Employment Report: The Never-Changing Story 52 comments
-
Font Size:
-
Print
- TweetThis
I did not bother with posting the normal analysis of the monthly (un)employment report; it's really the same old story - some months it will be a bit better, some months a bit worse. The market will overreact either way as if one data point is changing the course in this economy. I continue to see no reason to change my view of a double dip recession, and the only reason it's not just one continuous dip is the enormous amount of money stolen ... err borrowed... from our grandchildren to pump up GDP figures later in the year.
Just about a year ago, the Bush rebates sent out some $100B in money we don't have to consumers (also taken from the grandchildren) along with another $60-$70B (that we don't have) to businesses, and that pumped up GDP enough to make the quarter positive. Hence NO RECESSION! (at least at the time - remember, we were going into an election; in retrospect, by latter 2008, economists 'called' the recession as starting in Dec 2007 ).
This year we're going to make the Bush stimulus look like peanuts by doing something over 4x as large - much of it will hit later this year and 1st half of 2010. We'll stick our heads in the sand and say "green shoots" because while the private economy is a mess, chopping down money trees lets us pretend things are just dandy. Sometimes a picture is worth a thousand words.
All this is just labels and definitions ... the reality is on the ground - the recession will continue even if the GDP spikes to positive. While technically it will be a double dip (in my estimation) as we move into mid 2010, it will just be one long bad recession - the worst we've seen since the 1930s. Folks, a year ago people were calling for recovery - the same people who are telling you everything will be ok now. Obama's team told us 8% unemployment is what we'd top out at. Thankfully no one on financial TV or in government is actually judged on performance. This WAS the longest recession we had post World War 2, MANY months ago. And it continues. It might be interrupted by the water hose of money we throw at it (that we don't have), but that is the only reason it won't technically be a 3 year recession.
Sit down and think about that for a moment as you consider our dynamic "innovative" economy where the interest of workers is akin to toilet paper. The whole idea of the sacrifices workers make in this system is the tradeoff with dynamism of business and a bevy of jobs that this creates in new places as it destroys old ones. It's just like "trickle down economics" that's proven to be a myth the past few decades in my opinion. The main change the past 30 years has been a huge transfer of wealth to the top since the early 80s.
As for the employment report, just take my previous post from a month ago and change the numbers [Jun 5, 2009: Real May Unemployment Report Reaches 13.4%]. If you are new to the blog, in a sentence or two we've changed the way we account for unemployment since the late 1990s - both parties are guilty as changes have been made under direction of both. We cannot compare our unemployment rate today to how it was measured in the 70s or 80s since we've changed how we measure. Anyone who says unemployment is not as bad as the double dip recession of the late 70s/early 80s is not looking under the surface - it is far worse. I've gone back and tried to re-adjust the numbers to an accurate gauge to have it apples to apples, and it's somewhere in the 13-14% range now. (estimated)
But I want to delve deeper into a few figures ... we are of course in a very bad CYCLICAL place in the economy. However, I've outlined in multiple posts in my Economic Forecast / Track Record tab - some of my longer term thoughts on the STRUCTURAL changes happening globally. I believe many Americans' standard of living will lower (and to a lesser degree some advanced European countries although their workers have much higher levels of protection) as the Earth flattens and capital can go anywhere. [Dec 8, 2007: Do the Bottom 80% of Americans Stand a Chance?] But Americans will be worse off since in the "socialist" countries there is more of a push to stop inequality of wealth and their "transfers of wealth" go from top to bottom. In the US our "transfers of wealth" go from middle to top (Reverse Robin Hood) When anyone argues this they are ... in an ironic twist - called a socialist.
We've already seen many of the blue collar workers scorched, many now working at 30, 40, 50% of the wage rates they used to in their old jobs - many are now being 'transformed' from jobs making things to jobs providing services and reaping the financial... uhh, benefits. White collars like to say 'well just get an education, and you won't be in that spot' - check back in 10-20 years when many white collars will be in the same space and that dogma will look foolish. Ask the architect who is trying to compete with his peer in Romania where the cost of living is 60% lower than in the US and hence homebuilders can pay 60% less of a wage. Sound improbable? That's not a forecast - that's a story I read 3 years ago. Extrapolate from there.
What's a safe place for stable wages long term? Apparently public co. CEOs. They are rock stars who do little wrong and have a skill set so rare that they deserve 300x the wage of the average American. Even though that same skill set only gets them 7-20x as much as the median worker in say "socialist" lands in Europe. But if we dare question it, we are again - socialists ourselves (codeword for unAmerican).
So instead, as the middle class gets gutted, we have to look upward and wait for the "trickle down" economics to provide prosperity - been a decade now... it will come sooner or later, I am sure. Where else? Places we are creating unsustainable long term costs - i.e. healthcare and government jobs (or quasi government i.e. education). These are areas we've talked about for nearly 2 years now - they are "stable" because we are kicking the can down the road on the costs, building bigger and longer term obligations but growing these areas in many cases exponentially. To wit, look at the shock in this story in the Wall Street Journal that teachers (gasp) actually are being hit by the worst recession since WWII. You mean when states are underfunded by billions there is a cost (eventually?)
- In a sign of how severe the employment downturn is getting, even schoolteachers, an occupation once viewed as recession proof, are feeling the pain. That contrasts with annual growth of about 3% over the past 15 years in the education field.
- Ms. Frommer, 25 years old, said in college she was told teaching was among the steadiest jobs around. Now "there is no job security anymore," she said. Ms. Clutter: "You always think of teaching as a safe profession. Once you get in, you're there, you'll be able to retire," she said. "Not so much right now."
- Layoffs from other sectors are sending workers to seemingly more stable professions like teaching and health care.
Anyhow it's all relative ... those places will be 'safe(r)' for an undetermined time until the average citizen wakes up and realizes where all his money is going. At some point, Average Joe will figure out his tax rates are going up while his wages stagnate, but those his tax dollars support live in a mostly parallel universe - mostly unaffected by the reality of the economy (unless we get 70 year floods like we are experiencing now).
Just sniff around your local papers and I'm sure you can read about the municipal worker who has retired at age 55 with a $70, $90K yearly pension (p.s. can't blame them - that's the system of handouts we've created, they milked the system for what its worth). This is basically a parallel to our auto companies (promises made that cannot be fulfilled), but it is across the country in a much larger swath - and it can last much longer than the auto companies before meeting the same fate, because the taxpayers' money (and our borrowing from creditors) are apparently without bound. So as I love to say, "momma raise your kid to be a government worker!" It will be an oasis from the storm on our shores, until the common man private workers finally say "NO MORE!"
**********************
Some think I'm a permabear - nah; I was already thinking about the "recovery" at the end of last year [Dec 15, 2008: The "Recovery"] ... the problem is, it's going to make the "jobless" recovery of 2002-2003 look like 'good times'! We have to wait for our financial overlords to create a new bubble - and only then can we turbocharge job creation for millions whose jobs have been permanently pushed away to other countries (structural changes), and/or their job was only existing in the first place by PREVIOUS bubbles of the past 10 years.
In the Dec 15th piece, I listed a few categories of "prosperity" we created by the "shopping / house building / financial innovation" economy we transformed into as we got rid of non-useful things like "making stuff". With them are many jobs that will take a long time to come back, if ever... (#8 of course is the most 'safe' but things are so dire even some of them are threatened)
- Automotive (16M yearly auto sales was based on house ATM)
- Newspaper/media (structural change as advertising moves online)
- Mortgage Brokers (based on house ATM, easy credit)
- Realtors (based on house ATM, easy credit)
- Investment Banking (based on house ATM, easy credit)
- Misc Financial of all types (house ATM, easy credit)
- Retail (house ATM, easy credit)
- State and local government jobs (house ATM, easy credit)
So what is the common private worker who is not a CEO, a nurse, or a government worker facing in the meantime? That's why I want to pull out some of the statistics about this poor soul from the report.
