RUTHFULLY YOURS

Things are more expensive than government statistics say they should be.

A lot of people who watched Rick Santelli blow up on CNBC the other day thought the same thing: “That guy needs a vacation — and so do I. The world just doesn’t make sense to him, or maybe me, either.” So you head up to the cabin. Maybe it’s the same cabin you rented back in 2000, before your kids. You just want a quiet reality check, a chance to think it all through. You swear you’ll turn off your phone. You and your family need time to remind yourselves how good you have it.

But there’s one nuisance that can interrupt your seven-day idyll just as surely as a blackfly or a mosquito. That nuisance is the price zap.

The first zap comes even before you get in the car. Your daughter wants a haircut so she can feel the sun on her neck. Great. But then she reports she needs $45 for the cut. What? A haircut used to be $20. You fork out, hiding your irritation. You expected haircuts to be high, but not this high.

The next zap comes on the road. A gallon of gas is $4.00, when it was $1.30 back in 2000. You expected gas to be high. But not this high.

The cottage you rented is nice, but the rent is more than you expected. It’s hot in the cabin, and your other daughter wants to see The Fault in Our Stars one more time. So you head over to the theater. The ticket is $10.00, not $5.00, like it was when you went to see Gladiator back in 2000. Your spouse asks you to pick up some coffee. A pound is $5.20, not $3.40, like back in the old days. You expected movies and coffee to be high, but not this high.

As business owners, we should look upon competition as the tonic that increases our strength. The threat of competitive destruction is one reason we work harder and smarter. As members of society and as consumers, we benefit from the good things competition brings – lower prices and better products or services.

On the other hand, when businesses become monopolistic, consumers suffer. Monopolies, which may be efficient and are sometimes government granted, tend to hurt consumers, as they exclusively have the ability to control price and service. Definitionally, they reflect the absence of free markets. And, of course, when they don’t operate under a government license, they violate the Sherman Antitrust Act. The debate about Amazon, especially in its role as the dominant book retailer, incorporates all of these issues. Is it or is it not predatory and monopolistic? Or is it a good business that is destructive to existing retailers, but positive for consumers?

Disruption is painful for existing businesses, as many of us know from personal experience and as can be read in stories like The Magnificent Ambersons (or seen in the Orson Welles movie of the same name). Booth Tarkington’s novel relates the story of an Indiana family whose fortune was tied to 19th Century carriages at a time when the automobile was proving to be the 20th Century’s greatest invention. Dynamism in business is healthy. Family fortunes have risen and fallen throughout history, and they will continue to do so.

Amazon’s war with Hachette is what prompted these musings. Hachette, a wholly owned subsidiary of Lagardère Group (the world’s third largest book publisher), is in a dispute with Amazon over the disposition of e-book sales. While specifics in this case have not been disclosed, the consensus suggests that under the current contract the publisher retains 70% of all sales and the retailer 30%. Typically, the author gets 25%, which comes from the publisher’s share. The sense of most observers is that in negotiating a new contract Amazon wants to split revenues from e-book sales 50-50 with the publisher – with the publisher continuing to pay the author from its share.

Hachette is not a small company. As mentioned, it is a wholly owned subsidiary of Lagardère, France’s largest production company, with 2013 revenues of €7.2 billion ($9.8 billion). Nevertheless, it is not in the same league as Amazon, which had sales last year of $74.5 billion.

Negotiations over a new contract have been going on for some time, with Amazon, which sells 65% of all online new book units, print and digital, pressuring authors by delaying the release date of their books. (As an aside, and as a minuscule example, I have been “victimized” by Amazon, as they seemingly have delayed availability of my book, One Man’s Family; though, in this case, my brother, the owner of the Toadstool, is a beneficiary. Also, I do not own stock in Amazon.)

