Editore"s Note
Tilting at Windmills

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April 5, 2007
By: Kevin Drum

CUI BONO?....From our friends at EPI, here's our chart of the day. It compares the current economic expansion with past economic expansions.

Basically, everything sucks. GDP growth has been mediocre, employment growth has been terrible, and investment in equipment and software has been pitiful. And of course, we already know that median wages have been completely flat. The average worker has gained exactly nothing from five years of economic growth.

But guess what? One sector of the economy has gone like gangbusters: corporate profits. Even skyrocketing executive pay hasn't been enough to make a dent. Good times indeed.

If you're a corporation, that is. If you're not, then not so much. And if you think this is just a coincidence, you haven't been paying attention.

Kevin Drum 2:34 AM Permalink | Trackbacks | Comments (118)

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Comments

When I grow up I want to be a corporation.

Posted by: eightnine2718281828mu5 on April 5, 2007 at 2:58 AM | PERMALINK

Some guy, Jefferson...Tom, yeah, that's it, said this about corporations:

"I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country."

Indeed.

Posted by: SteveAudio on April 5, 2007 at 3:06 AM | PERMALINK

I have no quarrel to make with its conclusions, but from a purely information-design point of view, the graphic is so much more anemic than it needed to be. It's one of those cases where I itch to ask Mr. Bivens for a copy of his Excel spreadsheet (yes, it's obviously Excel) and show him how, with very little advanced knowledge and no new software, the same information, and so much more of the context that went into it, could have been presented.

All it takes is a little common sense in chart design to massively increase the information density while leaving the final conclusions just as crystal clear, and all the stronger for not having omitted the input data.

Posted by: derek on April 5, 2007 at 3:38 AM | PERMALINK

We've been living through a new guilded age, with the top crust of the moneyed class having behaved with absolutely rapacious greed.

The reason we haven't yet had a revolt is that the overall society is rich enough that much of the middle class hasn't noticed how badly they've been screwed, and we have in the TV/entertainment industries a kind of soma that keeps enough of the less wealthy dumb and happy enough not to bestir themselves.

I don't think it's a stable system, though. Here's hoping it doesn't end violently.

Posted by: jimBOB on April 5, 2007 at 3:45 AM | PERMALINK

The U.S. government should be happy to take credit for how splendidly corporations are doing. These profits show that the government is truly by, for, and about the people. Corporations are the people the government represents now, and we humans are the children in their joint care.

Posted by: AM on April 5, 2007 at 4:15 AM | PERMALINK

They're partying like it's 1929...

Posted by: john manyjars on April 5, 2007 at 4:15 AM | PERMALINK

Derek,

E-mail Kevin a copy of your improved chart, and let him decide whether it adds enough extra context (and meaning) added to the same info to make it worth running it.

from a purely information-design point of view, the graphic is so much more anemic than it needed to be. It's one of those cases where I itch to ask Mr. Bivens for a copy of his Excel spreadsheet (yes, it's obviously Excel) and show him how, with very little advanced knowledge and no new software, the same information, and so much more of the context that went into it, could have been presented.

All it takes is a little common sense in chart design to massively increase the information density while leaving the final conclusions just as crystal clear, and all the stronger for not having omitted the input data.

Posted by: derek on April 5, 2007 at 3:38 AM |

Posted by: keith on April 5, 2007 at 5:25 AM | PERMALINK

p.s. to john manyjars. do you know john smallberries?

They're partying like it's 1929...
Posted by: john manyjars on April 5, 2007 at 4:15 AM |

Posted by: keith on April 5, 2007 at 5:29 AM | PERMALINK

Any chance those profits are more fictional than the previous ones they are compared to?

And doesn`t the lack of investment, if not in people then in equipment/software guarantee that this profitability will be short lived?

Posted by: ytr on April 5, 2007 at 5:31 AM | PERMALINK

Does that mean if I incorporate....?

Consider the younger generations who wont even get the benefit of corporate pensions. As much as this is a war on the classes, it is a war on the generations, and of course, a war on America.

Posted by: Michael7843853 G-O in 08! on April 5, 2007 at 6:14 AM | PERMALINK

But if you say "class warfare" that would be too divisive.

Posted by: ItAintEazy on April 5, 2007 at 6:22 AM | PERMALINK

It isn't class warfare. Warfare implies both sides are aware there is a fight and are able to participate. It is more like class theft. The rich elites are the thieves and the rest of us are the victims.

What I think we are seeing is the long steady decline of America as jobs move from here to Asia. I don't care what Friedman says, you can't sustain an economy unless you are build and sell something. The stuff about the US becoming a service economy with everybody selling services to everybody else smacks of perpetual motion or wishful thinking. More and more of us are making less and less. We have been sustaining our standard of living by cashing in our savings and real estate equity.

A story that has been overlooked by all of us is the collapse of the sub-prime lending market. There is going to be an avalanche of foreclosures without potential buyers. The collapse will ripple up as the middle class folks seduced by aggressive credit schemes are also hit.

Unless we Americans get our heads out of our bums and change direction we are in for a terrible ride.

Like the poster said above, our elites are partying like it's 1929.

Posted by: Ron Byers on April 5, 2007 at 6:59 AM | PERMALINK

It's time to massively increase the SS tax. It needs to have income subject to this tax doubled. At this point, you opt out at about 86 K. It should go to 200 K. At that point, we could drop it a point for income below 20 K.

Posted by: POed Lib on April 5, 2007 at 7:17 AM | PERMALINK

The average worker has gained exactly nothing from five years of economic growth.

Word. That should be the Democratic slogan in 2008.

Posted by: Gregory on April 5, 2007 at 7:56 AM | PERMALINK

So, with the last tax deferment bill taxes on qualified corporate dividends were "eliminated." Does anyone know if there has been an increase in the % rate or direct amount of corporate dividends over this period? One would assume that a good corporation that is not re-investing their cash flow would send it to there owners, and the owners would re-invest it, which would grow the economy. I can only speak about the cash hoarding company that I work at, where the answer is no.

Before some of the right wing reactionary lurkers here start complaining about dividend and capital gains taxes, let me say that I think the dividend tax break was total hosed by the last congress and the Bush administration. They could have simplified all taxes, and eliminated all "double-taxation" by allowing corporations to expense dividends, and taxing the stockholders at their marginal tax rate, which according to the tax crowd, would make stock ownership much more attractive to those in lower tax brackets. I also think that allowing dividends to be expensed would have discouraged cash hoarding.

Posted by: Steve on April 5, 2007 at 8:22 AM | PERMALINK

excellent chart!

the title out to be:

TRICKLE DOWN? OR TRICKLE UP ECONOMICS?

Posted by: Federalist X on April 5, 2007 at 8:31 AM | PERMALINK

Here's my question... where are the corporate profits going? It is not like any stock offers a decent dividend these days. If they aren't offering a dividend for these profits, they better be using the money to reinvest in the company. But these numbers don't suggest that. So where is it going? Executive compensation?

For any company for which that's the case, I recommend dropping their stock pronto. They are a bad long term investment.

Posted by: Walker on April 5, 2007 at 8:41 AM | PERMALINK

Fat White Guy raises a good point. Where are corporations spending the money? My broker tells me that many companies are awash in money, the problem is they don't know where to spend it. As the chart shows they sure aren't spending it on capital and software or on employees. I think we need to research that question. My guess is they are spending it overseas.

Posted by: Ron Byers on April 5, 2007 at 8:53 AM | PERMALINK

Median Wages have been flat. Yes, the graph did show that. But more itneresting would be an analysis of how many peopel stay in the quintil eof income, versus how many move up, or move down. Merely saying that the bottom quintile hasn't changed isn't quite enough analysis, kevin.

Posted by: chris on April 5, 2007 at 8:57 AM | PERMALINK

This just shows how effective the trickle down effect is. All the "poor people" may not receive an increase in wages, but the dividends from their investment portfoilos probably work out to a 25% wage hike along with better tax benefits.

Posted by: American Hock on April 5, 2007 at 9:08 AM | PERMALINK

Chris, you obviously failed statistics. The median isn't the bottom quintile, it's the one in the middle. That's what "median" means.

Posted by: cn on April 5, 2007 at 9:13 AM | PERMALINK

If I'm John Edwards, I post an e-mail of this to every registered Democratic voter in America under the headline, "Who's getting the money?" (Based upon the funds Clinton and Obama are raising, I'm pretty sure a lot more people associated with "corporate profits" are contributing to their campaigns than to Edwards'.)

Posted by: Vincent on April 5, 2007 at 9:17 AM | PERMALINK

you know you're right, fats. corporations are neither good nor bad. they exist. let's instead blame their enablers in the white house and previous congresses for the overbalance toward corporate power and corporate profits and the minimal benefits that workers receive in return.

Posted by: mudwall jackson on April 5, 2007 at 9:18 AM | PERMALINK

Ron Byers: My guess is they are spending it overseas.

That's my guess, too, Ron. Last year, IIRC, I was reading press releases on the Shell website about their expansion in China. At the "Shell China" site, lots of announcements of joint ventures. The largest project, according to a "SD report" PDF, is a $4.3 billion petrochemicals plant in Guangong.

Posted by: Apollo 13 on April 5, 2007 at 9:31 AM | PERMALINK

Fat White Guy writes:

I am lucky. I work for one of those greedy oil giants. They have made huge profits but also paid large didvidends to shareholders, bought back a large block of stock, put a bunch of money into capital projects to grow the company, put money into more exploration and search for other growth opportunities and paid employees a 10-13% bonus based on company profits and local unit performance. I got a 11.2% bonus and was not unhappy to recieve it.

