Ok. . . This is terrifying.

[buckeye]

It's a little embarrassing to admit, but I've had a not-quite-conspiratorial thought about the '08 crash for a while now...  It seemed to my economically half-informed mind that the big crash was not the result of outright collusion, but that a number of financially powerful people / companies were intentionally pushing the system to see where it would break.  Now that they've explored that situation a bit, they'll go for one last squeeze that will truly wreck things this time, while making plans to flee or otherwise insulate themselves from the disaster that awaits on the other side. 

You guys plus news of the Fed buying treasuries isn't doing much to blunt my admittedly intuitive concern.

To try to stay more on topic, there's nothing really obliging a for-profit company to provide for the greater good, but those in charge and still in possession of a moral compass would do so to some degree anyway.  Certainly a little bit of that kind of thing in earnest would score points with customers and bring something good to the bottom line - it has -some- tangible value, not just fuzzy feelings, eh?  In the absence of a significant enough $$$ value and no moral compass or any other need for warm fuzzies, we are indeed borked.

guido: It's my contention that we've pushed past the point you mention, but it no longer matters - they'll squeeze the last few drops, crushing the system then run away.  My foil hat tells me that we're seeing just the nascence of a slow-motion economic horror.

[guido911]

Then why should we care about them?

Restated:  what interest should we have in nurturing them? 

Nurture them? What does that mean?  Look, you don't have to like or care about corporations, that really is fine. However, the idea that a corporation that provides a good or service, and by the way employs people to provide that good or service, owes something more such as the ambiguous "greater good" is simply wrong in my opinion. Now, if the corporation chooses to perform "greater good" type things because it wants to be a good corporate citizen or whatever, so be it.

[we vs us]

Nurture them? What does that mean?  Look, you don't have to like or care about corporations, that really is fine. However, the idea that a corporation that provides a good or service, and by the way employs people to provide that good or service, owes something more such as the ambiguous "greater good" is simply wrong in my opinion. Now, if the corporation chooses to perform "greater good" type things because it wants to be a good corporate citizen or whatever, so be it.

It means that, in actuality, we have a level of control over what companies do.  Not as much as we once did, that's for sure, but if you step outside our recent history -- where anything corporations do is seen (sometimes retroactively) as part of the necessary and right free market ecosystem -- it's obvious that we can push them in certain directions.  

I know you'll hear that as blah blah blah socialism blah blah blah but really corporations aren't sacrosanct.  They weren't created on the seventh day.  They're legal structures, and as such, respond to changes made within their legal framework.  And if that framework becomes more of a detriment to the well being of our country than a benefit, then we actually can change the framework so that it functions correctly. 

It's funny that pointing out that it's our duty to actively control corporate law will get me labeled a radical Marxist, but then we live in strange times.

[guido911]

It means that, in actuality, we have a level of control over what companies do.  Not as much as we once did, that's for sure, but if you step outside our recent history -- where anything corporations do is seen (sometimes retroactively) as part of the necessary and right free market ecosystem -- it's obvious that we can push them in certain directions.  

I know you'll hear that as blah blah blah socialism blah blah blah but really corporations aren't sacrosanct.  They weren't created on the seventh day.  They're legal structures, and as such, respond to changes made within their legal framework.  And if that framework becomes more of a detriment to the well being of our country than a benefit, then we actually can change the framework so that it functions correctly.  

It's funny that pointing out that it's our duty to actively control corporate law will get me labeled a radical Marxist, but then we live in strange times.

The fact that your view of corporations differs from mine will not get you a "socialist" tag from me.

[Conan71]

I think you're misunderstanding my point. I'm not advocating anything here.  My point is that, Reagan proposed trickle down economics as a grand bargain, a new way to view (among other things) the relationship between labor, capital, and ownership.  In fact, the idea itself is as old as society, but he recast it in a compelling way and it's been an underlying assumption in the way we (individuals, companies, and government) interface with our economy. 

And he only proposed it as an idea, not as a policy with percentages and quotas attached.  Simply:  we'll pump money into the oligarchy so long as the oligarchy gives back.  But now the feedback mechanism is borked, so that we're giving to the oligarchy but the oligarchy is hoarding while the rest of us slowly become poorer and poorer.  Generally speaking, of course. 

I'm talking about the demise of a certain social contract, not federal policy.

Trickle down will only work if there's an accompanying confidence in the economy or near future economy.  Otherwise people will hold money to avoid losses.  When things start getting good again and there is growth throughout the economy investors and corporations will hire.  Give them more net cash to invest via lower tax rates and that increases what is avaialble for discretionary spending on new hires and new capital improvements.

No one can know for certain that lowering tax rates alone created more jobs, but we do know that unemployment went from a high of around the mid 9's during President Reagan's first term to 5% when he left office.  Was it coincidental that the top tax rate was lowered from 70% to the 30's? 

