Why do you think lowering the maximum wage is a bad idea?

[Ziggurat]

Since that is a phrase taken out of context I don't see your point.

Gaetan is crazy. I don't mean that he simply has "crazy" ideas, I mean that he is literally not sane. He admits to hallucinations which he believes are real. So when psionl0 refers to "Gaetan's world", keep in mind that this is a world filled with aliens and djinn.

 

[fuelair]

And religion is the opiate of the masses, comrade.

So say we all!!! And may we all be blessed by his Noodly Appendage!!!

 

[wrs]

Gaetan is crazy. I don't mean that he simply has "crazy" ideas, I mean that he is literally not sane. He admits to hallucinations which he believes are real. So when psionl0 refers to "Gaetan's world", keep in mind that this is a world filled with aliens and djinn.

Yes, I took the time to read the entire money thread last week and I no longer contribute because I have concluded it's a crazy thread going nowhere. I do think that Gaetan has spells of lucidity and he has pointed out correctly the failure of money to circulate. I think this is partly a function of money and partly the way it's incorrectly viewed by people. Nonetheless, there are some strange things in that thread and it's pointless to try to discuss them with him.

In my view money is like blood and it needs to circulate and it is incumbent on people to spend more than they save because it keeps things going. Or at least if you have excess savings then look at what you could spend some of them on because excessive saving does hurt the economy. Apple having a big pile of cash is a problem for the economy. Apple's customers spent their money on Apple phones which boost the economy but Apple is greedily sitting on the cash. That is another bad behavior that corporations constantly engage in.

 

[wrs]

That depends very much on the business in question. For manufacturing cars, for example, yes, small businesses are inherently inefficient compared to large businesses. Other businesses may reach appropriate economies of scale at much smaller sizes. It all depends, but your approach will either ignore these differences between different industries (and thereby harm consumers and the economy) or open itself up to corruption when businesses lobby government to affect the decision-making process about which industries get to have large companies and which don't (and thereby harm democracy itself).

So what you are saying is that the economy is just great now? Nothing to fix, people are well employed and there is a thriving and booming middle class so nothing needs to be fixed because economies of scale are the most important thing we all need. Those economies of scale produce high quality, valuable products that are affordable to all and ensure that wages are high and employment is available to every person. These benefits accrue because of efficiency of scale that if lost, would cause depression and irreparable damage to the economy?

Is that it? Or is this just something you are stuck on that you believe is important but can't provide any basis upon which you make your claim. I have yet to see you do anything but hand wave assumptions about pricing of goods that you have no measure of how efficiency of scale is a benefit. What I see you doing is using a term for which you have no measure and claiming it will have an impact which you arbitrarily pull out of a hat for arguments sake.

 

[wrs]

Forcing inefficiencies into the system to prevent true price competition sounds like a bad idea to me.

Quantify the inefficiency. I direct you to the response above to Ziggurat, same challenge, be specific.

 

[psionl0]

So what you are saying is that the economy is just great now? Nothing to fix, people are well employed and there is a thriving and booming middle class so nothing needs to be fixed because economies of scale are the most important thing we all need. .............

"Economies of scale" and "panacea" are two different things.

 

[Ziggurat]

So what you are saying is that the economy is just great now?

No, it's kind of lousy. But it's not lousy because CEO salaries are uncapped, and it's not lousy because corporations are allowed to get very large.

Really, when the best you can do for a counterargument is this sort of straw man, you've pretty much conceded defeat.

What I see you doing is using a term for which you have no measure and claiming it will have an impact which you arbitrarily pull out of a hat for arguments sake.

That's more than a tad bit ironic, given that you've got no measure for anything you've advocated. But anyways, there is more than enough information out there about economies of scale, if you choose to look for it.

 

[wrs]

No, it's kind of lousy. But it's not lousy because CEO salaries are uncapped, and it's not lousy because corporations are allowed to get very large.

So says you. Maybe it's because a lot of the money is trapped at the top for some reason or another. If the top wont spend, the bottom suffers lack.

Really, when the best you can do for a counterargument is this sort of straw man, you've pretty much conceded defeat.

Hardly, I don't think there is anything to win or lose. I simply posited an approach to dealing with an obvious problem. Big corporations really don't need to be big. They can be limited in many more ways than they are. Apple has no justification for hoarding cash, no big corporation does. They are obligated to spend it because the people that contribute to their success spent that money on their products.

That's more than a tad bit ironic, given that you've got no measure for anything you've advocated. But anyways, there is more than enough information out there about economies of scale, if you choose to look for it.

