8 Fascinating Reads

Happy Friday! There are more good news articles, commentaries, and analyst reports on the Web every week than anyone could read in a month. Here are eight fascinating pieces I read this week.

Necessity is the mother of invention

Stephen Schork explains why the world is finding so much oil. This is simple, but it's really important to how basic economics works. Via Business Insider

"Our expressed skepticism was (and still is) based on common economic sense that high prices are indeed the cure for high prices. The mirror of this economic axiomatic is... low prices are the cure for low prices, which in the case of our Viennese fund manager, led him to the false messiah of peak oil. The reason why no new significant oil deposits were discovered in the 1980s and 1990s is because... at $20 a barrel it did not make any economic sense to go out and try and discover new oil. In hindsight, you drive oil to $147 barrel and lo and behold, five years hence the world is swimming in oil. It really is that simple."

How to eliminate poverty (in theory)

Switzerland is proposing a basic income policy. Annie Lowrey of The New York Times writes

Activists delivered 125,000 signatures -- enough to trigger a Swiss public referendum, this time on providing a monthly income to every citizen, no strings attached. Every month, every Swiss person would receive a check from the government, no matter how rich or poor, how hardworking or lazy, how old or young. 

Perception and reality 

Cullen Roche comments on government job creation:

Barack Obama is on pace to preside over the only Presidency in the post-war era to average negative government employment growth. Since 2009 when he took office the total size of the government workforce has declined by 706K jobs. That's about 3.1% of the government workforce. That's not a huge number, but let's put that into perspective. During Ronald Reagan's first 5 years in office the government created 623K jobs which expanded the size of the government workforce by 3.8%. Ronald Reagan was a huge creator of government jobs. In fact, over the course of his entire presidency the size of the government workforce expanded by 9%.


Bill Gates comments on those trying to make the world better with technology: 

Asked whether giving the planet an Internet connection is more important than finding a vaccination for malaria, the co-founder of Microsoft and world's second-richest man does not hide his irritation: "As a priority? It's a joke ... Take this malaria vaccine, [this] weird thing that I'm thinking of. Hmm, which is more important, connectivity or malaria vaccine? If you think connectivity is the key thing, that's great. I don't."

Made whole

Fannie Mae and Freddie Mac have, in aggregate, come close to repaying their entire bailout: 

Fannie Mae and Freddie Mac will pay $39 billion to the U.S. Treasury by the end of the year, the companies said Thursday, putting the firms close to having paid as much as the government injected in the mortgage-finance giants -- nearly $188 billion -- to keep them afloat through the housing bust ...Together, the companies will have paid more than $185 billion in dividend payments by year-end.

That's one way to think of it

Bloomberg asks gold bug Peter Schiff why some of his predictions haven't come true. He responds:

"If I say this is going to happen and then it all happens that way, but the markets react differently because they don't really understand what just happened, that was my mistake in overestimating the intelligence of everybody else to figure stuff out," he said.

New boom

Bloomberg writes about a new baby boom in states with high economic growth:

Rising fertility rates in states such as South Dakota, where unemployment is 3.8 percent, are prompting some demographers and economists to predict a reversal of the nationwide decline in fertility that coincided with the recession and its aftermath. More births would boost the economy by spurring demand for new homes and goods from pregnancy tests and diapers to furniture and cars.

Stocks for the long run

In an old video, Warren Buffett tells the story of turning $40 into $5 million:

Enjoy your weekend. 

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 15, 2013, at 3:44 PM, Schneidku40 wrote:

    I'm slapping my forehead at the How to Eliminate Poverty. I read a whole article about it a couple weeks ago and just find it hard to think of anything more stupid. Why would anybody ever work in that environment? The incentive to do so is completely erased. As more people "join" the program, taxes will have to go up. It's a positive feedback loop that will not end until the government is bankrupt and everybody is thrown into poverty. The CEOs of several Swiss companies, including that of Nestle, said they would immediately move their company out of Switzerland if that law passed (granted I think they were more angry at the provision that said everyone in the company should be paid the same, i.e. the CEO is paid the same as the janitor). There's a caveat on that section that should be "fascinatingly horrifying."

    The New Boom article is falling prey to the Broken Window fallacy. It is not the demand for new homes and goods that will drive the economic boom in South Dakota. Just like the shopkeeper that has to pay for the broken window (diapers, pregnancy tests), he now cannot afford to buy the suit he was going to buy with that money (whatever the man and woman would have bought had they not had a baby, such as a suit, vacation, etc). Paying for one thing in place of another does not elevate the economy. The increase in population and jobs with new (outside) money is what does it.

  • Report this Comment On November 15, 2013, at 4:57 PM, cmfhousel wrote:

    <<Why would anybody ever work in that environment? >>

    I'm not defending it, but the point is making a basic income quite low, like $10,000 a year. Enough to avoid poverty but not enough to prevent 99.9% of people from wanting to work.

