“Earlier this week, Verizon confirmed that it offered a voluntary severance package (VSP) to about 44,000 employees and that it will transfer over 2,500 IT staff – some rumors suggest the figure to be closer to 5,000 employees – to India-based Infosys as part of a $700 million outsourcing deal.”
I had put forth an article about this a few months ago. I was wrong-ish on losing Arctic ice, but an economic meltdown may be in the cards. I am just guessing on what this means (one company, albeit a big one, with over $114 billion in debt), but it can’t be good. I offer these thoughts, which have been ping-ponging around the many groups looking for tea leaves in order to predict our Dystopian end. Keep in mind, Verizon isn’t in the horse-and-buggy trade. They aren’t Sears or Penneys or the other retail dinosaurs made redundant by the collapse of brick-and-mortar trade. It’s in an industry that should be profitable as all Hell, and they’re a leader, but somehow they’re over $114 B in debt. So what happened?
The 2008 crash (remember that? Some people don’t seem to) knocked a minimum of $22 trillion out of the economy, and even the folks who got jobs back didn’t match former income and benefits. ‘Retail Therapy’ was no more. No buyers, so no reason to hire workers back. Structural depression. HOWEVER, there was trillions of dollars available for borrowing at near-zero rates of interest. Sprucing up the returns on Wall Street made it look like the economy was coming back. So CEO’s borrowed and bought up big blocks of their stock and liquidated them. It made companies that couldn’t give products away profitable (in terms of share prices). And (amazingly enough) companies are carrying more debt as a percentage of value than they were when the Housing Bubble burst. Meanwhile, nobody’s discretionary income has come back, thanks in part to the ACA. The first quarter of 2016 was a gdp increase of .5%. All the money that should have been restarting the economy was going to meet the HC mandate (we would have been in recession in 2014 but for healthcare spending).
Interest rates are now going up, and T-bills have to pay more. We’re very close to the point where interest on the debt will be a bigger part of the federal budget than defense spending (Trump is overspending tax receipts by nearly a trillion a year–when Jimmy Carter left the White House, the total deficit was under $1T). We’ve avoided disaster up to now, but the trade war plus the spending for all the disasters we’ve had this year are possibly going to kick the economy down the stairs.
One more thing–Verizon’s bottom line will be fine and their stock will be okay. But there are at least 44,000 families without a breadwinner (along with as many as 5,000 people whose jobs are heading to India), without healthcare, and collecting UI for 26 weeks minimum. People have missed the fact that people who are out of work can’t support carrier groups and three US Airborne divisions on call 24/7.And people working as Walmart Greeters REALLY can’t support those things either.
Is there any way to head this off? Well, when it looked very, very bad in the spring of 2008, President Bush sent out ‘rebate checks’ for working Americans–up to $600 for individuals, up to $1,200. Bush took that action after then-Treasury Secretary warned Bush in 2006 that the economy was primed to go off a cliff due to all of the debt accumulated by individuals and the banks. That didn’t work then and probably won’t now. The world debt is in the hundreds of trillions now thanks to derivatives trades and counterswaps, and the national treasuries are bare thanks to the giveaways governments have handed out. You’d need a giveaway to the 99% significant enough to offset the five-figure costs of medical coverage that many families can’t cover. And those great jobs Trump is touting aren’t the kinds of jobs that build a middle class.
And middle class money won’t come back as long as the workforce that can address the declining demand for products and services doesn’t need to be expanded. Paul Krugman has been writing about the so-called ‘skills gap’ for almost a decade. He blows up the meme here:
But remember. I am the simple Artist and claim no special knowledge of finance thingies–I thought this was a great selfie. What do I know?
Would you take economic prognostications from someone who’d take a selfie that looks like this?
The Brooklyn Culture Jam 