.  How would we like it if rates went from 3% to 15%?

The number one goal of the US should be to reduce debt, balance the budget and erase deficits.  All new social programs should have to wait.  Yes, I am saying, “I’m sorry Mr. and Mrs. 40,000,000 uninsured Americans, the US simply cannot afford to do anything right now.  We are hopeful that with our new three year plan of financial restoration, that the US will be able to do something.  If we do something now, it will ruin the financial future of America for many generations to come.  I’m sorry, but it is the American way to make do, to get by.  Read the stories of past generations.”

Since our last class, I have been thinking about American consumerism.  What is it that drives us to want to purchase items we don’t need or to purchase items that are far in excess in terms of luxury than we need?   Is there an innate desire to acquire “things”, or has it been completely instilled in us by the “corporations”?  

I do a lot of volunteer work, in taking elderly, somewhat infirm, non-driving women to their doctors and shopping.  They have ranged from age 65 to 92.  Their shopping habits have fallen into these categories:

Never buy anything you don’t need, but don’t buy it if it isn’t on sale.  Wait for it to be on sale.  One doesn’t need it that bad.  (This comes from the wealthiest of all of them.)

Buy what you need and don’t worry about whether or not it is on sale.  (This came from the poorest.)

Let’s go to a few name brand clothing stores.  It would really lift my spirits to buy a few new purses.  Yes, I know I don’t need them at all and probably won’t use them.  But it would make me happy for a bit.  Maybe they have some shoes, too.  (The poorest again.)

I know I don’t need a new pair of slacks, but let’s go in the thrift store next Tuesday when everything for seniors is 20% off, and see if they have mistakenly marked anything too low (in price).  (The wealthiest again.)

I don’t really like this 99 cent can opener I bought at the dollar store.  Will you take me back there so I can return it?  (The wealthiest again).

Would you take me shopping?  I’d like to go to Kohls and Penneys and Macys to see if they have anything I’d like.  I need some new clothes.  I haven’t had anything new in ages.  (This one comes from a totally blind lady, who lives on her own, who always dresses well.) 

If all Americans suddenly stopped tomorrow, buying any items they didn’t need, it might lead to WW III. 

I was glad to see in our readings a good amount of material relating to the evil powers that first lead us down this path.  And especially how they played upon women, turning them into buying machines. 

So, wasn’t it surprising to see the article in this week’s PARADE insert, “Why Shopping Is Good Again?”  First of all, before I read the article, I found the title of the article most unusual.  “Why Shopping Is Good Again.”  Shopping is good?  There is a reason why shopping is good?  There was a period of time that it was not good and now it is again?  What? 

Here are some random quotes from the article:

      “…perils of mindless shopping…”

      “It’s hard to resist the new and different…”

“…we’re happiest when … we spend money on things that provide social and personal engagement.”  This was referring to the wonderful experience of spending money together  with one’s loved ones as a bonding experience.

“The value (of shopping) that comes from purchases that give us a chance to transform ourselves.

“We’re wildly inconsistent and irrational about that we buy.”

“(Purchases) enable us to revise or renew our identities, how we present ourselves to the world.”

“…purchases … are, in their way, extensions of ourselves.” 

This article was written to make us feel better about unnecessary, recreational, “mindless” shopping, because there are good, rational reasons for doing so.  The article refers to the author’s new book coming out, “Why the American Consumer Will Keep On Buying No Matter What.” 

All is lost.

I heard on the news yesterday that Kelloggs is going to start "branding" their cornflakes - individually - to prove that they are not being passed off as store brands.  Apparently the technology to do that is out there.  According to the news report the flakes will have a darker color but will not taste any different.  Bear in mind, this is occurring in Great Britain, home of the Brixton self-currency I mentioned a few weeks ago.

In Susan Strasser's book Satisfaction Guaranteed the people at Kelloggs were careful to advertise that their brand of corn flakes were superior in all ways to others on the market.   But this is going a little far, don't you think? 