Certainly lowering the top marginal rate and cutting cap gains taxes left those with large sums of money more to invest.  It also was an incentive knowing they would not be penalized for those investments via high taxes.  Regardless of how us plebes view taxes, when one group pays a significantly higher rate, that is viewed as a penalty for creating wealth for themselves and others.

As we all know, steel mills were closing and typical American manufacturing jobs were drying up in the 1980's.  The energy business was taking a hit, the S & L's collapsed, etc.  Those with large sums of money were able to invest in emerging technologies like PC's, software companies, and the expansion of the telecom industry including these new fangled cellular telephone thingies.

It may well have been a total coincidence that the economy expanded when tax rates were lowered, but it's entirely likely people might have been just fine getting 7 to 8% on their money in CD's or tax shelters rather than investing in all those new income opportunities had they not lowered cap gains and top income tax rates.

Republican politicians and conservative pundits can go on and on at this point about not repealing the Bush tax cuts but it's a moot point anyhow if overall confidence in the economy isn't there.  Money will continue to sit in safe havens until the overall environment improves.  I know it goes totally against common sense, but all my current IRA contributions and employer match are going into money market for the time being until I see some stabilization.  No one is quite certain what it's going to take to get real growth back at this point, we are in uncharted territory with the kind of collapse we had.  There's similarities to previous recessions and depressions, but we've not faced anything exactly like this.

[rwarn17588]

It may well have been a total coincidence that the economy expanded when tax rates were lowered, but it's entirely likely people might have been just fine getting 7 to 8% on their money in CD's or tax shelters rather than investing in all those new income opportunities had they not lowered cap gains and top income tax rates.

I think a lot of that new investing money that sprouted up during the 1980s came from the implementation of the 401(k) law. That went into effect in 1980, and made it very easy and advantageous for common workers to invest in the stock market.

[Conan71]

I think a lot of that new investing money that sprouted up during the 1980s came from the implementation of the 401(k) law. That went into effect in 1980, and made it very easy and advantageous for common workers to invest in the stock market.

That would also help explain healthy growth in the Dow in the 1980's as well as more and more people from all classes became shareholders in companies for the first time.  I'm curious what kind of shape our economy would have been in the last 30 years if the PC had not been invented yet and therefore online commerce and the need for fast advanced telecommunications.

Think how much different the world would look right now if the integrated circuit and subsequent micro processors had not been invented yet.

Sorry for the drift, I'm simply explaining that tax cuts only work to stimulate spending when other incentives to invest exist.  If those incentives (like confidence in the economy or actual orders) aren't there, the tax cuts are irrelevant.  That, more than anything is what is being missed in all the rhetoric.  I realize Turbo Tax Geithner and President Obama can't blow smoke up our asses about a rosy future, but they seem overly aloof to the problems while staying focused on agenda items instead of problem solving that the average American can relate to.  More and more regulations, fees, and taxes are psychological dis-incentives for people to hire right now coupled with lower levels of orders.  

[Gaspar]

You are correct Conan.  I think people, including myself, tend to give government too much credit for manipulating the economy.  That's not to say that they don't play a big roll, just that innovation, advances and the lack thereof, have a far more dramatic effect.

Funny that you use the word "aloof."  Thats exactly how the London Telegraph is describing our President this morning. 

"Growing disillusionment with the Obama administration's handling of the economy as well as health care and immigration has gone hand in hand with mounting unhappiness with the President's aloof and imperial style of leadership, and a growing perception that he is out of touch with ordinary Americans, especially at a time of significant economic pain. "

Shame.

[Conan71]

"Imperial style of leadership"

That's what's been bothering me that I could not put a finger on.  They almost act like a royal family.  Wow, that's pretty bad when even the liberal rags in the UK start going after President Obama.

[guido911]

You are correct Conan.  I think people, including myself, tend to give government too much credit for manipulating the economy.  That's not to say that they don't play a big roll, just that innovation, advances and the lack thereof, have a far more dramatic effect.

Funny that you use the word "aloof."  Thats exactly how the London Telegraph is describing our President this morning. 

"Growing disillusionment with the Obama administration's handling of the economy as well as health care and immigration has gone hand in hand with mounting unhappiness with the President's aloof and imperial style of leadership, and a growing perception that he is out of touch with ordinary Americans, especially at a time of significant economic pain. "

Shame.

Obviously the London Telegraph is racist.

[JeffM]

"Imperial style of leadership"

That's what's been bothering me that I could not put a finger on.  They almost act like a royal family.  Wow, that's pretty bad when even the liberal rags in the UK start going after President Obama.

"...even the liberal rags in the UK..."?  

