Terminally Ill Economy
Treat the current economic climate as you would a terminal disease! If you were told you had a terminal disease what would you do? I expect most of you would spend your last dollars in hopes of finding a cure! You would probably travel to every corner of the planet seeking solutions and alternatives and you would learn everything you could about your situation.
This is exactly how individuals and businesses need to respond to the current economic situation. This economy is sick and to the degree you are involved with it you are affected. It is no longer important that it is sick, how it got sick or who is to blame for the sickness! The only thing that is important is to find your cure!
There are only three possible actions you can take (only one is correct):
1) Ignore- (that is what got us here- unwilling to confront the problem)
2) Retreat- (cut back, contract and get smaller- ultimately cease to exist)
3) Attack- (do everything possible to expand and live- survival)
Most of America including and especially the US government have been through the stage of ignoring.
Most American business people will incorrectly elect actions to retreat as a way to survive. Retreating shows up in the form of cut spending, reduce payroll, stop hiring, stop advertising and stop training; basically reduce the size of the organization in order to survive. See the NY Times Forecast for 2008.
While retreating appears to be the logical step in business, you would never do this if you knew you had a terminal illness and want to live. Businesses and individuals should never retract, especially during times of challenge! Retracting is incorrect even thought it seems the logical thing to do. Expanding may seem completely counter but it is the only correct action. I am sure this will be disputed by the readers of this article and I welcome you calling me an idiot, but prior to doing so, ask yourself, what would you do if you had a terminal disease? You would not retreat and expect to survive!
Wilma Rudolph was the 20th of 22 children. She was born prematurely and her survival was doubtful. When she was 4 years old, she contacted double pneumonia and scarlet fever, which left her with a paralyzed left leg. At age 9, she removed the metal leg brace she had been dependent on and began to walk without it. By 13 she had developed rhythmic walk, which doctors said was a miracle. That same year she decided to become a runner. She entered a race and came in last. For the next few years every race she entered, she came in last. Everyone told her to quit, but she kept on running. One day she actually won a race. And then another. From then on she won every race she entered. Eventually this little girl, who was told she would never walk again, went on to win three Olympic gold medals
If you had a terminal disease what would you ignore, retreat or attack? Treat your business the same way! Attack today' economic challenges the same way you would if your life depended on it! No solutions will come because you ignore or retreat. "Approach business solutions the way you would a terminal disease- attack with all your resources, never ignore and never retreat!"
Grant Cardone, Author and CEO
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Uncapped and unregulated executive CEO/CFO compensation is probably the greatest moral hazard to our nation. Not only does it impoverish workers and our economy, but it drives inflation higher.
Automatically paying top executives huge salaries (without merit) only rewards thieves and thievery. When top executives are given millions or even billions for gross mismanagement, ruining a company, defrauding share holders, lying about the financial condition of their companies, offshoring American's jobs, and taking more than $1 million in total compensation, a very negative ripple effect occurs throughout our economy.
Sin and incompetence must never be encouraged and rewarded.
Many hedge fund managers have made billions in commissions even while losing money for their investors.CEO's such as Ken Lay, Anthony Mozillo, BillGates, Dennis Kozlowski, Lee Raymond and Michael Milken have been rewarded for: destroying Enron and bankrupting shareholders, creating bankruptcy through predatory loans, offshoring MicroSoft HQ to Ireland to evade U.S. taxes, cooking the books to profit, gouging the consumer's at the gas pump and selling junk bonds to investors.
Capping salaries at $1 million, and using strict regulation to monitor executive behavior will help weed out the thieves and retain the good executives so that we can all benefit from a more moral and fairer business climate.
Capping CEO salaries won't work as it would just result in the most capable businessmen going abroad or into other businesses that have no cap (like real estate, for example). High CEO salaries also don't result in consumer price inflation. They do, however, result in inflation in asset prices (i.e. like art and real estate). The vast majority of CEOs are not crooks.
False critique on all fronts. Any good businessmen should be more than delighted with $1 million dollar salary. Thieves on the other hand will never be satisfied. Wasn't Steve Jobs receiving only $1 a year? Yet he did a far better job than most any overpaid CEO proving my point.
