Holland experienced the first widely-recorded economic collapses of the modern western era from 1634 to 1637.
In 1593, tulips were brought from Turkey to Holland. The new flower was quickly one of the most sought-after items throughout the country. Soon after, a non-fatal virus rocked the tulip populations throughout Holland, altering the colors and shading of the flowers’ petals.
While already yielding a premium price before the virus starting altering the flowers' look, certain types of tulips eventually reached a point where some were more valued than entire large estates. The Dutch quickly began to believe that the sky was the limit for the tulip market.
Needless to say, as the market reached such ridiculous prices, growers began to over plant and stockpile the tulips that they expected to yield the highest prices. Speculators began to liquidate assets, including family fortunes, life savings, and their estates in order to buy and sell tulips.
During the ramp-up, tulips prices went up 20 times over in just one crazy month. Needless to say, a market price that put a single special tulip at a price equivalent to an entire estate were unsustainable, especially once the hoards of tulips that speculators had liquidated to grow and buy flooded the market. Once the selling started, prices went into a freefall and contracts began to fall apart. Dealers just could not pay the prices they had promised growers and speculators.
In a futile attempt to quell the market, the Dutch government began offering 10% of the face value of contracts that were no longer being honored, but as prices continued to fall, the government had to halt the program and let the market correct itself (There was no selling treasury notes to China like today).
The Tulip Depression would have economic effects upon Holland for decades into the future.
Friday, February 12, 2010
Tuesday, February 9, 2010
"Oh man, homie, Toyota's tryin' to kill me..."
Fans of the movie Fight Club will tell you that it contains an excellent explanation of the unwritten agreement you make with an automobile manufacturer when you buy their product. Flat out, they will not issue a recall until their legal and settlement expenditures in settling their accident cases from a defect are projected to be higher than the monetary and reputation costs of issuing a recall.
We are going to find over the coming months and years, as we are already starting to find out, that the first death that was caused by two major problems that Toyota is working to correct now occurred quite some time ago.
We will also hear that while Toyota was "investigating", more people were losing their lives. We will hear from accident victims (the ones that survived) that they knew something was wrong with the car and that they approached Toyota, but Toyota insisted, even after examining their car, that there was nothing wrong.
We will find that the accident victims that filed suits were offered, and usually accepted, an out of court settlement in exchange for keeping quiet and no longer holding Toyota accountable.
We will learn that, of course, as soon as Toyota came to the realization that there was a problem, they worked at lightning speed to correct it. We're already seeing the apology commercials telling us that of course Toyota loves its customers and are concerned about their safety.
America will be mad at Toyota for a little while, but soon, we will forget, stop questioning why it took years to get from the first death to a mass recall, and sales of Camries and Priuses will resume.
Toyota is the focus of my comments today because they just happen to be the manufacturer who is under the spotlight right now. Remember when Ford found out that the tires it was putting on its Explorers were falling apart while people were driving? Same thing. They did not come out and offer to fix it until legal and settlement costs were going to exceed the cost of replacing the bad tires.
While Firestone was the culprit in that recall, and some nameless part manufacturers are the culprits this time, it is the auto manufacturer who bears the brunt of the costs and losses. They all keep quiet until the recall becomes a cheaper alternative to the bad press and drop in sales. While it was Ford during that time, today, it is Toyota, and tomorrow, it will be another one of them. It is just a matter of time.
What Americans need to do, however, is to stop living in the delusional world where we think these huge auto conglomerates are going to come out and issue a mass recall as the result of one death. That is just not going to happen.
We need to be more aware as consumers of this unwritten agreement we are making with the auto manufacturers when we buy their cars. If their product kills you early on in the discovery of the problem, the best your loved ones can do is seek a cash settlement, sign the non-disclosure agreement, and accept the apology commercials. We all just have to hope that our car's problem doesn't materialize until further down the line, after mounting legal and settlement costs have led to a recall.
We are going to find over the coming months and years, as we are already starting to find out, that the first death that was caused by two major problems that Toyota is working to correct now occurred quite some time ago.
We will also hear that while Toyota was "investigating", more people were losing their lives. We will hear from accident victims (the ones that survived) that they knew something was wrong with the car and that they approached Toyota, but Toyota insisted, even after examining their car, that there was nothing wrong.
