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American Industry: We Are the Cavalry
It's up to the private sector to save itself: government solutions have only failed.
This is an open letter to America’s managers, executives, and investors.
If America is going to come out of this crisis, it’s going to be up to us to make it happen. The cavalry is not going to ride in at the end of the movie to save us.
We are the cavalry.
It’s critical to understand the situation we are in. We are not in a recession, economic slowdown, demand slump, or any of those other phrases used to describe the normal variations of the business cycle. We are in a full-blown financial and economic collapse brought about by years of public mismanagement.
There is a political narrative being advanced that the current financial crisis was caused by deregulation. In fact, the opposite is true.
Congress actively encouraged the origination and securitization of subprime loans, and it is to no one’s surprise that the most regulated entities in the system — the FDIC-insured banks, the investment banks, and Freddie Mac and Fannie Mae — ended up holding this worthless paper, going under, and getting bailed out.
Then we were told by the same Congress that created the problem, and then failed to act as it worsened, that the remedy for a massive misallocation of trillions of dollars of wealth is to spend trillions more to bail out the guilty. The public recoiled and responded with protests in 100 cities. Still, the bill passed within two weeks, supported by the presidential nominees of both parties.
Upon taking office, the new president promised to make economic recovery his top priority and announced one more stimulus, the largest yet, that would create or save three to five million jobs by directing funds into shovel-ready projects. Four months later, less than six percent of the funds have been spent, two million more jobs have been lost, and the vice president charged with overseeing this fiscal outlay has only the lame excuse that “everyone guessed wrong.”
Still, more fools are asked to suffer gladly.
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Tristan Yates is a management and investment analyst and the author of Enhanced Indexing Strategies. His articles and research have appeared in the Wall Street Journal, Yahoo! Finance, and many other publications.
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21 Comments
1. WhyamInotsurprised?:Good start Tristan. I look forward to your seven ideas on what might be possible because right now I am not optimistic. I see businesses having no choice but to move to more favorable environments and seek broader global markets while Americans will have to pay more for everything, including the importation of what used to be “Made in the US” products. Taxes, fixed and variable costs will rise significantly, and investment incentives will have the screws turned to make it prohibitive to hire and expand business.
I see everything being put in place to shrink business because Americans are just too damn rich (per our Fearless Reader of a President). We are too rich, have been spoiled and used up an inordinant amount of the world’s resources and therefore we must be punished. Well, the dark ages are coming and even though Barry and his cabal think they will be immune to the caustic business environment they are creating, they will be like the “Looters” in Atlas Shrugged by Ayn Rand, crying and wailing for businesses to return and “do their duty” and provide goods and services because the public is owed a living.
And that is only the domestic picture. What will be worse internationally is the rise of new wars, and I fear, the waste of 4,500 troop deaths in Iraq as our investment their is allowed to atrophy and fail because Barry was always against the war.
Jul 2, 2009 - 2:17 am 2. RE:“We are the cavalry.”
Really? The way the calvary ran away to China such that one hardly ever sees ‘Made in USA’ anymore makes me think they’re a bigger part of America’s problem than they are willing to admit.
Rather than fight, they ran. Now kids that could have a future in skilled trades can look forward working retail – for as long as those crappy jobs last, anyways.
Jul 2, 2009 - 2:44 am 3. vivo:“This is an open letter to America’s managers, executives, and investors”:
Stop blaming others for your crises. Use your knowledge, intelligence, creativity and energy to find solutions.
“It’s not the strongest species that survive, nor the most intelligent, but the ones most responsive to change”. Darwin
Jul 2, 2009 - 4:31 am 4. Old Soldier:Sorry, I’m not charging into Little Bighorn. I’m going hunker down and wait until a majority of people re-learn the value of capitalism.
RE: You try manufacturing something here – OSHA, the EPA, IRS, and a dozen other government agencies will come knocking on your door to interfere with your business and make sure you can’t compete.
Jul 2, 2009 - 4:49 am 5. "progressive"watch:Great idea,except big business supports a lot of the Obama bad ideas.
