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Thread: Hostess employees shoot selves in head

  1. #1
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    Hostess employees shoot selves in head

    Striking workers defy Hostess' demands

    Striking workers defy Hostess' demands

    The maker of Twinkies and Wonder Bread is expected to announce Friday whether it will follow through on a threat to liquidate

    10:27PM EST November 15. 2012 - INDIANAPOLIS -- Striking Hostess Brands workers remained on the picket lines across the country Thursday night, refusing a company ultimatum to return to work or face the liquidation of the national baker.

    The maker of Twinkies, Ding Dongs and Wonder Bread warned it would file a motion in U.S. Bankruptcy Court to shutter operations if enough workers didn't end their weeklong strike by 5 p.m. EST Thursday.

    The company is expected announce Friday whether it will follow through on that strategy. A shutdown would result in the loss of about 18,000 jobs.

    Hostess, based in Irving, Texas, already has reached a contract agreement while in bankruptcy with its largest union, the International Brotherhood of Teamsters. But thousands of members in its second biggest union went on strike late last week after rejecting a contract offer that cut wages and benefits.
    This is a big deal locally because they are one of the biggest local employers.

    I don't think that their threat to liquidate is just a threat...I think it is an economic reality.

    Their bankruptcy judge canceled their union contracts. The teamsters negotiated a new one that the judge approved (and face it, if the teamsters are more reasonable than you, you are just flat out insane). The bakery workers, though, were not willing to take the pay deal, they are pushing for reinstatement of their pension fund....from a company that is in its second bankruptcy in 4 years. Yea...thats going to happen.

    As I understand it from talking to some of the local soon to be unemployed button pushers, they are basically hoping that the company will liquidate, sell of their brands and facilities, and they will fire right back up under new management with higher wages and their pension fund restored (good luck with that one).

    I cant help but be amazed at how stupid these people are. Say for a minute that you decided you were going to buy wonder bread (the big product they make locally). There are 5 factories in the US that make wonder bread. Are you going to buy the one where the workers went on strike and drove forced their employer into liquidation?? I sure as hell would not. If I did, EVERY SINGLE ONE of those previous union employees would be blacklisted. I would bring the (non union) management back and staff the entire place with Mexicans with dodgy paperwork and Somalian refugees.

    I just cant imagine how foolish you would have to be to do what these people are doing. They had a real opportunity there. What the company was asking for was an 8% pay cut, but they would get 4% of that back in the first 4 years, plus 2 seats on the board for the union, and a 25% stake. 2 seats on the board and a 25% stake puts you in a pretty good position to renegotiate once the company emerges from bankruptcy and is profitable again.

    Instead, they are forcing them into liquidation where the BEST CASE scenario is that they MIGHT manage to sell the facilities as bakery facilities and MAYBE the new buyer will be dumb enough to hire a bunch of union workers who just forced their last employer into liquidation. The big problem I see with that plan is that the facilities would cost tens of millions of dollars, and most people who have tens of millions of dollars are not complete and utter bafoons.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    And they shut down...

    Hostess, maker of Twinkies and Ding Dongs, says closing business - Business on NBCNews.com

    This is proof that we didn't learn a damn thing over the last 5 years. People still think they are entitled to what they had between 1993 and 2007....a fantastic unsustainable pension, a upper 5 or 6 figure salary, a 3k sq ft house, 1 SUV, 2 cars, a pool membership, low costs on all consumer goods, and retirement at 60.

    When the above is clearly not possible we loss iconic brands such as Hostess and now we have 18k in the unemployment line. This is also why bailouts are total bullsh*t. Yeah, having GM is a nice thing but the only thing they learned is that it is the government's job to clean up a mess made by management.

    As an aside, we talked a lot about why Romney total sucked for the country but let's not pretend Obama didn't have his baggage. The one truthful thing Romney said in the campaign was that 47% of people will vote for Obama no matter what mostly because they received gifts. Not to sound like a total dick, but it's partly true. People do feel entitled to a few things and they support those who give them what they want even if the long term is negative. Obama gave the birth control thing, auto bailout, "healthcare", and pushed for stupid immigration reform. All of these things were either bad ideas or ideas that kill bedrock freedom principals. They appease to the masses who think this is the best solution for them....just like the hostess employees felt a company going bye bye was going to score them a great paying job. Not gonna happen. And yeah, Romney tried to do it too....there just aren't enough stupid white people or stupid upper middle class people to vote for republicans anymore.

    Interesting about Hostess though. Keep us informed on what happens locally.

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    Hey daewoo, look up Twentieth Century Motor Company.
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    Quote Originally Posted by Steeeeve View Post
    And they shut down...

