Numbers might not lie, but there is a tendency to view them in the surrounding light. What does that mean? It means that your view and my view of the numbers are dependent upon the world that we view them from. An example, totally unrelated: I remember early in the 2nd US invasion of Iraq. While US tanks were driving through parts of Baghdad, the Iraqi Minister of Information was holding press conferences claiming that the Iraqi Army was turning back the US attack. In one outdoor interview, a US tank is seen driving in the distant background. Regardless as to whether the “minister” was just knowlingly lying or really believed his side was winning, his perspective wasn’t shared by most of the world. These events became so comical, that even 2 years after his last moments on the air, he lives on in cyberspace: CNN article on Iraqi Minister

This issue of perspective, is the whole point of this article. The price of oil is up to records high, gold is gaing fast, etc. Depending on where you live and what year it is you’ll hear about how fast a price is rising or falling on some commodity. In 2005, the US and the world were obsessed with the rapidily rising price of crude oil. Early in 2006, that role seems to be gold, with the price recently exceeding $550. Most of us see the world and the world economy in terms of our local media, that is americans see the price of gold, oil and currency exchange rates in terms of US dollars and US cost of living. This perspective leaves us all thinking that others in the western industrial countries, say UK, Japan and Germany are living thru the same pricing trends, but because commodity prices are tide to local currency, that sometime isn’t the case.

I’ve researched the price of gold and currency exchange rate ( a once yearly sample in late january) since 2001 and it illustrates my point. Since 2001 Euro based investors have seen a 157% gain in gold, the UK based pound investor only gained 75% for the same period of time. Interestingly, 2/3 of all Gold gains in the UK occured since janaury 2005! What a difference between investors in England vs those in Germany. US Dollar and Yen investors gained 104% during that time, over 35% more than Pound investors but more than 30% less of gain than Euro investors. We’ve used this Gold Price Chart from kitco.com and Currencies from Yahoo Currency

So I’ve been thinking about the rise in certain commodity prices, most notably, oil, gas and gold. Much of the financial news centers around the effect of rising energy prices on consumers, the transport and travel industries, etc. The price of gold is often used as a surrogate for inflation or currency devaluation. It occurs that to me that if you were to track the price of these commodities, in the major currencies, USD, Sterling, Euros and Yen you’ll see how a great year for gold in one country, might be a mediocre year in a different currency/country. I’m gathering the data, you’ll see it here soon.

Unless you’ve been living in a cave for the past few years, you’ve probably noticed a huge increase in the interest in poker and in particular, Texas Holdem poker. This boom has occurred online with sites like party poker, on TV with the World Poker Tour and of course the first name in poker: The World Series of poker. The 2005 World Series, was the largest poker event in history. The No Limit Hold’em Final had 5619 entries that generated over $52 million in prize money and $5.2 million in fees and untold publicity to Harrahs. Joseph Hachem, was the winner of $7.5 million grand prize. Overall 45 world series events from June 2nd to July 13th generated roughly $100 million in prize money.

Even more impressive than than the boom in casino poker, is the huge size of the online poker market. It is expected to generate over $3 billion in revenues. At any moment of time, 10’s of thousands of people, mainly males, from all parts of the worlds at rooms including Party Poker, Poker Stars, and others. What’s even more interesting is that most of the money, upto 80% comes from US players; while the US Attorney General (and most state counterparts) have declared online gambling illegal. Unlike casino games or bingo, Poker is considered a game of skill in many state. But we’re not hear to talk about poker or it’s legality, so if you want more on poker and online poker in particular, i found this site helpful All Poker Rooms. In particular you might want to read The rules of Texas Holdem or if you’re like me, and can’t ever remember whether flush beats straights, check out Winning Poker Hands, if you are unfamiliar with the game of Texas Holdem.

Now, that you’ve got the big picture, the real question becomes, what is the impact of poker or more generally gambling on an economy. It was years ago that i heard one TV talking heads, labeled the US culture “the casino economy”. I don’t think their entire theory was exponded in the sound bite, but for me, it was a great description of the stock market/Internet hype bubble that popped in 2000 and the executives that scammed shareholders of Worldcom, Enron, Tyco and many others, steal the jackpot for themselves. This casino mentality has transferred to the current, now slowing, real estate boom. The US culture and economy has become a world of nods and winks, were thieves steel by falsifing info, lying on appraisals and wild conflicts of interest around every corner. While this may not be unique to the USA, it was “The Story” in the US, after the “Internet Bubble” and before the most recent story “Outsourcing”.

