iCar?

If Detroit didn't already have enough problems... now one of the most popular high tech companies is rumored to be jumping into the business. Well, not really; but there is a lot of chatter online that Apple is going to team up with Volkswagen to offer a hip-looking compact car themed to Apple's line of iProducts and featuring lots of cool Apple gadgets.


Personally, I would love to see this happen and I'd like to see these cars run on diesel (or at least have the option for it). Despite the chatter about hybrids, fuel cells, electric cars and the like, diesel engines are the cheapest and most reliable of all the technologies. In Germany, over 50% of all cars on the roads are diesels; and it makes sense since the environmental regulations are so high. Diesel has a terrible reputation in the United States that needs to be changed - if anyone can do that, Apple can. Not that I can afford to buy new cars right now; but if I was, something like this would probably go to the top of my list.

No Revolution Necessary

A few days ago Barbara Ehrenreich, the author of Nickel & Dimed and Bait & Switch, wrote an extremely interesting article detailing how the proletariat in America has managed to severely cripple capitalism, without throwing a single punch. A lot of what has happened over the past few weeks have been things I've been harping about for years, and up until recently, I've been wondering how I could have been so dead wrong on these issues. But before I go there, here is a recap of how the revolution occurred.

A few years ago Mr. Alan Greenspan decided it would be a good idea to cut the federal funds rate to a measly 1% (historic lows). This prompted an era of cheap credit and a housing boom! In the state of the union addresses in the early 2000s, George Bush made proud references to the record number of Americans who owned homes; unforuntately, they didn't actually own much of anything, the banks had a lot of control over their assets. Fast forward to the present, interest rates are up over 5% and many Americans who took adjustable rate mortgages a few years ago are getting gouged. So what do they do? Quit paying! It can take months for a bank to repossess your house if you stop paying the mortgage, so a lot of Americans are taking advantage of this "grace period" before they have to switch back to renting.

Many of these loans were given to people who are economically illiterate and have poor credit. In theory, these people should not have qualified for a loan in the first place, especially one that would increase in price over time as the value of the underlying asset it paid for decreased... But bankers and Wall Street firms were making out like bandits, selling record numbers of shady loans and taking their huge bonuses straight to the bank (and hopefully investing in something other than housing). Now the jig is up and the banks are in a big pickle, trying to figure out what to do about all the money they gave out that isn't coming back. If this story sounds familiar to you, its because something similar happened at the now defunk company Enron. The Texas energy company commonly booked terrible deals that made no economic sense, simply because they were paid bonuses based on closing the deal, not on the deal actually being profitable for the company. Can you say, oops!?

So after sabotaging the banking system by throwing in the towel on their loans, the proletariat proceeded to stop buying cheap junk at places like Wal-Mart. Something that never quite made sense to me was how economists could talk about the US consumer driving the economy, when consistently we spend more money than we earn (the current savings rate in the US is -1%, compare that to 50% in China); the model is not sustainable. When Henry Ford started building cars many years ago, he realized that if he didn't pay his employees well, they weren't going to go out and buy the cars they were building. Thus back in the day, building automobiles was one of the most lucrative jobs in the economy (it still is, but becoming less so by the day).

Today, Wal-Mart has more influence on the US economy than any other company; but unlike Ford, Wal-Mart pays its employees among the worst wages in business. So should it really come as a shock to us that people working for the biggest employer in the country can't afford to buy a lot of stuff? Proponents of Wal-Mart always argue that the company helps consumers by providing them super cheap goods; opponents argue that Wal-Mart devastates wages when it moves into an area (among other things). Simple mathematics would suggest that for Wal-Mart to be a good influence on an area, the net-decrease in the price of the goods it sells must be greater than the net-decrease in the wages it's employees make. Based on the fact that Wal-Mart CEO Lee Scott recently said that "it's no secret that many customers are running out of money at the end of the month," we should probably re-consider whether those terrible wages are worth the low low prices on all that cheap junk.

Karl Marx wrote about the ultimate downfall of capitalism, when the proletariat gets fed up with their lives and leads a revolution to communism. More than 100 years after Marx's death, communism is yet to be attained on a broad scale, and only time will tell if the crazy bearded German guy was right or not. What I find most fascinating is that even though the radical, violent revolution that Marx predicted has never succeeded, we might get to a point where such violence is unnecessary, because capitalism will simply implode and collapse on itself. It might not happen for another 20 years, 100 years, or never; but the fact that a truly non-violent revolution is happening in this country right now is absolutely amazing.