Showing posts with label Crimea. Show all posts
Showing posts with label Crimea. Show all posts

Monday, June 2, 2014

The Visible Hand

THE VISIBLE HAND




Limiting demand is the visible hand of economics.  Why?  Because “The invisible hand” loses potency with rising affluence.


“Rich people are insulated from price increases, but not from supply shortages.”  ~ Slim Fairview.



The Invisible Hand


The theory of the invisible hand says, “If there are more carpenters than needed, the wages of the carpenters will fall (supply exceeds demand) and many carpenters will be unemployed except for the fact that surfeit of carpenters means a dearth of plumbers.  The demand for plumbers and the higher wages arising from demand exceeding supply means people will become plumbers instead of carpenters and “the invisible hand” of the market will handle this…more or less.

The Visible Hand is entirely different.  By limiting the demand, you stabilize the economics of your entire enterprise.



Profits v. Growth

In this paradigm, maximising profits is not the overriding concern—stability is the overriding concern.  This is because stability is necessary for growth.

This is analogous to an investment portfolio.  You have growth stocks, you have income stocks.  At the outset, you want growth stocks.  When you get older, you want income stocks.

Think of the Sharpe-Markowitz Efficiency Curve.  Risk v. Return.

The visible hand is the growth stock portfolio.

In the early days of B-School (my early days) growth was described as having an inherent risk factor.

If you grow to fast (faster than your market) you tie up capital  and reduce your ROI. (Return on Investment.)

If you grow too slowly (if your market grows faster than you do) you lose customers, cut revenue, and lose market share.


Let’s review Mr. Putin’s Visible Hand.


MERGERS

Forming a Eurasian Economic Union.



ACQUISITIONS

Crimea



Mr. Putin is taking advantage of a competitor’s weakness (The EuroUnion) to expand Market Share and to Increase Revenue.


SALES/REVENUE


Mr. Putting stabilises revenue by limiting demand with a deal to sell natural gas to China.


SUPPLY CHAIN STABILISATION


Mr. Putin establishes a stable supply of oil with an oil deal with Iran.



MARKET PENETRATION AND DISTRIBUTION CHANNELS



The acquisition of the Crimea includes a warm water part and accesses markets.


Mr. Putin’s Economic Theatre of Operation is a Textbook Lesson on Strategic Planning.


  • Market Analysis
  • Mergers and Acquisitions
  • Competitor Evaluation
  • Supply Chain Stabilisation
  • Distribution Channels
  • Market Penetration
  • Sales and Marketing
  • The SWOT Test.





Mr. Putin’s SWOT Test


Strengths

Weaknesses

Opportunities

Threats



STRENGTHS


  • Shared History and Culture with Eastern Europe
  • Natural Gas Supply
  • Natural Gas Deal with Germany
  • Leveraged Capital Investment Opportunities in Russia
  • Stable Government




WEAKNESSES


  • Late arrival into the Global Free Market Paradigm
  • Climate
  • Lack of Warm Water Port(s)
  • Activist Minority Stakeholder Dissent




OPPORTUNITIES


  • Weak EuroUnion Economy
  • Eastern Bloc’s Need for an Economic Union
  • Iran Oil Sanctions
  • China’s Growing Energy Needs
  • The Crimea
  • Slow U.S. and European Economies
  • Emerging Nations




THREATS


  • Trade competition from China
  • Competition from Cheap-Labour Markets
  • Sanctions by Western Nations
  • Weak Global Economy




All of these describe THE VISIBLE HAND.  Not as practiced by a company within an industry or an economy, but rather by nations among nations in a global economy.  And right now, Mr. Putin is establishing a template for emerging nations to follow.


Warmest Regards,

Slim

The blogger known as Slim Fairview.


ADDITIONAL READING





Copyright © 2014 Robert Asken writing as Slim Fairview
All rights reserved.



