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Saturday, January 3, 2015

Skimming the Masses, the New America Business Model- The Sunday Collage

...or as my friend Billy likes to say, "We are all trying to make the most money with the least amount of work."

Yesterday, I got into a spirited back and forth over my most hated topic- the ACA or Obamacare. Midway through, I realized the person I was speaking with didn't understand the "skim." He was busy blaming me for the costs of healthcare which I have always found to be a peculiar argument. You know the type. "Don't expect me to pick up the tab when you find yourself uninsured in the E.R." That sort of guy.

I have the proceeds of my work- called a work product or money. I enter into a contract or agreement for some good or service when my need for that particular item meets or exceeds the value of my work product. A seller has an item or service of value. He becomes a seller when he perceives that the price I am willing to pay meets or exceeds his expectations. We enter into an agreement based on a given price point. There is no opportunity for anyone to "skim" additional money from the transaction other than the state which now attempts to collect sales tax on every transaction. The state has the power to skim because it has the force of law and the ability to jail you if you do not submit.

The easiest way to make money with the least amount of effort is to simply "skim" a percentage of any transaction. You are not expending a great deal of energy nor are you producing anything. This cannot be accomplished when there are only two parties to a transaction. It is not in the interests of a buyer to over pay- nor is it in the interests of the seller to reduce his profit. Therefore any interested third party must find a clever way to convince both buyer or seller that his services are essential and worth the price. In other words- the buyer and the seller enter into a secondary agreement with some middle man who then skims a profit from the transaction.

Therefore any third party seeking to skim any transaction must (a) have the force of law or (b) try to create an essential or seemingly legitimate need for his services in the minds of a buyer and seller- generally through fear- founded or unfounded but well sold (c) be in a position to simply exert control over the proceeds of transacted business and skim money without getting caught or punished. Or (d) a combination of any and or all three above.

An example (a) is a government entity which is able to impose it's will on you to extract your work product. It accomplishes this by convincing you that you are receiving a good or service and that if you do not pay for it, your assets can be seized and you will be imprisoned. A taxing entity simply imposes it's will on you. There is never really a buyer/seller transaction where you are able to measure what you are actually receiving in consideration for your work product and then voluntarily entering into a trans-actional agreement. Government simply tells you what your share of the cost of a public good or service is- and they take that amount from you. That of course, is the perfect skim. We have no say in the matter of government skimming our work product- nor are we able to influence how they spend it. It is an incredibly frustrating situation- like having a daughter charging drugs and booze on your credit card- and you are unable to do anything about it except pay the bill. I personally believe 95% of all arguments involving "politics" involve this specific situation.

An example of (b) is a little more complex. Very often, third parties find and match buyers and sellers and drum up business. Interested third parties are then able to convince buyers and sellers that their services are essential. They create the illusion of obligation and/or need in the minds of buyers and sellers. They generally do not have the force of law to impose their ability to skim and often they are subjected to a competitive marketplace. However, highly efficient skimmers enlist the force of law anytime they see an opportunity to skim buyers and sellers. Floating to the top of this list are bankers and insurers. Bankers offer loans (money that does not exist or only exists as fractional reserves) to buyers and skim several percentage points or interest over the longest time frames imaginable. Compounded interest over long time frames causes buyers to cough up hefty sums, sometimes doubling or tripling purchase prices. Bankers find multiple ways to skim. They also enlist the aid of additional skimmers such as loan originators, brokers and re-sellers, title companies, insurers, appraisers, inspectors. Bankers monopolize the marketplace. They essentially price fix their costs and uniformly force compliance using any number of lending strategies. They even find ways to skim the government (treasuries) and pass those costs on to us as well. Bankers are at the very pinnacle of the skimming food chain. They are professionals.

Insurers are only one rung below bankers. They have enlisted the aid of government when forcing you to buy their services. There is an opportunity cost (high risk insureds) for them which reduces margins- however those losses are more than recaptured when you consider that they have been quite successful at forcing an entire nation into buying homeowners insurance, auto insurance, and now health insurance while slashing any claim to the bone. They are very adept skimmers who have enlisted the taxing authority of government to impose their costs upon us via the force of law. They have us all convinced that they are essential and without them we would all perish and die which of course, is untrue.

An example of (c) is anyone who exerts control over the proceeds of buyers and sellers and simply skims the proceeds hoping not to get caught or punished. Embezzlers and the mob come to mind.

Skimmers have no problem skimming the proceeds of producers, buyers, and sellers. If they can skim- they do. Smart skimmers recognize the skim. They constantly seek to eliminate or reduce skimmers from getting a piece of their own wealth. The story I am about to tell you is true-

Years ago, my ex wife was a loan originator. One day a wealthy woman walked into the bank and demanded a 90 day interest free loan for a million dollars. She had a million dollar CD on deposit which was nowhere near term. Not only did she infer that she would remove her million dollars from the bank- but the bankers realized that they would lose the opportunity to issue an additional 9 million dollars in loans using her million dollars as a fractional reserve requirement. Therefore, they approved the loan- interest free. When my ex tried to charge a loan origination fee of 250.00 bucks- the borrower screamed bloody murder and those documents were torn up. The wealthy woman understood the power of the skim and used it to her advantage.