    Hostess, maker of Twinkies and Ding Dongs, says closing business - Business on NBCNews.com

    This is proof that we didn't learn a damn thing over the last 5 years. People still think they are entitled to what they had between 1993 and 2007....a fantastic unsustainable pension, a upper 5 or 6 figure salary, a 3k sq ft house, 1 SUV, 2 cars, a pool membership, low costs on all consumer goods, and retirement at 60.

    When the above is clearly not possible we loss iconic brands such as Hostess and now we have 18k in the unemployment line. This is also why bailouts are total bullsh*t. Yeah, having GM is a nice thing but the only thing they learned is that it is the government's job to clean up a mess made by management.
    That is exactly it. Management at Hostess completely screwed the pooch or this would not even have been an issue. Even if you ignore the fact that for years they walked around with their heads in the clouds, approving union contracts that they never should have because they wanted the next quarter to look good, they still screwed the pooch. Management at Hostess was just plain incompetent. For a decade now they have basically been waiting for people to start eating 700 calorie apple pies again while their competitors were busy creating new ways to pretend their bread is healthier than the competitions (iron kids bread...what a joke).

    As an aside, we talked a lot about why Romney total sucked for the country but let's not pretend Obama didn't have his baggage. The one truthful thing Romney said in the campaign was that 47% of people will vote for Obama no matter what mostly because they received gifts. Not to sound like a total dick, but it's partly true. People do feel entitled to a few things and they support those who give them what they want even if the long term is negative. Obama gave the birth control thing, auto bailout, "healthcare", and pushed for stupid immigration reform. All of these things were either bad ideas or ideas that kill bedrock freedom principals. They appease to the masses who think this is the best solution for them....just like the hostess employees felt a company going bye bye was going to score them a great paying job. Not gonna happen. And yeah, Romney tried to do it too....there just aren't enough stupid white people or stupid upper middle class people to vote for republicans anymore.
    That is how people get elected now. They buy votes. Medicare part d anyone??? That was part of the republicans problem. Traditionally the republicans buy votes from the upper class and the middle to upper middle class. The middle class is shrinking, and what is left in the middle class is moving toward lower middle class. People who would have shown up to vote for a tax cut for themselves 10 years ago don't bother now because they are not making enough for it to matter. Instead of assuming they were on their way to the upper class (thus encouraging them to go vote for tax breaks for the rich since they planned to soon be rich) they are coming to the realization that they should probably be paying attention to what is going on with government housing and food stamps because they are 1 paycheck away from needing them.

    Interesting about Hostess though. Keep us informed on what happens locally.
    I actually just pulled an all nighter working on that (which is why I was posting at like 3:00 AM...doing something to stay awake while I waited for data). One of my employees wives is local union leadership and he asked if I would be willing to "look over things" and see what I thought since I am familiar with this kind of thing. Also, they have significant assets in the area, and are a significant employer. As the evening wore on and it looked increasingly likely that they were going to pull the trigger on this thing, I figured I had better see what kind of exposure I have to the economic slowdown that is almost certain to take place locally....and I wanted to be prepared to do some bottom feeding. They have some local assets I would be interested in purchasing at a rock bottom price. After spending a little time talking to her last night and looking at some of her paperwork, it became abundantly clear that they WOULD be pulling the trigger, none of those union workers would be getting their jobs back, their pension fund may as well be held in monopoly money, and there is not a whole lot they can do about it.

    Hostess is privately held, so all I have to work with are their bankruptcy filing and some data from a guy I know who is an investor at Silver Point (one of the vulture funds that was trying to recapitalize hostess). Basically Hostess has a ridiculous overcapacity problem....like 20-40% overcapacity. As completely and utterly foolish as it sounds, it appears that they have operated with that much overcapacity for the last several years because they could not take the asset markdown that would have come with shrinking the company and closing plants. If you close a plant valued at $100 million and liquidated it and your $100 million paper asset nets you maybe $5 million. If that $100 million on paper was the backing for a loan (and it was) you are suddenly $95 million overextended. The financial....lets call it "engineering" that has been going on at Hostess is insane.

    I got a decent crash course in the industry last night (it is amazing who is willing to get out of bed at midnight when they smell blood in the water) and while I am certainly nowhere near an expert, one thing I have determined talking to folks who are is that the entire industry suffers from an overcapacity problem.

    Their factories are not well placed. They were built when fuel was cheap and transport costs were a secondary concern. Those costs have more than quintupled in the last half decade, and it is getting worse. While it is nice to be able to buy wonder bread for $1 per loaf at the outlet store in Emporia, ks, locating their bakeries near large population centers....where there are a lot of people to eat their bread and zingers....would have saved them millions of dollars per month.