  • Report this Comment On November 15, 2013, at 4:59 PM, cmfhousel wrote:

    Also, the ideas I've seen for implementing this in the US call for getting rid of all Social Seurity, Medicare, unemployment benefits, housing credits, welfare, etc. and replacing it with a basic income for all. It woudln't even cost more; it just distributes it differently than we are now, with a tiny fraction of the overhead and admin costs. (Again, not defending it. This is all theoretical).

  • Report this Comment On November 15, 2013, at 6:17 PM, astuber9 wrote:

    Don't tell Republicans that Obama eliminated government jobs, their heads will explode. To be fair the majority of those government jobs are local and state correct?

  • Report this Comment On November 15, 2013, at 6:32 PM, cmfhousel wrote:

    Astuber, yes, although federal employment has declined by 80,000 jobs since January 2009. If that holds it will be the first president to preside over a decline in half a century.

  • Report this Comment On November 15, 2013, at 9:47 PM, Schneidku40 wrote:


    I guess I didn't think of it as a replacement for all the other social programs. The previous article I read did not address that and I guess my default guess was to think it was on top of other programs. That also just screamed inflation to me.

    I just read some of the comments in the article you linked for the guaranteed income. One poster said companies would lower their paid wages because they knew the worker would be receiving a distribution from the government and thus could be paid less to maintain the same lifestyle. Another poster said companies would have to keep wages the same or raise them because if they were too low the person would quit and just live off the minimum income. I can see it both ways, having trouble deciding what the incentive would be?

  • Report this Comment On November 16, 2013, at 5:45 AM, DJDynamicNC wrote:

    I've advocated for a guaranteed minimum income for some time.

    As it now stands, we operate under the ongoing threat - find work that the market values, or risk suffering and even death. That's... one way to do it, I guess, but since I have this thing about human beings, I find I prefer a system that doesn't provide an "incentive" based entirely on threats.

    A guaranteed income removes that threat and allows for capitalism between consenting adults. It also reduces overhead on government program administration - no more means testing, no more applications, all that red tape is gone.

    To say that people would do nothing if the threat of suffering were removed is a point that bears little resemblance to how people actually operate outside of the market's constraints - very few people I've ever met simply do nothing. They do things that the current hyper-aggressive market may not value all that much, but that's not the same as saying they do nothing. The incentive has simply shift to reward rather than punishment. Now if you want an iPhone it may be harder to come by (and more expensive) since fewer people are willing to do the work, meaning that work must be more highly compensated, making it more attractive. It's an economic realignment, to be sure, but hardly a catastrophe.

    There's a lot more, but one of the key points that is, for whatever reason, completely overlooked in most of these debates is the whole "people aren't starving to death for no reason" thing. I would say that this is an expense worth paying for.

    Markets exist to serve people. Not the other way around. A guaranteed income helps to ensure that that remains the case.

  • Report this Comment On November 16, 2013, at 5:48 AM, DJDynamicNC wrote:

    I also think that a reduced economy in which nobody suffers is significantly better than a strong economy built on the suffering and sweat of miserable people who are dying for it. As noted above, the common refrain is "but who would work if there was a guaranteed income?" and the answer is "well, if nobody wants to do it, why are we forcing them to do it on pain of starvation or death?"

    People first.

  • Report this Comment On November 16, 2013, at 5:53 AM, DJDynamicNC wrote:

    Ok, last one (sorry, this is a passion of mine). Everybody talks about the "new normal" and how automation is likely to continue to reduce old fashioned jobs, replacing them with far fewer and higher skill jobs. It's not inconceivable that a few hundred years from now could see every important or difficult or menial task automated.

    You might think "all the work is done by robots and humans are free to do whatever they want" would be a utopia, but under our current capitalist system, it would be an unmitigated disaster. Imagine - in any sane society, "nobody has to do any work" would be brilliant, but we've created an irrational, market-based society that could not survive such a utopia. A guaranteed income is the first step to correcting that problem.

    Think about all the gains in productivity that mechanization have yielded since the early 1900s socialists fought for, and won, an 8 hour work day - and yet is that productivity gain being rolled back into your life to free up your leisure time? No indeed, even though you can now produce in an hour the equivalent of what an early 1900s labourer could produce in a day (note - that is completely made up but sounds plausible). But hey, rich corporations are now richer than ever, so there's that I guess. Congrats.

  • Report this Comment On November 16, 2013, at 8:20 AM, cmfhousel wrote:

    <<One poster said companies would lower their paid wages because they knew the worker would be receiving a distribution from the government and thus could be paid less to maintain the same lifestyle>>

    You can say the same for Social Security, unemployment benefits, etc.

  • Report this Comment On November 16, 2013, at 12:29 PM, xetn wrote:

    "Fannie Mae and Freddie Mac have, in aggregate, come close to repaying their entire bailout:"

    I guess this is a result of the Fed's mortgage securities purchases. Another form of bailout.

    All from money conjured out of thin air. (A trillion on new money every year.)

