BIG BOX RETAILERS ARE FEELING THE INEVITABLE BITE OF INFLATION AND THE INTERNET

The out of control inflation that is sickening our nation's economy is having a drastic impact on "big box" retailers. This terrible scourge of inflation is eating away at the public's disposable income, and this leave people less money to spend on shopping. Inflation makes it appear that prices are on the rise, but in reality it is people's money that is losing its buying power.

The Internet and on-line shopping have of course had a tremendous impact on the market and the way in which people shop  However, the middle class has always looked for both value and quality when shopping, this means that everyone is not flocking to budget or discounts shops like Walmart.  Amazon will never have the sex appeal of Victoria's Secret. Personally, I dread the thought that Walmart will dominate every facet of the marketplace.

Regardless of Amazon's or Walmart's market share, if things continue the way the are and the Inflation bubble is not corrected, even modestly priced stores like Target will continue to lose ground.

BOSS VS LEADER, OR PERHAPS MANAGER VS LEADER

Over the past few years there has been a growing discussion over leadership styles, with various writers phrasing the issue as “Boss vs Leader”. For the purposes of this article, in order to keep clearly defined terms, the argument will be phrased as “Manager vs Leader”. Within the article the term “manager” will be used to denote persons responsible for guiding an organization. There are several good reasons why this is an appropriate nomenclature, all of which will become more evident as the discussion progresses. The terms Boss, Manager, and Leader will be defined and described as to how they fit within an organization. The graphic below will serve to initiate this discussion.  

 

The above picture is ubiquitous on the Internet, it comes in all sorts of shapes, sizes, colors, and decorations, but the information is the exact same. As can be quickly observed, most of the differences are based strictly upon charisma and personality. How does the term “Boss” fit into the structure of an organization? For the various Internet authors, “Boss” is used as a pejorative to denote anyone lacking in personal charisma.  Anyone holding a position of even the slightest authority can be called “boss” by their co-workers; therefore the term itself becomes vague and generally useless for the purposes of this discussion. A “manager” is defined as someone with a formal position within an organization (from assistant supervisor to CEO or business owner) who has the responsibility and authority to carry out the duties of that position. A manager derives authority because of his official position. A “Leader” is not an official position; rather it is someone who people desire to follow because of perceived personality and character traits.

There is a legitimate question of how effectively managers lead their organizations through their personal mannerisms.  Some issues are quite obvious; nobody wishes to hear their supervisor or company executive exclaim “You need to do what I tell you because I’m the boss around here!”, nor does anyone wish to experience abusive or condescending behavior in the workplace. It is assumed that astute managers desire a harmonious work environment in which their employees can be motivated to work at their full potential.

The study of management and leadership began during the late 1800’s, the University of Pennsylvania has the distinction of being the very first university to offer a degree program focused in this field. The early researchers began their examination by looking at the different characteristics of military and business leaders. They were able to discern different tasks or functions that are common to all authority figures or “managers” in carrying out their duties.  The Five Functions of a Manager, as any business school student can recite, are as follows: Plan, Organize, Direct, Control, and Communicate (Many authors use the term “Staffing” as the fifth function; however, for several good reasons, I prefer to use the term Communicate). How a manager carries out these various functions is the basis for this discussion of Boss vs Leader.

Each of the Five Functions of a Manager requires a different set of skills and knowledge, and different people will approach them in different ways. Below is an explanation of each of the terms.       

• Planning: CEOs and business owners must decide on the future of their organizations by carefully planning in advance. Hypothetically, the CEO of ABC company decides to expand operations into the Southern US. The CEO will issue a statement to the effect “We find opportunity in the South, and expect to expand operations soon.”

• Organize: After plans are decided upon, managers must organize resources (both personnel and material) in order to reach whatever plans or goals have been made. Continuing from the previous example, the CEO of ABC company decided to expand operations to the Southern US. The CEO must now organize company assets by hiring additional employees, moving assets to the South, leasing office space, or doing whatever else is needed to accomplish the company’s goals.

