Wednesday, March 19, 2014

America's Race to the Bottom Continues

Congress made sure that America drastically cut costs for infrastructure spending to give rich people and their unpatriotic "multinational" corporations big tax breaks.

Meanwhile, countries such as China invests in their country by building roads, bridges, dams and transportation. See the before and after photos of Shanghai after the past 26 years of China's growth.

America's Race to the Bottom Continues

As we already know, for years American businesses have moved operations to China, costing many American jobs.

And sometimes American businesses (such as the Sands, MGM Resorts, Wynn etc.) have gained from China's rising middle-class, from those who gambled in American-owned casinos in China (like the ones owned by billionaires such as Sheldon Adelson and Steve Wynn).

Now Chinese businesses are coming here to put American businesses out of business—a Chinese-owned casino (with a Chinese theme) to cater to the Chinese "whales" (high-rollers), and will directly compete with American casinos here in Las Vegas.

Below is from a reader's comment to another post I wrote:

Six months ago pharmaceutical company Merck announced over 16,000 job cuts. Shares of Merck rose more than 3% on the news and the stock is now up nearly 20% so far this year. Several other companies that have been posting decent earnings increases are also getting rid of workers. Wall street investors just keep on cheering.

German industrial conglomerate Siemens cut 15,000 employees. Its stock is up more than 10% year-to-date and nearly 20% in the past six months.

Cisco Systems disclosed last year it was eliminating over 4,000 jobs. Cisco's stock is up 18% this year and the company gave their CEO a massive raise, $15.2 million in stock awards and a $4.7 million cash bonus. Apparently, you need to be properly compensated for all the hard work it takes to swing an ax.

Want some other examples of job killers that Wall Street loves?

AOL cut 10% of its workforce last year, shares were up more than 15%. 

Hewlett-Packard hasn't been selling a lot more PCs and printers lately. But their CEO had ambitious plans to slash 29,000 jobs. Shares are up nearly 50% the past 12 months.

But wait. There's more!

Big banks are all making adjustments to their mortgage divisions. Citigroup, Bank of America and Wells Fargo have each disclosed plans to eliminate thousands of workers in their home loan units. A big drop in refinancing activity due to rising long-term interest rates is to blame. Still, it's not as if the banks themselves are struggling. Shares of all three companies are up about 20%.

Now don't get me wrong. I'm not suggesting that Fortune 500 companies go out and spend lavishly to hire new employees when demand isn't there. But Wall Street encourages companies to keep slashing costs because investors like the higher earnings that come along with fewer workers.

This lunacy can't last forever. Many people (including members of the Federal Reserve) like to harp on how a stronger stock market is good for the economy because of the so-called wealth effect. But that wealth is increasingly concentrated in the hands of just a few: the richest of the rich.

The real economy can't move into high gear if more people lose their jobs and pull back on spending. And if consumer spending remains stagnant, companies will have no incentive to hire more. In fact, they may keep firing people just to preserve profits. That may lead to even higher stock prices.

And that's great news ... for those who can actually afford to buy stocks and the executives who receive enormous bonuses for handing out pink slips. We are well on our way to another economic Armageddon even worse than 2008. If it does happen, you can say goodbye to capitalism, for no one will have faith in the system any longer. Maybe that's the whole idea...for the super rich to put an end to our economic system while keeping everything for themselves.

This is how you play the game for keeps.

And that's why I wrote: American Exceptionalism is dead.

1 comment:

  1. The core problem is that the corruption of the political class in America, in both parties, makes it easier to give out goodies, usually to those who are already rich, than to say no to them. Money given out to the poor is a pretty tiny fraction of the problem, but it is what enables Democrats to keep pretending that they are the party of the poor. In reality, BOTH parties are the party of Wall Street and looters of the Treasury. The only difference is one steals more than the other.