    What it boils down to is that those jobs are most likely gone forever. The unions hope that some white knight is going to swoop in and put them all back to work with a pay raise and fully funded pension is pretty much a joke. It is simply not going to happen.

    I passed this news on at about 7:00 this morning in my home office. At about 7:05, while I was repeating everything for the third time because it was not sinking in well (and wishing I had just thrown together a power point so they could take it with them and watch it as many times as they want), somebody called to let us know that hostess had pulled the trigger. There was crying and outrage.

    The incompetence by Hostess management is astounding, but so is the stupidity of the workers. One of the striking workers demands was the return of their pension. Their pension was turned over to PBGC during the last bankruptcy. There is no getting it back. Apparently a lot of the workers who were not due to retire for a long time felt that they should have gotten "their share" of the pension fund. They apparently should have looked a little harder at how pension funds work. Workers who were planning to retire at 60 are outraged that now they will have to wait until they are 65....like the rest of us poor, dumb suckers. Of course the PBGC pension does not include the extra goodies like health care and dental that they were planning on.

    I have also spoken briefly with a labor lawyer today. Apparently the general feeling among the legal profession here is that striking workers will probably not be eligible for unemployment insurance in Kansas. They are saying that when the judge forced that contract on them, they effectively lost the right to strike. When the union announced plans to strike, the company warned them that under the courts order, they could not strike and any worker who failed to show up for work would be fired. They did it. When those workers didnt show up, they fired them all...including calling and cancelling their health insurance that day.

    Under Kansas law, if you are fired for failing to show up to work, you are ineligible for unemployment insurance. Usually the state would kind of shrug and say "lets not get all technical" because our unemployment trust fund has been very healthy in the past. Now it is like $700 million in the hole because for some god unknown reason the state legislature decided to toss all the mathematical models for how much they needed to collect in premiums in the trash and lower them because...you know...we NEVER have economic downturns. He is saying that what he is hearing is that they will be refusing those claims. Ultimately the workers could probably go to court and get their benefits paid, but first they have to exhaust the unemployment systems internal appeals system, which can take up to 7 months....if they are lucky. I floated a loan the other day to a guy that I know who lost his job about 6 months ago. He was collecting unemployment and suddenly a month ago it stopped. When he logged into the system it told him his benefits have been temporarily suspended due to questions about his eligibility. He has been trying to get through their phone system for 4 weeks. Last week he called 80 times...every 30 minutes, ever day, and never managed to get through.

    The lack of intelligence on both sides of this deal just boggles the mind!
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  5. #5
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    Quote Originally Posted by daewoo View Post
    That is exactly it. Management at Hostess completely screwed the pooch or this would not even have been an issue. Even if you ignore the fact that for years they walked around with their heads in the clouds, approving union contracts that they never should have because they wanted the next quarter to look good, they still screwed the pooch. Management at Hostess was just plain incompetent. For a decade now they have basically been waiting for people to start eating 700 calorie apple pies again while their competitors were busy creating new ways to pretend their bread is healthier than the competitions (iron kids bread...what a joke).
    From what I understand, the new CEO was only in there a year and was there to restructure. Seems like Hostess management really did drop the ball. They have so many iconic American products and yet couldn't turn a profit? I believe you discuss this below.

    I'm thinking someone should just buy the recipes and brand names...ABC Bakers maybe. This is also what should have happened to GM.

    That is how people get elected now. They buy votes. Medicare part d anyone??? That was part of the republicans problem. Traditionally the republicans buy votes from the upper class and the middle to upper middle class. The middle class is shrinking, and what is left in the middle class is moving toward lower middle class. People who would have shown up to vote for a tax cut for themselves 10 years ago don't bother now because they are not making enough for it to matter. Instead of assuming they were on their way to the upper class (thus encouraging them to go vote for tax breaks for the rich since they planned to soon be rich) they are coming to the realization that they should probably be paying attention to what is going on with government housing and food stamps because they are 1 paycheck away from needing them.
    The only thing that can stop this is a balanced budget amendment...which will never pass. There is a reason why states can give out goodies as easily.

    Basically Hostess has a ridiculous overcapacity problem....like 20-40% overcapacity. As completely and utterly foolish as it sounds, it appears that they have operated with that much overcapacity for the last several years because they could not take the asset markdown that would have come with shrinking the company and closing plants. If you close a plant valued at $100 million and liquidated it and your $100 million paper asset nets you maybe $5 million. If that $100 million on paper was the backing for a loan (and it was) you are suddenly $95 million overextended. The financial....lets call it "engineering" that has been going on at Hostess is insane.
    Sounds about right. I'd be interested to know if this was mark-to-market accounting or not. With historical cost normally those assets get depreciated and you can't have a $100 million paper asset unless it is brand new. With mark-to-market you can make up just about anything if the equipment is specialized. I suspect Hostess had a ridiculous amount of specialized equipment and plants.

