Sun, 21 Oct 2012, 2:44pm PDT
One way to rig earnings is to acquire other companies and play with accounting. That game would stop.
1. Demand creates earnings as well as jobs.
2. On one hand, companies want to show profit by becoming more 'efficient' (cost cutting and resource adjustment). At micro level, that strategy is rational. At macro level, it is irrational: when every company follows the same suit, people loose jobs and, as a consequence, loose purchasing power. Anwar Sheik from New School University did some research on the lagging time between firings and loosing purchasing power.
3. These companies are in collusion with media. Media hypes about growing middle class in India and china. As if this new Indian/chinese middle class supplant the lost purchasing power of American consumers.
4. In the states, only 17 percent of earnings is left for consumption, once you take away mortgage payment, insurance, taxes, and basic needs.
5. Same thing is happening in India and China. The burgeoning middle class there spending most of their earnings for a new house (apartments as they are called in Indian metropolis), etc. What is left for consumption, then?
6. Both left and right share the same economic paradigm: neoclassical garbage with a difference of flavor. Both sell the wisdom that soveriegn nations function like households in terms of budget constraints. If the government strives for balance budget, this process takes away many govt jobs (however non-productive they might be). This reduces the aggr demand, which forces companies to cut down production and lay off folks.
7. Sovereign nation's cumulative budget debt = net financial savings for the private sector. (follow Modern Money Theory or MMT for more on this). So, the elite (esp uber wealthy, not those pediatric cardiac surgeons at Stanford who makes $1M a year) wants to their prior cumulative savings intact; that's why they are against budget deficits.
8. What is going to happen, when most of the stuff we consume can be automated. In fact, this is what is happening. Foxconn and Amazon are replacing humans with robots. The effective result destroys the current dominant paradigm, a paradigm that one should work to subsist, to pay rent/insurance. Eventually, this will happen. I don't know how long it will take. Maintaining machines is easier than managing humans, who demand lunch breaks, health insurance, pensions, safety, etc. That's the reason why companies in the developing world are replacing with machines.
9. Fellow human's debt is your asset. That's why we see all irrational behavior in housing market. As long as someone provides a mortgage, people take it--and this in turn provides finanical assets for those who exit the market.
10. The current consesus in every country for all but the uber wealthy is : study well, go to a college, get a degree, get a job, get a wife, produce kids, then send these kids through the same cycle. There are not many jobs out there folks. There is a hidden cost from moving from agrarian and/or manufacturing with the aid of humans to the new manufacturing, new net-orineted service economy. (In Old days, you had many travel agents; today we use websites. Same with appointments, scheduling, etc). Eventually, service sector will become efficient in terms of the human labor required.
11. This process of selling education to folks creates backlash eventually. Either the government has to step in and provide jobs for the unemployed or it has to provide better safety nets. Otherwise, people are not gonna be happy.
12. FED can't control the aggregate demand. What QEn does is swapping one kind of financial assets with another kind of financial assets. Only fiscal stimulus (government spending via jobs, projects, etc) can affect the aggr demand. We got tons of ignorant financial/economic journalists out there, selling garbage for mass consumption.