Wednesday, August 25, 2010
The Next (Minor) Phase of the Macropocalypse
Corporate cash hoards + lack of demand =
M&A wave = consolidation = "efficiencies" + "synergies" + cost-cuts (ie, negative investment).
= more layoffs.
= a lack of demand.
This is another negative accelerator, another downward spiral. It's not the wage-price spiral - call it, instead, the consolidation-cost-cutting spiral.
When it kicks off, the ensuing lack of demand and underinvestment is going to make today look like a walk in the park.
See what really happens in the equations above?
Firms spend their cash hoards in acquisitions. The cash (equity, converts, whatever) goes to the shareholders of the acquired firms (ie, your retirement account). Yet, that's exactly what feeds the deflationary cycle.
You should also see this as a the first wave in a great shakeout, a great winnowing - that will slash and tear jaggedly through industrial age incumbents, and leave them shocked, stunned, and...dead.
Hey Umair, glad to see you posting on Bubblegen again.
Did you see this?James Gosling's extended comments on the Oracle-Google lawsuit
It's not so much that the game favors evil, but that the definition of "good" is really twisted:
Good adj: anything which increases the stock price.
Considerations about employees, products, customers and community are all secondary. They only enter the equation as ways to achieve goal 1. Morality or high principles have no place in the corporate discourse. They maximize the stock price, within the bounds of the law. Corporations like Oracle and Exxon tend to be perfectly rational. They "buy laws" because it's perfectly legal to spend money on lobbyists and political campaigns. While you and I might think that it is morally reprehensible to buy elections, like the recent case with Target, it is nonetheless totally legal. Given the rules of the game, it would be bad for a corporation to not buy an election, if failing to do so would negatively impact their stock price. I could rant for a long time on this one, but not today… The whole modern concept of a public company is deeply flawed. But the game is what it is.