Fat, white and greedy.

Just like the corporate masters you serve.

We always knew you were a dick, FWG, but we never know why.

Now we know.

Posted by: chuck on April 5, 2007 at 9:33 AM | PERMALINK

Fat White Guy wrote: Money is spent on new equipment that helps the economy.

From the chart: Equipement and software investment 2.3% vs. a previous average of 5.8%

Here's a hint, FWG, but it doesn't help faith-based conservatives like you: The plural of "anecdote" isn't "data."

Aren't you embarrassed to trot out your ignorance and idiocy in public?

Posted by: Gregory on April 5, 2007 at 9:38 AM | PERMALINK

In 2000, Al Gore's campaign theme was "the people vs the powerful" and he got hammered for it. Even so-called liberal pundits criticized him for being, um, shrill.

I knew he was right back then and these stats just prove it. The powerful won in 2000 and they've been raking in the results ever since.

Posted by: Lifelong Dem on April 5, 2007 at 9:49 AM | PERMALINK

Chuck: stop being such a fucking troll and get off FWG's back. You're the dick - you just don't have any balls.
He's trying to make a couple nuanced points and you jump him...?

I work for an investment company and get looked at like I have 3 heads when I nonchalantly state the fact that Democrats are much better for business. My 2006 raise was a lousy 17 basis points above the CPI. I got a good bonus, too - which almost covered the down payment on a new vehicle to replace the 10-year old one I was driving.

Am I "evil" because I work for an investment firm...? I fell into it (I was planning on being a Rock Star, but apparently the position was filled) and my kids appreciate FOOD ON THE FUCKING TABLE each night.

What do YOU do for a living, shitstain...?

Posted by: steveconga on April 5, 2007 at 9:51 AM | PERMALINK

FWG: I got a 11.2% bonus and was not unhappy to recieve it.

Considering billion-dollar oil subsidies... corporate welfare... hmmm.

NYTimes, Mar. 29, 2006, G.A.O. Sees Loss in Oil Royalties of at Least $20 Billion:

The report is the first attempt by a government agency to calculate the soaring costs of a 10-year-old program that was created to encourage deepwater drilling when energy prices were low.
The program, known as royalty relief, allows companies to avoid paying the government royalties on much of what they produce from federal leases in deepwater areas of the gulf.
The Interior Department acknowledged last month that it would forgo about $7 billion in royalties over the next five years — even though it expected energy prices to remain near record highs....
Let me say it for you, FWG... I love it!

Posted by: Apollo 13 on April 5, 2007 at 9:56 AM | PERMALINK

What you are seeing is the financialization of the US economy. When one backs out the contribution of the financial sector, one finds that labor's share of income is near its historic average. Link

Of course, when one discusses wages, one ignores the fact that equity ownership in the United States is much broader and deeper than it was 30, or even 20, years ago, so the corporate profits you denigrate are partially owned by those very same workers you champion and claim are being screwed by rising corporate profits. Lets not ignore this fact.

Now, the real question is why the US economy has become overweighted with financial firms. One explanation is that finance is a comparative advantage that the US has over the rest of the world, however, I think the deeper explanation lies in the fact that money, and by extension, finance, is controlled by the government. When you have such a situation, rent-seekers flock to the trough. If you want to discuss how to break this rent-seeking activity, then you will have to willing to take power from the government. Are any of you willing to do this? Based on my experience with people of your political persuasions, you actually favor the policies that got us into this fix.

Posted by: Yancey Ward on April 5, 2007 at 10:11 AM | PERMALINK

Yup...

Ain't it great that 'merica has a government for the rich and nothing but the rich so help us god!?

It's as if the public good is only there to plunder and profitize profitable profits.

So, let's privatize everything and make more money for the privateering pirates!!

Man, ain't capitalism great?

I mean... afterall, isn't "...the US Constitution just a goddam piece of paper." (GWB)

This business of having a government for the people by the people seems to have perished from our earth.

Face it, grassroots movements and under-the-table economies are what keeps most of us surviving.

"We have to give back (rich) people more of their own money."

Amen to tax-cuts for all you wonderfully wealthy whinos!

Posted by: Tom Nicholson on April 5, 2007 at 10:12 AM | PERMALINK

I am lucky. I work for one of those greedy oil giants.

Well, those of us who know something about actual financial matters will tell you that the oil industry didn't make any money until Dick Cheney, rightly so, gave them the green light to manufacture a supply crisis and pump money into their coffers. Some of that--dividends to shareholders who have watched the oil companies consolidate into conglomerates and have seen anemic returns. Some of that is going to have to go towards getting ready to pump oil out of the sand and out of the Arctic Refuge. Laugh all you want, it'll happen no matter who gets elected in 2008.

The last place I'd want to be is the oil industry. I think I'd like to be buying the company that shakes hands with the governor of Montana and starts kicking out ethanol at a rate that can actually make a clean profit.

But I don't do business advice for liberals...you'll have to accept these bon mots and have them tide you over.

Posted by: Norman Rogers on April 5, 2007 at 10:14 AM | PERMALINK

FWG, that's a fair point. One area oil companies could spend their loot is by upgrading their refineries, and voluntarily making them more environmentally efficient. It will save them more money in the long run (environmental efficiency = energy efficiency), and they can gain some good PR for it, as well.

Posted by: MeLoseBrain? on April 5, 2007 at 10:16 AM | PERMALINK

'new guilded age,'

Nope.

Busted by the Homonyn Cop.

That's Gilded Age. 'Guilds' were medieval trade associations - merchants, glassblowers, weavers. What have you. 'Gilding' is the application of gold leaf or similar substance for purposes of display.

Posted by: MsNThrope on April 5, 2007 at 10:22 AM | PERMALINK

Can anybody point me to a report showing any sort of reports of dividend payments? I've tried looking this up, and every place I looked, the numbers looked painfully and dreadfully low. If the money is being redirected into the economy, then this probably isn't the reason behind lagging wages and all that, and we may need to look somewhere else (if it's a problem at all).

But I suspect that money is disappearing out of the system somewhere. I'm not sure where, but I think that after the economy crashes (and btw. That's not If. That's When.), you see a lot of money appearing and land/investments being bought up en masse...

Think about this.

Posted by: Karmakin on April 5, 2007 at 10:25 AM | PERMALINK

Of course, when one discusses wages, one ignores the fact that equity ownership in the United States is much broader and deeper than it was 30, or even 20, years ago, so the corporate profits you denigrate are partially owned by those very same workers you champion and claim are being screwed by rising corporate profits. Lets not ignore this fact. - Yancy Ward

Bullshit. Transparently false.

'There is another interesting aspect to this: the immense mass of stock that is owned by the wealthiest 10 percent of families in this country — by some measures as much as 80 percent of all stock. And a very, very large portion of it is owned by the wealthiest 1 percent of families. In fact, the upper 1 percent owned about 44 percent of financial assets in 2001, the most recent year for which I could get data.

If you said that the $2.6 trillion of cash owned by American corporations was yet another asset of the very rich, you would not be terribly far off. This makes it a bit sad — no, heartbreaking — for the roughly 80 percent of Americans who have no or virtually no savings.' - Ben Stein 'It’s a Great Country, Especially if You’re Rich' http://www.nytimes.com/2007/02/11/business/yourmoney/11every.html?
pagewanted=2&ref=business

Posted by: MsNThrope on April 5, 2007 at 10:27 AM | PERMALINK

Can anybody point me to a report showing any sort of reports of dividend payments?
Posted by: Karmakin

You'd have to be able to weed out the transparently phony 'dividends' (so designated in a fraudulent attempt to secure preferential tax rates) embodied here:

http://www.businessweek.com/magazine/content/06_44/b4007001.htm?chan=top+news_top+news+index_businessweek+exclusives
Gluttons at the Gate
Private equity are using slick new tricks to gorge on corporate assets. A story of excess.

"Banks have lent companies $71 billion since 2003 to pay dividends to private-equity owners, up from $10 billion during the previous six years, according to Standard & Poor's LCD, which, like BusinessWeek, is a unit of The McGraw-Hill Companies (MHP ). Credit ratings are falling fast. And while debt defaults are still ultralow by historical standards--around 1%--they're sure to rise. "If you look at the overall phenomenon, it has to mean an increase in defaults," says Solomon B. Samson, chief rating officer of corporate issuers at S&P. "And now that you have larger companies that are taking these big risks, you'd expect some of them to fall off the cliff." When that happens, employees and debt holders will suffer."

Welcome to Potemkin Economy.

Posted by: MsNThrope on April 5, 2007 at 10:41 AM | PERMALINK

It isn't class warfare. Warfare implies both sides are aware there is a fight and are able to participate. It is more like class theft.

Class piracy, or class warfare, followed by summary execution of POW's, more like.

Posted by: Davis X. Machina on April 5, 2007 at 11:04 AM | PERMALINK

"...Where are corporations spending the money? My broker tells me that many companies are awash in money, the problem is they don't know where to spend it. As the chart shows they sure aren't spending it on capital and software or on employees. I think we need to research that question. My guess is they are spending it overseas..."

