Help me out here. Need links for How America Lost its Job.

You have been told that America lost its jobs because of Unions, and Regulation made it too expensive to manufacture in America. Well, this is not actually why or how it went down. You see there are many pieces to this puzzle, and I will try to show them to you and help you connect the dots.
We have allowed Wall Street to buy laws which make it very profitable to buy out US manufacturing and Tech companies, move the manufacturing operations overseas and liquidate US operations. I have actually lived this up close and personal.

And this is how they do it.
• Most Companies raised money by selling stock. They have been doing this for hundreds of years.

o The way that most stock is/was issued, whoever controls the most shares, controls the company. Stock issuing companies really did not know what they were in for.

• We have a stock exchange with rules and people that are charged with “Making the Market” (liquid) which means that they stand ready to buy stock when there is no other buyer and sell when there is no other seller. These people were called “Market Makers”, and because they buy stock when there is no other buyer and sell when there is no other seller, which is often not an advantageous position, they have special privileges. They trade at a 30 to 1 margin, and they have 14 days to settle a trade, not 3, AND they are also allowed to sell stock that does not exist, and find it later. And it used to be that if they did not find it, they just filed a report with the SEC saying that they failed to deliver. (so in effect they pocketed the money for stock that never existed, they just had to pay dividends as if it did.)

o “Market Maker” can use their privileges to drive the stock of a company up or down, because people find stock that goes up day after day attractive, and will sell a stock that is going down.
o Everyone “buys (or sells) on the rumor” and the first thing that they think when a large down move happens is that something has happened within the company that they don’t know about but the “smart money does”.

o So Market Makers could create stock price movement that has nothing to do with the soundness of the company or its management practices.

• But capital gains taxes used to take a BIG bite out to short term trading profits. Short Term Capital gains were taxed at 50%. (Capitol Gains Taxes were cut by both Clinton and Bush and are now taxed at 15%).

• Now. The Securities and Exchange Commission changed its rules around 1980 to allow third parties attempting to buy out a company to do so with a loan against the asset value of the company itself.

This rule change resulted in many companies being targets of “hostile takeovers”, especially if they were well run, had a strong cash flow, a strong order book and very little debt, other than the outstanding stock and ample operating capital or “retained earnings”.

• At the same time, CAFTA was passed and China gained “Most favored Nation” status. China has a tariff (value added tax) on manufactured goods coming from the US into China of 17%. But the Chinese offered US companies that wanted to sell to China a deal. Partner with a govt owned Chinese company, bring the IP (instructions for making the product), the brand name and order book to China, and China would make all the capital investment required to make the product. The Chinese company would then build the factory, train the workers and pay the US owner of the brand 47% of the profits from exporting to 3rd countries.

So instead of just letting Wall Street profit from bouncing the stock price of companies up and down, it made it EXTREMELY profitable for Wall Street to use Market Maker Leverage and the long settlement time (over and over) to pyramid a million in to the sum buy enough stock to make getting a loan for a tender offer possible, take over the company, make the company take over the loan used to acquire it, strip the company, and ship the jobs to China. The buyout firm is then able to liquidate US operations, pocket the money and still get a steady income stream from the Chinese manufactured products being products being sold, as long as they can find customers with money to buy.

• To bring back American well paid Manufacturing Jobs, which is necessary if we are going to have robust continued technological development, we need to do the following things.

• Protect manufacturing and technology companies from hostile takeovers, unless a majority of the employees vote otherwise.

• Apply the same value added tax to goods from a country that it applies to ours.

  • Return the Short Term Capitol Gains Tax to 50% to dissuade churning.

This Matt Taibbi article explains the takeover part.
http://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-...

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mhagle's picture

And Mit Romney was in the middle of all these shenanigans . . . . along with so many others. I had read an article somewhere about how they used borrowed money to buy the companies and then dumped the debt on the companies they bought.

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Marilyn

"Make dirt, not war." eyo

Oldest Son Of A Sailor's picture

The stocks that were in your 401K that you held in bankrupted companies long after the "Vultures" sold theirs at a profit with you buying additional stocks in the "Pump & Dump."

Ain't it wonderful the 47% though Mittens would make a great president?

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"Do you realize the responsibility I carry?
I'm the only person standing between Richard Nixon and the White House."

~John F. Kennedy~
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GreyWolf's picture

That is the key sentence in your essay as far as I am concerned.

In Germany the business law of the country requires, automatically and at all times, that half of the Board of Director's seats be allocated to representative employees. Despite the recent VW debacle, the law, the viewpoint, the state of mind, creates a stronger society, and a stronger economy. (Alienation of labor is, to paraphrase Marx, bad for humans.)

Employee owned is powerful. Employee owned companies have higher productivity, are more profitable, last longer than absentee-investor owned companies, pollute less, has higher worker morale, etc, etc. I wrote an essay about Employee-Ownership a while ago: “A Better Way of Doing Business”. (Poke around the site, especially the older articles from when I still cared/had hope.)

A recent essay I ran across also forges ahead and maps some of the ground of where we need to go, and I would highly recommend reading it; What might a cooperative economy look like?

Creating an Employee-owned/cooperative economy is not sexy, and doesn't get many clicks, but is linked to everything else. I have supported Bernie because of his support of the cooperative economy (based on his understanding that all other problems, from poverty, to police violence, to the environment, are linked to money, and the power money exerts over all systems.

Just to finish up, an article that kinda sums up that we are pawns and the 1% own us, and are extracting the value and soul of the world, is; More Confessions of an Economic Hit Man: This Time, They’re Coming for Your Democracy

Democracy-at-work is key! And the laws of the US are basically "incorporation is a shield" (against criminal behavior, externalize costs onto society etc.). Bernie understands this, and supports cooperatives and holding investor-owned corporations accountable for the costs they burden society with. I am amazed he has gone as far as he has working with the same basic unsexy thoughts, but he is very tenacious, adept, and honest, and is managing to tie everything together ...

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Prior to this, the Interstate Commerce Commission (with the backing of the Supreme Court) outlawed rate differentials when railroads transported goods for different customers. This meant that as common carriers, railroads were required to treat cars carrying products from/to small manufacturers on an equal footing with cars carrying products from/to large manufacturers. Yes, deregulation helped the railroads when they were going through a difficult time, but at the price of hurting smaller manufacturers in smaller towns around the country.

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Pariah Dog's picture

Wow. The Taibbi article was like a memory walk down every street in hell. It describes in detail why I hated the eighties and St. Rayguns - who crowed about these deals like a proud Papa.

The MSM too raved on and on about LBOs, hostile takeovers, predator's balls, and mega-mergers in that way that they have of standing slack-jawed in the presence of money. And all the while nobody but us noticed that we were all getting screwed.

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Meddle not in the affairs of Dragons - For thou art crunchy and good with ketchup