    I got a decent crash course in the industry last night (it is amazing who is willing to get out of bed at midnight when they smell blood in the water) and while I am certainly nowhere near an expert, one thing I have determined talking to folks who are is that the entire industry suffers from an overcapacity problem.

    Their factories are not well placed. They were built when fuel was cheap and transport costs were a secondary concern. Those costs have more than quintupled in the last half decade, and it is getting worse. While it is nice to be able to buy wonder bread for $1 per loaf at the outlet store in Emporia, ks, locating their bakeries near large population centers....where there are a lot of people to eat their bread and zingers....would have saved them millions of dollars per month.
    Overcapacity! I thought someone on these forums was telling us we just need to produce more. So I assume you are implying that Hostess would have been making money left and right if only that produced 20% more Twinkies and shipped them to your house for storage.

    The incompetence by Hostess management is astounding, but so is the stupidity of the workers. One of the striking workers demands was the return of their pension. Their pension was turned over to PBGC during the last bankruptcy. There is no getting it back. Apparently a lot of the workers who were not due to retire for a long time felt that they should have gotten "their share" of the pension fund. They apparently should have looked a little harder at how pension funds work. Workers who were planning to retire at 60 are outraged that now they will have to wait until they are 65....like the rest of us poor, dumb suckers. Of course the PBGC pension does not include the extra goodies like health care and dental that they were planning on.
    This is really sad. Like I have implied in my previous posts, this is scary close to how America operates in general. You have a large number of people saying management is wrong and make incorrect conclusions based upon that fact. You have management who doesn't understand basic economics and they screw over everyone else. Then you have a few people who went back to work because they realize the only way to make this work is to get back to work and hope for the best. How does that not reflect Democrats, Republicans, and the 10% who hate both parties respectively?

    I have also spoken briefly with a labor lawyer today. Apparently the general feeling among the legal profession here is that striking workers will probably not be eligible for unemployment insurance in Kansas.
    I believe they actually announced this from an article I read. They are screwed.

    Please keep posting with more info. I'm particularly interested in how they took an American icon, Twinkies, and managed to bankrupt themselves. If you polled 100% of Americans and asked "tell us the top 5 products that make America America" I bet it would be hot dogs, hamburgers, Coca Cola, Oreos, Twinkies.

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    Quote Originally Posted by daewoo View Post
    Striking workers defy Hostess' demands

    This is a big deal locally because they are one of the biggest local employers.

    I don't think that their threat to liquidate is just a threat...I think it is an economic reality.

    Their bankruptcy judge canceled their union contracts. The teamsters negotiated a new one that the judge approved (and face it, if the teamsters are more reasonable than you, you are just flat out insane). The bakery workers, though, were not willing to take the pay deal, they are pushing for reinstatement of their pension fund....from a company that is in its second bankruptcy in 4 years. Yea...thats going to happen.

    As I understand it from talking to some of the local soon to be unemployed button pushers, they are basically hoping that the company will liquidate, sell of their brands and facilities, and they will fire right back up under new management with higher wages and their pension fund restored (good luck with that one).

    I cant help but be amazed at how stupid these people are. Say for a minute that you decided you were going to buy wonder bread (the big product they make locally). There are 5 factories in the US that make wonder bread. Are you going to buy the one where the workers went on strike and drove forced their employer into liquidation?? I sure as hell would not. If I did, EVERY SINGLE ONE of those previous union employees would be blacklisted. I would bring the (non union) management back and staff the entire place with Mexicans with dodgy paperwork and Somalian refugees.

    I just cant imagine how foolish you would have to be to do what these people are doing. They had a real opportunity there. What the company was asking for was an 8% pay cut, but they would get 4% of that back in the first 4 years, plus 2 seats on the board for the union, and a 25% stake. 2 seats on the board and a 25% stake puts you in a pretty good position to renegotiate once the company emerges from bankruptcy and is profitable again.

