Have you followed the demise of Circuit City? The electronics superstore closed for reorganization, but it did not take long for the end to come. It's being liquidated now. There was a spot of bother here in Virginia this week, when the remaining executives decided to hand themselves bonuses as an incentive to stick around a few months to finish the cleanup. Not much money, just around 4 million, but it bothered me. They ran the company into the ground, then turned around and wanted extra money to clean up, while the underlings hit the street. Wouldn't you have enough class to stick around just to do the right thing?
Where does money come from? In a company, some of us seem to believe now that the workers are interchangeable cattle. Wealth comes from the top down, the geniuses in the corner offices coming up with moneymaking schemes that the cattle carry out. But at Best Buy, Circuit City's competitor, there was the Geek Squad- employees with actual expertise, able to tell you what you are buying and even maybe how to fix it. Which model worked? Surprise, the geniuses in the corner offices of Circuit City turned out to be not that bright. It did go bankrupt, bottom line.
Obama in his address to Congress compared short term thinking to long term thinking. Short term thinking gives you Circuit City, long term thnking gives you Best Buy. Short term thinking gets us where we are today in terms of the economy, long term thinking perhaps could get us back out. Short term, we have to spend money to rent the wrecker to drag the bus out of the ditch. Long term, we have to get the Bus to move under its own power.
Ultimately, those who squint at Obama and moan about socialism have one point. Their point is not that too much money is being spent right now. No, that notion is bogus, we are in an economic free fall, the ideal situation for deficit spending to be enacted by government, the spender of last resort. Their one valid point is of course that eventually that spending has to be reversed. We eventually will have to not only stop it with the deficit spending, we will actually have to pay off the 5 trillion of pre-2000 debt, the additional 5 trillion of Bush era debt, AND whatever debt Obama will rack up (from first impression, quite a bit). It's a massive burden, and he really has no choice but to add to it for a while.
I think the eventual result, ooh horrors, is that Americans may find that their standard of living may need to inch downwards a few notches. We may not be building 50,000 square foot homes in the foreseeable future, and a good thing because they are a bear to heat and cool. I return to the metaphor of the Circuit City Fat Cats begging for a few million to stick around and do their jobs, in defiance of the more traditional notion that the Captain is the last guy to leave the sinking ship. Here's the thing, it's not their money, it belongs to the creditors. Likewise, it's not our money, it belongs to China. Let's give it back to China as soon as we can, and hand over as little as possible of the money to a useless middle man.
And then, someday, somehow, we will have to develop an economy that is not about re-stacking and re-counting imaginary money, but rather an economy that is about something real. If you sell turnips, you are doing better than if you were running Enron. Enron was about imaginary products sold for imaginary money. Turnips are about real money, perhaps in tiny amounts, but so what? Turnips are not sexy, but if you get more for a turnip than you paid to grow it, great.
Conspicuous consumption? Well, I have never been about that. So it does not hurt me much that many other people will be joining me in my little boat.
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Comments: 12
It hits some people hard... those who lose their jobs or businesses. Others who keep their jobs and business see less sales/profit and less wages (or at a minimum, missed opportunity for wage growth and business growth).
Government deficit spending does nothing to contribute to those personal losses. The deficit spending only creates some jobs directly, while that and tax cuts, health care funding, and other transfers indirectly help the general business economy and thus profits and wages in comparison to an economy that see's no government spending.
The spending that directly creates jobs provides us with a growth of standard of living that doesn't come directly from personal purchases. Infrastructure improvement, EPA funding, additional cops on the streets, advancement in new energy, science and research, etc. all raise standards of living, although it's sometimes under most people's radar or taken for granted.
The transfers like tax cuts, health care, etc. are all more personal versions of the same standard of living increases.
But these are all REAL increases in output and standard of living. They are not substituting greater standard of living in the present in exchange for lower standard of living in the future. If we can move closer to full employment now, and have full employment in the future while paying off debt, the net result is greater than letting doing nothing and experiencing more pain now. Unemployment is a market inefficiency.
The matter of the debt to be paid off is just a matter of the interest, rather than the principle amount. To refuse to borrow on this occasion is like a business refusing to borrow to expand it's business and grow it's profits just because it would have to pay a comparatively small amount of interest (compared to the profits gained). It's like refusing to increase standards of living because the people who make the loan also benefit slightly.