Yes. The most telling part of that graph is the big drop in investment and the big rise in profits. If it wasn't for the massive govt spending and private debt of the last several years our economy probably would have looked like Japan's in the '80's (basically zero growth). There is also psychology in play. There is an *expectation* that more and more mfg. (i.e.) is going to leave and go somewhere else which contributes to lack of domestic investment. China now commands 25% of the world labor market.
http://www.atimes.com/atimes/China_Business/ID05Cb01.html

Posted by: Doc at the Radar Station on April 5, 2007 at 11:08 AM | PERMALINK
What you are seeing is the financialization of the US economy. When one backs out the contribution of the financial sector, one finds that labor's share of income is near its historic average.

While interesting if true, it doesn't really change the point. It doesn't matter if labor is losing income share because the same industries are reducing the share of income that goes to labor, or because the industries that currently provide the least to labor are becoming the dominant ones in the economy. The effect on people that rely on selling labor to put food on the table is the same.

Of course, when one discusses wages, one ignores the fact that equity ownership in the United States is much broader and deeper than it was 30, or even 20, years ago, so the corporate profits you denigrate are partially owned by those very same workers you champion and claim are being screwed by rising corporate profits. Lets not ignore this fact.

Really? Best I know, the recent trend on stock ownership concentration has been upward, and the historic lows were reached about 20 years ago (1987) and matched again in 1994, while 30 years ago was in the middle of a plateau at about the same levels reached in 2000.

I've seen several reports of increasing concentration post-2000 though I don't have any handy, for one series of data up through 2000 see Figure 2 in this paper.

Note also the conclusion of the paper on how the taxes on the wealthiest are a major driver of broader stock ownership, and consider what that suggests the effects of the Bush tax cuts favoring wealthy capital holders would be on ownership concentration.

Now, the real question is why the US economy has become overweighted with financial firms.

I disagree that that's somehow "the real question" in any exclusive or even highest-priority sense, nor is it a particularly difficult question—its pretty obvious that if you focus policy on rewarding capital by reducing tax and other costs for it and serving its interests in trade and other areas of policy, you are going to stimulate the industry involved in trading and holding capital on behalf of its customers. Its hardly some kind of deep, impenetrable mystery.

I think the deeper explanation lies in the fact that money, and by extension, finance, is controlled by the government.

Aside from overlooking the rather more obvious and correct explanation, that doesn't even make a lick of sense. That's not a change that would explain any recent trend; money has been "controlled by the government" for quite some time.

If you want to discuss how to break this rent-seeking activity, then you will have to willing to take power from the government.

What power do you want to take away from the government? The power over money? You want, for instance, to allow private coining and printing of money? So do you want to eliminate the Federal Reserve, the FDIC, and federal banking regulation, reserve requirements, etc.? What effects do you think that will have aside from the effects you imagine on the dominance of the financial industry? And, for that matter, how do you imagine that weakening the power of the financial industry?

And if that's not what you were talking about when you refer to the government's control of money, then what on earth were you talking about?

Now, I'm used to you posting libertarian fantasies without substantive support either in evidence or reasons, but it seems to me your just mouthing noises about "government power" without any clear idea of what you mean, much less any support. But, please, show me what I'm missing.

Posted by: cmdicely on April 5, 2007 at 11:10 AM | PERMALINK

Some error bars (or at least a significance calculation) would be nice, but probably less dramatic. We're looking at averages of previous cycles; seeing their distributions would add a lot more perspective.

Posted by: anxiocrat on April 5, 2007 at 11:16 AM | PERMALINK

Posted by: Steve on April 5, 2007 at 8:22 AM

As a guy who is on a Board of Directors and has to fight with management all the time about dividends, I couldn't agree more. I would love to tell the President to stiffle when he raises the old "double taxation" argument. Expensing dividends would also encourage better management. It is harder to fake cash when needed to pay dividends than it is to issue funny accounting claims.

Posted by: Ron Byers on April 5, 2007 at 11:22 AM | PERMALINK

MsNThrope:"Robber Baroning". Now, I'm not talking historically. But I'm talking game wise. There's an old game, Railroad Tycoon, written by Sid Meier. (He went on to head the design of the Civilization series, one of the most acclaimed and interesting games of all time) but whatever.

One of the big strategies of the game was to purchase stocks in companies, pump up the value then sell the stock, and discard the burned out shell. This was designed in the early 80s, btw.

Doesn't that sound what that article is talking about?

Posted by: Karmakin on April 5, 2007 at 11:34 AM | PERMALINK
Here's my question... where are the corporate profits going? .... Walker at 8:41 AM
One place: Vons millionaire Safeway CEO earned $11.5 million in 2006 From the Associated Press April 5, 2007

Safeway Inc. rewarded its chief executive with a 2006 pay package valued at $11.5 million for leading the grocer to its highest profit in five years, according to an analysis of a regulatory filing.
Steve Burd, Pleasanton, Calif.-based Safeway's CEO for the last 14 years, received $2.64 million in nonequity incentives to supplement a $1.33-million salary and $212,298 in perquisites, according to documents filed with the Securities and Exchange Commission.
The biggest chunk of Burd's 2006 compensation consisted of stock and option awards valued at $7.28 million on the grant date.

By-the-way, grocery workers in California are about to take another hit in the pay packet since the Big 3 have once again agreed to an illegal banding together to lock out workers if they strike one.

....So from personal experience it would seem that corporate profits benifit more people than just the upper management....Fat Angry Guy at 8:46 AM

b-e-n-e-f-i-t. Your 'personal' experience is dubious at best. The retirement package was $400 Million for the ex-head of Exxon

Posted by: Mike on April 5, 2007 at 11:42 AM | PERMALINK

Doesn't that sound what that article is talking about?
Posted by: Karmakin

Pretty much - what's changed is the scale. And the involvement of federally insured banks in making loans of this kind.

Private equity leverages capital (which itself is likely borrowed) to take over a company. Then takes out huge loans paying themselves in real money today against debt backed by 'possible profits' later. Of course these debts severely compromise the ability of the company in question to earn profits of any kind.

Then these same companies, stripped of much of their work force and valuable assets and awash in debt service obligations, are re-offered to the public. HCA has played this game twice already.

Posted by: MsNThrope on April 5, 2007 at 11:44 AM | PERMALINK

When the piper gets paid -- and he's gonna get paid, one way or the other -- it damn well better be out of increases in capital gains taxes.

Posted by: Brautigan on April 5, 2007 at 11:44 AM | PERMALINK

I've been searchng for an overview of Dividend/Stock "Value" ratio, or whatever. I can't find a damn thing.

Nobody cares about this stuff. We're so focused on capital gains, and dividends seems to be swept under the rug, so to speak. One example I found, BMO (The Bank of Montreal), aims to pay 50% of profits as dividends. At least that's what they say.

The current stock value, is just a tad over 70. The latest dividend paid is, depending on the type of stock, ranging from 65 cents to 30 cents.

Let's use the most.

So if you bought the stock tomorrow, in a buy and hold strategy, with a stable valuation of the stock market (read minus capital gains) your stock would break even in about 26 years.

That's your return on the profit these companies are making.

The last time I looked into this, the "breakeven day" for most of the corps I can find was even worth. Some going over the 200 year mark.

WTF?

This is our share of the profits, everything else, although the money might trickle down, it's a one time event. They're closing off the spigots, so to speak.

Untiil somebody can show me evidence otherwise, the majority of the "capitalist" system we have is a sham, a fraud. I'm all for a free market (which needs to be regulated to maximize the free part of it).

But when it comes to capital? I have big reservations.

Can anybody prove me wrong?

Posted by: Karmakin on April 5, 2007 at 11:48 AM | PERMALINK

Last summer I interviewed a fairly well known stock market guru -- one of those ultra-bullish "How to make a fortune in the coming megaboom" types. A supply side true believer, at least by reputation.

The guy startled me by saying that he thinks the party is almost over, that income inequality and CEO greed have gotten so far out of control that the country is heading for one hell of a populist economic backlash -- which will materialize with a fury once the current expansion/bull market has run its course.

So his next book, he said, is going to be more along the lines of: "How to survive the coming socialist revolution."

Posted by: Peter Principle on April 5, 2007 at 11:51 AM | PERMALINK

Karmakin: The bulk of the big dividend payouts have been in closely held corporations.

A tax advantaged gift from the owners to themselves.

So you're not gonna find much of that in the reporting because these kinds of corporations by definition don't offer stock on the market.

Posted by: MsNThrope on April 5, 2007 at 11:54 AM | PERMALINK

The triennial "Survey of Consumer Finance" by the Fed is here :
http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html

The 2007 is in process but the 2004 Survey showed that in the upper quintile of net worth, 54.6% of the households held stocks,but 88.5% held retirement funds (Table 5). Lots more in the Excel files. Maybe even charts and graphs for the more able among us?

Posted by: TJM on April 5, 2007 at 11:59 AM | PERMALINK

The last place I'd want to be is the oil industry. I think I'd like to be buying the company that shakes hands with the governor of Montana and starts kicking out ethanol at a rate that can actually make a clean profit.

Those of us who can actually read know that ethanol is a complete boondoggle. It's inefficient, both in the net energy it produces and the money it takes to produce it, and it's dependent on subsidies.

That's a recipe for disaster, not clean profits.

Whoever thought that making foodstuff into fuel was an idiot.

Posted by: NSA Mole on April 5, 2007 at 12:08 PM | PERMALINK

cmdicely,

Yes, what you describe is exactly what I am proposing, removing government control of money. Financial companies use the coercion of government power to place themselves in the advantageous positions for profitting from inflationary policies, benefitting at the expense of everyone else. Government not only allows this, but actively encourages it because it is the most profitable way for government to benefit from its inflationary policies. It is this symbiotic relationship that causes the problems that Kevin is complaining about in this blog entry. Not one person is this country can legally escape this continuous fleecing, which is mandated by law.

