One of the most important aspects of an Economically Responsible venture is its Investment to Jobs ratio. Like any important factor, the Investment to Jobs ratio of a venture requires a certain amount of examination to be properly valued.
Some ventures, such as real estate development, will produce a very high number of jobs per X amount of capital invested; however, the new jobs will be low wage and temporary construction jobs; therefore, the economic effect of the jobs created will be slight and temporary, significantly lowering the economic value of the venture. Ventures which create permanent hourly jobs will have a have a more significant positive economic effect than ventures which create temporary jobs in the same numbers, but less than ventures which create permanent jobs, and should be evaluated as such.
The ideal Economically Responsible venture creates a large number of permanent salaried positions for investment brought in, and is able to both sustain and expand that number with company profits.
For instance, my company – Multi Axis Games – creates 1 salaried position for every $175,000 invested for a total of 75 new salaried positions created during product development. Profits from the product then allow the company to create an additional 35 salaried positions during the first year after the product is released. By the end of the third post product launch year, even with pessimistic sales projections, the initial $13,500,000 investment has created 190 new, permanent, salaried jobs at a ratio of 1 permanent job created for every $71,000 invested.
Those 190 salaried employees are also 190 new middle class consumers, capable of buying houses, raising families, and generally increasing the amount of cash flow in the domestic economy.
Obviously, the Investment to Jobs ratio is an important determiner of a venture’s Economic Value. What are other important factors of an Economically Responsible venture?
Saturday, February 28, 2009
Thursday, February 26, 2009
American Business: What to Make?
We all know that this economy needs new businesses producing new jobs, new products, new services, and bringing new capital into the economy. So, what kind of businesses are best?
My Thoughts:
Software and Entertainment. Now, if you've visited the link to my business website you may think that I am simply being biased because I am now, and have been, trying to get an entertainment software company off the ground for the last three years; however, we did not stumble into the industry by accident. Our long term plans span decades, and when we decided what kind of business we wanted to act as the foundation for the rest of our lives, we asked ourselves some very serious questions:
1. How can we create the most sustaining and sustainable jobs for the enormous glut of unemployed or underutilized college educated Americans?
Software development requires one resource above all others: creative human labor. By pursuing software development as our business, we can focus more than 75% of the total product development budget on creating and sustaining new jobs. The best part is that software development jobs are exactly the type of jobs that people want. They are long term, salaried, accompanied by health benefits as well as being intellectually and creatively challenging.
2. How can we attract international consumers who will inject new capital into the economy?
Software and Entertainment are the United States best sellers in foreign markets. While global reliance on software is a new phenomenon, the United States has been successfully profiting from the export of entertainment for a century.
3. What product or service can we provide that will be profitable regardless of global economic conditions?
During the Great Depression of the 1930s, the entertainment industry flourished. Domestic and foreign consumers alike will give up any other luxury before they will stop purchasing quality entertainment.
4. What market can we revolutionize by discarding universally held, but incorrect assumptions?
It can be fairly simple to identify a market which is stagnating due to popular myths and the natural human tendency towards laziness. Just look for a product that's relatively new, very popular, and which offers limited competition. You'll find producers who are so happy with the easy profitability of their product that they would never dream of challenging the status quot or the false myths that created it. With a bit of research and common sense, suddenly you'll be writing a script for the first "talkie" and trying to convince investors that people really would like movies better if they could hear what was going on.
The poorly tapped goldmine that we have dedicated ourselves to tackling? Online Games. The potentially perfect merging of Software and Entertainment. Currently they are just arcade games mashed onto an IRC program (chat), but just wait until you see what they're like with color and sound (metaphorically).
Now, there is a universal 5th question to any new business brain storming session: how will we show investors how profitable our venture will be? Profit is the bottom line for any investor, and investment is the bottom line for any new business. How profitable are online games? Unimaginably. It takes less than 100,000 players to make a full scale online game profitable. This number is so easy to achieve that even games considered market failures still make money.
Sadly, U.S. investors in general do not understand the online game market and are reluctant to invest in such ventures. Therefore, currently other countries are dominating the market, and pulling those huge international profits into their own domestic economies.
But that's just my story. From my perspective Software and Entertainment look like the best possible linchpins for an economic revival in the United States.
What do you see?
My Thoughts:
Software and Entertainment. Now, if you've visited the link to my business website you may think that I am simply being biased because I am now, and have been, trying to get an entertainment software company off the ground for the last three years; however, we did not stumble into the industry by accident. Our long term plans span decades, and when we decided what kind of business we wanted to act as the foundation for the rest of our lives, we asked ourselves some very serious questions:
1. How can we create the most sustaining and sustainable jobs for the enormous glut of unemployed or underutilized college educated Americans?
Software development requires one resource above all others: creative human labor. By pursuing software development as our business, we can focus more than 75% of the total product development budget on creating and sustaining new jobs. The best part is that software development jobs are exactly the type of jobs that people want. They are long term, salaried, accompanied by health benefits as well as being intellectually and creatively challenging.
