Low Capacity Utilization + High Unemployment = WTF???

By Justin Gardner | Related entries in Barack, Economy, Obama

Modeled Behavior points out something I’ve talked about recently. That companies are holding trillions of dollars in profits close to their chest and losing trillions more in opportunities because they’re scared and won’t put people back to work…even those there’s plenty of work to be done because the demand is there.

First, the capacity utilization…



Now, the unemployment rate…

As Modeled Behavior puts it…

This is a failure of our basic institutions of production. The job of the market is to bring together willing buyers with willing sellers in order to produce value. This is not happening and as a result literally trillions of dollars in value are not being produced.

Let me say that again because I think it fails to sink in – literally trillions of dollars in value are not being produced. Not misallocated. Not spent on programs you don’t approve of or distributed in tax cuts you don’t like. Trillions of dollars in value are not produced at all. Gone from the world entirely. Never to be had, by anyone, anywhere, at any time. Pure unadulterated loss.

Time and time again I see people speak about recessions as if they are a bad harvest – an unfortunate event wherein we have to figure out how to go with less. Some say we should all sacrifice – some say the sacrifice should be based on X or Y. Some say each family should take their lumps as they come.

However, they are all getting the basic idea wrong. This is not a bad harvest. The problem isn’t that there is less to go around. The problem is that we are creating less, building less, making less.

We have people who would be working but are instead watching Judge Judy. We have machines that could be spinning but are literally rusting for lack of use. This is a coordination disaster.

And the government can do absolutely nothing to make this happen. Obama can’t force companies to hire people. His new tax credits for small businesses may be able to nudge. But that’s all it can do…nudge.

More as it develops…


This entry was posted on Wednesday, September 8th, 2010 and is filed under Barack, Economy, Obama. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

19 Responses to “Low Capacity Utilization + High Unemployment = WTF???”

  1. superdestroyer Says:

    A business holding cash faces massive uncertainty due to the five year implementation of nationalized health care, possible environmental regulation, more aggressive lawyers and judges, possible transportation and energy regulation, possible employment regulation.

    Business are not investing because the regulatory uncertainty is so great in the U.S. that most investments are not worth it. It makes more sense to invest in emerging markets outside the U.S. than invest in the regulatory and legal climate that currently exist in the U. S.

    Why do anything in the U.S. when David Axelrod, Rahm Emanuel, and the rest of the Obama Administration decide that market segment or industry should not exist?

  2. Milo Says:

    There’s a major typo early in this article when it says “the demand is there” – the demand is most certainly NOT there, and that’s the #1 reason why businesses don’t do more to invest. I’ve literally had business owners laugh at this idea that regime uncertainty is holding them back.

    The other reason to hold cash is that we saw some credit crunch around the Lehman crash, and to be able to keep business flowing smoothly you now need to keep more cash on hand than you did 4 years ago. Gives you a solid balance sheet that keeps your bank happy so you can get credit.

  3. Tillyosu Says:

    Ditto what Milo said…though I suspect it wasn’t a typo.

  4. kranky kritter Says:

    That was exactly my question too. What is the basis for claiming that there is ample demand right now, so that businesses should hire workers in order to increase production? What is that based on?

    I wouldn’t call it a typo, which is an inadvertent misspelling.

    Where is the real and unambiguous data showing that companies throughout the economy and across the nation are leaving potential business on the table? Without that, all there is to this post is a complaint that a lot of people are out of work. Which we already knew.

  5. WHQ Says:

    Monetary policy is pushing on a string at this point. We need fiscal intervention to raise aggregate demand. Demand is, as Milo said, not sufficient right now. Regulatory concerns are a red herring. If people were able to pay for output, there would be output.

  6. kranky kritter Says:

    @whq Whaddaya mean by fiscal intervention?

    BTW, I have an off-topic metal question I wanted to ask you, since you self ID’d as a metal fan.

    I’ve seen “Photograph” called a top notch “hard rock”song on VH1, and Def Leppard made their list of top 100 artists. But let’s leave aside derogatory remarks about VH1′s credibility and get at what I’m wondering about.

    If one considers oneself a metalphile, does one adopt a “credit where it is due” attitude to showy, poppy hair metal bands of the 80s? Or are they regarded as an embarassing aberration driven by MTV, moronic adolescents and plain old New Jersey/LA bad taste?

    I am really not much of a fan of metal besides Joe Satriani, select old school classics, and distortion driven punk rock. But I view 80s era hair metal bands as an embarassment. Not really metal, but rather pop with superficial metal trappings. And I think that time has shown the bands of that era as not really standing the test.