What are you missing? The thing you and probably every other commenter here is missing is any comprehension of how economic laws actually work, and from such ignorance derives the ignorance of blog entries like the one above, and such idiocies we see here on a consistent basis such as "consumption causes economic growth" and "inflation is caused by rising prices". When Kevin asks the question of who benefits, he clearly didn't have government in mind, did he? And, apparently, he didn't have financial institutions in mind either.

Posted by: Yancey Ward on April 5, 2007 at 12:12 PM | PERMALINK

Ron Byers wrote: "What I think we are seeing is the long steady decline of America ..."

Or the short chaotic decline of America ...

Posted by: SecularAnimist on April 5, 2007 at 12:18 PM | PERMALINK

Part of it, mabye not so big, but it stings: paying higher interest *rates* to larger accounts, and fees on small accounts, etc.

Posted by: Neil B. on April 5, 2007 at 12:28 PM | PERMALINK

My broker tells me that many companies are awash in money, the problem is they don't know where to spend it.
Try paying the friggin employees a decent f*cking wage.

TOH, your shouting gave me a headache but I suspect you're full of shit. Which 401K, which home purchase, is going to make me rich? As far as "experience labor" do w Google News search on Circuit City.

If you're a socialist I'm f*cking Achilles.
Now where's my crack pipe?

Posted by: thersites on April 5, 2007 at 12:31 PM | PERMALINK

PS - we have the right to control corporations all we want, since artificial personhood/limited liability is a privilege we can charge for.

Posted by: Neil B. on April 5, 2007 at 12:31 PM | PERMALINK

Yancey, I hope you're not suggesting we go back to REAL private banking, with self-issued and self-regulated scrip.

Please read a financial history of how banking got regulated in the US at the beginning.

Posted by: grumpy realist on April 5, 2007 at 12:36 PM | PERMALINK

Disincorporate.

Posted by: Brojo on April 5, 2007 at 12:37 PM | PERMALINK

"The thing you and probably every other commenter here is missing is any comprehension of how economic laws actually work"

LOL.... Oh, the irony, particularly in light of your own postings here.

Posted by: PaulB on April 5, 2007 at 12:50 PM | PERMALINK

thersites, April 5, 2007 at 12:31 PM

Don't be angry with me. I am not endorsing what my broker told me. I am just reporting.

I agree people should be making more. The problem is that our technology has greatly reduced the number of jobs available to do the same amount of work. In addition, lots and lots of jobs are moving overseas. We are all having to compete with robots and guys in India. Think I am kidding when I use the word "all," I talked to an IP lawyer the other day who told me his law firm has outsourced patent research to India.

That isn't going to get much better. What we need now is a way to move those profits into the hands of the middle and working classes without totally fucking up everything.

I like a lot of the ideas found in this thread. Raise the SS tax ceiling from 85K to 200K and lower the rate 1% on folks at the bottom. Encourage corporations paying dividends by allowing them to expense them while taxing the shareholders at their ordinary rates. Maybe we should consider restoring unionization to the work place--expecially for service workers whose jobs can't be sent offshore.

Reunionization isn't the ultimate fix because as automation progresses there will be more and more work done by fewer and fewer people.

The nature of work is changing our society. We have to figure out a way to make sure we peacefully share the wealth. Otherwise our society will become totally unstable and Revolution will be inevitable.

So don't be mad at me. I am still trying to find my way, but I do know a way has to be found.

Posted by: Ron Byers on April 5, 2007 at 12:51 PM | PERMALINK

Yes, what you describe is exactly what I am proposing, removing government control of money.

And thus evaporates the last wisp of Yancey Ward's credibility as he take a one-way trip to Loony Libertarian La-La Land.

Bonus: Yancey throws out accusations of ignorance to boot!

Personally, I'll give Yancey's proposals the same weight I do his usual unsupported assertions of his loony libertarian faith: None whatsoever.

Posted by: Gregory on April 5, 2007 at 12:54 PM | PERMALINK

Ron Byers at 12:51 PM --

Sorry. My anger wasn't directed at you. Not even your broker, personally, but at the mindset he represents -- the one that says "awash in money" without thinking through the consequences.

Posted by: thersites on April 5, 2007 at 1:02 PM | PERMALINK

Ten hears from now, this New Dark Age will be long gone. Thank F@ck.

Posted by: J. J. Deluca on April 5, 2007 at 1:03 PM | PERMALINK

mhr at 12:58 PM --
Liberals say, "Capitalism stinks.

Actually, there's quite a difference between saying "capitalism stinks" and "totally unregulated capitalism can have negative social consequences" which is the tenor of many of the remarks here. I haven't actually seen anyone calling for an armed socialist revolution.

Posted by: thersites on April 5, 2007 at 1:09 PM | PERMALINK

Ten hears from now, this New Dark Age will be long gone. Thank F@ck.

Yeah, but what will be here in its place?

Posted by: fear the reaper on April 5, 2007 at 1:11 PM | PERMALINK

Corporations are hollowing out their customer base.

Corporate money has to come from some place and that place is the customer base.

Once hollowing reaches a breaking point the economy will collapse.

Only way to maintain that kind of profit scale is to start firing people. Watch for the sharp up tick in unemployment. That's the signal for a recession or depression beginning.

Try this thought experiment: Ford or IBM layoff a worker; Is McDonald's happy about that?

Posted by: James on April 5, 2007 at 1:11 PM | PERMALINK

Those of us who can actually read know that ethanol is a complete boondoggle. It's inefficient, both in the net energy it produces and the money it takes to produce it, and it's dependent on subsidies.

Look at the liberal, decrying renewable fuels and alternative energy sources.

Someone must be paying you to talk out of your ass about things you know nothing about. Ethanol, while certainly not perfect, is a better alternative to you telling everyone what they can drive and how they can live their lives. Good luck with your fascist takeover of society--the rest of us are on to you, sir. You're more of a crank and a fraud, less of a future tin pot dictator.

Posted by: Norman Rogers on April 5, 2007 at 1:18 PM | PERMALINK

PS,

Why do some of the articles calling ethanol a "boondoggle" have an association to the Lyndon LaRouche supporters who fill the Internet with their lies? Is our NSA Mole just another LaRouche crank who has no money, no job and no outlet for his crazed rants?

Posted by: Norman Rogers on April 5, 2007 at 1:23 PM | PERMALINK

Yes, what you describe is exactly what I am proposing, removing government control of money.

So are you advocating exactly and only the particular policies I identified, those and some others related to them, or some subset of them? I ask you for specifics, and I get handwaving. And you don't answer the first and merely wave your hand in the direction of the second of the following questions from my original post where I asked you what policies you were advocating:

What effects do you think that will have aside from the effects you imagine on the dominance of the financial industry? And, for that matter, how do you imagine that weakening the power of the financial industry?

Financial companies use the coercion of government power to place themselves in the advantageous positions for profitting from inflationary policies, benefitting at the expense of everyone else.

All corporations—or rather, the capitalists whom use corporations as a vehicle for enriching themselves—do that. This is hardly unique to financial corporations, its due to the fact that the corporation itself is an exercise of government power to create private benefits (notionally, of course, in the anticipation of social benefits.) Nothing you say here makes a specific connection to government's exclusive role in governing money, only to government's role in chartering corporations.

Government not only allows this, but actively encourages it because it is the most profitable way for government to benefit from its inflationary policies.

Discussing benefit to a corporation rather than particular natural persons is a big misleading, but usually something that can be easily seen through to the right underlying real parties in interest. But your discuss of "government" benefitting is entirely opaque. Exactly to whom are you referring by "government"? Who, allegedly, is benefiting?

While their are useful analytical sense outside of the strictly legal where extending the legal fiction of the pershonhood of an entity like government is useful, here it seems to be entirely useless. Of course, much of your immature libertarian orthodoxy seems to center around mistaking that fiction for fundamental reality.

It is this symbiotic relationship that causes the problems that Kevin is complaining about in this blog entry.

How? Government's power of money is a constant across the economic cycles studied, not a new feature of the present cycle. How, then, does it drive the difference Kevin complains about between the present cycle and prior cycles? Your assertion here, even aside from its utter lack of support, seems implausible. Kevin complains of a change, and you provide no explanation of the genesis of the change, simply make a bunch of handwaving generalities that relate to a constant feature of the environment and say that that is somehow, with no specifics, to blame.

Not one person is this country can legally escape this continuous fleecing, which is mandated by law.

What precise "fleecing" is mandated by which precise "law"? How is that relevant to the difference Kevin complains about in the present cycle vs. previous cycles?

What are you missing? The thing you and probably every other commenter here is missing is any comprehension of how economic laws actually work

Yancey, I was asking for evidence or argument, not unsubstantiated insults from someone whose knowledge of "economic laws" seems to be rote regurgitation of a few of the broad generalities common in introductory economics classes without any comprehension of the processes underlying those generalities and thus the limitations to their practical utility.

When Kevin asks the question of who benefits, he clearly didn't have government in mind, did he?

Probably not. "Government" isn't a "who", but a vehicle through whom many people's interests are represented, and the mix of interests represented are not constant over time.

And, apparently, he didn't have financial institutions in mind either.

Probably not. He probably had in mind actual people, some of whom exercise power over governments, some of whom exercise control over financial institutions, and some of whom exercise control over other corporations, and all three of which groups are overlapping sets.

