Saturday, April 19, 2008
The economy is like a rubber band that is almost stretched to its limit
I’m very worried about the long term health of the US and therefore the World economy. I made a comment last October that money is the cocaine of the wealthy, and the thought came back to me. For some, today’s money fix just will not be enough for tomorrow.
We see evidence of this all over, but in the corporate world, it is manifested most disturbingly in the way companies cut jobs after a good year that they don’t expect to top the following year. Of course, in bad years, the cuts are greater. People work harder and are more stressed, but ultimately, the only person who is really rewarded is the one who wields the axe- even when profits are down.
Companies merge and cut more jobs. More stress on the employees, more emphasis on next year’s dividend and still higher remuneration for the directors.
Oil prices have reached record levels not because of the usual supply and demand market forces, but because of short term investor greed. (Exxon, fortuitously for them, benefited to the tune of a 40 billion dollar profit last year – that is $111m a day and $1,268 per second but stupid George Bush will not impose a windfall tax because this would ultimately ‘have to be’ passed on to the consumers – according to him, anyway!) Got to keep increasing profits, even if they are obscene and unjustifiable.
So exactly how long can numbers be crunched so that more is gleaned from less? What can we do to wean the greedy people who can’t see beyond the bottom line of the balance sheet – either corporate or personal? If the rubber band snaps back, as I expect, who will suffer the most – the people who caused it with their greed or the people who fear for their jobs? That, of course is a rhetorical question. Ultimately, each of these questions is rhetorical. Greed of the type we are currently seeing is extreme narcissism, and that is a disease for which there is no known cure.
Perhaps, the real questions are, what happens to Investor confidence and the Stock Market when cuts in the workforce start leading to mistakes that result in losses and/or lawsuits? What happens when either no more cuts can be made or even job cuts don’t increase profits in an otherwise decent economy? This economy has been driven by continual increases in the bottom line at the expense of those who actually do the work. But it cannot and will not persist. No rubber band can expand in perpetuity. Sooner or later, it will either snap back to its true size or entirely break. I don’t believe we have too long to go before we find out what happens.
I know that one of the things that will happen is that those pension funds that so many people pay into will suddenly be worth a whole lot less. And I can predict with some confidence that if anyone is bailed out by the government, it will be the greedy shits who are causing this mess and not the individuals whose retirement will suddenly seem very much more secure.
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We see evidence of this all over, but in the corporate world, it is manifested most disturbingly in the way companies cut jobs after a good year that they don’t expect to top the following year. Of course, in bad years, the cuts are greater. People work harder and are more stressed, but ultimately, the only person who is really rewarded is the one who wields the axe- even when profits are down.
Companies merge and cut more jobs. More stress on the employees, more emphasis on next year’s dividend and still higher remuneration for the directors.
Oil prices have reached record levels not because of the usual supply and demand market forces, but because of short term investor greed. (Exxon, fortuitously for them, benefited to the tune of a 40 billion dollar profit last year – that is $111m a day and $1,268 per second but stupid George Bush will not impose a windfall tax because this would ultimately ‘have to be’ passed on to the consumers – according to him, anyway!) Got to keep increasing profits, even if they are obscene and unjustifiable.
So exactly how long can numbers be crunched so that more is gleaned from less? What can we do to wean the greedy people who can’t see beyond the bottom line of the balance sheet – either corporate or personal? If the rubber band snaps back, as I expect, who will suffer the most – the people who caused it with their greed or the people who fear for their jobs? That, of course is a rhetorical question. Ultimately, each of these questions is rhetorical. Greed of the type we are currently seeing is extreme narcissism, and that is a disease for which there is no known cure.
Perhaps, the real questions are, what happens to Investor confidence and the Stock Market when cuts in the workforce start leading to mistakes that result in losses and/or lawsuits? What happens when either no more cuts can be made or even job cuts don’t increase profits in an otherwise decent economy? This economy has been driven by continual increases in the bottom line at the expense of those who actually do the work. But it cannot and will not persist. No rubber band can expand in perpetuity. Sooner or later, it will either snap back to its true size or entirely break. I don’t believe we have too long to go before we find out what happens.
I know that one of the things that will happen is that those pension funds that so many people pay into will suddenly be worth a whole lot less. And I can predict with some confidence that if anyone is bailed out by the government, it will be the greedy shits who are causing this mess and not the individuals whose retirement will suddenly seem very much more secure.
