Here’s something interesting…Wal-Mart (NYSE:WMT) says it has crossed the ‘digital divide’ by offering a computer for less than US$200. Yes, dear reader, this is a big day for us here at The Daily Reckoning. Now every yahoo with US$200 in his jeans can read what we write. This is a big step forward for society, too, say the commentators, because now we will have ‘digital equity’ meaning everyone can have access to all the digital information, news and opinions they want.
Of all the crackpot notions to come along in recent years, the idea of the ‘digital divide’ was among the looniest. If you didn’t have access to the Internet, they said, you would be left behind…doomed to live in poverty and obscurity all your life.
But what do people actually do when they get a computer? Do they go onto chat lines to exchange interpretations of Kant’s “Critique of Pure Reason”? Do they begin to read Posidonius’s account of the battle of Pydna…or search for solutions to Poincare’s last theorem? No, they play poker…watch stupid videos…or visit porno sites. In other words, digits don’t actually improve people; they just make it possible for them to indulge more abundantly in whatever shiftless pursuit they take up.
The list of famous and successful people who never even laid eyes on a computer is as long as the Encyclopedia Britannica. And even today, many of the smartest and most successful people in the world view them as time-wasting distractions.
But we are beginning to rant, aren’t we? Let’s return to the subject – what was the subject, anyway?
Oh yes…price inflation and the perfidy of digits. Well…what do you think the folks at the Department of Commerce make of Wal-Mart’s US$199 computer?
We don’t know either…but we can take a guess.
Years ago, the digit persuaders who torture numbers for the government decided that they should make adjustments for quality enhancements. The theory of it was simple enough: if the price of a thing stays the same, but the thing itself is more valuable…it is if it had gone down in price. So, cometh the computer and prices collapsed. People still spent as much as before, but each year the computers became more powerful. Each year, computer consumers got more for their money…so, in theory, the cost of living was going down (even though, in reality, it was going up).
And now, here’s a computer whose price really is lower. At US$199 – here’s a number that doesn’t even have to be hammered down. Happy days! With quality enhancements, this computer – according to the Commerce Department – probably costs less than nothing! When they’re finished with it, it will probably enter the inflation calculation as a free computer with a year’s supply of gasoline as a bonus.
Want to get a good return on your money? Iceland just raised its short-term central bank rate to 13.75%. Inflation in Iceland is expected to be only 4.1% this year…giving you a net yield of more than 9%.
But wait, what’s this? An economist at one of Iceland’s leading banks says he thinks the Icelandic currency – the kroner – will fall by “almost 14%” next year. Well, easy come…easy go.
“I’m thinking about buying a house in America,” said a Frenchman at a dinner party last night. “Prices are so low. This looks like it could be a good opportunity. You probably won’t believe this, but you go into almost any real estate office in Paris and you’ll find houses listed for sale in Florida. And it’s amazing what you can get for your money…a place on the water, with a swimming pool…in the Tampa area. It’s listed for just US$300,000. We couldn’t get anything similar in France for that kind of money.
“One thing that is most astonishing to us in Europe is that Americans don’t really have much money. They earn a lot…or they have earned a lot…but they just don’t have much to show for it. I know people in California who earn very high salaries. Here in Europe, even with our high prices, you would live very well if you earned that kind of money. But they have children in private school…they pay a fortune for health insurance…and they have these gigantic mortgages. After they’ve paid those expenses, they just don’t have much left.”
The Daily Reckoning Australia