THE MANCHINS FATHER AND DAUGHTER HAVE BEEN INVOLVED IN CONTROVERSIES BEFORE:

2007: The Heather Bresch E.M.B.A. controversy refers to a controversy regarding the granting of an Executive MBA by West Virginia University to Mylan Chief operating officer Heather Bresch. An independent panel concluded that Bresch did not complete the graduation requirements. West Virginia University’s president, provost and business school dean resigned as a result of the investigation, and the university’s general counsel and the president’s communications officer relinquished those roles.

2014: Zohydro Ban Proposed by Senator Joe Manchin: His Daughter is CEO of Competitor?

http://johnsaddiction.com/7626-joe-machin-zohydro-oxycontin/

US taxation of corporate profits is the highest in the world, and hobbles American companies competing on world markets, thereby costing American jobs. Just last month, medical equipment giant Medtronic announced plans to move its headquarters from Minneapolis to Dublin, via the acquisition of a company located there, and taking the new company’s domicile as its own. Now, it is being followed by a company run by the daughter of a US senator. Andrew Ross Sorkin of The New York Times:

Heather Bresch grew up around politics. Her father is Joe Manchin, the Democratic senator from West Virginia and a former governor. She has heard him say repeatedly, “We live in the greatest country on Earth,” as he did in countless political advertisements. And it appeared to rub off on her: Ms. Bresch was named a “Patriot of the Year” in 2011 by Esquire magazine for helping to push through the F.D.A. Safety Innovation Act.

Ms. Bresch is the chief executive of Mylan, the giant maker of generic drugs.

Until now, Ms. Bresch ran an unabashedly proud American company based in a Pittsburgh-area suburb, one of a handful of success stories that kept the once-thriving steel city relevant.

But on Monday, Ms. Bresch announced plans to renounce her company’s United States citizenship and instead become a company incorporated in the Netherlands, where the tax rates are lower. She did so by agreeing to acquire Abbott Laboratories’ European generic drug business.

In preparing next term’s calendar for my classes, I use the At-A-Glance PM3-28 over-sized item. Sprinkled throughout the calendar are Christian, Jewish, and Muslim holidays, information about daylight savings, and the like.

Apparently since at least 2012 (if not before) the calendar manufacturer saw fit to note The Day of the Race on Sunday October 12, 2014 as well as Revolution Day on November 17, 2014. Next to the name of the holiday there is an (M).

Curious, I went to investigate these two holidays which I had never paid much attention to, only to learn that these two dates are anything but benign commemorations.

The Day of the Race refers to a “Mexican national holiday known as Dia de la Raza. This date is honored in other countries as Columbus Day and under other names; but the event it commemorates and the way in which it is observed have become quite controversial.”

Though the date that Columbus arrived in the Americas is celebrated in many Latin American countries, there has been a decidedly negative cast to the celebration in recent years. In 2002 in Venezuela the name was changed to the Dia de la Resistencia Indigena (Day of Indigenous Resistance). Thus, “originally conceived of as a celebration of Hispanic influence in the Americas… it has come to be seen by some in Latin America as a counter to Columbus Day; a celebration of the resistance against the arrival of Europeans in the Americas and of the native races and culture.”

Beginning in the 1960s, Dia de la Raza “has served as a time of mobilization for pan-ethnic Latino activists.” In fact, “La Raza has served as a periodic rallying cry for Hispanic activists” with the first Hispanic March on Washington occurring on Columbus Day in 1996. Additionally, the largest Hispanic social justice organization is called the National Council of La Raza (NCLR).

* Norman A. Bailey, Ph.D. is Professor of Economic Statecraft, The Institute of World Politics, Washington, D.C., and Professor of Economic Statecraft at the Center for the Study of National Security, University of Haifa, Israel. He was Special Assistant to President Ronald Reagan for National Security Affairs and Director of International Economic Affairs, National Security Council, 1981-1984.

The prevention of the proliferation of nuclear weapons, particularly in the case of rogue countries such as North Korea and Iran, is a goal universally accepted by the international community. There is no such unanimity as to what to do to prevent it. Diplomatic pressure, economic measures, and military action are all in the menu of possibilities.

