I am watching Squawk Box around 6:30am as I get dressed this morning. The conversation turns to various incentives in Germany, where firms are actually paid not to lay people off in a downturn. (Firms cut hours, but keep most of their staff). The lower German unemployment rate of 7% has less people with financial hardship, so the public continues to work, spend, save, invest, engage in all manner of economic activity. We are told this is the reason Germany’s economic data — employment, sentiment, retail consumption, etc. –  looks so much more robust vs. the US.

But the German approach of maintaining taxpayer supported employment is immediately criticized. Any discussion such as this — more taxes! — must immediately be criticized.

A guest notes that in the US, a recent report finds CEOs that engage in the greatest number layoffs are rewarded with the highest levels of pay and bonuses; apparently, this is proof of its appropriateness. Guest host Andrew Ross Sorkin makes an effort to argue that the cuts are short term, some of these companies have cut too far into the bone — and is mostly steamrolled. The massive USA layoffs are defended, erroneously acknowledges as a Tragedy of the Commons. (The correct dilemma they were looking for is the Paradox of Thrift).

Now for the fun part: Not only is the German approach of less layoffs, better sentiment,  higher economic activity not worthy of much actual debate, it is actually unAmerican (well yes, because its German). The layoffs in the USA are defended as raising productivity to record levels, and (at least over the short term) enhancing profits. One of the hosts suggest this high level of productivity “Is what makes America great.”

Gee, I always thought it was creativity, entrepreneurship, innovation, risk taking, economic opportunity, and freedom.

Turns out it was productivity enhancing layoffs.

Go figure.

Category: Employment, Really, really bad calls, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

90 Responses to “What Makes America Great: Layoffs!”

  1. chartist says:

    I once heard about a correlation between the quality of the cars built in a country and that country’s economy….Germany builds the finest cars on the planet including Audi, BMW, Mercedes and Porsche.

    The US builds shit cars designed to break down beyond repair once the warranty is over.
    England builds cars that look great in the showroom but when they break down, nobody knows hot to fix them. Toyota once built cars known for great reliability but that reputation has been harmed, maybe like Japan’s once great reputation.
    I am not going to count Italy’s Ferrari or Lamborghini because at $500K a car, they’re not designed for the mass market.

  2. Investradamus says:

    I noticed the other day when I tried to comment to thank you for tipping me off to the new Cee-Lo song that my comment was not showing up.

    Lets see if this works

  3. sysin3 says:

    Hey, they should fire all those pesky workers. Then profits would surely go to infinity. Disregard the fact that they are firing some other guy’s customers.

  4. philipat says:

    Incidentally, in Germany’s Social Security system, a worker gets his fill salary/wage for the first 2 years after layoff. So the arguement doesn’t even hold water.

  5. krice2001 says:

    Well, Barry, I guess that’s what I like about you and probably many others here do too. You often get frustrated by the same things that frustrate me. Folks actually cheering the ease that CEO’s find in laying off employees and then, no less, correlating that to high productivity in the USA? Well, it’s true, if you cut expenses, the bottom line can sure look pretty… for a while. I guess that’s the magical thought behind cutting your way to growth. Somehow reminds me of a ridiculous ad that used to run on satellite radio for a method to, “spend your way to wealth”.

  6. Jim67545 says:

    You have a pop-up (GE) which is taking over your website. Click on Cancel and one is taken to their website.

    ~~~

    BR: Damn! Write anything critical about any GE property (ie, CNBC), and GE’s bots try to block it. Those bastards!

  7. gloppie says:

    I once was in Germany for work, a long time ago, stopped in a small town for directions or whatever, I can’t remember. I need to cross the main 2 lanes thoroughfare and there’s this old lady with a cane, waiting for the pedestrian light to turn green on the single traffic light in town.
    I look right and left, there’s absolutely no cars as far as the eye can see and so I go across on red, I have no time for this.
    The old lady starts yelling at me, pointing at the light with her cane, all fiery eyes and grush-grunt-schwein-schown invectives. I don’t speak German, but I know she cussed the hell out of me. That there, is one of the reason the Germans are kicking our industrial butt; they don’t let shit stand, when they see something they think is wrong, they do something about it.
    Here we just change the channel.

  8. Maybe in the first stages when accumulated dead wood is best removed, but at some point hour reductions certainly make more sense to retain skills, but the optimum transition point is delayed more by higher fixed employee costs

  9. Chief Tomahawk says:

    A couple of years ago Joe Kernan openly bragged on air about never having seen a single “Star Wars” movie. That’s like missing out on a major cultural phoenomena, as just about every young person saw the original 3 films.

    “Turns out it was productivity enhancing layoffs.”

    BR, here’s what ‘makes America great’ these days: off-loading one’s health care bills onto the federal goverment (and of all news outlets, it was Fox Business who had the courage to publish this!!!)

    Caterpillar: Health Bill Would Cost Company $100 Million

    “The company said the potential extra costs would primarily come from provisions to tax the federal subsidies the company now receives for providing prescription-drug benefits to retirees and their spouses.

    Since the Medicare drug program was enacted in 2003, Caterpillar and more than 3,500 companies that already provided drug benefits for retirees have received tax-free subsidies from the federal government as an incentive to maintain their drug programs.

    The subsidies average $665 per person covered under a company-sponsored prescription program, according to benefits consultant Towers Watson, which recently completed a study on the health-care legislation’s effects.

    SNIP

    Now we know why the senior drug program became sooooo expensive. My guess is the fine *anchor talent* at CNBC would never tell the taxpayer that since 2003, “Caterpillar and more than 3,500 companies that already provided drug benefits for retirees have received tax-free subsidies from the federal government as an incentive to maintain their drug programs.”

  10. dant says:

    What are you doing watching CNBC?

  11. CTB says:

    “Here we just change the channel” is right. It’s time to take our country back, and restore our honor! I guess we’re more interested in slogans than solutions. We don’t have the time or ability to think for ourselves. Although, I fear the day when the goofballs decide to start “doing something about it”.

  12. dead hobo says:

    BR opined: What Makes America Great: Layoffs!

    reply:

    Partly. What really makes things great is the systemic accepted levels of fraud that permeates the financial markets on a daily basis. Nobody in a position of responsibility or control appears to care, and may actually support it. Today’s fraud of choice is an old favorite … pumped financial markets. Look at the futures. ADP just announced a horrible number and, like always, when bad news comes out to play, the markets almost always go up a lot.

