If the current economic environment continues, will

[Jim_Kennedy]

Do Americans know how to make anything?

Sure, but there are a lot fewer of us doing it. In 1979 there were ca. 19.5 million (the largest number ever) manufacturing jobs in the USA, which was about 21% of the workforce. Another way to look at: there was one 1 manufacturing job available for every 11 persons in our total popuation.  In 2009 there were ca. 11.8 million jobs in that sector, a loss of 7.7 miliion jobs over that 30 span, and for the first time since 1941 the sector dipped below 9% of the worforce. Today there is only 1 manufacturing job available for every 26 persons in our population.

As an aside, the highest percentage of the US workforce in the sector was 38.75% (ca. 16.7m) in 1943, which stands to reason.  

  

[Chris Wirthwein]

Chris Wirthein....first of all I do neot buy for one minute the myth that lower tax rates lead to more jobs and more revenue. The past history of this country does not support that at all. Second...it is horseshit to claim the wealthy are the sole producers and job creators...last time I looked no rich man dug the gold from the mine....and no rich man took his tax cut and ran right out and created a job.

I am far from rich, but I have started a couple of pretty successful small businesses,  and THE ONLY time I created a job was when there was more demand for my service than I could handle myself.  As it has been pointed out, tax rates are at all time lows and have been for going down for over 30 years, yet we lost over 8 million jobs in the first decade of this century. Now, corporations in America are sitting on over two trillion dollars in cash, yet very few are creating jobs. Why is that? Taxes too high?

Craig - Unsurprisingly, you missed my point. I was making fun of you because you can't do simple math.

Oh, and should we believe the rest of the numbers you so casually bandy about? If I we happened to have a little match, I hope you'll forgive me for asking to add up your scores.

[David_Tepper]

Even the Fed is making record profits! 

http://finance.yahoo.com/news/Fed-pays-US-Treasury-record-apf-1400765043.html?x=0&sec=topStories&pos=main&asset=&ccode=

[Lou_Duran]

David T or anyone else who may know,

Can you explain to me how the Fed makes profits?

Bernanke on 60 Minutes stated that it was a myth that the Fed was printing money to fund QE2.  Does the Fed have a $Trillion stash?  If so, where did it come from?  If not, absent running the printing press, where does it get the money to inject into the economy by buying government bonds?  And if you know the accounting, the actual debits and credits, please explain it to me.   

[Jud_T]

http://www.fool.com/investing/general/2010/11/17/hilarious-video-explaining-qe2.aspx

[David_Tepper]

Lou Duran -

I can't say that I know how the Fed works. I posted that link as much in jest as anything else. Just trying to lighten the mood!

This link may be of some help: http://blogs.wsj.com/economics/2007/08/12/how-does-the-fed-inject-money-into-the-economy-a-primer/

DT

[Rob Bice]

David T or anyone else who may know,

Can you explain to me how the Fed makes profits?

Bernanke on 60 Minutes stated that it was a myth that the Fed was printing money to fund QE2.  Does the Fed have a $Trillion stash?  If so, where did it come from?  If not, absent running the printing press, where does it get the money to inject into the economy by buying government bonds?  And if you know the accounting, the actual debits and credits, please explain it to me.   

1.  Interest and principal appreciation of their owned securities

2.  My guess is Bernanke wasn't being completely truthful.  While technically not printing money, my guess is they take the bond and then credit the primary dealer's account with proceeds for that bond.  Where do they get the "money" to pay for the bond?  They just create it out of thin air.  Effectively like a printing press.

[David_Tepper]

Sean Arble -

This one's for you!

"Ford Plans To Hire 7,000 More Workers By 2012" (and yes, that will be in the U.S.)

http://finance.yahoo.com/news/Ford-plans-to-hire-7000-apf-4046494665.html?x=0

DT

[JC Jones]

http://www.fool.com/investing/general/2010/11/17/hilarious-video-explaining-qe2.aspx

The plumber is clearly smarter than the Ben Bernanke.

[Lou_Duran]

David T or anyone else who may know,

Can you explain to me how the Fed makes profits?

Bernanke on 60 Minutes stated that it was a myth that the Fed was printing money to fund QE2.  Does the Fed have a $Trillion stash?  If so, where did it come from?  If not, absent running the printing press, where does it get the money to inject into the economy by buying government bonds?  And if you know the accounting, the actual debits and credits, please explain it to me.  

