The Fed Is Destroying Jobs: Ken Griffin

[jem]

Lets review what two top hedge fund guys have said...
from the op...


"As we've all learned over the years, if you reduce the cost of capital you increase your use of fixed assets and you take out jobs. Corporate America, seeing an ever increasing cost for its employee base and extraordinarily low interest rates, is taking every step it can possibly take to reduce employment, to build factories abroad and domestically to substitute technology and automated processes for people," Griffin said.

That's pretty far from standard economic thinking, for sure. But it at least tells a coherent story about why the massive increase in the Fed's balance sheet hasn't been more effective and putting us on a healthier economic path.

From Citadels Griffin..

and now for


Paul Tudor Jones...




In his latest letter to investors, Paul Tudor Jones reiterates in 6 simple charts that the Chinese RMB is too weak against the US dollar and is hurting the country.
It's causing job losses, inflation, and at least one other Asian country to follow suit and devalue their currency against the dollar.
To solve the problems inherent in the following 6 charts, PTJ suggests the following:


Read more: http://www.businessinsider.com/paul...as-hurt-us-strength-2011-2?op=1#ixzz2S4lz2CXb

JEM...

as I have been saying for years...

So the Fed sells more bonds to china.
Allows the govt to keep borrowing more.
Its member banks get to make higher commissions.

And then chinas peg sucks out american jobs...

the second of two very interesting letters from PTJ...

http://dealbreaker.com/2011/02/paul...s-in-the-us-manufacturing-sector/picture-549/

 

[jem]

So in short govt overspending destroys the standard of living of the middle class and helps export jobs to China.

And the commies on the left advocate more spending and more govt.

 

[oldtime]

Quote from piezoe:

agreed.

hey man, I am a founding father, the government is not my bitchy mother or my abusive father, it is my child

like the man said, "If you believe government is bad, you will create bad government."

 

[Ghost of Cutten]

Griffin's point is ecnoomically illiterate. If it were true that increased productivity of capital reduced employment, then the way to full employment would be to radically impair, or even destroy all the world's capital. Would jamming assembly lines with crowbars, firing EMP devices into semiconductor fab plants, and replacing the world's smartphones and computers with 1980s technology lead to a skyrocketing level of employment? Of course it wouldn't - rather, it would create a worldwide depression lasting many years. Therefore Ken Griffin is talking bollocks.

A quant hedge fund trader has no more knowledge of economics than an assembly line worker or a golf professional, unless he has studied and/or trained in the subject for some time and has a reasonable level of ability at it. Griffin wouldn't dream of trying to explain how brain surgery or rocket physics work, so he should stay similarly humble on economics where he clearly knows very little.

 

[Ghost of Cutten]

A further point about employment - the number of jobs is always at least as high as the number of unemployed. This can be proven by a simple thought experiment - how much value could a person create in a year of solid work? Would they be able to make or do something that you could sell to another person for at least 1 dollar? Of course they could. Therefore, EVERYONE IN THE WORLD at any time can get a job - whether employed, or self-employed. Even blind limbless beggars can earn money in the 3rd world. Think about it - if you offered you services in a modern western country for 5k a year, you would be snapped up. Even burger flippers make more than that.

So, there is rarely any such thing as involuntary unemployment. The issue rather is that the wage rate may not be as high as what the job-hunter hopes for. So, the problem is not job availability, but the potential wage level attainable for those currently unemployed.

 

[Maverick74]

Quote from Ghost of Cutten:

Griffin's point is ecnoomically illiterate. If it were true that increased productivity of capital reduced employment, then the way to full employment would be to radically impair, or even destroy all the world's capital. Would jamming assembly lines with crowbars, firing EMP devices into semiconductor fab plants, and replacing the world's smartphones and computers with 1980s technology lead to a skyrocketing level of employment? Of course it wouldn't - rather, it would create a worldwide depression lasting many years. Therefore Ken Griffin is talking bollocks.

A quant hedge fund trader has no more knowledge of economics than an assembly line worker or a golf professional, unless he has studied and/or trained in the subject for some time and has a reasonable level of ability at it. Griffin wouldn't dream of trying to explain how brain surgery or rocket physics work, so he should stay similarly humble on economics where he clearly knows very little.