    Where is the body of enduring high quality work from those bands that is still admired?. My sense is its a really thin catalog. [Unless you include guns and roses, which I wouldn't class as a poppy hairmetal band, since I think they have actual substance comparatively speaking] I see many bands from the VH1 top 100 that have double digit songs that got heavy play and are still appreciated as great music. By contrast, the vast majority of dominant hair metal bands that topped the charts in the 80s now look like silly fads.

    Bonus question: please explain the enduring popularity of Bon Jovi.

    I’m interested to hear a metal fan’s take on the subject. If folks object to the thread hijack, we can continue this discussion over at my open thread on “thecrankycritter”

  7. WHQ Says:

    kk, fiscal intervention means spending money. Technically, the tax break is also fiscal intervention, but it’s passive. But it won’t do much more than lowering interest rates or other monetary measures. There’s plenty of money in the system in aggregate. It’s just not moving. Aggregate demand at this point will only pick up if the government spends and targets the spending properly to produce jobs, preferably jobs that create value, not just provide income for individuals. More individual income would certainly help, but, if you’re going to put the money out, why not build, create or improve something worthwhile while you’re at it – be it physical or human capital?

    Regarding your metal question – yes, 80s hair metal is pretty much an abortion IMO. Even if there were some technically proficient musicians in some of the bands, what they did with their abilities was tasteless in an uninteresting way (as opposed to being tasteless in an interesting way, like some punk or thrash/death metal stuff). I could see something about, say, Twisted Sister that was campy and fun in the same way that old Kiss was. But mostly it was just plain bad – superficial, simple and soulless. I can deal with simple, like old AC/DC, which was badass in both a bluesy and a punky way, where the simplicity was a matter of “less is more” (not that I’m saying they were a hair metal band – just making a point that simplicity isn’t a disqualification all by itself.)

    It used to drive me nuts in the 80s when people would ask me what kind of music I liked, and when I said “metal,” they’d say “You mean like Poison?” Some couldn’t figure out what it meant when I’d mention bands like Iron Maiden or Slayer, as if it was all the same. They were all just guys with long hair playing electric guitars.

    I think Bon Jovi is still popular because they are good musicians and write better songs, if pop songs. In a lot of ways, there were always more of a pop/rock band than a bad pop/metal band. I’ve never been crazy about them, but it doesn’t surprise me that they endured while others who emerged around the same time failed. There’s less tension between pop and rock than there is between pop and metal.

    As I see it, metal is sort of fundamentally anti-pop. You can only go so far in the pop direction with metal before it breaks down the way it did. (Thank you, Curt Cobain, for driving the stake through the undead heart of 80’s hair metal. Grunge may have been popular, but it wasn’t pop.)

  8. blackout Says:

    I’m not quite sure what to make of it, but I’ve had a half dozen 401(k) clients sell their businesses to competitors within the last five months. There’s definitely money out there, and I’m wondering how many companies are spending their capital in acquisitions as opposed to increased hiring or operational expansion. Savvy companies seem to be taking advantage of the current economy’s impact on less successful ones, not holding on to their money tightly. It will be interesting to see if my anecdotal observation is something that will be more widely commented on in a few months.

    And a misspelling is actually an error that would not be typically considered a typo, KK, at least not if the misspelling was a mental error. Typo is a term which historically has referred to mechanical printing issues and has grown over time to include manual typing errors. Under no circumstances would the phrase that spawned the use of the word be considered a ‘typo’. Incorrect or debatable perhaps, but not a typo.

  9. kranky kritter Says:

    And a misspelling is actually an error that would not be typically considered a typo, KK, at least not if the misspelling was a mental error.

    I agree that an intentional misspelling isn’t a typo. But any unintentional spelling error IS a typo. At least in the modern era, it’s the predominant form. At least if all the editors I’ve worked with in the past 15 years are any judge.

    As defined, a typo or typographical error is “an error in printed or typewritten matter resulting from striking the improper key of a keyboard, from mechanical failure, or the like.” If you trust a dictionary.

    My point above was that there’s no way the error in the cited passage could be considered a typo. It’s either factually incorrect, or unsupported by any citation of facts. Or something like that.

    WHQ: I’ll agree that Bon Jovi is marginally superior to the worst of the 80s hair metal bands. Not as phoney stagey, a bit of decent songwriting. At the same time, I’m at a loss to recite a decent-length list of their “great” or really good songs. In other words, my opinion is that their longevity is not especially related to their quality as compared to many other longstanding bands.

    A few years back, my wife and I caught the Kiss-Aerosmith tour. What fun. KISS are truly great showmen. The whole Gene Simmons Kabuki God of Thunder flying through the fog and vomiting blood thing? Truly outstanding. But KISS’s catalog of material. Pretty thin. As much as I enjoyed KISS, Aerosmith blew them off the stage, because they’ve got a much deeper catalog of really really good rock and roll. And yeah, sionce I’m from Boston, that makes me a bit of a homer.

