Economy and profit.

The Dow Jones is up and the main financing firms(the only two left) in Wall Street, are showing profits. Nevertheless several indicators of the economy don't seem to show or reflect the otherwise positive figures. The question is why?

Without even trying to claim a pundit evaluation, I can only comment on what I can see at a lower level. America is trying to do more with less people. Even when they are trying to buy cheaper, the prices are rising. The salaries are disappearing(for those who are laid off). The times in which purveyors are being paid, is being extended (effectively converting suppliers into credit lenders); sizes of goods are being reduced and prices increased. All these little dirty tricks with only one thing in mind, evading the consequences of the recession. Transferring the burden of the impact on the little guy. Precisely the one that in not equipped to resist and overcome the hit.

Over the years we have been fed with the mantra that the economy is directly related to how well the rich are doing. If they do well, the overflow somehow will shower down on us. I think it's a myth. At least reality does not corroborate the theory. There is also the pernicious link between the economy and the market. There is a link indeed, but how is the market going to do well, if resources are pulled out of it, and vast sectors of it are not involved in the return part of the productive process.

People that are out of work are not in the market. They will spend less and cut on their non essentials. They will change their habits and become more frugal. All good, but to an economy that is expected to move on the stimulus of the demand. If people do not buy, that means immediately that somebody is not selling. That that same seller is not paying for the goods on time, or that is ordering less than before. He might be late with other expenses too. The banks suffer, commerce altogether is affected.

In a business that I follow closely, the so called human element starts to play a part as well. Employees are being laid off, and the ones that stay are making more money. Overtime is available and gladly received by those who think that being the only ones who eat is a good thing. A couple of days ago I explained an old medieval concept to an emigrant from Asia. It is the idea of a defensive position in the Motte and Bailey Castle. This 11th. Century principle is very simple. you have a castle surrounded by a fence and a channel that with water, separates you from the attacking enemy. Between the castle and the fence is the town, an of course a place for the horses. Being the armed cavalry a very important part of medieval combat, the protection of the horses and the knights that ride them becomes vital. There is a price to pay though. You have to feed those inside the fence. Them being the first line of defense, it is important that not only they are fed, but in good condition to fight. The Castle usually will have another barrier, or fence, but the first line is vital to resist any assault.

I believe that we are strong in numbers. And without those numbers, there is no feudal lord that will effectively hold a position, vital to hold his land and tittle. The same way I see the economy today, and firmly believe that if there is not a comprehensive understanding of the mechanisms of war and finance, there is no much time left for the barons to hold their castles.

The problem today is that there is a gap between that idea of the fighting baron an the current wealthy. There is no fighting qualities, no backbone. No sense of how to rule that wealth because they believe they are immune to the assaults and a sense of entitlement that is nauseating. That the little guys are expendable and there will be more behind those who fall on the defense of the very week walls of their present lives.

My father used to say that never give and order that you are not willing to obey yourself. He was very clear in his idea that leadership has to involve risk, if success is what you are looking for.

If this divorce continues between wealth and the working class, there will be less and less people in this active market economy that the pundits believe will fix everything. And then what?


Francis W. Butters

* you need an archeologist to find a motte and bailey castle today.