Whats Causing Record Profits High Unemployment?

[ItsTime]

The the title says. Are we in a jobless recover? Whats going on?

[acptulsa]

Oh, let's see. What's going on?

Well, we have outsourcing, mechanization, profit taking, spinning off, sales of divisions, corporate dismemberment, accounting tricks designed to help the CEO get his bonus, and a general lack of long term thinking that will eventually leave these CEOs with no customers but each other because the whole rest of the world will completely lack disposable income. And, of course, they'll have no company left to run after selling off all the parts. But, hey, the stockholders get a dividend this quarter, so everything else will take care of itself. Right?

[armstrong]

thats about right..oh wallyworld is hiring :mad:

[hazek]

If you are willing to pay 6 buck you can get the answers here: http://www.theamericandreamfilm.com/index.php

[erowe1]

Those record profits are at a record because they're measured in nominal dollars, not indexed to inflation.

[HOLLYWOOD]

FEDERAL RESERVE all their Money Pumping and Welfare to Banks and Corporations artificial bubble

CONGRESS... BAILOUT Legislation for Corporations, Banks, and Wall Street... Welfare, Tax Credits, Write-Offs, Reduced Taxing, Subsidies, etc

Inflation... Inflating sectors for business to capitalize upon... devaluation of the American currency

2009 average paid Corporate Tax Rate after all the BS deductions/write-offs/welfare: 10.9%

[TonySutton]

One of the big reasons why corporate earnings are so high is because of the expiring Bush tax cuts. Many businesses have been pulling their backlogged work into this year to avoid paying taxes at a higher rate next year.

This is one reason I have been worried about next year.

[Travlyr]

The the title says. Are we in a jobless recover? Whats going on?
What's going on? Main stream media is a tool of the corporate world. They promote opinions for the people who pay their salaries ... mostly International corporations.

Jobless recovery means that corporate profits increase by transferring high paying jobs to areas of the world where employee costs are lower. A jobless recovery is great for corporate owners and terrible for wage earners looking for a job.

Ron Paul says that honest sound money promotes full employment through equal opportunity for all. That makes sense to me.

[Brian4Liberty]

FEDERAL RESERVE all their Money Pumping and Welfare to Banks and Corporations artificial bubble

CONGRESS... BAILOUT Legislation for Corporations, Banks, and Wall Street... Welfare, Tax Credits, Write-Offs, Reduced Taxing, Subsidies, etc

Inflation... Inflating sectors for business to capitalize upon... devaluation of the American currency

2009 average paid Corporate Tax Rate after all the BS deductions/write-offs/welfare: 10.9%

Ding! Ding! Ding!

Hollywood hits it out of the ball park! ;)

Those who profit from government debt and spending are making record profits.

Post #4 in this thread addresses your question to a certain extent:
http://www.ronpaulforums.com/showthread.php?271280-The-Creature-from-Johnny-s-Half-Shell

[Brian4Liberty]

Oh, let's see. What's going on?

Well, we have outsourcing, mechanization, profit taking, spinning off, sales of divisions, corporate dismemberment, accounting tricks designed to help the CEO get his bonus, and a general lack of long term thinking that will eventually leave these CEOs with no customers but each other because the whole rest of the world will completely lack disposable income. And, of course, they'll have no company left to run after selling off all the parts. But, hey, the stockholders get a dividend this quarter, so everything else will take care of itself. Right?

Also a good answer.

If the question is about record profits at the few big Wall St. financial companies, that is about government debt (and monetizing it).

For global companies that are actually doing something, it might be what acptusla said.

[smithtg]

Oh, let's see. What's going on?

Well, we have outsourcing, mechanization, profit taking, spinning off, sales of divisions, corporate dismemberment, accounting tricks designed to help the CEO get his bonus, and a general lack of long term thinking that will eventually leave these CEOs with no customers but each other because the whole rest of the world will completely lack disposable income. And, of course, they'll have no company left to run after selling off all the parts. But, hey, the stockholders get a dividend this quarter, so everything else will take care of itself. Right?

agree with almost all of this. Outsourcing is huge in technical jobs and "globalization" is such a worn out word in the corporate world it almost makes me sick

Profits to the shareholders and forget about growing much is the new CEO mantra. Also sell off anything that doesnt make 15% year over year profit.