We will find that the accident victims that filed suits were offered, and usually accepted, an out of court settlement in exchange for keeping quiet and no longer holding Toyota accountable.
We will learn that, of course, as soon as Toyota came to the realization that there was a problem, they worked at lightning speed to correct it. We're already seeing the apology commercials telling us that of course Toyota loves its customers and are concerned about their safety.
America will be mad at Toyota for a little while, but soon, we will forget, stop questioning why it took years to get from the first death to a mass recall, and sales of Camries and Priuses will resume.
Toyota is the focus of my comments today because they just happen to be the manufacturer who is under the spotlight right now. Remember when Ford found out that the tires it was putting on its Explorers were falling apart while people were driving? Same thing. They did not come out and offer to fix it until legal and settlement costs were going to exceed the cost of replacing the bad tires.
While Firestone was the culprit in that recall, and some nameless part manufacturers are the culprits this time, it is the auto manufacturer who bears the brunt of the costs and losses. They all keep quiet until the recall becomes a cheaper alternative to the bad press and drop in sales. While it was Ford during that time, today, it is Toyota, and tomorrow, it will be another one of them. It is just a matter of time.
What Americans need to do, however, is to stop living in the delusional world where we think these huge auto conglomerates are going to come out and issue a mass recall as the result of one death. That is just not going to happen.
We need to be more aware as consumers of this unwritten agreement we are making with the auto manufacturers when we buy their cars. If their product kills you early on in the discovery of the problem, the best your loved ones can do is seek a cash settlement, sign the non-disclosure agreement, and accept the apology commercials. We all just have to hope that our car's problem doesn't materialize until further down the line, after mounting legal and settlement costs have led to a recall.
Monday, February 8, 2010
A Lesson In Capitalism & The Great Depression
It seems that America is undergoing a fundamental change in how we think about money, capitalism, and our economy. While conservatives are often accused of revisionist history and remembering the good ol' days to be better than they actually were, I refuse to believe that things have always been this way. I believe that in the past, when economic woes were at hand, America looked to hard work and ingenuity to get out of the hole, not reckless borrowing, increased spending in social programs, and an abandoning of our capitalist and democratic values.
We cannot afford these magic social programs, yet The Magician says that we have no choice. A majority of the American people are against undertaking these social reforms right now, yet The Magician says, shut up and support it anyway. These decisions go against the democratic and capitalistic ideals that a good deal of Americans hold dear. I believe the liberals and The Magician will ultimately pay politically for this, but I just worry that it might be too late.
As many of you may know, in my continual efforts to stay on top of what is going on throughout multiple industries, I read a lot of trade magazines. Too many, really, but I'll keep it up as long as I can. One of the magazines I get always puts a smile on my face because while the boats that are in it are way out of my price range (for now at least), I always like to dream and look to the future (as opposed to just sitting back, accepting my station in life and looking to the government to sustain me like The Magcian wants me to).
Whenever my free copy of ShowBoats International arrives, I chuckle a bit to myself because I can just hear the socialists and communists in this country decrying the very existence of this magazine, the boats in it, and the people who read it. It makes me hope that one day, I will see an America that once again rewards hard work and entrepreneurship, and encourages people to work hard, not sit back and wait for their check to show up in the mail.
Having said all that, I want to share a story with all of you that puts a great perspective on what we should be doing - working hard, not rewarding laziness with free checks in the mail, and looking to capitalism to solve our problems, not embracing socialism and its misguided principles, and most of all, allowing our entrepreneurs to flourish and create jobs instead of calling them evil and taxing them and their enterprising spirit into oblivion.
From Showboats Magazine:
There's been a lot of talk from Washington recently about getting the economy moving again. Much of the chatter has been focused on stimulus plans, but there have also been quieter murmurs about redistribution of wealth. It may come as a surprise, but we believe that both are excellent approaches. It's just that the government is going about it all wrong.
Our plan is simple, and rather than put a few hundred dollars into the pockets of thousands of average workers on a continuing basis over a span of years, even decades, it builds real jobs and provides real wages. It doesn't require one red cent of taxpayer money and doesn't add a single dime to the federal debt. Better yet, our plan will work not just in the United States, but around the world to get the economy moving again on a global basis.