Let's look at the average work week - the data below is in order of most recent data first so June, May, April, and then March
- 33.0 hours
- 33.1 hours
- 33.2 hours
- 33.2 hours
So we've now fallen to the shortest work week ever since statistics have been kept (1964). Sit down and think about that as well - worse than the late 70s, or early 80s recession in which the government tells us unemployment "was higher" per their rejiggered statistics. 2nd derivative non improvement. So for those still working, (even if not a full week) how is their wage growth going? Especially interesting in a world the Federal Reserve is throwing money from the heavens to get speculators out of savings and into ... well, speculation. Hopefully of the commodity kind! Driving up prices of things Joe 6 Pack needs to live - i.e. food, and energy. (which we now take as a signal the world economy is coming back!)
- 0.0%
- 0.1%
- 0.1%
- 0.2%
That's right - after slowing drastically the past few months, we've finally flatlined. 2nd derivative non-improvement. Remember 0.1% monthly wage growth = 1.2% annual, and 0.2% = 2.4% annual. You can figure out what 0.0% annualizes to. This is what happens when a fixed amount of jobs is chased by an increasing amount of people, laws of supply and demand. Economics 101. Desperate people need to work, and they will undercut others to get that job.
And let's not forget outside of wage stagnation we have workers losing 401k matches, being asked to take a greater portion of healthcare costs, losing other benefits, et al. Now let me be clear on this point; I don't expect the current rate of 0.0% to 0.1%/monthly wage gains to stay this low for the next 5-10 years - my "wage arbitrage" point is going to be very long term and specific to certain groups. Hence the aggregate won't be as bad as specific job niches in the long run - that's a structural change I see coming. But in the near term, competition among the desperate is going to be a cyclical wage pressure. What would be amazing is if the US sees wage deflation in the quarters to come - thankfully we're not Japan. (cough)
At this point, let me take you into the life of median Joe. Median Joe makes $18.53/hour. Unfortunately his work week has dropped from 38ish hours to 33 hours. Therefore, median Joe makes about $32K a year, instead of his potential in a normal economy of $36K. I assume after taxes, FICA, all that jazz - Median Joe is probably making somewhere around $20-$25K/ year. Median Joe probably does not read my blog, because to actually have enough money to invest - you have to do a lot better than median. I also don't believe that the 50% of workers who make less than Median Joe are reading my blog - but not to worry, they are out there, trying to survive in our thriving service-based economy. I personally worry about median Joe, if Uncle Ben and his merry band "succeeds" and does an adequate job of giving speculators enough juice to get commodities through the roof in mid 2010 forward.
And here is the dirty secret - most people don't really follow "inflation" very closely - they can 'see it' in things they buy, but it's hard to quantify - i.e. notice how small those bags of chips are getting? Even if the price is the same? That's inflation - but only to you. Not the government. Less product for same price. Salary on the other hand - everyone watches closely... you know your salary, it's easily quantified.
Master plan?
Chop enough money trees to create inflation - since people only focus on their salaries, they will feel GREAT about how their wages will go up... not realizing the cost of goods is increasing at the same or higher rate. But since most people can't quantify the inflation in aggregate, but can quantify their salary, they will be appeased. For a while anyhow...until they start to see bread costing $3 a loaf etc. Just remember the dogma - inflation is good, it is not regressive nor the worst tax possible for those in the lower tranches of society. (median Joe and below) Anything that hurts savers and helps borrowers... is a wonderful thing in the land of Cramerica, a country run by those who have no connection to Median Joe (or lower). Go team inflation.
Number of workers long-term unemployed - half a year or more? (I just began tracking this last month)
- 4.4M (June)
- 3.9M
- 3.6M (April)
For that last point, remember to clap your hands when continuing jobless claims begin to drop (they already started the past few weeks) as workers exhaust extended benefits. Ignore the fact this number is dropping because people are losing that safety net, and pretend they are finding jobs and hence suddenly the rolls are dropping. (for example see the next section to postulate where these people are going in our imaginary state of prosperity) Also ignore the welfare rolls that are rising as an indication of where those people are REALLY landing. [Jun 22, 2009: WSJ - Numbers on Welfare See Sharp Increase]
**************
Just for kicks we always like to look at the birth / death model. Newer readers - this is simply a number that is "guestimated" by the government ... since they have no idea how many small business are born or die each month they stick their thumb in the air (ok I am sure it's more complicated than that - perhaps 3 fingers are in the air) and estimate. Want to see the past 4 months in the WORST recession in the post World War 2 period? (please don't laugh too loudly)
- +185,000
- +220,000
- +226,000
- +114,000
So again, as this economy contracts - in perhaps some of the worst months we've seen in 70 years, small businesses across America are flourishing and a hiring binge is breaking out. I count almost 3/4 of a million jobs above just in 4 months! Wow - dynamic and powerful.
Dirty secret?
Oh if we showed even zero growth above, you could see the unemployment rate jump. And if instead of zero growth, we actually showed contraction in the birth death model... you can just imagine what the unemployment rate would go to. But remember... keep your head firmly in the sand and keep reaching for the stars (Casey Kasem).
For extra snickers - Leisure and Hospitality and Construction - yes Construction have been the birth death job "leaders" the past 4 months. Even as we see major contraction in anything we read about retailers, homebuilders, Las Vegas, et al. Anyhow...Since I am talking my yellow weeds book, let's take some independent thoughts via Bloomberg
- Americans’ wages are starting to buckle under the strain of mounting unemployment, threatening to erode the consumer spending essential to an economic recovery. Earnings per hour climbed at a 0.7 percent annual pace on average over the last three months, the smallest gain since records began in 1964, figures from the Labor Department showed today in Washington.
- The median time all individuals were out of a job grew to 17.9 weeks in June, the longest on records dating to 1967.
- “When we do get a recovery, it won’t be much of one,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “There’s no bargaining power for workers. Discretionary income is just cratering, and this will have a profound effect on the economy.” (LaVorgna has actually been one of the CNBC regulars who actually has some feet to stand out, with some solid calls over the past few years)
- “The only wage growth we are getting is through government transfer payments, and that can’t go on,” said Deutsche Bank’s LaVorgna. “Even that isn’t enough.” (we highlighted that last week in [Jun 26, 2009: US Savings Rate Surges to 6.9%; Spending Up Too but Government Assisted] but the one spot I disagree with Joe is that it can't continue. Joe, it can! Yes we can! Stimulus 3.0 is coming next year Joe - our money trees are endless, our currency is not an issue, and the world awaits to give us more money. Even our unborn grandchildren cry out from the future for us to take from them - we deserve it Joe!)
- Employers are not only being stingy with raises, they are also cutting back on hours, causing the average weekly paycheck to drop to $611.49 in June, down 0.5 percent since February. The squeeze is unlikely to end soon, because there are 14.7 million workers who have been without a job for an average 24.5 weeks, the longest since records began in 1948.
- “Employers don’t have to pay workers so much because there’s a queue of people waiting outside to get a job,”... “It’s reducing workers’ ability to negotiate higher wages. We’re looking at a couple of years of really slow wage growth, possibly even lower than inflation.”
- Industries including manufacturing, wholesalers, retailers, utilities and leisure and hospitality cut average hourly earnings last month, today’s report showed.
- “Scattered reports of outright wage deflation are becoming more widespread,” Ian Morris, chief U.S. economist at HSBC Securities USA Inc. in New York, said in a note to clients. “Workers appear willing to take the wage cuts, which makes this recession very unusual.”
- "The labor market is still in shambles," said economist Harm Bandholz of Unicredit Markets & Investment Banking in New York
Here is the kicker....
- All growth in jobs in the U.S. over the last nine years has now been wiped out, and the economy currently has fewer jobs than in May 2000, according to the policy institute.
But not to worry, employment is a LAGGING indicator and Main Street is really quite irrelevant to the joys of Wall Street. (unless Wall Street is in need of a bailout, and then Main Street is very handy to have around) In fact, as we cut more people, profits can only go up - since workers are just a big expense. On this count, I am hoping companies can fire another 40-50M Americans because profits should really shoot up - we might get Dow 36,000 after all.