[invisible]

Don't forget the laws of supply and demand. Right now there is more supply of labor than there is demand, causing wages to fall, thus increasing profits. Many places are finding every excuse possible to lay off experienced workers and replace them with inexperienced people that they can pay less. This happened to a nurse (20 years experience) I know, she was fired for a made-up excuse. Her former coworkers tell her that all the new hires have been people with no experience. In applying for other jobs, she has found it almost impossible. She says that she'll go to interviews or apply for jobs, and younger workers just out of nursing school are walking out of the office with W4 forms, while she keeps getting told "don't call us, we'll call you". Even though she is willing to work for whatever she can get, no one will hire her for less than what she was getting for fear of her leaving as soon as she gets a better offer. Wage deflation is certainly a prime factor with why the economy is being manipulated as it is. Remember back in the mid 1990's? "the sky is falling, unemployment is too low, labor shortage, it's so horrible that employers have to raise wages to keep good employees" (notice this is when we stopped guarding our southern border) Now it's record profits for whoever hasn't yet been forced out of business, so everything is hunky-dory and we're in a "recovery".

[Brian4Liberty]

Don't forget the laws of supply and demand. Right now there is more supply of labor than there is demand, causing wages to fall, thus increasing profits. Many places are finding every excuse possible to lay off experienced workers and replace them with inexperienced people that they can pay less. This happened to a nurse (20 years experience) I know, she was fired for a made-up excuse. Her former coworkers tell her that all the new hires have been people with no experience. In applying for other jobs, she has found it almost impossible. She says that she'll go to interviews or apply for jobs, and younger workers just out of nursing school are walking out of the office with W4 forms, while she keeps getting told "don't call us, we'll call you". Even though she is willing to work for whatever she can get, no one will hire her for less than what she was getting for fear of her leaving as soon as she gets a better offer. Wage deflation is certainly a prime factor with why the economy is being manipulated as it is. Remember back in the mid 1990's? "the sky is falling, unemployment is too low, labor shortage, it's so horrible that employers have to raise wages to keep good employees" (notice this is when we stopped guarding our southern border) Now it's record profits for whoever hasn't yet been forced out of business, so everything is hunky-dory and we're in a "recovery".

Another winner!

[Anti Federalist]

Lots and lots of win in this thread.

+1 to everybody.

[DamianTV]

The the title says. Are we in a jobless recover? Whats going on?

Record High Greed.

[tangent4ronpaul]

The solution is pretty simple:

Get rid of all the trade agreements. There isn't one out there that doesn't give the other country an advantage over the US and drives jobs overseas.

Secondly, either get rid of all the unconstitutional regulatory agencies and thus the burden that makes doing business (employing people / making things) unprofitable OR impose those same things on corporations that have employees overseas (OSHA, health care, comparable wages, taxes, paperwork, inspections, etc.) and thus level the playing field, making it more desirable to hire US workers again.

Lastly, and optionally - teriffs and high taxes on any work done overseas or products imported from overseas.

-t

[dean.engelhardt]

The the title says. Are we in a jobless recover? Whats going on?

In the 50's our economy was based on manufactoring. Today the major industry is financial services. The leading US industries today are not labor intensive. Foreign labor is too cheap to make products in this country.

[erowe1]

Profits to the shareholders and forget about growing much is the new CEO mantra. Also sell off anything that doesnt make 15% year over year profit.

Profits to shareholders isn't a new mantra. It's the old longstanding mantra of capitalism. And more importantly, it is the correct mantra that all corporations should have. The chief goal of all businesses should be to maximize profits. If that means outsourcing, then outsourcing is the right decision. Seeing corporations make decisions based on their bottom lines shouldn't make you sick. You should admire it.

[erowe1]

Record High Greed.

Hogwash. The natural inclination of all people to pursue their own interests doesn't change. What changes with time is the way policies affect people's assessments of what they need to do to satisfy those interests.

[Anti Federalist]

Foreign labor is too cheap to make products in this country.

I don't buy that, many high end manufactured products that find their way into US markets are manufactured in very high labor cost nations like Canada, Germany, Sweden and Finland.

No, I'm convinced that the reason nothing gets made here anymore is a deliberate set of policy, tax and legal initiatives that have systematically pulled the pants down on the American worker and American business and given them both a right jolly rogering at the behest of the global "free trade" crowd.

[JacksonianBME]

Simple answer: insane monetary policy now and previous decades. The core of Austrian Business Cycle Theory and our de-industrialization comes from monetary policy.

