Trumps: White Angry Middleclass

[frugal-one]

Why not advocate for some college professor to be the president!? Come on.

Trump is a troubled man for troubled times.

This is not the time to have some pointy-headed intellectual philosophizing about problems.

We need a man who can actually make American great again!

America first!

We have had this conversation before UA. America is great NOW. We DO need someone who has some smarts to be president! I do agree that Trump is a troubled man. We do not need that. We need someone who knows how to be diplomatic and get along with others. TRUMP IS NOT IT!! Trump is not the common man... he is a billionaire. How that makes him a good representative is beyond me?????

[jp1]

How do you "hoard" money?

Most of the extremely wealthy people I know do not keep their wealth sitting around in piles of cash and coin under their mattress like Scrooge McDuck. They invest their capital on things that produce income, generally by providing goods, materials, services, and jobs.

And what is "money" anyways?....

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.

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.

[Lainey]

The thing that so many in the current .1% class don't seem to get is that simply hoarding money won't work. When there aren't enough people out there who can afford to buy crap the whole economy falls apart. Henry Ford understood this and paid his employees what was perceived to be an obscene wage at the time. Hindsight tells us how that worked out for him. Quite well. Rich people hoarding money doesn't work in the long run. Nobody mentions this too much anymore but 'consumption' is still 70-some percent of US GDP. If a smaller and smaller chunk of the population has enough money to actually consume anything then the economy eventually crashes and burns. WHen that happens the .1% may not become destitute but they will certainly get poorer. We may very well have to relearn that lesson at some point in the fairly near future.

I think the answer is in the article jp1 posted:

"We rich people have been falsely persuaded by our schooling and the affirmation of society, and have convinced ourselves, that we are the main job creators. It’s simply not true. There can never be enough super-rich Americans to power a great economy. I earn about 1,000 times the median American annually, but I don’t buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. I bought two pairs of the fancy wool pants I am wearing as I write, what my partner Mike calls my “manager pants.” I guess I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money away in savings, where it doesn’t do the country much good."

[iris lilies]

Lainey and jp,

Is there a moral imperitive for me to remove my money from financial imstruments and throw it at consumer crap I dont want just to keep the economy chugging along? I am not "super rich" but I am rich in assets, not in income.

Is it only the 1% earners that earns your ire? Would those in the upper 10% of assets qualify as holding the ecnomy down as well?

There are not smart alec questions, exactly but
I am nnot sure if Lainey is talking about everyone who holds back money in financial accounts because surely the large 10% of which I am a member would earn your ire. The "we rich people" guy talks about his incme, but yet switches to assets because he does not want to spend assets, he wants to invest them.

[jp1]

No. Just like the guy in the article you only need so many pants and cars and whatever. But if you're an employer and making a decent profit is it really the best plan to cut your employees salaries to the point that they don't have disposable income? Costco can somehow pay it's workers decent wages but Walmart can't and instead relies on government handouts to supplement their shitty treatment of their employees. Yet the Walton family are one of the richest families on the planet.

[jp1]

The economy today kind of reminds me of the prisoner's dilemma. In that delimma two people have been arrested for a crime. There's enough evidence to convict both and send them to prison for a year. However the investigators believe that there was a bigger crime committed but have no proof. They separate both prisoners to interrogate and offer them each the same deal. "We know there was more crime committed but if you confess we'll be lenient and only charge you with the one year offense. However, if the other guy also confesses we'll charge you both with the eight year crime." The best solution, from the criminal's perspective is if they both don't confess. Our economy is the same. The best thing would be if all the employers stopped the race to the absolute bottom (since we won't reach that bottom until the US standard of living is equal to the average of the entire world's) but that requires someone with enough clout, such as Walmart, to stop the race to the bottom. If they started paying Costco level wages and benefits they'd have a huge influx of quality workers applying for their jobs. That influx would potentially be big enough to force other, smaller employers to match those wages/benefits in order to retain their employees and it would be a win for everyone, at a relatively modest cost to most organization's bottom lines. And if that drove some smaller, less efficient, low margin businesses out of business that wouldn't necessarily be a lose to society at large, or the businesses that increased pay because those failed businesses would be replaced by more efficient competitors who figured out how to win on the new, higher wage, playing field.

[gimmethesimplelife]

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.

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.

Jp1, I thought of you recently as I read a British article stating that underwriters were extremely vulnerable to job loss due to automation, software, and technology in general. That spooked me a bit. Why? Some here may find this hard to believe but when I graduated college back in December 1990 I wanted to be an insurance underwriter trainee. I'm an introvert, I figured it was a good fit. It never happened, and now it seems that job is on it's way out. Just curious, do you have a Plan B? I'm sorry that tech is encroaching on your territory. Rob

[jp1]

Jp1, I thought of you recently as I read a British article stating that underwriters were extremely vulnerable to job loss due to automation, software, and technology in general. That spooked me a bit. Why? Some here may find this hard to believe but when I graduated college back in December 1990 I wanted to be an insurance underwriter trainee. I'm an introvert, I figured it was a good fit. It never happened, and now it seems that job is on it's way out. Just curious, do you have a Plan B? I'm sorry that tech is encroaching on your territory. Rob

Thank you for your concern. I work in a fairly specialized insurance, information security (think Target data breach). At this time it's a new enough field that I won't be automated out of a job any time soon. People who work on more mainstream insurance, like property of general liability, should be concerned. Those are the divisions where our 'field underwriters' are just glorified salespeople. The ones who are generally extroverted will probably do fine, but the rest... Plan B is retirement. Although I'm relatively young (your age) I'm roughly 2/3 of the way towards my retirement savings goal. My main concern, like so many people, is retirement health insurance prior to aging in to Medicare.

The scary thing is that there are SOOOO many jobs like mine that are vulnerable to automation and outsourcing. I wouldn't want to be 25 today and trying to figure out what career to be going into.

[Williamsmith]

In a broader sense, the Trump phenomenon is two pronged. Political incorrectness...which the media and establishment has held against him and de-industrialization which is generally the process by which we find ourselves in a stagnant economy. And de-industrialization I mean the loss of labor intensive jobs, the off shoring of jobs to lesser developed nations to take advantage of lower worker costs, the transfer of construction facilities to third world countries and so called free trade agreements which are nothing but smoke screens for government abuse of power.

Trump is is talking like he is against all this especially in the energy industry. He appears to be appealing to the working class union democrats and may entice a large percent of the union vote. I believe Trump is in a better position to win an election that nearly five months away in that Clinton has to hope the economy gets no worse, nothing happens on the terrorist front and no homeland security breeches occur. Any of this would assist Trump as a challenger to the status quo.

For me, never Hillary is enough. Period. I don't need to have a President whom I admire. I only need one to quit undermining our sovereignty, security and wealth. The debt is something that immediately threatens our country. Not climate change.

[jp1]

He appears to be appealing to the working class union democrats and may entice a large percent of the union vote.

If the election does actually play out this way then Hillary has no one to blame but Bubba. The democratic party abandoned their working class base 25 years ago and are entirely resistant to reclaiming them. After all they just don't have the bank accounts to drop $225,000 per speech on hundreds of speeches the way the neoliberal democrats on Wall Street do. I really really hope that it doesn't play out the way you predict because I think a lot of bad things and harm will come to a lot of people, but if it does, at least there will be one good to come out of it, in that the current democratic party leadership will be utterly and truly destroyed and sent to the dustbin of failed political party ideas. Right behind the failed republican party that a trump presidency would represent. Good riddance to them both.