    But if you buy a bands greatest hits collection and half of the songs are like “what?” Then you know they’re not pantheon level.

    Also agreed about grunge. I wasn’t personally that big a fan, and as time passed and more and more and more bands had singers copying Eddie vedder, the more tedious that got. But it’s still an astonishing and great moment in rock history that a few guys in flannel shirts with balls, sincerity, and rock passion somehow managed to make a whole class of bands suddenly look preposterous.

    I had sort of given up hope on that count. It seemed like hair metal had won. Now, when I listen to 80s retrospectives, I am happy to hear that there’s a lot of music from that era that gets played more now than it did then. There’s blessedly little Duran Duran to contend with. And in retrospect, I think it’s easier to see that Poison and Def Leppard were a closer match with a Duran Duran than AC DC or Aerosmith or Guns and Roses.

  10. Mike A. Says:

    Interesting point made by an equipment supplier I know. There are companies that have held so much cash, that they are now attractive takeover targets. This particular supplier was seeing enormous demand from some of these companies beginning to buy capital to take the cash of the books.

  11. Chris Says:

    What about metallica? Kind of was 80′s hair (in that they had long hair)….

  12. WHQ Says:

    To approach the distinction between 80s hair-metal hair from other long hair (particularly that of non-hair metal, metal-band members) as scientifically as possible, I’d say you have to consider the degree of treatment involved. Hair can be simply long or it can be long and bleached, dyed, teased, permed, sprayed, etc. Compare a photo of James Hetfield (Metallica) circa 1988 to one of C.C. Deville (Poison) for an illustration. Metallica in the 80s was, very strictly speaking, thrash metal. They were one of the big four of thrash metal, along with Anthrax, Megadeth and Slayer. Within the context of 80s metal, they were the polar opposite of hair (or glam) metal.

  13. kranky kritter Says:

    Agreed. The aesthetic of the genuine 80s hair-metal bands was that they were marketing themselves as boy toys. Bad boys, but “safe” bad boys, If there was any question as to whether such boys were good at heart, this was answered by an anthemic love ballad that showed caring and sensitivity.

    The bands WHQ cited were very much counter to that trend. They were more about real unrestrained testosterone, for better or worse. It’s closer to the Frank Zappa ethos of rock and roll as an expression of ideas like the ones in these Zappa quotes:

    •The meek shall inherit nothing.

    •love is not the end of the world, love is the beginning of the world. Many people write about the subject of love as if that was some ultimate attainment to aspire to …you can have love but you can go beyond that, into realms that are even more interesting.

    •You can’t always write a chord ugly enough to say what you want to say, so sometimes you have to rely on a giraffe filled with whipped cream.

    •The disgusting stink of a too loud electric guitar; now that’s my idea of a good time.

    •The Quality of Our Lives (if we think of this matter in terms of “How much of what we individually consider to be Beautiful are we able to experience every day?”) seems an irrelevant matter, now that all decisions regarding the creation and distribution of Works of Art must first pass under the limbo bar (a.k.a “The Bottom Line”), along with things like Taste and The Public Interest, all tied like a tin can to the wagging tail of the sacred Prime Rate Poodle. The aforementioned festering poot is coming your way at a theatre or drive-in near you. It wakes you up every morning as it droozles out of your digital clock radio. An arts council somewhere is getting a special batch ready with little tuxedos on it so you can think it’s precious.

    •Without deviation from the norm, progress is not possible.

    •The taking of drugs is the license to be an asshole, which is the same reason why people drink.

    As Zappa demonstrates, there’s a spirit of rock and roll as a rejection of the establishment and what it stands for. That spirit is usually considered most seriously through the eyes of adolescents and young adults. I’m not so much interested in such ideas in terms of whether they are right or wrong. I’m much more interested in such phenomena as a stage of sociocultural development. Here’s the interesting thing about how that relates to hair metal bands. With the advent of MTV, we saw a vast ratcheting up of marketing opportunities targeted to adolescents and young adults with disposable income. The result was the prefabricated packaging of rebellion into the stuff that was successfully portrayed on MTV. And more underground stuff, whether it was hardcore, thrash metal, new wave, was a response to the shabby falseness of a lot of mainstream pop.

    Of course, that doesn’t mean you can beat mainstream pop. You can’t.

    BTW, just having some fun here. Don’t anyone take the above too seriously.

