The List: The Best Paid Teams in Global Sport

Sporting Intelligence has released findings from its first Annual Review of Global Sports Salaries. The study's aim was to compare how well teams across the sporting world are collectively paid. Unsurprisingly for Americans, though maybe a bit of a shock for fans of a certain team of Madrid-based galacticos, baseball's New York Yankees are the best paid team in all of Sportdom. Some additional and very interesting league/league and intrasport comparative analysis can be found here.

Ford to Announce Sale of Volvo to China's Geely

In a move to free up cash for core operations, Ford Motor Co. is selling the last of its former Premier Group marques, Volvo, to the largest private automaker in China, Zhejiang Geely Holding Group. An official announcement is expected for tomorrow. The sale has been anticipated for some time, and should put the company in a better position going forward. It also represents the final step in the unraveling of several assets that the company was never able to position very well, including Aston Martin, Land Rover and Jaguar.

As many keen observers of the auto industry might know, Ford's attempt at buying its way into the luxury segment was hardly the only misstep made in the US auto industry over the past decade and a half. Shareholders of US automakers (including everyone filing a tax return by April 15th) will not be happy to hear that it probably won't be the last. However, if the industry is to survive, inevitable future mistakes can't be as large or unwieldy to remedy. If they are, Americans will have to get used to buying more than just Volvos from Geely.

The List: Companies Booking Healthcare-Related Losses

Much of the ongoing healthcare debate focuses on very reasonable questions regarding how certain elements of the plan will be funded. However, even if claims that Uncle Sam is commandeering nearly 20% of the economy end up being frivolous, some potentially negative impacts are already rearing their heads in the private sector. For example, some companies have already started booking losses due to the passage of healthcare reform legislation. Many of these accounting measures are being taken in anticipation of a reduction in subsidies for prescription drugs that had been given to large corporations the past few years.

Pay or Play Produces Inefficient Results

In contract law, there is a term for the phenomenom whereby a party defaults on a contract and pays a penalty to the other party in order to take advantage of a cheaper business opportunity. So long as the breaching party is better off after the transaction, even after paying the penalty, the default is said to be an 'efficient breach' because the most economically efficient transaction has occurred. Though some may have qualms about breaking contracts or people who do so, this is a common occurrence in business. Indeed the potential for breach is often anticipated by parties in certain situations, with penalties for breach often being written right into contracts. This helps an economy run efficiently as parties have the freedom to find the best possible deal, keeping supply and demand pressures in check, particularly in markets for goods or inputs. It also helps avoid court time, and finally allows parties to contract fearlessly, knowing that, even if the other side doesn't perform, they can still expect a minimum payment. Though in contract law, the ability to pay a penalty to avoid fulfilling an obligation is attractive in economic terms, there are problems with allowing this type freedom in other areas of life. The 'pay or play' provision recent healthcare bill provides an example of this.

It is tough to say anything with great conviction when it comes to healthcare. There are so many numbers thrown around, so many accusations and so many contradictions that doing any kind of analysis can be more an excercise in frustration than a logical endeavor. Additionally, the Obama administration (at least publicly) is convinced that the plan that was passed will reduce costs. However, even some of the least controversial numbers paint a bleak picture of the future after a slightly more than skin deep look.

For example, the healthcare bill has provisions that allow employers to pay a penalty rather than pay for insurance for employees (the first bullet point in this Reuters piece does a good job explaining the numbers). This is called 'pay or play' and is presumably included to provide a disincentive to not providing insurance to employees. However, it may incentivize just the opposite behavior. If you believe these numbers, health care costs employers somewhere in the neighborhood of $4,500 to $7,500 per year per employee. However, under the pay or play provision, employers may only need to pay $40,000 total in penalties if they have 50 employees and they don't insure any of them. The math is pretty clear; there is an huge incentive for small to medium business owners to avoid paying for healthcare. This is especially true because they now know that these employees won't be left without coverage after the state-run exchanges are formed. Presumably, some of the penalty dollars will go toward subsidizing the exchanges, but it is clear that there will be a balance. What isn't clear is who will be responsible for paying this balance, but whether it is the government, the employees, or some combination, it represents a failing in the system, and in some cases will probably result in a higher cost per employee than exists now.

Efficient breaches of contract are so named because they result in efficient economic transactions and facilitate smooth interactions between parties. In such a situation, a penalty is a means to a positive end. Healthcare's pay or play however, seems to be a penalty on the economy, shifting costs around rather than reducing them. In the process, it will create headaches for employees, transaction costs, and incentives for employers to avoid the best possible employment packages for their employees. With the benefit of experience, it may turn out that there are parts of the healthcare bill that benefit employees and the overall system. Pay or play is, unfortunately, not going to be one of them.

