Oh, those nasty "get the guv'mint off my back" businessmans

[flylooper]

Why the Dow is Hitting 10,000 While Everyone Else is Cutting Back

By Robert Reich

So how can the Dow be flirting with 10,000 when consumers, who make up 70 percent of the economy, have had to cut way back on buying because they have no money? Jobs continue to disappear. One out of six Americans is either unemployed or underemployed. Homes can no longer function as piggy banks because they're worth almost a third less than they were two years ago. And for the first time in more than a decade, Americans are now having to pay down their debts and start to save.

Even more curious, how can the Dow be so far up when every business and Wall Street executive I come across tells me government is crushing the economy with its huge deficits, and its supposed "takeover" of health care, autos, housing, energy, and finance? Their anguished cries of "socialism" are almost drowning out all their cheering over the surging Dow.

The explanation is simple. The great consumer retreat from the market is being offset by government's advance into the market. Consumer debt is way down from its peak in 2006; government debt is way up. Consumer spending is down, government spending is up. Why have new housing starts begun? Because the Fed is buying up Fannie and Freddie's paper, and government-owned Fannie and Freddie are now just about the only mortgage games remaining in play.

Why are health care stocks booming? Because the government is about to expand coverage to tens of millions more Americans, and the White House has assured Big Pharma and health insurers that their profits will soar. Why are auto sales up? Because the cash-for-clunkers program has been subsidizing new car sales. Why is the financial sector surging? Because the Fed is keeping interest rates near zero, and the rest of the government is still guaranteeing any bank too big to fail will be bailed out. Why are federal contractors doing so well? Because the stimulus has kicked in.

In other words, the Dow is up despite the biggest consumer retreat from the market since the Great Depression because of the very thing so many executives are complaining about, which is government's expansion. And regardless of what you call it -- Keynesianism, socialism, or just pragmatism -- it's doing wonders for business, especially big business and Wall Street. Consumer spending is falling back to 60 to 65 percent of the economy, as government spending expands to fill the gap.

The problem is, our newly expanded government isn't doing much for average working Americans who continue to lose their jobs and whose belts continue to tighten, and who are getting almost nothing out of the rising Dow because they own few if any shares of stock. Despite the happy Dow and notwithstanding the upbeat corporate earnings, most corporations are still shedding workers and slashing payrolls. And the big banks still aren't lending to Main Street.

Trickle-down economics didn't work when the supply-siders were in charge. And it's not working now, at a time when -- despite all their cries of "socialism" -- big business and Wall Street are more politically potent than ever.

[SXSMITH]

Originally Posted by flylooper

Why are auto sales up? Because the cash-for-clunkers program has been subsidizing new car sales.

This strikes me as odd coming from Reich. He's smarter than that. This smacks as a piece being written for a purpose rather than an honest assessment. Maybe he took some money to say this. It just doesn't make sense.

The reality is...

September Auto Sales Go Clunk - Henry Payne - Planet Gore on National Review Online

September sales are in, and sobriety can take a bow.

Edmunds.com reports that “September’s light-vehicle sales rate will fall to 8.8 million units . . . the lowest rate in nearly 28 years, tying the worst demand on record. After the cash-for-clunkers program boosted August sales to their first year-over-year increase since October 2007, demand has plunged. In at least the last 33 years, the U.S. seasonally adjusted annual rate has only dropped as low as 8.8 million units once — in December 1981 — with records stretching back to January 1976.”

“Many people regard February as the darkest month of the recession, but even then (sales were) higher, at 9.1 million units,” adds Edmunds.com statistician Zhenwei Zhou.

Credit Crisis Plunges September Auto Sales to Uncharted Depths - Auto Observer

Wheezing U.S. auto sales in September fell by 26 percent, coming in below one million units for the first time for any month in more than 15 years and prompting epochal comparisons to the dismal fall of 2001, when American consumers were frozen by the shock of the 9/11 terrorist attacks.

