Rolling US Economy Into The Shitbin Thread

Yeah for him.

he just told me to DVR this whole week of his show because it will all become clear by the time he's done. also included: how the world is being trained to hate america because of this.

yes, he may be right.

. also included: how the world is being trained to hate america because of Glenn Beck.

Fixed.

It is a SOP for media types to View With Alarm anything which does not Warm The Cockles of Their Hearts.

taibbi for commerce secretary
http://www.rollingstone.com/politics/news/17390/232611?RS_show_page=0
Nowhere else on the planet is it such a crime to be down on your luck, even if you were put there by some of the world's richest banks, which continue to rake in record profits purely because they got a big fat handout from the government. That's why one banker CEO after another keeps going on TV to explain that despite their own deceptive loans and fraudulent paperwork, the real problem is these deadbeat homeowners who won't pay their fucking bills. And that's why most people in this country are so ready to buy that explanation. Because in America, it's far more shameful to owe money than it is to steal it.

excellent read, thanks for the link

this quote seems crazy to me, and not at all consistent with my impression of the current state of the economy

The ranks of the poor may be swelling and families forced out of their foreclosed homes may be enduring a nightmarish holiday season, but American companies have just experienced their most profitable quarter ever. As The Times reported this week, U.S. firms earned profits at an annual rate of $1.659 trillion in the third quarter — the highest total since the government began keeping track more than six decades ago.

i don't mean the widening rich/poor gap. i get that, but this seems to be part of a different trend. it's like the corporate sector is not just treading water, but booming?, and yet the economy is stagnant.

it's booming because of outsourcing and layoffs?

And the guarantee that they will never run out of credit thanks to our tax dollars!

Also most of these giant companies are international, so in a US recession/depression they don't have to worry because they can just make the majority of their profits from China and India.

makes me wonder if protectionism isn't at least a partial answer here, and what negative implications -- recalling of debt; internat'l tension; even war -- might be the consequence of a partial rollback of globalization.

and if not a partial rollback, then what?

the world eats itself in the pursuit of a fat bottom line

Companies are focused on improving productivity, and are in no hurry to rehire employees they've so recently had to lay off:

http://www.statesman.com/business/higher-productivity-feeds-profits-but-damps-demand-for-1076492.html

The economy has grown, at least in absolute terms, for over a year... It's the unemployment rate that's stagnant.

In this rare case, John McCain was sort of right: the fundamentals of our economy are strong. Assuming, of course, the fundamentals comprise the ability of money to generate more money, and corporations to profit, but do not address the inequitable distribution of wealth or general unfairness of the system as set up. I suppose the cold, hard truth - absolutist truth, if you will - of economics is that there is no moral component to capitalism, and that the good of the people come last as long as the principals (and principle) are flourishing. If anything, short of riots and whatnot, the growing poverty class is proving almost irrelevant to the political and economic discussion. Which, of course, only stresses the importance of a federal safety net for those millions getting squeezed out of the American success story. Depressing.

lots of people buying generic disposabilities = strong market

In this rare case, John McCain was sort of right: the fundamentals of our economy are strong.

is this true? i mean, it seems to me the big problem is that the vast middle of the economy -- the manufacturing jobs of the real boom years -- has eroded, while at the same time, american workers' expectations about their income has risen substantially. so if that's the case (and i'm happy to be disabused of the notion if i'm mistaken), then how exactly are the fundamentals of the economy strong? in some ways, i believe it, but then i get these depressing crises of confidence about it.

What do rising workers' income expectations have to do with whether there is a crisis?

makes it harder to adjust to new economic realities.

Because you're more disappointed? boo hoo..

because you're less willing to accept a lower-paying job, to compete with overseas workers.

Josh in Chicago, that's a pretty awesome post.

