Sunday, November 6, 2011


Economics can mimic nature in many ways.  Just like when a storm comes thru.  Bad thunderstorms can knock down trees and power.  Increasing strength in storms can have bigger impacts, look at what is happening in the northeast over a week after that snowstorm.  Earthquakes can leverage more intense havoc that takes longer to recover from.  Recent examples here are Haiti and the tsunami's from the Japanese earthquake.

Economically what we have been  trying to recover from for 4 years is in the same category as an earthquake or tsunami, it is going to take some time and things aren't going to be the same.  So, I wasn't so surprised when I came across this article in the Harvard Business Review:

The 2008 stock-market crash and subsequent recession significantly damaged U.S. companies' competitiveness, according to a team led by Gulser Meric of Rowan University that examined the financial characteristics of 334 top U.S. firms. On average, the companies' return-on-assets ratio dropped from 6.45% in 2007 to 4.17% in 2009, their total-assets-turnover ratio fell from 1.437 to 1.294, and their return-on-equity ratio dropped from 16.8% to 10.22%. All are factors in competitiveness, the authors say.

OK, so we had our knee's taken out and we need to invest to restore our competitiveness just like the Haitians and Japanese need to invest to rebuild from their natural disasters.  If we aren't doing this then how we will be able to compete effectively whenever a full recovery comes about.  But wait, if this what we should be doing, then why are corporations sitting on a ton of cash?

There is some investment in capital, but, one would presume this type of revamping would require additional workforce, and that is not happening either.  So, we have the proverbial 2+2=5.  We take a hit, are not as competitive, we should be investing and are not, and wonder why things don't seem right ???