Can the market alone fix the economy?

[WhoWee]

I'd like to share a personal story that...in the context of the stimulus debate government/private sector jobs...provides a different perspective.

I have boy/girl twins, age 16. She doesn't want to drive...he can't wait to get a drivers license.

His argument is that he needs a part time job so that he doesn't need to ask for money...several times a day. (Our motivation)

The employers that are close enough to home...walking/bicycle/electric scooter distance are "unacceptable" for a variety of reasons. (His Dilemma...we just don't understand)

Further, he doesn't want to in convenience us to drive him to and from work...in our vehicles and using our gas and insurance. (He apparently worries quite often about our inconvenience)

He paid for his own driving lessons (he made the 24% down payment and we paid the balance). He's arranged financing for his insurance (Grandpa is adding him to his policy $100/month and the boy will "pay him back when he gets a job").

He convinced Mom to let him drive her all over town to pick-up applications from prospective employers. Then he talked Grandpa into letting him drive him all over town to submit applications. Then, he talked me into letting him drive me all over town to interviews. We're out about $30 in gas and McDonald's put him on their schedule for 8 hours per week at $7.00 per hour. As a follow up, we've made another 3 trips to and fro with regards to a work permit.

Now he can't start work until he has a drivers license...can't depend on us to drive him to and fro? (Thinking of us again)

Accordingly, he took his test last week...did really well until he became over-confident and bumped a traffic cone in the maneuverability test. No license equals no work for a week. Now he's scheduled to retake the test today.

Assuming he'll pass this time (he does do a good job of handling the vehicle...just a typical over-anxious boy) he plans on starting work next week and gave us an option this morning to consider.

He either needs a commitment from us that a vehicle will be available when he prescribes. The alternative option is for me to make a scheduled $500 repair to a car that I choose not to drive in winter months, then "sell" to him (for a price about 20% of wholesale) over 2 years, at 0% interest. (What a deal & I can drive my "winter car" because I like it so much - a Saturn wagon)

The bottom line, I can't afford for him to get a job. If McDonald's paid him $20 per hour, it would be a losing proposition to me.

I see similarities between my teenage son's arguments and our current government direction. Obama, Pelosi, and Reid are all pushing their political agendas...at tremendous cost to us - the taxpayers...with very little hope of a true financial return on our investment. Even if the programs "work", we'll never retire the debt (with interest) in our lifetimes.

I don't want to say no to my son and crush his dreams. I want him to earn his own money and feel good about himself. I also want him to be balanced...studies/family/sports...then a job at McDonald's. I also need to teach him financial responsibility and hold him accountable. As the kids age, the problems become more complex, it's going to be an interesting spring/summer.

 

[Astronuc]

Although McDonald's and Walmart are influential in the US economy, the quote you provided only mentioned McDonald's influence on the Dow.

I was reading between the lines.

Both McDonald's and WalMart sell low priced, low quality stuff. The majority of their employees make low wages. If that is the bulk of jobs being created, and there's a post somewhere about that, then the economy is in trouble, because too many people become too reliant on subsidies, and certainly cannot afford luxuries like health care and retirement.

The article I cited mentioned an influence of 4 stocks on the Dow 30. Those could be the top 4 of which MCD is the 4th from top.

Symbol    Name                    Trade      Volume
IBM     INTL BUSINESS MACH       89.55      3,774,283
XOM     EXXON MOBIL CP           66.53     12,223,983
CVX     CHEVRON CORP             62.18      5,162,801
MCD     MCDONALDS CP             52.24      5,105,186
JNJ     JOHNSON AND JOHNS DC     49.53      6,514,179
WMT     WAL MART STORES          48.96      9,503,529
MMM     3M COMPANY               47.45      1,997,913
PG      PROCTER GAMBLE CO        46.27      5,369,644
UTX     UNITED TECH              40.82      3,132,096
KO      COCA COLA CO THE         40.66      5,720,945
BA      BOEING CO                33.27      2,862,366
HPQ     HEWLETT PACKARD CO       29.48     11,564,523
VZ      VERIZON COMMUN           27.94      7,197,454
CAT     CATERPILLAR INC          26.25      5,283,033
MRK     MERCK CO INC             26.01     23,272,940
T       AT&T INC.                24.07     11,996,112
JPM     JP MORGAN CHASE CO       23.55     64,309,670
KFT     KRAFT FOODS INC          22.43      2,828,293
HD      HOME DEPOT INC           20.40      9,091,531
DD      DU PONT E I DE NEM       19.00      3,889,883
DIS     WALT DISNEY-DISNEY C     17.20      6,813,074
MSFT    Microsoft Corporation    16.26     37,940,084
INTC    Intel Corporation        14.38     29,462,578
PFE     PFIZER INC               14.26     36,816,510
AXP     AMER EXPRESS INC         12.09     14,525,164
GE      GEN ELECTRIC CO           9.38    116,466,039
BAC     BK OF AMERICA CP          5.84    322,929,300
AA      ALCOA INC                 5.74     11,959,364
GM      GEN MOTORS                2.53     24,006,092
C       CITIGROUP INC             1.78    401,757,791

WalMart is 6th in price, and has a higher volume than MCD.