    BR, you ask about contrary indicators and hint that you are anxious for buyers and real investors to return to capital markets. Why on Earth would anyone with less than half a brain fall for this scam, especially since it is played several times per week and idiot newsies never question the correlation of up markets with bad news. It’s a fake market that has more in common with barkers in front of tit*ie bars shouting at passer-bys that this bar has the best of what you want. At least, this is what the visitors on TV business news and ‘professional investors’ who manage investor money for profit frequently sound like to me.

    Correction: Santelli gets it. I admire his current sarcasm.

    ~~~

    BR: I am not “anxious for buyers and real investors to return to capital markets” Like 1929, I expect we have chased away an entire generation of investors.

  13. Concerned American says:

    I have said it here for years. Our biggest issue is jobs, not housing, loans or any of that other crap, it is jobs or lack there of.

  14. DeDude says:

    Amazing how completely clueless these morons are. Not only does the German system keep the consumers employed (and consuming) – it saves the companies a bunch. When growth again begin they don’t have to retrain new employees.

  15. wally says:

    And how do you know, if you are the German government, whether the potential unemployment is cyclical or structural? This is quite an important distinction in the long term, as the risk is keeping obsolete systems in place. The US auto industry is a great example of what happens then.

  16. Greg0658 says:

    gloppie @ 7:37a .. that should be legally ok .. but if you mess up – throw away the key .. or in the case of a motorcycle that doesn’t have enough steel to trigger the magnetic field – look both ways and understand the cross traffic speeds .. even in a car – some of us are just smarter than the average machine .. but alas – seems like the path is just a Mt Everest to climb

  17. curbyourrisk says:

    Hey Barry…. About 3 years ago I wrote a small paper here at work talking about a “people” bubble which confused the Japanese managers here.

    I was writing in essence that we were in an employment bubble and not a time of low unemployment. Things were good all around and companies could afford to keep on people that really were not necessary, but it looked good they were not laying off. I argued that with all the advancements in technology and production that America was OVER EMPLOYED and that we should see some thinning of the herd.

    My company thought I was nuts, but we did begin to slow down on expanding our workforce. Instead of adding about 30 people a year, we only hired 5. Since the down turn started we have not fired or laid off 1 employee. We also, have not replaced the 6 employees who have left in the last 3 years. I hate to say this, but Companies are still to employee heavy (mostly thanks to unions).

    What this country does lack is that spirit of entrepuerism (spelling, I know) that made us great. There was a time (many years ago) when those let go would band together and form a new competing company. Now they all just want to stand around and ask for hand outs. Very few people want to take the hard choice and START SOMETHING on their own. We have not fully broken out of this bubble, and just like with EVERY OTHER bubble, we will probably OVER-CORRECT to the down side. We will hit a point where we are under-employed, but not until the economy turns around.

    One of the BIG things I noted in my paper was salary and wages. They were too low, and was one of my arguements as to why we were keeping som many unneseccary employees around. We needed to get rid of the “dead weight” and increase the slaries of those who counted most for a company. Yeah, I expect most on this board to think I am crazy for this view, but it worked fine for our company and “most” of the employees are happy to still be working here……ALTHOUGh many are still complaining about the low salaries. That is the trade off for working for a Japanese company…..low pay….but a job for life.

    I would rather be paid what I am worth, but I will wait for the economy to turn around before I move on from here. Resume is ready to go, but won’t be necessary for about another 6 years. The employment bubble should run its course prior to the economy turning around. I believe it will be a leading indicator of better times ahead.

  18. Peter.NL says:

    Excuse me for interfering in such a ‘domestic affair’ . But isn’t ‘creating shareholder value’ what makes (and made) America great?
    And isn’t cutting cost (as in Cutting jobs) a great way to reduce costs, and lift profit? (in typical share holder (medium / short term?) thinking).

    We’ve got a similar system as Germany in place in the Netherlands, resulting in one of the lowest unemployment rates in the whole EU, but why should the Government (and tax money) step in to make it clear to companies that firing the very consumer that they need to increase their spending isnt always such a great idea ?

    Another way of looking at ‘creating shareholder value’ could be big company’s (and their shareholders) accepting a temporary reduction of profit (so no double digit growth), and therefore reducing the direct blow that the massive lay-offs would have incurred on the economy. That would further eliminate the need for a government using tax money to enable companies to temporarily put workers on part-time work.

    Question remains if it can be done without crippling a company’s competitive ability, and also assuming companies are healthy enough to survive in the first place.

  19. JSchmid says:

    While I can’t say the German system of subsidizing businesses to prevent layoffs is bad, especially if it only costs the government the equivalent or less than it would cost them for unemployment benefits and other public policy payouts.

    One advantage of the American system is that when the fat gets cut during a downturn, while usually small, the employees that get laid off are typically the least productive, least reliable, and worse workers the company employees. When the economy rebounds the company rehires new workers and it is probably 50/50 on which of the new hires are better than those laid off, more motivated, and more destined to advance and be promoted, but with that the new workforce is superior to the old. It is a form of house keeping that cleans out the trash at least every decade. Without this the worst employees will likely not be fired and likely have less motivation to become mediocre or good employees.

    I can’t say which system is better, but the US system is not all bad.

  20. curbyourrisk says:

    Concerned American said: “I have said it here for years. Our biggest issue is jobs, not housing, loans or any of that other crap, it is jobs or lack there of.”

    Actually you are wrong. The biggest issue is wages. As jobs are required for wages, you arepartially corerct. So I give you partial points for your answer, although it is incomplete. If we cerated 10 million jobs at minimum wage, what effect would that have on our economy????? We need to bring back the manufacturing sector and make sure they are high paying NON-UNION jobs. If they are union, the unions would find a way to bankrupt the system all over again.

  21. austincompany says:

    It should be noted that there is a cultural difference between Germany and the U.S. In Germany (and France I believe), when sales slow, the employees usually agree to decreased hours to save other employees jobs. This is probably easier there than in the U.S. as personal debt levels are lower and personal savings (to fall back on) are higher.