Economies of scale are no justification for failure to improve the lives of the people in society at large. The big corporations are not giving back that which they are taking. If they fail to spend back into the economy what they take out, then they are not improving the world.

Corporations are part of the social contract and to the degree that they fail in improving life, they should be shuttered.

 

[The Don]

So says you. Maybe it's because a lot of the money is trapped at the top for some reason or another. If the top wont spend, the bottom suffers lack.

Income and wealth inequality is a major issue in many economies and in the UK and the US it's getting worse. Progressive tax regimes for the top earners are a way of addressing this.

IMO (and IMO only) a bigger issue is the UK and US approach to wealth. In life and in business there seems to be a "get rich quick" mentality where there is an incentive to cash out as soon as possible. This breeds short-termism in the way that businesses are run and encourages managers and executives to financially plunder companies. IMO the size of the company is immaterial, Lord Weinstock is an example of someone who ran companies for the long term and his successors are an exemplar of poor decision making and short term thinking.

Hardly, I don't think there is anything to win or lose. I simply posited an approach to dealing with an obvious problem. Big corporations really don't need to be big. They can be limited in many more ways than they are. Apple has no justification for hoarding cash, no big corporation does. They are obligated to spend it because the people that contribute to their success spent that money on their products.

I disagree, companies who have to make major capital and/or R&D investments need to be large. When it costs hundreds of millions to bring a new drug to the market or billions to develop a new car platform you need a large organisation to be able to afford to raise that money.

Apple's shareholders aren't clamouring to get their hands on the cash pile (2/3 of which are foreign earnings which would attract US taxes if it were repatriated) which does surprise me but that cash pile will allow them to invest for the future. There is no obligation to pay the employees more, they get a fair wage.

Economies of scale are no justification for failure to improve the lives of the people in society at large. The big corporations are not giving back that which they are taking. If they fail to spend back into the economy what they take out, then they are not improving the world.

Corporations are part of the social contract and to the degree that they fail in improving life, they should be shuttered.

Big companies do not have an obligation to society at large, they have an obligation to their shareholders. That said, study after study has shown that more efficient economies do benefit the populace at large whereas inefficiencies work to the detriment of society at large. The British (and US for that matter) car industries are excellent examples of industries which were run for the benefit of the employees and their poor performance should act as a warning.

 

[Ziggurat]

So says you. Maybe it's because a lot of the money is trapped at the top for some reason or another. If the top wont spend, the bottom suffers lack.

Why do you suppose the top won't spend? Because they're selfish bastards? No, that's not why. They might be (in the same way that most people are selfish bastards), but since you have to spend money to make money, there's got to be another reason besides selfishness if they aren't spending. When you figure out why (and you haven't yet), you will be on the road to wisdom.

Hardly, I don't think there is anything to win or lose. I simply posited an approach to dealing with an obvious problem.

And your approach is wrong and counter-productive.

Big corporations really don't need to be big.

"Need" is not a useful word here.

They can be limited in many more ways than they are.

Not without granting government more power than is good for us. Big government causes far more problems than big corporations.

Apple has no justification for hoarding cash, no big corporation does.

First, you seem to be confusing cash with wealth. Not the same. Second, yes, actually, they DO have reasons to do so.

They are obligated to spend it because the people that contribute to their success spent that money on their products.

Bull ****. The people who spend their money on apple products got Apple products in return. That is the full extent of Apple's obligation to their customers (support counts as part of the product). If you value a product someone is selling more highly than the money it costs, then you buy the product, and you are better off for having bought it. If you do not value a product more highly than the money it costs, simply don't buy it. What happens to the seller's money after you engage in such an exchange is none of your business.

Economies of scale are no justification for failure to improve the lives of the people in society at large.

I'm not using it to justify that. I'm pointing out that if you eliminate economies of scale, then the loves of the people in society at large will be worse as a result.

The big corporations are not giving back that which they are taking.

They aren't taking anything. Unless government gets involved, you never have an obligation to buy anything from anyone.

If they fail to spend back into the economy what they take out, then they are not improving the world.

Corporations are part of the social contract and to the degree that they fail in improving life, they should be shuttered.

And who gets the power to make such subjective decisions? Some benevolent god-king? No, wrs, the only people available to do that are politicians and bureaucrats, who are just as craven (if not more so) than the fat-cat executives you despise. Power corrupts, and no corporation has the kind of power that government does.