1.  Interest and principal appreciation of their owned securities

2.  My guess is Bernanke wasn't being completely truthful.  While technically not printing money, my guess is they take the bond and then credit the primary dealer's account with proceeds for that bond.  Where do they get the "money" to pay for the bond?  They just create it out of thin air.  Effectively like a printing press.

Thanks Bob.  I have an idea of how the normal interaction of the Fed with the banking system and the financial markets works as described in the link provided above by David T.

What I still don't understand is how the Fed came to the portfolio and how the accounting works when it prints money.  Unless the member banks continuously capitalize the Fed, specially since it turns its "profits" over to the Treasury annually, I just don't understand how the portfolio keeps growing so dramatically particularly during such difficult economic times.  If the newly printed or digitized money is booked only as an asset without a corresponding charge to a liability account on its balance sheet, than the portfolio is little more than a illusory paper stash.  What is it that I am missing?

[David_Tepper]

Lou -

You will notice that the article on the Fed's "record profits" actually refers to the money the Fed is paying back to the Treasury as "earnings" and those "earning" are mostly derived from the interest income the Fed collected on the government bonds it was holding. I would be (very pleasantly) surprised if the trading desk of the Fed actually booked capital gains (buying bonds at one price and selling them at a higher price) from their activities.    

Interesting article from the "trenches" of the Fed's bond trading desk:

http://www.nytimes.com/2011/01/11/business/economy/11fed.html?_r=1&hp

DT

[David_Tepper]

Lou Duran -

One more thing: Paul McCulley of PIMCO is one of the more literate commentators on the Fed and its' policies. Even though he recently retired from "active duty" at PIMCO, you can still access many of the commentaries he has written over the past year. Here is a link to the website:

http://www.pimco.com/Pages/InsightsOverview.aspx?pa=Paul%20A.%20McCulley

DT

[Mike Sweeney]

What I still don't understand is how the Fed came to the portfolio and how the accounting works when it prints money.  Unless the member banks continuously capitalize the Fed, specially since it turns its "profits" over to the Treasury annually, I just don't understand how the portfolio keeps growing so dramatically particularly during such difficult economic times.  If the newly printed or digitized money is booked only as an asset without a corresponding charge to a liability account on its balance sheet, than the portfolio is little more than a illusory paper stash.  What is it that I am missing?

Lou,

You are not missing anything. As you know, we left the Gold Standard years ago. http://en.wikipedia.org/wiki/Gold_standard

You won't like this answer, but we are basically trusting The Fed to create the "right amount" of money in the era of money supply. Interest rates and the value of the US$ is a function of a sales pitch by Uncle Sam to investors aka China. The NY Times diagram outlines the risk associated with this policy:

[JC Jones]

One item missing from the diagram is the collapse of the bond market.  Always a win-win....

[Jud_T]

Uh,

Guys, don't know if you've noticed.  But at least thus far, QE2 is working nicely....

[Rob Bice]

David T or anyone else who may know,

Can you explain to me how the Fed makes profits?

Bernanke on 60 Minutes stated that it was a myth that the Fed was printing money to fund QE2.  Does the Fed have a $Trillion stash?  If so, where did it come from?  If not, absent running the printing press, where does it get the money to inject into the economy by buying government bonds?  And if you know the accounting, the actual debits and credits, please explain it to me.  

1.  Interest and principal appreciation of their owned securities

2.  My guess is Bernanke wasn't being completely truthful.  While technically not printing money, my guess is they take the bond and then credit the primary dealer's account with proceeds for that bond.  Where do they get the "money" to pay for the bond?  They just create it out of thin air.  Effectively like a printing press.

Thanks Bob.  I have an idea of how the normal interaction of the Fed with the banking system and the financial markets works as described in the link provided above by David T.

What I still don't understand is how the Fed came to the portfolio and how the accounting works when it prints money.  Unless the member banks continuously capitalize the Fed, specially since it turns its "profits" over to the Treasury annually, I just don't understand how the portfolio keeps growing so dramatically particularly during such difficult economic times.  If the newly printed or digitized money is booked only as an asset without a corresponding charge to a liability account on its balance sheet, than the portfolio is little more than a illusory paper stash.  What is it that I am missing?

You're not missing anything unfortunately.  This is how the Fed has always done it although it has been more "contained" in the past because the Fed was primarily targeting the fed funds rate.  Relatively small interventions to move the fed funds 25 bps, 50 bps, 75 bps, etc.  With fed funds effectively zero and money velocity depressed the fed is ramping everything to a different level.

Think of the fed as a repo desk with an unlimited supply of zero cost capital.  The world of a fiat currency.

