Comments on: Russert Fails Basic Economics http://floppingaces.net/2006/05/03/russert-fails-basic-economics/?utm_source=rss&utm_medium=rss&utm_campaign=russert-fails-basic-economics Thu, 24 May 2012 12:07:41 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Rubin http://floppingaces.net/2006/05/03/russert-fails-basic-economics/comment-page-1/#comment-1154 Rubin Fri, 01 Dec 2006 21:22:08 +0000 http://www.floppingaces.net/2006/05/03/russert-fails-basic-economics/#comment-1154 Mr. Curt I think you're being a bit too harsh on MR. RUSSERT. It's his big bug-eyes that make his statments sound so dumbass and mindless.

Mr. Curt

I think you’re being a bit too harsh on MR. RUSSERT.

It’s his big bug-eyes that make his statments sound so dumbass and mindless.

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]]> By: crosspatch http://floppingaces.net/2006/05/03/russert-fails-basic-economics/comment-page-1/#comment-1155 crosspatch Fri, 01 Dec 2006 21:22:08 +0000 http://www.floppingaces.net/2006/05/03/russert-fails-basic-economics/#comment-1155 These days people only understand the eBay analogy. It goes like this: You have a well in your yard and a pump and you can get 10 barrels of oil a day out of it. It costs you 10 dollars to pump and deliver a barrel of oil. You put the oil on eBay to sell it. As people bid on the oil, the price goes up. People buy your oil for $15 dollars a barrel and you make $5 per transaction and life is good. Now some kids named China and India that have only been buying one or two barrels a day from you decide they need more. You are still only pumping 10 barrels a day. This means they must outbid other people for the oil. Now your oil auctions settle for $50 a barrel and you make $40 per transaction and life just got better. Now lets say I decide to make gasoline out of one of my barrels and sell that instead of selling crude. The people that don't know econimcs are going to say fine, it costs you $10 to pump the oil, you don't need to raise the price of gas. Back to eBay ... Lets say you can produce bolts of fabric for $10 and are selling them on eBay and they are bringing $20 so you make $10 each. Now lets say your fabric becomes very popular and it is now selling for $70. You have also been using one bolt a day to make socks. You were selling raw fabric for $20 and you were enough socks so you were getting $30 for the socks you could make out of that bolt of fabric. So after your wear and tear on equipment and your labor, you made what you thought was a fair profit. Now your fabric is bringing $70. Are you going to sell a bolt's worth of socks for $30? Are you going to spend all that labor and equipment cost to LOSE $40 a bolt compared to what you could just sell the crude for without refining it ... I mean fabric for without sewing it? No, of corse not. You are going to raise the price of your socks so that you make at least as much on the cloth from socks as you could selling the raw cloth ... so the price of gasoline ... I mean SOCKS goes up.

These days people only understand the eBay analogy. It goes like this:

You have a well in your yard and a pump and you can get 10 barrels of oil a day out of it. It costs you 10 dollars to pump and deliver a barrel of oil. You put the oil on eBay to sell it. As people bid on the oil, the price goes up. People buy your oil for $15 dollars a barrel and you make $5 per transaction and life is good. Now some kids named China and India that have only been buying one or two barrels a day from you decide they need more. You are still only pumping 10 barrels a day. This means they must outbid other people for the oil. Now your oil auctions settle for $50 a barrel and you make $40 per transaction and life just got better.

Now lets say I decide to make gasoline out of one of my barrels and sell that instead of selling crude. The people that don’t know econimcs are going to say fine, it costs you $10 to pump the oil, you don’t need to raise the price of gas. Back to eBay …

Lets say you can produce bolts of fabric for $10 and are selling them on eBay and they are bringing $20 so you make $10 each. Now lets say your fabric becomes very popular and it is now selling for $70. You have also been using one bolt a day to make socks. You were selling raw fabric for $20 and you were enough socks so you were getting $30 for the socks you could make out of that bolt of fabric. So after your wear and tear on equipment and your labor, you made what you thought was a fair profit.

Now your fabric is bringing $70. Are you going to sell a bolt’s worth of socks for $30? Are you going to spend all that labor and equipment cost to LOSE $40 a bolt compared to what you could just sell the crude for without refining it … I mean fabric for without sewing it?

No, of corse not. You are going to raise the price of your socks so that you make at least as much on the cloth from socks as you could selling the raw cloth … so the price of gasoline … I mean SOCKS goes up.

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