Why are we in a Economic Depression???

[purman]

This was very interesting to me, and I wonder how many other companies are doing it....

My brother works for EA Sports (a computer game company) He is in charge of fixing game problems as they are being created the "games not the problems..."

Yesterday in the big wig meeting (his job is ok) the the international ceo said the company was selling more, and making more than they had in a long time.... They have 28 million in the back.. Things are good... But stockholders want something done. So they have to lay off 600 employees..

How does this make any sense... The layoffs are between England and the USA...

So they lay off 600 people that they don't need to, so the stockholders can make more money..

So now 600 people can't buy stuff because they have no job... This affects other companies that are making products, so they REALLY have to lay of people and so the dominos start..

I wonder how many other companies are doing what EA Sports is??????

Bet there are a few.....

And then don't get me started on the media they don't help one bit.......

[aircooled4]

Maybe EA Sports is getting rid of people they dont really need...If they can make the same money WITHOUT them, maybe they should go...Gotta keep the investors happy, or theyll invest in something else then EA Sports will cease to exist if they dont have investors..

[ROBERTSUNRUS]

Hi, people losing their jobs is not a good thing for anyone. More people out of work means less purchases. Less purchases means less employees needed. More people needing or looking for jobs means the employers can insist on more production for less pay. Less pay means losing things or reduceing your lifestyle. More people out of work means the value of most everything is going down includeing the American Dollar. And if things keep going down, that means less for the stock holders too. Not to mention, when the economy goes down, crime goes up. If you still have a job, be very thankful.

[wheel interested]

I sure would like to see things go back to people being number one and employers taking care of their workers loyally and responsibly.

Are hands being pushed? What was the start of the dominoes going over? Let's hope for better times ahead and the good life and the wisdom to realize commerce is not almighty.

[RedSHED]

RedSHED's economic theorem #27a:
Every 65-80 years, the United States experiences a realignment of wealth. This has been the case since the 1770's or before.

Corollary: It takes about 2 generations for people to become complacent enough to throw away the estates painfully rebuilt by their grandparents.

This sort of thing has happened before, it will happen again. It isn't a happy thing to be a part of, but my grandparents survived theirs (and raised kids during it) and there's an excellent probability we will too.

[GlenCoombe]

If EA is so far in the black they should buy back some of their own stock. This will diminish the demand of shareholders and strengthen their company.

If the balance sheet is as strong as you imply perhaps some of the investors are asking "where's mine?"

[juel]

You make a good point and I've often wondered myself about this stock mania. I honestly believed companies were in business to make a product or furnish a service and if they were good at it, they made a profit and stayed in business. Now it seems that none of that matters. It's the price of the stock and the profit to the stockholders that is the important thing. Employees don't matter. Loyalty to the company and the quality of your product doesn't matter. Somehow being in business in America is now about stock sales. I don't own much stock, don't know many who do. I just work hard and buy things and try to enjoy my life. Where did I fall of the train here and become unimportant? When did all this corporate and personal greed sneak in to my country? Think I'll just go camping and try to calm down.

[flitzwhopper]

Look at Berkshire Hathaway.... it was doing business the old fashioned way... it continues to do business the old fashioned way and will be doing business the old fashioned way. Have high quality, well managed companies that take care of the employees and produce a valuable product. Balance profits with employee welfare and the stock retains value. I just can't afford $100k a share. The investors may not be getting rich quick but they aren't getting poor quickly either.

[PizzaChop]

This won't be popular right now but stockholders are just business owners in very small fractions.

The value of a business is determined (for the most part) by its ability to produce future profits (revenues generated less operating expenses, fixed costs, depreciation, and taxes).

This assessment not only involves the general health (past performance) of the company, but the future outlook of the company, the industry (market trends), and perceived economic operating environment.

Capital ($$), like water, will always flow to the area of least resistance. (This is why low tax, low regulated, non-unionized regions tend to experience more growth.)

Entrepeneurial wealth creation is a voluntary act which involves a level of risk that unfortunately, most Americans are averse to. (They would rather ride in the cart and help push than actually design, fund, build, and steer it.)

They enjoy being employees, provided their every increasing appetites for security (growing wages, benefits) are provided for.

Periodically, the cart faces obstacles (market conditions) which either upset the cart or require a drastic realignment.

We call these layoffs.

All wealth (excess productivity) is created, and those who create it understand the risk, cost, and true value of it. They are generally smarter (though not necessarily more educated), work harder, and are more disciplined than the typical wage earner.

Anyone who has ever created or operated a business understands the sacrifices involved, and few see it as charitable when a larger entity threatens to help themselves to that wealth in order to subsidize the bad decisionmaking of others.

When future profits (economic activity) are threatened by higher operating costs (wages, benefits, taxes, regulation), why should it surprise anyone that business capital ($$) heads for a safe harbor until conditions improve?