[Lou_Duran]

Thanks guys.  I sort of suspected that this was the case, but I was hoping that "The Bernank" was rising above political convenience with his "it is a myth that we're printing money to fund QE2" (paraphrased) statement on 60 Minutes.  My second and third mistakes were thinking that the show's audience was a little more sophisticated, and that if it was a droll "depending on what the meaning of the word 'is' is" assertion, that the press might have called him on it.

Jud- it is a rather common, natural occurence that when the shit hits the fan, it will eventually run out of the foul stuff and start blowing cleaner air.  During Medieval times, bleeding very sick patients was common, no doubt because the best medical minds of that time knew no better and some patients survived despite the abuse.  Might the current improvements you perceive have more to do with this than the Fed's printing more money out of thin air?

This thread and others of its type have helped me crystallize something that I learned through the school of hard knocks.  Investing in a declining industry such as golf is for the brave of heart.  I now understand why management companies are happy to earn a fee, but shy away from long term leases or outright purchase of a course even in an upscale market at 30-40% or replacement cost.  As much as we laud and appreciate the work of golf course architects on this site, we may come to accord the same respect to the surperintendent, general manager, and cost accountant in the future.

[Sean_A]

This thread and others of its type have helped me crystallize something that I learned through the school of hard knocks.  Investing in a declining industry such as golf is for the brave of heart.

Lou

You got that right.  To make money in a declining industry such as automobile manufacturing you have to have four key characteristics; intelligence, a penchant for high risk, experience and luck.  Unfortunately, I can only say I am as lucky as the next guy.  I fall woefully short in two categories, but thankfully had enough experience to recognize my serious shortcomings and get out at the last minute while the getting was good.  If making money in manufacturing is that hard I can't see how anybody is gonna convince many Americans with money, intelligence and a hearty appetite for risk to get into the business.  Why bother when bankers get a free pass?

Ciao 

[Bill_McBride]

How about making the best product that your mates simply can't live without? Look at Apple.  Last I heard that was still an American company...

Sure, but where are the iPhone and iPad made?

[Jud_T]

How about making the best product that your mates simply can't live without? Look at Apple.  Last I heard that was still an American company...

Sure, but where are the iPhone and iPad made?

Well, I guess in Sean's world, they'd have to be made here and sold for a higher price, apparently only to Americans.....

[Craig Van Egmond]

More optimism...

http://www.theregister.co.uk/2011/01/11/ces_ceo_confab/

[Patrick_Mucci]

Chris Wirthein....first of all I do neot buy for one minute the myth that lower tax rates lead to more jobs and more revenue. The past history of this country does not support that at all.


Craig, I'll ask you a simple question.
As a business owner would you be more prone to hire additional employees if you:

1.  had a $ 250,000 profit on operations.
2.  Broke even on operations
3.  Lost $ 250,000 on operations

If lower taxes improved your bottom line and took you from a break even to a profit, would you be more inclined to hire, versus breaking even ?

Second...it is horseshit to claim the wealthy are the sole producers and job creators...last time I looked no rich man dug the gold from the mine....and no rich man took his tax cut and ran right out and created a job.

Neither of those statements is true and both show a lack of understanding with respect to the reality of business.

There's a fellow I know who started as a delivery boy after high school, he was successful at delivery, so he began a business with its foundation in deliveries, then he started delivering beer, then he started a brewery, making and distributing beer, then he branched out to making and distributing other beverages, then, he started manufacturing and distributing iced tea, then he branched out into other businesses, furniture, decorating, etc., etc.   Along the way, he performed almost every duty immaginable.  He became rich.
Perhaps you've heard of Arizona Iced Tea, one of his companies.

I know guys who became rich who started with a push cart in New York City.
Others who began as carpenters, ditch diggers, electricians, tailors, dress makers, blouse makers, car salesman, candy store owners.
People who came here with nothing, people who came here with nothing but the tattoo number on their arm, their families having been killed in Europe
They started from nothing, many with NO formal education, they worked at every job imaginable.
They survived the great depression, WWII and became rich.
And, you resent their success.  You resent the The product of their hard work.  WHY ?

Another fellow I know entered a business started by his uncle and father.
They had him digging ditches, lugging material, then he went to work in the equipment yard.  Then he poured concrete, he worked in estimating, became a supervisor, negotiated contracts, eventually he worked at every manual labor job in the company.
Eventually, he became an executve, eventually, he became VP, then President.  He knows his business backwards and forwards because he worked at every job there was.  And today, he's rich.

So stop your absurd attacks on people you think are rich because they hit the lottery.
It doesn't work that way.
Hard work and smarts are why many people achieved success.  Some got lucky too.

