Forum Post: Sales profit is the root cause of this current economic crisis.
Posted 12 years ago on Dec. 12, 2011, 11:04 p.m. EST by FriendlyObserverA
(610)
This content is user submitted and not an official statement
If we had a CAP on sales profits we would not be in this economic crisis. The wealth would not be piled up at the top. And we would all have jobs and possible still living in our homes.
edit : the cap, based on percentage, is placed between points of buy and sell, not on manufacturing.
Sales profit cap = higher prices (to protect profits) = reduced sales (because of higher prices) = fewer jobs (because of reduced sales) = reduced tax revenue = problem exacerbated.
How to define a TROLL? Repeated posting of the same bullshit even though it was clearly debunked a month ago when he first posted it.
http://occupywallst.org/forum/sales-profit-cap-lower-prices-increased-sales-incr/
[Deleted]
[Deleted]
I did, read the top post.
And then read the top one in your identical topic from nearly a month ago. Then try posting something new and - although it is probably a stretch for you - intelligent.
[Deleted]
My post in that thread has 15 points.
Your two comments "defuting" it are copied here:
FriendlyObserver -2 points 3 weeks ago
There is a law that limits such a thing
FriendlyObserver -1 points 3 weeks ago
A law that limits chain retail. Good luck finding a cuustomer
While it would be perfectly appropriate to call you a moron and a liar, it would not be productive to do so, so I won't.
[Deleted]
You have not attacked my statement with anything other than baseless opinion which does not refute it.
Post some data, facts, links to articles, anything at all that supports your adolescent fantasy and I'll debunk that, too.
No, your wrong. Production occurring offshore is the reason. Why so_stupid?
[Deleted]
Prove it.
On a different thread you suggested a cap on markup, but on this one you seem to advocate a cap on profit. Which is it? They are two different things. For example, a boutique clothing store may have a markup near 100%, and an annual net profit of about 5%. Which would you cap?
I'm not sure "we will all have jobs" since to maintain solvency retailers may have to lay people off.
[Deleted]
As I suggested on a different thread, this would likely drive all small retailers out of business (especially high end and boutique retailers), since they rely on high markups to make a profit, while big box stores have the advantage of economy of scale. Is that a desirable goal? I would rather pay a little more at a local store, than have to walk up and down the crowded aisles of Walmart.
I think the experience of the Soviet GUM superstores, and of US wage-price controls under Nixon, would be a cautionary tale.
[Deleted]
"there is nothing to suggest a cap would affect either store differently .. since we really do not have transparency to debate this issue.."
The thing we lack is your suggested cap. What is your figure? We do have a certain amount of transparency, especially for publicly traded companies. For example, in the jewelry retail industry, it is typical to double the "keystone" (wholesale) price, so 100% markup. With that, a good performing jewelry store will have a net profit of about 7-8%. Costco marks up 17%. So if you impose, say, a 20% cap, good for Costco, bad for your friendly neighborhood jeweler.
By the way, the "transparency" issue is mostly one of convenience. If someone is truly interested in these statistics, they can be found in various sources. They just aren't printed on the products, so it takes a little effort.
"if there was a cap on all retail .. that rental fee would be forced to drop its price .. correct?"
And the value of that real estate would decline. And with a lower assessment, less in property taxes to pay for school budget, etc. And since employees are the most expensive resource of most businesses, the boutique with two clerks may decide it can function with one. Or the landlord could decide to rent to some other type of business that can pay a higher price. And certain product lines would likely disappear.
"since all competition would have the same cap"
Right. But the competitor who can leverage economies of scale will be handed a huge advantage. That is how Walmart and Lowes and Home Depot and the others are taking over the country. You want to give them another leg up? Right now they mark up less than small stores, on average. What you want to do is make small retailers try to lower their markup to that of Walmart. Many could not survive if they had to do that.
"this cap has many effects."
Sadly, yes.
[Deleted]
Again, markup or profit? They are two different things. And what is your proposed cap on markup or on retail profit (whichever you are targeting)?
What is the positive side? Loss of small retailers in favor of huge megastores, loss of certain products from the market, or what? I see those as bad things, so if there is some benefit that will outweigh those things I would love to hear it. I think history (particularly the Soviet experience) shows what really happens.
[Deleted]
What don't I understand? Please explain.
Markup (measured in several different ways) refers to the additional cost a retailer adds to a product over the cost he paid for it.
Profit (measured in several different ways) is what the company has left after paying its costs of doing business.
So I asked you, which would you cap?
If you cap markup, big stores like Costco (avg about 15% markup) may be unaffected, while smaller retailers will mostly all take a hit (depending on the figure you choose). I provided examples with figures that I believe are reasonably accurate.
If you cap profit, what level of profit would be permissible? Most retailers have a net profit in the range of about 5%, depending on what they sell. These data are readily available.