Who would buy things if we get rid of these 40-50M "cost centers"? Well we could just do 10 trillion government transfers annually with borrowed money - this would also allow Americans more time to shop with all that extra free time. And we always can sell things to the Chinese - which are going to support Europe, US, Japan, Brazil, Russia, and Antarctica with their stimulus. That last point sounds facetious but that's what the market is believing. Decoupling 4.0.
Look folks, I can only talk to you about the reality on the ground - I know the computers and institutions keep running into "consumer discretionary" stocks on each data point because that's what they are trained to do. When the economy is about to recover you go buy these things because that's the playbook. They've done it about 5x now since early 2008 - wrong each time. Does it matter this is a structural change in the US economy? Nah - just buy these stocks that rely on the US consumer and smile for CNBC.
Meanwhile, I'll continue to be deemed the pessimist (I prefer realist) and tell you what I believe not only is happening, but what I believe will happen in the future. For 2 years, I've gotten the economy dead on... by being the "pessimist" (realist). I see no reason to change my thoughts going forward because I see historical changes happening - although I'll clap like a seal too when government transfer payment gloss over the reality (just as the Bush rebate check did a year ago) to get us to positive GDP later in the year.
While I smirk inwardly.
In summary: As we celebrate our country, which unfortunately has been hampered by political and "upper 0.5%" dogma & oligarchy (still a chance we can take the country back fellow peasants!) let me leave you with the very obvious conclusion as I've analyzed the data set above:
Mmmmm.... Kool Aid.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 52 comments:
You always complain about high CEO pay and yes I agree they are as a class overpaid and that there are a number of #2's and #3's that would probably do a very similar job for a fraction of the obscene wages...
but, aren't NBA players overpaid? 4 million and change for the Average player to shoot hoops for a living? Aren't our movie stars overpaid? They could make 20 million per year pretending to be other people in movies, isn't 20 million also many many many times the average workers pay? Are entertainers more valued to society than people that have a say in what to produce and how much?
Inflation is a hidden tax, a regressive tax against that hits the poor harder, and in my opinion the sickest tax of all.
If our president came out and said that he was going to raise taxes for everybody by 10% that would piss everybody off, but if the government printed out 10% new money and siphoned it through the economy first giving that new money to political favorites to spend/trickle through the economy... it's a silent tax that nobody voted for...
The idea that we will have a "double dip" recession... or at least have it reported that way is a good thought too. Yeah we might have some stimulus money/government data that says the first derivative is getting better but it's really BS. Then things will " get worse again" but it's really all the same mess. No matter what way you want to slice it, it's not a pretty picture out there...
$
The unemployment website (I'm in Texas) suggests I take a 25K annual job, which still pays 20% higher than the average worker in my field (I'm just a secretary type). No kidding, that's what the unemployment website says.
I will never have enough money to declare bankruptcy when that time comes.
Thanks Mr. President, the stimulus is working wonders.
Excellent essay, well done. Yeah, just about the time we start to emerge from the second dip, banks will start to unleash their hoarded cash into the system, inflation will burst skyward and we....<sigh>....... slip into an immediate new inflationary recession. Hell, let's just call the tech bubble, real-estate bubble and the 'spending' bubble what they really are: one, very long, mother of all secular bears. God help the middle class and poor...
I'm impressed by the depth of your analysis and by your ability to see past the BS, and I thank you for the non-partisan even-handedness.
John Galt,
Re CEO pay: companies that pay athletes and movie stars are choosing them and their pay rate from a group of potential employees to make money. There is some managerial and financial control. Management has been able to influence their own pay without this kind of cost-benefit analysis. Essentially, they pay themselves with shareholder money, without shareholder consent. Your question is right: Would the #2 or #3 do much worse for much less money? My question is "Would the guy only do half as good a job if he only made $20 million instead of $40 million?" I believe that the problem of CEO pay is a corporate governance issue.
Nowhere does the Constitution direct the government to even promote commerce or even defend private property. The Constitution is clear. It was established to promote just six goals: (1) form a more perfect union, (2) establish justice, (3) insure domestic tranquility, (4) provide for the common defense, (5) promote the general welfare, and (6) secure the blessings of liberty to ourselves and our posterity. Of course, the Constitution does not prohibit the government from promoting commerce or defending private property, but what happens when doing so conflicts with one or more of its six purposes? Shouldn’t any law that does that be unconstitutional?
Unless housing and job situations improve - recovery is totally unlikely- Green shoots PR can only get in suckers to the stock market - but companies are not hiring.
Fed and Govt. are out of bullets (bazookas, helicopters, missiles, and everything). The only knee jerk thing they may do a 2nd round of stimulus that is already being talked about. But nothing will change, we going 12%+ unemployment by end of year (or early next year).
the jobs data is not backwards comparable so that the average joe does not really get the problem. the establishment media does not have rants like yours.
discussions and analysis like this is confined to the blogs like seeking alpha. we all congratulate each other over the content of our discussions.
it is like making love to ourselves.
Heaven forfend that Americans should be compelled to live at the standard of Scandanavians!
That would not suit the good folk at Goldman Sachs at all, or the CEO's picking up a few hundred million for their inestimable services - of course, the guys at GM have outperformed their peers at Toyota over the years, as their vast multiples of income over the directors of Toyota would indicate should be the case!
The folk in America who have no health insurance might be a bit less worried about having to live in Scandanavian misery, however.
I agree that it is a coprorate governance issue and I said that *most* or *many* CEO's are probably overpaid. A great CEO like Steve Jobs could however be worth his weight in gold. A bad CEO like Andrew Liveris or some of the financial CEO's are basically worthless.
A lot of their compentation (especially in record years) is tied up in stock options in a bull market, but let's see how they fare when the tide goes down. There are some companies ( Trader Mark may have even published an article about them), that look at a multi year moving average and not earnings for 1 year. That creates peverse incentives.
I believe CEO's, some of which are in charge of billion dollar companies and hudreds of thousands of jobs do deserve to earn equal to what they produce. A CEO making 10 million bucks is bad, but Tom Cruise making 25 million dollars to be some hero in a movie isn't obscene? Juwan Howard ( not even that good of an NBA player) could sign a 100 million dollar deal to play basketball and that's not obscene?
Do you want to live in a society where are entertainers make the most money? Our modern gladiators, movie stars, and musicans deserve the most? Where do businesmen who produce fit in there? During the Roman Empire the Romans paid their military the most... Rome fell...
The declining segments of remaining middle class who still have theirs hang on like the ostrich as long as they are among the few left with decent health benefits.
The same media and government that saw no inflation during $160/barrel oil sees as little unemployment as possible now. Luckily, we can still take from the money tree and "our unborn grandchildren cry out from the future for us to take it from them."
advice )
The true wealth of this country is in the collective knowledge and integrity of its citizens as a unified whole, proudly diversified as never before possible on the face of the earth. In that regard we are very fortunate to have individuals like Trader Mark to stand for healthy growth and true wealth for America. Thanks from my house to yours, Trader Mark, and "may the Force be with You!"
One problem, that $18.53 an hour includes the employer's portion of paid health care.
Which has seen double digit annual increases for the past decade.
I firmly believe that 100% of our "increasing" hourly wages are 100% made up from skyrocketing insurance costs.
Sheep say baa.
Nicely done Mark, wish we could educate our largely unteachable citizenship to see what the "we will take care of your crowd" is really doing.
I have very different views on original founders or those who actually are doing great things with companies. Most CEOs are "caregivers", with companies not much different when they leave than when they came. Is there any brilliance to a natural gas CEO when nat gas prices are X versus X*50%? No - but their stock price rages up and they give great tales about how they gave shareholder value.