Overall sales for the month were only about 965,671 vehicles, compared with some 1.3 million vehicles sold in September 2007. In September, the seasonally adjusted selling rate -- the industry's most important interpreter of the sales picture -- fell to an abysmal 12.8 million units compared with a rate of 16.5 million last year.
"We could see close to a 20 percent decline year-over-year until the end of the year," said Jesse Toprak, executive director of industry analysis for Edmunds.com. "If that happens, auto sales could fall to near 14 million units for the year -- quite a difference from more than 16 million last year."

[flylooper]

I think he was trying to illustrate a point. Yeah, the dates are wrong but the argument holds: that fed stepped in where the consumer has abandoned the marketplace. It was fed money that spiked auto sales during the summer.

Here's the thing I take away from this: Unless and until people get back to work with good jobs instead of being relegated to being baristas at Starbucks it's all going to implode anyway. When there are no buyers the sellers go broke. Government intervention can only work for so long.

[psudy]

"Government intervention can only work for so long."

+1. Did hell freeze over? lol.

[BigArn]

Originally Posted by flylooper

I think he was trying to illustrate a point. Yeah, the dates are wrong but the argument holds: that fed stepped in where the consumer has abandoned the marketplace. It was fed money that spiked auto sales during the summer.

Here's the thing I take away from this: Unless and until people get back to work with good jobs instead of being relegated to being baristas at Starbucks it's all going to implode anyway. When there are no buyers the sellers go broke. Government intervention can only work for so long.

So a Service society ain't going to cut it? We need more Mfg. jobs, and less coffee maker/server jobs.

[flylooper]

Originally Posted by BigArn

So a Service society ain't going to cut it? We need more Mfg. jobs, and less coffee maker/server jobs.

Yup. That's my take. The middle class is getting smaller and poorer. Where once a laboring guy's wages were bargained for collectively, now he's on his own. His union is dead, powerless. A union carpenter or dry waller has been replaced by scab illegals from Mexico. Teamsters can't even organize Fedex drivers or Delta ramp workers. And so on down the line. We have no manufacturing sector much anymore, other than in defense related industries. And they don't make products people can buy.

The corporations own the workplace and they're making short work of good jobs by shipping them to China and Bangladesh. (Can someone mention a single article of clothing that's "Made in the USA?") Auto parts? Tires? (Goodyear is all that's left of the once dominant American tire industry.)

Globalization hasn't raised the living standards of Americans; rather, it's brought it down to the level of the less developed countries. This has been going on for years. The "prosperity" of the last decade or two was financed on credit cards. The piper demanded payment and the whole thing collapsed like a house of cards. (1% of the country got really rich. The other 99% got a hot stick up the backside in terms of buying power.)

[SXSMITH]

Originally Posted by flylooper

I think he was trying to illustrate a point. Yeah, the dates are wrong but the argument holds: that fed stepped in where the consumer has abandoned the marketplace. It was fed money that spiked auto sales during the summer.

Here's the thing I take away from this: Unless and until people get back to work with good jobs instead of being relegated to being baristas at Starbucks it's all going to implode anyway. When there are no buyers the sellers go broke. Government intervention can only work for so long.

Yes, the rest of it was good. I just caught that one point in light of the news about September auto sales.

[jerome_oneil]

You should all watch a documentary called "What Would Jesus Buy." It's a documentary about Reverend Billy and the Church of Stop Shopping, and his very entertaining crusade to get people to give up their consumerism ways.

There is one segment where they are in a small town that has been decimated by Wallmart, and he walks into a small local store trying to buy an American made sweater. The conversation he has with the proprietor is fascinating, and the change in the proprietor's attitude from entry to exit is revealing as well.

[BDFINALLY]

Originally Posted by flylooper

Yup. That's my take. The middle class is getting smaller and poorer. Where once a laboring guy's wages were bargained for collectively, now he's on his own. His union is dead, powerless. A union carpenter or dry waller has been replaced by scab illegals from Mexico. Teamsters can't even organize Fedex drivers or Delta ramp workers. And so on down the line. We have no manufacturing sector much anymore, other than in defense related industries. And they don't make products people can buy.

The corporations own the workplace and they're making short work of good jobs by shipping them to China and Bangladesh. (Can someone mention a single article of clothing that's "Made in the USA?") Auto parts? Tires? (Goodyear is all that's left of the once dominant American tire industry.)