What's the secret? Encourage those with adequate assets to start building yachts again, and when they do, don't scorn them. Rather, commend them for their contribution to the common good. Instead of damning these yachtsmen - often epitomies of classic entrepreneurialism - as profligate examples of conspicuous consumption, we should be lauding them as economic heroes, and the reasoning is simple.
The tens of millions of dollars spent building a single superyacht turn into billions and billions when multiplied by the hundreds of yachts built in a typical year. Additional billions are spent annually on the existing world fleet of yachts, which runs into the thousands. Those dollars don't simply trickle down, they rush in raging torrents to workers and suppliers worldwide, and those workers and suppliers pass the money along to local stores, car dealers, movie theaters and restaurants that, in turn, pass them along to their own workers, who buy houses and send their kids to college so their grandchildren might enjoy a better life. What a magnificent system!
Politicians in the present hour of economic trial are fond of pointing back to the Great Depression for comparisons, so let's play along for the moment. Sea Cloud, at 316 feet in length, was the largest private American-owned sailing yacht ever built. She was completed in 1931 for Marjoire Merriweather Post, heiress to the Postum Cereal fortune and herself the founder of General Foods, and [married] to E.F. Hutton. She didn't need the yacht, but she considered it her civic duty to provide work for the unemployed, including desperate shipwrights, at the depths of the Great Depression. It was a private stimulus package of the best sort, and it didn't take an act of Congress and a plundering of the U.S. Treasury to accomplish it.
Amazingly, Sea Cloud continues in service to this day, nearly 80 years later, and for every day of all those years her succession of owners has funneled money into economies around the world for her maintenance, staffing, provisioning and operation. The next time someone mentions 'Tarp funds', think not of tax dollars, but of the money spent just to replace that fabulous clipper's vast spread of canvas every two years. She is no longer a private yacht, but is now a part of a cruise fleet, so who is it that's enjoying sunny days aboard? Perhaps it is that family of an auto machanic who repaired the car of the restaurant worker who was paid by the patronage of a welder from a nearby yacht yard.
We cannot afford these magic social programs, yet The Magician says that we have no choice. A majority of the American people are against undertaking these social reforms right now, yet The Magician says, shut up and support it anyway. These decisions go against the democratic and capitalistic ideals that a good deal of Americans hold dear. I believe the liberals and The Magician will ultimately pay politically for this, but I just worry that it might be too late.
As many of you may know, in my continual efforts to stay on top of what is going on throughout multiple industries, I read a lot of trade magazines. Too many, really, but I'll keep it up as long as I can. One of the magazines I get always puts a smile on my face because while the boats that are in it are way out of my price range (for now at least), I always like to dream and look to the future (as opposed to just sitting back, accepting my station in life and looking to the government to sustain me like The Magcian wants me to).
Whenever my free copy of ShowBoats International arrives, I chuckle a bit to myself because I can just hear the socialists and communists in this country decrying the very existence of this magazine, the boats in it, and the people who read it. It makes me hope that one day, I will see an America that once again rewards hard work and entrepreneurship, and encourages people to work hard, not sit back and wait for their check to show up in the mail.
Having said all that, I want to share a story with all of you that puts a great perspective on what we should be doing - working hard, not rewarding laziness with free checks in the mail, and looking to capitalism to solve our problems, not embracing socialism and its misguided principles, and most of all, allowing our entrepreneurs to flourish and create jobs instead of calling them evil and taxing them and their enterprising spirit into oblivion.
From Showboats Magazine:
There's been a lot of talk from Washington recently about getting the economy moving again. Much of the chatter has been focused on stimulus plans, but there have also been quieter murmurs about redistribution of wealth. It may come as a surprise, but we believe that both are excellent approaches. It's just that the government is going about it all wrong.
Our plan is simple, and rather than put a few hundred dollars into the pockets of thousands of average workers on a continuing basis over a span of years, even decades, it builds real jobs and provides real wages. It doesn't require one red cent of taxpayer money and doesn't add a single dime to the federal debt. Better yet, our plan will work not just in the United States, but around the world to get the economy moving again on a global basis.