Excessive CEO compensation not only hurts shareholders (the true owners of any publicly traded company) but steals revenue from the goto people (the workers) and weakens a business by failing to reinvest capital into that business. Additionally, overpaid CEO's drive overall inflation, because their bloated salaries make everyone else feel weak and poor and underpaid, hence they naturally want a salary increase. Look at Dr. William McGuire who earned $800,000 per hour at United Health Group. His greed grossly inflated healthcare premiums and impoverished working families causing inflation in HMO premiums.
Part of the reason the U.S. dollar has greatly weakened over the last 8 years (despite improvements in worker efficiency and productivity) is that when CEO's are overpaid, it sends a message that the dollar is worthless.
There is no connection between high salary and job performance except possibly an inverse relationship in most cases.The more CEO's are paid, the worse their performance becomes and the more corruption results.
$1 million dollar maximum salary ($500 per hour) is more than generous. $25 minimum wage (50K per year) should be the starting wage for legal U.S. workers to insure economic justice.
I have always thought the way business treats workers and wages is stupid. Henry Ford paid his workers a high enough wage to allow them to buy his cars. He realized that if he sold cars only to the wealthy, his business would never survive. Even when times are good, business begrudges every penny of salary. Now that things are getting so bad, many businesses will find that their products are no longer needed. I watch and listen to mantra that small businesses produce most of the jobs. Yes they do. But these jobs don't pay well, have no benefits, and often offer products and services that consumers can live without. I went into some gourmet food shop recently. They had organic pretzels covered in yogurt for $8-$9 a pound. There were a few people in the store, and no one was buying anything. Gourmet foods, trendy clothes and accessories, and expensive wine. I think the day is fast approaching when these items will be off most American's shopping lists. If this country does not put in a mandatory liveable minimum wage, and universal health care, we are just going to go down and down and down. We can't buy your widgets if you don't pay us. There simply aren't that many wealthy Americans in this country.
If companies start giving employees large pay increases they will become uncompetitive and often go out of business. Those companies also would be forced to raise prices resulting in inflation. Inflation would force the Federal Reserve to increase interest rates which would slow down corporate expansions and consumer borrowing resulting in less people buying cars and home and further pushing down home prices and putting more pressure on our already fragile financial system. Wage increases are exactly what we don't want. It's what is keeping interest rates in Europe high and what the Federal Reserve in the US is primarily focused on.
If I understand you correctly, the problem is we pay people too much. By that logic, if we paid everyone the minimum wage, our economy would be going great guns. If you have no money, you can't spend money. The reason we have so much debt is that people borrow (credit cards) to buy things. We will soon learn whether the economy does better when people have no money and can not afford to use credit. Instead of some rebirth of the American economy, I expect more and more people out of work, fewer and fewer dollars spent except for food, fuel, and housing, and more and more buinesses in financial difficulty.
The "information" is cite is from "official" production numbers. Don't you realize that GDP is the total consumption of goods and services of US citizens of things produced in the United States? If we use your logic, GDP should have been negative every year for the last decades... and it hasn't.
Texastrixie makes a very relevant comment. Your reply does not make sense as a reponse to his post. Treating workers well means a minimum wage of $25 per hour with full benefits and guaranteed pensions for legal U.S. workers to insure justice and that they receive the full benefits from their contributions.
Additionally CEO's salaries must be capped at $1 million maximum yearly wage to insure that corruption and injustice are not favored over hard work and smart business policies. Let's not forget that overpaid CEO's cause tremendous damage and injustice and inefficiencies to our economy and leads to corruption in most cases.
Moral business policy requires that naked greed must not be celebrated as a virtue at the expense of intelligence, integrity, and hard work.
So if real income has been going up why is it that we have seen the first median national decline in incomes during a recovery in 40 years?
Answer: MOST of the society has been suffering stagnant or falling incomes. The top quintile has been doing very well indeed. Some people are doing very well, most are doing badly and that explains the situation.
Expanding when the economy is contracting? This looks very much like the first response to a crisis, namely, ignoring the problem altogether. This is a time to either wait (go abroad or be asleep for a few years) or to change business (if you did luxury goods switch to providing very cheap goods for all the new thrifty people). This is definitely not the time to even increase what you have been doing and what very likely contributed to the current mess in the first place.
