The Economics of the Pencil. Why Government cannot fix the Economy

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Observerofu's picture
Joined: 07/14/2010

Ever wonder why Government just seems to always make the wrong moves when it comes to the economy?

I believe the reason why is that they have no clue of how the economy really works. Let me explain it this way.

Let’s look at the lowly pencil. We have used this little writing instrument since, well, forever. Now how does this little $0.10 item affect the economy?

First let’s look at the basic components of the pencil. The Eraser being on top, I will start there.

The Eraser is made of rubber generally from Brazil processed and then shipped via Container ships to the USA. Private Companies in the USA purchase the product and use the product to make the cylindrical eraser we all know. Now for a moment think about just how many people are involved in just the purchasing, shipping, unpacking, processing and then installation of the product known as an eraser.

Literally thousands of people owe their job to this simple product and that is just one item on the lowly pencil. Millions of dollars flowing throughout the World economy all for an eraser.

Next is the metal sleeve that holds the eraser on the wood itself. The metal has to be mined, smelted, processed and again shipped to the buyers. Each little sleeve is stamped, punctured and curved all requiring machines made and maintained by workers. The little sleeve is another cog in the economic machine again Millions perhaps billions over time are made and spent again adding to the pool of the economy.

The wood of the pencil, the paint on the wood on the pencil, the stamping on the wood on the pencil, the paint in the stamping on the wood of the pencil. All individually play their own parts in the economy. Then comes the Graphite itself. Another piece of the puzzle that is the economy.

All told the lowly pencil is responsible for thousands of jobs and billions of dollars to the economy.

Now let’s say the Government decides Graphite is too dangerous for Children. So in their infinite wisdom they regulate out of business the pencil companies. They rationalize that the loss of jobs will be small because only 500 employees actually make pencils here in the USA. The Government also decides to create “Green Pencils” and create an industry which immediately moves to China.

So the Employers, employees, uniform suppliers, vending machine suppliers the local businesses, energy suppliers, product suppliers, miners, machinist, shippers and producers all suffer which causes a ripple in the economy. Each individual macro economy affects the next micro economy which affects the next and so on and so on.

We see this example played out in Winchester Virginia. General Electric GE Lighting is closing their doors this month. This is the last incandescent light bulb factory in America. When President Bush signed into law a ban on the Incandescent bulb and President Obama strengthened that law an 2009 it guaranteed that America’s economic engine would sustain a hit.

Government does not create jobs but they can destroy them. We have lost another industry for no gain. The CFL bulbs that we will now be forced to buy are made in China not the USA. So we see the Law of unintended Consequences once again. Government interference and regulations not only lost jobs but shifted our wealth overseas.

CFL’s are dangerous. They contain high levels of Mercury a very toxic metal, known to create birth defects and death. These CFL’s will also create another issue as home owners start throwing these bulbs into the trash. The Mercury will end up in the landfills where it can enter the environment via groundwater transmission.

Government creates problems and solves few. Once “WE” the American People decide “WE” have had enough of the Governments interference maybe “WE” can fix the problem of Government. We understand the Economics of a Pencil. Government MUST get out of our way and let us the American People do what we do best.

Make Pencils.

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