Monday, May 12, 2014

Mr. Putin's ETO

Mr. Putin’s Economic Theatre of Operation.

In WW II we had the Pacific Theatre of Operation and the European Theatre of Operation.  Germany had the Russian Front. That was the military Option.  That was then, this is now.
Globally, the Military Option is no longer viable.  It has disappeared into the delusional mist of nuclear deterrence taking the Cold War Propaganda War with it.

What we have now are two, new, wars.

1.  The “Nuclear Free” safe wars of skirmishes and atrocities that keep us glued to the television set, freeing us to vent and lament from our safety blanket of nuclear deterrence and enabling us to feel good about ourselves because we show we care. And,

2.  The Real War.  The war I call the Economic Theatre of Operation.

The revelation came amid news reports that the EuroUnion was looking to attract Ukraine and that President Putin announced intentions to form a Eurasian Economic Union.

A simplistic interpretation is that Mr. Putin is attempting to defend the Russian and the Eastern European economies from the European Economic Union. However, on slightly closer examination, we see that the EuroUnion Economy is weak.  A better conclusion?  Using some basic B-School analysis, we see that Mr. Putin is taking advantage of a competitor’s weakness to increase market share and to enhance revenue.  However, there is more to it than that alone.

FLASHBACK

The world saw the pictures.
Ronald Reagan at the Berlin Wall, “Mr. Gorbachev, tear down that wall.”
The Wall coming down.
Lech Walesa at the Gdansk Shipyard Rebellion.
Mr. Gorbachev seated atop a tank in Red Square—Fall of the Soviet Government.
America’s unbridled economic success on programmes like, “Lifestyles of the Rich and Famous” and “Dynasty”.

The Promise?  Free Market Wealth and Military Support and Protection.
The Reality?    Far from it.

Nature abhors a vacuum. Mr. Putin is stepping into the breach.

What is Mr. Putin’s Strategy?

1. Move Russia into the 21st Century
2. Shift focus from inward to outward
3. Build Economic and Military Alliances

·       Iran
·       Crimea
·       Syria 

4. Build Foreign Policy Credibility
5. Restore cultural pride in Eastern Europe and Russia
6. Build on the shared histories and hardships with Eastern Europe.


REMEMBER:

Both Eastern Europe and Russia were ground beneath Soviet Military Occupation.

Both Eastern Europe and Russia were ground beneath German Military Occupation.


Mr. Putin is in the process of or already has cemented an oil deal with Iran.  This is a new focus on the Economic Law of Supply and Demand.

You may call it restricting or limiting access. I call it restricting or limiting demand.  Either way, it is counter intuitive to Freshman Economics.  I will explain what this means in another article.  For now, a deal with Iran stabilizing oil prices and oil revenue is important if not crucial to all parties concerned.

However, we should also consider this:  With the oil deal with Iran, what will be the change in the dynamics with

·       The Eurasian Economic Union?
·       Iran’s relations with Arab Nations?
·       The Relations between Arab Nations and Russia?


NB I did point out that it will become important for the Gulf Oil Producing Nations to act to protect future oil revenues!

Now there are some who can see nothing but RED and are attempting to create a Panic.  However, a closer examination will reveal that Russia has embraced the Chinese Model.

I twice pointed out the difference between Soviet Style Communism and Chinese Style Communism.

Soviet 5-year Plan
Soviet 10-year Plan
Soviet 20-year Plan

CHINA

Hydro Electric Power dam Project
High Speed Computer Project
High Speed Rail Project.

In addition, I pointed out:

China: Rising middle class, rising economy.
India: Rising middle class, rising economy.
USSR: No middle class, no USSR.
USA: Declining middle class, follow the path of the trajectory.

Finally, I am suggesting the Mr. Putin may be the only person reading my blog, because he seems to be alert to the changes in the Global Economic Paradigm.