In the case of North Korea, all measures adopted were unsuccessful, and North Korea has constructed a full-fledged nuclear arsenal, which (along with increased Chinese assertion of various degrees of control over most of the East China and South China Seas), has resulted in increased military buildups in Japan, South Korea, Vietnam, the Philippines and elsewhere. Why did the imposition of an extensive regime of economic sanctions, punctuated by periods of economic aid to North Korea in times of famine, fail to prevent its development of nuclear weapons capacity? Quite simply because the sanctions were never adopted universally or applied effectively, especially by China, which provided North Korea with the energy and food supplies needed to maintain a minimum level of societal functionality.

The case of Iran is different. North Korea is devoid of natural resources and of a private sector, and its industrial, scientific and technological development have been stunted by the world’s most repressive totalitarian regime, which aside from Chinese assistance sustains itself through such activities as smuggling, counterfeiting and money-laundering. Iran, in contrast, is a resource-rich country with a well-developed economic infrastructure and a well-educated population, as well as a private sector of some significance. Trade sanctions were first applied and then supplemented by financial sanctions. Both were relatively well enforced, although sales of crude oil continued at a much lower level than historically through continued though reduced sales to South Korea, China and India.

Despite the manifest success of the Iranian sanctions regime, in November of 2013 the six powers (5+1) negotiations with Iran, based on secret contacts with the Iranians by the U.S. preceding the formal meetings, resulted in an agreement signed by the six powers and Iran on November 22

significantly relaxing the sanctions in return for little more than promises on the part of the Iranians. In perfectly predictable fashion, the sanctions regime proceeded to crumble, as countries and private companies from around the world rushed in to take advantage of trade and investment opportunities. Whatever happens in the formal negotiations, the Iran sanctions are effectively dead.

Expressions of sympathy to Gazans, for having their Ramadan celebrations foiled by Israeli retaliations, highlight prevailing ignorance of Islamic values, not only on the part of the American media.

On July 9, in his “Ramadan Message,” President Barack Obama, once again, equated the the Islamic principles of Ramadan with American values: “I…know that Ramadan is a time of intense devotion and reflection…reciting and listening to the entire Koran over the course of the month. These rituals remind us of the principles that we hold in common, and Islam’s role in advancing justice, progress, tolerance, and the dignity of all human beings,” he said.

Yet, the Koran and prayers recited by Muslims, are reminders to follow in the footsteps of the Prophet Mohammad, who we all know had nothing in common with our Founding Fathers or Abraham Lincoln.

Canadian Imam Ahmed Shehab, who was linked to at least two of the 9/11 hijackers, set the record straight. Writing in Al Ayam, an Arabic bi-weekly newspaper (Issue 8, June 30, 2014, P. 10), translated by Jonathan D. Halevi, he reminded his Muslim readers of the true meaning of Ramadan:

“The [Prophet], peace and blessing be upon him, used to carry out the jihad during the [month of] Ramadan and to order his companions to strengthen themselves for encountering their enemy….”

“The [Prophet] … was the greatest of the mujahideen. Fasting did not stop him from taking part in invasions. He took part in six invasions during nine years; all of them occurred during the [month of] Ramadan. He committed formidable deeds during the [month of] Ramadan such as destroying al-Darrar Mosque [built by the hypocrites], smashing the famous statues of the Arabs, meeting with delegations, marrying the mother of the believers Hafsah and conquering Mecca during the [month of] Ramadan.

It’s like the old joke: Why do Jewish men die before their wives? Because they want to. Civilizations for the most part die because they no longer want to live. That is the nub of my 2011 book How Civilizations Die (and Why Islam Is Dying, Too). They cease to believe in their own future and distract themselves from the prospect of extinction as best they can. Hellenistic Greece was the first universal demographic disaster; it gave us prototypes of the steam engine and the computer (via Hero of Alexandria) as well as the modern literary forms. But even wealthy men exposed their daughters and the population imploded. When Aristotle taught that men naturally seek the good, the overwhelming preponderance of evidence had already turned against him. Most men seek nothingness. Soon the last surviving remnants of the classical world will disappear. In another generation, more people will speak Hebrew than Greek.