2. How can we attract international consumers who will inject new capital into the economy?
Software and Entertainment are the United States best sellers in foreign markets. While global reliance on software is a new phenomenon, the United States has been successfully profiting from the export of entertainment for a century.
3. What product or service can we provide that will be profitable regardless of global economic conditions?
During the Great Depression of the 1930s, the entertainment industry flourished. Domestic and foreign consumers alike will give up any other luxury before they will stop purchasing quality entertainment.
4. What market can we revolutionize by discarding universally held, but incorrect assumptions?
It can be fairly simple to identify a market which is stagnating due to popular myths and the natural human tendency towards laziness. Just look for a product that's relatively new, very popular, and which offers limited competition. You'll find producers who are so happy with the easy profitability of their product that they would never dream of challenging the status quot or the false myths that created it. With a bit of research and common sense, suddenly you'll be writing a script for the first "talkie" and trying to convince investors that people really would like movies better if they could hear what was going on.
The poorly tapped goldmine that we have dedicated ourselves to tackling? Online Games. The potentially perfect merging of Software and Entertainment. Currently they are just arcade games mashed onto an IRC program (chat), but just wait until you see what they're like with color and sound (metaphorically).
Now, there is a universal 5th question to any new business brain storming session: how will we show investors how profitable our venture will be? Profit is the bottom line for any investor, and investment is the bottom line for any new business. How profitable are online games? Unimaginably. It takes less than 100,000 players to make a full scale online game profitable. This number is so easy to achieve that even games considered market failures still make money.
Sadly, U.S. investors in general do not understand the online game market and are reluctant to invest in such ventures. Therefore, currently other countries are dominating the market, and pulling those huge international profits into their own domestic economies.
But that's just my story. From my perspective Software and Entertainment look like the best possible linchpins for an economic revival in the United States.
What do you see?
Wednesday, February 25, 2009
American Business, What Went Wrong
With the second round of big money government bailouts coming through, many Americans are asking: how did this happen? They went to work, they paid their bills, they paid their taxes, so why is the economy in the toilet?
I've already posted a History Lesson for people that are willing to put in the time to get a long view of the situation, but in 2009 information comes at us so fast and with so little effort, I know that most people will want the short version. The History Lesson shows the fluctuations of the economy over more than 100 years. Here's the summary of the last twenty-five:
First, we need to accept that what went wrong was not confined to America. We are no longer an isolated community with an independent economy. We are a vital part of a global economy that has run off the rails.
What went wrong?
In the 1980s computers created a significant change to investing and the stock market. Computers not only made normal trading easier, they created the ability to trade whole markets, and to trade in new complex ways because humans no longer needed to perform the complex mathematics needed to accomplish such trades. Those who understood a bit about the market and about this transition began encouraging those without said understanding to indulge in magical thinking.
The whole emphasis of investment shifted from employer/producer business to get rich quick schemes. Ordinary investors (doctors, lawyers, and successful professionals of all stripes) stopped wanting to do the hard work of identifying solid businesses with great ideas to be nurtured and began looking strictly for investments with a turn around of mere months and returns of upwards of 500%. This shift in the way investors select their investments starved the very foundation of our economy - new business - and fed the cancer which rots away all wealth - con artistry.
Where are the jobs? Where are the products and services? Where is our stable economy? They are exactly where we left them - dying of neglect next to hundreds of potentially outstanding businesses passed over in favor of short term schemes.
When we stop looking for easy money and start taking responsibility for investing in long term, sustainable solutions, then we will have some hope of resuscitating our ailing economy.
I've already posted a History Lesson for people that are willing to put in the time to get a long view of the situation, but in 2009 information comes at us so fast and with so little effort, I know that most people will want the short version. The History Lesson shows the fluctuations of the economy over more than 100 years. Here's the summary of the last twenty-five:
First, we need to accept that what went wrong was not confined to America. We are no longer an isolated community with an independent economy. We are a vital part of a global economy that has run off the rails.
What went wrong?
In the 1980s computers created a significant change to investing and the stock market. Computers not only made normal trading easier, they created the ability to trade whole markets, and to trade in new complex ways because humans no longer needed to perform the complex mathematics needed to accomplish such trades. Those who understood a bit about the market and about this transition began encouraging those without said understanding to indulge in magical thinking.
The whole emphasis of investment shifted from employer/producer business to get rich quick schemes. Ordinary investors (doctors, lawyers, and successful professionals of all stripes) stopped wanting to do the hard work of identifying solid businesses with great ideas to be nurtured and began looking strictly for investments with a turn around of mere months and returns of upwards of 500%. This shift in the way investors select their investments starved the very foundation of our economy - new business - and fed the cancer which rots away all wealth - con artistry.
Where are the jobs? Where are the products and services? Where is our stable economy? They are exactly where we left them - dying of neglect next to hundreds of potentially outstanding businesses passed over in favor of short term schemes.
When we stop looking for easy money and start taking responsibility for investing in long term, sustainable solutions, then we will have some hope of resuscitating our ailing economy.
