Stock markets doom !

[Mar]

Zack rules.

[rabbidrabbit]

I am glad to hear the opinions of real business owners and officers such as yourselfs. I know there has always been the employee/owner battle and I don't agree with unions either. I'm just looking for ways to create growth in America from the inside so that our stock market will be sustainable as the future generations move up. And I'll be honest, its not very encouraging for us right now.

So start up your own company and run it the way you want.

[Thruster]

"The world stock markets are nothing like they were 30 years ago."

Really? Google "Milken" or "Boesky". Not all that different. Actually pretty much unchanged. And that's in many respects the "problem".

[Brooke]

The markets for stocks, commodities, bonds, and precious metals are very different today than they were prior to 2008.

I agree with Rolex.

If you don't have a free market (that let's prices be determined by the market itself) and instead have a manipulated market (where prices are determined by the actions of a small committee of people in government), buyers and sellers must focus on what that committee does and is thinking instead of on intrinsic value.  That leads to malinvestment, misallocation of capital and labor, and an eventual disaster.

[SysError]

Syserror is a teamster?

Teamster?  LOL.  No.

I am no fan of the Teamsters.  I should say, however, that I have not looked at them since the DOJ lawsuit, so to be fair I should say I don’t know.

But in all honesty, there are very few US unions that I do like.  It is not because I am anti-union.  Far from it.  I think that unions improved the living conditions of their members, created a middle class and yes, often helped to improve US manufacturing.  If you plot the decline of union membership from its height (25% of workforce) until today you will see an eerie correlation with the decline of the middle class.

One of the unique problems that US unions face is the Taft–Hartley Act of 1947.  The law was meant to restrict labor and it did that and more.  It made it easy for national unions to exist as long as they, in effect, just agreed to be ineffective.  And national unions, while they could have chosen to counter key provisions of the Act, in the end just found it too easy to go along. (At least that is one version of the story).

One of the people who had a huge impact on Taft–Hartley was Sewell Avery, Chairman of Montgomery Ward.  Mr. Avery is what I would call a true right wing nut.  He hated FDR and worked to undermine him throughout WWII.  In fact, Mr. Avery refused to accept a voted in union and despite several legal procedures that went against him, he disrupted the flow of essential of supplies to the War effort.  After several warnings, FDR literally had to have the Army physically remove him from his office and had MW run by a trustee until after the war.

Avery regained control of MW after WWII at which point he proceeded to drive it into the ground.  For the next ~10 – 15 years, at every level and at every turn, Sears thrashed MW.   It wasn’t until Avery left that MW started a slow recovery process.  It never really did catch up to its once second rate competitor.

It is important to note that Avery, while an extreme case, was not alone in his distain of FDR or “his war”.  Most of the captains of industrial manufacturing only agreed to join the “Arsenal of Democracy” once they were guaranteed profits above their historical averages.  When questioned about these guaranteed Government backed profits, I think it was FDR’s Secretary of the Treasury who said something to the effect of: We live in a capitalist society and that is just how we do things.

Well I for one am glad that the job creators of their day discovered their sense of patriotism, (albeit through the detour of the profit margin), just in time to defeat the Axis powers.

BTW, and this is important.  Not all influential leaders acted in this way.  One notable exception was Alfred Loomis.  Loomis was a very successful Wall Street tycoon and a first class amateur scientist.  He hated FDR and the New Deal and was a very influential backer of efforts to challenge FDR and his programs at every turn.

When war broke out, however, not only did he put aside all of his political views, he signed up to help the War effort in extraordinary ways. 

Prior to the war Loomis was known as a bit of an eccentric millionaire.  He turned his home at Tuxedo Park NY into a scientific enclave.  Loomis brought many of the day’s top scientists to Tuxedo Park for short and extended conferences or for informal get-togethers.   He built a first class laboratory which was an immense draw to scientists who could not get access to the equipment that they needed in their own circles. 

With the entry of the US into WWII, Loomis made his laboratory and scientific equipment available to the War effort.