Taking a Look Into a Bleak Crystal Ball: The Future of Social Security in America

For the first time this year, but assuredly not the last, the Social Security Administration will pay out more in benefits than it gains in revenues, a situation long seen as a tipping point on the way toward insolvency. Though long-expected, economists did not quite expect this annus horribilis to arrive quite so soon. However, a combination of individuals seeking benefits earlier than anticipated and lower tax revenues, both corollary of the economic downturn, have moved up the timelines on both the first year of red income statements and the end result of a red balance sheet.

In terms of the continued financial health of America, this is a much bigger story than a short-term economic downturn, bigger than the possible expenses that will be found in a cryptic healthcare bill, bigger than currency rates, interest rates, stock market performance and unemployment numbers combined. Yet it has always been something of an elephant in the room, probably mostly due to political reluctance to go anywhere near the fruits of FDR's labor, but also due to an overall sense of helplessness; that almost nothing can ultimately be done to save the program.

However, it is not too late to reform the program to ensure its survival, at least for a politically necessary time horizon. A combination of a higher retirement ages (an obvious solution when coupled with rising life expectancies), lower, gradually declining benefits, and an eventual return to economic growth should be enough to get the program past current, and currently dismal, projections. More politically important, however, is the fact that such changes should get the program safely to the point where it will be able to continue paying out to those whose current and near-future retirement plans depend on a monthly check from Uncle Sam. This should allow politicians to make tough decisions about the future without too much kickback from retiree-rights organizations (though even this assumption is a bit optimistic). Despite quick fixes and patches, however, the fact of the matter is that Social Security will probably not be around in its current state, with or without reform, when today's 20 and 30 somethings are ready to put the lunch pail in the cupboard for the last time.

Therefore, combined with the quick fixes noted above, some brave politician will have to get some very difficult points across to the public and come up with some creative solutions to the problems we face. The best example of an attempt at this was President Bush's failed proposal for separate investment accounts a few years back. However, despite being on point with his warnings of future insolvency, his administration arguably did a very poor job of explaining the big picture, the problems we face and potential solutions. He also failed to assure today's benefit recipients that they would not be impacted; that his was a solution for the future, not the present. That the President had little to no political capital in the bank at that point certainly didn't help matters.

How about hope and change? Are they enough to conquer the inevitable issues facing Social Security? Just like anything else, the answer is a resounding no to the former and a perhaps for the latter. The current President is, however, also facing a public widely hostile to any suggestion coming from the White House these days and, much like his predecessor, is low on political capital at the moment. Therefore, it is most likely that it will be some time before this issue is properly addressed. It can only be hoped that 'some time' does not bring us right to the edge of a big scary pit called insolvency because by then, the Rubicon will have been long passed and potential fixes will have become the stuff of old D.C. wive's tales.

Don't Worry, Be Happy

Researchers at the California Institute of Technology have discovered that learning occurs better while the mind is in a relaxed state. While scientists already knew that relaxed minds are better at receiving information, this study indicates that relaxation neurons work together to strengthen the memories that are created.

While the study will likely have little to no impact on the cram-centric study habits of many university students, it may have implications for the learning disabled if scientists are someday able to manipulate and optimize the state of the mind when learning is happening. Unfortunately, the scope of the study was limited; it did not touch upon on whether the methods some use to do so entirely, or merely just partially, counter the potential learning benefits of relaxing their minds. No doubt the topic will need to be addressed if researchers in California continue to lead the way in this area.

The List: The House Healthcare Vote

Here the curious can find a listing of all of the ayes and noes from Sunday's House healthcare vote.

A Legislative Solution to the Problems Created by Citizens United

After its recent decision in Citizens United, the Supreme Court was accused by many of opening the floodgates with respect to the ability of corporations to spend money to promote their political interests. Many feared that corporate America gained a legally intractable foothold in the political process as a result. Though the seemingly unlimited ability of corporations to make expenditures in the political arena doesn’t perhaps have the same potential for corruption, either real or supposed, that unlimited contributions might have, the concerns expressed by the critics are not unfounded. At the same time, while the decision upset some, others applauded the protections afforded to free speech in the political arena and the increased abilities of corporations to self-advocate. However, despite its polarizing nature, most on either side can agree that the court left many questions unanswered in its opinion. Indeed, many of the issues either left unaddressed by the Court or created by it are concerning even to those who agree with its final holding.