Tuesday, February 24, 2009
Investing Wisely
In truth, our domestic economic health can be determined by looking at a few key points:
What are we investing in?
The we in this question refers to all United States citizens with spare cash. If you purchase a lottery ticket, you are investing in the government. If you purchase a glass of lemonade from your neighbor's kid, you are investing in their lemonade stand. Any time you voluntarily spend money on something other than a good or service, you are investing in something.
It is important to look at how we all invest. Some kinds of investments have a direct negative effect on our shared economy by reducing the amount of cash in healthy circulation.
Symptoms of an Economy Killing Investment:
-The invested capital will be spent in another country.
-The invested capital will not be used to create goods or services.
-The invested capital will not create or sustain jobs in the United States.
Symptoms of an Economy Building Investment:
-The invested capital will be spent in the United States.
-The invested capital will be used to create goods or services, particularly if those goods or services are likely to be popular in other countries.
-The invested capital will be used to create sustaining and sustainable jobs in the United States.
How efficiently are we producing goods?
Wasteful practices in production equates to wasted capital. If a company uses twice the amount of capital to produce a product than is necessary to create that product at that quality level, then the company is absorbing capital out of the economy that might otherwise be invested in ways which would build the economy - such as a more efficient businesses.
What quality level are the goods we're producing?
If the goods we are producing are not of a high enough quality to appeal to consumers in the global market then they are of limited value to the economy.
Are we obtaining the components and resources to produce our goods domestically?
Any time a business is reliant on components or resources that cannot be obtained in the United States, they are leaking capital out of the economy and leaving themselves vulnerable to political fluctuations elsewhere.
How popular are our goods and services internationally?
It is important to remember that appealing to international consumers is the only way to achieve a thriving economy. While businesses which create jobs, products, and services that have appeal within the United States are in no way a drain on the economy (provided that they are efficient), they are also not bringing any new money into the economy.
What are we investing in?
The we in this question refers to all United States citizens with spare cash. If you purchase a lottery ticket, you are investing in the government. If you purchase a glass of lemonade from your neighbor's kid, you are investing in their lemonade stand. Any time you voluntarily spend money on something other than a good or service, you are investing in something.
It is important to look at how we all invest. Some kinds of investments have a direct negative effect on our shared economy by reducing the amount of cash in healthy circulation.
Symptoms of an Economy Killing Investment:
-The invested capital will be spent in another country.
-The invested capital will not be used to create goods or services.
-The invested capital will not create or sustain jobs in the United States.
Symptoms of an Economy Building Investment:
-The invested capital will be spent in the United States.
-The invested capital will be used to create goods or services, particularly if those goods or services are likely to be popular in other countries.
-The invested capital will be used to create sustaining and sustainable jobs in the United States.
How efficiently are we producing goods?
Wasteful practices in production equates to wasted capital. If a company uses twice the amount of capital to produce a product than is necessary to create that product at that quality level, then the company is absorbing capital out of the economy that might otherwise be invested in ways which would build the economy - such as a more efficient businesses.
What quality level are the goods we're producing?
If the goods we are producing are not of a high enough quality to appeal to consumers in the global market then they are of limited value to the economy.
Are we obtaining the components and resources to produce our goods domestically?
Any time a business is reliant on components or resources that cannot be obtained in the United States, they are leaking capital out of the economy and leaving themselves vulnerable to political fluctuations elsewhere.
How popular are our goods and services internationally?
It is important to remember that appealing to international consumers is the only way to achieve a thriving economy. While businesses which create jobs, products, and services that have appeal within the United States are in no way a drain on the economy (provided that they are efficient), they are also not bringing any new money into the economy.
History Lesson
I've been reading and responding to a lot of blogs lately and I've noticed that a lot of people are really confused as to how the economy got to this point. What follows is a brief time line from 1900 to present.
I could not possibly include everything that happened, or even everything that's important, but I've tried to include enough information to grant a foundation of understanding to those wanting to educate themselves so as to make a better plan for the future.
I have offered my conclusions at the end of the time line. Please feel free to comment and/or draw your own conclusions. I am far from flawless and welcome discussion of these important issues.
1900
The United States is an isolationist nation of hicks. We are known for growing food and keeping our nose out of other people's business. Our international interference is limited to Central and South America, which World Powers consider to be a wilderness, so it doesn't count.
Most of the Major World Powers are Empires, and none of them like the others much. They compete economically, through the size and strength of their militaries, and through the acquisition and holding of "colonies". These colonies and World Powers form interconnected relationships through treaties.
-----------------
1903
The Wright Brothers make their first successful test flights of their self-powered flying machine. This develops into the first stable, sustainable, controllable aircraft by 1905.
-----------------
1911
Frederick Winslow Taylor releases a monograph titled The Principles of Scientific Management which puts forth the idea that the way work is done effects the productivity of that work.
-----------------
1913
Ford Motor Company finishes the development of the moving assembly line, reducing the time to assemble a vehicle from 12.5 hours to 2.5 hours and later to 1.5 hours each, which results in an enormous increase in total production and sets an example for all future industrial production.
