June 08, 2008

Well Duh

Here is a news article that makes me wonder just how stupid Corporate America is:

Wall Street to weigh consumer spending

Here's the money quote:

"With jobs growing scarcer and energy costs still climbing, Wall Streetís big worry is that Americans are going to keep tightening their budgets ó a shrewd move on the part of consumers, but an alarming prospect for companies that depend on them."

Right -- they depend on the people they laid off, on the unemployed whose jobs were sent overseas, on the people that they don't give raises to. I just bet they do.

A long time ago, Robert Heinlein wrote a book called Beyond This Horizon. In it he has a mathematician/economist explain to The Man From The Past how economies run. He points out that profits must be calculated into the equation from the beginning in order to get them at the end. I did not understand that very well until recently. The loss of jobs against the expectation of bigger profits, and the ruination coming from that expectation, have made it pretty clear what the fictional economist meant. If the money does not go to people to spend, profits are going to drop.

Get it?

Wall Street and Corporate America don't. They seem to imagine that profits magically happen. Surprise! They don't. Too bad.

Posted by Scorpio at June 8, 2008 10:40 AM | | Technorati links |

I am by no means a Marxist, but this exact situation is what Marx pointed to as unrestricted capitalim's built-in self destroyer.

Posted by: Oregonian37 at June 8, 2008 12:45 PM

It's all about CASH FLOW.

I have a simple way of describing this.

I inscribe a circle in the air with my finger, with the top of the circle representing the wealthiest, the corporatists, the investors, the lobbyists, the elitists, while everyone beneath the top are part of the "trickle-down," Reaganesque economic stratum.

Then, I move my finger rapidly around in a circle, while stating that a healthy, vibrant society has economic mechanisms in place to make certain that that nation's wealth doesn't get stuck at the top, thus impoverishing everyone below, essentially turning that nation into a Banana Republic.

Then I slow my finger down, inscribing the circle more slowly, like a nation's economy slowing down, because when most of the wealth and power concentrates in the hands of only a few of that nation's citizens, then the rest of the people in that society have less money to spend, which inevitably drags everyone down financially.

So, FDR, after being elected president, did a brilliant thing in an attempt to increase our nation's CASH FLOW...he redirected, redistributed more of our nation's wealth from the wealthiest to the increasingly larger number of our nation's poorest, thus saving our nation and putting us in a much stronger position financially at the beginning of World War II. Plus, FDR and his administrations put in place governmental mechanisms and federal agencies to try to thwart any future attempts to concentrate so much of our nation's wealth in the hands of a few.

This worked well for several decades until run-amok Republicans (and some conservative Democrats) decided that a Banana Republic, with Banana Republicans and their crony pals in charge, was much more preferable than a CASH FLOW RICH, FDR-generated society.

We are now experiencing the bitter fruit of this rotten Republican tree, with Reagan's evil "trickle down" economic theory (Voodoo economics someone called it), which has left a whole lot of U.S. citizens worse off while the wealthiest make out like bandits.

And many in America's middle class (a class that is rapidly shrinking) are discovering that their client/customer base is shrinking as more and more U.S. citizens tighten their belts because they no longer can afford to go out to eat or buy high-end items at the mall...or buy a new car or new clothes...because they are increasingly having trouble keeping their car filled up and their family fed.

Sounds like a CASH FLOW POOR, Banana Republic(an) scenario to me!!

Posted by: The Oracle at June 8, 2008 10:57 PM

Well said, Scorpio. It's reassuring to read your post and the comments that follow it. Makes me realize I'm not the only person who sees this obvious flaw in the prevailing economic rhetoric.

Posted by: Flo at June 9, 2008 01:04 PM