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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Steve Lokness who wrote (255244)	7/7/2014 5:32:00 PM
From: Wharf Rat	Read Replies (2) \| Respond to of 546456

"Higher profits will find their way back into the economy >>>> Careful! Starting to sound like the conservative right here!" I don't know if that makes it good or bad, but it doesn't make it true. Profits are for hoarding. Krugman: Corporations Overflowing With Cash, Don't Know What to Do With It [whole clip] Subjects Transcript HAYES: "There is two features of recovery that I think [inaudible] and particularly difficult to work out why it's happening. What is this cash hoarding? You have March 2002, corporate cash flow and capital investments are about both $700 billion each. By March 2012, corporate cash flow is at $1.2 trillion. Capital investments are around $1 trillion. And overall corporations have about $1.9 trillion sitting on their balance sheets. Apple recently have this bizarre kind of crisis of having too much cash where their shareholders were telling them, 'You have all this cash, what is the deal?' We don't even know how to price this over a certain window of time. Why is there so much money sitting on the sidelines?" KRUGMAN: "Okay. So we don't actually know the answer. One thing that is striking is, if you think that's because companies are refusing to invest. That doesn't really fit the facts. Business investments, corporate investments is not as strong as it was the peak of the last boom. It certainly is not as strong it was in the Clinton years, but it's not that weak either. It's more or less -- so corporate investing or corporates seem to earn vast amount of profits and they don't seem to want to invest it. Is that probably because demand isn't out there or also they just seem to be sitting on the stuff. But you know, back in the early years of the last decade, Ben Bernanke gave a speech about the global savings glut. And unfortunately he was saying not to worry about the U.S. housing bubble. But the point is right. There is a global savings glut and a lot of it are corporations that are saving. It's a lot of corporate earnings, just sitting there. Not quite sure why. Maybe they are just making so much money they don't know what to do with it." HAYES: "Well that brings us to this profits mystery which is corporate profits hitting a new high of 10% of GDP in 2012. Employee compensation fell to a low of 43.5% of GDP in 2012. And this is one of the stories of recovery that I think is probably the most worrisome. Aside from the sluggishness and the unemployment. Unlike Europe, we have reachieved growth. We're in a recovery. But there is this tremendous yawning chasm opening up between profits and wages. And it just seems to me that how long is that sustainable? There's a certain point right? In a consumption based economy, the profits are coming from selling things to people. And people don't have money from wages, and they don't have money from huge amounts of debt. Where is that money and why are we projecting out profits so far?" KRUGMAN: "Well it's interesting. I mean there is a point of view. Some economists will tell you that the corporations are a veil. And all those profits are accrued to somebody so investors must know that the money is there and so they are going to spend. But financially, real life isn't like that. It does look like a big sinkhole for purchasing power -- corporations are accumulating. These profit stories are relatively new. We have [inaudible] inequality since about 1980. But until about the year 2000, it was all among earners. I mean, hedgefund managers, it was people who one way or the other, collecting a paycheck. Since 2000, it's been a redistribution of labor of all kinds to corporate profits. We don't know what it's about. It might be technology. It might be the rise to robots. It might be the increase in monopoly power -- some combination of the two. But it suddenly has become, it's almost as big a deal as the great recession itself. And it really transforms everything and not in a good way." HAYES: "How do we think about what to do about it?" KRUGMAN: "Well, one answer is, a lot of what businesses are campaigning for -- let's cut corporate profits taxes. Cut corporate taxes -- maybe not, maybe we should be raising them again because it's a big source of our problems. We need to start thinking about paying for essential programs in part by taxing capital income. Which by the way, a little bit of ObamaCare is paid for by a special tax on investment income which is a good thing but we're going to need more of that. But we might also want to think if this is market power? How about revitalizing anti-trust enforcement? That sort of went away in the 80's and that is probably a big mistake that we are trying to pay for now." grabien.com