Wednesday, June 10, 2009

Bored Children

Obama’s economic policy is simplicity itself: butt fuck General Motors whilst giving the banks a blow job.

How we arrived at this state of affairs is another question. The answers are varied and complex. Like a perfect storm, multiple variables congealed to form the clot that is choking our economy. Here are a few suggestions.

Once our bored children of prosperity lost the dewy-eyed idealism of the sixties, they decided it was time to make a buck. So they flooded the nation’s business schools in pursuit of that Holy Grail, the MBA.

Now the last thing a bored child of prosperity wants to do is spend time in a dirty factory with its foul-mouthed workers. They much preferred the sanitized atmosphere of a well-appointed office with its banks of shadowless florescent lights and central air. Isolated from the factory, their fervid minds turned from the science of making things to the heady world of feral economic growth.

So it was that they transitioned us from a real world where real money was made by making real things, into a world of make-believe where illusory profits were made by over leveraging arcane instruments of economic fantasy.

This suited our plutocrats quite well because the profit margin in manufacturing was beginning to shrink due to our obsession with efficiency.

Nothing is more inefficient than human beings. They have to piss and shit. They whine and complain about being overworked and under paid. They go on strike or call in sick. And worst of all, they expect to be paid a living wage.

To our captains of industry, the answer was automation. A machine doesn’t have to use the bathroom and knows how to keep its mouth shut.

However, there was a flaw in their thinking. When the economy goes south, a manufacturer can lay off human beings, thus cutting his costs until things pick up again. Not only is it impossible to lay off a machine, but the manufacturer has to continue making payments on it, and the damn thing has to be maintained. This reduces the cost savings realized through layoffs and cuts into their profit margin.

Of course, it didn’t help that the bored children of prosperity who occupied their corporate headquarters suggested that instead of sinking profits into improving their product they should use said profits to diversify into different areas. This resulted in a drop in quality and a consequent loss of market share, as in the case of the big three automakers. So, the bored children suggested shipping oporations overseas where labor is cheap and union agitators can be snuffed without anyone raising much of an eyebrow.

With manufacturing overseas, our MBAs had to come up with another gimmick for inflating profits. Thus, did they create securitization, which Mike Whitney describes as:

[T]he conversion of pools of loans into securities that are sold in the secondary market…[The quality of the loans make no difference at all, since the banks make their money on loan origination and other related fees. What matters is quantity, quantity, quantity; an industrial scale assembly line of fetid loans dumped on unsuspecting investors to fatter the bottom line.

This allowed the banks to move the toxic loans off their balance sheets, which made it possible for them to become over leveraged.

It was a gigantic asset bubble filled with the hot air of illusion that eventually popped. And the Fed and Treasury are doing their damndest to reinflate it while letting General Motors sink into the Detroit River.

Two running sores mar Liberty’s face: Wall Street and the Beltway. There is no sign that they are healing.


Cirze said...

I don't believe the MBA's came up with this as a career plan: more likely it was originally the Mellon Scaife Foundation Rethug crowd.

Many real (not Liberty U graduates) MBA's are as aghast as you are at what has been done in their name.


Case Wagenvoord said...

Still, you have to admit that their mindset aided and abetted the problem. They may be appalled at the results, but hopefull they have learned that the Law of Unintended Consequences works 24/7.

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