Monday, January 26, 2009

Over 50k Jobs Cut and Citi Buys a New Jet

I know people are upset but for some reason the market has spent most of the day in positive territory. I guess investors like the fact that corporations are implementing cost cutting measures. So how come a bank that is receiving TARP money went out and purchased a new jet?

I am not going to jump all over the CEO's for laying off people. Ultimately their responsibility is to the shareholders. Shareholders invest because they want to see a certain rate of return on their investment. CEO's in order to continue to attract investors and generate new capital must put up numbers that show growth. If revenue slows down then they are going to cut costs in order to show profitability or smaller loss. Are layoffs the easiest way to cut costs well it depends. Only the insiders of those companies really know but I'm one to hold the executives to the fire first instead of employees that are vital to the day to day operations. One executive bringing in a salary of one million dollars for sub-par results is probably equivalent to 20 employees.

Obviously I'm upset that these overpaid executives continue to keep their jobs. What ever happened to pride or honor. I would be so disgusted with myself. So how do we allow a company that has received our tax dollars to buy something that they do not need right now. Citi wants a corporate jet for what? Is it so the CEO can fly to an overseas operation or cross country and tell them how to continue to lose money. What ever happened to technology making it easier to conduct video conferences. It's not the handshake that seals the deal these days, it is the attorneys.

This is why I have continued to say that we allow free markets to gobble up these inefficient companies. If we continue to allow our legislatures to throw our tax dollars to mismanaged companies then they will not learn their lesson. There is not any consequence for making bad business decisions. If our government continues to get involved in all types of businesses then we eventually will lose our freedom. The government will make the decision that they must take over cause they can not let any one industry fail and our tax rates will just keep climbing.

I feel the same when it comes to any type of welfare. People need to learn that they can not become complacent. I keep teaching my kids that they must always continue to educate themselves. Even if they are experts in a field they must continue to better themselves because you can not rely on anyone to bail you out if all of a sudden your field becomes obsolete.

In simple terms it works like this, if we rob Peter to pay Paul then Paul will not have any incentive to work hard and Peter will have incentives to stop working. Eventually you will end up with two people that are not productive. This is what happens in socialism. People get upset and start demanding answers from your representatives.

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