Aside from bizarre generalities that don't address the issues and are entirely without support, do you have a point?


Posted by: cmdicely on April 5, 2007 at 1:24 PM | PERMALINK
Liberals say, "Capitalism stinks. Wait until the US becomes like Cuba or the Soviet Union."

Which "liberals", specifically, say that?

Posted by: cmdicely on April 5, 2007 at 1:25 PM | PERMALINK
Liberals say, "Capitalism stinks... mh rat 12:58 PM
You have less vision than the straw men your argue against. Capitalist greed should be balanced by worker need and their differences adjucated by government intervention for an outcome that benefits the largest proportion of citizens. The current situation entails corporate money buying government compliance with corporate interests at the expense of benefits that would otherwise accrue to workers.
just another... crank who has no money, no job and no outlet for his crazed rants... Norman Rogers at 1:23 PM
Love the irony. LOL. Posted by: Mike on April 5, 2007 at 1:30 PM | PERMALINK

Ron Byers: The problem is that our technology has greatly reduced the number of jobs available to do the same amount of work.

That's what people said at the beginning of the Industrial Revolution over 200 years ago. Come to think of it, they also said about the British Agricultural Revolution, which began in the 16th century. Then there was talk of the increased productivity of agriculture putting hunter-gatherers out of work, circa 9500 BC.

Sorry for the sarcasm, but as an engineer I always thought the most hypocritical thing I could be was a Luddite.

The 1990's put the lie to this lump of labor fallacy. Great employment, rising wages, high investment and resulting productivity improvements.

To be sure technological change leads to sometimes painful disruption, but we've always found ways to keep people employed - if the political will exists. And without technological improvements, we would have a declining standard of living (due to increasingly scarce resources).

and guys in India. Think I am kidding when I use the word "all," I talked to an IP lawyer the other day who told me his law firm has outsourced patent research to India

Well, at least it's nice to know that engineers and programmers aren't the only ones getting screwed on this. When do they start an H-1B guest worker program for IP lawyers?

On the more serious side, this is a different animal than technological improvement. "Globalization" policies are intended to flood the labor market, but have many curious protections for capital (see The Conservative Nanny State for details). The ill effects to labor are more due to deliberate policy than some grand unavoidable aspect of historic inevitability (ala Tom Friedman).

Posted by: alex on April 5, 2007 at 1:30 PM | PERMALINK

Ron:The eventual result is that there just isn't going to be enough jobs to go around. THe money will be there, but the labor demands just won't justify it. Howver, there is an answer.

Job Sharing.

This will require affordable mass transit/housing (consideirng the problems with energy over the next while), universal health care, and other things to reduce the overhead of the common citizen. Instead of being preoccupied with material goods, instead our bread and circuses (not in a bad way), will be about content, which is plentiful and cheap for mass consumption, and producers will make a profit because of mass consuption.

This change from outward materialism towards internal content consumption is already visible among the younger generation.

This is the future. Probably, and yes even hopefully. It's better than a lot I can think of.

Posted by: Karmakin on April 5, 2007 at 1:31 PM | PERMALINK

mhr: Liberals say, "Capitalism stinks. Wait until the US becomes like Cuba or the Soviet Union."

cmdicely: Which "liberals", specifically, say that?

thersites: there's quite a difference between saying "capitalism stinks" and "totally unregulated capitalism can have negative social consequences" which is the tenor of many of the remarks here. I haven't actually seen anyone calling for an armed socialist revolution.

Comrades! great job disguising our true intentions. Keep up the good work.

Posted by: alex on April 5, 2007 at 1:38 PM | PERMALINK

A recent condo buyer still owes $305,000 on his mortgage but a bigger unit just sold for $240,000, and the HOA is raising its fees.

"We love this building," Pira says. "But the reality is, we've accepted the fact that we're going to go into foreclosure."

This will become a common practice.

Posted by: Brojo on April 5, 2007 at 1:40 PM | PERMALINK
Capitalist greed should be balanced by worker need and their differences adjucated by government intervention for an outcome that benefits the largest proportion of citizens.

Or, as noted socialist Adam Smith writes in An Inquiry into the Nature And Causes of the Wealth of Nations:

The plans and projects of the employers of stock regulate and direct all the most important operations of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin. The interest of this third order, therefore, has not the same connection with the general interest of the society as that of the other two. Merchants and master manufacturers are, in this order, the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration. As during their whole lives they are engaged in plans and projects, they have frequently more acuteness of understanding than the greater part of country gentlemen. As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business, than about that of the society, their judgment, even when given with the greatest candour (which it has not been upon every occasion) is much more to be depended upon with regard to the former of those two objects than with regard to the latter. [...] The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.
Posted by: cmdicely on April 5, 2007 at 1:47 PM | PERMALINK

alex

I agreed with you 1000% for most of my life. I made all the same arguments, but the technological changes in the last 15 years have been so profound I think they will result or have resulted in a fundamental shift in the nature of work.

As to the globalization thing, I happen to think that in the long run that works itself out as standards of living in most of the world improve. Those improvments lead to expanding markets everywhere.

Karmankin, might actually be on to something.

Posted by: Ron Byers on April 5, 2007 at 1:48 PM | PERMALINK

Those improvments lead to expanding markets everywhere.
Posted by: Ron Byers

Except for the tiny problem that the planet cannot support this. It would take 8 Earths to bring even the current population up to western levels of consumption (consumption is 'living standards when it's at home).

Got the other 7 in your hip pocket, perhaps?

Job sharing? When 1 in 3 jobs currently pay less than $11/hr with no benefits whatsoever? I assume you guys aren't volunteering to attempt to live on 1/2 or 1/3 of $11/hr, so who exactly do you have in mind?


'However, we cannot understand the concomitance of the ecological and social crises if we don't analyze them as the two sides of the same disaster. And that disaster derives from a system piloted by a dominant social stratum that today has no drive other than greed, no ideal other than conservatism, no dream other than technology.

This predatory oligarchy is the main agent of the global crisis - directly, by the decisions it makes. Those decisions aim to maintain the order that has been established to its advantage and favor the objective of material growth: the only method, according to the oligarchy, of making the subordinate classes accept the injustice of the social situation. But material growth intensifies environmental degradation.' "How the Rich Are Destroying the Planet" By Hervé Kempf


Posted by: MsNThrope on April 5, 2007 at 2:01 PM | PERMALINK

Ron Byers: the technological changes in the last 15 years have been so profound I think they will result or have resulted in a fundamental shift in the nature of work

The technological changes of the last 15 years haven't been particularly profound or fundamental compared to other changes since the start of the industrial revolution.

What's changed in 15 years, the Internet has become more popular? Contrast that with spinning and weaving machines replacing hand work, steam power for factories and ships, railroads, mass produced steel, electricity, telephones, the mechanization of agriculture, cars, air travel, the widespread adoption of computers for DP in the 1960's (yes, that's the right decade) and you don't have much to get excited about.

People have always said "this time it's different", more profound, more fundamental, whatever. What they really mean is that they were born into a world where past changes had already taken place - it was their grandparents that were affected by them.

Posted by: alex on April 5, 2007 at 2:03 PM | PERMALINK

Meanwhile:

Ford CEO: $28M for 4 months work
Former Boeing exec got $18.5 million bonus, almost $9 million in stock and options and base salary at annual $2 million rate, according to proxy.
April 5 2007: 12:40 PM EDT

NEW YORK (CNNMoney.com) -- Struggling Ford Motor Co., which posted a record $12.7 billion net loss in 2006, gave its new CEO Alan Mulally $28 million for four months on the job, according to the company's proxy statement filed with the Securities and Exchange Commission Thursday.

The Ford (Charts) pay package for Mulally comes on top of the $7.4 million that aerospace company Boeing (Charts) had previously reported paying him for his eight months running that company's commercial aircraft unit before he made the move to Ford at the beginning of September.

Mulally's pay package at Ford included a $7.5 million hiring bonus, as well as $11 million that Ford described as an offset for forfeited performance and stock option awards at Boeing. In addition he received $55,469 for relocation costs and temporary housing.

[snip]


'At this point it’s instructive to recall the common complaint that archaeology is a luxury, concerned with the remote past, and offering no lessons for the present. Archaeologists studying the rise of farming have reconstructed a crucial stage at which we made the worst mistake in human history. Forced to choose between limiting population or trying to increase food production, we chose the latter and ended up with starvation, warfare, and tyranny.' Jared Diamond
The Worst Mistake in the History of the Human Race
http://www.agron.iastate.edu/courses/agron342/
diamondmistake.html

Posted by: MsNThrope on April 5, 2007 at 2:18 PM | PERMALINK

Ron Byers: As to the globalization thing, I happen to think that in the long run that works itself out as standards of living in most of the world improve. Those improvments lead to expanding markets everywhere.

As for the long run, I like Keynes's observation: in the long run we're all dead. The real question isn't what things will be like in a century or two, but how to handle the transition. What made the Industrial Revolution (and the preceding Agricultural Revolution) such a horror for most people was the failure to manage the transition properly. The increase in productivity was intrinsically desirable (unless you like doing 70 hours/week of back breaking labor in the fields and living in a hovel with a dirt floor), but the distribution could have been a bit more equitable.

What we're seeing now with "globalization" is not primarily a matter of comparative advantage, but labor arbitrage. Guess who wins and loses from that. Guess who establishes laws, policies and international agreements that facilitate it. Guess who buys the propaganda that keeps the voters from revolting.