    In the U.S., however, most news reports show that most employees opt for a layoff of others before a cut in their own hours. This seems to be true both in labor union and private employers. Again, this is probably due to the fact that most Americans live paycheck to paycheck, have high debt levels and little or no savings. So take his job and not mine…

    In addition, Germany is an export country and has lots of social welfare nets, whereas the U.S. is a net importer and does not have the large social welfare net (though we have a very large military). So comparisons between the two countries need to be taken with a grain of salt.

  22. AHodge says:

    this is what you get when you pay execs on the stock price.
    a virtual or outsourced company.

    there is a half truth in there, its good to adjust, lets all applaud efficiency.
    no one can make the case we are doin it right.

  23. super_trooper says:

    Pointless data distinguishing Germany and Amiland (USA)
    1. Germany didn’t have much of a housing boom
    2. Resisited the Anglo-Saxons approach to finance
    3. Relative “low” compensation to CEO
    4. German export is larger than the US, with 1/4 the population
    5. Strong industrial base, but stuck with DDR

    Similarities.
    Cheap labor from eastern europe. The germans get the poles cheap and the poles get the russians even cheaper.

  24. super_trooper

    One small correction:

    Germany’s data did not show much of a housing boom because they were absorbing East Germany — communist built housing was pretty junky, and fetched really low prices.

    So when you look at the flatlined German House prices, understand that Re-Unification had an enormous impact on their national housing data . . .

  25. JustinTheSkeptic says:

    You would have thought that all the Bankers in NY would have realized that, the house of cards that they were promoting in real estate, etc., could only produce what we are witnessing today in every sector of the economy. Look what the result of all their leverage has wrought us. After all Bankers always have been and always will be the real stewards of any economy! Somehow, they get to go before congress, say a couple of million dollar attorney rehearsed words, then get a free pass. Everyone starts blaming everyone and everything else for the problem while they sit drinking cocktails and back-slap each other at some plush country club of their choice.

  26. Lugnut says:

    Barry, its Shill TV (Shillivision?). The likelihood of getting an anti-big-business stance there is as likely as seeing an inidictment announcement from the SEC of any of the big bankers for their part in the financial meltdown. The meme must go on.

  27. Michael M says:

    It’s all about striking the right balance between flexibility and security:

    http://en.wikipedia.org/wiki/Flexicurity

  28. tenaciousd says:

    Interesting. Of course, as a Democrat, I am frustrated by the fact that so many on the left would rather hoot and holler in favor of unemployment and other welfare benefits for laid off workers rather than subsidize employers to keep workers until an upturn. (They’d rather see workers laid off than give a penny to big business crooks, I guess.) I’ve evangelized this sort of thing till I’m blue in the face but the far left is always more worried about abortion rights or Ground Zero mosques. They’re as effing myopic and self-congratulatory as the Tea Partiers. Lord only knows what will happen down the road. You do what you can and then you shrug your shoulders and go on about your business.

  29. greg says:

    But Barry, if CEO’s didn’t lay off people they would have to actually figure out a way to grow and expand the company in order to increase value. That’s just crazy thinking and flies in the face of everything some of America’s greatest CEO’s like Mark Hurd, Al Dunlap, Rick Wagoner, et al achieved during their esteemed careers.

  30. JustinTheSkeptic says:

    We are doing the right thing on layoffs. This is the way it works in a dynamic economy. If we would now stop supporting everything, make sure no one goes hungry and has a roof over their head things would adjust and get back to business. As it turns out we have fired all our stimulus bullets prematurely for the sake of saving the Monied Class once again. Which is as they say par for the course!

  31. JustinTheSkeptic says:

    Oh! and then we blame on pure capitalism’s fault! Which we have not seen since Adam Smith’s day.

  32. catman says:

    If you think this crap is sickening check out the rhetoric from Mott’s management v. their employees.

  33. JustinTheSkeptic says:

    Has there ever been a time when we garded the tenets of pure capitalism for the sake of the people over the sake of the Monied Class once they figured out how to benefit themselves through their many loop-holes?

  34. wunsacon says:

    >> I am frustrated by the fact that so many on the left would rather hoot and holler in favor of unemployment and other welfare benefits for laid off workers rather than subsidize employers to keep workers until an upturn.

    Subsidize which employers? How? When? Is hiring those laid-off workers in this existing business an efficient use of that resource? Apparently not. And the fact that you keep workers in anything other than “win-win” positions means those workers aren’t as available for hire by another business.

    Better to give the money directly to people. Let them decide how/where/when to spend it. Let businesses decide who/what/when to hire. This is simpler, de-centralized, and more efficient.

  35. longwaves says:

    Barry,

    It’s so interesting to see what commenters think “makes America great.” Sadly, most are misguided. Your list squares pretty well with what one would hope we all identify–though I would add respect for individual property rights and refine your use of freedom to incude freedom from tyranny of special interests, religious freedom, and the freedom of opportunity.

    I didn’t see the segment you refer to, but I wish I did because it sounds like a train wreck for Ross Sorkin–who seems to be losing his edge lately. It is ironic that the CNBC blind defense of the American style of business, which is focused on short term profitability and CEO/BOD/insider gains, irrespective of the impact on other outcomes stands counter to all that America once stood for. But in reality it is capitalism’s inexorable march toward ultimate profit maximization that is eroding our fundamental liberties and the grounding principles of economic freedom. Sadly, it is what will ultimately be capitalism’s undoing–at least the American brand of corporatist capitalism. But like the frog in the pot of water whose temperature slowly rises, most “economists” and financial commentators don’t have a clue what they are in for.

  36. farmera1 says:

    Good article in Fortune (Sept 6, 2010) about what can happen when companies (J & J) let the bean counters lay off too many critical people, in this case mostly QA types just to make short term profits.

    WHY J&J’s HEADACHE WON’T GO AWAY

    “Once praised for setting the standard in crisis management, the health care giant is battling a stream of drug recalls. Fortune investigates what went wrong-and why it isn’t getting better.”

