On Prices… and the ‘battlefield’ of the marketplace

The marketplace is the field where people ‘battle’ to have their product stand above and compete with others’ product. Prices reflect hotspots where flags are to be raised so resources can be relocated and bolster the specific good; the higher a price, the higher the flag is raised. With the flag going higher, more in the field can see that there is an area needing support – customers are spending/buying. Seeing an area that needs more support, those in the field may move their resources from their current location to where it is needed more – is more activity. Whether it is a new innovation in a type of phone, or a hurricane-ravaged area needing (re)building supplies, rising prices signal to the rest of the marketplace that help is needed and more resources will be relocated to assist. Those who relocate their resources take part in those higher prices because it is profitable to them to move, and it is beneficial to those who would otherwise be out-of-stock are able to get supplies.

When the need has been met, the flag will lower because it will no longer be such a hotspot; resources will be relocated to another area. This is the way it should work. With the flag being the marker showing a hotspot where resources are needed, if the flag isn’t allowed to be raised or lowered accordingly, whatever prevents the flag’s movement will make it so the resources aren’t diverted properly. What are the ways that it will not work?

Preventing prices to rise: though the flagpole allows the flag to be raised higher, a bracket has been placed somewhere blocking the flag being raised. Though there is more need, without the flag being raised those in the marketplace do not see the demand, or do not see it as needed enough to relocate their resources to assist that spot.

Picture Steve Jobs being told he cannot sell the iPhone for more than $50. He might still produce it with a long-term agreement that whoever bought one had to pay a monthly service fee to offset the cost of production. Now picture a cap being set on that monthly service so the cost of production cannot be recouped. Apple wouldn’t be producing the iPhone; others in the field wouldn’t be putting their resources into producing like models. Or, for hurricane-ravaged areas, if there was a limit placed on canned goods, then those goods would quickly consumed. Without seeing the demand needed with the raised flag, others who also sell the canned goods won’t see the flag and won’t relocate their resources to assist the area.

Preventing prices from falling: though the flag needs to be lowered so resources can go to other areas, there is a bracket blocking the lowering of the flag so the resources keep coming. Other areas need the backing, but they are not getting the resources while the original area doesn’t need or want it, and even needs to purge the excess; resources flood the area as the flag is not being lowered. More and more resources will pile up, saturate the base and inevitably will overtake the flagpole leading to it collapse under the pressure of the piled-up resources – the prices, following the flag, will be down on the ground – a crash, or bust.

Recently, this can be seen in the housing market. This is tied to something good: home ownership. But just because something is linked to something good, doesn’t mean that all parts of it are good for everyone, especially at any time. Sellers want to make the most they can from their product, but the market will state that any given thing is only worth so much. When the flag is kept higher than the marketplace says it should be is by giving the product an artificially high value and paying for the difference through infusing a value difference. Not everyone needs to buy a home. For those who do want a home, it doesn’t necessarily mean it is the right time for them; they may not be able to make monthly payments. But with making home ownership easier with guarantees or assistance, the flag isn’t lowered to where it should be to allow the marketplace to find the true value. Non-market infusions mean that along with an artificially high price to be paid, there will be a debt created that will also siphon value, helping that flagpole, when it does fall, fall that much quicker.

Picture a city with an average house cost of $100k. At first, the prices will reflect the proper market value. With so many people being able to purchase a home with assistance (non-market value credit) – not having to take on the normal market purchasing process, the home ownership rate will rise. The housing market will become saturated because the purchases will continue because all of those who couldn’t normally afford a house, buy one. With all the purchasing of houses, the price will rise, and continue to rise as long as the demand is being met; the price may increase to $120k. Multiple factors will force the decline in the housing market, among them are the limitations that any given area can support at any given time, those who normally wouldn’t have been able to afford their house have the reality that they can’t afford the house and foreclose, and like any trend even in optimal circumstances, it will slow on its own. It will come to a point when the prices need to fall because the area has been otherwise saturated. Those who bought, or got a loan for a house in this city during the boom may have paid $120k, though when the market settled and corrected itself, the value of that purchase is only worth $80k. Those who didn’t buy, but already owned their house also lost some value.

Nothing in the marketplace is static. There will always be some degree of fluctuation. With the market being left to correct itself, the fluctuations will be smaller and more quickly corrected. If the market isn’t allowed to correct itself (of which it cannot actually be stopped, just delayed), the market will build and bring forth a collapse forcing the correction.