Furthermore, "globalization" isn't terribly new. The "first great age of globalization" ended with WWI. Trade as % of GDP, capital flows, etc. were every bit as large as today. The technological changes that enabled it were railroads and steamships (cheap rapid transport) and the telegraph (rapid global communication). Compared to those the Internet is a yawn.

Posted by: alex on April 5, 2007 at 2:18 PM | PERMALINK

Over 40 million U.S. Jobs — 1 in 3 — Pay Low Wages
For Immediate Release: March 15, 2007
Center for Economic and Policy Research

Washington, DC: A new report from The Mobility Agenda finds that over 40 million jobs in the United States — about 1 in 3 — pay low wages ($11.11 per hour or less) and often do not offer employment benefits like health insurance, retirement savings accounts, paid sick days, or family leave. Moreover, these jobs tend to have inflexible or unpredictable scheduling requirements and provide little opportunity for career advancement.

The Mobility Agenda is a special initiative of Inclusion, a virtual think tank affiliated with the Center for Economic and Policy Research.

"All too often these low-wage jobs are replacing jobs that have supported a broad middle class," said Margy Waller, director of The Mobility Agenda and one of the paper's co-authors. "The economy and our democratic society are strongest when no one is falling too far behind the rest. Unfortunately, we find that, in 2006, 44 million workers were employed in low-wage jobs paying much less than the rest of us get paid."

The report, Understanding Low-Wage Work in the United States, uses a social inclusion approach that provides a definition of low-wage work that allows for comparison among jobs in the United States. The authors define a low-wage job as one paying substantially less than the job held by a typical male worker. The trend since 2001 has been a sharp decline in wages for these jobs. Worse, reviewing the evidence on economic mobility, the authors conclude, "In the U.S. labor market, it is not possible for everyone to be middle class, no matter how hard they work. Moreover, it has been getting harder to do over time."

[snip]

Posted by: MsNThrope on April 5, 2007 at 2:24 PM | PERMALINK

http://en.wikipedia.org/wiki/Globalization

[snip]

'Globalization is a centuries long process, tracking the expansion of human population and the growth of civilization, that has accelerated dramatically in the past 50 years. Earlier forms of globalization existed during the Mongol Empire, when there was greater integration along the Silk Road. Global integration continued through the expansion of European trade, as in the 16th and 17th centuries, when the Portuguese and Spanish Empires reached to all corners of the world. The effects on European industries were notable, e.g. the Silver Mining in Schwaz, Austria was partly abandoned, as silver was available from the Spanish colonies for lower prices.

Globalization became a business phenomena in the 17th century when the first Multinational was founded in The Netherlands. During the Dutch Golden Age the Dutch East India Company was established as a private owned company. Because of the high risks involved with the international trade, ownership was divided with Shares. The Dutch East India Company was the first company in the world to issue shares, an important driver for globalization.

Liberalization in the 19th century is often called "The First Era of Globalization", a period characterized by rapid growth in international trade and investment, between the European imperial powers, their colonies, and, later, the United States. The "First Era of Globalization" began to break down at the beginning with the first World War, and later collapsed during the gold standard crisis in the late 1920s and early 1930s.

[snip]

Posted by: MsNThrope on April 5, 2007 at 2:30 PM | PERMALINK
... cmdicely at 1:47 PM
Adam Smith against monopolies. Pity Hamilton didn't pay attention.

...Some of Washington's sentiments were clearly Smithian. In his farewell address, for example, he wrote, "Even our commercial policy should hold an equal and impartial hand: neither seeking nor granting exclusive favors or preferences." Smith railed against monopolies and the political influence that accompanies economic power....
...Smith did favor low taxes and argued that subjects "ought to contribute toward the support of the government, as nearly as possible, in proportion to their respective abilities." But he also argued, "It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion."...

Posted by: Mike on April 5, 2007 at 2:34 PM | PERMALINK

Mike (quoting Adam Smith): "It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion."

Smith was a Commie.

Posted by: alex on April 5, 2007 at 2:41 PM | PERMALINK
Those improvments lead to expanding markets everywhere. Ron Byers at 1:48 PM
Then again, they may not

...Which is why the conduct of America's corporate titans in China is so disquieting. There, since March of last year, the government has been considering a labor law that promises a smidgen of increase in workers' rights. And since March of last year, the American businesses so mightily invested in China have mightily fought it....
If a nation removes its high wage manufacturing economic base for increased profits for multi nations, what is to be traded, its financial assets?

Smith was a Commie. alex at 2:41 PM

John Birch: Damned commies are everywhere, everywhere I tell you!

Posted by: Mike on April 5, 2007 at 2:45 PM | PERMALINK

mhr wrote: Liberals say, "Capitalism stinks. Wait until the US becomes like Cuba or the Soviet Union."

I love it when the John Birch crowd's ridiculous obsession with Communism rears its ugly head, especially when their fury at being in the dustbin of history lets them do no other by vent their spleen on straw man.

Posted by: Gregory on April 5, 2007 at 2:55 PM | PERMALINK
It would take 8 Earths to bring even the current population up to western levels of consumption (consumption is 'living standards when it's at home).

Since "the West"—if by that you mean at least the EU, US, Canada, Australia, Japan, and South Korea—accounts for more than 1/8 of the Earth's population, and since the rest of the Earth has a non-negative consumption, this is rather self-evidently false.

Posted by: cmdicely on April 5, 2007 at 2:56 PM | PERMALINK

MORE SILLINESS:

The triumph of this recovery is that it intervened BEFORE the Clinton Recession of 2000 (YES, DEFINITELY) became too destructive, fixing Clinton's mess immediately in other words. In absolute terms, the recover is weak, but relative to the static nadir of the economy in 2002-2003, it's booming. Going from 5.5% unemployment to 4.5% is like skyrocketing.

TOH

Posted by: The Objective Historian on April 5, 2007 at 3:06 PM | PERMALINK

the longer I look at the graphs, the poorer I feel. To think of all that corporate money just sitting there without being invested. That's the money that Hillary Clinton said she'd like to "take" (her word) and invest in clean energy. No quarrel with me on that one. If the corporate world won't do it on their own, let's take their money and do it for them.

Meanwhile, Kirk Kirkorian is trying to buy Chrysler again; that's Chrysler as in the money-losing half of Daimler-Chrysler. Chrysler, at least, doesn't have any 12% increase in profits. But we should take Kirkorian's $4.5B and invest it in -- biofuels, is it? PV Cells ? -- instead of a money-losing car company. Or, maybe we could take his money and buy Chrysler. After all, he'll probably try to reduce the work force and create profits at Chrysler. If we buy it, we can run it more like Amtrak, and avoid profits altogether. We could make fuel-efficient cars, and cover our losses by taking the profits of the profit-making care companies.

Posted by: MatthewRMarler on April 5, 2007 at 3:22 PM | PERMALINK

TOH

When in doubt blame Clinton, the fount of all that is wrong in the world.

That was the funniest comment in this entire thread. ROTFLAO

Posted by: Ron Byers on April 5, 2007 at 3:26 PM | PERMALINK

If you want to be objective then the unemployment rate has to be conditioned by the numbers falling off the rolls, etc. Better to look at the total employment growth and compare that to the growth in total working age population.

The rest of your statement is similarly lacking in objectivity and devoid of facts.

Posted by: notthere on April 5, 2007 at 3:27 PM | PERMALINK

Why the focus solely on wages? If you look at total employee compensation (which includes health care costs), it's increased fairly significantly during the expansion.

Seems disingenuous to complain about the rising cost of medical care in America and then completely ignore it when it detracts from your argument that employers aren't passing on the benefits from the recent expansion.

Compensation is rising. It's not showing up in wages, it's showing up in benefits. By my calculations, according to BLS numbers, total compensation is up ~13% since 2002, adjusted for inflation.

Posted by: Bob Bobson on April 5, 2007 at 3:47 PM | PERMALINK

Bob

You can't eat medical care nor can you spend it at the mall.

Posted by: Ron Byers on April 5, 2007 at 3:52 PM | PERMALINK

Ron,

True, but increased medical premiums are a cost to the employer that they provide the employee in lieu of wages. Would you be happier if wages had increased by 13%, but benefit cuts had made out-of-pocket medical premiums increase by the same dollar amount?

They're functionally equivalent.

Posted by: Bob Bobson on April 5, 2007 at 4:04 PM | PERMALINK

MsNThrope: ...about 1 in 3 — pay low wages ($11.11 per hour or less) and often do not offer employment benefits like health insurance, retirement savings accounts, paid sick days, or family leave.

That is seriously f**ked up.

Let me add snips from Kevin on recent and past topics re: stagnant wages.

Kevin wrote last June (Jun. 29, 2006) about YOYO (you're own your own) economics in which he cited Jared Bernstein, senior economist, Economic Policy Institute. On the alleged trickle down of higher incomes from higher corporate profits to workers... Bernstein:

Productivity is up a stellar 15% over this recovery. Real hourly wages of non-managers are up bupkes (-0.6%).
New economy cheerleaders expound on the great job market, yet employment growth is up only 2% over this business cycle. The growth for the comparable period over the 1990s cycle was 7% and the historical average for cycles of this length was 10%.
Over five million more people are poor in 2004 (most recent data) compared to 2000, including 1.4 million kids....
...This disconnect between productivity and living standards is one of [today's] most important, and most unsettling, economic dynamics.
Also note Kevin's post from Mar. 14, Income Inequality Update:
...excluding capital gains... the top 1% of the population... increased their share of national income from 16% in 2004 to 17% in 2005.... Meanwhile, the merely well off... went nowhere.... Top 10%: income share stagnant since 1983.... Top 5%: Income share stagnant since 1995.... Median wages have been stagnant since the mid-70s. Today, the wages of everyone below the top 1% are stagnant.
That's 30 years of stagnant middle-class wages.