Not only did he serve as a senior administrator, but on a number of occasions when it became clear that a lab space or piece of equipment was immediately needed, or that a payroll had to be met, Loomis would take out his own check book and fund what was needed on the spot. Far too often government bureaucrats were often still trying to figure out how to frame the requisition when Loomis’ checks were clearing the banks.

Besides his ability to fund key projects, (for which he was usually, but not always, reimbursed by the Government), he understood the language or mentality of scientists, and as such he was able to help formulate reachable scientific goals and to build an organization that was focused towards those ends.  MIT would not have made the scientific advances in Radar technology that proved to be so critical in the Atlantic and elsewhere without Alfred Loomis.

Loomis also played a critical role in the success of the Manhattan project.

I do not think that it would be unreasonable to wonder on what different time line and on what different terms WWII would have come to an end without Alfred Loomis.


Wow – that was a bit of a drift!

Look, I am not a Teamster, and I don’t really know what to think of their current day structure.

If you are interested in a union story about a nurse union in the south west…..you should pick up:
http://www.amazon.com/Raising-Expectations-Hell-Fighting-Movement/dp/1781683158
Raising Expectations (and Raising Hell): My Decade Fighting for the Labor Movement

I really doubt that you will agree with much in it, however, I am sure that you will find it interesting.

I say this in part because I believe that anyone who still supports the Snyder is not going to be motivated by facts, but rather by fantasy.  Who says the front office is worthless?  I mean, it only took them how long to drop RGIII?

[SysError]

Nobody had any pact.

I knew that when I used the word “Pact” that I might perhaps draw some criticisms, but I quickly said to myself, don’t be prejudicial, assume some reasonable level of antecedent knowledge here, and I was also in a bit of a rush.

So you have presented an “I never heard about it so it must not be true” rebuttal.

OK, fair enough.

So let us just go straight to the pictures.





These two charts pretty much show the same thing.  Since the end of WWII until the ‘70s, wages more or less tracked with productivity increases.  You can argue that that was a coincidence or that it didn’t happen, or you can read up on the early history of the NLRB and what happened with Taft–Hartley Act of 1947.  I think James Gross is still considered the (or perhaps now just an “a”) authority in this area. 

Starting in the mid to late 1970s, when worker productivity increased their wages did not.

Let me anticipate some of the more common criticism of this sort of chart/analysis:

1.   This is some sort of a Krugman Illuminati Darth Vader mind trick.  http://krugman.blogs.nytimes.com/2013/12/06/what-i-said/?_r=0

2.   He is counting Y and Z when he should be comparing X to Z.  (It is an argument that is often made and these arguments are either inaccurate or irrelevant.  One reason that I put up two charts with slightly different measurements was to show that the trend is there with whatever reasonable factors you want to use).

3.   I don’t care; I’m just going to ignore this.  (I kid you not; I saw a twit on Bloomberg make this exact point.)

I am not sure what other challenges are out there, but until I am shown valid proof to the contrary, I am not inclined to change my position.

So your original point to which I responded to:

“However, reduction in price of goods as a result of productivity increase is a good thing for economies and for most of the people in those economies.  You end up with more goods for a given amount of labor and capital.”

I contend that is inaccurate.  If gains in productivity are not shared, which since the 1970s has increasingly been the case, outcomes are clearly not “… a good thing for economies and for most of the people in those economies.”

In fact, in your construction, the effects are usually extremely beneficial to the 1% and devastating towards working families.


“People working for their own benefit works fine -- on average, and over time -- if you have a free market and the rule of law.”

Really?

First I must say that your qualifier “…on average, and over time…”, reminds me of Keynes when it was put to him that in the long run everything works out fine and his famous retort that “In the long run we are all dead.”

But I suppose that your point is that people “…for their own benefit works fine… if you have a free market and the rule of law”.

OK, let us think about that.

Have you ever read say a Dickens novel?  Have you ever studied working conditions in late 18th to 19th century in industrial Manchester or Birmingham?  How about stories of the now famous, (and yes probably exaggerated), living conditions in the underground Edinburgh Vaults?

Closer to home, have you ever thought what it really must have been like to have worked for Carnegie steel, or as a coal miner for a Rockefeller when he had national and private guards come sweep down and massacre you and family while you were in your tents?

Ever heard of the Battle of Blair Mountain?