As for jobs - my mom worked for Citi and was laid off in April. She'd worked there for 30 years so she got a nice severence and decided to take the summer off. She got a fantastic job in September but by the beginning of December, the company went poof. The small management consulting firm was funded and housed at Dreier LLP, a top Manahttan law firm. Well, Dreier himself was arrested on charges of impersonation, fraud and embezelment (he stole $400 million from client accounts). Unlike Bernie Madoff, Dreier was thrown in prison pending a hearing and was only recently released to house arrest. Like Bernie Madoff, he ruined thousands of peoples lives and he is now sitting in his posh upper east side duplex.
The problem is that people are so selfish, that they don't look at the consequences of thier actions. The executives at Circuit City probably have so much money already, why do they need more? Like you said, they need to do the right thing and finish what they started. Not enough people do the right thing anymore, and because of that, money simply disappears from our economy into personal accounts at offshore banks. I believe that the dishonesty and theivery is part of what caused this massive economic mess we are in now.
I believe in time, Obama WILL be able to get us out of this. But people need to be patient.
That this system is the same one that cannot run fixed budgets or even many of it's bureaucracies efficiently, is somehow better than the one that has given the majority of Americans a way of life better than than any in history. Right now, we have a minority of corporations in serious problems, I say again its the minority that make the news. Most companies have problems right now because of the ripple effect. Instead of those businesses collapsing some time ago, we have them dragging on because of the theory that they are too big to fail. Billions is being pumped into them and now the government that is saving them is basically running them. And its running them into the ground by dictating business decisions. Decisions being made for political reasons rather than economic ones. This is causing investors to hold their money in gold or I bonds, especially with Obama making confusing noises on whether certain financial sectors will be taken over with an attendant possibility of wiping out of stockholders. Even the Chinese/Russians are telling us we are going to far. Clinton is overseas begging the Chinese to buy our debt, a position that only months ago you claimed was totally evil.
At a time like this, pumping a trillion or more into the economy on various projects is having no effect but pumping up inflation. That is stealing more each month of people's savings/investments than all the bad CEOs on Wall Street.
However, there is a real loss of output (as in GDP). If you consider that we all get a share of the GDP pie, then the real concern here is that the pie is shrinking.
As to bailout being just "politics" rather than based on economics, I think you've obviously got that backwards. The bailouts are very unpopular politically, and it's the economic experts who are fighting in support of them. If a politician were just looking to play politics and choose the popular choices, going against the bailouts would be the easy answer.
And finally, I think it goes without saying that I disagree with your general characterizations on government and the economic and business situation.
I hope and pray that my friends find their open doors, and I hope they find the millions that those bums gave themselves
Harry Truman, from Missouri, was a different kind of President. He probably made as many important decisions regarding our nation's history as any of the other 42 Presidents. However, a measure of his greatness may rest on what he did after he left the White House.
Historians have written the only asset he had when he died was the house he lived in, which was in Independence Missouri. On top of that, his wife inherited the house from her Mother.
When he retired from office in 1952, his income was a U.S. Army pension reported to have been $13,507.72 a year. Congress, noting that he was paying for his stamps and personally licking them, granted him an 'allowance' and, later, a retroactive pension of $25,000 per year.
After President Eisenhower was inaugurated, Harry and Bess drove home to Missouri by themselves. There were no Secret Service following them.
When offered corporate positions at large salaries, he declined, stating, 'You don't want me. You want the office of the President, and that doesn't belong to me. It belongs to the American people and it's not for sale.'
Even later, on May 6, 1971, when Congress was preparing to award him the Medal of Honor on his 87th birthday, he refused to accept it, writing, 'I don't consider that I have done anything which should be the reason for any award, Congressional or otherwise.'
He never owned his own home and as president he paid for all of his own travel expenses and food.
Modern politicians have found a new level of success in cashing in on the Presidency, resulting in untold wealth. Today, many in Congress also have found a way to become quite wealthy while enjoying the fruits of their offices. Political offices are now for sale.
Good old Harry Truman was correct when he observed, 'My choices early in life were either to be a piano player in a whore house or a politician. And to tell the truth, there's hardly any difference.'
I think the eventual result, ooh horrors, is that Americans may find that their standard of living may need to inch downwards a few notches.
What is wrong with this picture and your future optimism?
Our Fed just announced the Prime Rate at 0-.025%. That is nothing short of FREE money.
There is a very real and definite push to displace the US Dollar as a world currency. See the past G8 summit where a German diplomat showed the new coins to be used.
George Soros just made several BILLION on the most base "insider trader" scheme ever perpetuated on the stock market that involved direct Government Intervention by Obama-ites. He had purchased stock in Petrobras Brazilean which recently announced a huge oil and gas discovery. Obama plans to transfer two billion dollars from the American treasury to help the project!!!
An inch or two? Try a utopia where all are 3rd-World countries and equal.