Check out what CHK's CEO has been doing - lost all his money on leveraged bets on his own company. Had just been given new contract right before this happened. When no one was paying attention right around New Years Day the board went in and ripped up his contract and gave him a spanking new one, repaying much of his mistakes. This just doesnt happen to "normal folk". I hate the excuse of "if you don't incentivize them they won't do a good job" - are you kidding me? Personal pride? Trying to provide for family? Knowing if you don't have a job your family is on the street? Those things seem to motivate the peasants in the lower tranches of a company quite well. Should they have more pay for more responsibility? Yes. Should jobs well done get rewarded with more pay? Yes. But that's not our system anymore.
The only counterarguement is "if you don't like it, sell" - what a great arguement. Even Carl Icahn with all his resources has a hard time coming into a board and making changes. It's a totally broken governance system and those foxes watching the hen house love having it just this way.
Again, if you are Steve Jobs and you've been a driving force for job creation, innovation, and actual profit growth for decades - please, take whatever you wish. You deserve it. The other guys are no different than the average CEO at a European company who seems to somehow excel making 15-25x the average Joe Schmoe salary.
People are brainwashed here.
On Jul 06 07:45 PM $ John Galt wrote:
> I love your style. The perfect blend of analysis, sarcasm, comedy,
> and outrage. I agree with a lot of what you are saying and yes,
> you are a realist, and not some grass knole whispering outcast.
> You have the ability to look past the facts and I like that.
>
> You always complain about high CEO pay and yes I agree they are as
> a class overpaid and that there are a number of #2's and #3's that
> would probably do a very similar job for a fraction of the obscene
> wages...
>
> but, aren't NBA players overpaid? 4 million and change for the Average
> player to shoot hoops for a living? Aren't our movie stars overpaid?
> They could make 20 million per year pretending to be other people
> in movies, isn't 20 million also many many many times the average
> workers pay? Are entertainers more valued to society than people
> that have a say in what to produce and how much?
>
> Inflation is a hidden tax, a regressive tax against that hits the
> poor harder, and in my opinion the sickest tax of all.
>
> If our president came out and said that he was going to raise taxes
> for everybody by 10% that would piss everybody off, but if the government
> printed out 10% new money and siphoned it through the economy first
> giving that new money to political favorites to spend/trickle through
> the economy... it's a silent tax that nobody voted for...
>
> The idea that we will have a "double dip" recession... or at least
> have it reported that way is a good thought too. Yeah we might have
> some stimulus money/government data that says the first derivative
> is getting better but it's really BS. Then things will " get worse
> again" but it's really all the same mess. No matter what way you
> want to slice it, it's not a pretty picture out there...
>
> $
Anyhow the way to end any arguement in America against status quo is "you don't want to be a socialist European do you?" Many of us are a simplistic "sound bite" people it appears.
It is funny when you see all these international quality of life studies the Scandanavian countries, despite lousy weather always rank at the top - what Americans are going to realize is the way things are going they are going to be paying the same level of taxes as "socialists" without half the "benefits". Even now I'd argue that families with kids are paying as much as the "socialists" once you take into account what is necessary to self provide for retirement, healthcare, and university. So all the stress, and the same level of costs (but instead of via taxes, its just out of pocket) for the same benefit. And the costs will only go up from here.
Anyhow - I just find it all bemusing... dogma rules.
On Jul 07 05:41 AM Davewmart wrote:
> As a non-American I find it amusing that in order to totally dismiss
> an argument you only have to label it as 'socialist!'
> Heaven forfend that Americans should be compelled to live at the
> standard of Scandanavians!
> That would not suit the good folk at Goldman Sachs at all, or the
> CEO's picking up a few hundred million for their inestimable services
> - of course, the guys at GM have outperformed their peers at Toyota
> over the years, as their vast multiples of income over the directors
> of Toyota would indicate should be the case!
> The folk in America who have no health insurance might be a bit less
> worried about having to live in Scandanavian misery, however.
"A lot of their compentation (especially in record years) is tied up in stock options in a bull market, but let's see how they fare when the tide goes down. "
What you don't see if when options go down (underwater) they are repricing for executives. So you never really "lose" - when the stock goes up, you win. When the stock goes down, they are repriced. Why? We cannot risk losing this CEO and his golden shoes he walks in. There are only 150 such people in the world with the brain of Socrates, the charm of Clooney, and the know how like (fill in the blank). We must protect them from ever getting upset with us, so they stay.
I agree with you on the actual wealth creators like Steve Jobs, as I wrote below. I also think of Joe Schmoe takes his company from nothing to a public success - please take everything you can. But its the guy that comes AFTER Joe Schmoe - what I call the "caregivers" whose companies basically are going to land in the same place (give or take 5% up or down) in 10 years no matter what they do, that are just milking the system. And that's a great majority of public companies nowadays.
As for sports or movies - there is a given market and a given pie. As long as TV is willing to pay (via advertisers) and fans willing to pay the prices, I can live with it even if I think these folks are overpaid. Now the US consumer is finally breaking and you see NASCAR crowds down, and Yankee stadium with empty seats - so there is a limit to everything. That is very different than the corporate world where many public co's are simply feeding troughs... all you have to do is issue new stock and dilute shareholders everytime you need some more cash for the "very rare skill set our top honchos" have.
p.s. some of the execs at these companies are excellent and work their tails off. I don't mean to put them all into 1 bin.
p.s.s. if you ever want to see a great story read up on the Costco CEO. Somehow he made his company into a monster success and his employees thrive and he makes a fraction of the typical CEO. And he has done a lot more for the co and "society" than most.
Unfortunately he is an outlier.
- I agree the corporate governance is set up to NOT change the system... ( and that is a bad thing).
- I agree the "game manager/auto pilot/Joe Public CEO is overpaid"
- We agree a good CEO that creates value is worth a pile of money
- We agree there are a # of #2's that could replace most CEO's
- We agree they overly attribute positive market forces ( say high oil prices for an OIL CEO)for Performance.
I think you even wrote an excellent article about a smaller financial firm that had a lower paid CEO, that was paid on a moving average of the increase in net book vallue or some alternative measures. You highlighted what the system "should" look like instead of the book profits now to book my bonus now system.
but to say that
"CEO's make a lot more money than the average worker ( therefore they are overpaid) I won't agree with. Julie Roberts makes a lot of money per movie, should she make less? What if Julie Roberts made 10 million per movie instead of 20 million per movie? How about Tiger Woods, is 75 million per year obscene as well? When you boil it all down wages are "certifcates of production". As we have witnessed in the past couple years, these CEO's that are "in charge of our economy" have a huge amount of power. People like Henry Ford improved the standard living of Americans more than any philanthropists ever did. These CEO's have the ability to drive innovation and improve our lives but they also have the power bring down our economy.
$
But the problem is our system wants the pie and to eat it at the same time. We want everything, and not to pay for it.
I think people want an even playing field, less government, but some form of stability at the bottom so if you get sick the wrong week your entire life savings is not thrown away in 3 days. But the larger question is what do we have, and what can be changed. You are not going to get a "government stay out" policy - the Ron Pauls were scoffed at as "loonies" even though almost everything he said has come true. Most of the "conservatives" were spending just as madly as the "liberals" when it was their chance. Watch what they do, not what they say. You have 2 crony arms of government not very much different than each other.
One other point, once you give these things away it is very hard to take them back. So unmilking the people from the teet they are now on is going to be another issue. The last issue is as global competition continues to reign in on workers you are going to see a lot of those who are permanently dislocated ask for more government intervention. (Protectionism)
You have to look at the US in the world mosaic, not in a vacuum. Much of what you write sounds nice in a white paper but its not close to our reality.
I also disagree with your "we take responsibility" thought process - do we? Some of us do. Many of us do not.
On Jul 07 09:47 AM pungent wrote:
> Davewmart - We heartily support the right of Scandinavians to be
> Socialists. You WANT to be Socialists, so more power to you. But
> at least 50% of Americans don't want to be Socialists. We want the
> government to get out of our lives and leave us alone. We don't
> need to government to do things for us, we just need it to stop doing
> things to us. We take responsibility for ourselves and those who
> belong to us and, having done that, we usually take care of others
> as well. Voluntarily, because that's who we are. Many of us have
> resisted the Siren call to buy things we don't need with money we
> don't have to impress people we don't like. Perhaps the US could
> split into 2 countries: the Grownups and Other.