-----------------
1914
A Bosnian Student (Serb) shoots and kills Archduke Franz Ferdinand, heir to the Austro-Hungarian throne. What might have been a war between Austro-Hungry and Serbia escalates due to the treaties interconnecting the vast majority of World Powers, resulting in WWI (The Great War).
-----------------
1915
German UBoat sinks Lusitania, a British passenger liner with more than 100 United States Citizens on board. Woodrow Wilson, the President of the United States, declares "America is too proud to fight" and later wins reelection based on keeping a still isolationist United States out of the war.
-----------------
1917
British Intelligence intercepts a German telegram to Mexican officials offering support for an invasion of the United States. President Woodrow Wilson releases the telegram to the public and gains sufficient public support to declare war on Germany.
-----------------
1918
January 8th, President Wilson releases his 14 Points to justify to the American people that they were entering a moral war. The 14 Points become famous throughout the world. Men and women memorize the points, write them on their bodies, and hold them up as the foundation for a new era. They later become the basis of Germany's surrender.
Highlights of the 14 Points include: International Diplomacy being made Public; Freedom of navigation on all seas; The removal of economic barriers between nations; Reduction of arms in all nations to the minimum needed for national security; among others.
The United States drafts 4 million men into the military, shipping approximately 10,000 troupes each day to the front in France in support of the Allies. Known as "Doe Boys", American troupes are generally untrained farm boys who die quick grisly deaths in the trenches, but pour forth in such numbers that the Allies are able to defeat the Central Powers by the end of the year. In total, 70 million men are mobilized for the war, 15 million die.
-----------------
1919
The Treaty of Versailles establishes peace, relies on the newly created League of Nations to oversee all parties with the assumption that the United States will provide the military arm of the League given that the League was envisioned and brought into being by President Woodrow Wilson.
Isolationism returns to the United States, Congress refuses to join the League of Nations, leaving said body powerless. European powers are left economically ruined by the War and with no clear guarantees for future arbitration from the League.
The United States is left with huge surpluses from the war, having established itself as a major supplier of goods and resources during the war, and having its industrial centers totally intact in a world mostly destroyed by conflict.
-----------------
1920 - 1928
The Roaring Twenties. The United States becomes a cultural center for the first time, and experiences an economic boom due to its supply of manufactured products to devastated European countries. As European economies collapse under the weight of debt, United States investors pour money into Europe to sustain the massive profits received by the United States through the sale of goods to these countries.
-----------------
1929
Currency trading and speculation on European debt accelerates into frenzy. Internationally banks fail under the weight of currency hording and trading as well as current and projected debt. Investors react with opportunism and panic resulting in a market peak in September followed by a series of Black Days (market collapse) in the dominant stock exchange - the New York Stock Exchange - which had achieved its dominance due to the economic dominance of the United States after WWI.
The Great Depression Begins.
-----------------
1930
As United States citizens attempt to recover from the stock market collapse and resulting deflation by cutting spending (approximately by 10%), a massive draught destroys farmland throughout the Midwest. The U.S. government reacts to falling prices and rising unemployment by raising tariffs on goods from other countries.
-----------------
1931
Unemployment continues to rise, prices and wages drop. Japan invades Manchuria.
-----------------
1933
Protectionist policies such as high tariffs result in the collapse of international trade. Franklin Delano Roosevelt is inaugurated as the President of the United States. FDR introduces the New Deal, an economic policy package developed to bolster the economy and grant relief to United States workers.
The First New Deal includes Bank reform law, Industrial reform, emergency relief programs, worker relief programs, and brings an end to Prohibition and the Gold Standard.
Adolf Hitler becomes the leader of Germany.
-----------------
1935
The Second New Deal includes labor union support, the introduction of Social Security, and farmer aid programs.
*note: while the majority of the New Deal policies are reversed by the Conservative Coalition during the 1940s some policies survive including Social Security, the Securities and Exchange Commission, and the Federal Housing Administration.
-----------------
1936
Germany re militarizes the Rhineland in violation of the Treaty of Versailles. Civil war breaks out in Spain, Hitler's Germany and Mussolini's Italy support the nationalist forces.
-----------------
1937
Japan launches a full scale invasion of China.
-----------------
1938
The last chapter of the New Deal is introduced as the Fair Labor Standards Act of 1938 which limits the maximum number of hours and establishes a minimum wage for most workers.
Germany annexes Austria and lays claim to Czechoslovakia.
-----------------
1939
Germany invades Poland. Germany and the USSR enter a trade agreement. The Soviet Union invades Finland and is expelled from the League of Nations.
The Great Depression continues through this time. Business which manages to thrive throughout include inexpensive sweets (such as Hershey's), motor vehicle manufacturing (such as Ford), mass distribution based retail (such as Sears), and most forms of entertainment (such as radio, movie theaters, and movie productions).