Hamas wants to die, obviously and visibly. That thought horrifies Westerners. As a number of Israeli commentators observe, Hamas doesn’t particularly care about having a Palestinian State. It wants to destroy the Jewish State and is willing to die in the process. It wants to die in such a way that Israel will die, too. There is something utterly surreal to Hamas crowding civilians around military targets, and Israeli pilots declining to attack them. It recalls joke about the sadist and the masochist. The masochist says, “Beat me!,” and the sadist says, No…suffer.”

Hamas, to be sure, proposes to die in an accelerated time frame and a particularly disgusting fashion, but it should be kept in mind that self-willed extinction is the norm. West of the Indus, Israel is the only survivor among the thousands of little nations that flourished between 10,000 B.C.E. and 600 C.E. To be sure, there have been plenty of small tribes that wanted to live but were trampled by conquering hordes. The rule, however, is that civilizations die of their own disgust with life. Most of the industrial nations are dying, some very quickly. Most of the Muslim world would rather die than accommodate modernity (although some of it may choose to cease to be Islamic).

I do not mean to sound cruel, but the best thing you can do for victims of a dying culture is: Don’t be one of them. Individuals who want to live have the option of changing cultures. I do not mean that Israel (or anyone else) should go about killing off enemies in order to satisfy their death wish. God forbid: life is still sacred to us even if it is repugnant to them. Neither do we have to commit suicide in order to accommodate our crazy neighbor’s death-wish. We might try to talk him down from the roof, but we are entitled to step aside when he jumps. It is not in our power to persuade suicidal civilizations to carry on living. Ultimately it is our job to contain the damage to ourselves. We cannot help but accept some civilian deaths while engaging an enemy that seeks the maximum number of civilian casualties.

Just five days away from the deadline for a final nuclear agreement with Iran, Secretary of State John Kerry said “very real gaps” remain between P5+1 and Iranian negotiators in Vienna.

“Despite the difficulties of these negotiations, I am confident that the United States and our partners in the P5+1 remain as squarely focused as ever on testing whether or not we can find a negotiated solution to this most pressing international security imperative,” Kerry told reporters today.

He said he’d had “lengthy conversations” with Iranian Foreign Minister Javad Zarif over the past few days “about what Iran is willing to do and what it needs to do to not only assure the community of nations, but to adhere to what the foreign minister himself has said repeatedly are Iran’s own limited objectives: not just to declare that they will not obtain a nuclear weapon, but to demonstrate in the actions they take beyond any reasonable doubt that any Iranian nuclear program, now and going forward, is exclusively for peaceful purposes.”

“In these conversations, and indeed over the last almost six months since the Joint Plan of Action took effect, we have made progress. We have all kept the commitments made in the Joint Plan, and we have all lived up to our obligations. We have all continued to negotiate in good faith. But after my conversations here with both Iran and with our P5+1 partners in particular, it is clear that we still have more work to do,” Kerry said.

“Our team will continue working very hard to try to reach a comprehensive agreement that resolves the international community’s concerns. I am returning to Washington today to consult with President Obama and with leaders in Congress over the coming days about the prospects for a comprehensive agreement, as well as a path forward if we do not achieve one by the 20th of July, including the question of whether or not more time is warranted, based on the progress we’ve made and how things are going. As I have said, and I repeat, there has been tangible progress on key issues, and we had extensive conversations in which we moved on certain things. However, there are also very real gaps on other key issues. And what we are trying to do is find a way for Iran to have an exclusively peaceful nuclear program, while giving the world all the assurances required to know that Iran is not seeking a nuclear weapon.”

