As of this writing, the market down by over 300.  Happy Friday.

A friend found this video series that is well worth a look if you can put aside an hour a day of your time.  Nobel Prize Award winning economist Milton Friedman extols the virtue of true free markets, and easily thrashes big government types with both logic and wit.

Enjoy.

A ‘Monopoly’ suggests ‘exclusive control of the market supply of a product or service.’

One entity, controlling all aspects of a particular business environment.  One controlling interest of a product or service, either necessary or not, but with no competitive forces.  One force, seemingly without opposition to hold accountable to quality and value in the consumer’s best interest.

This could NOT possibly be good for the consumer…  right?

To really answer that question properly, a few dogmatic standards must be challenged. The question of WHY controlling all aspects of an environment is a bad thing, should first be addressed with another question:  “What makes it bad?” Is it as simple as envy of control?  Is it fear that the product or service might be held from some, while offered to others? Or that  perhaps withholding certain products or services can be used as leverage to make people do things they might not do otherwise?

Answering “what makes it bad,” involves an overview of whether the monopoly is ‘natural’, or ‘induced’ by either a regulatory action or straight out sanction by government authority.

A ‘natural monopoly’ is one that develops from a unique idea, and has not had time to mature other competitors own visions of marketing and implementation, OR it has eliminated the competition by providing a product/service that is so superior no one would WANT the other.  It may also be the result of one competitor’s inability to maintain viability due to their competition’s pricing or value levels.  It is the natural selection process of business, and sometimes makes the survivor stronger.

If a natural monopoly develops, and does not become ‘protected’ by a government sanction, others may enter back into the market at a point where the incentive to do so overcomes the aversion to risk.  This maintains a free market element that requires no input from governing authority, and protects the interest of the operators who maintain the monopoly and the consumers who seek the best value from that product/service.

An ‘induced (or regulatory driven) monopoly’ derives its singularity as the result of a franchise of government that either permits no other to enter the selected market, or creates thresholds that are impossible to overcome for new entries into that market.  By design, it is used to ‘control’ elements of business in a way often cited by its proponents as a way to strengthen safety, availability, and consistency.

Induced monopolies offers the least value to consumers.  It robs them of choices that naturally occur.  In an induced monopoly environment, there is not only a financial, or value driven component to overcome before newly entering in a market, there is bureaucracy as well.  New and innovative ideas can die on the vine waiting to be allowed by governing authority.

Further, because government is made up with groupings of people it becomes more of a problem.  People have preferences, or likes, dislikes, can have hurt feelings, or are simply incapable of reason at times or always.  Value cannot reason with someone who has made their mind up, yet may not be the target customer.  An enemy in a governing body to a prospective business concern, can equal THOUSANDS of consumers, simply by using the hammer of authority to stop or hinder  the development of competition in a singularly serviced environment.

We are at a point in time where the unrelenting bogeyman of big oppressive business, has been quite handily replaced by authority of big oppressive egos, stroked with the satisfaction of knowing that ‘SOMETHING’ has been done.

In other words, government is a bit too big for its britches, and a complacent attitude that government knows best how to solve ‘a problem like monopolies’ gives its self satisfied functionaries a mandate to pursue more …bigness.

And we have a perfect example of how it can all go wrong in the worst way in Michigan’s most famous tourist destination, Mackinac Island.

The island government would like to proceed under a proposal created by (the beneficiary of this intervention) Arnold Line owner Jim Wynn, and create what they consider a ‘utility’ type of monopoly sanction.   That a single entity would be given a 20 year franchise exclusivity to all passenger and freight to and from Mackinac Island.

This action would end the existence of Shepler’s Ferryboat service, which has been operating in a competitive environment for over 65 years.

The moral authority claimed for the possibility of such an act?  The island city would have more control over transportation, and the city would see fares lowered under the agreement by $2 a ticket, only to be raised if fuel prices warrant it.  …If fuel prices warrant it.

But fuel prices won’t go up will they?  ..oh yeah.. ok

And there is another argument given by the proponents for the plan that suggests a monopoly by SHEPLER’S would happen if all three ferry services are allowed to continue with franchise operations. That increasing costs threaten the viability of Arnold and Star line operations, and efficiencies are needed or Shepler’s would be all that is left.

Really?  That is the worry?  Or an excuse?

So.. to avoid a monopoly that would happen naturally, proponents would simply have the governing authority accelerate the process and pick a winner.

Nobody could be that intellectually dishonest.  Nobody..  Unless they were truly to the core.. dishonest.

There is no question an abusive monopoly will self destruct if allowed.  But if an abusive monopoly is SANCTIONED it has a better chance to survive.  What this island government does will certainly affect one or the other two (merging) company’s ability to be profitable.  A continue as before option, where natural forces will play out to a natural conclusion, or an artificial ‘utility’ type monopoly which eventually weeds out any creative advances or efficiencies and limits the consumers to ‘whatever is the chosen winner’.