This is patently false and world war two proved that. Destruction does create jobs. When we bombed Germany and Japan (i.e their factories, their technology, their roads) we went to full employment. One, we destroyed our competition which created the middle class in this country for the next several decades. And two, we then re-built Germany and Japan thereby creating jobs. Hence the popular axiom war is good for the economy. The more you destroy, the better it gets.

Now destroying technology is not an answer and you obviously are missing the economic utility of that argument. Technology makes everything cheaper. So in theory, people can actually earn less wages in a technological world and have the same economic utility.

The problem arises when those jobs jobs get outsourced at the low level. The rich get the benefit from lower technology costs but the poor lose the jobs. Yes, costs are less for them too but when your net worth is zero cost doesn't matter.

Then think about this. If it's true that technology lowers the costs of goods, then the wages to produce those goods has to go down. So the rich/poor gap widens more as the rich get the benefit from technology through lower input costs and greater return on investments while the poor are stuck with lower wages from producing cheaper goods.

All these things are related. Griffin was spot on.

 

[oldtime]

timing is everything

wouldn't it be nice if it was just so simple?

then we could just set up a plan that was sustainable and good for all time

sometimes, destroying things and rebuilding them is good for business

sometimes hanging on to what you got is infinitely better

there is a time for every thing under the sun

 

[4thaugust1932]

http://www.businessinsider.com/rich-people-do-not-create-jobs-2011-12

 

[jem]

you could probably create full employment by removing technolgy... but the production frontiers would be moved inwards and economic utility curves would be radically changed.

to mix frameworks... a billion to 5 billion people would be moved down Mazlow pyramids to food and shelter... back to full time hunter gathers or farmers. I imagine that would create serious wars and the first guy to build a repeating rifle and ammo would be richest man in the world with lots of food and women.

Quote from Maverick74:

This is patently false and world war two proved that. Destruction does create jobs. When we bombed Germany and Japan (i.e their factories, their technology, their roads) we went to full employment. One, we destroyed our competition which created the middle class in this country for the next several decades. And two, we then re-built Germany and Japan thereby creating jobs. Hence the popular axiom war is good for the economy. The more you destroy, the better it gets.

Now destroying technology is not an answer and you obviously are missing the economic utility of that argument. Technology makes everything cheaper. So in theory, people can actually earn less wages in a technological world and have the same economic utility.

The problem arises when those jobs jobs get outsourced at the low level. The rich get the benefit from lower technology costs but the poor lose the jobs. Yes, costs are less for them too but when your net worth is zero cost doesn't matter.

Then think about this. If it's true that technology lowers the costs of goods, then the wages to produce those goods has to go down. So the rich/poor gap widens more as the rich get the benefit from technology through lower input costs and greater return on investments while the poor are stuck with lower wages from producing cheaper goods.

All these things are related. Griffin was spot on.

 

[jem]

if you remove capital and technology the Production Possibility Frontiers for the world would shift so far back that everyone in the world would be fully employed finding food and water or fighting for it.

The first guy to make ammo and an automatically assault rifle would be king.

I realize we both just argued to the absurd but I saw it in real life.

In 1986 I was at a tennis tournament in then Yugoslavia.
A fully employed quasi communist country. I noticed 14 workers sitting around smoking cigarettes.

When the matches ended all 14 guys would go out and sweep the tennis courts. Sweeping courts at the club was their job. A job one or two 14 year old kids could do.

Yeah they were fully employed but they were not very productive.
Which is why communist countries had to ration bread with 3 hour bread lines.

Quote from Ghost of Cutten:

Griffin's point is ecnoomically illiterate. If it were true that increased productivity of capital reduced employment, then the way to full employment would be to radically impair, or even destroy all the world's capital. Would jamming assembly lines with crowbars, firing EMP devices into semiconductor fab plants, and replacing the world's smartphones and computers with 1980s technology lead to a skyrocketing level of employment? Of course it wouldn't - rather, it would create a worldwide depression lasting many years. Therefore Ken Griffin is talking bollocks.

A quant hedge fund trader has no more knowledge of economics than an assembly line worker or a golf professional, unless he has studied and/or trained in the subject for some time and has a reasonable level of ability at it. Griffin wouldn't dream of trying to explain how brain surgery or rocket physics work, so he should stay similarly humble on economics where he clearly knows very little.