I am trying to understand your plan, but with no numbers it is very hard to figure out where you are going with this.
[Deleted]
What actual figure are we talking about? And which "fed rates" are you referring to? Currently the fed discount rate is about .75% (the prime is about 3.25%). At that level, what cap would you apply to the retailer markup?
[Deleted]
You suggested a cap on retail markup that would be tied to the "fed rate" (you didn't say what you meant by "fed rate" so I assumed the discount rate). Given that the fed discount rate is currently .75%, what markup would you allow? It is a simple question that can be answered with a simple number. We can consider later what happens as the fed fluctuates; right now we just need a starting point.
Other causes:
37% of the work force (baby boomers) is retrenching or retiring and 67% of GDP is consumer spending. Corporate America has none this fact for 40 years and that is why they seized the opportunity to development business in the new China. They are hoarding their cash because there is no need to invest in America, since America will not have normal growth for many years to come. The housing crisis is just accelerated the stagnation inevitable by the retrenching baby boomers. [Baby boomers retiring]
Not so much advances in technology but more the use of the existing technology; specifically, digitization. How do I know? I've been working in this area for 20 years. Ironically, Corporate America resisted this implementation for the last 20 years. [Workplace efficiency]
Excuse me for this final one: incalcitrant Americans. Americans still live and think in the world of brick and mortar. You would be surprise at the number of times that people have scorned me for promoting digitization. In contrast, the technically inclined people of India think otherwise. Once paper is transformed to digits, efficiency is achieve many times over and is easy to move around the world to cheaper labor. How do I know? Because that is how I manage to have a job now, albeit in America at reduced wages. [Outsourcing]
Crisis because of gov't attempts to house everyone, you are wrong, your thought process is broken
the government had honorable intentions .. but as soon as the market flooded with home buyers, home sales profits went through the roof .. it was these huge profits that broke the economy ..
if there had been a CAP on sales profits we would not be in this crisis .. and everyone would still be in their homes..
If there had been a cap how would people have competed for the home they desired? Fist Fights? Rock, Paper, Scissors?
banks were pressured into supplying loans that were risky and UNprofitable. less gov't regulation and meddling would have helped avoid this
Ridiculous. Govt. overspending is the problem.
governemnt spending is in fact good for the economy ..
it is good for just spending, ex. military equipment, infrastructure, not social welfare
How?Spending money you don't have isn't good for anyone.
yes it is good for those desperately needing income.
It seems absurd. Do you have any details that proves it caused the recession? Or that it causes wealth to be piled up at the top. How many salesmen would see their incomes limited? Most of them?
If you confiscated all the money from the " rich" you could run the govt for about one month. SPENDING is the problem. Do you continually spend more money than you have coming in? Are your debts climbing every month? Do you think that spending still more money would help your situtation?
I couldn't agree with you more.
[Deleted]
that's one example of what?
certainly not an example of how profits caused the recession or how profits pile up at the top. if anything, housing bubble allowed many not at the top to make a nice profit if their timing is right.
have you thought this through at all?
[Deleted]
"that " nice profit" from the housing bubble is an example of how money has piled up at the top"
hardly. people who made money in the housing bubble come from all economic levels. tons of regular (non-zillionaires) made a ton of money in the housing bubble. and, yes, many of those people then lost a lot as the value of what they bought plummeted. but if they got out at the right time, they did great. you have yet to explain how this only benefited those at the top.
"the money at the top sitting there has caused harm to the economy" - isn't it the money from the top NOT just sitting there, but being loaned to people who could not pay it back, what caused harm to the economy?
you sure you thought this through?
[Deleted]
I noticed you didn't address this:
"isn't it the money from the top NOT just sitting there, but being loaned to people who could not pay it back, what caused harm to the economy?"
sorry, I am not going to respond to your "better example" if you are going to completely ignore my point.
[Deleted]
You deleted your first sentence, and your second one, and your third one ...
Apparently they made the fact that you have your head up your ass just a little too obvious.
"I addressed that with my first sentence."
no you didn't.
I showed you how money from the top that IS being used (not "sitting there") harmed to the economy.
your first sentence: "they would not have needed the loan if so much was not taken from them in the first place through high profits"
...how the fuck does that address what I said and how what I said proves your statement is false?
[Deleted]
Post some information, a link to an article or something, anything, or just be widely known as (a picture really is worth 1,000 words!) a TROLL
"if you can answer this .. I will continue"
let me see if I got this straight.
and in order to continue you want ME to answer a riddle?
blow me.
[Deleted]
..possibly?
in your example there would be more profit to sell domestic .. kinda gives an incentive to the retailer ..