The REAL choices here?  Free markets or a free-for-all destructive bureaucracy..

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The market is a friend in another unappreciated way. In poor black neighborhoods, one might see some nice clothing, some nice food, some nice cars but no nice schools. Why not at least some nice schools? Clothing, food and cars are distributed by the market mechanism while schools are distributed by the political mechanism.

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We had one such event in DC attended, and documented, and for the most part ignored by the major news outlets.  Something dificcult to do when there are over 1,000,000 people involved in such an event.  But there were plenty of us who brought cameras, video recorders and themselves to be a part of history.  Funny however, is that even though news outlets didn’t want to cover completely the biggest, most aggreeable “protest” Washington DC has ever seen, there is quite a bit of attention paid anyway.

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In the video below, I attempted to document the sheer number of people attending.. There was no way from my vantage points.  So instead it turned out to be a thrown together collection of spot shots, and I used Lenny Kravitz’ “Fly Away” song as a pacing tool.  I considered the possibility of posting this video on youtube as having a copyright issue, and figured I could be told to remove it.  I had not counted on the free market to find a solution to this and other videos which seemingly have the same possible outcome.

It did, and the video stands.  The seemingly small number of overall views belies the fact the video was scanned and the audio content properly identified.  Indeed, the free market has found a way to capitalize on the random distribution of copyrighted works in this particular medium.  The message in my information page about this video reads:

What should I do?

No action is required on your part. Your video is still available worldwide. In some cases ads may appear next to your video.

They put an advertisement on the clip.  Excellent. And to check it out, I played the clip, and it is selling the song itself directly from the video.  Ingenious, and hopefully rewarding to WMG (the copyright holder) for their ability to participate in this manner.   I applaud the market for finding a solution that both allows cross use of intellectual property and a means to pay for it.  Truly a win-win for all.

Such bills as “cash for clunkers,” though a program that started on July1, 2009 was not really effective till last Friday, when the language was better interpreted.  Three quarters of a month went by, before congress made the language of the bill understandable enough for dealers to readily participate in the stimulus.

Then something still went wrong.. well kinda..

The language issue may well have been solved, but the details about what happens when CONGRESS Mandates a set of marketing tools for a specific industry are now leaving some dealers scratching their heads… again.  Some are worried they will be left holding the bag because of rebates already given, yet possibly unpaid.  According to Bloomberg :

“Officials at the White House and the Transportation Department declined to comment on the program’s status. A White House official, who asked not to be identified because no announcement had been made, said the administration was

assessing the situation facing what had turned out to be an overwhelmingly popular program.

Transactions Honored

All valid transactions that have taken place so far under the clunkers program will be honored, the official said.”

Of course, this means a pay cut for at least one official.

And in the same article..

“It is amazing that ‘cash for clunkers’ would be this successful this quickly,” said Stabenow in an e-mailed statement yesterday. “I urge Congress and the administration to provide additional funding.”

Amazing? Perhaps for someone who has never been in business.  Perhaps for a person who hasn’t the slightest clue about market forces, what creates demand, innovation, sales, etc.. I think we are seeing in Stabenow now, what must have been the same genuine overincredulous doe stare that was borne of the first human to encounter fire… or perhaps just maybe.. the iPod.

Stabenow has now asked that an additional $2 billion in taxpayer funds be given to this “successful” project..

What is TRULY “amazing,” is that these folks, these “brilliant” cream of the crop legislators might never understand the relatively simple consequence by the act of peeing in their own pool, and they persist in doing so.  By not reading or understanding BASIC dynamics of the laws that bear their particular marks, members of  congress continues to set the toxic spill up for the next crisis. Doug Powers at Michelle Malkin points out:

In the private sector — which the government hopes to compete with using money confiscated from the private sector (some “competition”) — when you create a sale or promotion of some sort, you must make sure you’re covered in case it is very successful. Poor planning leads to unhappy customers, which equals going out of business. Fortunately for the government, they have no such consequence as “going out of business.” In government, incompetence is rewarded.

Markets, real “FREE markets” do not respond very well to tampering by external forces.  There are consequences, both short and long term which will demonstrate WHY government ought not fiddle. Consider the Cash for Clunkers bill by itself. With an average of $4,000 per vehicle, the original plan would essentially designate 250,000 cars to the scrap heap, or better yet.. NOT EVEN THAT.  Under the Scrap Value Rule:

“The CARS Act requires that the trade-in vehicle be crushed or shredded so that it will not be resold for use in the United States or elsewhere as an automobile. The entity crushing or shredding the vehicles in this manner will be allowed to sell some parts of the vehicle prior to crushing or shredding it, but these parts cannot include the engine or the drive train.”