Think about it, all those people, acting as free agents, engaged in a mutual agreed relationship for the benefit of all parties under the rule of law, did so under a perceived future benefit.

Well blow me over; I do not understand, what went wrong?

Unregulated capitalism, when operating within a free for all market, is nothing more than a race to the bottom.

Societies, communities and families are destroyed by it.

Good decent men are broken in half.

There is no such thing as a future “free market”.  It is a fantasy to say that there is one.  The only time there was a “free market” was in antediluvian times.  When societies are encouraged and in fact move towards this utopia of a free market state, it is an unmitigated disaster.

BTW the Homestead Strike happened because workers (and engineers) figured out how to dramatically reduce production costs while improving steel quality.  Yep, it was a massive improvement in productivity. Any guesses as to what Mr. Carnegie decide to do?

A)   He thought about it for a moment and said well I guess it’s a good idea, but I couldn’t be bothered.

B)   He planned out the construction of the new plant equipment, brought in the workers who had made his plants successful and had helped figure out the new production method and said to them: “OK, let’s figure how we are going to staff these new plants and how we should help transition those that we will not be able to accommodate”

Or, (wait for it)

C)   Build the new plant, immediately fire all of your skilled workers, bring in a slew of unskilled labors at a fraction of the cost, and bring in the Pinkertons when you need to take care of what the Romans euphemistically used to call “their mortalities”.  After all this, trot back to Scotland for some fly fishing and wonder whether or not you will ever meet your mother’s definition of success for you.

And boys and girls, if you picked C don’t worry.  Set up a foundation to build a few public libraries here and there and to fund a PBS program on the wonders of butterflies.

All will be good.

[BaldEagl]

At a fundamental level the markets are very simple.  Can I, as an individual, create enough value for others to maintain the lifestyle I want.  Period.  End of story.

At another level companies ask the same question of themselves but the recipient is now a shareholder.  So the question becomes can we as a company, create enough value for others to attract investors.  Companies that do so survive, those that don't don't.  The survivors create jobs and those that lose put people on the street. 

As these two forces meet (employers and employees... and lets not forget every employer is also an employee themselves) they agree to a cost/work value.  Employers who don't pay enough get fewer or lesser employees and those who pay more get more or better (or a combination of both) employees.  Each side; employees and employers, agree to the cost/work value relationship. 

Competition between employers to attract, and employees to attain value ultimately creates equilibrium within margins of error.  This is a free market at it's best.

So back to the beginning.  If you want a job that's been shipped overseas you have to be at least as skilled as the overseas worker and be willing to accept a lifestyle equal to their exchange adjusted income or be cheaper, but if you really want to excel you need to be smart, educated and provide exceptional value.

[SysError]

The reason why people don’t need to pay any attention to the likes of Hazlitt, Sowell, Von Mises, et al, is that because after spending about 35+ years of implementing their ideas on deregulation, government defunding, free markets, principles of self-interest, etc. etc., they brought the world to the very brink of an utter total irreversible financial ruin.

When you screw up like that you are no longer allowed at the grown up table, and yes, you are going to have start using a sippy cup again.

It all started as some sort of comic masquerade in the form of the Laffer curve, which purports to show that a reduction of tax rates would result in an increase in government revenue.  Laffer claimed that the idea came to him at the kitchen table in California one morning while he was trying to recover from a slight hangover, or just the morning mist before the coffee kicks in (take your pick I guess), when EUREKA it came to him!

As he recalled it, he grabbed a napkin (a paper one I assume) and proceeded to draw an X Y axis, labeling one Government Revenue with increasing scale and the other as the Tax Rate, again with an increasing scale.  He then plotted down a half circle, and well the rest is history as they say!

Public figures loved what he had to say.  I’ll cut your taxes and we will all have more bounty.

A couple of problems; macro-economic theory says that one of three things can happen: revenues can go up, revenues can stay the same or revenues can go down.

Another problem, after implementation, except for the already converted evangelists, not many people agreed that the effects that Laffer had predicted came about.  As I recall, the most generous thing a kind person could say was, that if it had had an impact it was slight and short lived.

