[Kooler] Is the US already bankrupt?

[John Oliver]

On Tue, Dec 31, 2002 at 11:51:07AM -0800, Dario Alcocer wrote:
> On Tue, Dec 31, 2002 at 01:33:21PM -0600, Gabriel Sechan wrote:
> > Ok, so we now have a lot of out of work people.  Thats bad.  However, after 
> > a short while, increased profits come into the buisness that fired them.  
> > They grow, or invest, or spend, creating new demand.  To fill this demand, 
> > new jobs are created.  In the end, we get them all jobs.
> 
> I think there are other possibilities too:
> 
> * the new jobs they get aren't paying as well as the ones
>   they used to have, thereby reducing their consumption.

But if their previous jobs compensation was artificially inflated,
that's just an adjustment.  Unions create an artificially high cost for
labor... if there are 100 people, and I ned ten to work for me, with all
else being equal I should be able to get the ten who are willing to work
for the lowest amount.  Now, if some of those people get together and
say "We believe we should set a price for our labor, but w're afraid
that John won't want to pay it.  So, we'll just beat up anyone who tries
to work for less, and he'll *have* to pay us what we want".  You can
hardly blame me when it becomes profitable for me to move my operation
to Taiwan... :-)

> * you're assuming that the increased profits are reinvested here.
>   what if the profits are instead invested elsewhere, or the profits
>   go into conspicuous consumption that doesn't create new jobs here?

One mans consumption is ten other mens livlihood.  Yachts and Bentleys
have to be built like anything else.  If I run a company that makes huge
profits, and I decide that, instead of growing my business I just want
to live like a sultan, all the money I spend *still* goes back into the
economy.

Oddly enough, one of the biggest pieces of advice you always get "Save
your money!" is the one thing that keeps it *out* of the economy.  Your
mattress is the safest place to keep it (can't be looted by crooked S&Ls
or funds), but it doesn't do anybody any good there.

> > As for "extra" population- they'll find things to do.
> 
> That's what I'm *afraid* of; what if they instead decide to resort
> to illegal activities[1] to make up for their income loss?

Some people do that anyway.  And it isn't a justification, anyway... if
you're starving, then stealing a loaf of bread isn't a crime.  But if
you're unemployed, or the economy sucks, you can't go stealing peoples
cars and jewelry.

> > The economy rarely 
> > leaves spare resources around, they'll find jobs eventually.  Probably in 
> > other sectors, but they will be found.
> 
> I'm not willing to accept this on faith.  In fact, I'd say a long-term
> labor surplus has been created in many developing countries, witness
> the huge numbers of unemployed in the large cities like Mexico
> City[2], Sao Paulo, etc.  I think that long-term we may be creating
> a similar situation here; I hope not, though.

The difference is, we have the capacity to absorb our unemployed.  We
have a stable government, infrastructure, etc. so when the economic
cycle ebbs again, everyone goes back to work.  In a lot of other
countries, the "labor surplus" will never be used because it's just too
risky to try to use them... your capital investment in a business can be
lost by a change in government, riots by those who still don't have
jobs, etc.

-- 
John Oliver, CCNA                            http://www.john-oliver.net/
Linux/UNIX/network consulting         http://www.john-oliver.net/resume/
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