For example, while expenditures were addressed, it is unclear what bearing the ruling might have on a potential challenge to contribution limits for corporations in the future. It is also unclear just who is represented when a corporation spends money; is it the shareholders, the workers, or the executives? Perhaps it is the board? This remains unclear. Additionally, the implications for unions are not necessarily clear, though it seems that worker’s rights groups may have the ability to spend funds for political purposes as well. Finally, in declining to address the implications for foreign firms, the Court not only virtually penciled in a future oral argument on the matter, but also left open the potential for confusion by both citizens and the foreign-based companies who employ them, sell to them, and do business with them.

It is also true that, despite President Obama’s pleas to aides and congressional staffers to solve them, the Court may have closed the door on many potential legislative remedies to these problems. If the reaction of at least one side of the aisle during the State of the Union was any indication, the legislature would certainly be willing to oblige the President. However, as Justice Stevens noted on more than one occasion in his dissent, the majority has in many respects tied the hands of Congress. His analysis regarding the lack of Congressional ability to regulate media corporations, even with exemptions, in this First Amendment sensitive sector is merely the best example of this. See footnote 75.

However, one legislative solution to the problems created by the court’s decision could be the mandating of strict disclosures in regards to expenditures. Though not every problem would be solved with strict disclosures, many of the most pressing, including possible corruption and violations of shareholder rights, could be remedied with the help of disclosure and filing requirements. Additionally, a strict disclosure regime could lead to further benefits in the future as companies attempt to manage their relationships more effectively.

Though such a regime could take many forms, one avenue to accomplish and regulate strict disclosure could be securities law. Some ideas might include a compulsory section on a company’s website with a clear statement of total amounts spent for political purposes, jurisdictions the money was spent in, and a brief statement of the company’s position on the political topic it spent money on. This could be provided on a rolling monthly, quarterly, annual and five year basis. Similar disclosures could be mandated for quarterly and annual filings. These types of measures would address shareholders rights, giving owners the ability to vote with their feet if corporations are thought to be spending money inappropriately or on the ‘wrong’ issues. They would also go some way toward combating corruption, as it would be obvious what positions corporations were advocating for.

If These Guys Can't Agree, What Are We Supposed to do?

Today in The Wall St. Journal the Real Time Economics section is focused on two letters recently released by groups of economists, respectively. Each group is large in number, each contains ivy league professors, each makes logical arguments. Simply put, these are really smart people making really smart points.

Unfortunately for the common folk trying to get their bearings, they are also making conflicting points. Even more unfortunately, their conflict is over health care reform and the legislation currently making its way through Congress. This conflict of ideas, however, nicely highlights one of the major problems with the health care reform debate. This is namely that each respective side, completely devoid of more emotional arguments, can make a strong, intelligible and well-reasoned case for either pushing a bill through at all costs on the one hand or scrapping the process entirely on the other.

This ability to make logical arguments is counterintuitively, however, part of what has made the health care debate so difficult. Assuming politicians read the original bills, a bit of a leap of faith, it is hard to see how they have kept up with each individual amendment and tweak in each house of Congress. Therefore, many of their arguments are idealogical and based on party lines rather than on the merits, but are nonetheless at least marginally supported by a well-reasoned analysis. So all that is left for Americans in a sea of competing yet compelling claims is partisan bickering, shouting, accusations and name calling; in a word, hysterics. Most unfortunately, these hysterics have spilled over into the cable news realm as well, making the 'nightly news' more grating than informative.

However, this is more the fault of the leadership of both parties than of Americans. In the opinion of many, neither side has made a strong enough case to be entirely defensible. And both sides, politically and idealogically, have dug in to some extent in an attempt to make the bill as easy to swallow as possible back home. However, little of this back and forth is actually based on the merits. Therefore, all that is left for politicians and citizens alike is arguing, petty in nature maybe, but with one of the most critical debates of the next few decades as the backdrop. And if politicians involved in the process and some of the smartest people in the country can't agree (not that I am necessarily saying these groups are mutually exclusive of course) what is the average American supposed to do?

Wife's Political Plans Could Test Thomas' Future Judgment

Though it is typically unfair to attribute ideas or qualities of one person to another simply because of their association with each other, a developing story reported on in the LA Times is destined to test the limits of this notion. This is because Supreme Court Justice Clarence Thomas' wife Virginia has decided to start a decidedly political tea party group.