Increase means to go on attack by expanding your efforts to make something happen for youself. My mother was just diagnosed with Cancer throughout her back. The doctors said there was nothing they could do and cancelled a simple surgery that had been planned for her to handle something she had going on with her cancer. I immediately went on attack researching, meeting with other doctors and looking for alternatives. We later found out that the diagnosis was incorrect. Had we ignored or retreated we would not have found this out.
The point is if the economic conditions have contracted then your efforts will have to expand beyond the amount of the contraction in order for you to get back to where you were or exceed that last point. Americans have not been individually producing enough in their efforts and this contraction is painful for everyone especially those that have been relying on minimum wage jobs.
Just wanted to let you know that you have my deepest sympathies. Never give up the fight.
I wonder, however, if more effort is what America needs right now. Working two or three jobs and not being able to make a living is very scary and shortening the life span. And is there not a limit to expansion? There must be a better way to mange life for all members of society.
Grant you’re exactly right. Laying off people only exacerbates the problem. This would be the time for government to step in and counter the growing unemployment rate by putting people to work. It’s not as if there’s nothing that needs to be done, heavens knows our infrastructure could use some help right now. The problem is that kind of action takes some courage. So our economy will continue to flounder and slip into depression before anything is done about it, if even then. No one will act until they become desperate. But desperate people do desperate things and who knows what the outcome will be once that happens?
This is exactly right. If we rebuilt our infrastructure, like with the CCC, this country would be a much better place.
Infrastructure spending doesn't give a high rate of return on each dollar put into the economy and often takes years to have an affect. Construction projects often see tremendous lag times from the time of funding to the planning to the permitting to the acquiring materials to the actual work, etc. It's not an efficient way to stimulate the economy. It would be much better to simply hand money out to poor folks because they'll spent it immediately and the money will circulate through the economy. Hoover put forth large amounts of money to be spent on public works and most those projects didn't get going until a year or two after FDR was already President. Japan also put forth a number of such projects in the 1990s with little return.
Infrastructure is a far better investment to stimulate the economy than tax cuts for the rich or hand outs w/o work because it puts money into the hands of workers and rewards them for contributing to the nation and gets tangible results(roads, bridges, etc.) that create a better country and more favorable business environment.
Another good way to stimulate our economy is to install a 25 year retroactive tax to reclaim the trillions looted from our economy by the wealthy and locked up in idle stocks and foreign banks to evade taxes. Also a 100% tax on estates over $5 million will flush money into the economy instead of being hoarded by the heirs who did not work to earn this largesse
Tax increases on the wealthy will help restore economic justice, pay down the deficit, pay for the Iraq war, strengthen the dollar, and again recover the unearned, undeserved gains taken by the wealthy at the expense 99% of American citizens.
Great....even if there are no sales in the horizon, keep expanding.
seems to me, thats what led to the huge overcapacity in the telecom market during the .com boom. there is millions and millions of miles of unused cables lying below the ground in the united states and the rest of the world...
Well you could just lay everyone off and then wonder why no one's buying. It couldn't be that without their jobs they have no money to buy anything with, could it? Naaaa.
Trickle down does not work. Never did.
If you want a healthy economy, you have to have the bottom 40% earn a living wage.
That does not happen in the USA.
The economy will not be healthy until it does.
Earning a "living wage" is all relative. Where my parents live, for example, you can make $10-$12 an hour and do just fine. Where I live, however, making only $60,000 a year makes you practically homeless. Most the low wage earnings you're referring to live in areas with a very low cost of living. I believe the biggest thing "trickel-down" did was transfer a huge amount of wealth to the metro areas. This has resulted in a massive revitalization of New York City and the tremendous growth of areas like Miami, Phoenix, Las Vegas, Washington DC, most Texas, etc and the gutting out of many rural areas and some Mid-Western cities. The result overall has still been extremely positive.
It sure hasn't been positive for those in those midewestern states has it
And such great disparities of wealth, living costs and regional prosperities (or non- prosperity in the case of the industrial midwest) are good for the country as a whole how?
So basically what you are saying is that is was OK to allow bad economic and trade policies to kill midwesterners jobs and livelihoods and reduce our stds of living so that a few in New York, Washington, Vegas and Miami could benefit?
