Economics

I think I finally figured it out.

• When there are more people looking for jobs than there are jobs to be had, wages go down because more people are willing to work for less money.
• You (as a business person) can make more money by hiring a few bright people to construct a system that makes money than by hiring an army of slaves to do menial labor.
• Our American way of life, by which I mean the enormous variety of goods and services available for relatively low prices,  is dependent on an enormous infrastructure of businesses, their facilities, equipment and trained personnel.
• When you increase spending on consumables and decrease spending on investment (capitalization), economic growth slows.
• If you want your standard of living to go up, your capitalization per person needs to go up. If your population increases faster than your (inflation adjusted) capital investment, your standard of living is going to go down.

We have four main drains on our economy:

1. Our military adventures in the Mid-East
2. Security (our standing army and all our various police forces)
3. Raising and educating our children
4. Old people and their medical problems

Which one do you want to cut back on?

 One thing I have heard recently is that businesses are sitting on large amounts of cash. One thing I have not seen is how much of our capital investment is tied up in big business, and how much is tied up in small businesses. Any successful small business, say one that keeps half a dozen people employed, probably represents a capital investment of at least a couple of million dollars. Land, buildings, vehicles, equipment all cost money. You might be renting the space, and leasing the equipment, but somebody, somewhere had to put up the money to pay for all that in the first place. We hear about billion dollar deals here and there, and it's touted as like it's something important, but if you have a million small businesses, each with an investment of a million dollars, that's a trillion dollars right there, and that only accounts for maybe ten percent of the workforce.

When a chip (integrated electronic circuit) manufacturer spends a billion dollars on fab (wafer fabrication facility) that will employ maybe a thousand people, you are talking more like a million dollar investment per person, not a measly hundred thousand bucks.

Back to cash hoarding. The business world is in constant flux. A successful business may last for five, ten or even a hundred years, but things change, entire businesses may go up for sale, and buying a business requires money. If you want to be prepared to take advantage of an unexpected opportunity, you need to have cash on hand. However, just holding onto cash also entails risk due to inflation. Every day you hold onto that cash, it loses some value. On the other hand, you don't want to just throw it at the next opportunity that shows up. That can as bad as just throwing it away. So these hoarders are gamblers, waiting for the right moment to place their bets. After all there is a certain amount of luck involved in all human endeavors, and who among us is immune to the lure of the big score?