All Supreme Court Justices, like most Americans, have political leanings. For example, Thomas is noted for being one of the more conservative justices on the court. Additionally, Supreme Court justices are often politically charged appointments by partisan presidents and are voted on by the most political of bodies, the Senate. However, notions of fairness suggest that some minimum level of impartiality be observed by members of the Court. Therefore, though in reality political idealogy and public policy questions are often found being freely discussed in their opinions, Justices are expected to maintain a certain level of non-partisan decorum in public dealings.

What is interesting about the situation at hand is that it is not Thomas' public dealings, but his connection to his wife and therefore her activities that is being questioned. This is due mainly to concerns that this connection may cause at least the appearance, if not the actuality, of conflict in future cases. In truth, there are not likely to be too many cases where this situation leads to claims of even the appearance of impropriety. However, if such a case arises, it will be interesting to see how Thomas handles a potential recusal.

If personal experience serves as any indication, the court probably wouldn't miss much from an absent Thomas during oral arguments; he can most often be observed twirling in his chair and counting ceiling tiles while the lawyers are advocating. However, his consistently conservative vote's absence could certainly shift the balance of the court in potentially explosive cases. On the other hand, he may choose not to recuse himself, potentially leading to claims of unfairness. Either way, the situation has the potential to prove interesting.

KKR Plans NYSE Listing

Better known by some as the 'barbarians at the gate' in the RJR Nabisco saga, KKR founders Henry Kravis and George Roberts are planning a listing on the NYSE. Rather than a straight public offering however, the private equity giant is simply going to list in New York and then exchange shares in current Amsterdam-traded KKR Guernsey vehicle for new ones. The European entity would then be dissolved.

The creative and relatively rare structure to the deal has strong benefits in a very tough IPO market. Kravis and Roberts will benefit personally cash flow-wise while still maintaining control over the company. If shares increase in value, it could also give the firm more capital to leverage for deals. Additionally, KKR would benefit from added flexibility as it competes with rivals such as Blackstone for deals.

The More Things Change...

Blawgconomics has, in the past, opined that interest rates would have to come up at some point this year to avoid some of the very types of problems they were cut to remedy. However, recent rumblings in Washington suggest that interest rate tightening may actually become less likely as noted dove Janet Yellen has emerged as the odds-on favorite to gain nomination to the vice-chairmanship of the Fed. Yellen, the current president of the San Francisco regional Fed branch, shares Chairman Bernanke's inclination toward keeping rates low to stimulate economic growth, and has been more concerned about unemployment than inflation in recent speeches.

While unemployment remains a concern, the status of the dollar, inflation, and future bubble creation should all be given attention by the Fed. If they are not, and rates remain down at essentially 0%, some of these ugly factors will undoubtedly raise their heads as they have in the past. Like so many other things, it seems that with the economy, the more things change the more they remain the same.

Op-ed: Conspiracy Theories

Though it initially escaped my attention, Blawgconomics' previous post was its 150th...certainly a fact which merits celebration. And, what better way to celebrate than with a guest post from friend of the site Pat Decourcy. As always, Pat respectfully declines to pull punches in his latest contribution, one of the things I appreciate most about him. Though his 'conspiracy theory' has a few holes which need to be filled before it reaches classic Kennedy or Illuminati status, it is an interesting read; let us all hope he is wrong. As always, comments and feedback are appreciated.

I keep seeing Gov. Jesse Ventura doing the media rounds and shamelessly promoting his upcoming Conspiracy Theory TV show by offensively advocating the meritless position that 9/11 was an inside job orchaestrated by George Bush, Dick Cheney and Karl Rove. Seeing this has made me think to myself, are there some conspiracy theories that do have some merit? I thought it appropriate to unveil my own conspiracy theory, although I feel mine has much more of a basis in reality.

Has anyone heard of the Cloward-Piven Strategy formulated in 1966? From wikipedia:

"...They argued that full enrollment of those eligible for welfare “would produce bureaucratic disruption in welfare agencies and fiscal disruption in local and state governments..." and "The ultimate objective of this strategy—to wipe out poverty by establishing a guaranteed annual income—will be questioned by some. Because the ideal of individual social and economic mobility has deep roots, even activists seem reluctant to call for national programs to eliminate poverty by the outright redistribution of income.”

Ultimately, their strategy was to try and ensure that anyone who could receive government transfer payments did receive them, and that the financial and social stress this would imprint on the American culture would cause the welfare system to collapse. Once the system collapsed, they would focus on the advocacy of a mandated annual income - enforced by a Democrat ruling majority across the country and bureaucratic pay czars.