Seems proof positive to me that the whole idea was a massive upward shift of wealth on the backs of US middle class and workers
Peel back the onion on texas as well - Texas has losts thousands of manufacturing jobs too - most of Texas "new" economy is based on the transport and distribution of products coming from mexico
The revitalization of New York City happened in Manhattan. The Bronx, where I live, is still one of the poorest counties in the nation -- and there are plenty of jobs paying LESS than $10 an hour.
We have jobs in Texas, but many are filled by illegals, many don't have any benefits, and pay scales are not that great.
"what would you do if you had a terminal disease? You would not retreat and expect to survive"!
I respect your attempt to motivate people. But this metaphor doesn't work. If I have a terminal disease, I'm going to die. And if I don't have any customers, it does seem foolish to expand.
I got news for ya....We're ALL terminal...so maybe you just better hurry up & get living! If you don't have any customers, go out and get some! There are plenty of ways to market yourself that don't cost a lot of money. One of my favorites is to team up with local non-profits by either hosting a fundraiser or food drive, or donating some product to one of their functions somewhere else. It brings exposure, often generating positive news articles (much more effective than ads), their events are usually attended by top business and city leaders (who also tend to serve on their boards) and keeps me & my business front & center in the public eye-offering great opportunities to meet and mingle with potential clients. Even if it's not successful enough to stay in business, I'll more than likely have great leads for future employment. Plus I'm helping to make my community stronger. I sure as heck don't want to sit around and wait for the end.
Thats the real problem with our business leaders today. they do not know how to build, create and innovate like our forebears did
Our current crop of mercenary MBA's only know how to chop, cut, downsize and outsource
then you wonder why we don't produce anything here. outsourced it as a way to save our way to a few quarters or years of increased earnings in order to please shareholders, only to forget how to produce anything in the long term! Then contraction comes and the response is to cut again. Only to find yourself getting smaller and smaller over time!
Industrial production remains at all time highs in the United States. Most (70%) manufacturing plants that multi-nationals set up abroad continue to be in developed markets (vice developing countries) to produce for those domestic markets (vice to import back to the US). The idea that the US doesn't "produce anything" is not backed up by facts. It's true that manufacturing suffered a nasty downturn in 2001 to early 2003 but it has held up well during the current downturn, mostly because of exports (aerospace, electrical machinery, cranes, tractors, heavy machinery, chemicals, etc).
Our economy is more innovative now than ever. If you don't think so, when do you think we were innovative? In the 1950s, for example, when we were building textile factories all over the south, or in the 70s when we added a huge amount of need raw steel capacity only to see most those companies go out of business because we stopped making things mostly of steel? The innovation I've seen since the 70s and 80s is absolutely amazing. My wife runs her business mostly through her iphone email and skype internet telephone, and we order a lot of things right online and never have to leave the house or talk to anybody -- that is innovation.
The heydey of American innovation corresponds directly with the heydey of US manufacturing - the period from WWII to the 1970s. This was when many of the items we take for granted were invented AND produced here, auto technology, aerospace, computers, electronics, TV, computers, video games, pocket calculators, appliances - the list is almost endless
Innovation and manufacturing strength go hand in hand = each depends on the other. No other industry has the innovative impact of manufacturing - automation, robotics, industrial controls so forth.
The decline of US innovation corresponded directly with the decline of US manufacturing.
Many of the "innovations" you cite are not produced here and therefore few share in their benefits especially those benefits related to the production of those products.
In a precious post you cited steel as a growth industry, but here you say things aren't made of steel anymore - so which is it? The unfortunate thinbg is most of the steel production in the US is now either fully or partially foreign owned. this is a serious threat to national security putting such a strategic material in the hands of foreign countries many of whom may or may not be friendly to us in the future
The decline of US manufacturing is a result of the unholy union of neoliberal elitism, voodoo economics and globalism
What guys like this Cardone are telling you is that the establishment will never bring back jobs and it's up to you to be savvy enough to win the game of unchecked Capitalism so you can be in the upper 2% that will not be in poverty and slavery.
Are you content with that? Are you happy knowing you will not be able to live on wages and that your existence and your family's future is riding on how well you score on the "Wallstreet" slot-machine?
Is that the America you want? Is this better than New Deal economics?
Spin the wheel! You could be a winner!
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