CHINA

I pointed out that
China has shifted from looking inward to looking outward.
China is establishing economic and political alliances globally.
China is moving into Western Asia.
China will succeed because China will do as we did and not as we say

RUSSIA

Russia has shifted from looking inward to looking outward.
Russia is establishing economic and political alliances globally.
Russia is moving into Eastern Europe.
Russia will succeed because Russia will do as we did and not as we say.


EUROUNION

The European Economic Union does not have a strong offer.

Thus far, President Obama has done a fine job on Foreign Policy.  Egypt and Libya are two examples.  And he had strong allies in each situation. And he was a strong ally in each situation. However, Eurasia is neither a political theatre of operation nor a military theatre of operation.  This is the Economic Theatre of Operation.  Here President Obama’s allies (The EuroUnion) have little economic strength.  And, Chancellor Merkel has little or nothing to offer Eastern Europe.

Eastern Europe saw what happened to Southern Europe
Eastern Europe knows how and why it happened.
Eastern Europe knows that Southern Europe fueled the German economy.
And, they know much, much more.

When I wrote, “Merkel Invades Russia, I wrote about the assault on the Banks of Cyprus where Russia had sizeable sums on deposit.

When I wrote about Merkel’s Ponzi scheme, I wrote about Merkel’s attempt to send Madame Lagarde around the world, “Begging for coppers” Seeking a series of bailouts from a series of sources.

Eastern Europe can easily see that the Chancellor wants Eastern Europe to feed her Economic War Machine at the expense of Eastern Europe.

Merkel’s strategy is too obvious.  Keep the German economy strung until the global economy has its turn round, and then declare victory for her policies and their tenure.

Also, when I wrote “Merkel’s Big Lies", I listed the 10 Propaganda tricks being used by Merkel in her assault on Southern Europe.  This is analogous to the tricks used by industrialised nations to exploit emerging economies.

The only thing left to mention is this:

In addition to the fact that the Military Option is no longer viable, the economic zero sum game doesn't work anymore either.

You can heed my admonition now or wiat 50 years for a global depression.  Not a statistical one—a real one.

Warmest regards,

Slim

If you find anything here to be helpful, please don't hesitate to send me a really tricked out Mac Book and to tuck a few dollars into the envelope along with the thank you note. Slim.

Bob Asken
Box 33
Pen Argyl, PA 18072
Etas Unis


Copyright © 2014 Robert Asken 
All rights reserved.







Wednesday, April 16, 2014

Putin's Overture in EurAsia Minor

Putin’s Overture in EurasiaAsia Minor

There appears to be many opinions about what is going on in The Crimea. Most of it appears to be wrong, confused, or misdirected.

As this is not about knowledge but rather about understanding, I will use no graphs, pie charts, names of great leaders past, present, or future, and no list if historical dates.  Again, this is about understanding.

“If you want to know something, Google it; If you want to understand something, ask an old person.”

I have but two skills: an analytical mind and the ability to speak in metaphors.  However, if you don’t want to hear it from me, hear it from Einstein. “You can’t solve the problem using the same kind of thinking that caused the problem.”

The article has several parts and does rely on metaphors.  When you’ve finished the article, you will have a better insight into Russia’s actions.


Our Hypocrisy

Respect means different things to different people.  In some countries, people shake hands. In other countries, people bow.

Now, people in the US who believe in treating others with respect simply do not understand the concept.

He does not understand that other people do not want to be treated the way he wants to be treated.  He counters with all people wanting to be treated with respect.  He does not understand that respect means different things to different people.   Case in point:

A pat on the back, a pulled pork sandwich, and a bottle of beer.  “Sit down, put your feet up, and relax.”  That may be okay for me, however:

  • ·         You don’t touch people in Muslim countries.
  • ·         Muslims do not eat pork.
  • ·         Muslims do not drink alcohol.
  • ·         Don’t put your feet up!


First he is rude. Then he gets upset when other people don’t feel respected because he treated other people the way he wants to be treated, and in less obvious situations, he accuses other people of being snobs, elitists, or falls back on the old canard, “Who’s to say what’s right or wrong?”