-----------------
1940
Germany invades Norway and Denmark. The USSR fully occupies the Baltic States. British Prime Minister Neville Chamberlain is replaced by Winston Churchill; on the same day, Germany invades France, Belgium, and the Netherlands. Italy invades France and declares war on Britain. Germany subdues France and dominates Britain in the air and on the seas. The United States expands its Navy and enters an agreement with Britain to trade U.S. Destroyers to the British Navy, but does not enter the conflict.
Germany, Italy, and Japan formalize their military alliance. The USSR attempts to join the alliance, but only economic alliance is accepted by Germany.
The Japan-China conflict continues in stalemate.
United States Federal deficit is 52.4$ of the GDP.
-----------------
1941
The USSR signs a neutrality pact with Germany. Germany invades the USSR in the summer, after which the USSR enters a military alliance with Britain and they jointly invade Iran, drastically reducing Germany's access to oil.
Britain succeeds in deciphering German Naval communications encrypted using Enigma machines and maintains an intelligence advantage over Germany for the duration of the war.
In November, British forces reclaim much of the gains made by German and Italian forces.
Japan demands oil from India, but talks break down. Japan moves troupes into Indochina to exert more force on India. The United States responds by cutting off all supplies of oil to Japan. Up until this point, the United States had supplied 80% of Japan's oil.
In December, Japan attacks Pearl Harbor as well as Dutch and British holdings, causing the Western Allies, China, and the United States to all formally declare war on Japan.
United States Federal deficit is 50.4% of the GDP.
-----------------
1942
Japan conquers Burma, the Philippines, Malaya, the Dutch East Indies, and Singapore, as well as winning many important naval victories.
Germany sinks a significant number of United States naval vessels utilizing their U-Boats, and move forward on all land fronts during the first half of the year.
The United States Federal deficit is 54.9% of the GDP.
-----------------
1943
Allied forces regain control of North Africa by May, and successfully move up through Italy by late summer.
The United States Federal deficit is 79.1% of the GDP.
-----------------
1944
The USSR expels German forces, ending one of the most lethal sieges in history. The Allies' Operation Overlord (joint counter-invasion of Europe) is successful. Allied Western forces and USSR forces press in on German troupes from all sides. Occupied areas revolt and join Allied forces.
The United States Federal deficit is 97.6% of the GDP.
-----------------
1945
United States President, Franklin Delano Roosevelt, dies and is succeeded by Harry Truman. German forces surrender. United States forces make significant gains in the Pacific front against Japan. Japan refuses to surrender until after the United States drop two Atomic Bombs on Japanese cities.
The Allies form the United Nations to maintain international peace.
By the end of the war the United States is producing approximately one half of all industrial goods in the world.
The United States Federal deficit is 117.5% of the GDP.
-----------------
1945 - 1969
The economic prosperity in the United States due to its production of the major portion of all industrial goods in the world maintains throughout this period with emphasis on investing in new businesses and innovations in technology and chemistry including a large number of products derived from fossil fuels, such as plastic.
The United States Federal deficit goes from 121.7% to 38.6% of the GDP.
-----------------
1970 - 1973
Inflation and unemployment re-enter the United States economy as oil prices fluctuate and oil based products vacillate in profitability. The United States begins to enter trade deficits with other nations which continues indefinitely; the GDP drops 3.1%.
The United States Federal deficit goes from 37.6% to 35.7% of the GDP.
-----------------
1974 - 1979
The United States experiences slight growth in the GDP.
The United States Federal deficit goes from 33.6% to 33.2% of the GDP.
-----------------
1980 - 1982
The United States experiences a recession as the GDP drops 2.9%.
The United States Federal deficit goes from 33.3% to 35.2% of the GDP.
-----------------
1983 - 1989
Credit cards and mortgages become common place. Desktop computers become the new wizards of the financial world.
The United States Federal deficit goes from 39.9% to 53.1% of the GDP.
-----------------
1990
The United Nations authorizes an attack on Iraq by coalition forces in response to Iraq's invasion of Kuwait. Diplomatically these forces represent 34 allied countries; in reality these forces are made up mostly of British and United States troupes.
The United States Federal deficit is 55.9% of the GDP.
-----------------
1991 - 1992
The United Nations assault on Iraq is overwhelmingly successful. UN forces experience only 189 casualties, 113 of which are United States troupes.
The United States Federal deficit goes from 60.6% to 64.1% of the GDP.
-----------------
1993 - 2000
Bill Clinton becomes the President of the United States. Personal computers become common place. The internet spreads from Universities, the Military, and business into individual homes. Stock market trading becomes common place. DotCom businesses flourish.
The United States Federal deficit goes from 66.2% to 58% of the GDP.
-----------------
2001
George W. Bush becomes the President of the United States. Members of a radical religious group crash aircraft into the World Trade Centers and the Pentagon. President Bush declares a War on Terror.
The United States Federal deficit is 57.4% of the GDP.
-----------------
2002 - 2006
The United States launches military attacks on Afghanistan and Iraq. Iraqi dictator Saddam Husain's is captured, tried, and executed. House "flipping" becomes the most popular "small business" in the United States. Real estate prices soar. Deregulated banking practices allow the continual repackaging and reselling of debt.