[Pete Kay]

An MIT economist wrote a report that showed that technology is rendering the middle class obsolete.

http://www.good.is/post/automation-insurance-robots-are-replacing-middle-class-jobs/


People say America doesn’t make anything anymore, but that’s not true. With the exception of a few short lapses, manufacturing output has been on the rise since the 1980s. What is true is that industrial robots have been carrying ever more of the manufacturing burden on their steely shoulders since they appeared in the 1950s. Today, a Japanese company called Fanuc, Ltd., has industrial robots making other industrial robots in a “lights out” factory. (That’s the somewhat unsettling term for a fully automated production facility where you don’t need lights because you don’t need humans.) That’s where we’re headed.

[JacksonianBME]

Like it says lights out factories have been around for decades. My father visited one when he first started out in the 80s and was pretty amazed by it. No workers except for highly skilled labor, technicians, and a few engineers for maintenance and knowledgeable oversight. I don't think the middle class is obsolete. They have skills and many have somewhat of a good education. They just need to find the right match and ending unemployment benefits would speed up that process.

[Anti Federalist]

An MIT economist wrote a report that showed that technology is rendering the middle class obsolete.

http://www.good.is/post/automation-insurance-robots-are-replacing-middle-class-jobs/

Something with this claim does not make sense, and I've seen it many times before.

Part of where the problem lies, is what is classed as "manufacturing". Like government employment figures, much of the devil lies in the details. Making Big Macs is not "manufacturing".

Here's real wages:

http://dark-wraith.com/images/AHW.png

Here is productivity and manufacturing:

http://www.scdigest.com/images/misc/Manufacturing_Data.jpg

So there is this huge "boom" in manufacturing, and a huge increase in worker productivity, but no corresponding increase in wages?

I don't buy it, not for one second.

[JacksonianBME]

I know middle class REAL wages had been rising up until 2008. Obviously, the down turn (which we all know who and what the real culprits are for that) forced many private sector wage freezes.

http://mises.org/Community/forums/t/15824.aspx

That forum thread also presents data that says real manufacturing sector wages had been rising and basically plateaued in the downturn.

(BTW, that thread in the link I posted is just excellent to read through entirely.)

[Travlyr]

I know middle class REAL wages had been rising up until 2008. Obviously, the down turn (which we all know who and what the real culprits are for that) forced many private sector wage freezes.

http://mises.org/Community/forums/t/15824.aspx

That forum thread also presents data that says real manufacturing sector wages had been rising and basically plateaued in the downturn.

(BTW, that thread in the link I posted is just excellent to read through entirely.)

Then why do we have so many homeless people?

[ItsTime]

Great answers in this thread.


I know middle class REAL wages had been rising up until 2008. Obviously, the down turn (which we all know who and what the real culprits are for that) forced many private sector wage freezes.

http://mises.org/Community/forums/t/15824.aspx

That forum thread also presents data that says real manufacturing sector wages had been rising and basically plateaued in the downturn.

(BTW, that thread in the link I posted is just excellent to read through entirely.)

Well that thread does explain why we have so much "crap". How the poor in the US have cell phones, tvs, dvd players ect.

[JacksonianBME]

Then why do we have so many homeless people?

Well, prima facie I would say that most of the people who are receiving these wages probably aren't homeless. As far as those who were receiving these wages and are now homeless, they lost their homes because of, as Dr. Paul would put it, "destruction in the name of humanitarianism." In other words, Fannie and Freddie, who socialized the credit/cost, and the subsequent derivatives gamble of Fannie and Freddie securities by Wall Street, all encouraged by easy money policy from the Fed. Who were the first to lose their homes in the crisis? Obviously the poor, but also the middle and probably even some of the upper middle class who were over-leveraged. They shouldn't have had a mortgage for the home they were in in the first place and now they don't have a home plus their credit rating is ruined.

The American Dream is not forever making payments on a low interest mortgage, no matter what Clinton, Bushie, and Obama tell you. You will never pay it back. The American Dream is ownership and that comes from purchasing something you can afford or a mortgage that you can pay off. As far as equity from a home, well we have great evidence that that is certainly not a guarantee now that we have overbuilt (as a result of suppressed interest rates) and housing has deflated and still needs to deflate. Renting until you can afford something is not futile, unless you think eating is futile as well.

As far as those homeless anyways, public schools (even though they suck for the most part) offer education to potentially anybody that walks through their doors and there is plenty of federal money for college (which can be debated if that is a good thing too) so I would there is plenty of opportunity that these people passed up on. But part of the blame doesn't fall on them. The system we have dictates and our officials tell us that the natural rate of unemployment is around 5%. Why is that? Why can't we have truly full employment? I was taught in my voodoo macroeconomic class in college that it is because there are just some people (about 5%) that just don't have the skills to get any job. I think this is untrue. I think that the natural rate of unemployment it is a result of our monetary system somehow.