“Circumstances, if not consequences, will prove who is right and who is wrong; too often when it is too late to benefit from the answer.” The quotations of Slim Fairview.


Now we go further.


The Fallacy of Win-Win Negotiations.

As form follows function (Bauhaus), I am using a metaphor to enlighten. Also, there is an economics lesson thrown in for good measure.

You and your husband both work. You share the household chores. Your husband asks you to do the dinner dishes for a week so he can watch some protracted sports event. You negotiate. You make an offer.

You will do the dinner dishes every night except Thursday if he gives up golf on Saturday to mow the lawn, trim the shrubs, and mulch the garden. As a sweetener, you tell him he does not have to go with you to dinner at your parents’ house on Saturday night.

He counters with what he calls a win-win offer. He will do the dishes on Wednesday, he will do all the yard work, but on Sunday, and he will go with you to your parents’ house for dinner on Saturday—to please you.  Sounds like a fair offer, doesn't it?

If you get caught up in the paradigm too quickly you will agree.  And, you made an agreement and you keep your bargains. Your husband made immediate concessions.  You accept the deal.  Now let’s look at the details, because actually, you lose on every point. Here is why.


  • There is no game on Wednesday night.
  • You want the TV Thursday to watch a programme on Economics
  • Your Dad dislikes your husband, but your husband loves your Mom’s Pot-Roast with gravy and mashed potatoes. 
  • However, the most important aspect is that you wanted the lawn work done on Saturday because you invited the women from the Economics Club at work to an al fresco luncheon ot your house on Sunday.


Now, the Economics Lesson.  Time, place, form utility.


You want to watch the Economics programme on Thursday because that will be the topic of discussion in your Economics Club meeting on Friday.  Time Utility.  The Rerun on Sunday night has no value.

Also, the yard work has time-form utility.  In economics, the yard work is a “product or a service.”  On Saturday, the yard work is very valuable.  On Sunday, the yard work is worthless.  The condition of the yard also has utility.  In its present form, it has no value.  Once cleaned up and made presentable, the yard has form utility
.
Your husband gives up nothing.

Now, this is not about respect v. disrespect; nor is this about chauvinism v. liberation; nor is it about how to have a happy marriage, empowerment, or conflict resolution.  This is about economics.  Why?  Because, in global matters, the military option is no longer viable—period!   To understand this, let’s look at the hidden agendas.

Your husband does not want the Economics Club meeting at your house.

You don’t want him golfing with his Saturday buddies; you want him to go golfing with his Sunday buddies.

Also, you want your husband out of the house all day Sunday. (Form utility)  Your husband is a good provider, a great Dad, and helps out around the house without being told. However, he does not “show well” at al fresco luncheons with the women from the Economics Club. 

There are also: deliverables and supply-chain considerations.  You want to show the other women that you can handle deliverables.  The condition of the yard—form utility and the locations of the husband—place utility.  You can deliver.


Now on to the US v. Russia Understanding.

The Military Option is over.  Ronald Reagan and his “Star Wars” build-up was not a military campaign but rather an economic one.

The Nuclear Deterrent is nothing more than Diplomatic Legerdemain.


Before Nuclear Deterrence:

The USSR sends troops into Germany.  German soldiers shoot back. The Headlines Read:  Germany and Russia at War.

After Nuclear Deterrence:

The USSR sends troops into Germany. The German soldiers do not shoot back. The Headlines Read:  Nuclear Deterrence Works.


Russia and Syria

I pointed out while back that the negotiations over Syria are not about Syria. They are about something else. When we find out what that something else is, then we can negotiate that and that will resolve the Syrian situation. We now know what that something else is.  However, we don’t understand it.

The fight for the Crimea is about a warm-water port. (Time, Place. Form Utility) In addition, this is not for military purposes. This is for economic purposes.