Op-ed: The Path Not Taken in Randall v. Sorrell

That campaign finance issues represented a judicial quagmire by the time of Randall v. Sorrell is not an argument in need of defense; the tangled web of selective concurrences, concurrences in opinion only and dissents by the justices in the case does that heavy lifting for us. Justice Kennedy recognized this, stating in his concurrence, ‘The universe of campaign finance regulation is one this Court has in part created and in part permitted by its course of decisions. That new order may cause more problems than it solves.’ (emphasis added). Therefore, accepting that the court had created a mess of a situation, all that remains for discussion is whether a better path could have been taken. On one hand was the soft balancing standard developed by Justice Breyer in a plurality opinion which served as the judgment of the court. The more desirable alternative would have been scrapping the last vestiges of Buckley v. Valeo and its disparate treatment of contributions and expenditures as seemingly advocated for by Justice Thomas.

The framework of the debate has its foundation in the 1976 opinion of the Court in Buckley v. Valeo, where in an oftentimes rambling opinion the Court afforded the protections of the First Amendment to political expenditures, qualifying candidates’ spending as akin to speech. This provided the category of expenditures a strict scrutiny analysis shield in situations where expenditures were restricted. However, the court failed to extend the same protections to contributions. Although acknowledging that contributions represent support for a candidate, the Court did not feel that the direct voice of contributors was stifled when their contributions were capped. Indeed, claimed the Court, contributions, and particularly large ones, could be viewed in many cases as emblematic of corruption rather than as speech, whether in fact or merely in appearance. Because of this potential appearance of corruption and its deleterious impact on the political process, the court was satisfied with legislative efforts to control contributions, so long as restrictions were tailored to meet a state interest.

At the end of a long line of contentious cases resulting in split Courts arose Randall, a case where state restrictions on both expenditures and contributions were addressed. Justice Breyer, delivering the judgment, dispensed with the expenditure issue by refusing to overrule Buckley and its progeny. From there, Breyer turned to the question of contributions, which, in Vermont, had been capped at $200 per candidate per election. Not only was this less than the caps in a vast majority in the country, according to the court, it was in fact the lowest cap in the land. Despite previously allowing (at least in concurrence) contribution limits in cases such as Nixon v. Shrink Missouri Government PAC, Breyer decided in Randall to reject the state’s limits. The basis for Breyer’s judicial decision was that Vermont had gone too far, and the tool used to support it was the First Amendment. Because of the soft standard he adopted, however, Breyer created confusion and more problems than he solved.

Proving that Vermont’s limits had gone too far, and were therefore incompatible with the First Amendment, was accomplished via a five point analysis, noting inter alia, that the restrictions were not adjusted for inflation and that there was no statutory justification for low limits in Vermont. Because of this, Breyer claimed, Vermont’s restrictions were not narrowly tailored and were therefore unconstitutional. Because of this seemingly gut feeling- based analysis, and because its basis was the possible impingement of free speech, Justice Thomas could not have handpicked a better case to expose the failings of the state of judicial meddling in campaign finance than Randall. In fact, as soon as Breyer accepted the First Amendment implications in the Vermont plan, the Court should have used it as an opportunity to scrap the entire campaign finance regime and adopt a strict scrutiny analysis. This would have effectively ended most restraints on limits.

NYC and London Losing Ground as Financial Centers

The Financial Times has reported the results of a poll which indicate that London and New York City are losing ground to up and coming financial centers, particularly in Asia. The results of the study highlight the risks that are run when markets face enhanced scrutiny and regulation. At the same time, it is likely that politicians in both London and Washington are currently more concerned with righting faltering financial systems than in poll results.

In reality, it will likely be a long time before any second-tier financial hub overtakes either city. However the poll does emphasize the growth of cities such as Hong Kong. This is particularly apparent when it comes to specific segments of the financial industry, such as insurance.

The List: The World's Richest People

Every year Forbes puts out its list of the worlds richest people. At the link you can find The Top 20.

We Don't Write the News...We Just Report It

The Washington Times had some interesting figures from a Labor Department study today indicating that government workers are being paid substantially more than private sector employees while enjoying a higher level of benefits. Additionally, with these higher benefits typically comes greater job security. Though it is always nice to keep unemployment down, one can see that there are a few glaring problems with these statistics without putting so much as a big toe into the idealogical arena.