    “But serious questions have been raised about the quality of numerous J&J products. Since September 2009, McNeil Consumer Healthcare, the J&J division that makes over-the -counter (OTC) drugs, has announced eight recalls, including one for an estimated 136 million bottles of children’s Tylenol, Motrin, Benadryl, and Zyrtec-the biggest children’s drug recall of all time-”

    J&J now has plants closed until 2011, damaged brand reputations and there apparently is no end in sight. Now the FDA is in their shorts writing massive damming 483s (sorta like a really bad speeding tickets for the pharma/food industry) that are public . Trust me you don’t want any 483 and especially long nasty ones. J&J sunk so far that they hired a contractor to go out and secretly buy products off the shelf so they wouldn’t have to notify the FDA and have a recall. Bad business. But not to worry, a lot of bonus money was paid to the creative executives.

    How to potentially destroy brands that had a good reputation for ever. All it takes is a few well placed layoffs, throw in a lot of mismanagement, add copious cost cutting and you have yourself the perfect mess.

    Good read.

  37. Mannwich says:

    @curb: Generalize much? Get real, man. There are MANY issues why people are SCARED to death to start their own companies. One of them being loss of health care for themselves and their families. Is that not a legitimate reason?

    And there are PLENTY of people still out their TRYING to start new companies everywhere. I run into them all the time (I’m one of them) and you don’t hear about them because most of them eventually fail. Does that mean they don’t exist? Get real. You live in your own fantasy-land.

  38. constantnormal says:

    Nice post, Mr Ritholtz, sir. One of the best I have seen you produce.

    Thank You. You run a nice blog.

  39. Mannwich says:

    And those who think that layoffs only involve “getting rid of the dead wood” have likely never worked in a big corporate environment before. It is VERY common that solid, productive workers get caught up in mass layoffs all the time. I’ve also seen it happen where some eventually get hired back but only AFTER receiving a nice severance package. What a great, productive use of shareholder money and company time.

  40. Mannwich says:

    ….or in a big corporate HR environment before. Company politics and nonsense buries A LOT of really good people in those environments.

  41. dss says:

    Oh yea, it is the unions that bankrupted the system. No need to blame anyone else when the unions can be made the scape goat and the real culprits laugh as sit on their yachts and fly away on their private jets. Of course, sitting in the jump seat are the corrupt politicians that have enabled them. The soulless lobbyists will join them later, after dinner.

  42. ronald says:

    Can someone in the know explain to me how Productivity is calculated?

    If it’s a statistic based on statistic, GDP rise with same “Workforce” for example, then what is the rise of financial products in GDP? Since most of those products are computer structures which are just pushed around and don’t require much man power.

    In other words did Productivity really rise or is it just an illusion of more computer structures being sold and bought by computers?

    I personally get the feeling many people in the financial world are talking about things they don’t understand anymore, or which are based on definitions which were ones true but are now being an illusion of statistics.

  43. Mannwich says:

    @ronald: Of course they don’t understand it anymore, but they sure do have one hell of a pitch to make it sound like they do.

  44. tenaciousd says:

    @wunsacon: I hear what you’re saying, but you’re taking a sort of left-libertarian view. The facts have shown that the general trend of layoffs will be downward mobility due to several factors. My order of concern: 1) Outflow of jobs to nations with aggressive industrial subsidies, including but not limited to enforced peasantry. 2) Conglomaration. 3) Automation. So, there is no perfect labor market of employers seeking undervalued skills. We have to at least address the macro situation if we are to have your decentralized approach. The Germans don’t hesitate to pick industrial champions and we will have to do the same–beyond agriculture, that is–in the short run to avoid the economic abyss. We did this, sort of, with the Big Three.

  45. wunsacon says:

    >> It is VERY common that solid, productive workers get caught up in mass layoffs all the time.

    So right, Mannwich.

    In at least a few past jobs, when I saw “dead wood”, I took it upon myself to “build a case” to get them off my team and preferably eliminated (so that they don’t cause damage to *another* manager/project/product). How’d it go? Difficult and often unsuccessful. But, when layoff time came around, many good workers were/are let go.

  46. Mannwich says:

    Bingo, wunsacon. Oftentimes it are OTHER reasons besides actual productivity that workers are let go in mass layoffs, be it that person making higher wages, company politics, demographic mix of those layoffs (e.g. can’t just target older workers or those in other “protected classes”, as that would be overtly discriminatory so usually managers are forced to include some sacrificial lambs in their layoff lists), etc.

  47. Mannwich says:

    Which is another reason (of many) why mediocrity often reigns in many of these larger companies.

  48. dead hobo says:

    BR: I am not “anxious for buyers and real investors to return to capital markets” Like 1929, I expect we have chased away an entire generation of investors.

    reply:
    ———–
    The sad fact is that markets would be weak but recoverable, and possibly recovering, if financial regulation were competent. It’s the nature of a large number of people to steal whatever isn’t nailed down unless they think there is a pretty good chance they can get away with it anyway. Effective regulation is meant to keep people like that in check and at a minimum. Rather, these thieves are today the majority and the regulators effectively don’t exist except in the most peripheral ways. If fact, I strongly suspect that many regulators are assisting the thieves with the rationalization that it aids liquidity during these trying times. In effect, the farmer is helping the foxes eat the hens. The government is killing the markets directly and economy indirectly via ineptitude and/or complicity.

    Look at today’s bullshit markets. Where’s the money coming from to perform the pump today? Not main street. BR, are you out buying tons of stocks? I suspect not unless it’s to game the bots for a day trade. Who is really buying in this market today?

  49. ZedLoch says:

    close to 1/5 of the workforce has lost their job or had hours reduced. the rest of us are making more for less money. harder work = less pay?

    *ah yes, this is such a great situation we have here in America.*

    did you happen to see strings hanging from the ceiling on CNBC?

  50. Mannwich says:

    @DH: I’m still not convinced the Fed doesn’t buy equities when it sees fit. Why not? It has no problem distorting everything else.

  51. dead hobo says:

    Mannwich Says:
    September 1st, 2010 at 11:36 am

    @DH: I’m still not convinced the Fed doesn’t buy equities when it sees fit. Why not? It has no problem distorting everything else.

    reply:
    ————
    I agree completely.

    Look at the regular, repeating pattern: Bad News or really bad news. Markets go up, today they go up a massive amount. Who in their right mind would put new money into a market and bid up stocks as if they will continue rising for weeks more? Nobody I know would do that on the release of bad news with no good news of substance on the horizon. Yet it happens weekly. Right now it seems that Dow 10000 is the line to hold and money comes out of the woodwork to manufacture rallies. The Fed knows that it won’t be audited and people like BR still live in a simpler time when this kind of manipulation was inconceivable. The Fed probably rationalizes it as “We Have To Do Something” and “Eventually It WILL Work.”

