How to fix the economy


by DrClapeyron
Tags: economy
DrClapeyron
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#1
Dec20-08, 11:08 AM
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With numbers being thrown about in the range of $100's of million to $100's of billion, a growing trade deficit, an ever expanding public debt and private debt it looks like the economy is nearing the end of the road. Is it bad, is it good, does it need mending?
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Astronuc
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#2
Dec20-08, 12:03 PM
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Looking at the situation from where we were, or where we thought we were, versus now where we are, something needs fixing.

The government needs to adopt more effective, and fair, oversight.


Importantly, the entire (US and global) economy needs to be deleveraged, and people need to live within their means.
gravenewworld
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#3
Dec21-08, 10:01 PM
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Let's start by adopting uniform usury laws across all states.

tchitt
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Dec21-08, 10:24 PM
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How to fix the economy


People have learned that you can rack up all the debt you can imagine, then tell your creditors you can't pay... file bankruptcy and all is forgiven. I think it's just an overall death of the idea of personal responsibility and duty.

What's sad is that our system is set up so that the only duty you have is to yourself... and everybody wins that way. Until, that is, people start to see that everyone else will take care of them anyway. Complacency born from the amazing standard of living capitalism has given us. It's a cycle and very well may be the death of our economy. Perhaps a (painful) restart is just what people need to wake up.
gravenewworld
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#5
Dec21-08, 10:49 PM
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Quote Quote by tchitt View Post
People have learned that you can rack up all the debt you can imagine, then tell your creditors you can't pay... file bankruptcy and all is forgiven. I think it's just an overall death of the idea of personal responsibility and duty.

What's sad is that our system is set up so that the only duty you have is to yourself... and everybody wins that way. Until, that is, people start to see that everyone else will take care of them anyway. Complacency born from the amazing standard of living capitalism has given us. It's a cycle and very well may be the death of our economy. Perhaps a (painful) restart is just what people need to wake up.
No one should be forgiven for racking up debt that they should pay back, however what if the system is set up such that a person can never pay it back? How is that fair?

Is it fair that some people have to pay 2,3,4, even 5x's their principal in interest and penalty fees that creditors tack on just because that person might have gone slightly over their credit limit or made 1 late payment?

If you are one of the millions of Americans that doesn't have insurance and only makes $40,000 while trying to support a family, how easy is it gonna be to pay off $5000 that you racked up on credit card with 30% interest for a trip to the ER at the hospital ?

FYI, new legislation that was passed in 2005 makes is much much more difficult for consumers to file for bankruptcy.
tchitt
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#6
Dec21-08, 11:08 PM
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I understand what you're saying and you're correct to a point. What the credit card companies are getting away with right now by raising people's interest rates to ridiculous levels all of the sudden makes me sick. At the same time, I'm sure you can concede this to me; a large percentage of outstanding credit card debt is unnecessary... the product of peoples greed and inability to wait a few more months to splurge on that new flat-screen TV. And you can't tell me there aren't a LOT of people out there who don't push their income levels to the limits... like accepting new car payments of $600 monthly when they know full well that they only have $700 of disposable income every month. (My mom financed my car for me and it was about $400 dollars monthly over what she could actually afford... hence if I screw up my parents are in a bad way.) Fortunately, unless I can't find a larger source of income than a minimum wage job I can make the payments very comfortably. I only make large purchases when I have a coushin of at least a month's worth of bills AFTER the purchase. I receive medical benefits from my employer and always have. I've never worked a minimum wage job and I didn't go to college... just did enough to get by in high school. I didn't get anybody pregnant because I understood the consequences and took the necessary precautions. I make decent money for my skill level, and yes, I had to relocate in order to do so... but thems the breaks. I don't have a credit card and I don't want one. In my opinion they're nothing more than a clever scam people fall into by going for that big juicy carrot dangling in front of their faces. You might feel sorry for these people... I think they're just stupid and shortsighted.

It's not ALL the fault of corruption and greed on the part of the corporations... just everyone being equally idiotic.

Edit: I'm only calling it like I see it. Every single person I know first hand, without exception, that is in some sort of serious financial trouble bought a new truck or a nice house they could never afford. Paid sixty dollars a month for cable TV when broadcast television or doing something else to occupy their time could have sufficed. You know what I'm saying. Poverty happens when people make bad decisions and they have to live with them.
thaddeus
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#7
Dec21-08, 11:20 PM
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The system is corrupt , financial reporting is corrupt ..

