Hey, that was my point. I wasn't saying shut down credit card companies. I was responding to a senario saying here is the solution . . . but I realize that senario wasn't reality.
A few points: Joe Biden, from Delaware, is VP. MBNA, the biggest credit card company is in Delaware. Numerous corporations are Delaware Corporations. According to this site, http://www.wisegeek.com/what-is-a-delaware-corporation.htm, almost 1/2 the Fortune 500 companies are Delaware Corporations. I wouldn't hold my breath that this administration is going to do anything to hurt anything to do with Delaware. In fact, they've funneled about $3.7T of cash into companies like MBNA. 90% of the people don't work. True unemployment rate of 20% doesn't mean 80% of the people don't work. The workforce is on the order of 120M, and the population is on the order of 310M. So something like 190M people don't work, or 61% don't work. For MikeDC - companies do sell their own stock and there are more than just INITIAL Public Offerings (there are secondary ones, and so on). But in general, when you buy stock you are buying it from some other person not particularly related to the company. More likely, you're buying shares from some institution, like a retirement fund or maybe an insurance company. More for MikeDC - remember our conversation before the housing bubble burst, and what I said about consumer spending?
I think you have a point about Biden/MBNA, although I'd question how much influence Biden actually has, as well as how much influence MBNA has over Biden. As for the corporations being incorporated in DE, that has nothing to do with anything. My company is a DE corporation, and I don't give two shits what happens to Delaware. Turn it into a nuclear waste dump, fine with me, as long as the secretary of state's office stays open. It's like ships being registered in Liberia. None of the ship owners cares whatsoever about Liberia. It's just cheap and easy to register a ship there. Well, if we get rid of those damn child labor laws, we can up the % working, and solve that pesky illegal immigrant problem. barfo
barfo, I don't believe for a second that MBNA and companies like them will see any of the hate for business shown by the administration elsewhere. That 190M don't work is a pretty good thing, no?
This is relevant I believe. http://www.ted.com/talks/laurie_santos.html Basically she's saying that like humans, monkeys will go for the safe bet when it comes to gains, and gamble when it comes to losses. Basically she's arguing that primates in general make dumb decisions about finances.
Link NPR, too. Work's not bad at all, but it's not good if everyone has to work and there's no leisure time or time to invent new things. So do you believe that those who are able to work should work? Or do you think it's OK for many who are able to live for free off the taxpayer? I'm not talking about children, but adults who are able.
What about people who have made tons of money and want to retire young? Should they be able to stop working, even though they can work? (just a curious)
Google "wealth effect" I'm not sharing my opinion at this point, I'm asking barfo for his. Besides, people like to see me make him dance. [video=youtube;PD7KRqoY9Ss]http://www.youtube.com/watch?v=PD7KRqoY9Ss&feature=player_embedded[/video]
Business people are a lot like Rudy Fernandez. I don't believe adults who are able to work should be able to live for free off the taxpayer, unless there is no work available to them. barfo
Damn this article has me pegged. I have no job and am often worried about spending money on basic things and yet I have no problem buying iPads for me and my brother. I choose the cheaper gym, but I gamble the amount of the better gym in one night. Caught!
Denny- Yeah, there's more than just IPOs, I was mostly just simplifying. IIRC, you agreed with the idea consumption "drives" economic growth? Economic growth means an increase in folks' income. Consumption is folks' spending. Increased income could be used on personal spending or a number of other things (saving or taxes, for example), but it's intuitive to think about consumption rising as a function of income. If I go from making $50k to $100k/yr, I'll increase my consumption by some amount. It doesn't have to, but increasing income allows increasing consumption. The opposite is not the case. It is neither intuitive nor correct to say that I've increased my spending, therefore it is possible for me to earn more money. Now, at the aggregate level it's true in some way that one person's spending equals another person's income. That's basically the identity property of GDP (GDP as measured spending will = GDP as measured income). Yet that doesn't explain causation. Remember, the concern here is change (growth or decline) in income. The identity... in economics it's put into a "circular flow model" is pointless in explaining changes because it has no functions for time or productivity.
The point I raised was how 2/3 of the economy is driven by consumer spending. The spending was made possible by profits on speculation (day trading, real estate) and debt (refinancing). The issue now is jobs, jobs, jobs, just to get people who could work and earn money and spend it to be able to do so.
There is no "how" because 2/3 of the economy is not "driven" by consumer spending. 2/3 of the economy is consumer spending. 2/3 of a pie does not drive the rest of the pie. It is 2/3 of the pie. As you say, the issue is not spending, it's getting people to work. Those are supply issues. Why aren't people working? Well, for pretty much the reasons I laid out in the second post. Look at the people who aren't working. They are disproportionately your working class folks. I won't bother using the term "low skilled", but point out that the employment rate for high skilled workers is quite small. The recession looks like a "bizarro" economy because it affects different people differently. The policies I've pointed out are basically 1. Making it more costly for businesses to hire working class folks (uncertainty, higher min wage), so they're less willing to hire. 2. Making it more costly for working class folks to go out and work (unemployment benefits work out to a better deal, in many cases, than taking an available but low paying jobs). Thus, we have high unemployment.
Higher minimum wage does drive down employment to some extent. However, I don't see how uncertainty changes hiring of low-skilled, low paid workers. Low-skilled, low-paid workers are by definition easy to find, and easy to get rid of. If I need them now, I hire them now. If conditions change in the future, I get rid of them. I'd argue that uncertainty would have a much bigger effect on hiring professionals, where the time and effort to recruit is higher, and there are higher costs for termination. People on unemployment are lazy and don't want to work? I'd like to see evidence for that assertion. It is true that getting laid off from a high-paying job will provide better unemployment benefits than taking a minimum wage job. Those people, I would expect to stay unemployed until they have to go flip burgers. However, now we are talking about replacing a high paying job with a low-paying job. That might help the unemployment rate, but it is not helping the economy. The unemployment rate isn't the only measure of success here. barfo
I touched on this issue in another thread, but the more fundamental question is why has personal consumption become such a large percentage of our economy? When you are merely producing for the populace, you limit your market to 300M people who are affected by many of the same local and national issues. This leads to more boom and bust. Developing a true export economy allows you to spread your risk over the entire planet and also increases your market. The economic growth over the past two decades has largely been built on consumer spending, and even worse, consumer credit. That is a foundation of sand. There is no more slack in the line; consumers are tapped out. Until we repay our personal debts, the economy won't get going again. A more fundamental change has to occur in our economy. We have to move to an economy where we export more goods and services. One that's less consumer-based and more business-based. I'm not a mercantilist by any means, but citizens need to not only pay off their debts, but have some substantial savings for retirement. Our parents and grandparents did fine with fewer consumer products; I bet we can as well. The Yankee ideal of thrift has faded away and needs to be reborn. In fact, that heritage of using what you have laying around is consistent with being "green", which should make all the PC folks feel terrific. And we haven't even begun to address the spending problems we have with our local, state and federal governments. Too many people are dependent on them for their daily needs. People need to become more dependent on themselves. If we're going to promote a new service or expansion of benefits, it needs to be paid for from the get-go. I bet if taxes were increased immediately after passing a new "benefit" we'd see fewer of those types of programs. Government deficit spending should only be a last resort. This stuff won't be sorted out overnight. And barring a miraculous new invention that transforms our economy, we're headed for a "new normal"--much slower growth. We have the Japanese example of what not to do. They have not only one "lost decade", but are on the verge of two of them. The relationship between our population and government needs to change. Our expectations of filling the void in our lives with new stuff has to end. Welcome to the 1930s.
