Sunday, September 20, 2015

Supply-Side Ponzinomics aka. "Going Out of Business Sale"

"Once the economy had been sold, all that was left was buying back stock with borrowed money. At the end, the corporations put themselves out of business."

According to data from Standard and Poor's (Additional Info~Stock Buybacks) aggregate quarterly operating earnings are back at levels first reached four years ago...

Since 2011: Operating earnings +0%. S&P +88%:

The rise in the indices is a function of stock buybacks:
MW: July 21, 2015
Wall Street's New Drug
"In the first quarter of 2015, companies in the S&P 500 index returned more money to shareholders than they earned. The last time that happened was in the fourth quarter of 2008"

"S&P 500 companies have spent about $2.41 trillion on buybacks over the course of the current bull market"

"According to recent data from S&P, total buybacks and dividends (assuming those dividends were reinvested) have accounted for 35% of the buildup in market cap for the S&P 500 since it bottomed out in 2009"

Karl Marx predicted that given enough time, capitalism would self-destruct. He didn't have to be right, but today's Mad Men proved him right. Back in 2011, Roubini said that capitalism was entering a self-cannibalizing death spiral, at the exact same time that operating profits peaked. His main oversight is never mentioning the trade deficit as primary source of deflation and falling aggregate demand. Prior over-consumption (debt) is also extremely deflationary:
"You cannot keep shifting income from labour to capital without having excess capacity"

In between the all-knowing Marxists and the Capitalists, there are a very small handful of us "pragmatists" who don't believe in putting ourselves out of a fucking job.