First, the government is already running an enormous deficit. Therefore it is mostly debt sales which are funding the salaries and perqs of government employees. This leaves our currency vulnerable and gives more power to large debt holders such as China and OPEC states than is prudent. It also puts our credit rating at risk and leaves open the possibility of debt default in the future if the foreign appetite for sovereign debt were to ever dry up. Such a scenario would have been unthinkable in the past; however with calls for global currency, possible Chinese de-pegging from the dollar and foreign states' asset diversication away from dollar-denominated assets, it no longer is.

Second, and more alarming, are the longer-term implications of such a situation. Government workers mean government pensions. And with workers entitled to retire at the ripe old age of 55, leaving many of them 25 to 30 years from death as of their last day on the job, the burden on future generations could be back breaking. Think of medicare, social security, and the pension schemes at the large autos; these are all examples of the generational problem we are facing as a nation where a boomer population will be seeking entitlements that a shrinking number of workers will be responsible for. In the investment world, pyramid schemes are prosecuted. In entitlement terms, they are the norm. This isn't always bad; indeed even the biggest opponents of social plans concede that they provide benefits for society. However, it is unfortunately the case that with population issues they look, at current trajectories, to be unsustainable.

Op-ed: Protect the Pirates; the Pitfalls of Protection in the Fashion Industry

Today, I have the pleasure of introducing the latest contribution from friend of the site Pat Decourcy. Today, Pat tackles a potential law being written by Sen. Chuck Schumer (D, N.Y.) which would afford fashion designers the same types of protections for their designs as music artists and authors currently have for their works. Though such protections have existed in Europe for some time now, the legislature in the US has avoided the topic. As a result our judges, referring to the common law and in true law and economics fashion, have often found for the 'pirates' in such cases due to the loss of efficiencies that would occur if the plaintiff were to succeed. I get the sense Pat would prefer the current state of the law over the proposed changes. As always, comments and feedback are appreciated.

Though I feel that there is some need for limited copyright protection, the bottom line is that designers currently demand a huge premium for their clothing. Most outsource labor to 3rd world countries, and thus, are able to create massive profit margins, which I am all for. However, bootleggers offer consumers one source to drive the price of these luxury goods downward to a fairer equilibrium by eroding some of the overall demand.

I feel that for most consumers, cost outweighs quality, and that is the difference between name brand and bootlegged goods. The name brand item is usually higher quality, while the bootlegged product might not be as durable, or may not use the highest grade materials. As long as there is a “sunshine” policy on these details, i.e. the bootleg manufacturers do not make fraudulent claims that they actually ARE the same as the name brand, I don’t see a need for this sort of legislation. All it will do is limit the choices of consumers and help extinguish the innovation of low cost clothing lines which try and mimic more mainstream brands, while also creating a virtual oligarchy amongst the Calvin Klein’s and Giorgio Armani’s of the world, whose operations do not need further protection by the US government. A quick search of the price of Ed Hardy apparel yields prices of around $90 for a t-shirt -that’s not a misprint, A T-SHIRT FOR $90!

So why does anyone feel a need to help protect these designers? The answer lies in progressive/liberal ideals, which is why it is no surprise that the uber-arrogant Sen. Chuck Schumer and some elitist Harvard professor are pushing something like this. Progressives such as the aforementioned Schumer, do not like when the free market is allowed to correct supply and demand issues. They know that the inclusion of the bootleggers helps move the “invisible hand” to a lower price equilibrium and gives consumers more choices, and progressives don’t like that. When the free market is allowed to function without govt. interference or meddling, it will always erase the need for progressive policies. They always need to be seen as the heroes – saving us from some crisis through the drafting of complex legislation, which neither helps consumers or the economy.

Beside this copyright legislation for clothiers, another perfect case in point is the healthcare legislation being force fed to us in Congress. This won't help consumers or the economy and is completely unpopular with the American people, but progressives need to be seen as the “shining knights in armor” to save us from those evil insurance executives, so they push on with no regard for the costs or need for such sweeping controls on 1/6th of the US Economy. This is what is wrong with Washington; they haven’t learned that the old adage “If it ain’t broke, then don’t fix it” is sometimes the best legal policy.

The Hidden Reason for Avoiding NBA and NFL Labor Stoppages

I often find myself, usually over a beer or two, discussing with fellow Americans the reasons they believe soccer will never be big in the US. It is too slow; it lacks the physicality of American football; America already has its growth sport in NASCAR (we can leave the 'is driving a sport' debate for another day); between college and pro sports there is already enough on the collective sporting plate of the country; the list goes on and on.