In particular, what is the effect of offshore operators, attracting players that might otherwise play locally at state licensed and taxed casinos? Just using the figures (i got them from Marketing Sherpa) the figures i quoted earlier, the online gambling industry is generating $8 billion to $10 billion in revenues each year. Probably drawing away US gamblers who might otherwise play at casinos that pay local taxes. Let’s assume that at least $2 Billion to $3 Billion would have paid taxes in the country where the player live. That’s $10 for every american. Given that the online industry, employs people offshore, it’s really the equivalent of outsource our gambling to lower cost offshore providers. This year alone, rapidly growing India will supply nearly $20 Billion of services for a number countries in wealthier/industrialized world.

I guess my point is that market forces generate an advantage in “Offshoring”, whether it be outsourced-offshore IT services or offshore gambling, because the offshore operator has some combination of cost or regulatory advantage. For IT and Accounting services their advantage is nearly all based on price. Online gambling benefits from both the regulatory advantages of being offshore and the cost advantage being virtual. It is this cost advantage ( being VIRTUAL ) that Las Vegas and the US Indians cannot overcome, without a change in the political climae. While most US business being outsourced is being outsourced based soley on wage differencial, online gambling is being “outsourced” offshore, because the US government refused to allow online gaming or even to allow each state to make it’s choice.

Is there anything wrong with gaming going online or offshore? I’m not really seeking to identify right and wrong, but the same governments that have refused to allow licensed online gambling also lose tax revenues to Offshore/Online operators, every day. So as US gamblers send their money offshore, states lose millions a day in taxes while the US gambling industry loses even more revenue and customers. The best way to stem the tide of online gambling taking money offshore is to all US based/regulated gaming online (each state should decide) and US operators compete with there trusted brands against the offshore operators.

One of the main problems being discussed in the US recently is the problem of underfunded pensions and sky rocketing benefit expenses. Old line American companies (the same is true elsewhere is G8 countries) are now burdened with pension costs that their competition does not have, but these cost are higher their obligations have went on longer than these plans had allowed for.

It really doesn’t matter if the companies poorly planned, or the insurance/investment industry mis advised, but there are at least problems that will become painfully obvious in the days ahead. First, old line companies, burdened by benefits are uncompetitive with their newer or less obligated competition. Second, a society that ignores social services and leaves it to business, will either have a failing social systems or failing businesses. Society need to establish government funded safety nets that work to make life in a world of temporary jobs, managable and rewarding to both the worker and investors.

Imagine a US where employers paid only hourly wages or salaries employees, no additional employment taxes or benefits, just a flexible labor force. This is the best way to help business compete against remote nations and their cheaper labor, right here at home. Imagine, a simplified, flat tax on indiduals with household and personal exemptions, generates the money for a social system, that trains and maintains a flexible workforce, for a newly unburdened and engergized business sector.

ah, the dream continues.

What the hell is a “Left Wing” Capitalist? Do you spend too much time listening to talk radio to think on your own? Are you unable to wrap your head around what sounds like an oxymoron? Don’t feel bad, you’ve been brainwashed by the those who use the ideas of capitalism as a justification for greed and selfishness.

Simply put a “Left Wing Capitalist”, is a liberal/social democrat that believes that market forces are the best way for humanity to innovate and generate ecomonic growth. Yes, someone who is pro flat rate taxes, but wants that money that’s collected to help the weakest in society and to provide opportunity to people regardless of class and wealth. How can this work?

Well whether or not a social welfare system exists has no real bearing on how an economic system is run. A welfare system that runs independently of an economy is certainly possible, it can be limited to providing all the benefits, without mandating any requirements on business. The only real issue, is the effect of tax levels and social spending on the economy. So in short, who cares how the taxes are spent, as long as they are low enough to let the econonmy grow. How big of a difference would there be, spending the money on health, education, housing for the poor, instead of military spending.

So now that we want a social welfare system, how do you accomplish it? First, make taxation cheap and efficient. Creating a flat tax rate with only 2 deductions, one per household and one per person living in that house. Changing the tax system to something this simple, combined with the end of corporate taxes and social security could reduce so much friction on the economy, that is could dramatically boost annual GDP growth.

Imagine a USA where ever person has receives a catostrophic coverage medical insurance voucher, from the government to use toward an insurance policy from a lightly regulated free market. No longer are employers burdened with the costs of medical insurance, while their competitors don’t offer any benefits. Suddenly the work world no longer needs to worry about full time or part time, employers assume no additional hourly costs when cash compensation is the only empolyer obligation.

So, that’s the answer to what a Left Wing Capitalist is, over time, you’ll see how it comes out in my posts.