Do you believe in Fairy Tales?

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I saw a great picture on Facebook the other day.   (OK- great, as in this really sucks.)  It showed a monopoly board and overwritten it said:

   Imagine if you will, playing monopoly with four friends. One of them is given all the property except Atlantic Ave.  He is also given 95% of the bank.  Everyone else is expected to succeed with what’s left.  Of course, they lose immediately.  Because they’re lazy…

Monopoly

 

Kind of like the real America, right?

Oh, let’s compound it.  That same party (the one that issues such sentiments) has been starving the IRS of funds, so that it can’t enforce the Obamacare (PPACA) rules.  (They also complain when those shortchanged staff make errors.  Doing twice as much with no more people.  Yeah.  Just like those profitable American companies are trying to do to the rest of us.)  Which is also why when you call the IRS to discuss an error they have made, you hear that your wait should not be longer than 2 hours…

But, let’s go back to the original premise.  How things are rigged.

It’s not quite like Las Vegas.  Where when you gamble, they keep 10% off the top.  (Oh, and they share some money with the state, too.)  So, you know the odds are not quite right.  They also use six decks of cards in BlackJack – and start a new stack again before they finish 240 cards, so you never can make the odds quite right.

And, now, those same sort of folks are buying up American companies.  You know, the ones that claim they can find hidden value in these firms.  By firing 1/3 of the staff, slashing wages, and taking 10% off the top.  (I’ve already written about how they’ve managed to buy our banks- using BankUnited as an example.  You should re-read the series (30 January to 2 February 2011; here’s the first one in the series)- but probably not on a full stomach.)

Well, Dr. J. W. Mason (John Jay Institute of NYC and the Roosevelt Institute) just wrote a paper that details all the little facts I’ve been accumulating over the past decade or so.  The first fact really hits you between the eyes.  Way back before Reagan was President, companies spent money on capital investment, research, or new employees.  How much?  40 cents of their profit- and every dollar they borrowed from banks.  Thanks to the “improvements” and “regulatory changes” imposed since then, we’ve really gone to town- spending all of a dime of every dollar on those critical elements.  Officially, the difference goes to shareholders.  But, if you have been collecting dividends, you know that’s a crock of manure.    Most of that money has gone to excessive pay for the executives, for the corporate raiders, or just hiding the money overseas.

To make matters worse, since about 2000, US companies have been borrowing money to purchase back their shares of stock and to provide those scant dividends investors earn for owning their stock. That’s right- companies are borrowing that money they use to pay dividends.  Not using their profits for those activities.  If you haven’t figured it out, they are hollowing out the companies with this practice.

And, as I have written many times in the past, Milton Friedman was the one who espoused a break in the compact between corporations and their employees and between the cities in which they operated.  Nope, not according to Friedman.  Instead, the only job for company management is to reward stockholders.  Now, that would be nice if they did that- but as you can see from what I just told you, the only folks company management are rewarding is company management.

Sure, you can say that the Fortune 500 (this practice has been extant since around 2003) have been using more than 90% of their net earnings for dividends.  But, they are NOT using their net earnings.  They are borrowing that money to give it to their stockholders.  (Don’t believe me?  Check out the purpose for Apple’s most recent borrowing spree.)

Unless and until companies start investing in their future- the building of new plants (for example: America has not built a new petrochemical refinery since 1977- and that one in Wyoming is not only tiny, it only refines oil, otherwise it would have been a decade earlier), investing in research for new products, and developing new employees, we are in for a heap of trouble.

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4 thoughts on “Do you believe in Fairy Tales?”

  1. Interesting monopoly game. I think I will pass.

    What I can’t pass on are the greedy mis-managers of any size corporation being so blatantly greedy.

    But what can we do?

    We elect people that no matter what they promise before the election they will end up carring on like all other legislators.

    Private companies have lost the idea that they exist for their clients, instead of their stockholders.

    Good thing I read this on an empty stomach.
    Ann recently posted..Some of the articles I wrote for clients

    1. Actually, Ann, the problem is that we are all forced to play!
      I think the choice term for corporations is that they are beholden to their stakeholders- that means shareholders, employees (including executives), and their community….
      And, I disagree with your blanket statement. You elect Ted Cruz and his minions- or Scott Walker and his minions- and they clearly say they are for business. What they don’t say is at the expense of the employees and communities. You have to listen to the whole paragraph and not the headline.

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