Economy Zombie companies

[panamaican]

This textbook 'well academia says that supply and demand should be such and such' is flimsy as hell in something as complicated as the world economy. The auto for a large part still exist in the U.S. because Obama took a winger and loaned the auto companies so they could stay in business. Loaning them money could have easily created a zombie situation. Had the auto industry shutdown, it could never come back because the expertise would evaporate. You can't magically make a machinist with 30 years of experience in pressing out parts. Academia and academics never call themselves out on their overly simplistic ideas when they don't work in every real world situation. Way too many ideas only work as you would expect in very small bubbles. If their ideas were so valuable, they would all be incredibly wealthy, which is nearly never the case.

I was going to ignore this thread but this intrigued me. How does this machinist disappear? Does he simply forget how to press out parts, is his skillset not applicable to anything else, or does he just up and leave the country? How does he and others with his skillset "evaporate"?

 

[Prefect]

I was going to ignore this thread but this intrigued me. How does this machinist disappear? Does he simply forget how to press out parts, is his skillset not applicable to anything else, or does he just up and leave the country? How does he and others with his skillset "evaporate"?

What do you think happens when a group of very specialized people all get laid off at the same time by an extremely large employer? They try to find other things and if not switch careers. Machinist who survived the first cullings can write their own checks now due to their being shortage instead of a glut due to young people avoiding the craft. Almost all your machinist are old or young and inexperienced. There are a lot of industries like this where the median age is around 55 and every year way more years of experence goes out the backdoor than comes in. You can't fix stuff like this once it happens and you literally can no longer do certain things because no one knows why stuff was done a certain way. You are left with a company that basically just copies and pastes what was done without knowing why.

 

[JohnnySagebrush]

Does all intervention have to be so that the company and it's stock holders are made whole? Banks can be bailed out, by just protecting the loans and the deposits while wiping out the shareholders. I think the level of intervention is too intrusive and is probably damaging. As we are skewing the risk/reward relationship and making sure no one faces risks. Airlines know they get bailed out. They should have sat on more money than they did. They knew they could play fast and loose, as there was no incentive not to.

Well, yes, I agree with everything you are saying in this post.
I think we have a problem in that politicians make decisions that are politically expedient. It is a problem that is actually likely fundamentally rooted in our biology; we are actually only marginally better at long term thinking than a squirrel. GW and Obama could have followed a different path that would have been beneficial in the long run, but caused a lot of pain in the short term (and politically ruined them, without a doubt; maybe their party, too).

Jimmy Carter was the last President that took the difficult, long term approach that required short term pain and sacrifice. But he and Volcker did a hell of a lot to preserve America. And what was the result? He was a one term POTUS who was, and is, vilified by ignorants. Americans were unwilling to make any sacrifices. And his successor took a short-term approach that left a hell of a mess and was lionized for it.

 

[JohnnySagebrush]

This textbook 'well academia says that supply and demand should be such and such' is flimsy as hell in something as complicated as the world economy. The auto for a large part still exist in the U.S. because Obama took a winger and loaned the auto companies so they could stay in business. Loaning them money could have easily created a zombie situation. Had the auto industry shutdown, it could never come back because the expertise would evaporate. You can't magically make a machinist with 30 years of experience in pressing out parts. Academia and academics never call themselves out on their overly simplistic ideas when they don't work in every real world situation. Way too many ideas only work as you would expect in very small bubbles. If their ideas were so valuable, they would all be incredibly wealthy, which is nearly never the case.

What do you think would have happened had GM and Chrysler not been bailed out?

There were better run automakers with better product poised to capture market share. I really think this example only reinforces the importance of creative destruction as being important in the long term. GM had long been very poorly run, with arguably inferior product and quality control. The elimination of GM and Chrysler would have caused many folks pain, and that’s worth something on its own. But by no means would it have been an industry collapse. The bailouts were a reward for mediocrity, and mediocrity is a very generous word for GM and Chrysler at the time.

 

[JDavis]

What do you think happens when a group of very specialized people all get laid off at the same time by an extremely large employer? They try to find other things and if not switch careers. Machinist who survived the first cullings can write their own checks now due to their being shortage instead of a glut due to young people avoiding the craft. Almost all your machinist are old or young and inexperienced. There are a lot of industries like this where the median age is around 55 and every year way more years of experence goes out the backdoor than comes in. You can't fix stuff like this once it happens and you literally can no longer do certain things because no one knows why stuff was done a certain way. You are left with a company that basically just copies and pastes what was done without knowing why.