The United States Federal deficit goes from 59.7% to 64.7% of the GDP.
-----------------
Conclusion
While many put forth that economic crisis is inevitable and that war is the solution, careful examination of actual influences on the domestic economy shows a different story.
In truth, our domestic economic health can be determined by looking at a few key points:
What are we investing in?
The we in this question refers to all United States citizens with spare cash. If you purchase a lottery ticket, you are investing in the government. If you purchase a glass of lemonade from your neighbor's kid, you are investing in their lemonade stand. Any time you voluntarily spend money on something other than a good or service, you are investing in something.
It is important to look at how we all invest. Some kinds of investments have a direct negative effect on our shared economy by reducing the amount of cash in healthy circulation.
Symptoms of an Economy Killing Investment:
-The invested capital will be spent in another country.
-The invested capital will not be used to create goods or services.
-The invested capital will not create or sustain jobs in the United States.
Symptoms of an Economy Building Investment:
-The invested capital will be spent in the United States.
-The invested capital will be used to create goods or services, particularly if those goods or services are likely to be popular in other countries.
-The invested capital will be used to create sustaining and sustainable jobs in the United States.
How efficiently are we producing goods?
Wasteful practices in production equates to wasted capital. If a company uses twice the amount of capital to produce a product than is necessary to create that product at that quality level, then the company is absorbing capital out of the economy that might otherwise be invested in ways which would build the economy - such as a more efficient businesses.
What quality level are the goods we're producing?
If the goods we are producing are not of a high enough quality to appeal to consumers in the global market then they are of limited value to the economy.
Are we obtaining the components and resources to produce our goods domestically?
Any time a business is reliant on components or resources that cannot be obtained in the United States, they are leaking capital out of the economy and leaving themselves vulnerable to political fluctuations elsewhere.
How popular are our goods and services internationally?
It is important to remember that appealing to international consumers is the only way to achieve a thriving economy. While businesses which create jobs, products, and services that have appeal within the United States are in no way a drain on the economy (provided that they are efficient), they are also not bringing any new money into the economy.
I could not possibly include everything that happened, or even everything that's important, but I've tried to include enough information to grant a foundation of understanding to those wanting to educate themselves so as to make a better plan for the future.
I have offered my conclusions at the end of the time line. Please feel free to comment and/or draw your own conclusions. I am far from flawless and welcome discussion of these important issues.
1900
The United States is an isolationist nation of hicks. We are known for growing food and keeping our nose out of other people's business. Our international interference is limited to Central and South America, which World Powers consider to be a wilderness, so it doesn't count.
Most of the Major World Powers are Empires, and none of them like the others much. They compete economically, through the size and strength of their militaries, and through the acquisition and holding of "colonies". These colonies and World Powers form interconnected relationships through treaties.
-----------------
1903
The Wright Brothers make their first successful test flights of their self-powered flying machine. This develops into the first stable, sustainable, controllable aircraft by 1905.
-----------------
1911
Frederick Winslow Taylor releases a monograph titled The Principles of Scientific Management which puts forth the idea that the way work is done effects the productivity of that work.
-----------------
1913
Ford Motor Company finishes the development of the moving assembly line, reducing the time to assemble a vehicle from 12.5 hours to 2.5 hours and later to 1.5 hours each, which results in an enormous increase in total production and sets an example for all future industrial production.
-----------------
1914
A Bosnian Student (Serb) shoots and kills Archduke Franz Ferdinand, heir to the Austro-Hungarian throne. What might have been a war between Austro-Hungry and Serbia escalates due to the treaties interconnecting the vast majority of World Powers, resulting in WWI (The Great War).
-----------------
1915
German UBoat sinks Lusitania, a British passenger liner with more than 100 United States Citizens on board. Woodrow Wilson, the President of the United States, declares "America is too proud to fight" and later wins reelection based on keeping a still isolationist United States out of the war.
-----------------
1917
British Intelligence intercepts a German telegram to Mexican officials offering support for an invasion of the United States. President Woodrow Wilson releases the telegram to the public and gains sufficient public support to declare war on Germany.
-----------------
1918
January 8th, President Wilson releases his 14 Points to justify to the American people that they were entering a moral war. The 14 Points become famous throughout the world. Men and women memorize the points, write them on their bodies, and hold them up as the foundation for a new era. They later become the basis of Germany's surrender.
Highlights of the 14 Points include: International Diplomacy being made Public; Freedom of navigation on all seas; The removal of economic barriers between nations; Reduction of arms in all nations to the minimum needed for national security; among others.
The United States drafts 4 million men into the military, shipping approximately 10,000 troupes each day to the front in France in support of the Allies. Known as "Doe Boys", American troupes are generally untrained farm boys who die quick grisly deaths in the trenches, but pour forth in such numbers that the Allies are able to defeat the Central Powers by the end of the year. In total, 70 million men are mobilized for the war, 15 million die.
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1919
The Treaty of Versailles establishes peace, relies on the newly created League of Nations to oversee all parties with the assumption that the United States will provide the military arm of the League given that the League was envisioned and brought into being by President Woodrow Wilson.