When economic activity cannot produce returns to justify the risks involved, entrepeneurs will engage in less of it.

We call this a recession (slow or negative economic growth).

This results in fewer jobs for the risk-averse wage earner.

This isn't really a difficult concept if you think about it.

While you can confiscate a person's wealth, you can't force him/her to put it at risk in the market place.

I'd love to argue against the unfairness of gravity but it wouldn't really change anything!

(But at least we'll finally have assistance in paying for our gas and mortgages now!)

[Bob Thompson]

Well, I own stock in a number of companies and I haven't asked a single one to lay off anybody. The question has never been presented to me. Matter of fact, I don't recall ever having been asked that question ever. But I do believe a board of directors would try to make a company appear more profitable so stockholders would think the stock is worth more money, thus raising the price and making the board of directors substantially richer given they usually award themselves bonuses of millions of shares of stock!

[hampstead38]

The current economic malaise is the "hangover" from too much easy money, too much risky subprime lending, the monetization of subprime mortages in financial instruments or derivatives, institutional exposure to this bad debt, deregulation, etc. The bottom line is that the run up in U.S. housing prices was an artificial bubble fueled by speculation, easy money and imprudent lending. The market was out of balance and what we are feeling now is a return to equilibrium. Unfortunately, many people borrowed against inflated house prices with home equity loans. Others bought houses near the top of the market and now owe more than the home is worth. The U.S. economy is driven by consumer spending. The party of the past five years is over and consumers are sitting on a mountain of debt.

The problem is that the return to equilibrium means consumers and businesses need to cut back. When businesses cut back, they generally postpone capital projects, cut expenses and shed jobs. While this may seem like a domino effect, at some point an new balance in reached.

[GT1963]

Originally Posted by wheel interested

I sure would like to see things go back to people being number one and employers taking care of their workers loyally and responsibly..........

Excellent point - but don't you think the door swings both ways? Where is the dedication of the employees today. Our society wants everything yesterday, we tire easily of things that bore us. We want the use of and the attainment of product for barely pittance and we want it YESTERDAY. WE WANT the customer service to be second to NONE and yet we do not support those (employees) who are working in various conditions that are not conducive for motivation nor provides the means to sustain a standard of living. All this empresses upon the employer. Our spending habbits and product we choose cause a reaction on the manufacturers...it is the people who make the peoples bed....

Last night was FANTASTIC and for the first time in many many years I witnessed the US People finally stand UP! Inside their own walls - the last time I saw this level of crying out was as a child watching the Vietnam protest parades by our YOUTH on a Granada Rental Black and White TV...!!!

I wish the Youth of America Godspeed, but most of all PATIENCE!!! and UNDERSTANDING with their NEW Leader....

[dogpound]

I see a variety of valid points to everybody's comments. However it is not the stockholders that make the decisions to cut jobs. It is the members of the board of directors. If the stockholders want "more" then I would say it is the board members that want more stock options, management want more benefits for themselves. Look at the manangement of AIG that went under this past summer. Their manangement (CEO) received over $360 million in salary/benefits over the last 3-5 year period. Sotckholders? I don't think so.
Bob
Member Four Corners Unit
WBCCI # 10105
AIR # 28748

[genearnold]

After the stresses, financial and political, of the last several weeks maybe this will help.

During this financial crisis in America a lot of people have sold off a lot of their volatile investments and are wondering where to put their money where it will be more secure than the stock market. I’ve come across a great business opportunity that sounds like Airstreamers might be naturals to buy into since we are all so flush (at least that is the perception, right?) Anyway, back to the subject.

A group of my acquaintances, called simply, “The Associates,” are putting together a new operation. Their intent is to find a depressed area and establish a large cat ranch. They are starting small, with about one million cats. Each female cat averages about twelve kittens per year; skins will bring about fifty-cents for the white ones and a dollar for the black, bringing revenues of $18,000,000 per year. This averages out to about $60000 per day, excluding Sundays and holidays.

A good cat skinner can skin about 50 cats per day at a wage of $60 (8 hours X $7.50 per hour). They figure 800 people can operate the ranch so the net profit will be $12,000 per day.

The cat food will be rats, and they plan to start a rat ranch adjacent to each cat ranch. Rats multiply four times as fast as cats and if we start with a million rats we will have four rats per cat each day. The rats will be fed on the carcasses of the cats we skin. This will give each rat a quarter of a cat. You can see by this that the business is a clean operation, self-supporting and really automatic throughout. The cats will eat the rats and the rats will eat the cats, and we get the skins!

Let me know if you are interested and I will tell you more about our investment program. By the way; we are working on a method of crossing the cats with snakes so they will skin themselves twice a year. This idea has fantastic possibilities.

Gene

(My apologies to all you cat lovers out there!)