One has to look at what's driving the economy. Exxon and Chevron are energy companies, but much of their revenue is derived from oil that is imported, which means cash going out of the US economy. IBM actually derives a lot of revenue outside the US, which is good if the earnings come back into the US.

Increasing exports would be great, but the rest of the world is not buying, and certainly not buying US export as much as the US is importing. The US buys on borrowed money - and in the long term, that is unsustainable. The US government is stimulating the economy of borrowed money. Each deficit is small, but in the long run the cumulative debt is unhealthy.

And the short fall in health care and retirement liabilities are still not being addressed.

 

[turbo]

The drive toward low-paying jobs with no benefits is troubling. Wal-mart and the fast food places are drawing in workers that cannot afford to buy homes, pay taxes, or even feed their kids without public assistance. In the last town I lived in, my property taxes went up 30% in one year - and more than half of the property taxes go to the educational system. When people moved to that town to take low-paying jobs, they loaded our school system with lots of extra kids without providing any significant support to the property taxes that educate them. People renting trailers and cheap apartments are a drain on the town's resources.

In addition to Wal-Mart and a large supermarket, where the only full-time employees are managers, that town now has two rent-to-own stores (always a bad sign) two Dollar-store type places, and a host of fast-food places. How a town of fewer than 7000 people can support two Dunkin' Donuts, a Burger King, Subway, Pizza Hut, Wendy's, Tim Horton's, KFC, Taco Bell, and a mix of locally-owned non-franchise pizza and sandwich places is beyond me. All these fast-food places are in addition to three Chinese restaurants and about a dozen restaurants serving American-style foods. Aside from the Chinese restaurants, that may employ family, all these places represent a huge pool of part-time, low-wage jobs with no benefits. None of these part-timers are covered by unemployment insurance, so when they lose their jobs, they and their families are suddenly the responsibility of the town and the state. There are VERY high costs associated with these jobs. Costs that are not reflected in price tags on items or in cheap menu items.

 

[misgfool]

The drive toward low-paying jobs with no benefits is troubling. Wal-mart and the fast food places are drawing in workers that cannot afford to buy homes, pay taxes, or even feed their kids without public assistance. In the last town I lived in, my property taxes went up 30% in one year - and more than half of the property taxes go to the educational system. When people moved to that town to take low-paying jobs, they loaded our school system with lots of extra kids without providing any significant support to the property taxes that educate them. People renting trailers and cheap apartments are a drain on the town's resources.

In addition to Wal-Mart and a large supermarket, where the only full-time employees are managers, that town now has two rent-to-own stores (always a bad sign) two Dollar-store type places, and a host of fast-food places. How a town of fewer than 7000 people can support two Dunkin' Donuts, a Burger King, Subway, Pizza Hut, Wendy's, Tim Horton's, KFC, Taco Bell, and a mix of locally-owned non-franchise pizza and sandwich places is beyond me. All these fast-food places are in addition to three Chinese restaurants and about a dozen restaurants serving American-style foods. Aside from the Chinese restaurants, that may employ family, all these places represent a huge pool of part-time, low-wage jobs with no benefits. None of these part-timers are covered by unemployment insurance, so when they lose their jobs, they and their families are suddenly the responsibility of the town and the state. There are VERY high costs associated with these jobs. Costs that are not reflected in price tags on items or in cheap menu items.

It is a lot better to put their kids into school, so they may reach higher in their lives. They will probably leave to find a new job, if they lose their current jobs. Haven't you watched the night of the living homeless? Seriously, what would you do to solve this? According to capitalism working for any amount > 0 is rational behavior even if they couldn't afford to buy food with the income.

Here we already have almost fully automated stores at some places, where there is absolutely minimal staff. This removes substantial amount of jobs and creates huge unemployment issues, but I guess in the long run, it is the only wise path.

 

[WhoWee]

The drive toward low-paying jobs with no benefits is troubling. Wal-mart and the fast food places are drawing in workers that cannot afford to buy homes, pay taxes, or even feed their kids without public assistance. In the last town I lived in, my property taxes went up 30% in one year - and more than half of the property taxes go to the educational system. When people moved to that town to take low-paying jobs, they loaded our school system with lots of extra kids without providing any significant support to the property taxes that educate them. People renting trailers and cheap apartments are a drain on the town's resources.

In addition to Wal-Mart and a large supermarket, where the only full-time employees are managers, that town now has two rent-to-own stores (always a bad sign) two Dollar-store type places, and a host of fast-food places. How a town of fewer than 7000 people can support two Dunkin' Donuts, a Burger King, Subway, Pizza Hut, Wendy's, Tim Horton's, KFC, Taco Bell, and a mix of locally-owned non-franchise pizza and sandwich places is beyond me. All these fast-food places are in addition to three Chinese restaurants and about a dozen restaurants serving American-style foods. Aside from the Chinese restaurants, that may employ family, all these places represent a huge pool of part-time, low-wage jobs with no benefits. None of these part-timers are covered by unemployment insurance, so when they lose their jobs, they and their families are suddenly the responsibility of the town and the state. There are VERY high costs associated with these jobs. Costs that are not reflected in price tags on items or in cheap menu items.