We need to get rid of Barney Frank. He not only raped Fannie Mae,he also raped Freddie Mac.
Jul 2, 2009 - 5:16 am 6. Mongoose:RE: Well if you had to face the onerous cost of running manufacturing business here in the USA, you would go elsewhere too. Where were the rest of us when they elected all these creeps, passed all these laws? It is a two way street. Wait until they go after overseas taxation.
These firms will not even be US firms then.
Seriously, if we do not pull back all this regulation and taxation, and roll it back, we are never going to see things like they were. Look at what the Socialists did in the UK and the rest of the EU.
There is now no way around a political solution to this mess.
And what about regulation? They made a fuss about regulation on Wall St.
Jul 2, 2009 - 5:48 am 7. DaveinPhoenix:The small electronics company I work for is actually bringing back to America some of the jobs which were outsourced in earlier years – mostly due to the high cost and shoddy workmanship done overseas in Japan, Indonesia, Thailand, and Korea. There IS hope folks…….
Jul 2, 2009 - 5:54 am 8. RE:Short term thinking has led to this ‘cavalry’ performing more like ‘F Troop’ for America than ever saving the day.
Sorry, I couldn’t resist.
The MBA widget thinkers that were unleashed on American industry have not done it any favors.
Think Scott Adams and ‘Dilbert’.
But Mr Yates is correct. The private sector needs to rally to save itself and the rest of the country. I hope it gets it’s act together sufficiently to do so. I have my doubts.
Jul 2, 2009 - 6:25 am 9. Harry Schell:Well, yes, we are the cavalry, for government has nothing it doesn’t take from the private sector. Nothing. That is why states are broke, and areas where government is the strongest may have lower unemployment but that happens only as long as the unions can force tax increases.
The flip side is when, as in CA, government really would prefer you take your grotty little business elsewhere, and tax and regulate to make that happen. A friend runs a paint manufacturing operation in the Central Valley, not one of your high smog areas. He proposed to the air quality folks some process and equipment changes to improve efficiency and worker protection.
He was told it was a great plan but if his permits were changed his factory output would be halved. Why? Those are the new rules for allowable output of VOC’s. So I do nothing and I can keep going? Well, yes, we can’t shut you down under the law, yet. No way to stay in business at that production level, I have to shut down, fire all my workers. Well, that isn’t our problem, we are protecting the environment.
He threw his proposal in the trash, is making a plan to sell or move from CA, taking his financial and intellectual capital with him.
That trend is increasing and, God willing, we are not that far behind him.
Jul 2, 2009 - 6:50 am 10. uburoisc:The solution is to save your own skin and protect your own family and friends; short the market and make money off the system before it goes down hard. You’ll need that money to weather the crash that’s coming our way. If it gets bad enough that the shotguns come out, then all bets are off. Private industry cannot save a system that is so corrupt and filled with scoundrels and parasites that it would only kill anything healthy that came into view. Mr. Yates is spot on in his analysis, but I do not share his optimism that there are enough decent people left in the private sector to right the ship; this thing has to sink and drown most of the rats before health can return.
Jul 2, 2009 - 7:17 am 11. RE:Old Sodier and Mongoose,
I’m very sympathetic to the small and mid-size manufacturing businessman. It’s a very hostile environment out there.
It’s clearly big business that has sold the country out more than any other.
But that is no excuse for avoiding the question “How did we let this happen?” and how our own sins – be they sins of commission or sins of ommission – played a contributing factor. We cannot afford to repeat those mistakes.
Jul 2, 2009 - 7:37 am 12. Old Soldier:How did we let this happen? – I thought it was obvious – we pay people (Congress and the various state legislatures) to pass laws and regulations. So we have far too many laws.
Nobody gets paid to overturn outdated laws or bad regulations. We need a third body in Congress that does nothing except overturn laws.
Big business loves big government. Big businesses can afford to comply with SOX, and OSHA, the IRS, etc… Those pesky entrepreneurs who threaten big business profits can’t. Big businesses can afford to buy their own Senators from both parties for protection – small businesses can’t. Big Business didn’t sell you out – they bought you from Congress.