•  Directing: This can also be called Commanding or Leading, the manager directs employees by issuing orders. How a manager goes about directing employees is of the utmost importance, and it will depend on a great many factors.  For example, the CEO of IBM directing the Vice-President of Finance to sell some stock in order to raise working capital will use a very different sort of language than the manager of a fast food restaurant directing a rebellious teenage employee to clean the bathrooms.

•  Controlling: Managers control their company’s resources in order to ensure goals are being met. This is another area in which everything will depend on the situation. The manager of a car dealership may control employees by setting quotas. For example, an underperforming employee may be warned “If you don’t sell three more cars by the end of the week, you’ll be looking for a job”.  A manager may have to address an employee that’s being distracted by personal issues. Example “Get off the phone, and pay more attention to your work”

• Communication: A manager must communicate constantly, both internally to employees and to external stakeholders. The most successful and effective managers are able to communicate very effectively.

Given the various functional areas of management, and the wide spectrum of organizations and circumstances, it is clear that different managers will be focused on certain of the Five Functions. From the examples above, the CEO of a large company will be focused almost exclusively on Planning. Organizing, and Communicating, with little time to Direct or Control employees and assets. A department manager at the local department store will be focused on Directing and Controlling, with little opportunity for anything else.

Taking into account all the information discussed above, it becomes apparent that an individual manager will adjust their management style depending on the situation. Generally speaking, there is no one with an absolute personality of evil Boss or saintly Leader; everyone has some mixture of both personality traits and everything will depend on a given situation. It should be emphasized that the best leadership style is the one that is appropriate to the situation and will motivate employee to reach their fullest potential.

BOSS VS LEADER

There are all sorts of articles on the Internet trying to compare the qualities of a "Boss" and a "Leader". Much of what has been written seems copied from one author to the next. For my next article, I will explore the different leadership styles, and provide some clarity on how they function in an applied basis given different scenarios.
Stay tuned my dear friends, the article should post within the next few days.

THE POWER TO TAX IS THE POWER TO DESTROY

"The power to tax is the power to destroy" is the classic American expression, it originated from an 1819 Supreme Court  decision. What does this mean? It means exactly what it says: the ability of a government to levy taxes gives that same government the ability to destroy an industry or an entire economy. When governments want to destroy an industry, but banning the industry would be unpopular with the voters, they can simply tax the industry to death. It has been done many times, for example, many states have harsh cigarette taxes that are so onerous many people have difficulty affording their habit. On the other hand, governments can do inadvertent damage by carelessly taxing industries. The perfect example of a bad tax came during George H. Bush's administration. He made the now infamous statement "Read my lips, no new taxes", but Congress didn't get the memo. They forced Bush to raise taxes on luxury items such as yachts. Soon enough, the yacht building industry in the US was utterly destroyed.

Today we have a war on food. Governments are picking and choosing what is appropriate for people to consume. Philadelphia is the first city in the nation to impose a "soda" tax, and business is already dropping. Why are governments making such decisions? It should be left to the individual to decide what he/she wishes to consume. People have been eating and drinking for thousands of years without any problems. But wait, here come concerned politicians looking at the the next election and all of a sudden they know whats good for everybody.

Today, they are targeting soda. Tomorrow the target for a destructive tax could be coffee, rice, bread, alcohol, meat, or vegetables. The politicians have a powerful tool, and they are all too eager to use it.
Politicians have declared war on soda

THE HUBRIS OF JANET YELLEN, THE FEDERAL RESERVE, AND CONGRESS

Janet Yellen, the Chairperson of the Board of Governors of the Federal Reserve Bank (in other words the “leader” of the Federal Reserve Bank), went before a Congressional committee on Tuesday February 14, 2017, and presented what is basically a routine report. If this report is taken at face value, everything will seem to be just fine, without a problem in sight. However, after careful examination, given our understanding of money and economics, we can conclude that Mrs. Chairperson Yellen is full of crap.

I will analyze her report, line by line, and tell you what her words really mean when taken in the context of my previous posts to this blog. She begins by painting a very rosy picture of the overall economy and job market, citing reduction of unemployment and rising wages.