Globalization hasn't raised the living standards of Americans; rather, it's brought it down to the level of the less developed countries. This has been going on for years. The "prosperity" of the last decade or two was financed on credit cards. The piper demanded payment and the whole thing collapsed like a house of cards. (1% of the country got really rich. The other 99% got a hot stick up the backside in terms of buying power.)

Not being flippant, but both Schott and Vanson still make M/C jackets here.

Full disclosure, I wear a Dainese made in Italy.

[ARozanski]

Originally Posted by flylooper

The corporations own the workplace and they're making short work of good jobs by shipping them to China and Bangladesh. (Can someone mention a single article of clothing that's "Made in the USA?") Auto parts? Tires? (Goodyear is all that's left of the once dominant American tire industry.)

6. Goodyear

Demand for Goodyear tires has sunk, and the company is saddled with massive debt and pension obligations.

It doesn’t help that The United Steelworkers union prevents the company from proper cost control by forcing factories to stay open.

Shareholders have to wonder how much value will be left of the company after bondholders and the union members have their way.

MC/EV=53%

Ten Big Companies That Are Veering Toward Bankruptcy: Tech Ticker, Yahoo! Finance

[Lewd Ferrigno]

Originally Posted by ARozanski

Ten Big Companies That Are Veering Toward Bankruptcy: Tech Ticker, Yahoo! Finance

You know, they also said my company would be bankrupt by the end of this year. They said it would be the biggest tech bankruptcy ever.

We are no longer on that list and are doing well. So, take analysts with a grain of salt.

[ARozanski]

Originally Posted by Lewd Ferrigno

You know, they also said my company would be bankrupt by the end of this year. They said it would be the biggest tech bankruptcy ever.

We are no longer on that list and are doing well. So, take analysts with a grain of salt.

I know - it was more directed towards Fly's mention of Goodyear being the last American tire company.

[flylooper]

Originally Posted by BDFINALLY

Not being flippant, but both Schott and Vanson still make M/C jackets here.

Full disclosure, I wear a Dainese made in Italy.

BD. Okay, I'll grant you that.

But what I mean is mass produced clothing. Think Levi Strauss, Arrow, Gant, Pendleton shirts, Hart Shaffner and Marx suits, Fruit of the Loom, Jockey...anything made for the general public. All those companies have gone to sourcing offshore. All these companies once employed Americans (most with limited educations) whom made a decent union wage. No more.

Edit: Last summer I was up in Pendleton, Oregon and I stopped by the Pendleton Woolen Mills to buy a genuine Pendleton shirt, which I've always loved for their quality and fit and which I hadn't bought in years. Thought I could get a good deal on one there.

Anyway, I started looking through the racks and all the stuff said "Assembled in Mexico" on them. I bought one ($65) and while I was paying I asked the clerk what happened to "Made in USA" and she replied that several years ago the company shipped all their assembly to Mexico for "competitive" reasons. I didn't press her. (She was just a clerk, after all, not the CEO)

I just thought, Wow! The company that made Pendleton famous shipped how many jobs to Mexico? Could they have survived with American labor? I don't know. The product is one of a kind, to my mind. Maybe they could. Maybe they couldn't.

[Lewd Ferrigno]

The mass produced garment industry in the U.S. has been nearly decimated by globalization. I am in agreement with you Fly

[flylooper]

Originally Posted by ARozanski

I know - it was more directed towards Fly's mention of Goodyear being the last American tire company.

I'm not quite sure as to whether you're saying it's the union's fault Goodyear is struggling, or whether it's their management. But assuming you are at least partially blaming the unions, let me direct your attention to Michelin.

Michelin Has Miles To Go
Javier Espinoza, 07.31.09, 08:30 AM EDT
The French tire maker posted a smaller loss than expected, but said it was too soon to talk about a turnaround.

Union ratifies labor agreement with Michelin; trades wage reductions for Job Security

Michelin is the world's largest tire maker. How did they get that way? By shipping jobs to China? I don't think so.