    Instead, they are forcing them into liquidation where the BEST CASE scenario is that they MIGHT manage to sell the facilities as bakery facilities and MAYBE the new buyer will be dumb enough to hire a bunch of union workers who just forced their last employer into liquidation. The big problem I see with that plan is that the facilities would cost tens of millions of dollars, and most people who have tens of millions of dollars are not complete and utter bafoons.
    The union mentality is the same as the mind-numbed Obama 'gimmee' crowd. The people who support Obama and these types of greedy unions need to be deported. They're too dumb to know how to run a business, or a country. They're dangerous to the American dream.
    “For the scientist who has lived by his faith in the power of reason, the story ends like a bad dream. He has scaled the mountains of ignorance; he is about to conquer the highest peak; as he pulls himself over the final rock, he is greeted by a band of theologians who have been sitting there for centuries.” - Robert Jastrow

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    Quote Originally Posted by Steeeeve View Post
    Sounds about right. I'd be interested to know if this was mark-to-market accounting or not. With historical cost normally those assets get depreciated and you can't have a $100 million paper asset unless it is brand new. With mark-to-market you can make up just about anything if the equipment is specialized. I suspect Hostess had a ridiculous amount of specialized equipment and plants.
    The numbers I have are mostly geared toward obtaining financing for operations, so they are probably a mix of replacement cost/wishful thinking. Valuation is tricky when you are going in for financing because on specialized equipment the market value is usually pretty much scrap value because there is no market for it. A machine that makes ho-hos is only worth anything if you are making ho-hos for it. It is a valuable asset, but putting a dollar value on it is more than a little tricky. Sometimes lenders have valuation guidelines, but as a rule of thumb you can generally figure replacement value minus 30% and as long as the plant is in operation, lenders just kind of shrug and move on since they are not really giving a collateralize loan against your equipment even if the equipment is part of the surety, they are lending against your expected operating profit.

    The problem is that if you shut down that plant, you are in a different situation because then it has to be marked to market...the extra value assigned because it was part of a continuing operation is gone and you are left with what you can get at an auction, which usually pretty much nothing.

    Corporate financing gets a little murky

    Overcapacity! I thought someone on these forums was telling us we just need to produce more. So I assume you are implying that Hostess would have been making money left and right if only that produced 20% more Twinkies and shipped them to your house for storage.
    No, I am pretty sure that would have been a bad business move. Our local outlet store is all out of bread, but they say they have enough twinkies, hohos, zingers, fruit pies, and assorted other junk to stay in business for at least a month...maybe more. If they had increased production by 20%, I think they probably would have had to start stacking the stuff in the parking lot. I do not need 40 million Twinkies at my house, thanks.

    Really it is their overcapacity problem that bankrupted them. Modern production facilities are built for continuous production. You build a line that is designed to produce a million twinkies a month, you generally dont have the option of only producing 500,000. You can run it for half the month then shut it down, but a lot of times the cost of shutting the ling down and then bringing it back online is higher than it would be to just go ahead and produce the damn twinkies, even if you just end up throwing them away. You can only lower prices so far before you are producing at a loss and with anything that has a shelf life issue, you cant afford to shut down long enough between runs to justify doing it if you actually want to have product to market. So you end up in a situation where your overhead and production costs are going up, while your sales are dropping and in a lot of cases your prices are dropping.

    I have the same problem with my big rock crushing circuit. It will do about 1000 tone per hour processed aggregate. I can, of course, slow it down just by feeding it less (which is probably not an option with a twinkie line), but I know from experience that slowing down to only 500 tons per hour only cuts my operating expenses by about 8%, so for all intents and purposes it is costing me the same to produce 500 tons of gravel as it would to produce 1000 tons running full. I can shut it down overnight with no problem, but if we shut down for a week it will take 2 weeks to get it back up and operating. It is actually cheaper to run it for that week and crush straight back into the pit.

    This is really sad. Like I have implied in my previous posts, this is scary close to how America operates in general. You have a large number of people saying management is wrong and make incorrect conclusions based upon that fact. You have management who doesn't understand basic economics and they screw over everyone else. Then you have a few people who went back to work because they realize the only way to make this work is to get back to work and hope for the best. How does that not reflect Democrats, Republicans, and the 10% who hate both parties respectively?
    It does. Perfectly. Including the fact that the real root of the problem is that the whole organization was dysfunctional and unsustainable and everybody agreed that it was, but nobody was willing to accept the pain that would have come with fixing it.

    Hostess could have been saved. If they had been willing to accept the fact that the world was changing and adapted to the new market reality, they would be profitable today. Management mismanaged and basically kept borrowing money while they waited for the good old days to come back. The workers needed to look long and hard at their union and realize that the bakers union was not looking out for them, it was looking out for itself. I actually feel sorry for the individual workers...even the ones who went on strike. They are not evil or malicious. They were just dumb and trusted the wrong people. Right up to the point where management filed for liquidation the bakers union was telling its members "They are bluffing...they actually have plenty of money...if we stand our ground they will reinstate your pension plan and give you all raises to get you back to work".