There is only one who can actually ‘force’ the brackets into place, and that is the government. The government is the non-market factor that sabotages the marketplace, through guaranteed loans, subsidies, licensing fees and regulations. All these things are enacted with the goal of helping people, under the guise of equality, but a scorched-earth policy’s form equality is in the shared destruction. Any individual in the system who tried the same manipulation would be pointed out and lose their market share as the marketplace would correct itself from such acts – sometimes the correction is quick, sometimes slow. But the marketplace would correct itself, and expunge such manipulators who would be unable to have their affect any longer. There isn’t getting away from the government.

Book edit addendum

Just got an update from my publisher: the updated print copies will be available in 10-14 days; the updated ebook/kindle will be available in 3-4 weeks.

Book edit

I found a couple editing errors. I already updated my publisher, and those errors have been corrected (anything ordered after 10/21 should be updated). Most are minor errors, but one big change was moving Parable of For your own Good from 183 to page 133, while being replaced on 183 with:

Parable of the Protection Room
A couple of parents wanted to shield
their child, from birth, from all the dangers
that may befall him. In order to
ensure full protection, they built a special
room. They went about and padded the
floor, the walls and all objects within the
room. Toys were all safe. Any friends who
were allowed to visit had to play, and
overall behave in certain ways approved
by the parents. The room was the only
world the child knew as it grew; the par-
ents treated the child the same as he developed,
and they educated.
Eventually, the child became old
enough to want to venture out, and the
parents realizing they had taught the
youth what they thought was appropriate,
let him go out into the world.
However, once the youth stepped outside
of the room, he was quickly overwhelmed;
the sun was so bright - he never
seen it before; there was so much variety
in sound, he was deafened by all the noise
and couldn’t concentrate. Perplexed, he
sought some help; a couple helped him,
but another robbed him. Lost and confused,
he eventually succumbed to sickness
for his body was weak from not
developing, matching his ignorance that
brought him to harm.

The Boom and the Bust

The boom and the bust of the market is like the ebb and flow of a stream.

Look at the flow of a stream as consumer demand. It is a constant in some degree, larger at some times, lesser at others; if it dries up, then all around it dies from no water. The mountains and valleys that form the tributaries, that are innovations, which contribute to the flow of the stream and are brought into consumer demand. These innovations, like the flow of water from the mountains out to the sea have their own birth, life and death as they form on their way to the stream, flow with the stream until the stream expels it out to the sea; e.g. the Model T being built, mass produced, and then phased out - replaced. There is one more part to consider, and that is the dam – the marketplace. The marketplace is where consumer demand builds, the various innovations are available for various consumers; it pools the innovations, yet also provides an outlet to expel that which is no longer desired in the market, such as the Model T being ousted from the marketplace when newer, better autos became available.

The marketplace, in conjunction with consumer demand and innovation regulates itself. When a new innovation is available, such as Ford replacing horse buggies, others seek to participate in the demand, and General Motors among other auto manufacturers add their own in their tributary to the stream of consumer demand. The level in the dam rises. Eventually, the dam rises too much, there is too much input and the release is increased flushing out the excess. The beginning is when prices are high with lesser supply but higher demand; the middle is where more supply is offered by those seeking to profit off the demand; the end is when there is more supply than demand and prices are at their lowest. There is no boom, no bust, just small fluctuations.

It’s an efficient system, and takes care of itself with its cycles, its ebbs and flows. However, there are ways of messing up the system, and the biggest way is through governmental influence introducing artifice into the marketplace; it is by an outside influence altering the cycles, and that only can bring problems for the marketplace and all those who are in it.

For example, the government may influence it in two main ways: trying to stimulate production, more of what comes from the tributaries; controlling the consumption, that is regulating the release of the dam.

Through stimulating production, the State is giving that which isn’t otherwise marketable a false place in the market, siphoning water from one route that produces more and routing it to a dead zone, such as re-routing a creek from an area of lush vegetation so that parched earth may get wet; the lush vegetation suffers, while the parched earth gets wet, and may eventually produce something, but not as much if the water went to grow that which was already growing. An example here is how much was lost across the planet for ‘green’ jobs. They may be marketable at some point, but now they’re not: see Solyndra.

Through controlling consumption, the State is blocking the release of the dam and not letting the prices change to how the stream dictates. This release control is done in two ways: stopping the release, or forcing the release to be too much. Keeping the release open beyond what the marketplace desires keeps the price too high, and as its too high to stay in the marketplace, it quickly goes out and the marketplace doesn’t built; consumers don’t consume as much and this can be seen in minimum wage laws, licensing fees and other regulations that increase the cost of business but do not actually contribute to the process of business.

