# How to fix the economy

1. Dec 20, 2008

### DrClapeyron

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?

2. Dec 20, 2008

### Staff: Mentor

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.

3. Dec 21, 2008

### gravenewworld

Let's start by adopting uniform usury laws across all states.

4. Dec 21, 2008

### tchitt

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.

5. Dec 21, 2008

### gravenewworld

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.

6. Dec 21, 2008

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. Last edited: Dec 21, 2008 9. Dec 21, 2008 ### tchitt 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.

10. Dec 22, 2008

### OAQfirst

Now I have to ask why we need the corporate entity, by the same token.

11. Dec 23, 2008

### tchitt

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. Last edited: Dec 23, 2008 12. Dec 23, 2008 ### OAQfirst 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. 13. Dec 23, 2008 ### gravenewworld 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. 14. Dec 23, 2008 ### mgb_phys 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. 15. Dec 23, 2008 ### mgb_phys 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. 16. Dec 23, 2008 ### gravenewworld 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. 17. Dec 23, 2008 ### mgb_phys 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?

Last edited: Dec 23, 2008
18. Dec 23, 2008

### mheslep

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.

19. Dec 23, 2008

### mheslep

That ended, if it ever occurred, in the 1800s/1920s.
No restrictions? Where does that occur? Anyway, a big part of the news this week is that government can not police itself.
Even Chicago's Crooks Are Appalled by Blagojevich

20. Dec 24, 2008

### tchitt

I didn't say a corporation should have any obligation to the community or the country... it just so happens that their existence benefits both the community and the country. Capitalism is built on mutually beneficial arrangements. I don't believe ANYONE (outside of elected officials, of course) should feel any sort of obligation to their community or their country. Yes, they exist solely to make as much profit as possible and keep their stock holders happy.

There does not exist a thing as too much profit. These people with poor credit histories made their own bed... by destroying their own credit! If you don't have the credit... RENT! If you don't want to pay ridiculous interest rates... or if you can't COMFORTABLY afford the payments DON'T SIGN THE CONTRACT! There's no shame in renting a home and I don't think the urge to "play house" justifies taking on debt you can't handle. I don't care if you're approved or not, anyone with half a brain knows that you can get financed beyond your means... it's always been that way. Think before you act. Ignorance is not an excuse.

My problem is that so many people think that the government can do a better job. Let's face it... the federal government has the opposite of the Midas touch. Instead of gold it all turns to rust. The postal service is one of the few programs that isn't a complete and utter failure, and even then, UPS and FedEx completely outshine them. Our socialized school system has created generation upon generation of dependent ignorant retards. Social Security/Medicare are a joke. (And my paycheck suffers HORRIBLY for it.)

Now they want politicians "over-seeing" everything from cars to health care. Why on earth would some senator have a better idea on how to run a corporation than someone whose entire life has been dedicated to running corporations?! Because he's a senator? Because, well, it's the government and if anyone knows what they're doing... it's obviously them?

That's the kind of thinking that's caused so many parents to send their children off to their local public school just "knowing" that they're going to get a good education.

I'm tired of watching all these super-dependent, lazy people demand that the government steps in and makes it all better. It won't work.

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