    Friday should be another up day since it looks like employment will suck bad. If Uncle Speechy wants to really improve the economy, he’ll stop Uncle Stupid from manipulating the price of everything. Bernanke probably has a get out of jail free card in case he gets caught doing shenanigans. Perhaps Uncle Speechy should revoke it.

  52. Space_Cowboy_NW says:

    chartist Says:

    “I once heard about a correlation between the quality of the cars built in a country and that country’s economy….Germany builds the finest cars on the planet including Audi, BMW, Mercedes and Porsche.

    The US builds shit cars designed to break down beyond repair once the warranty is over.
    England builds cars that look great in the showroom but when they break down, nobody knows hot to fix them. Toyota once built cars known for great reliability but that reputation has been harmed, maybe like Japan’s once great reputation”

    Reality Check:

    Porsche: Google ‘RMS’ and ‘IMS’ issues…which have been ongoing since the 996 came out some 13 years ago. So much for German craftsmanship!

    BMW: the last decade (3 series) production was well known for 60k (mileage) waterpumps, 80k (auto) transmission, 90k radiator sytematic failures. Religiou$ experience$ awaited all M owners when vehicle went off warrenty.

    Volkwagen: Job security for independent service techs…electical/mechanical (talk to former(VW) owners for the never ending ‘real story’).

    Toyota: The have aquired the “MBA” virus……which is why Hyundai/KIA is eating their lunch.
    New kid on the block is Tata, and I sure would not ‘short’ their ability to execute. Tata picked up Jag/Rover from Ford for a song (all the re-engineering was done on the new Jag before Ford sold the company) and has some serious efforts forthcoming. The (East) Indians are going to be a force to reckon with this century.

    Ironic that Ford has (again) evolved a high level of reliability ( EXCEPT for 6.0 diesel) credit given to their [ex-BA] CEO who understood a few things about delivering quality. Boeing should have kept him to get the 787 on line instead of 2.5 plus years LATE! Did they learn from Airbus’s experience?: NO!
    Same goes for Buick (they only time they come back is for oil changes) and …in the performance vein: Corvette (now if only gm would not source the interior from the rental car fleets parts bin).

    Chrysler? Terrible quality…so time will tell if FIAT’s ceo can change course.

    Of course past performance is not a prologue of future expectations….Your mileage may vary!

  53. Rube says:

    Barry,.. excellent discussion.

    JShmid said One advantage of the American system is that when the fat gets cut during a downturn, while usually small, the employees that get laid off are typically the least productive, least reliable, and worse workers the company employees. When the economy rebounds the company rehires new workers and it is probably 50/50 on which of the new hires are better than those laid off, more motivated, and more destined to advance and be promoted, but with that the new workforce is superior to the old. It is a form of house keeping that cleans out the trash at least every decade. Without this the worst employees will likely not be fired and likely have less motivation to become mediocre or good employees.

    You are making vast assumptions here which in my experience are completely wrong. The dead wood survive by keeping their heads down and not making waves. The best employees with the most imagination and options are the first to jump ship when the writing is on the wall.

    Example,.. HP,… so many people from HP are out looking for jobs,.. I recently read that someone from Apple quipped “I didn’t know that many people even worked there.” Or something like that,…

    So use your imagination,… who is Apple hiring from HP? The deadwood,… or are they cherry picking?

    I’m going with cherry picking.

    From what I’ve seen, that is more broadly what goes on at all companies when things get ugly.

    The best employees jump ship and the worst hunker down,… on average.

  54. Mannwich says:

    Bingo Rube. At least that’s been my experience at very large companies. However, I found it to be a vastly different at smaller companies where one’s contribution is more easily measured.

  55. S Brennan says:

    There’s confusion in regards to what constitutes an investor, let me remind a few folks above:

    1] There’s the shareholder, who are considered long term if they own a stock/bond past a few months.

    2] There’s the employee that makes a huge investments in labor and education, twice a month they are involuntarily vested two weeks salary with no interest.

    3] There’s the venders, these folks make huge long term investments in capitol and labor.

    4] There’s the customers that purchase year after year, each purchase is an investment.

    5] There’s the nation that provides the security and infrastructure, yep there are folks out there dying for your oil, in Sierra Leone 3/4 of payroll is security.

    Now I know many above are so myopic they could only recognize one kind of investor, but a vision impairment should be corrected, not glorified.

  56. Domagoj says:

    I was thinking about same when I saw this article on Bloomberg

    “Germany’s “short-work” policy showed the world how to survive a recession without losing jobs. Now it’s time to pay the price.

    The country’s social welfare-driven economic model, which the International Monetary Fund says is helping to preserve labor-market rigidity, has sheltered it from the worst of the financial crisis. The cost is that as the economy recovers, hiring won’t pick up as much as it does in countries such as the U.S. or the U.K., posing a risk to growth in a nation that needs to ignite household spending. …”

    http://www.bloomberg.com/news/2010-07-27/germany-s-labor-market-miracle-comes-at-a-price-for-recovering-economy.html

  57. curbyourrisk says:

    Mannwich, you said: “Generalize much? Get real, man. There are MANY issues why people are SCARED to death to start their own companies. One of them being loss of health care for themselves and their families. Is that not a legitimate reason?

    And there are PLENTY of people still out their TRYING to start new companies everywhere. I run into them all the time (I’m one of them) and you don’t hear about them because most of them eventually fail. Does that mean they don’t exist? Get real. You live in your own fantasy-land.”

    Let’s see, those not working are probably notr getting healthcare coverage….so what are you arguing here. I was not talking about people who are currently working going out on there own, but people who have been out of work or downsized. I understand why it might be a reason for someone to leave a job and start a new business. As for me getting real, I don;t know where you are coming from with that. There is no fantasy land I live in. What are you doing about the company you want to start. One of the main reasons why people fail in starting their own business is many of the beliefs thay have going in to the business. The belief that their business is better than existing busiensses. The belief that their business is different and it will not fail. These might be considered fantasy thoughts by some, but I would consider them the necessary tools one must have in order to take such a risk. For, if you did not feel that your new business venutre was better that existing businesses, why would you take the risk. Sorry, but I live in reality. In my reality the company where I manage the risk, sets takes risks all the time. Our Investment unit is always on the prowl for new ventures whether they are funded companies or joint ventures or outright acquisitions. We take risk all the time.

