Posts for category ‘Economic Thought’

Buffet said for many times, does a business if you see the business is profitable. I remembered the journey of Bill Gates. Bill and Allen decided to entered Computer Hardware and Software business, Buffet created new system on Wall-Mart. I also salute to all people entire the world in the past and present who have the ability to see profitable business and run the business and get success.

My uncle said, every week they get meeting with boss and the boss always said to them, for example, if I give you $100 million, how much profit that you can give me? Or how long I wait for break event point and I start to get profit?

My professor in university teaches us about business evaluation management, breakeven point and calculates ROI, Return of Investment and how long you wait to continue or to exit the business based on the Fix Cost and Variable Cost. Businessmen should know about it. No one will success if they have no knowledge and understanding about ROI, Return of Investment!

I have discussed with friends about ROI, especially how to get ROI in soon, fight with time, to get back ROI in fast (optimum condition). Any businesses must do ROI analysis with main point is how to operation the tools to get ROI in shorter then prediction. One of the excellent phrases is Drive ROI, Know your customers! Basic knowledge for business owner before gets started. There are some tools to improve your ROI in fast and one of them is Targeting your customers! It is stupid to sell expensive jewelry if your jewelry store is located in medium income level citizens or you promote your jewelry in wrong potential customer target. Another principle is Differential products! Most of cellular industries entered to differential products (product with vary in price and specification) to target all customers. Department and Division plays important role to increase sales and to distribute product to costumers. My first writing on internet was titled Marketing Basic, How to stop your consumers in your products.
Today, we are walking in downturn economic. Most worldwide industries said on their quarter report about declining on sales, declining on their net profit even run in big net loss. One of the big reasons is low of customer demand on their products. Not only they, our business, small business, home business and any informal businesses have too many suffers as the economic downturn. Stay on your loyal customers and don’t make them leave you. If you are services companies, know your customers, what they want is very hard because services means satisfaction and it is abstract. Abstract comes from heart. Associate with your customers, discuss and ask them about their desire to let you know what they want.

At the end, I have to say, Mr. Crab in Bikini Bottom Cartoon always see dollar in everyone and he always says, customer is the king and please serve them. Drive ROI, Know your customers! positive result to increase your sales, company and products brand and finally will impact on ROI targeting you decided.

Bill Gatet rank as richest men in the world went down as global crisis; Lehman and WaMu were collapsed, Major Wordwide Industries housed their employers, cut their production and went to debt problems. Central Banks tried to help with lowering interest rate to recover the crisis and to refresh market. FED were third time to cut their interest rate, but so far so good. Government tried to recover with debt help, injection fund, restructurization and to buy back any bankrupts and bad financial reported.

Both Governments and Central Banks fight force to recover the crisis before too late or getting worst with their stimulations. Like a doctor and patient. If patient didn’t check their health, there was no cancer but once doctor analyzed the patient, the cancer will be worst. The same case happened on Economic. Time lag took long period with crucial problems on companies. Lower demand forced companies to reduce their production as over stocks. this crisis took very long time lag to recover. Estimated more than million people were housed and the number will increase in near if fundamental economic doesn’t resolve, To increase Purchasing Power Parity.

There is one tool we dont hear so far. Economists believe that Invisible Hand will born to solve this situation. Does the battle of Israel and Hamas play the insivible hand? or the lowering oil price is invisible hand? or both of them?

Keynes, the Invisible Hand Hater believed Government and Central Bank are two main points of the solution. Keynes also put investors as the third to make one economic goes bad or good. As the example, the battle of Hamas and Israel has been increase the gold price in stock market. Many companies stocks were depreciated and appreciated by their financial reports in crisis. Investors make it worst in crisis.

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After running high, Oil crude price now is lower than $80 per barrel. Amazing right! Why Oil crude price decline very significantly? Why? Congress had question to American Giant Oil Company about how much the real price for oil crude price, How much US to produce 1 barrel? And the answer was very surprising, lower than $50 required for one 1 barrel. So why the price is too high (upper $100 per barrel)? The answer is very simple, Broker, Investor and speculator make it. They have power to increase or decrease oil crude price based on economic indicator. (Middle East Politic Situation, America Financial Condition, Others Legal data from Biggest Countries-rich countries).