See also Kevin's post on The GOP Economy, Apr. 1, and the nifty chart on median wages compared to GDP from the WSJ for 2002-2006. Notice the wage dips below zero.

Sheesh.

Posted by: Apollo 13 on April 5, 2007 at 4:06 PM | PERMALINK
... run it more like Amtrak, and avoid profits altogether... MatthewRMarler at 3:22 PM
Is T. S. Elliott around here today? the hollow men, the stuffed men headpiece filled with straw

When a corporation becomes a money loser, defending them becomes almost a point of personal honor for some. How much did he improve GM, his last auto investment? None.
What is wrong with subsidizing rail passenger service? Have you heard of the Long Island RR? Do you complain about subsidizing for-profit airlines? Did you complain about the Chrysler bail out? Where are all the new jobs, businesses and wages from all that investment money sitting in corporate accounts?

... By my calculations.... total compensation is up ~13% since 2002.... Bob Bobson at 3:47 PM

Do your calculations include workers without benefits and people without health insurance? Can you pay the mortgage and groceries with the higher benefits in your paypacket? Do you increased benefits come at a higher cost to the worker and higher co-pays that tend to equal out their value?


Posted by: Mike on April 5, 2007 at 4:07 PM | PERMALINK

excellent work by cmdicely and gregory kicking yancey ward's butt, so all i can add to that is to note to yancey that roughly 1/2 of households own stock in america, and the median stock ownership level is in the 5 digits.

not exactly the worker's paradise you seem to think obtains.

as for the objective historian, he makes you miss yancey, who at least writes sentences that may be wrong but can be understood. i have no idea what silliness objective historian is trying to spout at 3:06, but he/she is deranged. (just as a very small point, recessions are defined as two consecutive quarters of negative growth. those 2 quarters were q2 and q3, 2001; the negative growth of q3 2000 wasn't part of a recession, although it was a precursor. and we'd been in an expansion for 2 years by what you call the "nadir." and that's just a small point.)

Posted by: howard on April 5, 2007 at 4:13 PM | PERMALINK

thanks, mike, for drawing my attention to bob at 3:47, who clearly doesn't understand the numbers he's looking at.

bob, if a bonus of $1B is paid to an executive (i'm exaggerating, we haven't seen one of that size yet), it will show up in total compensation, and it will mean nothing to the other 119,999,999 american workers.

similarly, if health-care costs go up and as a result, companies drop coverage and increase out-of-pockets to employees (both of which have happend), then the total compensation line will be bigger but most people aren't benefitting.

in short, looking at total compensation is like looking at total net worth in america; it's a highly skewed number and suggests nothing about most households.

Posted by: howard on April 5, 2007 at 4:16 PM | PERMALINK

Mike: Is T. S. Elliott around here today? the hollow men, the stuffed men headpiece filled with straw...

Weird. I was just reading that poem last night.

Posted by: Apollo 13 on April 5, 2007 at 4:17 PM | PERMALINK

Howard,

I understand the difference between mean and median perfectly. I just don't know where to locate data that will allow the median to be calculated. If you have a source for total compensation broken out into such detail (or however you deem appropriate), please provide a link so we can look at it.

The BLS might not have the best numbers, but focusing solely on wages still seems suspect to me.

Posted by: Bob Bobson on April 5, 2007 at 4:22 PM | PERMALINK

Bob Bobson: focusing solely on wages still seems suspect to me

I agree. But even harder to get a handle on is inflation in medical costs. The BLS's own admission:

The current indirect method for measuring health insurance premium changes does not mimic the way consumers pay for health care

(from http://www.bls.gov/cpi/cpifact4.htm)

So who knows what the net effect is.

Posted by: alex on April 5, 2007 at 4:52 PM | PERMALINK

bob, mean and median isn't the issue here; it's understanding the applicability of any particular data set.

i don't have the time for a comprehensive linkfest, but let me point you at some useful readings.

on health-care coverage (this is the 2005 kaiser foundation study, which is the gold standard; there was a new one in 2006, but i haven't bookmarked it, but it's basically more of the same concusions):

http://www.kff.org/insurance/7315/sections/upload/7375.pdf (be aware, bob, that no comp stats take into account employee out-of-pockets)

here's a nice study from the san francisco fed on rising income inequality and its causes:

http://www.frbsf.org/publications/economics/letter/2006/el2006-33-34.html

here's a nice research note from the st. louis fed on rising household debt loads relative to income:

http://www.stlouisfed.org/publications/re/2006/c/pages/digging.html

here's a good discussion by picketty and saez (the gold standards on upper 1% of households by income and their income level):

http://economistsview.typepad.com/economistsview/2006/07/new_data_show_i.html#comments

here's a good update on that:

http://www.epinet.org/content.cfm/webfeatures_snapshots_20070117

a good warning about what happens when asset inflation stops in the face of record levels of household debt:

http://www.safehaven.com/article-5640.htm

a related discussion, based on some of the same thinking:

http://bigpicture.typepad.com/comments/2006/12/festivus_flowof.html#more

the importance of mortgage equity withdrawal to sustaining consumption and gdp growth:

http://calculatedrisk.blogspot.com/2005/12/gdp-growth-with-and-without-mortgage.html

(just so you know, these are all links i keep in an interesting readings folder). admittedly, none of these specifically gets into the details of how the bls looks at total compensation (although the bls website is actually quite good on this if you choose to dig around), but the big picture is quite clear: the increased income to the upper 1% of households by income pretty much consumes the entire amount of increased income the bls reports. increased benefits costs as far as the bls is concerned are simply a line item - it takes a separate study like the kaiser foundation study to show you how fewer people now receive those benefits and how their out-of-pockets have increased (which total comp doesn't take into account, as the bls will tell you). meanwhile, household debt has soared (particularly revolving, primarily credit card, debt), while consumption has been supported in good measure by mortgage equity withdrawal (MEW), which is winding down considerably. none of these factors would make much sense in the light of a 13% increase for the typical household.

perhaps at some point i can dig around some more (i've gotten into the habit of bookmarking this kind of link, because you never know when an opportunity for remedial education will present itself, but i don't have a precise specific one on total comp and its meaning just now.)

PS. the median household has virtually no net worth and an income of roughly $44K; to understand those households, wages are fine. if, on the other hand, we want to undersand the upper 1%, then we need to get beyond wages (as a small, but typical, example, many senior execs are provided with life insurance policies at no cost, as compared to the rest of the average joes and janes who pay for their own. that would show up in total compensation, but it wouldn't mean much to most people. and don't get me started on bonuses and stock options!)

Posted by: howard on April 5, 2007 at 5:10 PM | PERMALINK

bob, i just wrote you a lengthy reply replete with lots of links, and i got a message that it was "being held for review by the owner." i've never gotten that message here before so i don't know what it means!

maybe it will show up, but if it doesn't, i'd be happy to correspond directly via email (you can use the address associated with my name).

Posted by: howard on April 5, 2007 at 5:11 PM | PERMALINK

Someone must be paying you to talk out of your ass about things you know nothing about. Ethanol, while certainly not perfect, is a better alternative to you telling everyone what they can drive and how they can live their lives. Good luck with your fascist takeover of society--the rest of us are on to you, sir. You're more of a crank and a fraud, less of a future tin pot dictator.

Actually, you tool, I support gasoline, until the free market can find something better.

You think ethanol is better? Great. Screw the subsidies and let it compete with gas.

And to cut carbon emissions - start using more nuclear power and natural gas to generate electricity and less coal.

A great source of gas would be the nonsensical words that come out of your mouth.

Posted by: NSA Mole on April 5, 2007 at 5:31 PM | PERMALINK

interesting trade statistics here, with links to more interesting trade statistics:

http://www.di2.nu/200704/05a.htm

In brief: exports to China have increased faster under Bush than they increased under Clinton, whereas imports from China have increased at the same rate under Bush as they did under Clinton.

Since exports are principally by corporate/agribusiness producers, this topic is related to the unusual profits increases in the current expansion. The authors do discuss, at least briefly, exchange rate issues, but the imports and exports are dollar-denominated.

And, as always in economics, these figures consitute only a part of the whole.

It is at least interesting that the rate of increase of exports to China is greater under Bush. The rate of increase of EU exports to China is somewhat lower, more volatile, and unchanged over the decade.

Mike: Where are all the new jobs, businesses and wages from all that investment money sitting in corporate accounts?

That is a good question, and I did note the disparity between profits (that's % increase over previous profit levels) and investments (also % increase over previous investment levels.) Absolute profit levels (and investment levels) are not given, but an increase in average profit margin from 1% to 1.125% is a 12% increase. I believe the figure refers to increase in total profits, not increase in profit rates, so it is hard to know what exactly to make of the figures. The most famous truly huge increases in profits are in the energy industries, and all of them have numerous new projects just starting up or in the planning. Shell, for example, has just received permission to start doubling the size of its large Houston refinery, so most of the contracting, hiring, and building has just been completed, and construction is barely underway. That is a huge investment that is not yet reflected in the tabulated investment figures.