  • Report this Comment On November 16, 2013, at 4:13 PM, LovePeace wrote:

    On "How to eliminate poverty", an idea who's time has come. Hope I get to see it in my lifetime. It would take away fear and allow such innovation.

  • Report this Comment On November 16, 2013, at 9:00 PM, DJDynamicNC wrote:

    "All from money conjured out of thin air. (A trillion on new money every year.)"

    All money is conjured out of thin air. That's what money is - a notational system that humans have created to track accounts. It is not some natural item we discovered one day in a currency field or a money mine; we made it up, whole cloth.

  • Report this Comment On November 17, 2013, at 10:22 AM, cmalek wrote:


    "it just distributes it differently than we are now, with a tiny fraction of the overhead and admin costs. "

    When was the last time you saw the government implement any project "with a tiny fraction of the overhead and admin costs"??? Reminds me of the description of "elephant" - a mouse built to government specifications.

  • Report this Comment On November 17, 2013, at 10:27 AM, georgetag wrote:

    Why don't people understand there is no Utopia. Giving people money will not eliminate poverty. Think of lottery winners who quickly end up poor... uneducated athletes, musicians and many others who don't respect money for what it is. The respect comes from education and hard work.

  • Report this Comment On November 17, 2013, at 2:00 PM, DJDynamicNC wrote:

    "Giving people money will not eliminate poverty."

    Given the definition of poverty, it turns out that giving people money is explicitly what will eliminate it.

    Obviously it's not going to be perfectly eliminated - there will always be problems - but you compare incidence of elderly poverty with implementation of social security, you see that directly giving people money has an incredibly beneficial effect on the rate of poverty, which makes sense given that poverty is a lack of money.

  • Report this Comment On November 17, 2013, at 4:53 PM, wjcoffman wrote:

    I don't think the President has direct influence over state and local government jobs. When I read about a President and government jobs I think federal jobs: shipyards, warfare centers, USG civil service-type employment. I suspect decrease in local and state govt jobs is driven either by federal tax revenue flow to the states and/or state tax revenues.

  • Report this Comment On November 17, 2013, at 7:08 PM, georgetag wrote:

    Many people who are given money squander away the money. I've worked in the depressed areas of NYC for many years and saw welfare checks being spent on lottery tickets. Then the people are left with no poverty. Because many people don't respect or understand what to do with money they are given they still end up with no money.

  • Report this Comment On November 17, 2013, at 9:22 PM, jlclayton wrote:

    Social security is not money that is just given to seniors so that everyone has an income. It's paid out of money that the recipient has paid into the system through their years of working for it.

    If someone is facing starvation because they are too lazy to work or because they are miserable if they need to do honest labor, they have no right to a guaranteed income. Taking away the incentive for people to be personally responsible for their financial well being is not the way to eliminate poverty.

  • Report this Comment On November 18, 2013, at 12:23 AM, melfizz wrote:

    It all depends on your values; if you value helping humankind and the elimination of suffering and despair, you would go for the income to everybody by the government to eliminate poverty, illiteracy, etc. However, if you value getting ahead of others financially, luxuriously, or the power money brings, then you tend to be a pure capitalist. (Even at the cost of others sweat and tears) However, we are far from creating a utopian society b/c everyone's idea of it is different.

  • Report this Comment On November 18, 2013, at 7:13 AM, cmfhousel wrote:

    <<If someone is facing starvation because they are too lazy to work or because they are miserable if they need to do honest labor, they have no right to a guaranteed income>>

    For what it's worth:

    "Approximately one-third of homeless persons have a serious mental illness, mostly schizophrenia or bipolar disorder. The percentage is higher among those who are chronically homeless and among homeless women and is lower among homeless families. If overall one-third of homeless persons are seriously mentally ill, that means that there are approximately 250,000 homeless persons with serious mental illnesses in the US."

  • Report this Comment On November 18, 2013, at 11:27 AM, bamasaba wrote:

    The one about Obama being the only president to reduce the number of jobs reminds me of the fact that much of Obamacare, including the individual mandate, is actually the product of Conservative thinking. But since it is Obama who is implementing this stuff it gets labeled 'liberal' or even 'socialist.'

  • Report this Comment On November 18, 2013, at 1:41 PM, TheRealRacc wrote:

    DJDynamic, I appreciate your comments.

    Have you ever read Aldous Huxley's Brave New World? Or Kurt Vonnegut's Player Piano?

    There is a lot more to a "utopia" than giving everyone life's necessities. The trends we see today are repeated throughout history.

    The key is keeping everybody busy. Markets do a great job at that.

  • Report this Comment On November 20, 2013, at 10:12 PM, jlclayton wrote:

    Morgan, I appreciate the link, however, the people who are homeless or not working because of a serious mental illness are not too lazy to work or miserable because they have to do honest labor.

    I do not feel I am a pure capitalist or someone who does not want to help humankind. I am someone who believes that a huge emphasis should be placed on personal responsibility. There are those in our society who truly need, and should get, assistance. But there are those in our society who feel that a good life is owed to them without their efforts of hard work and being a contributing member of society.

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