The fact of the matter, however, is that it is a growing spectator sport here. Changing demographics, the continued growth of MLS, recent success by the US Men's National Team and better TV access to quality matches in Europe and around the world have all contributed to this. ESPN's growing coverage of the sport, from Saturday morning EPL matches to the MLS game of the week to a growing number of references on Top Plays to the constant hyping of a World Cup which is still three months away all attest to this as well. I recently noted that the US Mens Team's first game of the tournament, against England, will be presented by ABC. Apparently the network expects viewership to rival that of big time games in more mainstream sports.

Perhaps the biggest indication that 'the world's game' is gaining prevalence in the states, however, is its growing prominence as a business story. Though not always welcomed with open arms, US-based financiers have become increasingly enamored of not just the history, but tremendous earnings potential of English teams in particular. And with good reason, as European soccer clubs feature prominently on the annual Forbes list of the richest teams in sports.

So what's the point? Well, over the next few years, both the NBA and the NFL face major labor issues. Strikes and lockouts are not unfamiliar to fans of America's major sports. Some of the biggest, including the baseball labor stoppage in baseball in the 90's and the lost year in the NHL a few years back, arguably caused at least medium-term pain to the leagues. Baseball's labor stoppage hurt ticket sales for a few years until a certain steroid-fuelled home run craze brought casual fans back. Arguably, the NHL has yet to return to its peak pre-strike popularity, though the recent Olympics is sure to help. Despite inevitible rebounds, however, even short- to medium-term dents to profits and popularity would be damaging to the NFL and NBA.

Still waiting for the point? Well, no one could make a logical argument that soccer is anywhere close to supplanting basketball as a major sport in the US. Pro football is even stronger. However, soccer has a foot in the door, and it may only be a matter of time before it steps all the way in. The surest way for the major sports in the US to ensure that soccer is one day counted among their number is to engage in damaging labor stoppages. In addition to the obvious factors, this is another reason why ownership and players representatives should try their best to avoid stoppages while there is still time.

Iceland 'No' Vote May Fortunately be More Symbolic than Binding

Over the past few months Blawgconomics has on more than one occasion expressed its opinion on topics it has little to no first-hand experience with. The continuing financial troubles and yesterday's referendum in Iceland are no exception.

The Cliff Notes version of the story is that a bank in Iceland offered high interest rates on savings accounts to attract deposits from the Dutch and Britons. When the financial system in Iceland unfortunately collapsed, the government took over much of the industry and made deals with foreign governments to pay back certain obligations, almost serving as a deposit insurer. Though the scheme passed through the legislative branch, Iceland's populist president lead the charge to Iceland's first referendum vote in protest of the deal. The result of yesterday's vote was a resounding no to the repayment plans, as citizens expressed their discontent with paying for the sins of bankers.

Unfortunately, there are a few problems with this. First, Iceland is awaiting IMF loan payments that are a critical piece in the country's rebuilding puzzle. The IMF has put the payment schedule on hold until a deal is reached. Additionally, Iceland is hoping to become a member of the EU. Adding deal-breaking to a list of negatives which include a crumbling economy and a failed currency is not likely to endear the state to longer-standing members who are already reeling from the debt crisis in Greece among other issues. Finally, the affront to close trading partners England and The Netherlands as well as international obligations is just plain bad business. Despite all of this, it is understandable that the proud people of a very independent island nation are angry and have embraced this situation as an opportunity to express displeasure with the general state of things. Luckily, their no vote may be more bark than bite.

This is because the government has already been in negotiations for a new deal at more favorable terms. The other governments involved, particularly the British, appear keen to avoid the label of bullies. This has lead to hope that a new deal, and thus a resolution to the situation that is favorable to all parties involved, can be reached soon. Clearly the politicians involved are willing to make difficult decisions, and perhaps a new deal will bring a majority of citizens on board. Nonetheless, the situation is a powerful example of the influence citizens can have over government. Unfortunately it is also an example of when this influence can lead to damaging outcomes.

Larger Lessons Loom in Psychic Investment Manager Suit

Bernie Madoff he is not. Even if he never reaches the same level of infamy as his colleague in crime, however, Sean David Morton does have the benefit of a more amusing story, at least for those not tangled in his web of deceit.  As The New York Times reports, Morton has found himself in an unenviable position, facing a lawsuit as a result of shady investment propositions and tactics. One might wonder what could be so amusing about a scheme that was always guaranteed to lose innocent people money. The answer becomes apparent almost immediately upon reading the Times piece. You see, Morton, or 'America's Prophet,' based his investment strategies on his abilities to time travel and foretell the future.