The short answer to your question might be: The jobs are in the future. That is certainly the case in energy, but I do not know about the whole economy. A recent issue of the journal Science tabulated the new cellulosic ethanol plants that have just been approved by DOA (not industry financed, clearly, but the same general theme), where construction is just starting and where, consequently, most jobs remain for the future. Microsoft and Google are just starting their giant PV-powered establishments in Silicon Valley, so most of the jobs for those projects are in the future; construction of the largest PV factory in the world had just started (TX or CA, I do not remember where for sure), so most jobs for that project are in the future; construction of the giant new supercomputer by Google is just getting underway, so that is another large project where most jobs remain in the future. Westinghouse and GE are negotiating new powerplants (coal and nuclear) in some of the Red States; if they get permission, the jobs for those construction projects will also be in the future; and new power plants for TX were recently approved as part of a large merger and promis of clean electricity in the future. IIRC, a new synfuels plant for the western Columbia River basin has been recently approved, and construction has just started; most of the jobs for that construction are in the future.

What happens across the whole economy can't be predicted. But the large accumulations of profits in the energy industry, and the large portfolio of projects newly begun, about to begin, and in the planning/approval stages, probably implies that there will be no recession in the energy industry before 2009.

It would be useful to see these statistics updated in the upcoming quarters. There is a lot of money represented in the far right-hand bar for growing the economy of the next year, if that's what companies do with it.

Posted by: MatthewRMarler on April 5, 2007 at 6:28 PM | PERMALINK

here is another informative website for energy/CO2 news:

http://www.netl.doe.gov/publications/carbon_seq/news/2007/3-07.pdf

Posted by: MatthewRMarler on April 5, 2007 at 6:35 PM | PERMALINK

howard says: PS. the median household has virtually no net worth and an income of roughly $44K...

The 2004 Survey of Consumer Finance:
http://www.federalreserve.gov/pubs/oss/oss2/2004/bull0206.pdf

The mean net worth of the 40 to 60 quintile by income is $193k with a median of $71.6k
That same quintile shows 16.3% own stocks,53.4% have retirement accounts; the median values of those accounts $12k in stocks and 17k in retirement accounts

Posted by: TJM on April 5, 2007 at 6:49 PM | PERMALINK

TJM, to be quite precise, the median family income in 2004 was 43.2 (table 1, page 5, and someday i'll have to read up and see if "family" and "household" are interchangeable in this context: the census data uses "household"), which i simply round up to 44.

the median family net worth was 93.1 (table 3, page 8). (for comparison, the census bureau 2000 assessment showed the median household net worth at $55K, which is part of why i wonder about the distinction between "family" and household: http://www.census.gov/prod/2003pubs/p70-88.pdf). maybe it sounds cavalier of me, but i regard that as "virtually no net worth." after all, that number includes your checking balance, your car, your home equity, your retirement accounts, your stocks (median value of stock holdings among those who own stocks: 24.3K), and anything and everything else, all net of debt.

as a median income household, you could survive 2 years on that, after which you would have no possessions at all.

you can't retire on that.

you're in no position to face up to a medical emergency (hell, you're barely in a position to face up to a car emergency in that scenario).

as far as i'm concerned, if you don't have a net worth of at least $500K (and i understand how few housheolds do), you really don't have much in the way of household net worth....

Posted by: howard on April 5, 2007 at 7:21 PM | PERMALINK

MatthewRMarler: interesting trade statistics here, with links to more interesting trade statistics

I wouldn't take this guy's data too seriously. His plots show that we currently import more from China than the entire US GDP.

Posted by: alex on April 5, 2007 at 7:38 PM | PERMALINK

[Knock off the all caps.]

Posted by: The Objective Historian on April 5, 2007 at 7:57 PM | PERMALINK

the stupidity of the objective historian is always something to behold! he doesn't know what a recession is, or when one occurred, but he's sure it must be clinton's fault!

who knows how he comes up with such blithering idiocies?

still, let's try and help the poor clown out a touch, shall we?

recessions, my poor nitwit, are part of the ecology of capitalism. presidents (who set fiscal policy) and the fed (who set monetary policy) can of course contribute to the timing, severity, and length of a recession, but not whether one will occur. so calling it a "clinton recession" makes no more sense than referring to a "bush recession" or a "reagan recession" or a "carter recession," or a "nixon recession" ad nauseum. it's the mark of an immature and ill-informed commenter to pretend otherwise.

now, recoveries are a slightly different matter: while sooner or later the economy will recover, too, the president and the fed have a much bigger role to play, and both fulfilled their role in 2001: the fed, by giving money away, and the bush administration, by...giving money away!

and despite all that money being given away, we've had a very weak recovery. don't know what is so hard to understand about that, but the objective historian seems to have a problem getting it.

as for the notion of people rising like rockets: what a maroooooon (as bugs used to say of elmer fudd). there is very little in the way of income mobility in america, especially mid-career.

as always, some individuals are prudent and careful with their income and postpone present consumption in the interests of future wealth, and as always some individuals are wild consumers who want to live as though they are making more than they are.

but the notion that wealth is exploding for the reasonably sober, reasonably lawful, reasonably sexually responsible, reasonably diligent: bullfrickinshit. As Alan Abelson noted in Barron's a couple of months ago, the upper 1% of households own 30% of the assets and 7% of the debt. Take them out of the picture and the american net worth picture looks terrible.

The biggest change in net worth in recent years is increasing home values, but in many parts of the country, that's reversing, even for the sober, lawful, sexually responsible, and diligent.

One could go on, but why bother: the objective historian simply hasn't a clue, simply a message.

PS. listen, sonny: if you don't think that at least as much coke-snorting and extra-marital intercourse is going on in nyc in 2007 as was in 1977, you don't know nothin. There have been 3 enormous differences in new york city over the last 30 years: a.) much better policing; b.) a cohort shift as a result of a smaller number of people entering the prime crime-committing stage of life; c.) the enormous, indeed, unprecedented boom in wall street and nyc real estate over the past 30 years has had enormous spin-off effects elsewhere in the city.

Sobriety, sonny, got nothin' to do with it.

Posted by: howard on April 5, 2007 at 8:13 PM | PERMALINK

well, so the extensive, foolish (and heavily capitalized) screed that objective historian bestowed upon us at 7:57 disappeared while i was composing my 8:13 response, which now looks kinda naked by itself!

sorry, folks.

Posted by: howard on April 5, 2007 at 8:16 PM | PERMALINK

alex: I wouldn't take this guy's data too seriously. His plots show that we currently import more from China than the entire US GDP.

good catch. the original data are from the census bureau, and are reported in millions, not billions. It's a simple(!) 3-order-of-magnitude misscaling, for both graphs.

Posted by: MatthewRMarler on April 5, 2007 at 8:27 PM | PERMALINK
The jobs are in the future....MatthewRMarler at 6:28 PM
Excess cash on hand does not necessarily portend jobs in the future and the industries you use for examples do not generally have high employment numbers as, manufacturing, retail, home building or service trades. Much is spent on share buybacks which increase share prices without showing corporate willingness to expand and succeed in the marketplace. Posted by: Mike on April 6, 2007 at 1:45 AM | PERMALINK

Why is anyone taking this corporate propagandist seriously? His arguments are so absurd he should really just be laughed at. We all know what's going on in this country, MatthewR is just here to piss in all our faces and comment on how nice the rain is. Clearly, he thinks we're fucking morons, or he wouldn't keep making these supply-side whacked out theories.

Someone best be paying him, otherwise he's just an idiot for free. Nobody wants that.

Posted by: soullite on April 6, 2007 at 7:38 AM | PERMALINK

Here are two related posts from the NYTimes DealBook that I think are well worth your time:

The Money Binge
By ANDREW ROSS SORKIN
http://dealbook.blogs.nytimes.com
/2007/04/04/the-money-binge/#more-13208

and

After the Buyouts, Lawyers Prepare to Wrap Bandages
By PETER EDMONSTON
http://dealbook.blogs.nytimes.com/2007/04/04/after-the-buyouts-lawyers-prepare-to-wrap-bandages/

AS the chiefs of private equity pull off one highflying buyout after another, bankruptcy lawyers are beginning to get their safety nets and first-aid kits ready.

Many Chapter 11 casualties are expected to come from the dozens of companies that have been taken private in the last few years in debt-financed transactions. Anticipating that the long lull in corporate bankruptcies may finally be over, law firms are bulking up their bankruptcy and restructuring groups.'

[snip]

Posted by: MsNThrope on April 6, 2007 at 10:50 AM | PERMALINK

http://www.washingtonpost.com/wp-dyn/content/article/2007/04/06/AR2007040600649_pf.html

Those new jobs are a result of construction spending, possibly examples of the "future" (compared to Kevin's graph) investment that I wrote of. The investment spending is expected to continue, according to the article.

Mike: Excess cash on hand does not necessarily portend jobs in the future and the industries you use for examples do not generally have high employment numbers as, manufacturing, retail, home building or service trades.

What you wrote is of course true, as anything one says about the future may not come true, and any one sector of the economy may not have the same trends as others. That was why I encouraged updating this information quarterly. Meanwhile, the statistics at the link I posted above do show increases in spending on construction, and decreases in the unemployment rate, partial confirmation that what I wrote might happen in the future might indeed already be happening.

Recall also what I said about permitting. As profits started to increase, and corporations started to spend on new investments, the first step was to get federal, state and local approval. In San Diego County, the County commissioners have told us that permits for new construction take 8 years, on average. It's less time in other places, but new projects have to follow new profits just about everywhere, and almost always by years rather than months.

Posted by: MatthewRMarler on April 6, 2007 at 11:46 AM | PERMALINK




 

 

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