This brings us to the most damaging part, and that is when the release of the dam has been jammed shut, and the marketplace just builds. This is the bubble that will burst. Without a release, the marketplace gets flooded with goods with higher prices than what the market says it should be. It wants to expel the excess, but it can’t because the State blocked the release. So, more builds in the marketplace, and it continues to build; the housing market is an example of this. The demand for houses was high, and the prices were rising so more got into the housing market. The more that enters the market, the more the prices should go down; the release should be triggered. However, with the blocking of the State, the marketplace couldn’t get rid of the excess so it only grew. Things can only grow for so long; if the dam doesn’t break altogether, it will overflow. That is the burst bubble. The market is correcting itself and trying to get the prices to where they should be. With the artificially high prices being what was invested in, those are the prices people agreed to, but after the correction began, and the real market value comes to the fore is when people lose their equity.

Those are the only things the state can do in the marketplace. Stimulate that which the market says isn’t ready to be marketed in one of three ways, or worse and compounding, blending the three. If the marketplace was left alone, the basic fluctuations of supply and demand would take care of it self; with the interference of the State, bubbles are created and great amounts of wealth are lost.

Let’s keep the government in its proper place: protecting individual rights. When it tries to get into the field of business outside of rights violations, it will only hamper the market.

The Biggest Problem in Politics

The biggest problems with legislators, is that they pass laws.

They’re not the worst things in the world, but career politicians are a definite negative factor in society. What is a career?—a career is chosen path, profession or occupation. Being in a profession, one wants to be productive; what is it to be productive politician?-worse, what is it to be a productive legislator?

There are some areas of governmental work where one can make a career: military or law enforcement: police and judges. However, where governmental careers create problems are when they are in the executive or legislative branches. There will likely always some members of society that may decide rights violations are appropriate, so there will always be a need for police. Even moral people may come to disagreements on terms, so aside from criminal prosecution, judges are needed. To deal with criminal acts and civil disagreements, it can be daily work.

What do legislators do? What more do legislators need to add? Legislative laws are to reflect moral laws in application in society, i.e. not allowing, and prosecuting violations of individual rights. If that law protecting individual rights is set, what more can a legislator add? When the principle has been set, only the superfluous may be added. If someone murdered another, then they should be punished (after being judged guilty) for the act of murder; the principle of the right to life was violated, and that violation is to be punished. Adding the superfluous to that principle, e.g. a ‘hate’ crime to justify a more severe sentence, or for a lesser sentence, maybe someone was ‘mentally impaired.’

With legislators getting into the situation, the principle is no longer enough. Context may have been given consideration in the process of a trial, where the jury of peers may weigh the validity of said context, but with legislators preempting the judicial system, what emerges a formula created by someone outside of the prosecution of the trial. It is also a justification of the legislator being able to legislate, giving the image that they should continue to legislate in society, and in more areas in society.

What happens when the legislator legislates in other areas?—further intrusion into the lives of those in society, denying them to take their own context into consideration, and be told what is acceptable by the distant legislator. A couple of examples include the minimum wage and rent control. If someone is short on money and needs some earn some supplemental income, but the potential employer that has work that is only worth a wage that is not as much the minimum wage, then his work remains incomplete and the one short on funds, remains short on those funds. With a ceiling on what can be charged on renting a room, then more can afford it, but there are consequences with that as well and not just the goal of more people getting a room like the legislator wanted. With the prices being held artificially down, then more can afford to rent, and rent on their own where they might have roomed with another, and more do not have a room at all. With the limit on what can be earned, there won’t be the incentive to offer more rooms, so the supply will not increase, but the demand will have increased. With an increased demand, but same supply, concern of quality and upkeep will be less for it isn’t worth the same investment, and if someone doesn’t like it there will be another in line who will accept the lesser quality, cheaper room.

Legislators keep themselves busy; No Child Left Behind, Obamacare, drunk driving laws, subsidies, the HUD, and each of these programs/laws have consequences far beyond the hyped goal pontificated by the legislator.

But, people see the busy law-makers and applaud ‘look at how productive they are.’ They have been productive, and cumulative; that which previous law-makers create remain as laws until a following law-maker works specifically to overturn the earlier laws. The federal tax code has close to 80,000 pages – how all those legislators have kept busy. Each code is a restriction, barrier or at the very least, a ‘hoop to jump through’ in order for ‘free’ people to associate with each other in business and employment.

Politicians were not to exist in that sphere for a career – they were to be living their lives and coming to serve the public, to return to their lives. But with the push for production, a great trait for the private sector, legislators’ production comes with new laws/codes/regulations that have with them the threat of a gun behind them. A body will die from a thousand cuts; a State will die from a thousand laws.

We need less productive legislators. We need less productive government, for a 'productive' government is one that is busy governing in our lives, meaning leaving our lives less free.

My book electronic format

The (kindle/ebook) version should be coming available, soon: 2-3 weeks.