Originally Posted by SDW2001
Oh, look. More government. This is exactly why we can't build anything in this country anymore.
More government is not the problem, at least not in the sense you mean. It is too much government when the government subsidizes and encourages companies to send work abroad. It has nothing to do with environmental protections. In addition, government policies always favor the big guy over the little guy even though 75% of jobs are the little guy.
In addition, investors, in cahoots with the big bankers, contribute nothing to the US economy and in fact are actively engaged in its destruction.
Investors want high returns on their investments -- don't we all?. So instead of investing in productive activities (like businesses that make things), they invest in money and debt. If you don't know, you need a review. If you as an investor want to make a lot of money (as opposed to product) your best bet is to invest in money. Payday loans are great with 400% interest earned, but high risk. Or investment in credit card debt, which earns 18 to 24% interest -- no longer high risk because Congress got bribed like they always do by making credit card debt non-dischargeable in bankruptcy. If an investor invests in small companies (or banks that give loans to smaller and local companies), then you will not be making any 18%. Small businesses support the local economies and the local economies remain viable because of the multiplier effect of local employees and local businesses buying local, supporting locally-built homes, farms, local schools and teachers, etc. Investors in these businesses might make 3% on their investments, but that 3% supports entire communities and not some Bain Capital or JP Morgan billionaires. It's the same 3% if you invest in infrastructure, or generic drugs, or any industry that is stable and long term -- think water supply, family farms, maintenance services like electrical, plumbing, home maintenance, nuts, bolts, nails, fabric, shoes, etc.
You also have to remember, if you ever knew it, that the average US economic growth is 3% per year, of which 1% is due to 1% growth in population, leaving about 2% for actual economic growth. Of course, there will be industries and companies doing much better than 3%, and one can try investing in these companies for relatively short term gains. Investment in the stock markets have little to do with adding to productivity. Except for the initial IPO companies don't directly benefit from their stock valuations. If companies hold some of their own stock, then it can be used as collateral for debt incurred to improve and increase production and R&D. Other than that, companies get no benefit from stock evaluations. If an investor wants to support a company's productivity, they have to purchase a company's private bonds.
Basically, the big investors today, and for decades now, make their money the old fashioned way: "rape and pillage". If you can buy up a company, you put some marginal amount in, borrow the rest, and shift the debt load to the company you just bought. For the investors, these are non-recourse loans -- an investor cannot lose any more than his initial marginal investment, and if you can shift even that marginal amount to the purchased company, all the better. Now, that previously viable company is loaded with debt, often far greater than they can pay off. In order to pay off that debt, the company is downsized, parts sold off, wages slashed, or moved offshore, products cheapened by buying from cheaper suppliers. And if the big banks can do better by bundling and selling the new debt as CDO's (collateralized debt obligations) and selling it to other investors, all the better. The initial investors can make a second bundle of money off this mechanism.
This is how the bubble economy works. Housing, big banking, savings and loans in the 1980's -- all bubble. Health care industries is another bubble industry for which substantial debt is being incurred and is unsustainable in the long term and has been for at least a couple of decades. When the housing and financial bubble collapsed, the government propped up the bubble economy with bailouts. Because the financial industry is about 40% of the economy, the economy took a close to 40% hit. At that time, the financial folks advising both Bush and Obama indicated that the economy would take about 12 years to return to "normal". There is nothing magical about this 12 years. That is about the value of 3% growth compounded annually over 12 years -- that is, 1.03^12 gives 1.426.
Edited by waldobushman - 7/10/12 at 10:14am