Friday, December 27, 2013

More slow collapse cheeriness

Continuing the slow collapse

Did Someone Say “Crash”?
Mike Whitney, Counterpoint, 17 December 2013 (hat tip: NC)
Bottom line: Net investment is down because there’s no demand. And there’s no demand because unemployment is high, wages are flat, incomes are falling, and households are still digging out from the Crash of ’08. At the same time, the US Congress and Team Obama continue to slash public spending wherever possible which is further dampening activity and perpetuating the low-growth, weak demand, perma-slump.
So,  tell me: Why would a businessman invest in an economy where people are too broke to buy his products?  He’d be better off issuing dividends to his shareholders or buying back shares in his own company to push stock prices higher.
And, guess what? That’s exactly what CEOs are doing.
Note this is an argument from the left.  But only someone more interested in polemics would argue that lots of broke people are a natural part of a healthy economy.
My argument would be that since 1974, the weakening economy has given the advantage to the business owners, so that what profit that is available is kept by them. Unfortunately that profit was usually generated by deficit spending at some level: usually the household level. If borrowed money becomes dearer, there is not going to a be a margin to distribute to anyone.


JaneofVirginia said...

No argument from me. The first and greatest step to solving a problem is to admit one exists. The present regime still lives in Peter Pan's Never Never Land, still spending our money as the middle class shrinks and the US becomes less and less capable of manufacturing anything we need. A larger and larger group of Americans can't even SPELL innovation.
I would really like to be more positive. I have adult kids.

russell1200 said...

Jane: Yes, my little one is going to be growing up into this.

Both sides are arguing about rearranging the deck chairs on the Titanic while the ship is sinking. If we run out of the ability to generate more debt, we are sunk.