Can we at least have the military-industrial class outsource these wars? No doubt they can keep that system going, with its US budget-draining $$$, and not have the poor of America fighting for them. They can probably even make a much higher profit if they start hiring soldiers at the lowest bidder.

it'll be the Roman Empire all over again

http://www.newyorker.com/reporting/2010/11/29/101129fa_fact_cassidy?currentPage=all

great article that confirms what I've always suspected

I mean, not like "wall street provides no real value to anyone except itself" is a radical or innovative view to take

but still

American companies have just experienced their most profitable quarter ever
American companies have just experienced their most profitable quarter ever
American companies have just experienced their most profitable quarter ever
American companies have just experienced their most profitable quarter ever
American companies have just experienced their most profitable quarter ever
American companies have just experienced their most profitable quarter ever
American companies have just experienced their most profitable quarter ever
American companies have just experienced their most profitable quarter ever
American companies have just experienced their most profitable quarter ever

yeah. here's an article attempting to explain the big disconnect:

U.S. firms slashed 8.5 million jobs during the last recession; millions of these workers remain unemployed. However, corporate profits are soaring to pre-crisis levels. This is because American businesses are able to increase profits by rising productivity, increasing exports, cutting costs, and in some cases raising prices. Productivity simply means extracting more or the same amount of work using fewer workers. Globally, U.S. companies are leaders in productivity due to the corporate culture prevalent in the U.S. and the fierce competition in many industries. Hence, in the current situation, they are wringing out more profits with fewer workers.

This concept was illustrated in a recent Bloomberg article:

__________________________________

Campbell (CPB), the world’s largest soup maker, DuPont Co. (DD), the third-biggest U.S. chemical maker, and United Parcel Service Inc. (UPS), the world’s largest package-delivery business, are asking workers to help save cash by working smarter with existing technology. A potential cost: Efficiency gains reduce the chances recession-casualty jobs will come back.

“When the productivity growth comes, then watch out because that is when companies start not needing so much labor,” Edmund Phelps, a Columbia University economist and Nobel laureate, said in an interview.

Some 142 non-financial companies in the S&P 500 had improvements in operating margins of three percentage points or more from the final three months of 2007, when the previous expansion peaked, compared with the most recent quarter, according to data compiled by Bloomberg as of yesterday.

so again, what's the answer: limited protectionism; incentivizing u.s. businesses to create and maintain jobs domestically; something else? it surely can't be -- as tom friedman says, once again, in this morning's nyt editorial -- that we must begin "out-educating" our global competitors. i mean, of course that's true, but what he's talking about sounds suspiciously like the notions that i heard when globalization began accelerating, e.g., we'll push all the lower-paying jobs onto other nations, and we'll move vast swaths of our workforce higher on the economic totem-pole. that always seemed to me to be a fantasy.

i've asked this here before, i think. my thoughts would be (a) research, (b) technology, and (c) green industries. as to (b), the idea would be to capitalize on the fact that much technological innovation takes place here, and use that as a springboard for bringing tech production back here (this idea was outlined by the former CFO of a major tech company in a trade-industry journal a few months ago). as to (c), i actually think this could be somewhat of a radical notion. since i was a child, i'd always seen environmentalism and economic prosperity at odds with each other. but if this could be flipped -- if political concerns (over oil and nat'l security) and environmental concerns (over, say, greenhouse emissions) really motivated widespread change -- then, instead of being at odds, enviornmentalism could be an engine for economic growth.

anyway, thoughts. really i'm just grouping for answers. maybe there are none, and the ugly central premise of matt taibbi's griftopia is right (we're sliding into third-world status; elites from both parties know it and know it can't be reversed; and the elites only goal now is to preoccupy us with fake political battles while they vaccum up all the remaining cash).

It's a fantasy not least because if you've ever tried educating our workforce...

but Daniel: I'm not sure what "sliding into third-world status" is supposed to mean. Lots more poverty than we presently have? The broad sharing of economic prosperity that lasted from the 1940s to Reagan's presidency rested on a social contract, that shared prosperity is a good thing, that we don't have anymore. Making the case that shared prosperity is a good thing is something I'd like to see America's leadership do, but I'm not sure on what grounds it can be done: our crumbling religious heritage can't do any heavy lifting, and we're all bowling alone. And furthermore this is what broad swathes of Americans want. From what I can see, we are getting the country we, as a nation, want.

taibbi isn't so specific.

btw, maybe there's room for optimism on the employment front?