These businesses knew way before the crash that they were up to their necks , non-disclosure of this information encouraged all sorts of foul play

there is far far more corruption in the system than is currently being presented in the media ..

needs a real good clean , open disclosure is likely the only viable option long term .. of course this scares the hector in most of the players because dirty deeds generally are done behind closed doors .
gravenewworld
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#8
Dec21-08, 11:26 PM
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Quote Quote by tchitt View Post
I understand what you're saying and you're correct to a point. What the credit card companies are getting away with right now by raising people's interest rates to ridiculous levels all of the sudden makes me sick. At the same time, I'm sure you can concede this to me; a large percentage of outstanding credit card debt is unnecessary... the product of peoples greed and inability to wait a few more months to splurge on that new flat-screen TV. And you can't tell me there aren't a LOT of people out there who don't push their income levels to the limits... like accepting new car payments of $600 monthly when they know full well that they only have $700 of disposable income every month. (My mom financed my car for me and it was about $400 dollars monthly over what she could actually afford... hence if I screw up my parents are in a bad way.) Fortunately, unless I can't find a larger source of income than a minimum wage job I can make the payments very comfortably. I only make large purchases when I have a coushin of at least a month's worth of bills AFTER the purchase. I receive medical benefits from my employer and always have. I've never worked a minimum wage job and I didn't go to college... just did enough to get by in high school. I didn't get anybody pregnant because I understood the consequences and took the necessary precautions. I make decent money for my skill level, and yes, I had to relocate in order to do so... but thems the breaks. I don't have a credit card and I don't want one. In my opinion they're nothing more than a clever scam people fall into by going for that big juicy carrot dangling in front of their faces. You might feel sorry for these people... I think they're just stupid and shortsighted.

It's not ALL the fault of corruption and greed on the part of the corporations... just everyone being equally idiotic.

Edit: I'm only calling it like I see it. Every single person I know first hand, without exception, that is in some sort of serious financial trouble bought a new truck or a nice house they could never afford. Paid sixty dollars a month for cable TV when broadcast television or doing something else to occupy their time could have sufficed. You know what I'm saying. Poverty happens when people make bad decisions and they have to live with them.


OH don't get me wrong, there are millions of people out there who live well beyond their means and they should face the consequence.

But the way the system is set up now does NOT reward people for saving. Credit banks do NOT make money if people save. For example, if you decide to start being a good consumer and actually save the cash to buy everything your FICO score can go down because you haven't been using your credit card. If you decide to close your credit cards, your credit score can go down.

Why should we absolve predatory lenders who lent people money who obviously shouldn't have gotten it with subprime loans? The lenders knew they could rape those people for tons of money later by increasing interest rates. If they couldn't pay who cares? They could take their home through foreclosure and sell them for profit because housing prices were expected to rise forever. Well guess what, the housing prices crashed and the creditors got what was coming to them. I mean I can't believe we have agreed to give these corporations $700 billion of our tax money for their BLATANT greed that has backfired in their faces.


And just so you know, according to a recent Harvard study, medical care costs play a role in half of all bankruptcy filings. The average amount of out of pocket medical debt of those filing for bankruptcy was $12,000. The scariest part is the fact that 68% of those people had health insurance.
tchitt
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#9
Dec21-08, 11:45 PM
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I'll admit I do have a tendency to be a little insensitive (Hell, I'm insensitive all the way around.) I sometimes forget that there are people who have families and own a home, who then get laid off and can't move to find another job because they have this obligation to pay for this house. At the same time everyone is turning to the government to solve everything. The same government that taxed these companies who laid their workers off in order to save money by moving production off-shore. The same politicians who sold out to union bosses for companies like chrysler and GM. 75 dollars an hour for manufacturing work?! The UAW put a gun to their head and screwed themselves with their greed.

Unions are no longer necessary. Everything that the original unions fought for has been made into law everywhere in the country, now all they serve to do is extort the very people who provide jobs for American citizens in order to continue to get paid regardless of whether or not they're doing any actual work. These poor little blue collar workers aren't blameless... god forbid they should have to work more than eight hours a day or miss out on a days worth of pay when they couldn't make it to work.