Hailing from construction I can tell you from experience we hire former auto techs all the time. I get that your point is emphasizing 30 years on the job but factory tech is a moving target if you're a career factory worker. If you're talking about molding jobs in auto, that's all automated for a reason. If you're talking about finishing work (fine detailing/wiring/pneumatics etc) then it requires a great deal of human expertise, but those types of heavy detailing workers transfer to auto shops and high end garage work, customs shops, places where automation still doesn't go.

There's a ton of different types of machinists so I'm curious the type of 30 year work you're referring to -- I'd be the first to back up and concede their transfers are nonexistent if I knew what sector you mean

 

[ElKarlo]

Well, yes, I agree with everything you are saying in this post.
I think we have a problem in that politicians make decisions that are politically expedient. It is a problem that is actually likely fundamentally rooted in our biology; we are actually only marginally better at long term thinking than a squirrel. GW and Obama could have followed a different path that would have been beneficial in the long run, but caused a lot of pain in the short term (and politically ruined them, without a doubt; maybe their party, too).

Jimmy Carter was the last President that took the difficult, long term approach that required short term pain and sacrifice. But he and Volcker did a hell of a lot to preserve America. And what was the result? He was a one term POTUS who was, and is, vilified by ignorants. Americans were unwilling to make any sacrifices. And his successor took a short-term approach that left a hell of a mess and was lionized for it.

Yeah there are short terms struggled that just be done otherwise it’s ultimately bad
Poor jimmy he got attacked by everyone. The cia did Jim dirty in Iran and his choice of vulker was right. Stagflation needed to be beaten for any recovery to happen. No one else has the guts to do that and everyone takes the easy way out

 

[JDavis]

On a side note we really like former US army corps engineers in construction but it's a bit depressing to see them come over because the pay scale was comparable to our own on certain projects. The idea that they only made slightly more money in military engineering is f#ked

 

[Scheme]

Too big to fail is a terrible policy. Once a company is deemed too big to fail it should be split up.

Fractional reserve banking causes bank runs, which causes government intervention. Banks should be separated into storage (with no fractional reserves) and investment. Get rid of banks using people's savings, it's perverse and goes against the free market as banks that don't rely on government guarantees are heavily punished.

 

[ElKarlo]

Too big to fail is a terrible policy. Once a company is deemed too big to fail it should be split up.

Fractional reserve banking causes bank runs, which causes government intervention. Banks should be separated into storage (with no fractional reserves) and investment. Get rid of banks using people's savings, it's perverse and goes against the free market as banks that don't rely on government guarantees are heavily punished.

Problem is we made all the large banks proportionally so much bigger. Now too big to fail is now set in stone

 

[Prefect]

Hailing from construction I can tell you from experience we hire former auto techs all the time. I get that your point is emphasizing 30 years on the job but factory tech is a moving target if you're a career factory worker. If you're talking about molding jobs in auto, that's all automated for a reason. If you're talking about finishing work (fine detailing/wiring/pneumatics etc) then it requires a great deal of human expertise, but those types of heavy detailing workers transfer to auto shops and high end garage work, customs shops, places where automation still doesn't go.

There's a ton of different types of machinists so I'm curious the type of 30 year work you're referring to -- I'd be the first to back up and concede their transfers are nonexistent if I knew what sector you mean

I am not talking about guys that punch parts on an assembly line but guys that know enough how to work with metal and troubleshoot why something is not coming out correctly or machining a new part from a block of metal to replace a part in an automated machine. Guys that can use a mill and lathe to make precise metal parts.

 

[BIKES!]

I said back in 2007 and 2008 that we shouldn't have bailed any of the corporations out precisely because it would have been keeping companies in business that needed to finally die and be replaced by something newer and better.

I’m sure you would love to see all four major airlines collapse and their massive unions disbanded so the next guys can start from scratch with low income, pensionless, unprotected workers.

Kind of soulless that you wish the death of industries that were killed entirely by the government and their media arms rather than the pandemic themselves...

Public education fails in nearly every district. You have any issues firing everyone and starting over?

 

[Prefect]

What do you think would have happened had GM and Chrysler not been bailed out?

There were better run automakers with better product poised to capture market share. I really think this example only reinforces the importance of creative destruction as being important in the long term. GM had long been very poorly run, with arguably inferior product and quality control. The elimination of GM and Chrysler would have caused many folks pain, and that’s worth something on its own. But by no means would it have been an industry collapse. The bailouts were a reward for mediocrity, and mediocrity is a very generous word for GM and Chrysler at the time.