Let's assume the total capitalization of your local Taco Bell is $1.5 million...plus land...$500K = $2.0 million.
http://franchises.about.com/od/fastfoo1/fr/taco-bell.htm

Because ALL of the chains pay so much for land, the land values usually appreciate. This can be good for the community...until foreclosures sweep through main street.

Let's also assume the Taco Bell creates 5 full time salaried positions...cumulative $140,000 with taxes and benefits, plus 35 part time positions at 20 hours at $8.00 (including taxes) = approx $300,000 per year in part time salaries...total payroll $440,000/40 = $11,000 per worker.

From an investment stand point $2,000,000/40 workers = $50,000 investment per job.

From a business stand point, the unit needs to generate about $1,500,000 to meet the designed operating budgets/projections. The operator (with a $2.0 risk) can expect to earn a pre-tax gross profit of 10% to 20% or $150,000 to $300,000 depending upon financing structures and other overhead considerations (single or multi-unit).

Similar (total capital) investments are made for each of the other restaurant chains, less for local operations and substantially more for the retailers. You can do your own analysis of average investment per job...my guess is the Taco Bell numbers will be the average.

From a jobs description standpoint the manager to employee ratio of Taco Bell will approximate to the other concepts and average wages will be +/- $1.00 average from concept to concept.

These businesses/models are located in every community. Specifically, ($2.0 million Taco Bells) have become the predominant small businesses of Main Street. The chains themselves (and WalMart) might be global conglomerates, but the individual franchisees are typically local investors with significant personal risk.

 

[turbo]

I understand the business model WhoWee, and I appreciate the value of the investments. The point I was making was that families cannot survive on these part-time jobs, and unless the wage-earners in the family can manage to get several of these jobs, they will rely on food stamps, housing assistance, heating assistance (heating is a BIG deal in this climate) and a host of other public programs like free school lunches for their kids, just to scrape by. These part-timers can be fired or laid-off for any reason and they do not qualify for unemployment benefits, so collectively they are a significant liability that gets laid at the feet of the town and the state. The business models of the fast-food franchises and Wal-Mart rely on laying off these costs on the municipalities and their taxpayers.

My wife and I saw the deterioration in that town's economy and tax-base years ago, and we got out. We're now living in a small town, in which there are two convenience-stores and a market, all with lunch-counters, and all have hands-on owners that put blood, sweat, and tears into their operations. The owner of the market doubled the size of his store 2 years ago so he could stock more items, AND he will gladly buy and stock local produce, berries, and fruit in addition to the stuff that is available through Associated Grocers. These stores employ mostly part-time help, but they are not a huge draw for the unemployed, and we have no trailer parks in town, so we haven't gotten an influx of the working poor. Instead, employees in these businesses are generally long-term residents (mostly women) who want to earn extra money, often when the kids are in school, so they can get back home and not have to pay for child-care.

 

[WhoWee]

I'm not disagreeing with you about the quality of jobs ie low pay/no benefits. My point is that when someone risks $2.0 to open a Taco Bell. while it's a big risk to the local franchisee. But, it doesn't create many "good" jobs...the 40 total jobs equates to about 10 decent full time jobs...spread over 40 people.

If you look at my earlier post...my son wants to work 8 hours per week at McDonalds to earn $56 gross per week...it will cost us about $100 per week to facilitate his request (car/gas/insurance).

Because chains need a lot of bodies, but can only offer a few full time and mostly part time positions, the door is always revolving...employee retention is one of the biggest problems. Employees will often risk job security to move across the street for a $.05 per hour increase. Often, local businesses will "share" crews of workers via pre-set and coordinated scheduling.

The government seems to believe that raising minimum wages or promoting union expansion will improve the situation...but it doesn't...every time employers are forced to raise hourly wages, they cut total payroll hours and/or raise prices. The people who receive the "raises" are most impacted by the price increases.

Accordingly, the trend in small business for the past decade has been to reduce the need for employees. Many franchises are marketed based on "low labor requirements".

I can't say I blame them either...it is difficult and expensive to hire, train and retain stable employees. The government has turned every small business owner into an accountant and compliance manager...just consider the information required to hire someone...Application/interview, I-9, W-2, workers comp, payroll inclusion, permits (some), rules and regulations, orientation and benefits (if applicable). Then OSHA, health department, fire procedures, security procedures and basic training follow. It can easily take a week to hire and train a new employee to bag french fries.

 

[Astronuc]

I'd like to share a personal story that...in the context of the stimulus debate government/private sector jobs...provides a different perspective.

I have boy/girl twins, age 16. She doesn't want to drive...he can't wait to get a drivers license.

His argument is that he needs a part time job so that he doesn't need to ask for money...several times a day. (Our motivation)

The employers that are close enough to home...walking/bicycle/electric scooter distance are "unacceptable" for a variety of reasons. (His Dilemma...we just don't understand)

Heh, heh, my kids are much the same.