  14. blackout Says:

    An unintentional spelling error would only be a typo if it was the result of miskeying the word. Most misspellings are a result of ignorance of the correct spelling, which one assumes is unintentional. So no, lack of intentionality itself does not make a spellign error a typo. The point is, typo has been misused for so long that any mistake is dubbed a typo. Your editors are probably no less immune to this misuse than anyone else from the sound of it, Kranky.

  15. blackout Says:

    FWIW, I left in an excellent example of a ‘typo’ in the previous post… lol

  16. kranky kritter Says:

    If you spell a word incorrectly because you thought it was spelled that way, I wouldn’t describe that as unintentional. Because you spelled it the way that you intended to spell it. But I agree that the common understanding is that it’s miskeying. I wasn’t trying to be especially precise when I made my first comment

    BTW, another thing that most experienced editors understand is that when the language has moved on, you have to move on as well. You can cling to the previous understanding, but as time passes, the numbers in your camp dwindle. I accept the definition as stated, from dictionary.com. Although I sympathize with your position if you disagree with the broader common understanding I alluded to.

    When a definition expands to include other things, you can try to correct it. But if that usage persists, it becomes correct by acclaim. That’s how usage actually and truly works in the real world of evolving language, whether editors like it or not.

    For example, some few years ago, for the word nuclear, one dictionary began to identify the pronunciation “NOO-kyoo-lr” as a regional pronunciation. I know, and many other folks know that this is really a mispronunciation, not a regional pronunciation. But it has in fact become an acceptable pronunciation even though that’s, well, preposterous.

    Some people will still persist in whining about this as a mispronunciation when I’m dead and gone, but my sense is that this pronunciation is here to stay. It might even be winning.

    Justin, for the love of God, can you do something to ratchet down the difficulty of the captcha?

  17. blackout Says:

    Along those lines, KK, my chief grievance these days is the past tense formation *should have went* when *should have gone* is correct. There are days where I am literally the only person in the room who employs the correct phrase. And I understand your point about evolution very well; while I attempt to use who and whom correctly, and go out of my way to avoid ending sentences with prepositions, I do understand that I will end up sounding as I’m wearing a powdered wig and shoes with buckles if I make no exceptions. lol

    Still, where does it end? I accept the expansion of typo to include miskeying (introduces the human element) but do not accept that all misspellings are (spellign is a clear typo as no one would reasonably think the word is spelled that way, but speling?). You balk at the idea — and rightly so — that factually incorrect statements can be called typos. I guess my point is, it’s tough to cavil at one liberty taken more than at another, even when one is clearly more egregious. Personally I’d rather stand corrected and attempt proper usage than defend my position under the rule of evolution, especially when evolution is simply a euphemism for *incorrect* or *dumbed down*.

    And I agree that captcha has been nuts of late. what’s next, a series of notes played on a flute into the computer’s external microphone? lol

  18. kranky kritter Says:

    Typo is certainly a term that is used to describe a generally trivial inadvertent error. To call a factual inaccuracy a typo is so far afield from its meaning as to be preposterous. That was my point, and it’s undented.

    When I quickly alluded in passing to the correct and appropriate meaning of the term typo, which is a printed misspelling or error of spacing or punctuation due to miskeying (typesetting being a practically defunct practice), I neglected to explicitly state that not all mispellings ought to be included in the set “typo”.

    So if it makes you happy to say that “I stand corrrected”, then I say so.

    Where does it end? It doesn’t. Not so long as we endure. Evolution is a constant. Evolution is not a euphemism for incorrect or dumbed down. Over the long term, acceptable language is not determined by an ivory tower academy, It’s determined by evolving consensus. That doesn’t mean that we have to like it when someone says noo-kyoo-lr, but it means that at some point we are both petty and incorrect to tell someone they are pronouncing it “wrong.” Blame Jimmy Carter, but hold your tongue and practice a soupcon of tolerance.

    I agree with you that the result can be a deterioration of clarity. I always strive for clarity, and I generally practice disregard for language rules that do not affect clarity. Who vs. whom is a good example of a distinction which lacks sufficient utility for the majority of folks to have bothered to grasp.

    Ending a sentence with a preposition is another battle that has been lost whether you like it or not. As an experienced editor, I know there are occasional but fairly rare instances where clarity suffers from ending a sentence with a preposition. And over time, usage texts have tried to carve out exceptions where it’s ok. But at this point, regardless of what current style manuals claim, the only remaining rule is that one should try to avoid it, unless the alternate is clunkier.

    As a pragmatist and a devoted utilitarian, I think there is a tremendous amount to be said for the virtue of the plain notion that if everyone understands what is meant, there’s no real foul.

  19. WHQ Says:

    So how do you guys feel about split infinitives?

    “Boldy to go where no man has gone before…”

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