Most successful businesses started as family businesses, including GM
Most businesses were started by poor or middle class people pursuing the American dream.
People who fled Europe and Asia for varying reasons.
Through hard work and smarts they became successful, and, they knew their businesses inside out because they had to be "jacks of all trades' in the early years.

I could go on and on about people who started with nothing who became rich.

Why do you resent them ?

Are they not entitled to the rewards of their efforts ?

I am far from rich, but I have started a couple of pretty successful small businesses,  and THE ONLY time I created a job was when there was more demand for my service than I could handle myself. 

Perhaps that's because you chose to be in a service business, rather than a manufacturing business.

As it has been pointed out, tax rates are at all time lows and have been for going down for over 30 years, yet we lost over 8 million jobs in the first decade of this century.


You're either misinformed or lying.
America's corporate tax rates are the second highest in the world

Now, corporations in America are sitting on over two trillion dollars in cash, yet very few are creating jobs. Why is that? Taxes too high?

Again, you're wrong.
Some public corporations are sitting on cash, and you know why.
It's called uncertainty.
NO ONE, repeat, NO ONE has any confidence in Washington, DC.
The environment is so anti-business.
There's NO stability.  So why would you spend your hard earned cash.
I'm also sure that you know that these corporations have already paid their taxes on that cash

So, I'll ask you again, if you were a CEO of a company sitting on cash, would you expand your business today ?
Would you invest in capital improvements ?
Would you HIRE people even though there's NOTHING for them to do once you hire them ?

What happened to all the money that was supposed to go to infrastructure ?

Sadly, America is on the decline and it's mostly because governments, looked upon business as adversaries, and we lost our connection ot our Pre-WW II European work ethic, disciplines and values 

End of rant 

[Craig Sweet]

Jud...Apple enjoys huge margins on their iPod and iPads...above 40%....so do not be so quick to say they would have to charge more if manufactured in the USA...

Pat....again...tax credits and tax cuts will not create jobs...period!  I am not going to hire people simply because I had a profit due to a tax cut. Demand is the driving force behind hiring...tax cuts will not provide more jobs ESPECIALLY in this current economy where demand is slow and in many cases there is EXCESS inventory.

Pat...I subscribe to the theory that the business owner gets wealthy on the backs of those who labor for him.  Thus, no owner of tthe mine is digging out that gold and putting his life on the line to do it...yet the fruits of that labor go to the owner disporportionedly.

Pat...the people that manufacture the products I sell are not manking any of those products if I am not selling them...and I will not sell them unless the demand is there...when I started my first nursery/landscape business it was just me the first year. The second year it was me and one other person...third year it was me and four employees....fourth year it was me and five employees....if the demand had not been there for my services, it would have been me and only me....a tax cut would have gone right in my pocket..and that is what has happened over the past eight years...the wealthy are not spending their tax cuts...and they are sizeable...on hirinig people.

Pat...no Pat, it is you that is misinformed regarding tax rates and what is actually paid in taxes...I recall you arguing a couple of years ago that when the marginal tax rate was 90% back in the 50's and early 60's that no one actually paid those rates...same is true now...whether we are talking corporate or individual tax rates.

Pat...I do not care why corporate America is sitting on trillions of dollars....the point is...giving them even more cash via tax cuts....will not mean they will run out and create jobs.  Right now, that money would be better spent retraining the workforce, supporting state education budgets, and providing unemployement benefits for the unemployed.

[JMEvensky]

Pat...I subscribe to the theory that the business owner gets wealthy on the backs of those who labor for him.  Thus, no owner of tthe mine is digging out that gold and putting his life on the line to do it...yet the fruits of that labor go to the owner disporportionedly.

I had to call a friend who grew up in Bulgaria and read this line to her.She assumed the author must be American because nobody who grew up in the Soviet Bloc would really believe it.

Are you and the other serfs planning to overthrow the Tsar?

[Mike_Young]

Pat...I subscribe to the theory that the business owner gets wealthy on the backs of those who labor for him.  Thus, no owner of tthe mine is digging out that gold and putting his life on the line to do it...yet the fruits of that labor go to the owner disporportionedly.

I had to call a friend who grew up in Bulgaria and read this line to her.She assumed the author must be American because nobody who grew up in the Soviet Bloc would really believe it.

Are you and the other serfs planning to overthrow the Tsar?

Craig,
Make sure all the tour caddies hear the above...ok....Tiger should be splitting them $$$ with Stevie right down the middle....he's doing all the back breaking work...