My mom told me that if I wanted to go to university then I had to work. So the first job I had a 16 was at a local gardening center. I could walk a couple of miles to get to work, or my mom or dad would take me or pick me up on the way to shopping. The second job I had was at a nearby grocery store, to which I also walked or drove. I was also expected to be a chauffer to my sister and youngest brother, because both parents worked. I saved up enough during high school that I paid most of my first year tuition, books, fees, and room and board. I was then able to find a job on campus as a plumber, which paid tuition and fees, and also a job working in the food service, in exchange for room and board, and that lasted until I transferred. I bought a well-used car from my dad, and then another one later when I transferred to a different university.

During my time as an undergraduate at the second university, I was able to find some good paying construction jobs (high iron), and I worked summers and holidays (even Christmas and New Year's days). I graduate with savings and no debt.

In graduate school, I received teaching and research assistantships, but I also took a full time job (40 hrs/wk) as an operator in a municipal water production facility. That lasted through my MS program, but I had to give up during my PhD program, in order to be able to sleep. Two years of sleep deprivation during my MS program took its toll. But my wife and I was able to pay off her student loans from her undergrad program, we left grad school without debt, and with some small down payment for a house, and a brand new Honda Civic Wagon (since she was pregnant with our first).

I enjoy hard work.

 

[turbo]

I looked at your earlier post, too, WhoWee. It is not cost-effective to take a part-time job at low wages if you have to have a car, insurance, maintenance, etc just to get to work and keep the job, as you have found out. And this is for a responsible kid that wants to work to earn extra money. The problem is that his wages won't be "extra" once you zero out the expenses that allow him to take the job. Think how bad it must be for a young couple trying to juggle 3-4 of these low-value jobs... Obviously, unless they have parents to support them, they have to rent a real cheap dump of a place and drive a junker, probably with no liability insurance. (Illegal here in Maine, but VERY prevalent among the working poor.) Throw in a kid or two, and you've got a working family that must have welfare to survive.

The business models of these franchises cannot possibly work if they have to pay unemployment insurance and other benefits. Those costs are foisted off on local tax-payers, and people are generally blissfully unaware of this.

There are a few hardware stores, a couple of automotive-supply stores and an office-supply store in that town that managed to survive when Wal-Mart moved in, and they have full-time employees with some benefits. The critical difference is that they have skilled long-term employees that are knowledgeable and helpful. They know their stock and their inventory, and can get you whatever you need if you are willing to wait a day or two for an order. They also deliver, so you don't have to take time off from your business to get the stuff you need. When I take a vehicle to my mechanic for an oil-change, he immediately calls an auto-supply place and orders the oil, filter, and whatever else he might need, then gets the vehicle on the lift to check the suspension, fluid levels in the differential(s) etc. Before he is through with that, a nice lady shows up in a pickup truck delivering his order. Try that with Wal-Mart.

 

[WhoWee]

I completely understand. WalMart, Home Depot, McDonald's (corporate), etc. are all public companies. As long as they show either growth or a profit, they have access to capital and can spread their risk over the entire country/world. Corporately, they are part of that "Evil Wall Street" world.

The nationals that have local franchise owners fall into the Main Street category. The local hardware store, lunch counter, day care, plumber, etc. are by definition Main Street.

Here's my dilemma...when our government takes an anti-business stance...who are they targeting?

It could be argued a few weeks ago that Main Street will benefit directly from the $13 per week stimulus "tax cut"...but that bubble was burst when we found out we'll need it to pay increases in electric bills due to cap and trade initiatives.

Our government is spending over a $Trillion to stimulate the economy...but unless you lose your job and receive some benefits or enter the construction field it isn't going to help you at all in the short term.

As for the average Main Street businesses...they don't have ANY friends in Washington.

 

[turbo]

As for the average Main Street businesses...they don't have ANY friends in Washington.

They can't afford to BUY any friends on on K street, and so cannot get such "friends" to bribe the people in authority - Congress, regulators, etc. Much of what's wrong with our economy can be traced to the corruption that gives businesses more influence than individuals. When I write to my Senators and Congressman (which is more often than the average person), I never get anything more than a very vague "thank you for your interest" form letter from them. I can't afford to pay them $20,000 to speak to me and my wife during breakfast - that's the difference.

 

[WhoWee]

Small business used to have a voice in state and local politics. Now, the federal government controls funds and mandates projects in such a way that state governments have become little more than extensions of Washington...again Main Street businesses lose.

 

[turbo]

Small business used to have a voice in state and local politics. Now, the federal government controls funds and mandates projects in such a way that state governments have become little more than extensions of Washington...again Main Street businesses lose.

Sad but true. When Wal-Mart wants to move into a Maine town (don't know how it works elsewhere) they hold out the promise of jobs, and demand tax give-backs from the town. Too often, the towns give them the tax-breaks and screw the local business-owners. Washington certainly does not have an exclusive lock on greed and corruption - it takes a lot less "grease" to buy some small-town hacks than it takes to buy a Congressman.

 

[SixNein]

I'd like to share a personal story that...in the context of the stimulus debate government/private sector jobs...provides a different perspective.

I have boy/girl twins, age 16. She doesn't want to drive...he can't wait to get a drivers license.