What about the values of used cars, or even NEW cars post incentive?  For used car dealers, it will likely have an adverse effect. By creating an abnormal shortage of used vehicles of a particular class, the used car dealers will see higher prices to place those vehicles on their lots.  Further, the POOR will also be negatively affected, as new car financing won’t be in the cards for them.  When those who could not afford to buy the new cars even under the program attempt to find a suitable “b” value used car, they will see the added cost reflected in their purchase.

The cars which are being turned in, are likely NOT vehicles which are completely devoid of life.  Under the “dealer” section:

“You should bring documentation establishing the identity of the person who currently owns the vehicle, preferably the title of the vehicle, and documentary proof that the vehicle “has been continuously insured consistent with the applicable State law and registered to the same owner for a period of not less than 1 year immediately prior to the trade-in.” The final rule will specify what types of documentation would be acceptable.”

Not less than a year of being registered..  What this means is these cars have been on the road, and they are likely capable of providing years MORE service.  Perhaps years more, that a person of lesser means might not now be able to enjoy. The unintended consequences of well placed intentions perhaps, but nearly ALWAYS predictable if history is observed.

I could certainly go into much describing the effects on a secondary parts market, the creation of a black market for engines, transmissions, etc.., but my point is already made well enough through the raised eyebrows of those who are amazed and befuddled all at the same time.

The happiness Stabenow, and those who promote such unnatural actions to stimulate ONE segment of the economy, will be in stark contrast to the emotions felt by the unintended victims of the legislation. And the hardest hit? Those income limited folks who might never be able to buy a new car in the first place..

The answer I have already given.  As the guilt laden perpetrators of the most heinous abuses business has, and will ever face in a supposedly free market environment, Congress carries on pointing fingers and “shaming” the executives at the helm for not being able to drive the radically altered obstacle course known as manufacturing in America.

Note the road a manufacturing entity such as GM must travel to get from point “A,” where need for product is established, to point “B,” which represents final delivery.  Think of the road as placed on high plateaus, where missing a turn would surely mean falling into an abyss.

Congress mandates many things for which big business must capitulate to stay in business. Look at each hairpin curve as a labor law, manufacturing safety requirement, tax, or the very worst turns environmental stipulations. Each turn, and each bend must be negotiated not with an eye on the scenery however, but with the eye on the road, because to slow down would mean further losses in profits, and a plunge off the cliffs to the rocks below.

The PROBLEM is the result of the simple creating the complex.   The SOLUTION is going to be a matter of allowing the complex thinkers to draw a straight and simple line from point to point.  The inverse to look a little more like this:

Consider that the congress set aside at least $25 Billion in the energy department budget to assist the automakers in upgrading to newer “eco friendly” technology.  That technology which requires fewer CO2 emissions that Congress MANDATED (because they are such gifted scientists) because the planet was/is warming so fast.  Never mind that it is a patently false assertion, and the continued premise as such merely creates more poverty here, and abroad.  The money set aside for the automakers as is the case with all government projections, would NEVER be enough to offset the true cost of meeting such mandates.

The solutions CONGRESS must adopt to maintain the health of the automakers and manufacturing in general for a healthy national economy are as follows:

1. Abandon Safety Rules - Bear in mind that product liability issues must still be met with responsibility by the creators of products.  Allow them to assess which parts assemble together properly for maximum safety and ultimately the best bottom line return on their own production.  There are other benefits to this in the reduction of government employees needed to monitor such things as well as being able to “turn on a dime” and redesign quickly and efficiently without any extended approval processes.

2. Abolish the NLRB - Only when the manufacturer has the ability to truly negotiate without fear of violating any number of draconian rules by government which limit the proper employee/employer bargaining relationship, will they be able to run these businesses as true “free market” enterprises.  In this age of choices, and open information it is hardly necessary to hold manufacturer’s feet to the fire in order to secure a decent wage for a job well done.

3. Eliminate environmental restrictions on Automobiles - Or at least reduce them to limits on toxic emissions only.  Buyers will not want to buy a car which spews out brown smelly exhaust, so the market will sort this out anyhow.  But the reduction in mandated rules always allows for “instant” corrections to be made without costly and time consuming “certification” processes.

4. Eliminate and refrain from establishing federal drilling restrictions. - Allow the local (state) constituencies to negotiate their own drilling guidelines much like Alaska..  Even on Federal lands within their borders.  This would ensure that there is a ready supply of oil and resources for vehicle use, and for national security.  It also would keep oil and gas prices on an even keel versus the unnatural ups and downs created by an invasive government presence in the process.

These are four items which I believe if acted upon as stated would be a GUARANTEE that the automakers could pay back any loans we as taxpayers are on the hook for.  Though I doubt a single effort by THIS congress will be made in the direction as described above, I remain eternally optimistic that we as a nation will at some point in my lifetime rediscover how TRUE free markets really bring about prosperity and health of a nation.