X amount of dollars goes into a bin from TV, merchandise, and ticket sales (simplyfing) - the owners and players split up the dollars. And that's that... I don't find it complicated or something that can be argued. If and when there is a limit to ticket prices (which we've seemed to reached in some places) or a drop in the price advertisers are willing to pay (and hence TV stations can not ever increase TV rights) that pool drops and the owners and players can decide what to do then.
The golf situation is the same - there is a pot of gold paid by sponsors (mostly the same people who advertise). Ticket prices to the events and advertisers pay for this pot... and then you split it at the end of the tournament.
As for movies, there is a lot of money made in screen writing, directing and the like. Look up Spielberg or Michael Bay's net worth :) Same for music - people don't realize how well the writers do, not just the artists. But without the end user spending the money to go to the movie or buy the music, there is no gravy train back to the artist or actor. So I have less of an issue in these areas since I can see the economies and how money goes from 1 end to the other. Someone is going to make money in a celebrity culture where people will line up 500K strong to see an American Idol. Or worship at the feet of Jon and Kate Make 8. (whatever the name of that is) But at least its an open system and you can understand the economic dynamic of it all - money goes in 1 side from the public (either direct or via advertisers), and a concentrated amount of people make money on the other end. That's fine to me, because that's what the public wants and spends their money on. Even if I think the salaries make little sense.
Corporate America is a closed structure so its a completely different animal in my eyes.
On Jul 07 11:01 AM John Galt wrote:
> Trader Mark - We agree on a lot more than you think.
>
> - I agree the corporate governance is set up to NOT change the system...
> ( and that is a bad thing).
> - I agree the "game manager/auto pilot/Joe Public CEO is overpaid"
>
> - We agree a good CEO that creates value is worth a pile of money
>
> - We agree there are a # of #2's that could replace most CEO's<br/>-
> We agree they overly attribute positive market forces ( say high
> oil prices for an OIL CEO)for Performance.
>
> I think you even wrote an excellent article about a smaller financial
> firm that had a lower paid CEO, that was paid on a moving average
> of the increase in net book vallue or some alternative measures.
> You highlighted what the system "should" look like instead of the
> book profits now to book my bonus now system.
>
> but to say that
> "CEO's make a lot more money than the average worker ( therefore
> they are overpaid) I won't agree with. Julie Roberts makes a lot
> of money per movie, should she make less? What if Julie Roberts
> made 10 million per movie instead of 20 million per movie? How about
> Tiger Woods, is 75 million per year obscene as well? When you boil
> it all down wages are "certifcates of production". As we have witnessed
> in the past couple years, these CEO's that are "in charge of our
> economy" have a huge amount of power. People like Henry Ford improved
> the standard living of Americans more than any philanthropists ever
> did. These CEO's have the ability to drive innovation and improve
> our lives but they also have the power bring down our economy.
>
>
> $
>
>
There used to be a time when government work meant below average pay, but great benefits in return for that below average pay. Somehow in the past 15 years its morphed into above average pay with the same benefit package.
Perhaps we can rescind many of these people we are paying to take retirement 10 years before average Joe in the private sector , with large pensions and very nice health care (on taxpayers dime) and hence use that money to give people jobs.
I wrote a piece a year ago about a city in California that went bankrupt - can't remember the name right now. There were countless folks making $100-$200K+ on the city dole. By countless I mean hundreds. I don't think people realize what is happening at the state and local government levels. Revenue and expenses are just not in line and unfortunately the public worker (ex federal) is going to start feeling some of what the private worker has been feeling the past 18 months.
On Jul 06 08:11 PM Karen Consumer wrote:
> I lost my job on June 23. It was a good city job. I made 41K last
> year (according to this handy dandy earnings record from Social Security).
> Now I'm applying for 27K jobs. I lose my house if I get a job less
> than 29K. But I have a car so I can live in that. I have savings,
> that's going to supplement my unemployment of 1,200 a month if I
> qualify.
>
> The unemployment website (I'm in Texas) suggests I take a 25K annual
> job, which still pays 20% higher than the average worker in my field
> (I'm just a secretary type). No kidding, that's what the unemployment
> website says.
>
> I will never have enough money to declare bankruptcy when that time
> comes.
>
> Thanks Mr. President, the stimulus is working wonders.
We shouldn't subsidize stadiums owned by the rich for the rich to play in. But, entertainers and athletes are paid in a system that is as close to a free market as it gets. Don't pay the ticket price. But at least those people don't run the world economy into the ground.
However giving a CEO a $50M paycheck while he lays off 10% of the workforce and cuts workers pay by 20% is simply taking money from the middle-class/poor and giving it to someone who is probably already wealthy beyond belief. It's outrageous and needs to change.
Would Juwan Howard be any worse of a basketball player if he signed a 30 million dollar deal instead of a 100 million dollar deal? How about the ex Yankee Pitcher Carl Pavano who signed a 70 million dollar deal and was injured and hardly pitched?
The argument that CEO's make 250 times the average worker, therefore they are overpaid... Tiger Woods makes 250 times the average worker for playing golf and doing commercials, is that outragous? Couldn't you complain that Tiger would be just fine making 5 million bucks per year?
Not all CEO's make 50 or 100 million dollars...
Let's look at Costco's CEO which Mark brought up. The CEO is in charge of 75,000 workers and makes 7.24 million dollars per year. Do you know how many MLB, & NBA players make that much money? Who has more value to our economy, Plaxicoo Burress or Jerr Brotman ( Costco's CEO)? Michael Jordan might fill up a stadium, but does Joe NBA player making 4.5 million bucks really fill up the seats?
Back dating options is crooked and should be stopped, I listed what I saw as a lot of the problems with executive compensation and I'd agree that a lot of the "auto pilot or caretaker" or whatever you want to call them guys are overpaid but jealousy and class classwarfare is a dangerous game to play.
It does bother me when you see a situation where a worker making say 220,000 tries to squeeze out say an extra 5k bonus when their great behind the scenes secretary making 40K is equally deserving and could easily use the money much much more.
I believe people should be paid for performance and what they produce, but the "soak the rich" people complaining about executive compensation rarely complain about Entertainers making just as much money if not more.
Which in and of itself, is a sad state of our affairs.
Where is the dynamic job creation that our version of capitalism was supposed to birth? Excluding bubbles created by Federal Reserve policy the past decade.
You can see the attitude in the teachers above - almost outright shock that teachers are facing economic reality. Almost all government jobs are just assumed to be safe, with steady increases in pay. No market forces there.
At some point (not now) when taxes get high enough that sort of thinking will retrench in massive ways as the populace revolts against the subsidization scheme. But it will take a long time for the populace to figure out what is (and has been) going on; thankfully I am starting to see more and more of it... without house ATMs people are not so quick to agree to property tax increases or vote yes for millages or all the other things that cities seem to have taken for granted. As long term obligations (promises we cannot keep) only grow, and stresses on US workers in private sector continue on this gulf will be exposed further. I expect a bevy of California's 1 year from now when the next budget year (July) is on the table....
On Jul 07 11:54 AM Nettligent wrote:
> I want to be a government employee when I grow up.
Was Carl Pavano overpaid? Absolutely. Hindsight is 20/20 and in baseball there are clear winner and losers. They even keep a record of every pitchers wins/losses to boot. So of course it's easy to see if he was "worth it". But did Carl's contract cost anything to society. No, virtually nothing. It costs George Steinbrenner. That's basically it. If fans were so outraged they should stop buying tickets, $14 beers and replica jerseys. Then you would see salaries brought in.
When a CEO slashes workforce and pay so that he can get his $100M bonus by hitting profit objectives, yes I would say there is a costs to society there. Big difference from an athelete.
You are right, Costco is a good example of the right thing to do. But they are the exception, not the norm.