 

[wrs]

I disagree, companies who have to make major capital and/or R&D investments need to be large. When it costs hundreds of millions to bring a new drug to the market or billions to develop a new car platform you need a large organisation to be able to afford to raise that money.

This is just bunk and Apple is proof. When they came out with the Ipod they were in trouble as a computer manufacturer. They were barely breathing with their stock having crashed. They made a lot of money on the ipod and rolled it into the iphone. They didn't need big piles of cash to develop either product. Electronics products are among the cheapest in terms of capital investment required. Much of their manufacturing is outsourced to other firms.

Apple's shareholders aren't clamouring to get their hands on the cash pile (2/3 of which are foreign earnings which would attract US taxes if it were repatriated) which does surprise me but that cash pile will allow them to invest for the future. There is no obligation to pay the employees more, they get a fair wage.

If you don't think so you aren't paying attention. But it's not the shareholders that matter. It's the consumers that paid for the phones but somehow this is absent in your thinking. The consumers rewarded Apple with success, society did. This is the excuse given around here for punitive taxes on individuals but when it comes to greedy big corporations, they get a pass. Your reasoning is baseless. There is an obligation to put the money back into circulation and not hoard it. Either pay a dividend, invest in a new product or pay the employees more. Sitting on the money does no one any good.

Big companies do not have an obligation to society at large

Of course they do, this is where they get their money. If society isn't benefited by the existence of the corporation then it has no right to exist.

 

[wrs]

Why do you suppose the top won't spend? Because they're selfish bastards? No, that's not why. They might be (in the same way that most people are selfish bastards), but since you have to spend money to make money, there's got to be another reason besides selfishness if they aren't spending. When you figure out why (and you haven't yet), you will be on the road to wisdom.

Really, then why don't they spend if you have the answer?

And your approach is wrong and counter-productive.

Says you with no proof while big companies fail to spend the cash they earn and starve the economy as a result.

"Need" is not a useful word here.

Sure it is and the world needs to be a better place.

Not without granting government more power than is good for us. Big government causes far more problems than big corporations.

They both cause problems and it's a specious argument to deflect the damage to society created by big corporations in the claim that govt power is worse. The power govt needs to exercise is in the break up of corporations and more freedom for the individual. Right now the society is far too constrained by laws to limit the individual and not nearly enough to limit corporations.

First, you seem to be confusing cash with wealth. Not the same. Second, yes, actually, they DO have reasons to do so.

Cash is a form of wealth and no, they don't have legitimate reason to sit on the cash. They didn't have it ten years ago, they developed the ipod and iphone without it. It needs to be spent back into the economy or don't you understand how money actually is supposed to work?

Bull ****. The people who spend their money on apple products got Apple products in return. That is the full extent of Apple's obligation to their customers (support counts as part of the product). If you value a product someone is selling more highly than the money it costs, then you buy the product, and you are better off for having bought it. If you do not value a product more highly than the money it costs, simply don't buy it. What happens to the seller's money after you engage in such an exchange is none of your business.

Wow, that one sure hits a nerve doesn't it? Apparently you value greed and miserliness. Apple as a public corporation has no justification to sit on money that it was given by it's customers. The customers worked at jobs and spent their money into the economy to Apple's benefit. I the same way, Apple owes it to their customers to spend that money back into the economy for the benefit of it's customers and it's own business. This is how the economy works. It's called the velocity of money and if it drops, the economy slows down needlessly.

I'm not using it to justify that. I'm pointing out that if you eliminate economies of scale, then the loves of the people in society at large will be worse as a result.

Offered without proof.

They aren't taking anything. Unless government gets involved, you never have an obligation to buy anything from anyone.

They have an obligation to keep it flowing but they have a choice as to how to do that. Paying better salaries, paying out dividends, developing new products are all ways to do that. In each case, society benefits by the circulation but when they sit on it, no one is gaining and most certainly not Apple itself. It just sits and stares stupidly at it's big bank account that is doing no one any good at all.

And who gets the power to make such subjective decisions? Some benevolent god-king? No, wrs, the only people available to do that are politicians and bureaucrats, who are just as craven (if not more so) than the fat-cat executives you despise. Power corrupts, and no corporation has the kind of power that government does.

Well the CBs are talking about negative interest rates which might address the problem. They are tasked with addressing exactly this problem.

 

[Iamme]

So these big corporations just accumulate all this money with no objective? To just look at it...to count it?, like the ogre did?, in Jack in the Beanstalk?
Would you dare approach a CEO and tell them they dont know what they are doing?, and that it is both hurting them and the economy at the same time? That they need to spend that money?