  58. d4winds says:

    Mannwich,
    “And those who think that layoffs only involve ‘getting rid of the dead wood’ have likely never worked in a big corporate environment before. ”

    Amen.

  59. S Brennan says:

    Domagoj Says:

    “the IMF says Germany….is preserv[ing] labor-market rigidity…[t]he cost is that as the economy recovers, hiring won’t pick up as much as it does in countries such as the U.S. or the U.K., posing a risk to growth in a nation that needs to ignite household spending. …”

    1] Germany is running at 9% growth, the IMF [as always], is full of beans.

    2] Could the right wing get it’s story straight? On my post that pointed Germany success out yesterday a R-wing guy says sure, because Germany went much deeper into recession, today a R-wing guy says, the IMF says Germany didn’t go into deep recession [we presume they think that is bad], so it won’t grow much. Contrary to the facts…and contrary to themselves…the R-wing needs a clearing house for a syndicated view that at least has some attachment to reality, or at least a non-contradictory storyline.

  60. Mannwich says:

    @curb: Do you have any actual data to back up your assertion that lazy people just won’t start their own businesses anymore due to lack of initiative? If so, please provide. I run into struggling entrepreneurs all the time. Not sure what circles you run in, bro.

  61. Mannwich says:

    And who’s sitting around “asking for handouts?” Again, I know MANY people that are at least TRYING to get a business going but I guess they don’t count (and somehow want “handouts”) in your eyes if they fail? Sure, do many do the wrong things and eventually fail? Yes, but that certainly doesn’ t mean there’s no longer “an entrepreneurial spirit” in this country anymore.

    Good grief. Sounds like a fantasy-land right-wing meme trying to replace the “Cadillac-Driving Welfare Queen” meme to me…..

  62. Domagoj says:

    @S Brennan

    Sorry, I was referring on BR post and bizarre premise of Bloomberg article. USA right and left web political discussions means nothing to me.

    Welcome to Croatia ;)

  63. Arequipa01 says:

    The only plan the MBAs in this country have is “grind all the women between 48 and 62 years of age into dust”.

    Oh, we also have genius level strategy like this:

    http://www.booz.com/nordic/home/40194601/47833556

    “THE RIGHT FIGHT identifies the six Right Fight Principles, explaining the issues worth fighting over and the tactics for fighting fairly—as well as the wrong fights to avoid at all costs. The core maxims of this philosophy, examined here in detail, are: Make It Material; Focus on the Future, Not the Past; Pursue a Noble Purpose; Make It Sport, Not War; Structure Formally but Work Informally; and Turn Pain into Gain.”

    Medieval. “the tactics for fighting fairly” hahahahahahahaha!

  64. Mannwich says:

    @curb: I would also add that those unemployed who don’t have healthcare won’t somehow magically get even remotely affordable healthcare if they somehow magically got the “spirit of entrepreneurism” (as you put it) and started their own biz. In what world are you living, pray tell?

  65. gman says:

    The meme on cnbc for a decades was “germany is a “socialist” loser in need of “reform” of its labor markets”

    Now cnbc/heritage/cato….”Germany is doing great…they pulled there stimulus early so that means we should as well”

    It all smells of pure obfuscation for ideological/self interested reasons.

  66. Detlef says:

    Domagoj quoted:

    The country’s social welfare-driven economic model, which the International Monetary Fund says is helping to preserve labor-market rigidity, has sheltered it from the worst of the financial crisis. The cost is that as the economy recovers, hiring won’t pick up as much as it does in countries such as the U.S. or the U.K., posing a risk to growth in a nation that needs to ignite household spending. …”

    1. Unlike the USA the unemployment rate in Germany is going down.
    Actually some companies are already warning about a shortage of skilled workers.
    Where is the “jobless recovery” right now? Doesn´t seem to be in Germany?

    2. Didn´t I read in US newspapers that unemployed Americans finding a new job have to accept lower wages in many cases? A short time worker in Germany going from part time to full time again will receive the old wage with no loss in income.
    Won´t that hurt consumer spending in the USA? Especially if people save a bit more?

    3. The last months did see a rise in domestic demand in Germany.
    Although I doubt we´ll ever see US levels of consumer spending in Germany. The household savings rate probably will stay in the 12% region.

    4. What is cheaper for the government?
    Paying full unemployment benefits? Or adding some money to a short time wage?
    Remember that the employer still pays his share for the part time work.
    Not to mention that the government and job agency strongly encouraged companies and employees to use the “free” time for further job training and qualifications. Even subsiding some of the courses.
    Which will be good for the German economy even if some companies don´t survive.
    And do you think exports could have risen that fast if German companies had fired lots of skilled employees?
    It certainly was a risk in early 2009 to include such a program in the stimulus bill. If the recession hadn´t ended in 2010, I´d say that companies right now would be firing many of the short time workers. Given what happened though it was one of the better ideas of the German government.

  67. curbyourrisk says:

    Mannwich….when did I ever say that people (lack of initiative) who won’t start their own company are lazy??? I know it’s hard and it is a risk…I thought I said that. I did ask what you are doing about it……you did not answer that. Talking and doing are 2 different things. I talk about leaving my company and starting a consultancy firm …. like the world needs another one of those…. I don’t sty here because of the lack of initiative… I stay here because the economy sucks and I chose not to take the risk. I am not going to sit here and argue healthcare issues with you… The ONLY way to fix healthcaer is to start with TORT reform. If any plan, Obama’s included does not start there…it ain’t worth crap. It all starts with TORT reform…address that and I will debate healthcare with anyone.

    You also said….”Sounds like a fantasy-land right-wing meme trying to replace the “Cadillac-Driving Welfare Queen” meme to me…..” Man you could not be further from the truth. I am simply a realist……. I could care about right-left politics.

  68. Mannwich says:

    @curb: This was YOUR quote, no?

    “What this country does lack is that spirit of entrepuerism (spelling, I know) that made us great. There was a time (many years ago) when those let go would band together and form a new competing company. Now they all just want to stand around and ask for hand outs. Very few people want to take the hard choice and START SOMETHING on their own.”