His argument is that he needs a part time job so that he doesn't need to ask for money...several times a day. (Our motivation)

The employers that are close enough to home...walking/bicycle/electric scooter distance are "unacceptable" for a variety of reasons. (His Dilemma...we just don't understand)

Further, he doesn't want to in convenience us to drive him to and from work...in our vehicles and using our gas and insurance. (He apparently worries quite often about our inconvenience)

He paid for his own driving lessons (he made the 24% down payment and we paid the balance). He's arranged financing for his insurance (Grandpa is adding him to his policy $100/month and the boy will "pay him back when he gets a job").

He convinced Mom to let him drive her all over town to pick-up applications from prospective employers. Then he talked Grandpa into letting him drive him all over town to submit applications. Then, he talked me into letting him drive me all over town to interviews. We're out about $30 in gas and McDonald's put him on their schedule for 8 hours per week at $7.00 per hour. As a follow up, we've made another 3 trips to and fro with regards to a work permit.

Now he can't start work until he has a drivers license...can't depend on us to drive him to and fro? (Thinking of us again)

Accordingly, he took his test last week...did really well until he became over-confident and bumped a traffic cone in the maneuverability test. No license equals no work for a week. Now he's scheduled to retake the test today.

Assuming he'll pass this time (he does do a good job of handling the vehicle...just a typical over-anxious boy) he plans on starting work next week and gave us an option this morning to consider.

He either needs a commitment from us that a vehicle will be available when he prescribes. The alternative option is for me to make a scheduled $500 repair to a car that I choose not to drive in winter months, then "sell" to him (for a price about 20% of wholesale) over 2 years, at 0% interest. (What a deal & I can drive my "winter car" because I like it so much - a Saturn wagon)

The bottom line, I can't afford for him to get a job. If McDonald's paid him $20 per hour, it would be a losing proposition to me.

I see similarities between my teenage son's arguments and our current government direction. Obama, Pelosi, and Reid are all pushing their political agendas...at tremendous cost to us - the taxpayers...with very little hope of a true financial return on our investment. Even if the programs "work", we'll never retire the debt (with interest) in our lifetimes.

I don't want to say no to my son and crush his dreams. I want him to earn his own money and feel good about himself. I also want him to be balanced...studies/family/sports...then a job at McDonald's. I also need to teach him financial responsibility and hold him accountable. As the kids age, the problems become more complex, it's going to be an interesting spring/summer.

In a basic nutshell, over-production is the reason that we are in our current situation. I don't mean over-production as if we have produced too many goods. Instead, I'm referring to the idea that people cannot afford to buy what is produced. Production has outpaced purchasing power in our economy, and should have been first noticed in 1999-2000 when personal savings took a nose dive. After people ran out of money, they started floating on credit. The gap between rich and poor has been growing for years now, and it has finally began to break our system.

The democrats plan is far better then what is being presented by republicans. While I don't think it targets the problem directly, it should provide some help indirectly. At the end of the day, neither party has represented all of America. In all 3 debates, the poor class was not mentioned once. We are turning into a hierarchical society where all are not equal, and that should scare you. By the end of this century, robotics will lock that in place.

 

[WhoWee]

In a basic nutshell, over-production is the reason that we are in our current situation. I don't mean over-production as if we have produced too many goods. Instead, I'm referring to the idea that people cannot afford to buy what is produced. Production has outpaced purchasing power in our economy, and should have been first noticed in 1999-2000 when personal savings took a nose dive. After people ran out of money, they started floating on credit. The gap between rich and poor has been growing for years now, and it has finally began to break our system.

The democrats plan is far better then what is being presented by republicans. While I don't think it targets the problem directly, it should provide some help indirectly. At the end of the day, neither party has represented all of America. In all 3 debates, the poor class was not mentioned once. We are turning into a hierarchical society where all are not equal, and that should scare you. By the end of this century, robotics will lock that in place.

Neither plan addresses job creation in the small business sector...Dems want expansion of govt and reps want corp tax cuts. We need programs that assist small to medium sized domestic firms, such as expanded; SBA, State Business Development, Enterprise Zones, Main Street Revitalization, perhaps even allow more under-the-table casual labor without taxation...reward extra effort/side jobs.

 

[Al68]

Why would you even reply to a post you obviously didn't read?

Well, the flat tax plans that have been proposed by Republicans have a flat rate with huge standard deductions that effectively exempt poor and lower-middle class from income taxes. Dems called those "right wing wacko extremism to benefit the rich". It's just hate speech, no substance.

Maybe I just misread you, I was up like all that night =(

Flat tax is bad because there isn't deductions. It would tip the inequality imbalance even further then what it is now.

Well, you just replied again, obviously without reading even the part of my post that you quoted. I think that explains a lot.
You've replied to many posts in this thread and others when you obviously didn't read the post you replied to.

 

[lisab]

Neither plan addresses job creation in the small business sector...Dems want expansion of govt and reps want corp tax cuts. We need programs that assist small to medium sized domestic firms, such as expanded; SBA, State Business Development, Enterprise Zones, Main Street Revitalization, perhaps even allow more under-the-table casual labor without taxation...reward extra effort/side jobs.

