Predicting where the Bain capital charges against Romney will lead...

[johnsobas]

richardhutnik said:

johnsobas said:
This is not an argument of substance, just a political argument trying to pull the strings of people that don't understand the economy. I don't like Romney at all, and will not vote for him but companies like Bain are necessary and can help the economy. If they don't have a record of helping, then they won't be hired, that's how the free market works. The economy is built on finding the most efficient way to assign capital and labor. If a company is not making money, then it's not an efficient use of capital and labor could be used more efficiently elsewhere. Yes that means many people will lose jobs, but if the capital and labor is assigned more efficiently elsewhere then it is a net positive for jobs.

And this will be part of the focus.  However, what is going to happen, if more and more Americans can't find work, and there is a push for less and less government involvement, is your line of reasoning is going to end up causing people to question free markets and capitalism itself.  If you say, "Well the free market did the best it could", and then suddenly a lot of people are losing ground, they will revolt against it.

And there is no guarantee that a market will most effectively allocate resources either or capital.  Individuals driven strictly by optimizing their own benefits, and maximizing profits for themselves, can end up not seeing long-term, and end up having things not as optimal as they can be.  A lack of any semblance of coordinating makes one worse off than coordinating.  Nash's Equilibrium goes to this, in that, individuals not factoring what other sellers in a market will do, based upon them strictly thinking in terms of maximizing their own profits, will result in a sub-optimal allocation of resources in an economy:

http://en.wikipedia.org/wiki/Nash_equilibrium

Beyond this, there is no guarantee either that we aren't facing a systemic issue of perpetual high unemployment.  Companies who decide to lay off for profits end up undercutting demand in the economy and causing economy to slow down.  Wall Street now reacts negative whenever unemployment numbers come out not good.   This is because demand has gotten to be sluggish.  Businesses are also sitting on large amounts of cash and not hiring as they possibly could.  This is because they don't see where there future demand is in place.  And the laid off labor, in the United States is facing jobs that are paying less than they used to.  Say maybe 20-30% are doing better, but the rest are doing worse.

Markets can theoretically end up working optimally, but lots can throw them off, including systemic corruption and fraud, as is being witnessed now.

Thing now is, where will labor get allocated to?  No one knows at this point.  And as far as Romney's company helping the economy.  Well, he did help himself.  In regards to him doing job creation, which is what he would use Bain for, Bain didn't even keep records on this, so no one can figure out for sure how many jobs Romney helped to create.  Job creation wasn't important to Bain.

the idea that there is anything close to free market capitalism right now in America is ridiculous.  None of this would have been allowed to happen in free market capitalism.  Government and the fed literally control the entire economy.  All markets care about anymore is fed policy and how that will effect future stock market prices.  If people didn't expect future fed intervention we would see a collapse right now.  If the fed didn't intervene we would have deflation and interest rates around 7% at this point.  The markets have been punished over and over again for selling by the fed, and they don't even bother anymore.  They just know that the fed won't even allow it to go below a certain point anymore.  This doesn't mean it is a good thing, it just means the correction in the future is getting bigger and bigger.

 

As far as Bain goes, the idea that you could ever calculate how getting rid of a job and selling capital in one area translates into another is just impossible.  People who create jobs don't create jobs because they want to, they create them in search of profits for themselves.  If people can't see long term, then they will be punished in the future, that's the whole point.  If you aren't smart enough to allocate capital wisely, then you lose money.  There is not a more efficient way to do it.  Government sure as hell isn't gonna do it efficiently in almost all sectors.  The whole point is that if Bain has no success, they wouldn't be hired in the first place.  If these jobs were productive jobs, Bain wouldn't have been called in the first place.  Companies getting broken up that aren't productive is necessary, and it frees up capital and labor to be used elsewhere.  That's the economy at it's most basic level.