Thursday, March 31, 2016

The Trouble with the Minimum Wage

It looks like companies that are effected by a rise in the minimum wage, mostly being in competitive industries, raise their prices enough to cover almost the entire difference on labor costs. That means that the disemployment effects are due to people a little buying less from those businesses. therefore the disemployment effects are very small.

Never the less I am against minimum wage because I believe that even a very small increase in unemployment is very bad easily outweighing the benefit to those whose wages increase. I believe that the nonmonetary benefits of having a steady job are large. Also many people already work for less that minimum wage so...

Monday, March 28, 2016

If you, Like Trump, Are Concerned About Trade with China and Mexico there is Something You Can Do

If you, like Donald Trump are concerned about trade with China and Mexico and the trade deficit there is something you can do. You can buy VIGI. VIGI is an exchange traded stock fund with very low fees that invests in foreign Dividend Achiever stocks. The expense ratio is only one quarter of one percent so Wall Street is not getting much of a cut.

(To qualify as a Dividend Achiever, a company must have increased its dividend payout each year for the last 10 or more consecutive years and meet certain liquidity requirements.)

Why will this work?

When Foreigners buy more assets in the USA than USA citizens buy assets in foreign countries they are buying less goods and services and that is what produces a trade deficit. Essentially they sell goods and services to us and use some of the many that they make to buy assets.

So the deficit is a result of foreigners buying more US assets (stocks, bonds, T-bills, etc.) than US citizens buy foreign assets. The balance of payments is always nearly equal so if we buy more assets they will have to buy more goods and services. (There is some cash held outside the USA but it is a small amount and most of it is needed long term and it is not significant and is eroded by inflation.)

Interestingly, though foreigners own more assets in the USA (stocks, bonds, T-bills etc.) than US citizens own in foreign countries, US citizens receive more returns (dividends and interest) than foreigner receive on US assets. This shows that foreigners have been bidding up the price of US assets.

If you think that you cannot afford to buy even a little bit of stock ready this.

Wednesday, March 9, 2016

Bernie Sanders and the AMA

It is mind boggling to me that the likes of Bernie Sanders trot around the country talking about the high cost on healthcare and education (2 state issues BTW) but he never talks about the what is driving the costs up.

He would rather focus on talking about getting the very rich to pay for them rather than reducing the costs but the very rich do not consume enough for you to move sufficient consumption from them to everyone else to make a huge difference. He is a con artists like almost all politicians, he is probably cosy with the AMA.

BTW The more the Federal government pays for healthcare and education the more the states are motivated to regulate on behalf of the in state providers, pushing up costs.