Amid Hamas’s rocket barrage from totalitarian Gaza, the land Israel left nine years ago, American Jewry’s tiny but loud far left launched its own fusillade. “End the bombing, end the occupation,” Jewish Voice for Peace (JVP) cried. “Peace not vengeance,” J Street insisted. J Street at least “condemn[ed] Hamas” and “recognize[d] Israel’s right to respond to the rocket fire.” Still, while respecting their right to criticize – simply questioning their judgment — I wish to rebut the JVP Peter Pettigrews and the J Street Pettifoggers. Peter Pettigrew is the rodent-wizard who betrayed Harry Potter and his parents to Lord Voldemort. Pettifoggers are intellectual tricksters who, by exaggerating the trivial, distorting the big picture, obscuring the truth, act like Rowling’s Cornelius Fudge, a weak character who unintentionally helps the evil Voldemort.

American Jews once instinctively respected Israelis because of the complexity of living under the Arab threat; now, a shrill minority instinctively blames Israel, without, for example, praising it for yet another bombing campaign far more disciplined and less lethal than any major bombing campaign America has launched. Fanatic Blame Israel Firsters, like the JVPers, naively declare “The occupation … is the root cause” of the conflict. The Gaza clash proves that the “root cause” remains Arab extremists’ rejection of Israel’s existence and the idea of Jewish nationhood. Just read the Hamas charter.

These enablers of totalitarian evil – who pretend to respect Palestinians but actually insult them by condescendingly absolving them of responsibility for their bad decisions and perverse political culture — echo the Palestinian propaganda line calling Gaza “the world’s largest prison.” Gaza has beautiful beachfronts. It could have been the Palestinian Riviera had the Palestinians chosen to celebrate Israel’s withdrawal from Gaza by building a modern, democratic, prosperous state in the land they now controlled. Instead, they proved once again that as long as Israel controls “one inch” of “their” land — meaning as long as Israel exists – they will fight “the occupation,” allowing their Islamist, anti-Semitic, anti-democratic, anti-Zionist struggle to trump constructive nation-building.

The Economist explains

Some wonder if Iron Dome’s main problem is in fact a political one. The system’s success means that Binyamin Netanyahu, the Israeli prime minister, has been able to use Iron Dome to maintain his policy of conflict management, with less fear of retaliation. “Iron Dome has altered the calculus of Israel’s political echelons in ways they have yet to understand,” says a former senior official. “It allows Israel to resist internal public and military pressure for a quick end to the conflict, and keep bombing Gaza.” It also provides some degree of immunity against other neighbours armed with missiles, such as the Lebanese Shias’ Hizbullah militia, or Syria, perhaps making the agreement of a lasting peace settlement seem less urgent. Nonetheless, as air-raid sirens sound, most Israelis are glad to have the protection of the Iron Dome.

How Israel’s “Iron Dome” works

ISRAEL has long been protected by its famed “iron walls”. Now those walls have a rooftop. Israel’s arms manufacturers have devised an anti-missile system, offering what they call an “Iron Dome” overhead. Iron Dome’s manufacturers claim it is the fastest and most reliable such system to date, able to shoot down missiles with a launch-to-impact time of 15 seconds. The $1-billion programme, subsidised by the United States, has served Israel well in Operation Protective Edge, its recent campaign against Hamas in Gaza. Palestinian militants have lobbed almost 1,000 missiles into Israel, but Iron Dome’s interceptors have struck down 87% of their targets, according to the Israelis, allowing life in Israel’s cities to proceed more or less normally. How does it work?

Iron Dome is the short-range component of Israel’s three-tier anti-missile defences. The other two elements are David’s Sling, still under development, which is intended to shoot down targets in the atmosphere, including over the Mediterranean; and the Arrow system, designed to intercept longer-range anti-ballistic missiles in space. As soon as enemy rockets are launched, Iron Dome’s radar tracks their trajectory, calculates their impact point and launches a missile which within seconds locks onto the rocket and shoots it down. Each interception costs about $60,000, but its architects claim to have saved Israel billions in physical damage and economic impact, as well as loss of life.