I know in Nashville there are a number of homeless that like the vagabond lifestyle and make good money begging. There was a newspaper story on it and the police urged people not to give them handouts because they make a lot doing so and you are only encouraging that behavior. I understand the concern for the homeless, but bleeding hearts don't solve the problem. It was tried with Fannie and Freddie and looked what happened.

[Travlyr]

Homelessness and poverty are on the rise in America. If real wages were keeping pace with inflation, then home ownership and prosperity would be on the rise. Therefore, I question the validity of the claim: http://mises.org/Community/forums/t/15824.aspx

[JacksonianBME]

Homelessness and poverty are on the rise in America. If real wages were keeping pace with inflation, then home ownership and prosperity would be on the rise. Therefore, I question the validity of the claim: http://mises.org/Community/forums/t/15824.aspx

Well, like I tried to imply there are people losing their homes who are making $90,000. Rising real wages != people will spend wisely. Lots of those who are making/made these good wages lost their homes because they were just making the payment and then their rates ticked up when the defaults the banks were absorbing started to propagate.

There is a reason 1% of the population own 40% of the wealth. They understood you don't get to the position they are in on borrowed money. They also have this wealth because they own capital goods and the factors of production. These are things that you can't really redistribute unless you advocate communism, and then there is no incentive for progress since you took away private ownership and profit motive. However, although they own the capital goods, all of us get access to the consumer goods, for a price, their capital produces and this is why the standard of living is pretty high here despite the destructive policies of the Fed. Now, if you want to talk about income distribution inequality I think you have a point. But the man who makes $30,000, but owns what he has, is wealthier than the man who makes $90,000 and is up to his eyeballs in debt.

I would say the income distribution inequality is a result of a consumption based society/economy. The market correction that came in 2008 and still ongoing is trying to work out the imbalance (as Schiff has described) of us consuming too much and not producing enough. Production based economies provide stable, high paying jobs as the data I presented shows, just not enough people have or there aren't enough openings in manufacturing positions (I would throw in engineering/science and R&D positions as well). Production comes from investment and subsequent capital formation, which even a Keynesian would agree, comes from savings which is something Dr. Paul reiterates in his interviews. People are saving and paying off debt right now which leads to investment in the future, but is hurting in the short term due the lack of spending. So Keynesians naturally advocate government spending to substitute for the consumer and private sector saving and also Fed intervention to lower interest rates to discourage saving and encourage spending in the short term.

I realize just now I kind of veered off the topic of homelessness and poverty, but our policies for a long time have encouraged homelessness and poverty.

[Travlyr]

My perception is that many people were wealthier in the 60's & 70's than they are now. There were a lot of households where one earner supported big families. I don't buy the claim that real wages are higher now than a generation ago. It may true for a smaller portion of the population, but many wage earners have not been able to keep pace with inflation. Homelessness and poverty were present years ago, but not like it is today.

[JacksonianBME]

My perception is that many people were wealthier in the 60's & 70's than they are now. There were a lot of households where one earner supported big families. I don't buy the claim that real wages are higher now than a generation ago. It may true for a smaller portion of the population, but many wage earners have not been able to keep pace with inflation. Homelessness and poverty were present years ago, but not like it is today.

Yeah now that I think about it, the real wage data I presented could be using the core CPI, which excludes food and energy.

[Anti Federalist]

My perception is that many people were wealthier in the 60's & 70's than they are now. There were a lot of households where one earner supported big families. I don't buy the claim that real wages are higher now than a generation ago. It may true for a smaller portion of the population, but many wage earners have not been able to keep pace with inflation. Homelessness and poverty were present years ago, but not like it is today.

In many ways they were, my dad raised a family on a roughly $150 a week.

But that was also in a bungalow home with one bathroom that he bought from my grandparents for $3000.

[Travlyr]

In many ways they were, my dad raised a family on a roughly $150 a week.

But that was also in a bungalow home with one bathroom that he bought from my grandparents for $3000.

Certainly technology has made our lives easier, yet quality of life has steadily deteriorated with increased controls and business regulations.

[Anti Federalist]

Certainly technology has made our lives easier, yet quality of life has steadily deteriorated with increased controls and business regulations.

Agreed.

As I alluded to in another thread, yes, we have an abundance of pretty shiny things, we have ease and comfort, and we have a high tech surveillance grid all around us.

All things being equal, I'd rather have a few less shiny things, a few less whizbang electronic geegaws, work a little harder and have more freedom.