Lavorgna believes companies are at an inflection point when it comes to hiring. With strong profit margins, and a record amount of cash, and continued economic growth, he sees private employers hiring up to 200-thousand jobs a month in the coming year.

"Productivity growth is starting to slow," he argued. "If there's any incremental demand, that will have to be met through hiring."

Aladdin Capital Chief Economist Constance Hunter agrees job growth could be stronger than many expect, after the upward revision to third quarter GDP growth.

"We expect jobs growth to pick up steam in the first half of 2011 with monthly payroll gains of 165K to 230K," Hunter wrote in a note to clients. "This should push the unemployment rate below 9 percent in the second half of 2011."

Unfortunately, short of a tax hit on the rich (that will never happen), this slide seems pretty permanent and, I suppose, logical. If more and more money gets consolidated among fewer and fewer people, as goes the current distribution of wealth, then the relative prosperity of that small percentage is technically, I imagine, enough to "drive" the economy. That is, as long as that top 1% or whatever with a disproportionate amount of money does OK, then the economy will continue to "grow" (unemployment and other indicators be damned). And then those that oppose any sort of equitable solution to the economic divide can increasingly claim (accurately, if unfairly) that we can't take money from the rich, because the rich are truly the ones driving the economy. I don't know how we got to this point, honestly - maybe the tech/housing boom finally bumped enough people up from the middle class and the tech/housing bust bumped enough people down to poverty (or something practically/precariously close enough to poverty) that the middle class itself has been considerably shrunk?

Regardless, I'm not sure third world status is in America's future, but I have a feeling the status quo will only grow more permanent and extreme, at least until opposition gets less timid/more effective. But again, barring a true voter's revolt (which seems unlikely in a country that can barely muster satisfactory participation at the polls) I think even that opposition has to come from within the wealthy class, because the middle class and below has been shut out almost entirely. In theory, something like the Tea Party response seems like the right step, at least in theory, but that movement is too inchoate and mired in old school culture politics to work as an effective counter, esp. since so many of those Tea Party folks are well-off and educated. If anything, they serve as a pre-emptive reactionary counter-counter-balance to a counter-balance that hasn't yet manifested itself.

Thinking out loud as someone with no economic schooling, of course.

So what is happening to all this money if it's not going to new employees, dividends, etc? Are paying tithes at the altar of Citizens United?

hoarding it, i suppose. maybe investing it in efforts to drive up demand among those who can afford the products. donating it to political causes in the wake of the new supreme court ruling on such contributions.

At a thrift store the other day I picked up a book, "The Making of a Counter Culture", by Theodore Roszak from 1969. This passage struck me as pretty relevant:

From the standpoint of the traditional left, the vices of contemporary America we mention here are easily explained - and indeed too easily. The evils stem simply from the unrestricted pursuit of profit. Behind the manipulative deceptions there are capitalist desperados holding up the society for all the loot they can lay hands on.

To be sure, the desperados are there, and they are a plague of the society. For a capitalist technocracy, profiteering will always be a central incentive and major corrupting influence. Yet even in our society, profit taking no longer holds its primacy as an evidence of organizational success, as one might suspect if for no other reason than that our largest industrial enterprises can now safely count on an uninterrupted stream of comfortably high earnings. At this point, consideration of an entirely different order come into play among the managers, as Seymour Melman remind us when he observes:

The "fixed" nature of industrial investment represented by machinery and structures means that large parts of the costs of any accounting period must be assigned in an arbitrary way. Hence, the magnitude of profits shown in any accounting period varies entirely according to the regulation made by the management itself for assigning its "fixed" charges. Hence, profit has ceased to be the economists' independent measure of success or failure of the enterprise. We can definite the systematic quality in the behavior and management of large industrial enterprises not in terms of profits, but in terms of their acting to maintain or to extend the production decision power they wield.Production decision power can be gauged by the number of people employed, or whose work is directed, by the proportion of given markets that a management dominates, by the size of the capital investment that is controlled, by the number of other managements whose decisions are controlled. Toward these ends profits are an instrumental device-subordinated in given accounting periods to the extension of decision power.

re what's going to happen to those juicy profits: i suspect some of it may end up getting paid out as bonuses (to the top dogs, of course).