When government is constrained, big businesses are left unprotected from innovative small businesses. Look what Bill Gates did to IBM in the 80’s. Rapidly growing small businesses create jobs and create wealth. Static big business does relatively little of either.
Jul 2, 2009 - 8:36 am 13. AThinkingPerson:Just like the Democratic party to blame “big” business for the trouble we are currently in. Surely it can’t be their fault for ordering mortgages be given out to every ACORN voter with their hand out right? No. Let’s blame the job creators! They’re the big problem here. Better yet, let’s tax the hell out of them and then drag them through the mud when they take their business elsewhere.
Is there ANY democratic elected offical who’s ever held a real job besides lawyer or “organizer”? Anyone?
Jul 2, 2009 - 8:38 am 14. AThinkingPerson:Oh wait… I forgot there IS a democrat elected offical who has held a real job…
Al Franken! He was a comedian before becoming an official Democrat elected person. Quality. That’s what the liberals have always offered the country. Quality.
Jul 2, 2009 - 8:40 am 15. Blarty Blarckleblart:If the “cavalry” does as good a job getting us out of this mess as they did recklessly getting us into it, we’re saved!
Jul 2, 2009 - 9:05 am 16. Professor Guvinoff:I have run a small business for 20 years in my days, and I’m proud for the jobs I created, and what I produced, and exported.
The freedom of entreprise has always been the engine of America’s greatness. So-called “small” businesses are in fact central to the “big” picture. Under the right operating rules, (mostly about taxes), small business are very nimble in the creation of new jobs making up for the job losses from big corporations finding themselves in a bad corner.
When you create and run a business, you become the custodian of a small slice of the national economy, and in this way your personal success is tied to the national success, as a two-way street. This is the total opposite of the mental frame of victimhood which the big spenders are trying to push you into for their own aggrandizment.
Keep in mind that, in human history, tyranny is the rule and freedom is the exception, and the historic exception is America as originally conceived. Don’t let the governement that was created for the people by the people into a parasite on the people for the elite.
Join your local tea party! Get your copy of the declaration of independence and the US constitution, the best tiny book (just about the size of your passport) anyone can get for 5 bucks! Make your voice heard by those who are supposed to represent you, but won’t if you do not keep the fire under their feet.
Jul 2, 2009 - 11:01 am 17. Roderick Reilly:We may need “Guerrilla Capitalism” operating in tandem with the underground economy. America may become two nations economically.
Jul 2, 2009 - 1:51 pm 18. M. Report:_IF_ there is a solution that does not include
Jul 2, 2009 - 9:37 pm 19. Dr. Fred in PA:learning Chinese, with special emphasis on the
Inferior to Superior mode, it is a bottom-up,
start-up, hi-tech, manufacturing economy,
political action, company town model.
The Feds will oppose any such initiative with
all their power, hence it will be necessary to wait
until that power has been reduced by at least one
major catastrophe, and then try to become profitable
before the final crash.
a good example is the IEC Fusion powerplant market;
Quietly invest in support technologies, and do a
break-out when the design parameters come out of
the prototype experimental results.
Oh, yes, be sure to market to the rich; The poor
won’t have any money.
The productive people in this country should tell Obama, Congress and the moochers and looters that voted for them to go to hell. Put them all on notice that there will be NO wealth creation as long as this statist crap continues, that there will be NO new jobs and there will therefore be NO significant tax revenue for their stupid schemes. Taking any risks in this climate is just stupid.
Jul 4, 2009 - 8:51 pm 20. Buckaroo Banzai:Galt them. (Yes, it’s now a verb.)
Your picture appears to be Mounted Infantry not Cavalry, they are deferent you know, maybe not.
Happy Trails!
Jul 5, 2009 - 9:33 pm 21. vivo:Buckaroo Banzai
14. AThinkingPerson:
“Quality. That’s what the liberals have always offered the country. Quality.”
I could not pass showing this again.
And remember, some of the regulations are aimed at improving product quality and human safety. The world is filled with unscrupulous manufacturers and merchants.
Jul 6, 2009 - 12:45 am