Amerika

Almost all Crowd activity aims to obliterate what is clear and true and replace it with ambiguity and doubt so that individualism can triumph over social order. They like to deny obvious rules of nature, such as how businesses calculate prices.

When you run a business and are selling a widget, you add up all your costs to establish a base price of the widget, then see how high above that the market will bear as a price. If you are selling luxury items, you can often widen that margin quite a bit.

If your costs change, the math changes and the price goes up or down depending on your costs. After all, selling the same product for cheaper often brings in a wider audience, which makes your brand less likely to become extinct during vicissitudes of the market.

Votards like to believe in something we might call “The Money Boat.” They think that up there in the sky, next to Heaven and the UFOs, there is a giant boat filled with money. This is free money, if you can find a plausible argument through which to take it.

In reality, the money boat does not exist. Companies make profit in order to reinvest and to be able to pay off loans, including the purchase of stock by shareholders. The shareholders want maximum increase in value so that their retirement funds have more money in them.

When share prices drop too much, businesses cannot acquire funding, and so they tend to go into bankruptcy. As bankruptcies rise, it is worth knowing that most of these are driven by a lack of ability to borrow:

Chapter 11 cases of businesses with at least $100 million in debt or assets, or those with national prominence, totaled at least 82 through June, up from 29 and 43 in the same periods of 2022 and 2021, respectively, according to an analysis by the American Bankruptcy Institute.

Quotient, developer of the MosaiQ blood-testing system that filed for bankruptcy in January in the U.S. Bankruptcy Court in Houston said in its court filing that “adverse conditions in capital markets made the company’s pursuit of necessary additional capital very difficult.”

Bed Bath & Beyond, which also filed for bankruptcy this year, found buyers for the intellectual property behind its main banner and the Buybuy Baby chain, but failed to find acquirers willing to continue operating most of its stores.

This means that if costs rise, businesses must raise prices in order to have credit. Like old family farms, which took on loans before each season to buy seed and supplies, businesses grow by borrowing money to invest in themselves, then paying it back if they increase profits.

When you add a cost to a business that does not reflect actual market needs, the prices go up but the business also gets less competitive, which is why when alternatives appear, they often swamp it much like Japanese carmakers beat the US carmakers on price back in the 1980s.

These added costs can be things like taxes, lawsuits, regulations, affirmative action, and union activity. When you hear about the union negotiating new high raises — these come with more rules that mean less work and less ability to fire the useless, like in Communism — expect prices to go up.

We are going to see this with UPS as it starts raising salaries because of union activity:

The union, which had long threatened a strike, boasted about the “historic wage increases” for its members, saying existing full- and part-time UPS Teamsters will get $2.75 more per hour in 2023, and $7.50 more per hour over the length of the contract.

It said the agreement includes provision to increase starting pay for part-time workers to $21 per hour, up from $16.20 today. It also reiterated prior concessions it got from the company, such as making Martin Luther King Day a full holiday for the first time and ending forced overtime on drivers’ days off.

Since there is no Money Boat, the company must get the money from somewhere, and if it slashes its profits, it will lose investor support and may run out of money. It will instead raise prices. Its competitors will most likely do the same because now they too can demand more money.

If you wonder why real wages have been stagnant and purchasing power declining since the mid-1960s, consider all the costs we have added with diversity, regulations, taxes, and unions alone. Each time someone gets a payday, the consumers pay, and across multiple industries, this means higher cost of living.

A more sensible approach would be to allow each worker to negotiate a salary on the basis of their own contributions, or better yet let them be contractors, so that they could be rewarded for greater efficiency and quality, allowing them to go home earlier if they finish before everyone else.

Equality is a mental virus that consumes societies. It starts with little things, but soon the details conspire, and (for example) price rises across all industries end up creating an overall cost of living that is much higher while most people find their salaries do not rise to match.

Tags: cost of living, taxes, unions