    I left the corporate world on my own in ’06. Since then I’ve started two small businesses, one of which I bailed on in ’09 shortly after the markets went haywire. The other one is taking shape slowly our research has revealed that we may have something but our biggest challenge right now is capital, or lack of, and access to, it.

  69. Mannwich says:

    @curb: They recently tort reform in Texas. What did that do for healthcare there?

  70. SteveC says:

    When HP replaced Mark Hurd as CEO, Jim Cramer remarked on Squawk Box that “he didn’t think HP could find anyone as good as firing people as Mark Hurd”. That remark sounded particularly heartless to me, but not a peep from the roundtable. Capitalism at its finest.

  71. S Brennan says:

    Domagoj Says: That “US right and left web political discussions means nothing to me. ”

    Since you quote the IMF, let me help with some background:

    (IMF) is an organization formed with a stated objective of stabilizing international exchange rates and facilitating development through the enforcement of liberalising economic policies. Its headquarters is in Washington, D.C., United States. The United States has always been the only country able to block a supermajority on its own. Timothy F. Geithner is Governor -Ben Bernanke is Alternate.

    IMF policy makers supported military dictatorships friendly to American and European corporations. The IMF is generally apathetic or hostile to their views of human rights, and labor rights. In the 1960s, the IMF and the World Bank supported the government of Brazil’s military dictator while credit was denied to previous democratically elected governments. Financial aid is always bound to so-called Structural Adjustment Programs (SAP) which lead to an increase in poverty in recipient countries.

    So IMF is: US-Dominated by corporate interest / horrible on human rights / supportive of military dictatorships / promotes class disparity and poverty.

    Now, I believe you when you tell me you are ignorant of US political structure, but the IMF is a US right wing political organization, so when you quote them as being a source of wisdom, it helps to know something of US politics. FYI, Generally, Europeans I meet are superior to me in political knowledge, so the boys in Bosnia better get on the ball if they don’t want to look bad.

    http://en.wikipedia.org/wiki/International_Monetary_Fund

  72. S Brennan says:

    Sorry, Croatia, I tend to remember them all as Yugoslavia.

  73. Brick says:

    This is my first post. I am German.

    To unemployment benefits in Germany: the system is very complex like everything over here but basically one gets 60% for a duration between 6 and 24 months. and thereafter 380 Euros a month indefinitely plus rent and full healthcare coverage (almost forgot, not worth mentioning over here).
    Kurzarbeit may typically only last 6 for months therefore structural unemployment is not affected. This timespan was in this case increased to 18 months since it was obvious that this wasn’t structural.

    Our unemployment has been declining since spring and basically did not increase much before that. This bloomberg article Domagoj mentions is BS. UK unemployment unchanged YoY at 7.8%. US unemployment well … you know better. German unemployment is at 7.6 % down from 8.2%. Oh and the article was before that china-like 9% GDP growth number in the second quarter.

    I don’t understand the US problem with Unions: my dad works at BMW: ALL union jobs. The workers have 1 vote less than the shareholders in the board of directors (same goes for all corporations in Germany). Results: Very good pay, very good earnings for the company, the best engines in the world.

    Our banks acted no different from American banks so our Government know owns a great share of our second largest bank. Deutsche Bank (largest) avoided this probably ONLY by being bailed out by the US government through AIG.

    But Germany has some really messed up problems. Like high structural unemployment in two areas oviously eastern Germany being one of them. The strangest of health care “systems” with private insurance for the rich (who can alsobe in the Public system) and a public branch with lots of not for profit companies competing for healthy people. The newest being this guy: http://en.wikipedia.org/wiki/Thilo_Sarrazin a racist in the Bundesbank who for some reason or other is not being fired.

    @ Space_Cowboy_NW:
    The Ford Focus is actually German. Like many Ford engines. So much for German craftmanship.

  74. willid3 says:

    Mannwich Says:
    September 1st, 2010 at 2:51 pm

    @curb: They recently tort reform in Texas. What did that do for healthcare there?

    I think I can tell you the answer to that question

    it did nothing
    the insurance execs who pushed for it, even testified that it would have little impact
    and we still have among the highest health care costs in the nation

    i saw a study last year in amongst the big health care bru-haw
    turns out it has little to to do with torts or much else. they studied the entire state (others too of course).
    and discovered that a lot of the cost is because some doctor’s also own the labs doing the tests (so they make more when they prescribe them). there also was a strong relation to fee for service. in the lowest cost areas, the major health care provider didn’t operate that way

  75. Concerned American says:

    Mannwich Says:
    September 1st, 2010 at 2:51 pm
    @curb: They recently tort reform in Texas. What did that do for healthcare there?

    ———————————————————

    Same question I have asked since Bush pushed that down our throats. I have never seen the answer nor a decrease and I live in Texas.

  76. dss says:

    @Brick,

    Thanks for the information about the German system. For the past thirty years the demonizing of unions has become standard fodder in our corporate controlled media. They have to blame unions for our economic ills to deflect from the real causes, of which greed is paramount. You will never see so many people who vote against their own self interest in the US. It defies reason, but it is true.

    In the US, we think that the only employees deserving of high pay are the executives, the rest get the left overs for the most part. Some of our executives brag about how many people they have fired during their time at the helm and the media crows about how “productive” this makes us.

    Thanks!

  77. Domagoj says:

    Thank you all for your comments on my post.

    I hoped that you will see irony in Bloomberg article, but it’s probably lost in my poor English. German actions will, and have, positive result in German economy and would have same result in most of the “rich” countries, but they are inapplicable, mostly because of political and cultural differences, in USA.

    I was referring on bad data that we absorb daily from press, and then act on them as they are commonly knowledge, same thing like in CNBC show.

    @ S Brennan

    If you want me to ignore your quoting of wikipedia, you should learn something about government policies in Croatia around 2000 and results they produced for our economy (they are mostly results of our contracts with IMF). Even now, if you recommend to our government this:

    http://blog-imfdirect.imf.org/2010/06/24/ten-commandments-for-fiscal-adjustment-in-advanced-economies/

    you are doing us a favor.

