Rumors have been flying that Google will be buying Groupon for $6 billion. Okay, that might be wrong, it might be $5 billion. In either case, that's more than the annual profits of all of the US commercial printing industry. Yet somehow we're to believe that these digital new media are somehow only mildly effective or generally ineffective or not credible or some other expression of unsatisfactory result. Groupon is barely two years old and is focused on local advertising and promotion services. It looks to me like it's a great fit in the long-term development on local search and also their ongoing development of AdWords. In the last four quarters, Google's annual revenue is about $28 billion. Their annual profit is getting close to $10 billion. * * * Just last month Google gave everyone a raise so they'd stay around and not defect to Facebook and other companies. It was a 10% raise. When's the last time anyone saw that happen to so many people at once in this kind of economy? It's a reminder of the basic economic rule that when more of something is demanded, its price goes up. It's also a reminder of the lament about attracting employees to our industry. If we truly need employees, the wages we pay those workers would naturally rise. They obviously have not, and in fact they have been flat for a decade or so. How do we attract workers? There is only one way. Successful and thriving companies. There is no stronger force than that. So printers, if you are hiring, be sure to make a big deal about it. Call your local paper. Call your local business journal. Put out a press release. Make sure that every graphic arts publication knows about it, too. And if you give a blanket raise, or a large bonus, do the same thing. Many of our companies have restructured and reinvented themselves through tuck-ins and acquisitions, or have grown just because weaker printers around them have closed. Whatever the case, business reporters love any kind of growth story for whatever reason. I think we've all had enough of the closures and sacrifice stories to last a long time. * * * And then we hear that Google's plans for being in the e-book business are finally getting close to implementation. Google Editions is likely to be browser-based, and tied to your Google account (which is free), allowing the e-books to be device independent. This pushes tablet computing as an independent book device, and plays on cloud computing which allows viewing on smartphones, desktops, notebooks, netbooks, and anything else with a connected screen. This only means that e-book devices will either keep going down in price (I've seen refurbs online for $99) or start adding other features, or both. That will turn e-book devices into... tablet computers. * * * Little known is that imports from China include materials and components from still other countries. That means that half of our imports from China are actually non-China imports. I've seen the figure range from about 40% to 50%. This is nothing new, but I'm always amazed at why people are surprised. There is not enough awe about how the economy in general, and especially how trade works. It goes back to economists explaining how the most important things in economies are those that are unseen, and how others describe them as "animal spirits." It's an amazing thing. Everything is interconnected in ways that are not obvious. People we don't even know and quite possibly would not even like, create things that we could never make ourselves, and we do the same for them with products and services that we create. Today, those people can be down the block or on the other side of the world with an ease that was never possible before, and we take it for granted. Too much time is spent talking about competition but economies exist only because of rampant cooperation, and we take the cooperation part for granted. * * * Half of our supposed trade deficit is actually intercompany transfers of US multinationals and global multinationals with significant US operations. These companies can manage exchange rate fluctuations better than companies that are not multinationals because they have a combination of transactions that can counterbalance each other. They also manage tax consequences of those exchanges, which was why when Microsoft wanted to pay dividends, it borrowed the money at today's incredibly low rates, even though overseas subsidiaries had loads of profits on their books. Moving the money to the US would have incurred corporate profits tax, so leaving the money overseas and then incurring debt made sense. Strange, huh? * * * It is claimed that the US is being held hostage by China's holding of Treasury debt. It is rather silly, because if anyone should worry about the value of US Treasuries, it is Chinese investors. Dollars held outside the US have to eventually be repatriated to have value. That is, they have to be used to purchase some kind of US goods or services at some time. Because the dollar is a reserve currency, it can be traded to others who want US goods, such as China using it to buy oil from oil-producing countries. Under the radar, however, is that in 2009, investment by China in the US surpassed US investment in China. Sure, the Treasuries are a very bad deal. Buying US companies is a great deal, and the continuing devaluation of the dollar (excluding the bump up this past week as the EU deals with Ireland and other issues) will only create more interest in the purchase of more US productive assets. Those assets are far better deals, and the Fed and Treasury have been unwitting facilitators of this. It is funny how there is paranoia about China holding financial instruments that expire in a relatively short and defined period of time and pay virtually nothing, yet there is nothing said about buying businesses that they are likely to hold for decades. Owning the businesses will help them manage exchange rate risks as well. Remember, too, that one of the ways to avoid protectionist legislation is to buy the companies that are complaining or to buy their onshore competitors. * * * I still hear that only 70% of US GDP is attributable to consumers. Sorry, it's 100%. Consumers finance all of the government spending, and with the increasing debt, are promising their future income to finance for today's spending. GDP accounting has another big flaw that I have mentioned before: spending $1 for a candy bar is considered to be just the same as spending $1 on construction equipment. We know they're not the same, but it seems to matter little to the general media. Only in the detailed analysis in the business press do you see it treated otherwise, and it's usually buried in paragraph 10. Few people ever read paragraph 10, even among the experts. Good managers see through the accounting in their companies and see what's really happening, and we need to do the same when we view economic data. * * * The employment engine that small business supposedly is, is much overblown. Small businesses may hire lots of people, but they also let people go faster than larger businesses, and shut down more often than other businesses. What is not appreciated enough is that small business is where our industry's dynamism comes from, and how much of an economic buffer small business is. CEOs of small businesses in bad times often go without pay, or take salaries that are less than their workers. Freelance workers also have wild swings in their incomes, even though they may be spending the same amount of time working as they do in good years; they just charge lower fees to keep their business going. In the end, small business gets their business from the activities of larger businesses and the employees who work for them. You can't stimulate one and not the other, especially since small businesses rely on large businesses outsourcing to them. * * * Year-end budget games often create unintended results. One year, a major supplier needed to have a meeting with me and another consultant about an ongoing project, but their end-of-year budget for consulting had dried up. So instead of flying the two of us down to their office, they flew three executives up to us, because their travel budgets still had money left. Because the approvals for our travel would have been rejected, it was easier to spend 50% more by getting three airfares (and rooms and meals) rather than paying for just two consultants to make the trip. I've always wondered how much of this stuff goes on, especially at year-end. During austerity, the “spend it before they take it away” mentality at the beginning of the fiscal year and “spend all of your budget or next year's budget will be lower by the amount you did not spend” is probably (unfortunately) too common. # # #