    You should have seen the look on that ladys face friday morning when I told her "From what I can see in these financials, Hostess is going to fold....I dont think there is probably any other option, even if you all went back to work right now, and from what I can tell looking at the industry as a whole and talking to people who are familiar with it, there is not going to be another company buying these facilities and re-opening them....you guys are not going to be getting your jobs back".

    The first words out of her mouth were "The union lied to us".
    I believe they actually announced this from an article I read. They are screwed.
    Utterly. I figure about 4 weeks and this will be a GREAT place to get a deal on used boats, campers, SUVs, guns.......

    Please keep posting with more info. I'm particularly interested in how they took an American icon, Twinkies, and managed to bankrupt themselves. If you polled 100% of Americans and asked "tell us the top 5 products that make America America" I bet it would be hot dogs, hamburgers, Coca Cola, Oreos, Twinkies.
    I should have some decent info next week. I know a couple of executives at the local plant, but they are basically under a gag order until monday afternoon. I know they are having a pretty rough time right now...both of them have had their houses egged and have been leaving their home phones off the hook because the threatening phone calls were getting annoying. Now that I think about it, that also mirrors national conditions because those guys had about as much to do with what ended up happening as the president has to do with the price of gas. Regardless of title, they are basically plant managers with extremely limited decision making power. They are operations side guys, and our local plant was the most productive and profitable in the company, so they were obviously doing a good job....then congress....er...uh....the XXXXXX back at corporate headquarters screwed everything up so now they are scraping eggs off their house.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Good news Twinkies will live on but I feel sorry for those employes that lost their jobs.

    Attention, People Buying Twinkies for $50 Online: The Twinkie Is Not Extinct - Yahoo! Finance

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    Quote Originally Posted by Steeeeve View Post
    Overcapacity! I thought someone on these forums was telling us we just need to produce more.
    Indeed

    Quote Originally Posted by Steeeeve View Post
    So I assume you are implying that Hostess would have been making money left and right if only that produced 20% more Twinkies and shipped them to your house for storage.
    This is so simple that I'm sure you understand, you just don't want to admit that the connection I pointed out is correct. Producing more things that won't be bought is useless. The reason they are not bought however is not because people don't want them but because they can't afford them (that means at the price point they would rather spend on something else).

    Therefore no matter what you do, the only way you're going to make anymore money is if other people started to make more money to spend on you. The only way they are going to make more money is to sell more things. The only way they are going to sell more things is to make more things.

    Production is the problem because it's is ultimately the only limiter besides want itself. The reason some foolish people on these forums can convince themselves that production is not the problem is because they think wasting your money on products that aren't traded proves production isn't the limiter.

    I will explain with a rock-paper-scissors economy:

    Bread is needed to live.
    Wood is needed for shelter and baking bread.
    Metal is needed for tools

    Joe bakes bread
    Rob cuts timber
    Jill mines metal

    The demand for bread is not 3x needs of one person for bread. That is how much bread is wanted. The demand is the worth of those things which people who want the bread would give in trade.

    If Jill finds a way to produce more tools, but does not consider them of less worth for it; what happens? It depends on whether demand was met before. If it wasn't Joe and Rob would buy more tools. However if it was they would not. This is an example of irrational over-production, not a genuine shift in the supply curve.

    Let's assume there is not enough demand. To Jill there seems no reason to continue the enhanced production she doesn't. This happens to Rob independently. Whats going on? Market equilibrium, at the price point nobody is willing to buy more things than they do. Demand is constant. The only way to change the situation would be to increase demand or supply.

    If Joe on the other hand finds a way to enhance production of bread which actually makes it easier to make bread, he will lower his prices. This constitutes a true increase in supply. To Rob and Jill things just got cheaper, so they buy more.

    Something magical happens now though, at this price point Tom, Jills cousin thinks he can afford to buy the bread by selling pottery. He moves in and starts to produce pottery well in excess of his own needs. To Joe this appears to be an increase in demand. He is making more money (in the form of pots) than he was before. He did not have to raise prices, he had to lower them.

    More importantly though Jill and Rob now have a new customer, they go to enhanced production as well to meet the new demand. The economy has grown, in the new equilibrium things are cheaper, but there is more to buy.

    You see the key isn't to just make stuff, it's to make stuff more efficiently. Everything is at a price point, back before the printing press books weren't any less intrinsically useful than they are now; but then it was a small market with almost no demand. It wasn't the nature of books it was the price point. After the printing press they got everywhere because people wanted them and were willing to pay for them at the new lower price. The demand (not demand curve) went up just by producing something better. All the wealth that the new personal libraries constituted, all the jobs of writers; factory workers, newspaper workers etc... all because of an advancement in production.

