Great questions. When I refer to hoarding money what I'm thinking about are things like large corporations doing massive stock buybacks. In 2014 nearly a trillion dollars of US corporation stock was repurchased by those companies and in 2015 the latest numbers I could find were that it was expected that slightly over a trillion in stock would be bought back, continuing an upward trend of several years. That number represents nearly 6% of our GDP of money being hoarded as a way to drive up paper asset values instead of being invested in increased production of any sort of useful goods or services. In addition a lot are just outright hoarding cash. S&P 500 companies had a combined total of $1.43 Trillion dollars in cash sitting on their balance sheets at the end of Q2 2015. At the same time capital expenditures by these companies had fallen by 5.6% year over year.Originally Posted by bae
Another example is when profitable companies choose to offshore labor to the cheapest place they can find. I get that it's necessary for corporations to be efficient, but with the American consumer representing 70% of GDP if we do away with all the good jobs then eventually we do away with the ability of consumers to consume and GDP will necessarily fall and with it the stock market and all that hoarded “money”.
And we're not just talking about offshoring manufacturing type, low skilled jobs. All the talk of training people for more advanced skills and blah blah blah is just a bunch of hot air because we're offshoring good information economy type jobs as well. I'll give an example from my own job, underwriting commercial insurance for a large international company. In my company the entire underwriting process has been painstakingly broken down into every single discreet task that happens during the lifecycle of an annual insurance policy. And this process has been done, or is being done currently, for every different insurance product we write since the process is not the same from division to division. Tasks that I used to do, such as creating a new rating spreadsheet each year based off of the expiring one, are now outsourced to a service center in Manilla. That particular task takes perhaps a half hour to do. When I did it myself it cost the company $40ish in salary. Now the Filipino employee who does it gets paid a fraction of that. The result is that there are less commercial underwriters in the US because each underwriter can handle more accounts. Over the coming years the Filipino staff will get more skilled and familiar with US insurance and risk management concepts and be able to do more advanced tasks than enter numbers from one spreadsheet into another. At that point they will likely get assigned a chunk of the actual underwriting analysis while their old job of transferring numbers on spreadsheets will go to yet another, lower cost country. And still fewer underwriters will be needed in the US. Eventually the only tasks the US underwriter will do is review the underwriting workup created somewhere else and then release the proposed policy terms to the broker. I will simply be a salesperson, not someone who actually analyzes risk. Other divisions within my company are already getting there. They have "field underwriters" who simply present insurance quotes to brokers and clients that have been created by "technical underwriters" working in low wage US cities. The field underwriter has no say in the risk analysis and is only tasked with negotiating the final price for each policy within a range recommended by the technical underwriter. I expect that ten years from now the technical underwriting will not happen in the US. That too will have been outsourced to a low wage country (possibly our service center in Manilla), leaving the US technical underwriters unemployed. We've already reduced the number of US employees by several thousand in the 7 years that I've worked there, yet revenue and profits aren't declining. Assuming that this same trend is happening at every organization big enough to outsource I expect that average US wages, which fell after the economic collapse 8 years ago and never recovered, will not recover and will in fact continue their downward fall. It's understandable why a whole lot of money is being hoarded. Corporations understand that there's no point in producing more products than already are being produced because they aren't willing to pay the higher wages that would be necessary for consumers to actually be able to consume more and actually grow the economy. Until they realize, as Henry Ford did, that the whole economy is an equilibrium that necessarily includes paying people decent wages, the future for a lot of people looks pretty bleak.
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