I'm not well versed on this subject, but my company is a small business (in the last 2 months, we've gone from 110 employees to 77 today...getting smaller all the time!). My director told us we are relying on http://www.sba.gov/recovery/" , part of the stimulus bill, to get through the next half year or year or so.

It's part of the stimulus bill, and it's directed at small businesses.

From that link:

The American Recovery and Reinvestment Act contains a package of loan fee reductions, higher guarantees, new SBA programs, secondary market incentives, and enhancements to current SBA programs that will help unlock credit markets and begin economic recovery for the nation’s small business sector.

And it's keeping me employed .

 

[OmCheeto]

I'm not well versed on this subject, but my company is a small business (in the last 2 months, we've gone from 110 employees to 77 today...getting smaller all the time!). My director told us we are relying on http://www.sba.gov/recovery/" , part of the stimulus bill, to get through the next half year or year or so.

It's part of the stimulus bill, and it's directed at small businesses.

From that link:

And it's keeping me employed .

That's awesome Lisa!

I found out the other day, that because I'm a veteran, I can apply for a half million dollar loan to start a business. Thank god for the http://www.themoscowtimes.com/article/1010/42/375144.htm" button.

I can so relate with Michelle Obama when she talked about realizing why she really loved this country.

 

[WhoWee]

I should have been more specific...there is a very small percentage of funds allocated to the SBA...$730 million of $787 billion.

When you consider the cost of Harry Reid's train that starts at Disney and ends at a Nevada brothel...and was inserted at the very last moment...I believe the number is) $6billion.

Next, analyze the stimulus potential derived from $4 to $6 billion more for community organizing groups (like ACORN).

http://spectator.org/archives/2009/01/27/acorns-stimulus

Both of these allocations are a slap in the face to small business.

In the context of a discussion of jobs creation and stimulating the economy...an alternative investment of $10 to $12 billion into the SBA would have a tremendous stimulus impact as well as make a great deal more sense.

Plus, the railroad builders and community groups could still submit their "business plans" to create jobs and be considered for loans...I just doubt any bankers would approve them.

I hope your company is successful in their efforts...please keep us posted.

 

[OmCheeto]

I hope your company is successful in their efforts...please keep us posted.

Ivan is first in line for pork barrel paybacks.

My company's business plan is to create a product that the planet would enjoy having.

And that, is how you fix an economy.

 

[misgfool]

I'm not well versed on this subject, but my company is a small business (in the last 2 months, we've gone from 110 employees to 77 today...getting smaller all the time!). My director told us we are relying on http://www.sba.gov/recovery/" , part of the stimulus bill, to get through the next half year or year or so.

It's part of the stimulus bill, and it's directed at small businesses.

From that link:

And it's keeping me employed .

Good for you.

Our national exports have dropped 36% and new orders 38,3% in January. It would mean about 10-15% decline in the GDP in 2009, which would be a new record. We are also in the euro-zone, so we are unable to let the currency float like in our "Great depression" in 90's. It will be interesting to see what is going to happen.

 

[WhoWee]

Obama or Geithner must have read these posts?

Today's announcement, of $15 billion in TARP funds for SBA (re-packaging)

http://www.startribune.com/nation/41335177.html?elr=KArks7PYDiaK7DUHPYDiaK7DUiD3aPc:_Yyc:aUU

is by far the best stimulus initiative Obama has made to date. This will allow banks to re-open credit lines to small business...BRAVO Mr. President!

 

[Astronuc]

The lines for public assistance are getting longer.

Auto suppliers to get $5 billion in aid
http://biz.yahoo.com/ap/090319/auto_bailout.html

Meanwhile GE Financial will apparently be profitable in 1Q 2009.

 

[jal]

Auto suppliers to get $5 billion in aid

Pssss!

Instead of giving out $5 billion to the B3 let's pay off their bills and hope nobody notices what we did.
Shuuush!

jal

 

[WhoWee]

It might be the best way to actually help the economy and save the general industry. Big 3/union retiree benefits and retirement funds should not be prioritized above all other taxpayers.

 

[OmCheeto]

Meanwhile GE Financial will apparently be profitable in 1Q 2009.

Shhhh! Don't be spreading that around just yet. Wait until the next first Wednesday...

 

[turbo]

Meanwhile GE Financial will apparently be profitable in 1Q 2009.

Better than many of its manufacturing divisions. GE Security is the largest employer in Pittsfield, ME, with about 500 employees at its peak. They let go of 30 employees in December, and are currently offering voluntary separation to employees who will accept the severance package and some extended benefits. According to the news article in today's paper, they will have to shed at least another 100 jobs, perhaps significantly more, by May. With construction soft, the demand for electronic surveillance/monitoring systems is 'way down. The slump in new construction has already hit logging, lumber-production, etc very hard, and now it's affecting some pretty high-tech jobs, as well.

 

[WhoWee]

A "small amount" of TARP funds ($5 to $10 billion?) would be very productive (if specified for US domestic allocation only) directly placed in the hands of GE Capital or other top 100 large ticket leasing companies.

