Comment by s1artibartfast
2 years ago
When a company is liquidated, its value and assets go elsewhere and are put to more productive use. This value difference is how liquidation is profitable.
This means more taxes for the government. Owners get paid out when PE buys a company, usually with a premium so they are happy.
PE liquidation IS utility optimization. The only way it makes profit is if the money made is invested into something with higher returns than the company had.
Killing a company is bad for employees that have to find new jobs, but permanent jobs are extremely toxic economically. If we avoided corporate churn for the sake of employee transitions, we would all be wearing textiles woven by luddites, and riding around in horse carts.
Oh OK, I think I understand where you come from now.
I see what you mean, but it is not what I have observed, at least in my country. There has been a steady transfer of wealth upward over the last decades. Unemployment has gone up and wages have stagnated.
When a company is liquidated, I doubt enough of its assets are reinvested to make of the event an overall positive for the economy.
>When a company is liquidated, I doubt enough of its assets are reinvested to make of the event an overall positive for the economy.
Where do you think they money goes? it is almost always reinvested. If it wasnt reinvested but spent, it wealth couldnt transfer upward.
The rich would lose 5% of of their value of any cash assets to inflation every year. Instead, the money has to be invested in something.