On Jul 07 02:05 PM John Galt wrote:
> Elcopone-
>
> Would Juwan Howard be any worse of a basketball player if he signed
> a 30 million dollar deal instead of a 100 million dollar deal? How
> about the ex Yankee Pitcher Carl Pavano who signed a 70 million dollar
> deal and was injured and hardly pitched?
>
> The argument that CEO's make 250 times the average worker, therefore
> they are overpaid... Tiger Woods makes 250 times the average worker
> for playing golf and doing commercials, is that outragous? Couldn't
> you complain that Tiger would be just fine making 5 million bucks
> per year?
>
> Not all CEO's make 50 or 100 million dollars...
>
> Let's look at Costco's CEO which Mark brought up. The CEO is in charge
>
his base salary in 06 was $350K
abcnews.go.com/2020/Bu...
His employees also make 40% more than Walmart's Sam's club, and only pay 9% of their healthcare tab. For reasons that are obvious turnover is very low compared to industry.
If he is up to $7M I am going to have to get upset ;) hah. Nah,he is still worth it! Maybe your figure took a year in which he locked in some options. I'd be interested to know.
On Jul 07 02:05 PM John Galt wrote:
> Elcopone-
>
> Would Juwan Howard be any worse of a basketball player if he signed
> a 30 million dollar deal instead of a 100 million dollar deal? How
> about the ex Yankee Pitcher Carl Pavano who signed a 70 million dollar
> deal and was injured and hardly pitched?
>
> The argument that CEO's make 250 times the average worker, therefore
> they are overpaid... Tiger Woods makes 250 times the average worker
> for playing golf and doing commercials, is that outragous? Couldn't
> you complain that Tiger would be just fine making 5 million bucks
> per year?
>
> Not all CEO's make 50 or 100 million dollars...
>
> Let's look at Costco's CEO which Mark brought up. The CEO is in
> charge of 75,000 workers and makes 7.24 million dollars per year.
> Do you know how many MLB, & NBA players make that much money?
> Who has more value to our economy, Plaxicoo Burress or Jerr Brotman
> ( Costco's CEO)? Michael Jordan might fill up a stadium, but does
> Joe NBA player making 4.5 million bucks really fill up the seats?
>
>
> Back dating options is crooked and should be stopped, I listed what
> I saw as a lot of the problems with executive compensation and I'd
> agree that a lot of the "auto pilot or caretaker" or whatever you
> want to call them guys are overpaid but jealousy and class classwarfare
> is a dangerous game to play.
>
> It does bother me when you see a situation where a worker making
> say 220,000 tries to squeeze out say an extra 5k bonus when their
> great behind the scenes secretary making 40K is equally deserving
> and could easily use the money much much more.
>
> I believe people should be paid for performance and what they produce,
> but the "soak the rich" people complaining about executive compensation
> rarely complain about Entertainers making just as much money if not
> more.
"Of the 2,000 companies in our database, he has the single shortest CEO employment contract. And the only one, which specifically says, he can be -- believe it or not -- 'terminated for cause.' If he doesn't do his job, he is out the door," Minow said.
I went to Yahoo finance, found COST and clicked on "profile" on the left side of the screen. If you scroll down Sinegal actually made 400K salary but also had 6.73 mil in stock options so he made a little over 7 million. I was wrong earlier because I looked at Brotman who is a chairman and actually made more, 7.24mil in options plus his salary. Those guys made MOST of their money in options, keep in mind they did have < 500K base salaries. Making 350K doesn't sound that bad until you realize that it's 5% of their take home compensation.
You just said you liked Sinegal a minutue ago, so if Sinegal made less money you'd like him more? Is being paid a market wage a bad thing? You said you respected his work...
I agree that paying workers higher wages can easily save money in the long run and boost morale. Henry Ford said that 5 dollar per day wages ( high wages for that time period... thanks inflation/Fed) were the best cust CUTTING move he ever made. The reduction in turnover, morale, and making good middle class consumers to even buy his cars paid off in the long run.
I did a little research and also saw Exxon's CEO made 5.87 million, Connoco Phillips CEO made roughgly 3 Mil but 7 mil in stock options... John Mack at Morgan Stanley just under 9 million. Steve Jobs made 14 million...
So do CEO's make more than the janitors? Sure, but don't they have a much larger chance to impact earnings on the positive and negative side? Every single worker is important and every single worker has value no doubt, but if you had the best janitor in the world, what is that going to do for your company? If you had a horrible janitor, how many problems is that going to cause? Flip that argument to a CEO and yes there are true "visionaries" and then there are "Joe Public CEOs" and they shouldn't be paid the same. I'd agree there are too many easily to replace CEO's making money like they are "visionaries". I would like to see investors have more say in executive pay though.
Sinegal can be accused of being a "socialist" with quotes like this "I figured that if I was making something like 12 times more than the typical person working on the floor, that that was a fair salary," he said.
Next, your compensation numbers are too simple to simply look at cash and options, there are a slew of benefits that entire websites and SEC filings detail. There has been a push for more disclosure that passed recently (can't remember what year) but its still all deep into filings. Company cars, private jets, all that stuff are not things you include. That said, we fly Pelosi home every 2 weeks so same song and dance in Congress.
Here is perhaps a better chart - it shows the 5 year pay chart but again only stock and options and not all the other perks
www.forbes.com/lists/2...
Costco CEO is on page 9, keep in mind he has been there a long time unlike Joe Schmoe CEO who walks in the door and promptly moves ahead of him. Also almost all his pay is in options so he is "paper rich" - I am using him as an example of a policy, not for specific numbers.
Now on that 5 year chart Steve Jobs #1 at $650M. Barry Diller who is loud brash but what has he accomplished the last 5 years at #2 half a billion. #3? Ray Irani. What has he done? He is head of an oil company - Occidental. So let me guess - when oil is down he has bad years, and oil up good years. A selective skill set.
Terry Semel of Yahoo was #4 (this was from 2002-2007) with $432M - he has been ousted
Richard Fuld of Lehman (what ever happened to those guys?) at #5 $312B
and the list goes on, many on this list have not even been at their companies for 5 years.
My whole point is when you can make generational wealth - the type that takes care of not just you but generations after you, no matter what sort of job you do, as long as you "hang around" for 12 months at least , the incentives to perform start dropping. I'd argue the guy who is facing life on the street if he does not perform has far higher incentive... in a very perverse way.
www.forbes.com/lists/2...
On Jul 07 07:12 PM John Galt wrote:
> Mark-
>
> I went to Yahoo finance, found COST and clicked on "profile" on the
> left side of the screen. If you scroll down Sinegal actually made
> 400K salary but also had 6.73 mil in stock options so he made a little
> over 7 million. I was wrong earlier because I looked at Brotman who
> is a chairman and actually made more, 7.24mil in options plus his
> salary. Those guys made MOST of their money in options, keep in mind
> they did have < 500K base salaries. Making 350K doesn't sound that
> bad until you realize that it's 5% of their take home compensation.
>
>
> You just said you liked Sinegal a minutue ago, so if Sinegal made
> less money you'd like him more? Is being paid a market wage a bad
> thing? You said you respected his work...
>
> I agree that paying workers higher wages can easily save money in
> the long run and boost morale. Henry Ford said that 5 dollar per
> day wages ( high wages for that time period... thanks inflation/Fed)
> were the best cust CUTTING move he ever made. The reduction in turnover,
> morale, and making good middle class consumers to even buy his cars
> paid off in the long run.
>
> I did a little research and also saw Exxon's CEO made 5.87 million,
> Connoco Phillips CEO made roughgly 3 Mil but 7 mil in stock options...
> John Mack at Morgan Stanley just under 9 million. Steve Jobs made
> 14 million...
>
> So do CEO's make more than the janitors? Sure, but don't they have
> a much larger chance to impact earnings on the positive and negative
> side? Every single worker is important and every single worker has
> value no doubt, but if you had the best janitor in the world, what
> is that going to do for your company? If you had a horrible janitor,
> how many problems is that going to cause? Flip that argument to a
> CEO and yes there are true "visionaries" and then there are "Joe
> Public CEOs" and they shouldn't be paid the same. I'd agree there
> are too many easily to replace CEO's making money like they are "visionaries".