These companies have in-place and on-going relationships with both manufacturers (vendor lease programs) and users of capital equipment (everything from computer systems to manufacturing lines to mining equipment to windmills/solar installations to aircraft and ships).

This would provide a three-pronged approach...continue to assist the large banks with re-balancing of their portfolios, continue to help the smaller/community banks with the SBA portfolio buy-up and create a direct loan program to the large ticket leasing industry to re-open business credit/purchases...which will create/protect jobs.

 

[Astronuc]

It looks like various financial institutions are return TARP money back to Treasury. That seems a good sign for institutions like GS, but maybe not for others.

If Goldman Returns Aid, Will Others?
http://www.nytimes.com/2009/03/24/business/24sorkin.html

Goldman Sachs is planning to give back its TARP money soon, possibly within the next month, Andrew Ross Sorkin reports in his latest DealBook column.

The taxpayer would be made whole under this scenario -- but the news isn't necessarily all good, Mr. Sorkin writes. If Goldman sets itself apart by repaying the money it borrowed, there is a risk that its rivals may feel the need to follow suit, even if they aren't financially ready to do so. This could end up costing them, Mr. Sorkin says.

 

[WhoWee]

I received this today and thought it was relevant. It's a newsletter from the CEO of TheLadders.com. They are a nationwide executive recruiting firm... have the TV commercial with all of the people chasing tennis balls all at once.

"I went down to Florida last weekend to the Club for Growth conference. The Club for Growth is pro-growth group, and I think we are all in favor of that – we aren't going to shrink our way out of this mess, now are we?

I wanted to find out more about what the heck we can do to get more great $100K+ jobs in this country. And I met with Senators, Governors and members of Congress to ask them "Who's going to fix this mess?"

<photo>

Me with Senate Minority Whip Jon Kyl. Boy, he has a great smile, doesn't he? I guess I'll have to practice!

Among others, I met with Senator Jon Kyl – he's a Republican from Arizona – and I asked him my question: "Senator Kyl, who's going to fix this mess?"

His answer?

"You are."

And you knew that was coming, didn't you? After all the big speeches, the bonuses and the blowouts and the bailouts, who's going to be left to clean up this mess?

It's us. The members of TheLadders.com.

TheLadders is a community of $100K+ employees. We're not the ones with the big yachts and million-dollar offices and private jets (though, perhaps, someday we'd like to be!) We're the hard-working folks, making between $100,000 to $500,000, who actually orchestrate the work of the country...

We're the managers at Fortune 1000 companies, the CMOs, CFOs and CTOs of start-ups, and the Java developers, Sarbanes-Oxley experts and database marketers of the United States...

And we know that after the hoopla and the hoorays, and the "whoops!" and the whys, that we are going to be the people who have to clean up this mess.

After all, who's running the strategic planning meetings, and the Six Sigma initiatives, and the server virtualization projects, and the "Hey vendors, it's time for you to cut your prices 10%" efforts? It's not the guys in the corporate boardrooms.

It's us. The 2.8 million subscribers to TheLadders.com.

And the only way this great country is going to get out of this mess is if we lead it.

And, after reminding Senator Kyl that TheLadders is a strictly non-partisan newsletter, I asked him what we can specifically do to help.

He answered:
Get involved politically. Whatever party you're in, get active.

Get involved through civic groups. Whether you're a CPA, or a member of the bar, or a concerned tech executive, or just a patriotic citizen from Youngstown, get active through your civil, professional, or industry associations.

But most of all, Senator Kyl urged, don't wait for Washington. This country wasn't built from Washington, and it sure isn't going to be saved by Washington. It's going to be the efforts, and the toil, and the work, of the real leaders of the country – people like you who can make a difference every day by making your companies and your communities stronger and better.
Well, folks, that seemed like pretty good advice to me, so I wanted to share it with you.

I know you'll do your part, and you can count on me, and the 325 friends you have here at TheLadders.com, to do ours: we're working every day to find you more great $100K+ jobs.

Happy hunting this week, let's get this mess fixed!
Warmest regards,

Marc Cenedella
Founder & CEO
TheLadders.com, Inc. "

 

[Astronuc]

I found this yesterday.

Total: Allocated - $12.9 trillion, Spent - $2.7 trillion!

http://money.cnn.com/news/specials/storysupplement/bailout_scorecard/index.html


The allocated money is almost one year's GDP for the US.


Now this was before some companies announced their intent to give back TARP money.


I hope someone is keeping track. The plans seem rather fluid.

 

[OmCheeto]

I found this yesterday.

Total: Allocated - $12.9 trillion, Spent - $2.7 trillion!

http://money.cnn.com/news/specials/storysupplement/bailout_scorecard/index.html

The allocated money is almost one year's GDP for the US.

Now this was before some companies announced their intent to give back TARP money.

I hope someone is keeping track. The plans seem rather fluid.

I honestly don't remember the first one:

December 2007 Term Auction Facility $2.9 trillion

Lending program that allows commercial banks to unload hard-to-sell assets, including mortgage-backed securities: Fed takes assets as collateral and banks get cash.