I worked for Case IH (formerly International/Case-International... the red equivalent of John Deere. Very large corporation.) as a welder building farm equipment on an assembly line... pay and benefits of about $27/hr all together and I was very happy to do so. (In fact I felt as though I was overpaid for what I was doing... it was a pretty cushy job, and there was no labor union making it that way.) I never felt the need to ask for more, and I understood that in their factory I follow their rules and work the hours that they ask. It's not as though I'm not being paid after-all.

I'm just sayin' this is an extremely multi-dimensional issue and it bothers me how people have the tendency to attack the "big guy" all the time. I fear that sort of militant "DEATH TO CORPORATIONS" attitude is going to cause more problems than it's going to solve.
OAQfirst
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#10
Dec22-08, 06:13 AM
P: 65
Quote Quote by tchitt View Post
I'm just sayin' this is an extremely multi-dimensional issue and it bothers me how people have the tendency to attack the "big guy" all the time. I fear that sort of militant "DEATH TO CORPORATIONS" attitude is going to cause more problems than it's going to solve.
Now I have to ask why we need the corporate entity, by the same token.
tchitt
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#11
Dec23-08, 04:00 AM
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Why do we need the corporation? A corporation is nothing like a labor union... you're comparing apples and oranges.

The Case corporation employs 1,300+ people in my city. Considering there are only 40,000 people in my city I'd say that's a pretty significant contribution. The benefits and pay are unmatched for hundreds of miles in any direction for that type of work. They build 28 combines per day, every day, and ship them all over the world where they're used to FEED THE WORLD. There are 12 other businesses (many of which are corporations themselves ...albeit much smaller corporations, but they survive because Case survives) of varying sizes that do a lot of work for Case-IH (who subcontracts parts to be built outside the factory because they don't have the capacity to do it all themselves) which employ thousands more people and pay wages and bennies MUCH higher than they'd earn for working at Starbucks or Wal-Mart

Oh, and last year they donated $1,000,000 to the United Way. This year the goal is $1,200,000.

But yeah, screw them. They pull in five hundred million dollars a year selling 28 combines per day for $350,000 dollars a piece. (Roughly a 13.5% profit) Pure evil, I tell you.
OAQfirst
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#12
Dec23-08, 07:49 AM
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I wasn't making a comparison. I'm just looking for another perspective. I hear points from both sides that are hard to argue with. By the same token.
gravenewworld
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#13
Dec23-08, 08:07 AM
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Quote Quote by tchitt View Post
Why do we need the corporation? A corporation is nothing like a labor union... you're comparing apples and oranges.

The Case corporation employs 1,300+ people in my city. Considering there are only 40,000 people in my city I'd say that's a pretty significant contribution. The benefits and pay are unmatched for hundreds of miles in any direction for that type of work. They build 28 combines per day, every day, and ship them all over the world where they're used to FEED THE WORLD. There are 12 other businesses (many of which are corporations themselves ...albeit much smaller corporations, but they survive because Case survives) of varying sizes that do a lot of work for Case-IH (who subcontracts parts to be built outside the factory because they don't have the capacity to do it all themselves) which employ thousands more people and pay wages and bennies MUCH higher than they'd earn for working at Starbucks or Wal-Mart

Oh, and last year they donated $1,000,000 to the United Way. This year the goal is $1,200,000.

But yeah, screw them. They pull in five hundred million dollars a year selling 28 combines per day for $350,000 dollars a piece. (Roughly a 13.5% profit) Pure evil, I tell you.



No one is saying do away with corporations. But should corporations abide by business ethics? Why should a corporation have any obligation to the community and country? Don't they solely exist to make as much profit as possible and keep their stock holders happy?

There are good businesses out there as well as greedy ones. The greedy ones simply get all of the press.

How much profit is too much? Does there exist such a thing as too much profit? Is it really ethical that credit banks for years preyed upon people with poor credit histories because they knew they could give them high interest loans and make a killing in profit off of them?

I'll try to find the one WSJ article that I read that was about how credit card banks now almost make 35% of their entire profit from interest rate hikes and penalty fees.
mgb_phys
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Dec23-08, 08:52 AM
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Quote Quote by gravenewworld View Post
Don't they solely exist to make as much profit as possible and keep their stock holders happy?

There are good businesses out there as well as greedy ones. The greedy ones simply get all of the press.
Ford is really a stock trading business who incidently make cars on the side, Chrysler is entirely owned by a investment company since being sold by Merc. GE is basically a bank, GE Capital being much larger than any of it's engineering business.

