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Tuesday, October 11, 2011

60 Minutes Fnord - Jeff Immelt

I don't normally watch 60 Minutes, because it's pretty severe propaganda. I watched a bit on Sunday, waiting for The Amazing Race, delayed due to football.

I saw Jeff Immelt on 60 Minutes. There was one bit that was really interesting.

They do a cut-away to a "reaction shot" from the interviewee to the interviewer. They interviewer had an expression of "Jeff Immelt is a genius! I'm so lucky that I'm privileged to interview him!" Contrast that with a Ron Paul or Peter Schiff interview, when they're criticizing the Federal Reserve. The "reaction shot cut-away" shows the interviewer scowling and frowning, saying "This guy is such a fruitcake!" That's a subtle, but important, piece of pro-State brainwashing. (In some of the Presidential debates, they had a cut-away shot to a scowling interviewer, as Ron Paul gave his answers.)

They also had another misleading bit. "GE pays zero Federal taxes." That is wrong. GE pays negative Federal taxes.

GE's nominal Federal tax rate was zero. However, GE receives Federal contracts and loans. Including those contracts as negative taxes, that pushes GE into negative taxes.

GE also has a massive amount of debt on its books. According to Yahoo Finance, GE has $471B of debt on its books. The interest rate on that debt is probably approximately 5%. (I don't know exactly, but that's typical corporate bond rates.) True inflation is 20%-30% or more. That means that GE is paying an interest rate of negative 20% or less on its debt, receiving a State subsidy of approximately $100B a year. This State subsidy comes from the fact that GE gets to borrow at artificially low rates, borrowing via the banksters and the Federal Reserve interest rate cartel.

This interest rate subsidy gives GE a tremendous advantage over smaller competitors. GE can use this cheap debt to invest or buyout smaller competitors, wait for inflation, and then profit. If you include this interest rate subsidy as a charge to GE's earnings, GE is destroying capital at a tremendous rate. GE receives a continuous massive State bailout, via negative interest rates.

It's the underpants gnomes, but making sense according to evil State accounting:

  1. Borrow as much money as you can and buy as much as you can.
  2. Wait for inflation.
  3. Profit!
If I wanted to invest in a web startup, I wouldn't be able to borrow at a couple percent like GE. That gives GE a huge economic advantage over me and other potential small businesses. (Also, patent law benefits GE, enabling them to use the legal system to quash competitors.)

There was another amusing bit about "international corporate tax holidays." International corporations keep offshore earnings in offshore subsidiaries in tax havens, paying zero US Federal income taxes. Every 5-10 years, the Federal government declares a "tax holiday", allowing corporations to take their offshore earnings back into the USA, paying a low tax rate of only a couple of percent.

Do you see the fallacy? If you *KNOW* that there's going to be a "tax holiday" every 5-10 years, then you keep your earnings offshore until the next holiday. That's a clever loophole.

There also was an interesting bit about an NFL agent. That guy was obviously an ***hole. The athletes probably have the "abused productive" personality type, and need a parasitic/psychopathic agent to bargain for them. The agent was being promoted as an awesome guy helping out athletes. In fact, being on 60 Minutes was a huge boon to his career, making it easier for him to sign other clients.

He was a clearcut example of corruption capitalism. The middleman agent earns a huge income, without doing any real work, and he thinks he's a super-genius. The athletes are probably thinking "I'm lucky I have such a huge scumbag, negotiating on my behalf."

Here's another fallacy with agents. "The agent gets paid a commission, based on a percentage of the athlete's earnings. Therefore, the agent's interests are aligned with the player." That is false. Suppose it's a 3% commission rate, on a $10M contract. That's $300k to the agent for closing the deal. Is the agent going to risk his $300k fee, to try to get the player a little more? No. The incentive for the agent is to close the deal, rather than negotiate for an extra couple percent. Is the agent really willing to risk $300k for an extra couple thousand dollars? The agent doesn't have to go out and risk bodily injury playing. He collects his paycheck for closing the deal, and not for negotiating hard for every last dollar for his client.

It was interesting to see 60 Minutes. It was nearly complete propaganda. The "interviewer reaction shot" is a great trick for editing the interview, to make the interviewee look brilliant or stupid. The hype is "Jeff Immelt is a genius who deserves his fortune." rather than "Like almost all CEOs, he's someone who uses the State to line his pockets." An abomination like GE could not exist in a really free market. GE receives tremendous direct and indirect State subsidies, in the form of government contracts and artificially cheap debt. If you include these subsidies as a charge to earnings, GE is a huge sinkhole destroying capital and wealth.


Anonymous said...

>The incentive for the agent is to
>close the deal, rather than
>negotiate for an extra couple

In London, UK most software development jobs are gained through recruitment consultancies.

Twice I applied directly to banks and they immediately forwarded my CV/resume to their favoured recruitment consultant.

My first few jobs were gained through recruitment agencies. I got stiffed. Likewise they say their interests are aligned with yours. But really they work for and are paid for by the employer. They just want to get some money in as fast as possible and if you get screwed they don't care.


Liberal or not, Jeff Immelt is still a capitalist pig. Just like the Koch Brothers. very little difference as far as im concerned

omegaman said...

I agree, Jeff is still a capitalist pig!

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