Isolationism returns to the United States, Congress refuses to join the League of Nations, leaving said body powerless. European powers are left economically ruined by the War and with no clear guarantees for future arbitration from the League.
The United States is left with huge surpluses from the war, having established itself as a major supplier of goods and resources during the war, and having its industrial centers totally intact in a world mostly destroyed by conflict.
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1920 - 1928
The Roaring Twenties. The United States becomes a cultural center for the first time, and experiences an economic boom due to its supply of manufactured products to devastated European countries. As European economies collapse under the weight of debt, United States investors pour money into Europe to sustain the massive profits received by the United States through the sale of goods to these countries.
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1929
Currency trading and speculation on European debt accelerates into frenzy. Internationally banks fail under the weight of currency hording and trading as well as current and projected debt. Investors react with opportunism and panic resulting in a market peak in September followed by a series of Black Days (market collapse) in the dominant stock exchange - the New York Stock Exchange - which had achieved its dominance due to the economic dominance of the United States after WWI.
The Great Depression Begins.
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1930
As United States citizens attempt to recover from the stock market collapse and resulting deflation by cutting spending (approximately by 10%), a massive draught destroys farmland throughout the Midwest. The U.S. government reacts to falling prices and rising unemployment by raising tariffs on goods from other countries.
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1931
Unemployment continues to rise, prices and wages drop. Japan invades Manchuria.
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1933
Protectionist policies such as high tariffs result in the collapse of international trade. Franklin Delano Roosevelt is inaugurated as the President of the United States. FDR introduces the New Deal, an economic policy package developed to bolster the economy and grant relief to United States workers.
The First New Deal includes Bank reform law, Industrial reform, emergency relief programs, worker relief programs, and brings an end to Prohibition and the Gold Standard.
Adolf Hitler becomes the leader of Germany.
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1935
The Second New Deal includes labor union support, the introduction of Social Security, and farmer aid programs.
*note: while the majority of the New Deal policies are reversed by the Conservative Coalition during the 1940s some policies survive including Social Security, the Securities and Exchange Commission, and the Federal Housing Administration.
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1936
Germany re militarizes the Rhineland in violation of the Treaty of Versailles. Civil war breaks out in Spain, Hitler's Germany and Mussolini's Italy support the nationalist forces.
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1937
Japan launches a full scale invasion of China.
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1938
The last chapter of the New Deal is introduced as the Fair Labor Standards Act of 1938 which limits the maximum number of hours and establishes a minimum wage for most workers.
Germany annexes Austria and lays claim to Czechoslovakia.
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1939
Germany invades Poland. Germany and the USSR enter a trade agreement. The Soviet Union invades Finland and is expelled from the League of Nations.
The Great Depression continues through this time. Business which manages to thrive throughout include inexpensive sweets (such as Hershey's), motor vehicle manufacturing (such as Ford), mass distribution based retail (such as Sears), and most forms of entertainment (such as radio, movie theaters, and movie productions).
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1940
Germany invades Norway and Denmark. The USSR fully occupies the Baltic States. British Prime Minister Neville Chamberlain is replaced by Winston Churchill; on the same day, Germany invades France, Belgium, and the Netherlands. Italy invades France and declares war on Britain. Germany subdues France and dominates Britain in the air and on the seas. The United States expands its Navy and enters an agreement with Britain to trade U.S. Destroyers to the British Navy, but does not enter the conflict.
Germany, Italy, and Japan formalize their military alliance. The USSR attempts to join the alliance, but only economic alliance is accepted by Germany.
The Japan-China conflict continues in stalemate.
United States Federal deficit is 52.4$ of the GDP.
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1941
The USSR signs a neutrality pact with Germany. Germany invades the USSR in the summer, after which the USSR enters a military alliance with Britain and they jointly invade Iran, drastically reducing Germany's access to oil.
Britain succeeds in deciphering German Naval communications encrypted using Enigma machines and maintains an intelligence advantage over Germany for the duration of the war.
In November, British forces reclaim much of the gains made by German and Italian forces.
Japan demands oil from India, but talks break down. Japan moves troupes into Indochina to exert more force on India. The United States responds by cutting off all supplies of oil to Japan. Up until this point, the United States had supplied 80% of Japan's oil.
In December, Japan attacks Pearl Harbor as well as Dutch and British holdings, causing the Western Allies, China, and the United States to all formally declare war on Japan.
United States Federal deficit is 50.4% of the GDP.
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1942
Japan conquers Burma, the Philippines, Malaya, the Dutch East Indies, and Singapore, as well as winning many important naval victories.
Germany sinks a significant number of United States naval vessels utilizing their U-Boats, and move forward on all land fronts during the first half of the year.
The United States Federal deficit is 54.9% of the GDP.
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1943
Allied forces regain control of North Africa by May, and successfully move up through Italy by late summer.
The United States Federal deficit is 79.1% of the GDP.