What's the secret? Encourage those with adequate assets to start building yachts again, and when they do, don't scorn them. Rather, commend them for their contribution to the common good. Instead of damning these yachtsmen - often epitomies of classic entrepreneurialism - as profligate examples of conspicuous consumption, we should be lauding them as economic heroes, and the reasoning is simple.
The tens of millions of dollars spent building a single superyacht turn into billions and billions when multiplied by the hundreds of yachts built in a typical year. Additional billions are spent annually on the existing world fleet of yachts, which runs into the thousands. Those dollars don't simply trickle down, they rush in raging torrents to workers and suppliers worldwide, and those workers and suppliers pass the money along to local stores, car dealers, movie theaters and restaurants that, in turn, pass them along to their own workers, who buy houses and send their kids to college so their grandchildren might enjoy a better life. What a magnificent system!
Politicians in the present hour of economic trial are fond of pointing back to the Great Depression for comparisons, so let's play along for the moment. Sea Cloud, at 316 feet in length, was the largest private American-owned sailing yacht ever built. She was completed in 1931 for Marjoire Merriweather Post, heiress to the Postum Cereal fortune and herself the founder of General Foods, and [married] to E.F. Hutton. She didn't need the yacht, but she considered it her civic duty to provide work for the unemployed, including desperate shipwrights, at the depths of the Great Depression. It was a private stimulus package of the best sort, and it didn't take an act of Congress and a plundering of the U.S. Treasury to accomplish it.
Amazingly, Sea Cloud continues in service to this day, nearly 80 years later, and for every day of all those years her succession of owners has funneled money into economies around the world for her maintenance, staffing, provisioning and operation. The next time someone mentions 'Tarp funds', think not of tax dollars, but of the money spent just to replace that fabulous clipper's vast spread of canvas every two years. She is no longer a private yacht, but is now a part of a cruise fleet, so who is it that's enjoying sunny days aboard? Perhaps it is that family of an auto machanic who repaired the car of the restaurant worker who was paid by the patronage of a welder from a nearby yacht yard.
Monday, February 1, 2010
Pessimistically Optimistic About 2010
I was asked recently what I thought of the coming year. I firstly replied, “Do you realize that is it already one-twelfth over?” I then added, “I am pessimistically optimistic about 2010.” I think it is going to be a much better year than 2009, though, as I have stated before, honestly, 2009 was a very scary period, but not what I would call a bad year for us. We’ve had worse than 2009, believe me.
But, as for 2010, I am looking forward to an even better year! In a recent B to B Magazine article, John Seifert, the Chairman-CEO of Ogilvy & Mather North America, said, “We are being very cautious this year. We were very tough on ourselves in terms of cost management in the last half of the year. We underestimated the severity of the recession and how long it would continue. We have conservative budgets, and my impression is that clients will be very cautious and determined to beat their forecasts for Q1. Doing well in Q1 will give them permission to spend in Q2.”
While we may never again see the same surge in the markets, home prices, and enterprise spending that we saw during the “lost decade”, the Dow has had more good days than bad, home values in Orange County are creeping up slowly, and it looks like it is going to be a far better year this year than last for some sectors if the I.T. market, among others. With the markets, housing and I.T. making the turn, other industries will not be far behind.
I say I am pessimistically optimistic because while I do have some optimism, I am keeping myself ready for the floor to fall out from underneath us again. I have assured that the rope tied around my waist is as tight as ever and will continue to do so, quite honestly, for the rest of my life.
While I considered myself a fiscal conservative before all of this happened, I would say I am even more one now. This recession has reminded me of those core fiscal principles that we should all live by. Most formidable of them is do not turn your nose up at a job during an up-economy because you will wish you had that job during a down-economy.
Another important lesson I hope to see more Americans live by now and for the rest of their lives is to not create new debt. While at times, we must take on so-called "good" debt when we need to buy a home, or buy a new car, I am personally hoping to get at least 300,000 miles a piece from the two cars that we own now – one at just over 10 years old and one at 8.