Are we talking about the same London Daily Torygraph... er, uh.... Telegraph?  

[heironymouspasparagus]

Guido, in particular, everyone in general.

Peter Drucker is arguably the father of management practices in this country, if not the rest of the world.  He and his contemporaries are directly responsible for making management a science that could be taught and practiced.  He has an extensive body of literature to support his thoughts on the matter.

He said (paraphrased) things like;

There is no purpose for the existence of a corporation outside of its context as a tool of society.
The main way it fulfills that goal is through profit.
They exist to allow the leverage of effort toward a goal.  (10 people working together are more productive than 1 working alone for 10 times the effort).
There is a social contract with same society.
If the tool isn't working within its context, then it should not exist.

My addition;
Failing is an option - no matter the size.  Bailing out is also an option if there is a value created that exceeds the bailout.  Examples;  AIG bailout, no value created.  GM bailout - good value created - leveraged to the effort of Ed Whitacre and the remaining employees of GM to create/save value for several million more.  (All the suppliers/dealers/parts stores, etc surrounding the GM enterprise.)

A tiny little Drucker reference - everyone here knows how to find more about him if interested;
http://www.sixsigmaiq.com/columnarticle.cfm?externalid=2507&columnid=29

What is bad (not to mention troubling) for us in particular and the rest of the world in general is the fact that we have gotten away from the use of a corporation as a tool.  It is no different from a hammer to a carpenter, a computer to a programmer, or one of those puffy white hats to a chef!

We have even given it human status to some degree.  And the RWRE would have one believe that corporations
are independent of the society the exist in and by definition are intended to serve.  They are wrong.  The sooner we re-discover that fact and get back to the basics as defined and illustrated by Peter Drucker, et. al, the better off we will be individually and collectively.

[guido911]

Guido, in particular, everyone in general.

Peter Drucker is arguably the father of management practices in this country, if not the rest of the world.  He and his contemporaries are directly responsible for making management a science that could be taught and practiced.  He has an extensive body of literature to support his thoughts on the matter.

He said (paraphrased) things like;

There is no purpose for the existence of a corporation outside of its context as a tool of society.
The main way it fulfills that goal is through profit.
They exist to allow the leverage of effort toward a goal.  (10 people working together are more productive than 1 working alone for 10 times the effort).
There is a social contract with same society.
If the tool isn't working within its context, then it should not exist.

My addition;
Failing is an option - no matter the size.  Bailing out is also an option if there is a value created that exceeds the bailout.  Examples;  AIG bailout, no value created.  GM bailout - good value created - leveraged to the effort of Ed Whitacre and the remaining employees of GM to create/save value for several million more.  (All the suppliers/dealers/parts stores, etc surrounding the GM enterprise.)

A tiny little Drucker reference - everyone here knows how to find more about him if interested;
http://www.sixsigmaiq.com/columnarticle.cfm?externalid=2507&columnid=29

What is bad (not to mention troubling) for us in particular and the rest of the world in general is the fact that we have gotten away from the use of a corporation as a tool.  It is no different from a hammer to a carpenter, a computer to a programmer, or one of those puffy white hats to a chef!

We have even given it human status to some degree.  And the RWRE would have one believe that corporations
are independent of the society the exist in and by definition are intended to serve.  They are wrong.  The sooner we re-discover that fact and get back to the basics as defined and illustrated by Peter Drucker, et. al, the better off we will be individually and collectively.

Drucker?

[Conan71]

Drucker?

I never realized Sam was a flamer.  Don't you think he looks a bit effeminite there?

[Gaspar]

Guido, in particular, everyone in general.

Peter Drucker is arguably the father of management practices in this country, if not the rest of the world.  He and his contemporaries are directly responsible for making management a science that could be taught and practiced.  He has an extensive body of literature to support his thoughts on the matter.

He said (paraphrased) things like;

There is no purpose for the existence of a corporation outside of its context as a tool of society.
The main way it fulfills that goal is through profit.
They exist to allow the leverage of effort toward a goal.  (10 people working together are more productive than 1 working alone for 10 times the effort).
There is a social contract with same society.
If the tool isn't working within its context, then it should not exist.

I don't think anyone disagrees with that.  You have failed to recognize the tool for it's primary modern purpose though.  Protection from liability.  The role of the corporation has changed as the tort system has grown in this country.  It is no longer a question of "if," a company will encounter legal liability, but "when," and "how much."  The corporation in all of it's convoluted shapes and sizes is designed to protect the owners, workers, clients, and vendors from liability both internally and externally.  From other companies and each other.

It has become more of a legal armor than a simple tool for banding together the productive innovation of groups of people.  20, 40 years ago, most independent self-employed business people were just that,  sole proprietors.  Now you find very few not operating under some form of corporation.