    The way that economics works has not changed people, it's just as much driven by production now as it was then. What has you all confused is that you think factories sitting around idle means production is on hold for want, it isn't; it's on hold for another section of production which isn't able to meet the price of the idle factories. The middle class isn't buying because the middle class isn't selling. It's that simple. You want the middle class to buy consumer good, then they have to make something that consumers want and that they can afford. It's a cyclic engine, every cycle is based on the last and the only way to get it stronger and bigger without jump-starts that equate to high risk behavior is to incrementally make things cheaper and cheaper.
    Morals are a religious Myth.. - Xcaliber
    How is Evil Immoral? - Xcaliber
    I am right until you prove otherwise - Xcaliber

  10. #10
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    Quote Originally Posted by Freedom View Post
    To Rob and Jill things just got cheaper, so they buy more.

    Something magical happens now though
    Something magical just did happen. We can basically boil down your entire illogical argument to this one falsehood. No where does cheaper bread mean Rob and Jill will buy more.

    , at this price point Tom, Jills cousin thinks he can afford to buy the bread by selling pottery. He moves in and starts to produce pottery well in excess of his own needs. To Joe this appears to be an increase in demand. He is making more money (in the form of pots) than he was before. He did not have to raise prices, he had to lower them.

    More importantly though Jill and Rob now have a new customer, they go to enhanced production as well to meet the new demand. The economy has grown, in the new equilibrium things are cheaper, but there is more to buy.
    Oddly enough, you just disproved your entire point. The increase in economy was due to an increase in a person demanding stuff. Basically Tom was born.

    Your entire theory doesn't take into account timing, debt or personalities which alters both supply and demand. There are several theoretical instances where supply is holding back an economy. There are also instances where demand is holding back an economy. And there are instances where it is neither.

    You see the key isn't to just make stuff, it's to make stuff more efficiently.
    No it isn't.

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    Quote Originally Posted by Steeeeve View Post
    Something magical just did happen. We can basically boil down your entire illogical argument to this one falsehood. No where does cheaper bread mean Rob and Jill will buy more.
    Sure it does, unless they don't want more. If that circumstance is universal all human desire has been sated. Look around you.

    Quote Originally Posted by Steeeeve View Post
    Oddly enough, you just disproved your entire point. The increase in economy was due to an increase in a person demanding stuff. Basically Tom was born.
    The increase in economy was due to Tom making pots and being willing to trade them. He could not trade them before because before he couldn't feed himself that way, pots weren't worth it. Everything daewoo calls consumer goods are in the same category as pots. You don't need em, but you would like em. You will only buy them if you have spare money, and the only way to have spare money is to produce and sell a lot.

    Quote Originally Posted by Steeeeve View Post
    Your entire theory doesn't take into account timing, debt or personalities which alters both supply and demand. There are several theoretical instances where supply is holding back an economy. There are also instances where demand is holding back an economy. And there are instances where it is neither.
    Look one step higher steeve, there are only two theoretically possible limiters. Production, and desire. Demand is a secondary phenomenon borne of the combination of those two.

    Quote Originally Posted by Steeeeve View Post
    No it isn't.
    Then provide a rebuttal.
    Morals are a religious Myth.. - Xcaliber
    How is Evil Immoral? - Xcaliber
    I am right until you prove otherwise - Xcaliber

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    Quote Originally Posted by Steeeeve View Post
    Something magical just did happen. We can basically boil down your entire illogical argument to this one falsehood. No where does cheaper bread mean Rob and Jill will buy more.
    But it does mean that Hostess goes out of business and 18,000 people end up unemployed. It is almost like in the real world there is a price floor on this stuff.

    Does it amaze you as much as it does me that the same people who are just POSITIVE that a 4% increase in taxes for incomes over 250,000 will lead to people refusing to work and even leaving the country are also just sure that those same people would happily cut their profit margins to nothing in order to make supply side fantasies work out?
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    But it does mean that Hostess goes out of business and 18,000 people end up unemployed. It is almost like in the real world there is a price floor on this stuff.

    Does it amaze you as much as it does me that the same people who are just POSITIVE that a 4% increase in taxes for incomes over 250,000 will lead to people refusing to work and even leaving the country are also just sure that those same people would happily cut their profit margins to nothing in order to make supply side fantasies work out?
    One of Freedom's main problems is he thinks everything thinks alike. Specifically, everyone will do whatever to get as much as they can.