> I would like to see investors have more say in executive pay though.
Of course the American economy is not capitalist in any meaningful sense of the word, since it has suffered capture by producer interests, and in particular by the financial oligarchy.
Adam Smith was well aware of this danger and wrote extensively of the tendency to conspire against the public interest.
It reaches the ludicrous extent whereby American exceptionalism is held so dear that elements of the system which are broken are simply denied.
For instance, health in America is demonstrably lower on average than in many other developed countries.
Americans pay far more for health care than elsewhere, but serve only a proportion of the population.
They are being robbed blind by this 'capitalist' system.
The fortunate few can of course buy health care as good as any in the world, but for the great majority of the middle class severe illness can mean bankruptcy.
On another level, executives are paid vast salaries, when there is no data at all to support the notion that they are any more effective than executives elsewhere on a fraction of the salary.
All this is crony capitalism, not an effective distribution of resources.
We are told that entertainers, for example, earn huge amounts of money so so should executives.
Perhaps that in fact makes the case for very high taxation on high earners, including entertainers, as for instance happened to the not inconsiderable entertainers 'The Beatles'
Disproportionate rewards for the elite only encourages the formation of bubbles and asset price inflation.
The idea that America is in any real sense capitalist is in any case absurd since the oligarchs at the banks have been bailed out by the taxpayer.
Nice trick the American elite have pulled, to have convinced so many to support their grossly disproportionate grabs, at huge cost to the general welfare, and to the detriment of the efficient reward of actual production.
I have the equivalent (in speed if not total capacity) of 6 T1 lines feeding that computer. Fifteen years ago a T1 line cost $600 a month. I pay about $40.
What we do not want to do is to stifle the brains (out of envy) by not giving them the rewards that keep them producing.
So the deal is - a lot of the increased wealth is not showing up as dollars in the pocket. It is showing up as increased quality of goods.
"Concentration of wealth is a natural result of concentration of ability, and recurs in history. The rate of concentration varies (other factors being equal) with the economic freedom permitted by morals and the law... democracy, allowing the most liberty, accelerates it. -- Will and Ariel Durant
Now compare this to middle class living in the 1950. I am far wealthier. Some people tell me I am being robbed blind by the fat cats. And yet I have a life that even the fat cats of 1900 couldn't afford.
In 1900 if you wanted central air you needed to work in the cooled parts of a meat packing plant or at an ice making plant.
This "robbed blind by the fat cats" deal is envy and greed not reality.
On Jul 08 06:54 AM Davewmart wrote:
> It is very convenient for the elite in America that it is unnecessary
> to actually argue against the substance of any proposal when it can
> be simply dismissed as 'socialist'.
> Of course the American economy is not capitalist in any meaningful
> sense of the word, since it has suffered capture by producer interests,
> and in particular by the financial oligarchy.
> Adam Smith was well aware of this danger and wrote extensively of
> the tendency to conspire against the public interest.
> It reaches the ludicrous extent whereby American exceptionalism is
> held so dear that elements of the system which are broken are simply
> denied.
> For instance, health in America is demonstrably lower on average
> than in many other developed countries.
> Americans pay far more for health care than elsewhere, but serve
> only a proportion of the population.
> They are being robbed blind by this 'capitalist' system.
> The fortunate few can of course buy health care as good as any in
> the world, but for the great majority of the middle class severe
> illness can mean bankruptcy.
> On another level, executives are paid vast salaries, when there is
> no data at all to support the notion that they are any more effective
> than executives elsewhere on a fraction of the salary.
> All this is crony capitalism, not an effective distribution of resources.
>
> We are told that entertainers, for example, earn huge amounts of
> money so so should executives.
> Perhaps that in fact makes the case for very high taxation on high
> earners, including entertainers, as for instance happened to the
> not inconsiderable entertainers 'The Beatles'
> Disproportionate rewards for the elite only encourages the formation
> of bubbles and asset price inflation.
> The idea that America is in any real sense capitalist is in any case
> absurd since the oligarchs at the banks have been bailed out by the
> taxpayer.
> Nice trick the American elite have pulled, to have convinced so many
> to support their grossly disproportionate grabs, at huge cost to
> the general welfare, and to the detriment of the efficient reward
> of actual production.
The problem is this is not the current economy; those with connection are generally the most rewarded and at certain levels of business it is irrelevent if you are good or bad, you just have to be there - to be rewarded.
> it. -- Will and Ariel Durant
On Jul 08 08:48 AM MSimon wrote:
> Why is CEO pay so high? Because quality CEOs are in short supply.
> Are some CEOs over rated - sure. Just like some ball players. But
> the salaries of both are high because talent is scarce.
On Jul 08 09:54 AM TraderMark wrote:
> that doesnt explain why CEO pay overseas is a fraction of pay in
> the US. Or are you saying the CEOs in Europe are all poor? Or poor
> in relation to Americans.
I used to be in the camp that CEO pay was right where it should be. Free individuals negotiate a pay rate with free enterprises. Both sides have the ability to determine what is in their own best interests. If either side is unreasonable, that side will cause itself economic hardship. This is, in very simple terms, what capitalism and free markets are all about. And I live in America. Home of capitalism and free markets. Right?
So that's pretty much where it all derails. As I grew up, I started to realize that America is only the home of free markets in the history books. Our politicians and corporate leaders - the people we trust with out votes, our savings, our jobs, our freedom - have slowly eroded the freedom from capitalism to the point that I no longer believe we have a capitalist economy. We are clearly not fully socialized, but we are somewhere inbetween capitalism and socialism.
So, to sum up some ramblings, I do not think executive pay is ANYWHERE NEAR reasonable in America. I don't buy the argument either that to believe that exec comp is too high is inherently socialist. What I believe is that exec comp has GOTTEN too high because of the market was not free (market manipulation from gov't and corp board 'nepotism').
We are running out of chances to return to a free market economy.
However, the early theorists on capitalism were very aware of the dangers of crony capitalism, with more relation to Al Capone than classical economics, and the moral justification of high income differentials was always based on the theory of trickle-down.
What is trickling down certainly is not money.
Henry Ford knew very well that a capitalist society has to pay it's workers well enough to afford to buy the products.
Instead the economies of much of the Western world have been hollowed out, with production outsourced to the East.
This may in global terms have increased total productivity, but the cost is immense and is being borne by the middle and working classes in the West.
No economy ever attained a developed status with pure free trade operating, and nor is there such a thing as the textbook 'free economy'.
The plain fact is that France, with a partially planned economy and large state intervention, has a far better infrastructure than the Anglo-Saxons, including generating almost all of it's electricity from nuclear power emitting very little greenhouse gasses and minimising dependence on the oil-exporters.
They have demonstrated that they intend to lead in the field of electric vehicles.
In contrast the leaders of the American motor industry, let alone finance, have demonstrated hugely remunerated incompetence.
They have demonstrated that they intend to lead in the field of electric vehicles."
True...true...true. It should also be noted that the French are better at football than we Yanks. :)
Unfortunately, there are other things that are true: the French have significantly lagged behind the rest of the developed world in scientific discovery since Curie; and more importantly, France can not defend itself from aggression.
Not in any way defending the warring ways of the US in the past 30 years. Rather, the point is, Frances 'planned' economy does not generate enough for the French government to both 'provide' for the citizenry and defend it. Any country that can't reasonably defend itself clearly does not have an economy worth defending.
Honestly not anti-French. Just not willing to jump on the 'oh, I wish I were French' bandwagon :)
That rolled off the fingertips when typing; but it isn't really what I meant to say! :) The end of the sentence should probably read: "...does not have an economy worth worshipping." or something to that affect.
www.cdi.org/nuclear/da...
By the criteria you have selected no countries other than the US, Russia and perhaps China are wholly able to 'defend' themselves against 'aggression'.