October 18 

In the book, Wheels for the World, there is a lot of narrative regarding the negative impact the auto industry caused Detroit, and the insufficient amount they did do for the very poor in the city.  Except these comments are really quite extreme and arguable, in my humble opinion. 

Did you see the October 5 issue of Time?  It is a “Special Report – The Tragedy of Detroit.” Here are a few quotes that reminded me so much of our book.

      “…  brought more attention to the auto executives than to the people of the city, who had for so long been victimized by their dreadful decision making.” 

      “For more than two decades, the insensate auto companies and their union partners and the elected officials who served at their pleasure continued to gun their engines while foreign competitors siphoned away their market share.” 

      “Union leaders tailored their policies to suit the mighty auto industry, whose leaders ignored the growing threat from abroad.” 

      “In an effort to prop up their constituencies, politicians like Rep. John D. Dingell (he is discussed in our book) resisted sensible policies, like more stringent mileage standards , that would have helped Detroit compete today.” “…by resisting, in succession, tougher safety regulations, more stringent mileage standards, relaxed trade restrictions and virtually any other measure that may have forced the America automobile industry to make cars that could stand up to foreign competition.” “…Dingell has in fact played a signal role in destroying Detroit.  He was hardly alone; if you wanted to get elected in Southeastern Michigan, you had to support the party line dictated by the Big Four – GM, Ford, Chrysler and their co-conspirator the United Auto Workers.” 

      “This defiant attention (by the UAW Union) to market reality… pricing labor so uniformly high, it closed off Detroit to any possible diversification…”  “…and employ workers who would have been thrilled to make a fraction of what they once earned.”   (These comments seem particularly unbelievable to me.) 

Really, a major thrust of the article was that the auto industry and the UAW, all with their heads in the sand, fighting tooth and claw against making marketable cars, ignoring the impact of the growing Japanese imports, destroyed all of Detroit.   I don’t think that this would be readily agreed to by someone like Lee Iacocca.         

Thoughts for today

You know what really fascinates me is the men who made these mass production machines.  I know a fair amount about metal lathe work, tool and die, mechanics, etc.  and have done work in these areas.  I just stand in awe of these guys who figured out how to make these machines.  Especially in the 19^th century.  Having to hand make nearly every part from bolts, gears and on up.   Such imaginations these fellows had.  To me, the guys who designed the machines on the Ford assembly line are much more deserving of admiration than the “white collar guys.” In my work as a CPA, I audited the books annually of one of the largest suppliers of urethane wheels for skateboards.  The fellow, Mr. Heitfield, designed and built with his own hands all of the machines needed to combine the chemicals, heat and pour into molds, release and cure, trim and print logos, etc.  I remember just looking at the big machines and thinking, this guy built all of this stuff by hand.  And when something might break down, he would be able to quickly fix anything.  To me that’s true genius. 

In my CPA work, I also had a lot of contact with workers who did repetitive tasks over and over all day long.  From routine bookkeeping work to machine work.  And what I generally found was that they were quite happy just doing the same thing over and over.  They told me that you could just kind of get lost in your work, didn’t have to think much, they enjoyed seeing if they could beat goals they set for themselves, the time passed quickly and they liked it.  The general thinking is that these type of workers were abused having to do such repetitive work on the big assembly lines.  From the perspective I gained, this was not always the case.  Everyone is different, and this type of repetitive work definitely appeals to a lot of people.  They don’t want to have a job where they have to think much, or everything is always changing or different, or they have to deal with people in solving problems on the phone or in meetings, where you have to deal nicely with people who whine and complain.  And even the guys on the assembly lines still thought of themselves as craftsmen and took a lot of pride in their work back then. 
 

ALSO -

Take a look at the latest Mini Page from the Washington Post (October 4).  This probably should be required reading for future classes.  It explains very carefully all about “Banking on the Fed.”  It tells you among other things, where the expression “not worth a continental comes from.”  I had never heard this expression, but now intend to use it frequently in conversation.  I did like the part about, at the Federal Reserve Bank of Kansas City, they have computer controlled robot forklifts that can store and retrieve paper currency stacks.  Cool. 