 

[WhoWee]

I honestly don't remember the first one:

It's just one more reason not to give the Fed or Treasury any more power*.

http://www.investopedia.com/terms/t/term-auction-facility.asp


* That is...as long as Barney Frank and company are permitted to sit in judgment and claim they didn't know they were hurting the financial sector with their housing programs.

ALL subprime and over-leveraged borrowings should have been halted in 2007.

If you really want to get mad...look at the expansion of derivatives trading during the same time periods.

Next, overlay the media diversion of the same time frame...100% focus on spending in Iraq...it's called "smoke and mirrors".

The same thing happened last week...OHH look at the big $165 million AIG bonuses...we'll tax them back...(never mind about half of the recipients live in the UK). Glenn Beck reported today that Acorn organized/hired the buses that took people to the CT homes of AIG execs. Even better, Chris Dodd couldn't remember presiding over including the payments, everyone admits they didn't even read the bill, lot's of reports that the bonus structure was known for months, etc.


But alas, nobody seemed to care that $20 billion or so was funneled through AIG to foreign banks...at 100% on the dollar! Where is the outrage? Why isn't Barney Frank threatening to sieze assets of the foreign banks? Why aren't we demanding the names of who authorized $20 billion to be paid to these banks?


If the government wants to fix a business, they should start with the Postal Service. The Fed is already too powerful and needs to be separated from politics...and the Treasury needs to figure out what they've already done and where the money went. If a taxpayer told the IRS they don't know what happened to the money...well...?

 

[OmCheeto]

It's just one more reason not to give the Fed or Treasury any more power*.
If a taxpayer told the IRS they don't know what happened to the money...well...?

Oh. I'm here again...

Sounds like Fiona was running the country for the last.. few.. years...

 

[Astronuc]

Financial Crisis Caused by a 'Culture of Complicity'
http://www.spiegel.de/international/business/0,1518,614297,00.html

I heard a discussion of this topic on a news program, CNN I believe. The commentator was arguing to let the banks fail, the banks be restructured, management to be replaced.

While the world talks about new ways to save struggling banks, there are a handful of economists who think some banks shouldn't be saved at all. American economist James Galbraith told Manager Magazin that it might make more sense to break them up and start over.
. . . .

. . . The way it usually works in the USA is that a bank is closed on Friday and re-opened on Monday under a new name, with a new leadership and with a team of examiners who are going through the books, trying to sort the good business loans and personal loans from those which are hopeless. Then you isolate the hopeless stuff, you force a write down of the equity and the subordinated debts of the people who put in risk capital -- so they have to take their losses as they should. And then you break up the bank into pieces which have a better prospect to gain viability soon. That's a process of re-organization and re-capitalization.
. . . .
Galbraith: A change of management is essential, because firstly, the incumbents are responsible, whether they were culpable or not, and secondly, you need new people who are in line with the public purpose of this re-organization. It's the same principle in the navy: When a ship runs aground, the captain is removed, no matter if he caused the accident or not. . . .
. . . .
Galbraith: . . . Again: When the bank runs aground, there have to be consequences. The management has no claim on sympathy. They won't be poor. They have enough to send their kids to college. Some of them may have to sell some houses or boats. This is not a sad thing -- this is called the capitalist system. Well, it used to be called the capitalist system. Do we still have a capitalist system somewhere? China, maybe? (laughs) It's certainly a life change for them, but there's no human tragedy involved in changing the management of an insolvent bank.

. . . .
Galbraith: I sincerely hope the bank management conducted some due diligence with the products they bought. And if they relied on agency ratings, they should have asked whether the agencies were working on their behalf. But I am very sure that, again, the answer is 'no'. The rating agencies made a mess by rating asset backed securities with AAA, so we're seeing a failure of due diligence at every stage. And a deep fraudulence at every stage. When a rating agency certifies that a security is AAA, it is making a claim about the quality of that security. It cannot make this claim unless it has closely looked at this security...
. . . .
Galbraith: . . . The language they used reveals a different story than the one bank managers are selling to the public these days. "Liars' loans," "toxic waste," or my favorite: "neutron loans" -- loans that destroy the people but leave the buildings intact. These were the words to describe these loans and they were used by the people who were working in this industry. They reveal a culture of fraudulence on a massive scale. And of course governments now have to come to recognize that these are things they have to deal with.
. . . .

Not only was the economy over-leveraged, but it seems a lot of debt was bad, i.e. it could not be repaid, especially when other expenses consumed available cash/liquity.

In another article, it appears (circumstantially) that a trading arm of Goldman Sachs was bidding up the price of oil against short positions on a company, Semgroup, that was expecting prices to go down. Semgroup went bankrupt, and the high oil prices further damaged the economy. In effect, it seems that GS was bidding against the US economy for their own benefit.

So in effect, the bailouts, as structured, reward the financial companies who are responsible for the current financial crisis. AIG gets bailout money, but that gets sent to the companies (banks and private investment firms) who bought the insurance on questionable (fraudelent) securities, but those banks and private investment firms also received direct injections of capital from the bailout funds. There's something wrong with this situation.

It seems to me that there should be a heck of a lot of criminal prosecutions going. I have to wonder if the government is even bothering to investigate, because it not, if they ever get around to it, they'll probably claim to much time has elapsed.