Americans are still down with their biggest problem; Credit Crunch-Mortgage Crisis and now after the very long time lag, they enjoy the bad impact. Many employers are fired, Lower Demand on Import, Credit Crisis, Many Home owners have lost and more.
Is this case has positive correlation with decrease on Oil Price? Yup! For every economic situation has impact to global economic. When Americans down with their crisis, Our Local TV said, Which countries then buy Chinese Product and which countries will buy our products (Indonesian Product)??
Crisis in America has multidimensional effect. European, Japanese, Chinese and development countries also get the impact, the big impact. Many Central Bank fight force to cut their interest rate to avoid the worst. Russian and Indonesia suspended their stock market to avoid naughty investor and broker to do illegal transaction or to make it worst.

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Last two week, when closing weekend, Rupiah was around Rp.9250 per USD. But last weekend closing time, Rupiah had fallen into Rp.9600 per USD. And now Rupiah is 9450 per USD (taken from KlikBca.com).

Not only Rupiah declined significantly against USD, major currencies EURO, POUND, YEN Japan and Swiss Franc also declined against USD. Let us see the fact. Why USD flies the flag. What’s going on with USD?

We look the past, 4 months before when Credit Crunch attacked American Financial Market and Hot Money from Japan attacked Indonesia and Pound, and USD had fallen to the worst and makes its new record low against EURO and Pound.

Economic Theory can explain this situation. Trade-off between two countries to make economic theory goes well. If Japan YEN won against Dollar, it means Japanese spend less YEN to get $1. In International trade (between Japan and America), Japanese prefer American Product because of cheaper, so Japanese will consume (import) American products.

In other hand, declined on YEN makes American gets more YEN for Trade. American gets surplus (because Japanese products is expensive) and Japanese gets deficit. If the condition goes in long term, Americans will hold Many YEN and Japanese has loss their YEN.

Inside America, Americans have more money and as result Inflation raises there. Inflation rises because of Higher of money supply. To avoid it problems, construction money supply from FED is taken, Producer cut their Product and Surplus (Over supply) must be used to buy foreign products, so Americans start to buy Japanese product to put the inflation down.

In my opinion, the theory works well so far if there are no external error destroys the theory. Economic theory comes from assumption so people (even the economists) believe that Economic theory is very restrict and far from realize. But generally we will get some information from the theory that Declined USD in the past and the rise USD in present tries to inform us that Appreciation or Depreciation, Inflation or Deflation, Recession or Growth is a cycle of life. Sometimes you are down and sometimes you are the top.

The economic theory is disturbed by external error, let us say them Broker or Investor in Stock and Money Market. They are destroyer. Declined on USD in generally is a process, but Brokers making it run faster and the panic is spread to all sectors.

Indonesian Reserve Bank (Bank Indonesia) had taken some necessary actions to keep the Rupiah around upper than Rp.9500 per USD. But Bank Indonesia couldn’t win against the panic cause by Brokers. When Rupiah declined on USD, who (which) people gain the benefits? Declined on Foreign Currencies makes Exporters gain more Rupiahs, especially Oil and Gas, Local product (higher than 75 percent importer material) such as faming, wood, handicraft and more. But in modern world, Many people are depended on importation products so when Rupiah declines on USD, Cities people go to crazy. Real money also decline.

 To Be Continued……………..

Economists know Adam Smith as Economic Father, Father of Trade and Father of Specialization.

He had popular slogan, if you want to be rich, Trade now! Smith believes that through Trading, a nation can be rich. His phenomenal book, The Wealth of Nation gives us rich information, information about how a nation can be reach. Adam Smith is also called as Father of Colonialism, because though his idea, the wealth of nations, WEST turn to war, conqueror nation with high resources. Smith is sounder of Mercantile Thought, Gold as Wealth and Rich Symbol. Gold in Africa had been extinct, Yellow Sandalwood too in my island Flores and many place with High recourses will charmed WEST.

Smith thought covered to Specialization. He said, we can win (surplus) with other nation if our Cost is lowest. The battle is how much cost (money) you spent to produce INPUT to OUTPUT.

The implementation of his thought is Absolute Advantages. Absolute advantages could be read as Lower Cost to produce. If you have much wool than your neighbor, please sell the wool or you can produce any good that came from the INPUT WOOL. I think that is an Adam Smith Implementation. Read more »