To buy or not to buy?

October 6, 2009 

Isn’t it fun to read about the early days of the salesman, being taught how to induce people to buy things they didn’t know existed and didn’t know they needed?  Just think of the impact they had on turning America into such a consumer driven society.   And when consumers aren’t buying, our entire economy turns sour.  Basically, our economy depends on consumers going out and buying stuff, stuff they didn’t know existed and didn’t know they needed.    Go WalMart! 

One item I find exasperating is how Americans have been trained that they have to have the latest of cell phones that come out.  Oooh, new colors, oooh a few new features, oooh that girl that hawks them on TV is so cool.  Need has nothing to do with cell phone trade-ups.  Except that, especially young folk, we are trained to think that want and need are the same thing. 

The other thing I find simply fascinating is how the American public was trained to have to have water in a bottle.  If it is in a bottle, it must be better, even though studies have shown to the contrary.  Sure, $4 to $6 for a bottle of water at a game or theme park makes sense.  I always have this vision that somewhere there are these water bottlers looking down on us, laughing at us as they get their water out of the tap. 

The closest we come anymore to these real salesmen are car salesmen.  And it is funny, they all have basically the same approach.   They all, “Well, let me have the manager come over and see what we can do” and “what would it take to get you to decide to buy this car today?” 

Some of you will remember all the salesmen that used to go door to door.  I remember: Fuller Brush, Encyclopedia Britannica, Hoover vacuum cleaner, a variety of miracle all-purpose cleaners, Avon, Little Treasury Reader books, Tupperware.  But I don’t remember any of them trying too hard.  If you showed no interest, they left quickly.  The approach changed from persuasion to hitting as many prospects as possible I think.   

Jim 
 

October 3, 2009

I did not agree with some of the things Professor O’Malley said.  One thing he said is that it does not matter, in the study of history, why someone did what they did.  He was referring to Baum at the time.  But his comment was meant to be quite general in nature.  An important part of the study of history is to learn from it and apply one’s findings to addressing current issues and avoiding bad future problems.  How could we fully learn all the lessons we should learn about WWII without knowing why Hitler and ToJo did what they did?  Is not understanding why the lords of finance did what they did in addressing the great depression important for knowing how to address the current economic problems?  Do we not need to know why Islamic terrorists are doing what they do in order to put together the best plan to protect ourselves?  And that means knowing why people did things thousands of years ago.  Knowing why, I think is the most important.  Or, maybe I misunderstood – he did talk kinda fast and furious for me.

I also wish we could have much more fully discussed his articles.  Now, he was making quite the point that the form of currency was being used to promote, or maybe better said, defend, prejudice, post Civil War.   The whites had gold, the blacks had only the Greenbacks and because God appointed that gold is the divine medium for exchange, the whites were clearly the better race.   But, did not the common white man post Civil War principally use Greenbacks, also?  Was he not paid by his employer in Greenbacks?   And because the black could only earn Greenbacks he was doomed to be thought less of?  Was this the general sentiment of the public back then?  Could the USA have survived, economically, without all of the Greenbacks?  The Free Silver folk wanted even more Greenbacks.

Debbie and I will miss class on October 15.  But when we come back I will have a really good handout for the beginning of class.  I am already working on it.  I made the copy of pictures I need at Staples today.  You see, a couple of people made comments to me that I was basically expected to have such a handout at each class, and why didn’t I have one at the last class!!! 
 

Jim

Most or all of you probably saw this in the Washington Post today (Sunday 9/27), but I thought I'd post it just for fun.

When Going Gets Tough, Local Currency Gets Going

By Karla Adam
Special to the Washington Post
Sunday, September 27, 2009

LONDON -- Throughout Britain, people are hanging on to their hard-earned pounds, scrimping and saving as they ride out the recession.