Under the current system a greedy company is a good one - companies have only one moral obligation 'to enhance shareholder value'. This is because you are putting your savings into these companies and you need to trust that they will do the best thing for your money.

Unfortunately the system of reporting and share trading mean that it is only possible to do this a quarter at a time. A director of Ford could legitimately be sued for any investment such as R+D which isn't likely to pay off in an immediate rise in share price. Bonuses and promotions also follow this short term view - which also leads to more fraud, after all you only have to get away with it for long enough for tomorrows opening price to rise.
mgb_phys
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Dec23-08, 09:00 AM
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Quote Quote by OAQfirst View Post
Now I have to ask why we need the corporate entity, by the same token.
Corporations were invented to protect the community.
Before corporations you had merchant companies, you pooled your money to fund a trading voyage and if it lost money you lost everything.
The last existing one of these is Lloyds of london, you don't own shares - you own a part of the company. If it loses money you have unlimited liability - you lose everything you own.

Limited liabilty corporations (LTD or LLC) were introduced so that you only lost the money you had put in so they were safe investments for widows and orphans. Alexander Hamilton the first US Treasury sec was against them - he thought the managers would make wild gambles since it wasn't their money on the line.
gravenewworld
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Dec23-08, 09:52 AM
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Quote Quote by mgb_phys View Post
Ford is really a stock trading business who incidently make cars on the side, Chrysler is entirely owned by a investment company since being sold by Merc. GE is basically a bank, GE Capital being much larger than any of it's engineering business.

Under the current system a greedy company is a good one - companies have only one moral obligation 'to enhance shareholder value'. This is because you are putting your savings into these companies and you need to trust that they will do the best thing for your money.

Unfortunately the system of reporting and share trading mean that it is only possible to do this a quarter at a time. A director of Ford could legitimately be sued for any investment such as R+D which isn't likely to pay off in an immediate rise in share price. Bonuses and promotions also follow this short term view - which also leads to more fraud, after all you only have to get away with it for long enough for tomorrows opening price to rise.



I completely concur.


The era of unfettered capitalism is over. It is obvious now that the corporate world can not police themselves. We are now seeing the true social cost of what happens when you let capitalism run wild with no restrictions.
mgb_phys
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Dec23-08, 10:37 AM
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Quote Quote by gravenewworld View Post
what happens when you let capitalism run wild with no restrictions.
Most restrictions just try and keep up with the latest trick, you need a more fundamental change of attitude to stock.

Make it easier NOT to be a public company. Family and worker owned companies are stable - but because of reporting requirements (to stop Enron type fraud) it is more expensive to file accounts for private companies than public ones. It needs to be possible for these sort of companies to borrow money. We bailed out the savings and loans when they went gambling. But that didn't leave the small town bank industry intact.

If you do need money it is now very difficult for small companies to go public - even before the crash there had only been one major IPO in 08. Again SOX reporting requirements mean that it costs so much to meet the compliance requirements it isn't worth it for companies less than $100M - so instead they just get quietly sold to big corporations.
The point of a stock market was supposed to be an open and fair market that could set the price of a company. Now it's a closed shop to new entrants and with all the existing ones held by the same few pension funds and insurance companies, if you do get in it's the end most companies.

Don't know what you can do to fix this (other than put all the merchant bankers up against a wall)
Perhaps make it easier for small companies to enter the market - with a limited cap investment market (like NASDAQ used to be)?
Have a minimum holding time for shares so there isn't day trading?
mheslep
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#18
Dec23-08, 01:41 PM
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Quote Quote by gravenewworld View Post
No one is saying do away with corporations. But should corporations abide by business ethics? Why should a corporation have any obligation to the community and country? Don't they solely exist to make as much profit as possible and keep their stock holders happy?

There are good businesses out there as well as greedy ones. The greedy ones simply get all of the press.

How much profit is too much? Does there exist such a thing as too much profit? Is it really ethical that credit banks for years preyed upon people with poor credit histories because they knew they could give them high interest loans and make a killing in profit off of them?
...
Why the focus on financial corporations and CEOs? Do not the government and, say, major league baseball players warrant the same description - greedy? What about their ethics? California alone took in $3 billion from lottery sales, and we know that overwhelmingly the poorest of us buy those state lottery tickets. The Red Sox player payroll is almost $150 million, with the average ticket price almost $50, and the family of four + food cost is $321 (good seats for four - $1,248). How's that for predatory.


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