Sadly, the story also provides uncomfortable insights into the sophistication, or perhaps more appropriately lack thereof, of the American investor. Despite claims of links to the Dalai Lama and investing Nepalese monks, time travel and aliens as well as a company named Magic Eight Ball, Morton managed to accumulate around $4 million in investor contributions, and published a newsletter with a subscribership of over 20,000. Stories like this make one wonder, especially in an investing and consuming environment such as the current, whether people will ever truly be able to learn from mistakes and avoid situations that are destined to end in ruin.

Pondering the answer to this question, situations such as the housing crisis come to mind. Another would be credit card repayment terms. Though less voodoo and more numerical in nature, consumers' general lack of understanding when it comes to the workings of the financial world is troublesome at best, and disastrous at worst. Current times are emblematic of the latter scenario. Sadly, from snake-oil to get rich quick schemes people have always been succeptible to outrageous claims of easy fixes. More sadly, it doesn't seem that the future is any brighter. Though there are lessons buried in stories such as Morton's, if the past serves as precedent, they will most likely go unlearned.

Obama Pushes for Congressional Adoption of the 'Volcker Rule'

The Obama administration is reportedly making a new push to get congressional leaders to adopt a set of banking reform measures which have come to collectively be known as the 'Volcker Rule.' The reforms, named after former Fed Chair and current Council of Economic Advisors Chair Paul Volcker, were first floated by the Obama administration in January to the surprise of markets. They are aimed at reducing the ability of banks to engage in particularly risky strategies in an attempt to reduce the risk of the overall financial system. The rules, which also limit the market share of financial institutions, will feel familiar to financial history buffs with an understanding of the goals of Glass-Steagall in the early '30s. This is because the new proposals have a similar goal of forcing banks to keep to core banking activities. In the modern context, this means that banks would need to leave the riskier (and often lucrative) trading activities they now participate in to traders and hedge funds. 

How one feels about the rules will be almost perfectly correlated to what one feels the role of banks should be. On the one hand, the banking industry is of the mind that it should be given carte blanche to engage in profit-making activities, which now include proprietary trading and hedging. Though many banks, in particular Goldman Sachs, made incredible profits engaging in these activities in the past, it should have been clear to all involved that changes would be imminent as soon as banks went to the government for assistance during the financial crisis. This will be good news to those in government, and a large portion of the public, who feel that banks need to be reigned in. However, the banking lobby is strong, and Democrats, who provide much of the support for reform, may not be keen to further provoke some of their largest contributors in a year when many are already facing tough fights in their home constituencies. In the end, it is likely that some of the freedoms banks have enjoyed since Glass-Steagall was repealed in 1999 will be curtailed, but it is difficult to believe that all of the current proposals will escape the chopping block in committee negotiations. Therefore, the likely result will be something short of the complete overhaul being advocated by the administration with enough changes to appease the angry masses.

The Body of a Porsche with the Heart of a Prius

At the 2010 Geneva Motor Show, Porsche unleashed its contribution to green development. The 918 Spyder compares favorably with such cars as the Toyota Prius on emissions numbers, hitting 78 miles per gallon in tests on its parallel hybrid platform. However, even more important to its long-term success, it competes with other supercars on power and speed numbers, hitting 60 mph in less than 3.3 seconds. Additionally, compared to some of the other electric and hybrid offerings in Geneva this week, it not only looks like a car, but it looks spectacular.

As of right now, the model is merely a concept, so those who want a true sportscar while getting on board with green technology will have to continue looking in Tesla's direction. However, and particularly with the company showing a willingness to broaden ideas of what a Porsche can be, it would not be surprising to see the 918 hit showroom floors soon.

Warren Buffet's Annual Message

Those who don't have CNBC on in the background 24 hours a day or read The Wall St. Journal religiously might have missed one of the biggest events in the investment calendar; Warren Buffet's annual letter to shareholders of Berkshire Hathaway. As always, the 2009 edition is full of wit and wisdom. I found the following particularly full of both:

Long ago, Charlie laid out his strongest ambition: “All I want to know is where I’m going to die, so I’ll never go there.” That bit of wisdom was inspired by Jacobi, the great Prussian mathematician, who counseled “Invert, always invert” as an aid to solving difficult problems. (I can report as well that this inversion approach works on a less lofty level: Sing a country song in reverse, and you will quickly recover your car, house and wife.)