But in a few communities, people are taking a different tack: printing their own money and spending it. No, the queen's image on the iconic British pound isn't being counterfeited. Instead, some communities are producing their own scrips -- some of the latest have painter Vincent van Gogh's face on them -- which can be used much like cash at participating businesses.

The latest community to do so is Brixton, the second area in Britain this month that introduced its own currency. With an initial run of 40,000 notes in various denominations, it is the most ambitious project here of its kind so far.

Sometimes called Britain's Harlem, the Brixton is a multiethnic area in south London with a large African Caribbean population and a vibrant atmosphere. The kind of mind-set seen in this bustling and close-knit community is crucial for any local currency plan to work, say economists, adding that like any other form of exchange, the success of the Brixton pound will hinge on the continued confidence and willingness among people to use it.

The first Brixton pound entered into circulation last week when Christopher Wellbelove, mayor of Lambeth, the borough that encompasses Brixton, waved a sepia-toned one-pound note in the air at a town hall meeting where it was unveiled and used it to buy a box of tomatoes. (He got a good deal, said many at the scene.)

"It's a modern-day IOU," said Bruce Weber, a London Business School professor who teaches a course on alternative currencies.

History offers many examples of people developing alternative currencies in tough times. After the financial meltdown in Argentina in 2001, for instance, bartering clubs sprung up nationwide. When Germany was hit by hyperinflation in the early 1920s, many towns issued special money that was not recognized as legal tender but was widely accepted by businesses.

People can buy Brixton pounds with standard British currency -- a pound for a pound -- at a half-dozen local outlets. The incentive for consumers, beyond an altruistic desire to support local businesses, is that many restaurants and stores will offer a 10 percent discount to people using the currency. Those businesses, in turn, hope to build customer loyalty. They will make change for purchases using the Brixton currency to continue its circulation, though customers can insist on standard British money if they wish.

"It can stimulate the local economy," Weber said. "It gets done in tightknit communities where people feel they have a shared stake in things. It's a response to recession conditions. . . . If we issue a certain kind of currency amongst ourselves, maybe it keeps someone to do grocery shopping within the community."

Brixton pounds were launched by Transition Network, an environmental group that promotes low-carbon living and believes that by promoting local businesses people will travel less and reduce impact on the environment. Inspired by the BerkShares currency launched in western Massachusetts three years ago, Transition Network also has helped launch currencies in the town of Stroud this month and in Totnes and Lewes earlier.

The British are usually embarrassed to discuss money. But in Brixton, cash is the talk of the town, with residents curious to know which businesses will accept the new currency (participants include a local grocer, a pharmacy and a belly-dance instructor) and which ones will not (a popular movie theater and cafe.)

Ossie Bash-Taqi, 44, who is accepting the notes at his catering company, said he has more faith in the Brixton pound than he does in its official counterpart.

"In a community like this, if you break the chain, you'd have a lot of angry people. We all know each other, and you can't hide behind an empty bank counter," he said.

There is no law against using alternative currencies, be they pieces of paper or beaver pelts or seashells, as long as they are not passed off as official money. Tax authorities also have no problem with the currencies as merchants continue to account for all of their trade.

"There is still some apprehension," said Tim Nichols, project manager for the Brixton pound. "But there's also a lot of buzz, and we're hopeful it will strengthen the local economy."

Nichols said it cost about $16,000 to have the Brixton pounds printed and to pay for the public information campaign. Most of that was donated by local businesses. The notes bear pictures of significant Brixton residents, including van Gogh, who is said to have lived there in his early 20s, as well as watermarks and security measures that the organizers hope will prevent counterfeiting.

Any effect on the greater economy will be "probably nil," said Nick Mayhew, an expert on the history of currencies at Oxford University. The upshot of alternative currencies, he said, is mostly increased community spirit.

"It's a constant reminder to shop in Brixton," said Leon Rothera, 28, owner of a local restaurant called Honest Foods, the first business to sign up for the new currency. "But let's see what happens when the novelty wears off."