President Putin is attempting to form a Eurasian Economic Union; ostensibly, as a counterweight to the EuroUnion. Not quite true.  With the condition of the EuroUnion Economy, President Putin is merely seizing an opportunity, not land.

President Putin has been a witness to China’s Economic Success and Diplomatic successes in Africa and in Latin America.

President Putin sees America’s lagging economy.


Indeed, we must also view Russia’s humiliations since the collapse of Ivan Grozny’s Empirical Aspirations.

However, there is still more. 


Insight into Human Nature

Remember, Putin is seizing the opportunity presented by Europe’s weak economy. Europe is too weak to rebuff Russia’s economic overtures to Eastern Europe with Ukraine as a linchpin. And, Putin does not want to be Jimmy Carter to Eastern Europe.


The Bloc shift to the west was due to:

  • ·         The Strength of Reagan v. Gorbachev.
  • ·         The Runaway Success of the US Economy
  • ·         The Seduction of Perceived Freedom
  • ·         The Promise of Unbridled Economic Wealth.



That was then, this is now.
  • ·         The EuroCrisis
  • ·         US Economic Crisis
  • ·         Emerging Economies Slowdown


Now the Bloc Nations will be moving East.


The strict v. the weak.

Over 55 years, I’ve seen this scenario play out so many times that I can’t remember them all. Here are a few for illustration.


Mrs. Reardon, Mrs. Burke, and Smitty.

The first two were 1st and 6th grade teachers, respectively.

Each was known to be a terror. Very strict. Their students complained about the constantly.  However, if other students said anything against the teachers, their students would rebuff the criticisms with a vehement defence.  

Almost the Stockholm Syndrome, but not quite. And, I’ve been party to it, myself.

We had a boss named Smitty.  Not disliked, or held in contempt, but generally ridiculed by his "people".  His people, too, defended him against criticism.  (I personally, had no substantive opinion of him or his abilities.)

Then, one night, delivering "paperwork" to the local HQ, I encountered two upper middle-management Jackasses. After finding out where I was from, and that that was where Smitty had been transferred to, tey began to make snide, sarcastic, belittling remarks about Smitty.  

In response, I painted a glowing picture of Smitty’s success at our Office.  

Not because I liked Smitty, but because I didn’t like the two middle-school smart-asses. or their attitude. 
The difference? I knew I was doing it.


50 years ago, then comedian Bill Cosby, now Dr. William H. Cosby, did a monologue on an album about a shop teacher who used psychology to get students to confess to any wrong doing.

“Yep. Somebody must have a really rotten mother to put a bullet in the furnace.”

“Listen, I didn't put the bullet in the furnace and stop talking about my mother.”



The psychology of it all seems to be universal and universally understood.

After more than a half a century of watching the scenarios played out, I don’t understand why people are confused about what is going on in The Crimea.



The Bloc Nations Flirting East.

  • ·         Disillusioned by the failed promises of Western Economic Success.
  • ·         The Tendency of People to Forget


“It is a Universal Condition. We refuse to accept that all alliances and enmities are transitory.” The Quotations of Slim Fairview.


  • ·         The Excess of US Successes
  • ·         The Witnessing to China’s Successes both Domestic and Global
  • ·         The Display of Western Excessive Military Power & Might & little to show for it.
  • ·         That the Global Military Option is no longer Viable.
  • ·         Economics is the new Weapon of Choice
  • ·         The Fallacy of Nuclear Deterrence



Remember the Quotation of Slim Fairview

“China will succeed because China will do as we did and not as we way.”


Russia will do the same thing with the offer of strong Military Support and Protection and the Promise of Economic Well Being.


Surprise!

Warmest regards,

Slim


Slimviews and Sidestreetjournal are Unfunded, Unsupported, Non-Profit web logs by Robert Asken writing as the blogger known as Slim Fairview

Copyright © 2014 Robert Asken Slim Fairview

All rights reserved.