 

[wrs]

So these big corporations just accumulate all this money with no objective? To just look at it...to count it?, like the ogre did?, in Jack in the Beanstalk?
Would you dare approach a CEO and tell them they dont know what they are doing?, and that it is both hurting them and the economy at the same time? That they need to spend that money?

You know who Carl Icahn is?

But to answer your question, yes. Corporate raiders used to go after big cash piles like that. Wall Street has reacted to this with a variety of schemes meant to keep raiders away. Apple has floated a bond offering for stock buybacks, which is not a good idea because that debt isn't producing anything.

 

[Iamme]

I have heard of him, yes. Cant place him though. Too many names in numbers in my head, lol.
.
Anyway, dont you suppose they pile up the cash to cut debt in acquiring new capital investments? Or do you think they would be better off spending, while incurring the debt? Or perhaps foregoing aquisitions and concentrate on just reinvesting, expanding, reinvesting, expanding, etc?
.
Out of curiousity...do you have a business degree, or any experience in dealing with capital funds, divestitures, etc., to be able to hobnob with fellow wizards in this field?...to convince anyone that you know what you are talking about? That you have a better way?
.
I am enjoying reading your posts...but am curious if you really might know something that they don`t...or not?

 

[wrs]

I have heard of him, yes. Cant place him though. Too many names in numbers in my head, lol.
.
Anyway, dont you suppose they pile up the cash to cut debt in acquiring new capital investments? Or do you think they would be better off spending, while incurring the debt? Or perhaps foregoing aquisitions and concentrate on just reinvesting, expanding, reinvesting, expanding, etc?
.
Out of curiousity...do you have a business degree, or any experience in dealing with capital funds, divestitures, etc., to be able to hobnob with fellow wizards in this field?...to convince anyone that you know what you are talking about? That you have a better way?
.
I am enjoying reading your posts...but am curious if you really might know something that they don`t...or not?

I ran a cash-flow positive business for 15 years and only had one losing year. Our biggest year was 2001 when we made $1.3m gross. I think we had 7 years over $1m out of the 15. I did get involved in raising venture capital back in 2000 and we were able to raise $150,000 at a cost of $100,000. I decided that the $150,000 came with too many strings and so we didn't accept it. The next year, 2001, we made the wasted $100,000 back but the problems in 2001 due to 911 stretched over into 2002 and so our revenues declined by $400k in 2002. We never got over $1m after that. I ended up with a cancer diagnosis in 2006 and wound the business down by 2010.

So, that is my story of my business experience. However, in my business, I developed code for big companies all over the country. I was a fairly well regarded consultant and so I got to work in a lot of big companies and meet with fairly high level executives. Here is a list of the big companies that I did substantial projects for

NY Life, JP Morgan, JC Penney, Lexis-Nexis (Reed Elsevier), IBM, Loral, Lockheed-Martin, Raytheon, Sprint and Freddie Mac. Of those, our biggest and longest lasting customers were IBM, Lexis-Nexis, Raytheon and Lockheed-Martin. Those were our core accounts for project work. We sold our product to a lot more companies but didn't do project work for them and so didn't get as good a look inside as I did in those I listed.

In every one of those companies, there were many, many projects done that never had a chance of coming to fruition and the people on them pretty much knew that. Some were done to test ideas out and some were done to act as a backup for another project that was going to be the real thing. We also worked on stuff that was real / core business though and did actually work and make money so I know what kind of effort is required of each and how the approach taken is different on the ones that have to work. In those cases, you get paid top dollar because it has to be done.

We had one of those with Lexis Nexis. They were moving a specific function off of their mainframes on to Solaris and they had a serial adapter that was supposed to have a device driver that implemented 3780 protocol from IBM. They had something like 4000 law firms hooked up to printers via this hardware over phone lines. It was an ancient protocol but lawyers were charged by the page they printed over this system and it was critical that it work on the Solaris platform. We made $125k to fix the driver that Sun never finished and got a $25k bonus for delivering it on time. We did the whole project in six weeks and it just took me and one of my guys that amount of time to get it done. The project was fixed price but our hourly rate worked out to over $300/hr on the project. Normally I charged them $175/hr for my time and $125/hr for my employees.

When big companies spend like that, they help the rest of the economy and my company was one that would benefit. However, there are others that do as well. When IBM did it's CHRP which was a failure, they spent over $3B on it and that helped a lot of outside companies. It is incumbent on big companies to use their cash in order to try things that won't work because they learn from the failures and they still help the economy in doing so.

