Featured Quote

In 1913, Henry Ford wrote the following as the directors had been reaping the rewards of profits - "The wages we pay are too small in comparison with our profits. I think we should raise our minimum pay rate".

Friday, November 19, 2010

Create Jobs!! Where are the Jobs??

How is a Job created?

First, there has to be a product or service.  Second, there has to be a demand - a need - for that product or service.  Third, there has to be someone willing to pay to fill that need.

So, as companies sit on record profits and large sums of cash on hand, there is little to no extra demand to require adding jobs.  Why?

The way I see it, the Middle Class has been lured - or walked willingly - into a fiscal trap.  We have mostly acquired cars, houses and credit cards - all with significant debt payments.  This debt payment ratio may be a fairly high part of our monthly expenditures.  With expenses remaining high while salary and take-home pay fall slightly, we have reached a point of really living paycheck to paycheck.  So, we are cutting back on acquiring 'stuff.'  We still need the essentials, but we are cutting back on those too.  "Conserve" is the new motto and our economy - based on "Consume" - is suffering for it.  So, while those companies sit on cash reserves, we don't have the cash to consume any more of their product, so there is no more demand.

To increase demand, we, the workers will have to be paid more.  Either that or Gas/Oil, Energy and Food will have to reduce prices to see an increase in demand.  Either way, corporate profit margins will have to fall and the culture of paper profits will have to go away.  Right now, our economy is driven by Investors putting their money in the right earning entity.  We will need to get back to the times where Hard Work making things, contributing to the good of society and being self sufficient drive the economy - where we invest in living our lives, not some corporate fiscal creation.  We need to get away from our most profitable businesses being Insurance, Credit Card and Financial companies.  The United States are built on Industry - creating things, providing services - not moving money from one balance sheet to another.

My solution would be to have every company, where the CEO makes more than 50 times what the average worker earns, lower CEO pay and give every employee a raise to bring that gap back down to 50 or under.  More people with more money = higher demand for everything = more jobs = even more people with more money = even more demand = more jobs.  The trick is to know when that levels off and be able to adjust in order to maintain.

(PS: Dude from Harvard Business Review agrees with me! Time for a new $5 day!)

Thursday, November 18, 2010

Personal vs Social Responsibility

I wrote this for a reply to a forum conversation (which is irrelevant for this post, so not linking to it).

Currently (well, as of 2007), we, the bottom 80% hold about 7% of the wealth, but pay 40% of the taxes.  The top 10% pay 60% of the taxes, but control 90% of the wealth.
This is roughly the same situation as just before the Great Depression.  History repeats itself.
I am not for socialism, but there does need to be responsibility in wealth management.  Right now, the money is all going up - but very little coming back into the economy. The Rich save and invest in paper funds.  They don't spend.  Therefore, money accumulates at the top till it topples - an endless cycle of growth and crash.
We have government to try to help protect us from the Irresponsible actions of others - both the very poor on welfare and the very rich who contribute nothing to society are irresponsible.  We, the Middle, need to solve the problem and balance our society and economy.
 This got me thinking about Personal Responsibility versus Social Responsibility.  Right now, I don't think you can separate the two.  I am thinking about wealth management right now.  Lets ignore the rich who inherit and never actually made a contribution to society to begin with.  Instead, lets focus on the guy who started at the bottom.

Our guy starts with nothing.  He works long hours, hard days and starts a business.  He saves his money, invests wisely and grows his fortune.  His fiscal habits make for a sizable wealth.  At what point does he need to stop the aggressive saving and investing and start returning more of his money to the society that created the environment for him to succeed?  I do believe that it is vital to return, to give thanks and appreciation.

Its my old "Farmer tends the soil for his crops to grow" scenario.  There comes a time that all the good habits of saving and investing turns into bad habits of hording.  Is this, possibly, what we are facing now?

I know the Rich should put their savings back into the economy.  Any serious analysis of the mathematical aspects of savings vs spending practices will clearly display the unsustainable reality of our current system.  I do not believe Charity is the answer though.  We need something to help the Middle.  Those of us who are working, making ends meet, but not much else.  Society needs us, the middle 80%, to have some spare change.  We need, along with a little stimulus money, some wealth management classes.  Some counseling, education, therapy - something to get us away from the spend, spend, spend mentality and teach us to put back some savings.  We need some good "Buy U.S. Made" indoctrination.  Some "do you really need a 64 inch tv in your bathroom?" kind of therapy.  We are sick with an overabundance of consumerism and need to get it back down to a reasonable level.

Heck, we need to get EVERYTHING back down to a reasonable level - the Deficit, CEO Salaries as compared to average worker pay, consumerism, political rhetoric, entitlement programs.  Well, maybe some things need to get back up to a reasonable level - average income, savings, product quality, employment rates, ethical standards.

... enough rambling.  So, on a side note - the U.S. Health system actually, truly, honestly, SUCKS!

Wednesday, November 17, 2010

"No Earmarks!"

"We must reduce the deficit! No Earmarks!" - a Republican liar (isn't that redundant?).

Banning Earmarks will do NOTHING.  For one thing, it only makes up 1% of the budget.  Take this from the last link "Earmarks are used to allocate a small fraction of already approved spending amounts."  See that?  "Already Approved Spending."  Its not like earmarks are new spending.

Okay, so a bill comes to the floor.  It is $100 million for infrastructure spending.  A Senator from Kentucky says that, sure, he will support the bill, but only if this one project in Kentucky - in his district - gets $516,000 of that $100 million.  Another Senator says she will support it, if this bridge building project in her state gets $300,000.  The whole bill cost is still $100 million - just some of that money is earmarked for those two projects.

But, uninformed... actually, misinformed people will see the Republican move as being heroic and monumental.  "Keep 'em Stupid, Keep 'em Republican!"

Why am I all against Republicans?

While I am not a Democrat, the Republican Agenda is a greater detriment to the Nation - period.

Almost their entire platform is based on outright lies and misinformation.

Check out the links to references in The Plum Line article.