Anyway, for several years, from time to time, I could humor myself by reading a piece here and there in the NYT or WSJ about supply side theories while downing a morning coffee and donut.  (Actually I was much more of NYT/Nation guy and my wife was the WSJ/Economist reader).

Not too long ago I saw a debate which included Laffer where he said with a straight face, that the prosperous swinging ‘20s were all made possible because of aggressive tax cuts.

OK, so did you happen to turn the page to the next chapter to find out what happened in the next decade?

I don’t know, maybe he grew up in a school district that in the name good stewardship, frugality and economy, the local council cut the school budget such that they were only able to afford volume I of American history which ended with the ‘20s.

A final note on Laffer, by all accounts he is a kind and well-meaning individual.  I just think that it would have been better for us all if he had pursued a degree in say Sociology or anything else, as long as it didn’t scare the children or startle the horses as they say.

So let us fast forward to today.  After 35+ years of:

•   - Deregulating industry and financial sector
•   - Defunding government oversight
•   - Bashing unions to a pulp
•   - Defunding schools
•   - Failing to pay for infrastructure
•   - Squandering the country’s inheritance of physical natural resources and air spectrum
•   - and of course handing over one bloated government contract after another to the “efficient and effective” private sector

after all this, and a hundred other self-emasculation acts in the name of a free market, what other reasonable set of outcomes could one have expected other than what happened in 2008?

Don’t try to say that it was too much regulation that brought on the crisis and that too much regulation will cause another crisis.

If it didn’t work with everything that you guys got these past 30 years, it is never going to work.

And I am not going to accept some modern day variant of Zeno’s The Tortoise and Achilles Paradox as an excuse to just keep pursuing the attainment of a free market Nirvana.

And BTW, an argument that says “Hey it wasn’t us” is not going to wash.


Here is probably one of the most stunning moments of the aftermath of the 2008 crisis.



https://www.youtube.com/watch?v=R5lZPWNFizQ

It is really is like the Pope saying that he has just figured out that there is no God.


Alan Greenspan, a Chicago School guy was an admirer of Milton Friedman, the original tax-cutting and antigovernment economist.

Greenspan was also quite literally a disciple of Ayn Rand, a Soviet immigrant and author of The Fountainhead and Atlas Shrugged.  (Rand’s objectivist philosophy gave a sort of moral license to sadists who masquerade around as human beings.  My favorite quote attributed to her was when she was asked, given her fierce antigovernment positions, why she was accepting Social Security and Medicare -- she replied that she was only accepting the payments as reparations.  Usually it is white adolescent middle class males who become enamored with her works.  A boost to their libertarian proclivities at a young age I suppose.  It is unquestionable that large segments of society would be spared countless hours of dribble if these young men instead found their way to their father’s private magazine collection.)

And let’s not forget Greenspan’s admiration of Friedrich Hayek of the Austrian School.

Greenspan, by far, has been the most influential and most prolific free market guy in a position of real power in the 20th century.  Deregulate everything; defund the government, let the free market reign supreme and have enlightened self-interest to be our only guide.

Upon retirement in 2006, he is reputed to have said of his unfinished goals that most things were set on a trajectory towards a desired state.  One of his biggest regrets: that he didn’t get to privatize social security.

Good Lord above!

[zack1234]

At a fundamental level the markets are very simple.  Can I, as an individual, create enough value for others to maintain the lifestyle I want.  Period.  End of story.

At another level companies ask the same question of themselves but the recipient is now a shareholder.  So the question becomes can we as a company, create enough value for others to attract investors.  Companies that do so survive, those that don't don't.  The survivors create jobs and those that lose put people on the street. 

As these two forces meet (employers and employees... and lets not forget every employer is also an employee themselves) they agree to a cost/work value.  Employers who don't pay enough get fewer or lesser employees and those who pay more get more or better (or a combination of both) employees.  Each side; employees and employers, agree to the cost/work value relationship. 

Competition between employers to attract, and employees to attain value ultimately creates equilibrium within margins of error.  This is a free market at it's best.

So back to the beginning.  If you want a job that's been shipped overseas you have to be at least as skilled as the overseas worker and be willing to accept a lifestyle equal to their exchange adjusted income or be cheaper, but if you really want to excel you need to be smart, educated and provide exceptional value.