I know that IBM was very good about this for years. I don't know anymore since I haven't been in touch with the business for the last five or six years.

So what I am sharing is what I see over a 30 year professional career that included having my own business and working inside a lot of top 100 businesses and small to medium sized ones as well during that time.

 

[Iamme]

Thank you wrs. Very interesting.
Now everyone knows you arent just some gas bag spouting uneducated theory.
Notice how the posts quit? (At least for the moment).
Maybe everyone took a break to go back to the drawing boards...gathering themselves for the second wave.

 

[Manopolus]

In other words, if ALL cars were significantly more expensive, then niche car makers would be competitive.

A bit out in left field here, but on this particular subject... if new cars were more expensive, the market for used cars and possible upgrades compatible with used cars might also be improved. There's also a matter of government programs to destroy older cars.... nowadays they're treated as more "disposable" than something even as expensive as they currently are should be, IMO. There's even lease rollover deals for people that have no intention of actually ever buying one.

Anyway, there's a lot of "what ifs" in there, but such a situation wouldn't necessarily be a bad thing. I could definitely see reasons where smaller companies in that market producing more expensive cars might be a benefit here. The money would also be split off to other pursuits within the industry (like replacement parts -- even replacements which are also upgrades (new engine/old body, and so on -- which exist, but are a niche market at the moment)).

...but reliability and innovation might suffer, strictly in terms of the new car market. It might not, too. The same number of creative engineers would still exist in the world... maybe even more of them, if there's a demand for it.

Notably, none of this happens in a vacuum. It happens in the context of a broader economy which may or may not possess some of the same conditions which exist now. Growing pains will always occur with change, but that's happening already and will continue to do so no matter what.


In any case, where the market will actually go in any given situation is hardly as predetermined purely WRT money as some economist might predict. It also depends on the ideas of the people actually creating the products. That side of it is damn near unpredictable. A cheaper economy really isn't always better -- from the perspective of anybody but the guy at the top selling millions of the cheap, identical products he has a near-monopoly on (not a true monopoly, since most of them have competitors of equal size, but a situation where new competitors are effectively impossible).

What gets me is this strange idea that economists have that they can objectively calculate what's "best for consumers." That's actually a subjective judgement, not an objective one -- just like anything else that involves values. It is based upon a presumption which not everyone in the universe holds as true in all cases. A broader, more expensive market can actually have some potential advantages.

 

[The Don]

This is just bunk and Apple is proof. When they came out with the Ipod they were in trouble as a computer manufacturer. They were barely breathing with their stock having crashed. They made a lot of money on the ipod and rolled it into the iphone. They didn't need big piles of cash to develop either product. Electronics products are among the cheapest in terms of capital investment required. Much of their manufacturing is outsourced to other firms.

Apple's R&D costs are hardly peanuts, in 2013 they were around $4bn.

http://appleinsider.com/articles/13...s-surge-33-on-pace-to-top-4-billion-this-year

If you don't think so you aren't paying attention. But it's not the shareholders that matter. It's the consumers that paid for the phones but somehow this is absent in your thinking. The consumers rewarded Apple with success, society did. This is the excuse given around here for punitive taxes on individuals but when it comes to greedy big corporations, they get a pass. Your reasoning is baseless. There is an obligation to put the money back into circulation and not hoard it. Either pay a dividend, invest in a new product or pay the employees more. Sitting on the money does no one any good.

Some of Apple's shareholders have been calling for the Apple cash reserve to be released back to the shareholders. Apple on the other hand are reluctant to do this and presumably want to keep the cash on hand for future liabilities and to weather possible future hard times.

Apple are under no obligation to anyone other than their shareholders. If and when the shareholders want their money they'll get it.

Of course they do, this is where they get their money. If society isn't benefited by the existence of the corporation then it has no right to exist.

 

[The Don]

So what I am sharing is what I see over a 30 year professional career that included having my own business and working inside a lot of top 100 businesses and small to medium sized ones as well during that time.

And you've come out of that 30 year career with some IMO bizarre ideas about the way the business world works, the motivations of those involved and a lack of understanding of economies of scale.

Your attitude towards doctors is insulting (suggesting that they are just pill-pushers in the pockets of big-pharma) and your insistence that small inefficient companies are better for the the economies runs counter to both economic theory and common sense.

In your post you laud IBM's $3bn failed investment but if, as you suggest, IBM had been broken up years before because it had become too large, it would never have been able to afford to make that investment.