    Once more, kindky regards from Crotia (ex Yugoslavia republic and Bosnia neighbor) and sorry for my poor English language.

    http://maps.google.hr/maps?hl=hr&q=croatia+map&um=1&ie=UTF-8&hq=&hnear=Republika+Hrvatska&gl=hr&ei=W8Z-TMreMojNswbCwJiUCQ&sa=X&oi=geocode_result&ct=title&resnum=1&ved=0CBgQ8gEwAA

  78. Andy T says:

    Great stuff Barry.

    I think what we ought to do is create some sort of legislation that mandates these concepts. If you’re a company, you can’t fire more than 10% of your workforce–you must simply reduce the work hours for everyone commensurate with the % you were going to layoff. In the long run, the stronger performers within the firm will be happy working less and making less because it’s all for the social good. Over time they’ll realize that it’s in their collective best interest to just make less money. They’ll work just as hard because they know they’re doing it for the greater good.

    In order to ensure compliance, we will like need a “work force czar” to make sure firms are following the rules. Otherwise, they might just try to dodge the new rule by firing only 3-4% at time. Because that’s a ‘subjective thing,’ some sort of government committee will also be required to make sure the CEOs aren’t “skirting the law” once again.

    The other way we could make this country better is to limit the pay of CEOs who fire more than xx% of their workforce in a year. That actually may be the ‘cleanest’ solution.

    CEO pay is also clearly out of hand. Studies show that they’re currently making historically high multiples of the average employee. If we were a more ‘even handed’ and equitable country, we would limit the pay of the CEO to a factor related to the average income of the employees in the firm.

    Of course, it’s the decline in Unionization which has led to these inequities and abuses. It should be national policy that at least 50% of our workforce is Unionized in some way. One thing we could do to incentivize the transition is to give massive tax breaks to firms who work with Unions.

    I think if we can work towards these goals, we could be more like Germany….and then, like BR said, people would “work, spend, save, invest, engage in all manner of economic activity.”

  79. Mannwich says:

    Precisely willid3 and Concerned American, but will we ever see those idealogues and liars who continue to promote the fallacy that is tort reform ever own up to it? What do you think?

  80. FrancoisT says:

    @curbyourrisk:

    “hate to say this, but Companies are still to employee heavy (mostly thanks to unions). ”

    Hate to break the news to you, but only 12% of the US workforce is unionized. So, you statement just cannot make sense.

  81. FrancoisT says:

    @Brick:
    “I don’t understand the US problem with Unions” It’s not “the US”.
    It’s the US conservatards ideologues and the super rich who have a problem. Alas, it has become OUR problem, because over here, when you have tons of cashola, you can buy a lot of politicians and the media.

  82. willid3 says:

    they won’t change their minds on tort reform. its to central to their ideology. its like lets do tax cuts to spur employment. so they did that in 2001 and 2003. funny thing. it never ever worked we had the weakest job growth ever. then we gave tax breaks to bring home offshore earnings to create jobs. that didn’t work either. so the short version. if the a politician is claiming X will create jobs. it probably has no chance of doing so, especially if its a tax give away

  83. FrancoisT says:

    CNBS loves layoffs because executives love layoffs. They do for 2 basic reasons:

    1) they don’t have to think about how to truly manage. In case of revenue shortfall, cut employees, and you expenses problems go away.
    2) Keep earnings up during a downturn and you’re a genius. Business geniuses get mightily rewarded in the US.

  84. Mannwich says:

    @willid3: But it will usually make the uber-rich even richer (and nearly everyone else worse off), hence the promotion of said false meme.

  85. philipat says:

    IMHO, what MADE America great was the Constitution, a flexible economy with minimal Government intervention, Government responsive to “We the people” and a good work ethic.

    Hmmm……..

  86. Space_Cowboy_NW says:

    Brick said: “The Ford Focus is actually German. Like many Ford engines. So much for German craftmanship.”

    Point taken….My Faux Pas (Thank You for the insight)

    Btw German exports more machine tools to the world than the US, why is that?
    What happened to US capability & knowhow? Hint: “MBA” virus

    Brick, Thank You for shedding light upon German employment std’s and practices. The range &
    depth of those who post on this board is astounding. Welcome aboard :)

    In America, Unions are viewed as an advarsary…being the lowest common denomiator for worker representation. Were (US) mgmt to listen to the work force, the workers would not vote for a Union to represent them. An oversimplifcation at best , perhaps a blanket statement in the least!

    Btw BMW 335d is one fine automobile……Doubt US auto mfg would ever match the fluid efficency of that
    powertrain. Too bad as competition improves the breed (Porsche mantra?).

  87. Andy T says:

    philipat:

    No man. It was government that made this country great. Where would you be without the USDA and the Department of Education and the Minerals Management Service?

    You would be choking on salmonella infested eggs; your kids would be suffering from subpar educational system relative to our peers; and, oil might have blown out all over the waters of the United States.

    So, be thankful that your tax dollars have been efficiently used these last few decades.

    Bigger and better government is what made this country great.

    So….be thankful….

  88. gloppie says:

    @ Greg0658

    I was on foot ! Walking right next to ol’ Gretchen :c)

  89. willid3 says:

    interesting side line. what made the US great?
    up till the 1930s we were far from being great. or even really important.
    it would have been hard to American business from fraud and scam artists.
    after all banks prior to that time were more like shysters than any thing else. and lost of other companies weren’t much better.
    not sure but I think the American population of the day had one to many body blows, and basically American business changed under duress. that being if they didn’t clean up their acts, capitalism would have died.
    and government hadn’t really been that much better either, and basically under duress, changed to be more reflective of the people’s needs, than what ever the TPTB wanted.
    but TPTB have been working on both problems. they fixed the government problem by buying it. which allowed them to almost go back to where they were before the fixes happened. and to make it even better, they have co-opted enough of the population to keep their scams going

  90. gbgasser says:

    Wally

    “And how do you know, if you are the German government, whether the potential unemployment is cyclical or structural? This is quite an important distinction in the long term, as the risk is keeping obsolete systems in place. The US auto industry is a great example of what happens then.”

    Im not sure the distinction matters. If an industry is becoming displaced the workers still can change jobs. Is a system obsolete if there are still customers for it? None of the jobs being supplemented are “pretend to work” jobs.

    Theres nothing “purer” about being laid off as opposed to having hours cut. It really is better overall to have more people consuming.