Abrupt changes are terrible for the workforce. While I think that it is wrong to prop up large employers for just the sake of being large, there is tremendous damage that is caused by an industry falling under or a huge block ,tens of thousands of people, all looking for work at the same time with likely limited transferable skills. I have seen this in Texas when oil and gas crashes and you have 100,000s of oil and gas workers looking for other work and it not being unusual for someone to be washed out of their field or be unemployed for over a year. The amount of labor that goes into building a vehicle is around $600-1000, which isn't much and the rest is labor. The amount that you have to press the scales to keep automobile manufacture here in the U.S. is very minimal. In fact, currency exchange rates often play a large role in determining whether a plant is built in the U.S. or the vehicles are built elsewhere and imported. The steel industry in the U.S. is slowly going under and likely will never comeback due to China ,they aren't my boogeyman but they are flooding the market with underpriced steel, in all likelihood will maintain a price ceiling that allows them to maintain a very large market share and makes it extremely hard for new players to open up in the U.S. That is an example of a dead industry in the U.S that will never come back.

Now, I know someone is going to say that "hey, that is the free market. Everyone should make what they have the comparative cost advantage". Well, to that I say that there is a huge section of the workforce that those blue collar jobs were the best jobs they could qualify for. Not everyone is capable of being a lawyer, engineer, computer programmer, or a doctor and there are very serious problems caused by underemployment or unemployment. Not just monetarily but also physical and mental. I can't think of anything more stressful than being broke. I think it is better for everyone to keep people moving and working even if it means that some product cost a little more or you have an industry that is only existing to breakeven and abrupt changes in the workforce need to be strongly avoided. Everyone that bring up this "well, they just need to find do what they have the comparative advantage" is just wanting to look smart by regurgitating the overly simplistic models that were taught in Econ 101. "Didn't you read the chapter with the example of the lemonade stand? The market will fix everything."

 

[panamaican]

I’m sure you would love to see all four major airlines collapse and their massive unions disbanded so the next guys can start from scratch with low income, pensionless, unprotected workers.

Kind of soulless that you wish the death of industries that were killed entirely by the government and their media arms rather than the pandemic themselves...

Public education fails in nearly every district. You have any issues firing everyone and starting over?

Nope, no issues there either. I've said in lots of threads that the education system needs to be revamped. I've said in lots of other threads that teacher accountability needs to be restructured. I also said that teacher standards need to be increased, with a complete understanding that teacher compensation should also increase to reflect the higher standards. I've said in both of those types of threads that an education system initially designed around the needs of 19th century children isn't particularly well suited to the needs of 21st century children.

You should read those threads, I make excellent points in them.

 

[Yehudim]

Abrupt changes are terrible for the workforce. While I think that it is wrong to prop up large employers for just the sake of being large, there is tremendous damage that is caused by an industry falling under or a huge block ,tens of thousands of people, all looking for work at the same time with likely limited transferable skills. I have seen this in Texas when oil and gas crashes and you have 100,000s of oil and gas workers looking for other work and it not being unusual for someone to be washed out of their field or be unemployed for over a year. The amount of labor that goes into building a vehicle is around $600-1000, which isn't much and the rest is labor. The amount that you have to press the scales to keep automobile manufacture here in the U.S. is very minimal. In fact, currency exchange rates often play a large role in determining whether a plant is built in the U.S. or the vehicles are built elsewhere and imported. The steel industry in the U.S. is slowly going under and likely will never comeback due to China ,they aren't my boogeyman but they are flooding the market with underpriced steel, in all likelihood will maintain a price ceiling that allows them to maintain a very large market share and makes it extremely hard for new players to open up in the U.S. That is an example of a dead industry in the U.S that will never come back.

Now, I know someone is going to say that "hey, that is the free market. Everyone should make what they have the comparative cost advantage". Well, to that I say that there is a huge section of the workforce that those blue collar jobs were the best jobs they could qualify for. Not everyone is capable of being a lawyer, engineer, computer programmer, or a doctor and there are very serious problems caused by underemployment or unemployment. Not just monetary but also physical and mental problems. I can't think of anything more stressful than being broke. I think it is better for everyone to keep people moving and working even if it means that some product cost a little more or you have an industry that is only existing to breakeven and abrupt changes in the workforce need to be strongly avoided.

Texas oil is actually a great counter-example to what you’re saying here, though.

Companies go under all the time and you have all sorts of small players trying to become the next big thing.

Yeah it sucks that some people become unemployed but in the end it worked out for the country as a whole since were a great oil producer again

 

[A Lurker]

biggest false advertising of a thread title ever.