[Deleted]
well the percentage you gave is 50% .. I don't think it would be that high .. but for example it makes the point of understanding ..
the exact example would be a percentage that reflects federal interest rates .. the reason for this .. ..when the fed wants to stimulate the economy by lowering interest rates .. profits will also be lowered .. insuring stimulus .. currently when the fed lowers interest rates .. the sales man raises his prices to gain extra profits , which defeats the feds intentions.
[Deleted]
the housing bubble
http://www.youtube.com/watch?v=e-3hZsXrxaI
http://www.youtube.com/watch?v=4mkRFCtl2MI
http://www.youtube.com/watch?v=1SQqjTxI3vc
http://www.youtube.com/watch?v=EewGMBOB4Gg
http://www.youtube.com/watch?v=4Z9WVZddH9w
http://thezeitgeistmovement.com/
http://blog.thezeitgeistmovement.com/
http://www.thevenusproject.com/
The average business has 1/2 a percent profit.
If you think that's outrageous then you're nucking futs .
No dear, OVERSPENDING is. A govt spending money it doesnt have and trying to tax people to pay for the govt's irresponsibility ways is the problem.
absolutely false. governments are spending to try maintain jobs and supply opportunity .. whil those with piles of sales profits .. spend very little .. waiting for a lucrative place to invest .. or the world to collapse ..
Government spending certainly did not cause the recession .. governments are holding up the economy .. with spending ..
govt is spending to maintain jobs? Govt. jobs ? Govt is killing the economy by spending money WE don't have.
..capitalists are killing the economy by not spending the money they have hoarded. .. the government is trying to keep everyones head above water .. by borrowing if necessary ... the government does not want anyone to drown .. the capitalist doesn't care who drowns .. and will not help.
The current administration doesn't give a damn about the country. Wealth redistribution is their goal,.......demonizing people that have money, which is joke since 0bama hangs with wealthy Democrats. He has nothing to say about how much money ( millions) actors are paid ( they're democrats). If you have money why are you obligated to spend it? Caring is the dem mantra,............they "care". No, they don't
well, currently there are plenty of wealthy with way more than they need , while at the same time there are plenty of poor struggling to maintain their daily needs.
IN this country, whatever money you have is your private business. Your possesions are your private business. Who are you or anyone including to govt to say someone has more than they need?
good luck with that position ?
why is your response a question?
the question mark is for the naivity of your statement..
.........................................?
the idea of whatever you have is of no ones concern .. ? we live in a civilization where inequality and unfairness is the subject of the day .. we are concerned with over wealth as well as poverty .. we strive for equality for all .
life has always been "unfair". Not everyone is equal,...........some are more intelligent, some have more ambition and drive than others. Some have a stronger work ethic. why are you concerned with "over wealtth"?
In a real free market system, price controls would be completely uneccesary, because competition would keep prices low and in check. When regulation like a "profit cap" are implemented, regulations determine how profitable a company or product can be. What happens then, is competition is removed from the equation, thus forcing prices up, because competition is effectively eliminated. If I can produce a widget for 1 dollar, and my profit is 10 cents, but a regulator tells me, you can only charge 90 cents, I make no profit, and am forced out of business. If my competitor charges 98 cents for the same widget, and his cost is 92 cents, but regulation put me out of business. Now the competition is free to charge 1.10 for the product, because he now has no competitor.
The Cap would only go on retail and wholesale , not on manufacturer .. does that help understand? so the manufacture is not affected by the quality of his product with a cap ..
What your proposal would do is limit what a person, or business, could profit. What would happen to a person that puts out risk, and capital? Their would be no reason for a person to take a risk, and no incentive to take a risk. If I am told what my maximum profit is going to be, why would i want to risk anything? I wouldn't take a risk, nor would anyone with common sense.
well, most employees are told what their wage is going to be ... and they still work ?
even at minimum wage they work ...
Of course. When I need to hire people I decide what I can pay them to remain profitable. If a person is willing to work at the price I set, fine. If not, the person is free to work for someone else.
A cap on sales profits is another way to say price controls. Any time price controls are implemented it distorts the equilibrium and causes supply problems.
Look toward the problem with the money supply and keeping interest rates to low for the cause of the bubbles - tech, RE and now commodities. We need to have a good discussion about how the Fed works. During the 80s Volcker with the help of Manny Johnson and Wayne Angell had us on a price rule which worked very well. It appears that Greenspan took us off sometime in 92 or 93 to try to pull us out of recession.
[Deleted]
Are you advocating a revenue cap or profit margin cap?
[Deleted]
So you want to limit the amount of profit a person can make? If so that would absolutely affect the supply of the product. Less profit potential would decrease the incentive for companies to build the product. Setting the profit would also decrease competition and keep prices higher a la the airline industry under regulation.
[Deleted]
So your capping their profit margin which would reduce the amount of retailers limited the availability of products?