Since my appearance before this Committee last June, the economy has continued to make progress toward our dual-mandate objectives of maximum employment and price stability. In the labor market, job gains averaged 190,000 per month over the second half of 2016, and the number of jobs rose an additional 227,000 in January. Those gains bring the total increase in employment since its trough in early 2010 to nearly 16 million. In addition, the unemployment rate, which stood at 4.8 percent in January, is more than 5 percentage points lower than where it stood at its peak in 2010 and is now in line with the median of the Federal Open Market Committee (FOMC) participants' estimates of its longer-run normal level.

What price stability? Has Mrs. Yellen gone to the grocery store lately? Has she been paying attention as the price of food and consumer goods have skyrocketed over the past twenty years? The cost of college tuitions and medical care, have increased exponentially over the same period of time, and they are continuing to increase at a tremendous rate. Where is the maximum employment? There are more than 45 Million Americans on food stamps, and most of them have been unemployed for quite some time US Department of Agriculture Food Stamp statistics. 

Mrs. Yellen continues by quoting several different statistics and comparing the ups and downs of the economy. The numbers are obscure enough to confuse even the most astute Congressperson. Getting past all the happy talk of the 1.5% increase in the Gross Domestic Product, she finally arrives at a discussion of monetary policy. This is where the original mandate of the Federal Reserve was found; it was supposed to be the guardian of US currency by ensuring that the US dollar retained its proper value on the world market.

Turning to monetary policy, the FOMC is committed to promoting maximum employment and price stability, as mandated by the Congress. Against the backdrop of headwinds weighing on the economy over the past year, including financial market stresses that emanated from developments abroad, the Committee maintained an unchanged target range for the federal funds rate for most of the year in order to support improvement in the labor market and an increase in inflation toward 2 percent. At its December meeting, the Committee raised the target range for the federal funds rate by 1/4 percentage point, to 1/2 to 3/4 percent. In doing so, the Committee recognized the considerable progress the economy had made toward the FOMC's dual objectives. The Committee judged that even after this increase in the federal funds rate target, monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation.

 That said, the economic outlook is uncertain, and monetary policy is not on a preset course. FOMC participants will adjust their assessments of the appropriate path for the federal funds rate in response to changes to the economic outlook and associated risks as informed by incoming data. Also, changes in fiscal policy or other economic policies could potentially affect the economic outlook. Of course, it is too early to know what policy changes will be put in place or how their economic effects will unfold. While it is not my intention to opine on specific tax or spending proposals, I would point to the importance of improving the pace of longer-run economic growth and raising American living standards with policies aimed at improving productivity. I would also hope that fiscal policy changes will be consistent with putting U.S. fiscal accounts on a sustainable trajectory. In any event, it is important to remember that fiscal policy is only one of the many factors that can influence the economic outlook and the appropriate course of monetary policy. Overall, the FOMC's monetary policy decisions will be directed to the attainment of its congressionally mandated objectives of maximum employment and price stability.

Why did Congress make the Federal Reserve responsible for full employment? How is the banking system supposed to do this? Is the Federal Reserve going to call every business owner in America and demand they hire additional employees? The idea is ludicrous!!! The economy is made up of individuals; every day those individuals make choices which affect the economy. Trying to quantify every individual employment decision on a neat little graph is ultimately misleading, because the numbers will not tell the whole story.

Mrs. Yellen and the Federal Reserve have failed to carry out their most basic fiduciary responsibility, that of maintaining stability of the US dollar. The rise in prices in consumer goods, in college tuition, and in every facet of life, is a direct result of their careless stewardship of the public’s money. A person working full time and earning up to $10 an hour is not able to support themselves because the money they’ve worked so hard to earn is constantly losing its value, and this makes it appear as if prices have risen. This is how inflation works, and the Federal Reserve has been advocating for ever increasing inflation since the 1930’s.

Allow me to quote Ludwig Von Misses, one the great economists of the Twentieth Century, as he spoke out against the sort of inflationary policies favored by our banks and government.

The great inflations of our age are not acts of God. They are man-made, or, to say it bluntly, government (bank) made. They are the off-shoots of doctrines that ascribe to governments the magic power of creating wealth out of nothing and making people happy by raising the “national income” (GDP).