Most of the aristocracy recognizes the skim. It seeks to impose the skim where it can and avoid being skimmed. A beautiful example is CNBC's shark tank. Creators or producers submit their ideas to the skimming aristocracy in return for working capital. Producers do the work and produce. The skimmers do nothing except offer financing and then try to extract as much wealth as possible using someone else's creativity and work product. The seek to gain the most money with the least amount of work and in so doing- they replace our would be bank skimmers. I hate watching Shark Tank for that very reason. Seeing the aristocracy ripping off creators, producers, and the people who work- just galls me.

Recognizing the tremendous advantage that the skimmers have- is the first step in reducing their ability to steal your work product.

Any time government has to pass a law to get you to buy something- that is not a buyer/seller agreed upon transaction. In other words, government understands that the buyers would not voluntarily purchase the goods or the services of the seller without the force of law. The buyers are receiving very little in consideration for the vast amount of their work product that they must surrender. The sellers have perfected the skim and in this case- enlisted the enforcement arm of the Federal government to essentially seize your money or suffer the consequences. It is a Robin Hood, mob rule democracy theft arrangement- where two wolves (government and subsidized patients) and a lamb decide what's for dinner.

Mitt Romney understands the skim. Not only did he skim the work product of producers invested in the funds he used to manage which made him incredibly wealthy- but he off shores and hides as much of that money as he possibly can- trying to keep it from the greedy tentacles of government skimmers.

I don't think our enemy is some anonymous goofball offering up his hatred in a comment thread. It is not some person who is desperately seeking adequate health care to survive and cannot afford it. People so desperate that they are willing to steal to survive. I understand those things and I might do the same.

Our enemies are those who have hijacked a very simple and voluntary transactional process between a buyer who agrees to purchase something for a reasonable price- from a seller offering a service for a reasonable price. Our enemies are our very own government and the swarm of skimmers they have allowed and facilitated in the health care space. It probably started during the reign of FDR.

The skimmers blame each other. The insurance companies blame everyone but themselves for rising costs. Other skimmers, like medical device and diagnostic tool makers and pharmaceutical companies while seeking patent protection for themselves, blame other skimmers like ridiculous insurance and malpractice rates as part of the reason for their ridiculous pricing. Hospitals want to operate and seek non profit status to prevent government from skimming them while charging outrageous amounts of money. Lawyers seeking unlimited awards for damaged parties while taking half of those awards for themselves on contingency- don't want awards and settlements capped by insurance. All of the skimmers it seems- think they are essential. None of the skimmers see themselves as the problem. They all believe they are essential. In the midst of all of their mutual finger pointing and accusations- there are real people, patients, who get used as the kickball. These are decent people who aren't demanding free healthcare but who are willing to pay a reasonable price for a reasonable service which they can no longer get.

And somehow, this giant, convoluted mess of pillagers and skimmers made possible only through the efforts of government, lobbyists, and campaign contributions- have turned what was once a pretty simple and successful buyer and seller arrangement with healthy competition- into a burning bag of decades old dog shit and left it on our doorstep.

Sorting this mess out, through massive reform and bi partisan support will be monumental. In our history as a country, I can only think of one other life and death issue that was ignored for this long until finally the unthinkable came to pass. That problem was kicked down the road and eventually solved with a civil war.

Ignoring this problem will not make it go away. There is only one solution. They will deal with the problem and solve it or they will wait until it has become a full blown emergency and then solve it. Real people will die needless deaths because of this. Don't fall for the cheap arguments of the skimmers who want to divert attention from themselves and pit one class of consumer against another. It's a cheap trick that has worked thus far- but it's days are numbered. Sooner or later, people are going to get wise to this. Consumers aren't the enemy. They never have been.

Corporate America, perfecting the skim (PBS) and worth a look:

Wednesday, December 31, 2014

The Very Best of Frankenstein Government- 2014

It's kind of humbling to scroll through 6 years of archived blogs and to re-read some of the things you have written. Some projections/opinions of mine have been very wrong particularly any of those dealing with the stock market. There are other things- that clearly needed additional editing.

My top two all time blogs consist of a piece I had written on the death of CNBC Mark Haines who I really liked- and the other was a piece I wrote called the "Ten Reasons to Hate Huffington Post."

My very best blogs of 2014. They might not always represent my favorite writing- but people liked them. Here they are, month by month for 2014.

On changing our corporate biz structure:

The President trying to convince us to buy government debt:

The advantages of being black or poor:

Environmentalism, Cliven Bundy:

Making health insurance illegal is our ticket out!:

Getting Bergdahl's side of the story: (which has never happened)

Modern day snake oil salesmen:

The death of a very good friend:

Blaming Americans for hoarding money:

The rule of men rather than the rule of law:

Who was really responsible for Michael Brown's death:

Doctors kill 300 times more people than cops do:

Honorable mention, April, Wounded Knee:

I want to thank everyone who stopped by this year or who left a comment. I appreciate the time you expend here overcoming all of the bad grammar and convoluted thoughts. I wish all of you the very best and a Happy New Year!