    As a person who manages people let me ask you a question. Do all of your employees want more and more out of their careers so that incentive's actually work (more pay, promotions, etc)?

    I manage 10 or so people and out of those 10 you have 2 that completely such, 2 that are extremely motivated and 6 that are happy just doing what they are doing. Those 6 people don't want anymore money, they don't want promotions, they just want to come in and leave in 8 hours. If I told them "I'll give you a $20k raise if you worked on people a leader in our office (obviously more specific than this)" they would and have passed. I suspect it is the same for you.

    My point is, not everybody thinks the same way. As such, you can't make too many blanket statements about our economy when you have 300 million people who think 300 million different ways. Freedom thinks if we just increase production on goods we'd be fine. But what goods? Increasing production of Ding Dongs and other unhealthy food will probably send more people to the unemployment line no matter how you do it. Why? Because many Americans want to stop being fat asses. Produce more cars? You could halve the price of cars right now and there would merely be a short boom in car sales followed by a crash in car sales. Why? Because unless you are a car collector, you don't want that many damn cars. And if you are still in debt right now, it won't do you any good because you are paying off old purchases.

    I could go over hundreds of scenarios but at the end of the day Economics doesn't always work like how some no-name drug addict thinks it should.

  14. #14
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    Quote Originally Posted by Freedom View Post
    Sure it does, unless they don't want more. If that circumstance is universal all human desire has been sated. Look around you.
    Who says they want more? If I could get milk for 10 cents a gallon right now I'd still buy the same amount I always do. I don't need 10 gallons of milk nor do I want 10 gallons of milk.

    The increase in economy was due to Tom making pots and being willing to trade them.
    No, it was due to you creating Tom out of thin air.

  15. #15
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    Quote Originally Posted by Steeeeve View Post
    One of Freedom's main problems is he thinks everything thinks alike. Specifically, everyone will do whatever to get as much as they can.

    As a person who manages people let me ask you a question. Do all of your employees want more and more out of their careers so that incentive's actually work (more pay, promotions, etc)?

    I manage 10 or so people and out of those 10 you have 2 that completely such, 2 that are extremely motivated and 6 that are happy just doing what they are doing. Those 6 people don't want anymore money, they don't want promotions, they just want to come in and leave in 8 hours. If I told them "I'll give you a $20k raise if you worked on people a leader in our office (obviously more specific than this)" they would and have passed. I suspect it is the same for you.

    My point is, not everybody thinks the same way. As such, you can't make too many blanket statements about our economy when you have 300 million people who think 300 million different ways. Freedom thinks if we just increase production on goods we'd be fine. But what goods? Increasing production of Ding Dongs and other unhealthy food will probably send more people to the unemployment line no matter how you do it. Why? Because many Americans want to stop being fat asses. Produce more cars? You could halve the price of cars right now and there would merely be a short boom in car sales followed by a crash in car sales. Why? Because unless you are a car collector, you don't want that many damn cars. And if you are still in debt right now, it won't do you any good because you are paying off old purchases.

    I could go over hundreds of scenarios but at the end of the day Economics doesn't always work like how some no-name drug addict thinks it should.
    Yep. I have found that pay has very little to do with performance, and a lot of people are just not interested in ladder climbing. People get to the point where they pretty much feel comfortable and that is about as far as they are interested in going. Sure, they would probably like to be rich...if they didn't have to do anything for it.

    Even the extremely motivated people usually hit a point where they look around and go "Ok....I can live with this". I was one of those people. For years I worked 80-100 hours a week...would sleep on the couch in my office whenever I got the chance to lay down for 20 minutes. Today I do what I do because I like doing it and because I like the challenge. A few months out of the year I work "long" weeks (now a long week is 50 hours). Last spring I think I spent more hours a week wandering around drinking coffee and looking at flowers and trees with my wife than I did at work. If I wanted to put in more time, I could make a lot more money. I routinely pass up deals that would be good because I just don't want to mess with it. If somebody wanted to give me a billion dollars tomorrow, that would be just fine. If I had to drive to town to pick it up, I might pass on it.

    Most middle and upper class people I have ever known are more or less the same. The insatiable drive to acquire more stuff and make more money is not nearly as prevalent as some people seem to think. I have offered people promotions before and had them turn them down because they just didn't want the headache.

    Economic reality just does not work the way some folks think it should. Marketing people study the hell out of this, and one thing that they have found is that no matter how deeply you discount something, you are not going to convince anybody to buy it because of the price. If you sell TV's half off, people do not buy it just because it is half off, you just get people who already wanted to buy a TV to buy it from you instead of somebody else. The total net numbers of TVs sold industry wide does not change.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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