Since US wars since 1998 or so have pretty well been paid for by Japanese and Chinese buying US debt, it remains to be seen how long this massive military effort is able to be maintained.
The US military is very much tied into retaining control of oil resources.
Since shortages and high prices are now inevitable in the medium term (see IEA reports) , France would seem to be far better placed than the US to transition to an electric economy with it's large proportion of nuclear power and road, transmission and rail networks in far better repair.
The US of course has massive resources,but the point of the present discussion is that they have been poorly deployed and mismanaged, with polemics replacing a real engagements with the issues.
Californian governance, or the green fanatics making building sensible low-carbon fuel alternatives almost impossible are examples.
In the 60s the US developed thorium reactors which are far better for producing energy than present light water reactors, but again they were killed by vested interests as they were lousy at producing weapon's grade materials and had a real potential to be cheaper than coal.
That seems to me to be the issue.
Vested interests in the US are using Brave New World type sloganising such as 'socialism bad' to prevent needed change and maintain control of resources whilst stymying the productive deployment of capital.
Second, I wrote about France today - ironic you mention it. It appears the socialist method for getting stimulus is even more 'efficient'.
www.fundmymutualfund.c...
You make some good points and as others have posted, people are under an illusion we are a free market system. We have 3-4 major telecom providers, we have crony capitalism throughout, we have captured political interests, a healthcare system dominated insurers, the only country on Earth who allows drug companies to advertise (why again? so in 30 seconds I can tell my doctor who has trained for 20 years what drugs I need?), etc.
Jeff Immelt even said, this is not free market capitalism - GE goes where government goes. Thats how they succeed.
I don't think people can face the truth of what we've become so they cling to the ideals.
The trick now is to realize what we have, admit it, and pray we find a way to make it better for the masses. And not use 10 second taglines to stop every constructive discussion.
Unfortunately the commentary on this thread is more progressive than anything on main stream cable TV or I'm sure the halls of Congress.
On Jul 08 11:52 AM Davewmart wrote:
> Perhaps it is worthwhile pointing out that I am a lifelong member
> of the Conservative party here in the UK.
> However, the early theorists on capitalism were very aware of the
> dangers of crony capitalism, with more relation to Al Capone than
> classical economics, and the moral justification of high income differentials
> was always based on the theory of trickle-down.
> What is trickling down certainly is not money.
> Henry Ford knew very well that a capitalist society has to pay it's
> workers well enough to afford to buy the products.
> Instead the economies of much of the Western world have been hollowed
> out, with production outsourced to the East.
> This may in global terms have increased total productivity, but the
> cost is immense and is being borne by the middle and working classes
> in the West.
> No economy ever attained a developed status with pure free trade
> operating, and nor is there such a thing as the textbook 'free economy'.
>
> The plain fact is that France, with a partially planned economy and
> large state intervention, has a far better infrastructure than the
> Anglo-Saxons, including generating almost all of it's electricity
> from nuclear power emitting very little greenhouse gasses and minimising
> dependence on the oil-exporters.
> They have demonstrated that they intend to lead in the field of electric
> vehicles.
> In contrast the leaders of the American motor industry, let alone
> finance, have demonstrated hugely remunerated incompetence.
America is the richest* country on Earth
*Excluding debt
Go back the past 50 years and see how many years we've run a surplus. Then ask yourself what could other countries "afford" if they chose to run deficits for as long as the eye can see. If you don't care about your debt, you can afford anything.
We just run up a credit card bill every year, and the bill has never come true. This is how we're "rich".
Our implied liabilities lead the world.
On Jul 08 12:55 PM Jason722 wrote:
> "The plain fact is that France, with a partially planned economy
> and large state intervention, has a far better infrastructure than
> the Anglo-Saxons, including generating almost all of it's electricity
> from nuclear power emitting very little greenhouse gasses and minimising
> dependence on the oil-exporters.
> They have demonstrated that they intend to lead in the field of electric
> vehicles."
>
> True...true...true. It should also be noted that the French are
> better at football than we Yanks. :)
>
> Unfortunately, there are other things that are true: the French have
> significantly lagged behind the rest of the developed world in scientific
> discovery since Curie; and more importantly, France can not defend
> itself from aggression.
>
> Not in any way defending the warring ways of the US in the past 30
> years. Rather, the point is, Frances 'planned' economy does not
> generate enough for the French government to both 'provide' for the
> citizenry and defend it. Any country that can't reasonably defend
> itself clearly does not have an economy worth defending.
>
> Honestly not anti-French. Just not willing to jump on the 'oh, I
> wish I were French' bandwagon :)
We seem to be picking up the same information!
The big difference is that the French and the Chinese admit that the economy is subject to direction, whereas the US and to some extent Britain try to pretend that they are not doing so, and so do it very inefficiently and in ways which are tailor-made to create manipulation and theft.
Goldman Sachs and the Fed's market manipulations are perhaps the most blatant examples.
For the mainstream media, I find yahoo surprisingly ready to think outside the box, and to give space to people who are prepared to say that the Emperor has no clothes:
finance.yahoo.com/tech...
Even stranger, Bloomberg has been prepared to rock the boat, by calling for disclosure to the discomfort of the banking robber barons at the Fed and in power.
I am especially troubled by the notion that a country that would have been German twice (if not for those other countries actually able to field a military) is a model of a safer and more stable system. It just isn't true. I can't make this argument against the Scandanavian countries. America is no longer capable of self-defense, either. The America worth defending began to vanish a long time ago. But freedom got America to a great point once...
On Jul 08 02:59 PM Davewmart wrote:
> Tradermark,
> We seem to be picking up the same information!
> The big difference is that the French and the Chinese admit that
> the economy is subject to direction, whereas the US and to some extent
> Britain try to pretend that they are not doing so, and so do it very
> inefficiently and in ways which are tailor-made to create manipulation
> and theft.
> Goldman Sachs and the Fed's market manipulations are perhaps the
> most blatant examples.
> For the mainstream media, I find yahoo surprisingly ready to think
> outside the box, and to give space to people who are prepared to
> say that the Emperor has no clothes:
> finance.yahoo.com/tech...
>
> Even stranger, Bloomberg has been prepared to rock the boat, by calling
> for disclosure to the discomfort of the banking robber barons at
> the Fed and in power.
I am very far from being anti-American, it is a country which I have spent some little time in and in some respects both like and admire.
However, some of the present refusals ( I am not referring to you here) to confront honestly massive American under-performance in many areas, from a bloated and inefficient health care system which is frankly unacceptable in it's failure to provide any adequate cover to the poor, to it's equally disproportionate military, to it's rapacious financial system and oligarchic and more or less feudal political system with little change of incumbent and both being obliged for funds to the same corrupt players remind me dreadfully of Britain in the early 1950's and 60's, when people dwelt excessively on the past glory of having won the second world war, and still retained Imperial ambitions without the means to enforce them or a full realisation that the world had moved on.
I would respectfully suggest that the performance of the US in both the Second, and, God knows, in the First world war has little relevance to current conditions.
Reference to good ol' Yankee ingenuity may fall short of the case, when technologists and scientists are being turned out in multiples of US quantities in China and to some extent India.
None of this means that the US is without strengths, or that no improvement is possible, but in my view it can only come once failings are recognised and the superior performance elsewhere in many respects is noted, not through an over-ideological bias towards a state of assumed liberty which has usually had a very limited factual existence.
As a British Conservative I am almost entirely pragmatic, unlike the more ideological strains prevalent in the US, and efficient market theory, trickle-down economics and Laffer curve based tax policies have had their day.
There is no single 'right' model, of course, but I would hope that the US would lean more toward a Scandanavian style desire to provide for all it's people, rather than a South-America style of the vast bulk of it's people being impoverished, whilst the elite live in armed enclosures in fear of kidnap.
That is where they will end up if no attempts are made to redress the ever-growing inequalities, impoverishment of the middle classes and the robber baron techniques of the Goldman Sach's of the world.