Comments on: When the government outsources employment policy http://blogs.reuters.com/felix-salmon/2013/07/05/when-the-government-outsources-employment-policy/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: nixonfan http://blogs.reuters.com/felix-salmon/2013/07/05/when-the-government-outsources-employment-policy/comment-page-1/#comment-47628 Wed, 10 Jul 2013 20:56:47 +0000 https://blogs.reuters.com/felix-salmon/?p=22206#comment-47628 QE has been pushing on a string because almost none of it has made its way into the money supply. Money growth has been retarded by credit contraction following the Minsky Moment. However, private sector credit has finally begun to grow, especially for businesses. Household credit contraction has ended but hasn’t yet begun to grow. Once HH credit starts to grow, you will see money growth accelerate, thus raising NGDP.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2013/07/05/when-the-government-outsources-employment-policy/comment-page-1/#comment-47601 Mon, 08 Jul 2013 02:41:05 +0000 https://blogs.reuters.com/felix-salmon/?p=22206#comment-47601 TFF: -:)

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By: TFF http://blogs.reuters.com/felix-salmon/2013/07/05/when-the-government-outsources-employment-policy/comment-page-1/#comment-47600 Sun, 07 Jul 2013 22:21:17 +0000 https://blogs.reuters.com/felix-salmon/?p=22206#comment-47600 There you go, KenG, that’s your next project. RoboCEO. Can you please program it to avoid ego-driven takeovers at exorbitant valuations? More often than not, that is all corporate CEOs are good for.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2013/07/05/when-the-government-outsources-employment-policy/comment-page-1/#comment-47599 Sun, 07 Jul 2013 19:34:43 +0000 https://blogs.reuters.com/felix-salmon/?p=22206#comment-47599 No argument there, TFF, but the people earning 10-digit salaries for managing those F500 companies should be leaders, not caretakers. If all they (corporate boards) want to do is minimize risk, I’m sure some startup can develop software to do that, for a fraction of the cost of a conventional wisdom-driven CEO.

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By: TFF http://blogs.reuters.com/felix-salmon/2013/07/05/when-the-government-outsources-employment-policy/comment-page-1/#comment-47598 Sun, 07 Jul 2013 17:01:57 +0000 https://blogs.reuters.com/felix-salmon/?p=22206#comment-47598 Prisoner’s Dilemma,KenG. No one company (no ten companies) is enough to drive those positive feedback loops. The government has the power to change the rules, but as presently set companies are rewarded individually for cutting costs, even if that results in a sub-optimal outcome for the whole.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2013/07/05/when-the-government-outsources-employment-policy/comment-page-1/#comment-47597 Sun, 07 Jul 2013 15:49:01 +0000 https://blogs.reuters.com/felix-salmon/?p=22206#comment-47597 TFF, I agree with most of what you say, except for the “smart management” part. A market economy is filled with positive feedback loops and self-fulfilling prophecies; when enough large companies believe the economy will be weak and not worthy of investment, then that’s what will happen, because they reduce investment. They are missing an opportunity to grow both the domestic economy and their business, which is why I don’t think they are smart, but just risk-averse members of the corporate sheep herd.

The U.S. has many advantages over other economies for justifying investment. In spite of recent declines, we still have a (relatively) good education system. In spite of insufficient maintenance, we still have the most developed transportation infrastructure (a self-healing network of highways may not be the most efficient transportation system, but it allows for the most advanced distribution channels in the world, save for maybe the people in China who deliver lunches door to door on the same day). Our financial system has many flaws, but it’s more evolved than most, and allows for all kinds (too many, IMO) of financing options for consumers. Our communications infrastructure is far from the best (and is a perfect candidate for increased investment), but it reaches almost everywhere. Electricity and clean water are available everywhere. All of these ecosystems not only combine to create an attractive environment for investments, but they also represent good places to invest capital. Those ecosystems are aging and need to be updated and maintained, and investment here will only make them more valuable. Smart management would recognize this. Clueless management abandons our economy and will see their misguided assessment become reality.

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By: TFF http://blogs.reuters.com/felix-salmon/2013/07/05/when-the-government-outsources-employment-policy/comment-page-1/#comment-47596 Sun, 07 Jul 2013 14:42:25 +0000 https://blogs.reuters.com/felix-salmon/?p=22206#comment-47596 Also, KenG, these are global figures. Some corporations (e.g. KO) are investing heavily in Asia while milking their US operations. On one level, that is simply smart management. They are growing rapidly in China, and need to build out resources to support that. Obviously doesn’t make sense for them to build in the US for new markets in China. On another level, it doesn’t do anything for the US economy.

It ends up being a bit circular. Companies aren’t investing much in the US and Europe because those economies are not growing much. Yet the reason those economies aren’t growing is because companies are not investing there.

Your ideas for creating tax incentives for domestic investment may need to be fleshed out in greater detail, but something along those lines is needed.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2013/07/05/when-the-government-outsources-employment-policy/comment-page-1/#comment-47595 Sun, 07 Jul 2013 13:34:57 +0000 https://blogs.reuters.com/felix-salmon/?p=22206#comment-47595 TFF, your slander is not out of date. 2004 would be a better benchmark year, as the ’08 crisis resulted in a big drop in spending, from which they have only been recently recovering from. Eight years of even modest growth for these companies means they should have increased their capex by around 50%, yet only one of them did. And, as you mentioned, they have also cut spending, usually in operating expenses, and those reductions offset any employment gains that result from their modest capex increases over the last 4 years,

If corporations had been investing more of their profits, the economy wouldn’t have atrophied to the point where the government needed to provide stimulus, whether in the form of spending or printing, just to keep from sliding into depression.

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By: TFF17 http://blogs.reuters.com/felix-salmon/2013/07/05/when-the-government-outsources-employment-policy/comment-page-1/#comment-47594 Sun, 07 Jul 2013 12:59:22 +0000 https://blogs.reuters.com/felix-salmon/?p=22206#comment-47594 GE: $13B in 2004, $15B in 2012
IBM: $4.4B in 2004, $4.1B in 2012
JNJ: $2.2B in 2004, $2.9B in 2012
PG: $2.0B in 2004, $4.0B in 2012

Some have increased capex, others have not. Some have more than doubled revenues (through growth and acquisitions) while keeping capex steady. PG may be the only one of these four that has a true increase, relative to revenue.

Thinking further, at least some of the increasing cash hoard has come from borrowing. Companies locking in cheap cash, because why should they not? And major corporations sometimes acquire capital investment rather than spending it themselves. So a difficult question to answer.

Also, looking at a few charts, the last few years are trending upwards again. Perhaps my slander is a couple years out of date?

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2013/07/05/when-the-government-outsources-employment-policy/comment-page-1/#comment-47593 Sun, 07 Jul 2013 05:44:57 +0000 https://blogs.reuters.com/felix-salmon/?p=22206#comment-47593 y2k, corporate cash hoards are also at an all-time high, which means even though they may be spending more on capital expenditures, they are either reducing expenses (like employee compensation) elsewhere or just making a lot more money. If they weren’t hoarding so much cash, more money would be in circulation, which means either personal income would be up or unemployment would be much lower.

If a larger percentage of corporate revenue was used by corporations, instead of just put in a zero interest bearing account, something would have to be done with that money. But it’s not.

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