Worker and Investor Woes

The American Prospect makes a good argument against outsourcing Government labor. The Reader should know that the primary rationale actually in use in the privatization drive was neither Government size reduction, or saving of Wages. The Republican administration has never shown indication of real desire for Budget reductions; downsizing consisting only of introduction of Profits-making opportunities for Contractor companies. These forms of Employee reductions, whether in Security, IT, Tax Collections, or Social Services, has never been as effective in provision, and generates greater Operational expenses. There also exists an exterior threat of Contractor Sales of internal information, for the benefit of themselves and purchasing parties. Current Contracting practice functionally produced actual excess Costs with less value for the legally-sanctioned efforts involved.

The Markets have been real dicey for the last two Weeks. Much of the Market is extremely worried, but should the rest of America worry excessively? The Answer is Yes and No. Too many Americans are invested in the Markets, and Those not, are too deeply in debt to oversized Mortgages. Consumption has long been financed by Credit, and the sources for this Money is tightening up with higher Interest rates. Is it the time to really begin to worry? The Answer is Not Yet.

Relevant Facts: We have been awash with Cash for too long, all of it expecting a high rate of Return. These excessive Expectations have needed to take a Bath for a long time. The Markets have not reflected actual Economic forces for a long time (I call it Paper Inflation, though most everyone else calls it overpriced Stocks and Instruments). The real Problem here resides in very Profitable Business operations which have been finding little opportunity for expansionary Investment in the original source industry. They transfer major financial assets to Markets, but with the Expectation of achieving the same rates of Profits as found in their original Business production. Traditional practice suggests that long-term Profits in the Markets will be only about 40% of Normal Production Profits; it is all a question of actual Participation in the Production process. This pursuit of Normal Profits for Business production in the Markets has led to whirlwind Trading in the Markets, and inflated Stock and Bond pricing.

Read Carefully Now as I am not saying these circumstances will occur, or even are likely to arise. The Markets could probably lose about 50% of their current value, without adversely affecting the actual Economy, though there would be a massive Shift in Consumption practices. Employment is not extreme, and can be curtailed only with sharp cutbacks in Production; a Situation unlikely with access to World markets and high Consumer Demand–even with major reduction of Splurge Spending. The major problem Today remains Investor refusal to accept and absorb their Losses and move on; those Losses being only Paper values never able to be realized. lgl