By 27, I’d had 9 different cars, two brand new, and seven used, but the one I drive now has been with me for nearly 8 years and I am hoping for another 8 years on top of that. Not having car payments and not taking on new debt by frivolously getting a new car on a whim is something that I do not think I will ever do again. I hope to see America following suit. My next car will be pre-owned off a dealer lot and I hope to be paid for with cash, not financing like all of those Cash-For-Clunckers fiascos that are going to come back and bite people later.
This lesson with cars can be applied to just about anything that we buy. While we should not force ourselves into the “poverty chic” look, having a pair of shoes re-soled at 50% of the cost of a new pair when they look brand new anyway, is a tool I am going to keep in my arsenal, regardless of what the economy is doing. Little things like this all can add up to big savings and even more money to use to make money.
That leads me to the third important lesson I hope people have learned from this downturn. As a nation, we cannot simply spend everything we make on stuff that doesn’t either earn money, or make money, or provide a return on investment. That leaves you with no savings, no emergency fund, and in a heap of trouble.
Remember to work all you can and save all you can during the swingin’ times because you will have a much more solid foundation to stand on when the bad times hit!
B to B Magazine also states that “39% of B to B Marketers plan to increase their marketing budgets this year”, and that is a good sign. Marketing budgets are the first to grow, and the others tend to follow.
So, for now, I remain pessimistically optimistic about 2010. If things change, I am sure you will be the first to know.
But, as for 2010, I am looking forward to an even better year! In a recent B to B Magazine article, John Seifert, the Chairman-CEO of Ogilvy & Mather North America, said, “We are being very cautious this year. We were very tough on ourselves in terms of cost management in the last half of the year. We underestimated the severity of the recession and how long it would continue. We have conservative budgets, and my impression is that clients will be very cautious and determined to beat their forecasts for Q1. Doing well in Q1 will give them permission to spend in Q2.”
While we may never again see the same surge in the markets, home prices, and enterprise spending that we saw during the “lost decade”, the Dow has had more good days than bad, home values in Orange County are creeping up slowly, and it looks like it is going to be a far better year this year than last for some sectors if the I.T. market, among others. With the markets, housing and I.T. making the turn, other industries will not be far behind.
I say I am pessimistically optimistic because while I do have some optimism, I am keeping myself ready for the floor to fall out from underneath us again. I have assured that the rope tied around my waist is as tight as ever and will continue to do so, quite honestly, for the rest of my life.
While I considered myself a fiscal conservative before all of this happened, I would say I am even more one now. This recession has reminded me of those core fiscal principles that we should all live by. Most formidable of them is do not turn your nose up at a job during an up-economy because you will wish you had that job during a down-economy.
Another important lesson I hope to see more Americans live by now and for the rest of their lives is to not create new debt. While at times, we must take on so-called "good" debt when we need to buy a home, or buy a new car, I am personally hoping to get at least 300,000 miles a piece from the two cars that we own now – one at just over 10 years old and one at 8.
By 27, I’d had 9 different cars, two brand new, and seven used, but the one I drive now has been with me for nearly 8 years and I am hoping for another 8 years on top of that. Not having car payments and not taking on new debt by frivolously getting a new car on a whim is something that I do not think I will ever do again. I hope to see America following suit. My next car will be pre-owned off a dealer lot and I hope to be paid for with cash, not financing like all of those Cash-For-Clunckers fiascos that are going to come back and bite people later.
This lesson with cars can be applied to just about anything that we buy. While we should not force ourselves into the “poverty chic” look, having a pair of shoes re-soled at 50% of the cost of a new pair when they look brand new anyway, is a tool I am going to keep in my arsenal, regardless of what the economy is doing. Little things like this all can add up to big savings and even more money to use to make money.
That leads me to the third important lesson I hope people have learned from this downturn. As a nation, we cannot simply spend everything we make on stuff that doesn’t either earn money, or make money, or provide a return on investment. That leaves you with no savings, no emergency fund, and in a heap of trouble.
Remember to work all you can and save all you can during the swingin’ times because you will have a much more solid foundation to stand on when the bad times hit!
B to B Magazine also states that “39% of B to B Marketers plan to increase their marketing budgets this year”, and that is a good sign. Marketing budgets are the first to grow, and the others tend to follow.
So, for now, I remain pessimistically optimistic about 2010. If things change, I am sure you will be the first to know.
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