You actually believe what you have written?

 

One day you could be president

Its North Koreas fault

I deleted my original reply as the above was too funny

[SysError]

Bloody hell.  So it looks as if I chose to spend a few hours last night replying to posts when I could have been flying! 

(Given the very limited amount of time that I have these days to play, at a minimum my choice in priorities is either really messed up, or, or I don’t know what.) 

Travelling again this weekend.  Will not be able to play, but, if I wanted to, I could post…. 

[zack1234]

 

Dogs are awesome

[DmonSlyr]

Bloody hell.  So it looks as if I chose to spend a few hours last night replying to posts when I could have been flying! 

(Given the very limited amount of time that I have these days to play, at a minimum my choice in priorities is either really messed up, or, or I don’t know what.) 

Travelling again this weekend.  Will not be able to play, but, if I wanted to, I could post…. 

(Image removed from quote.)

I've enjoyed reading your post. So you didn't write it all for nothing.

The government needs to be there. This is why our founding fathers created one. They realised that even though people deserved to live free of oppression, a rule of law, liberties, and social philosophies should be discussed and debated, so that good prosperity would happen for the people in their society. They had the right idea with the capitalist economy and "free market" ideals.

What we have turned capitialsm into is another sweat shop for the workers. We have created so much productivity and technological capabilities to create sustainable growth in productivity, yet, we still work 8 - 10 hours a day to maintain that growth, which looks great on paper. But instead of making lives easier with growth, we have limited the majority of Americas because of a certain perceived skill level/pay ratio that doesn't back up the productivity level. IMO, a nation that is weak in middle class and lower class growth is weak on the inside. Our capitalist society has allowed businesses to pay low wages (based on skill and labor demand) to the point where citizens in the work force are still barely hanging by a limb. Now that 35% of Americans believe they have to get into piles of debt to learn skills they arent going to be fairly compensated for, its going to have a big impact on spending in America.

A microeconomy is all about a business.

A macroeconomy is all about the entire country.

You have to have a strong microeconomy in the majority of the bussinesses in order to keep a strong market economy on the macro level. Think of each microeconomy as being leaves on a tree. The more that fall off, the more the tree slowely dies. Sun and water act as equity and Revenues. Some part of the tree gets more than others, that side prospers, it has more equity and Revenues to pass through the vains to create growth for the whole tree in order to keep the weak side sustainable. If it didn't allocate those revenues to the leaves, and only uses its sunlight and water to support the bulk of the tree, the leaves die and intern the whole things falls apart.

It's crazy how you can compare a tree to a business and also a tree to an entire economy. I couldn't write a book on it.

What I believe is, in a capitalist economy of scale, growth comes from the revenues and equity poured into a business. The only way to keep the prosperity of growth is to provide incentives for the growth to be possible. IE, we have to pay people who work enough to shed their equity and money to all aspects of the economy in order to keep businesses sustainable and for markets to grow healthly. If we don't, we give that back in welfare to people who choose to not work as hard, or become single parents, or we devalue the" skills " to pay them less, and so thsy take advantage of the system, thus defeating the whole purpose of growth.

If we devalue our labor market too much because of the notion of cheap goods and products, we intern become cheap as a socitey and thus spending halts, creating a recession in the economy.

If we devalue "skills" in this economy with the amount of time worked, we kill the very seed that is used to create prosperity in our country. What we will have is a nation full of very smart people who are in debt but cannot afford to live a sustainable life because the skills have been devalued, thus creating turmoil in the streets and slower growth.

[Zoney]

Violator, I see 2 things you can do if you do not agree with how US business conducts themselves.

Stop doing business with them.

Create your own business and show them how it should be done.

Everything else is just sour grapes.  No one owes you anything because you went to college.

[Mar]

Violator, I see 2 things you can do if you do not agree with how US business conducts themselves.

Stop doing business with them.

Create your own business and show them how it should be done.

Everything else is just sour grapes.  No one owes you anything because you went to college.

 

[Rolex]

Ah yes, the esoteric Chauncey Gardener School of Economics . . .