I expected this:

I kinda liked that film/ thought the reviews were a tad unfair

 

[panamaican]

What do you think happens when a group of very specialized people all get laid off at the same time by an extremely large employer? They try to find other things and if not switch careers. Machinist who survived the first cullings can write their own checks now due to their being shortage instead of a glut due to young people avoiding the craft. Almost all your machinist are old or young and inexperienced. There are a lot of industries like this where the median age is around 55 and every year way more years of experence goes out the backdoor than comes in. You can't fix stuff like this once it happens and you literally can no longer do certain things because no one knows why stuff was done a certain way. You are left with a company that basically just copies and pastes what was done without knowing why.

Yes but that takes decades to take place. For your scenario to be realistic, we would have to stop producing cars for a decade so that the skilled workers have all retired, died, or forgotten how to do their jobs. And that's unrealistic. New car companies would arise and they would employ a portion of the car producing labor force inside of a few years. We're talking specialized labor skills but not a niche industry that no one would enter. So there wouldn't be a decade plus without car manufacturing to create the skills evaporation that you're alluding to.

Note: I'm not saying skills evaporation of the type you're referencing doesn't occur. It certainly does and is well documented even with technology as simple as producing fire. There are interesting stories of communities that get cut off from mainland communities and see the very skills evaporation that you're referencing. But it takes far longer than the time period that is involved here.

 

[Yehudim]

Nope, no issues there either. I've said in lots of threads that the education system needs to be revamped. I've said in lots of other threads that teacher accountability needs to be restructured. I also said that teacher standards need to be increased, with a complete understanding that teacher compensation should also increase to reflect the higher standards. I've said in both of those types of threads that an education system initially designed around the needs of 19th century children isn't particularly well suited to the needs of 21st century children.

You should read those threads, I make excellent points in them.

It’s crazy how the two big hot topics of public education and policing can for the most part be resolved by just letting the bottom percentage of people be fired.

Obviously there’s more to it, but you don’t need a great centralized committee to make a plan. Criminology has made great strides simply by a police department trying something new, succeeding, and then other departments copying it.

But we a need great national plan for everything, at least for some people.

 

[Jack V Savage]

Texas oil is actually a great counter-example to what you’re saying here, though.

Companies go under all the time and you have all sorts of small players trying to become the next big thing.

Yeah it sucks that some people become unemployed but in the end it worked out for the country as a whole since were a great oil producer again

But there's an obvious reason for geographical stickiness with oil that doesn't apply to many other industries.

Anyway, gotta say it's a breath of fresh air to see dumb conservative views driven by moralizing about the economy again (or one could say, having moral views that don't line up with reality) rather than just making up incorrect factual claims.

 

[Yehudim]

Yes but that takes decades to take place. For your scenario to be realistic, we would have to stop producing cars for a decade so that the skilled workers have all retired, died, or forgotten how to do their jobs. And that's unrealistic. New car companies would arise and they would employ a portion of the car producing labor force inside of a few years. We're talking specialized labor skills but not a niche industry that no one would enter. So there wouldn't be a decade plus without car manufacturing to create the skills evaporation that you're alluding to.

Note: I'm not saying skills evaporation of the type you're referencing doesn't occur. It certainly does and is well documented even with technology as simple as producing fire. There are interesting stories of communities that get cut off from mainland communities and see the very skills evaporation that you're referencing. But it takes far longer than the time period that is involved here.

The only example I’m aware of that happening is exactly how you framed it: refining of rare earth products

We have outsourced rare earths mining and refining for decades and so we don’t have the infrastructure and expertise to do it on American soil.

Ergo, we can mine rare earths in America and Australia but we in America and Australia have to send it to China for it to be usable, because nobody has been employed in that for decades.

That we would literally stop producing cars and lose the knowledge would require for absolutely everything to be outsourced which doesn’t happen.

Even Japanese and Korean car companies set up their plants here, because you have to produce the car near the market.

 

[panamaican]

It’s crazy how the two big hot topics of public education and policing can for the most part be resolved by just letting the bottom percentage of people be fired.

Obviously there’s more to it, but you don’t need a great centralized committee to make a plan. Criminology has made great strides simply by a police department trying something new, succeeding, and then other departments copying it.

But we a need great national plan for everything, at least for some people.

Policing and teaching are 2 examples of you get what you pay for government. If we applied higher standards with better pay for both of those industries, we'd get far better results. Instead, we have low entry pay discouraging the most talented people from pursuing the fields (unless they have a pre-existing deep passion for the work). This means an overabundance of below average individuals in jobs that, by necessity, touch the lives of almost everyone.

I'm not saying that cops or teachers are below average. I'm saying the professions get more below average people than the importance of the job should allow and that's because the initial pay structure is not attractive enough for the people with the most career options.