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1944
The USSR expels German forces, ending one of the most lethal sieges in history. The Allies' Operation Overlord (joint counter-invasion of Europe) is successful. Allied Western forces and USSR forces press in on German troupes from all sides. Occupied areas revolt and join Allied forces.
The United States Federal deficit is 97.6% of the GDP.
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1945
United States President, Franklin Delano Roosevelt, dies and is succeeded by Harry Truman. German forces surrender. United States forces make significant gains in the Pacific front against Japan. Japan refuses to surrender until after the United States drop two Atomic Bombs on Japanese cities.
The Allies form the United Nations to maintain international peace.
By the end of the war the United States is producing approximately one half of all industrial goods in the world.
The United States Federal deficit is 117.5% of the GDP.
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1945 - 1969
The economic prosperity in the United States due to its production of the major portion of all industrial goods in the world maintains throughout this period with emphasis on investing in new businesses and innovations in technology and chemistry including a large number of products derived from fossil fuels, such as plastic.
The United States Federal deficit goes from 121.7% to 38.6% of the GDP.
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1970 - 1973
Inflation and unemployment re-enter the United States economy as oil prices fluctuate and oil based products vacillate in profitability. The United States begins to enter trade deficits with other nations which continues indefinitely; the GDP drops 3.1%.
The United States Federal deficit goes from 37.6% to 35.7% of the GDP.
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1974 - 1979
The United States experiences slight growth in the GDP.
The United States Federal deficit goes from 33.6% to 33.2% of the GDP.
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1980 - 1982
The United States experiences a recession as the GDP drops 2.9%.
The United States Federal deficit goes from 33.3% to 35.2% of the GDP.
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1983 - 1989
Credit cards and mortgages become common place. Desktop computers become the new wizards of the financial world.
The United States Federal deficit goes from 39.9% to 53.1% of the GDP.
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1990
The United Nations authorizes an attack on Iraq by coalition forces in response to Iraq's invasion of Kuwait. Diplomatically these forces represent 34 allied countries; in reality these forces are made up mostly of British and United States troupes.
The United States Federal deficit is 55.9% of the GDP.
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1991 - 1992
The United Nations assault on Iraq is overwhelmingly successful. UN forces experience only 189 casualties, 113 of which are United States troupes.
The United States Federal deficit goes from 60.6% to 64.1% of the GDP.
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1993 - 2000
Bill Clinton becomes the President of the United States. Personal computers become common place. The internet spreads from Universities, the Military, and business into individual homes. Stock market trading becomes common place. DotCom businesses flourish.
The United States Federal deficit goes from 66.2% to 58% of the GDP.
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2001
George W. Bush becomes the President of the United States. Members of a radical religious group crash aircraft into the World Trade Centers and the Pentagon. President Bush declares a War on Terror.
The United States Federal deficit is 57.4% of the GDP.
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2002 - 2006
The United States launches military attacks on Afghanistan and Iraq. Iraqi dictator Saddam Husain's is captured, tried, and executed. House "flipping" becomes the most popular "small business" in the United States. Real estate prices soar. Deregulated banking practices allow the continual repackaging and reselling of debt.
The United States Federal deficit goes from 59.7% to 64.7% of the GDP.
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Conclusion
While many put forth that economic crisis is inevitable and that war is the solution, careful examination of actual influences on the domestic economy shows a different story.
In truth, our domestic economic health can be determined by looking at a few key points:
What are we investing in?
The we in this question refers to all United States citizens with spare cash. If you purchase a lottery ticket, you are investing in the government. If you purchase a glass of lemonade from your neighbor's kid, you are investing in their lemonade stand. Any time you voluntarily spend money on something other than a good or service, you are investing in something.
It is important to look at how we all invest. Some kinds of investments have a direct negative effect on our shared economy by reducing the amount of cash in healthy circulation.
Symptoms of an Economy Killing Investment:
-The invested capital will be spent in another country.
-The invested capital will not be used to create goods or services.
-The invested capital will not create or sustain jobs in the United States.
Symptoms of an Economy Building Investment:
-The invested capital will be spent in the United States.
-The invested capital will be used to create goods or services, particularly if those goods or services are likely to be popular in other countries.
-The invested capital will be used to create sustaining and sustainable jobs in the United States.
How efficiently are we producing goods?
Wasteful practices in production equates to wasted capital. If a company uses twice the amount of capital to produce a product than is necessary to create that product at that quality level, then the company is absorbing capital out of the economy that might otherwise be invested in ways which would build the economy - such as a more efficient businesses.
What quality level are the goods we're producing?
If the goods we are producing are not of a high enough quality to appeal to consumers in the global market then they are of limited value to the economy.
Are we obtaining the components and resources to produce our goods domestically?
Any time a business is reliant on components or resources that cannot be obtained in the United States, they are leaking capital out of the economy and leaving themselves vulnerable to political fluctuations elsewhere.
How popular are our goods and services internationally?
It is important to remember that appealing to international consumers is the only way to achieve a thriving economy. While businesses which create jobs, products, and services that have appeal within the United States are in no way a drain on the economy (provided that they are efficient), they are also not bringing any new money into the economy.
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