"The "fixed" nature of industrial investment represented by machinery and structures means that large parts of the costs of any accounting period must be assigned in an arbitrary way. Hence, the magnitude of profits shown in any accounting period varies entirely according to the regulation made by the management itself for assigning its "fixed" charges."

Um, wouldn't this typically be handled via debt service? I don't think corporations typically plunk down all the cash for new plants or large new equipment expenditures at once. Not to say that there aren't other ways a quarterly or annual profit can be 'distorted' by one-time events, including deliberately manufactured ones.

in context, this is heartbreaking.

I hate to take away from the moment, but I've seen basically the same photo essay in like 10 different publications in the last two years.

"There's a million and a half engineers graduated in China every year. There's still more sports therapists graduated in the US than electrical engineers. So that's a losing equation. We're going to have to switch this. I mean, a good massage is still good, but it shouldn't stay that way."

http://www.theregister.co.uk/2011/01/11/ces_ceo_confab/

most of those chinese engineers are crap though

yeah there's def a huge element of degree inflation going on

I read about that CES panel yesterday and thought "wow, three fucking dinosaurs telling a room full of people that it's everybody else's fault" I especially liked the part where they said America's tax structure is bad for their business, but even if it was, all the engineers are in Asia, so they still wouldn't see any point to employ Americans except as a salesmen. I am always struck by the total weirdos who ascend to CEO jobs for blue chip tech companies btw. You think career bureaucrats are bad and then you read transcripts of people like Ursula Burns. WHAT ARE THEY TALKING ABOUT

Back in 2006ish, I think, I was becoming concerned that USA was going to have our lunch eaten once our buying power dropped off and we were no longer the #1 consumer of everything on earth, because that would mean a lot less demand for our core competency as a workforce, namely selling shit to our fellow Americans, but now I think it was just easy to make that kind of mistake when we had just come off of the dot com bubble and were living through a really, really obvious mortgage bubble that nobody wanted to fess up to. Basically the last couple of years are the first since my graduation from high school that the primary engine of "growth" in our economy didn't consist of a fucked up con everybody was running on one another.

So I actually feel better than I ever have about our economy:

- Google, Intel, Apple, Microsoft, Nvidia, and even fucking Ford Motors continue to make loads of money pushing "innovative" this and that to the entire globe. Seriously, Xerox?

- The boomer era work model for engineering and science applications is obsolete and has been since whenever Fred Brooks published his first book. I don't need more coders and techies asking me "what should I do next?" all day and everywhere I go has the same kind of too-many-indians problem. (Maybe hire a promising sports therapist, put them in the analyst pool and send them to a technical/engineering management graduate program. You need more of those people but your problem is you keep directly hiring careerist MBAs instead, who, by the way, usually know absolutely nothing about the rest of the world outside of the collected works of the Gartner group.)
(And what a dumb fucking metric anyway, "# of engineers graduated." Wow. How about # of engineers gainfully employed doing what they were trained to do? Oh, that's hard.)

- Labor and tax structures overseas are never going to be more business-friendly than they are now. The populations in developed countries are only overpaid and overprivileged if you forget that most of the rest of the world hasn't discovered its middle class yet. The Chinese know what a shrink is now, and they would like to see one. imagine all the sports therapists they're going to need.

Note, the ice caps are still going to melt, the gulf stream is going to run backwards and we're all going to die of starvation or acute hypothermia, but economically, I feel reasonably good about the future.

terrific radio program about housing here -

http://marketplace.publicradio.org/display/web/2011/01/13/pm-lot-354-a-tale-of-americas-housing-meltdown/

The Chinese know what a shrink is now, and they would like to see one. imagine all the sports therapists they're going to need.

― El Tomboto, Tuesday, January 11, 2011 10:15 AM Bookmark

You read that New Yorker article too? I had almost the same thought on reading it.

There was an interesting Esquire article as well about the economic future of different countries. China won't always be on the top and Canada will do good in the long run. It's gotta be on the Esquire site right now.