Wall St. Recovery floats only big boats
The Wall Street Recovery has been very good for the casino capitalists and the mega-corporations they call people. The investor class is swimming in cash and it keeps pouring in. Dow closed at an all time high just this very afternoon. Meanwhile, the majority of America is trying to stay afloat from month to month. So how did this titanic economic disaster happen?
How are companies managing to earn so much money in a sluggish economy? And why aren't their profits goosing the economy?Rising tide lifts all ships was a lie. Anything smaller than luxury yachts gets swamped in their wake and slowly sinks. Time to bail out the people barely clinging to the life rafts. [charterworld.com photo]
For starters, weak job growth has held down pay. And since the recession struck six years ago, businesses have been relentless in cutting costs. They've also stockpiled cash rather than build new products or lines of business. And they've been earning larger chunks of their profits overseas.
All of which is a recipe for solid profits and tepid economic growth. The economy grew at a meager annual rate of just 1.8 percent in the first half of 2013. The unemployment rate is 7.2 percent, far above the 5 percent to 6 percent considered healthy.
Even so, corporate profits equaled 12.5 percent of the economy in the April-June quarter, just below a 60-year high reached two years ago. Profits of companies in the Standard & Poor's 500 have nearly doubled since June 2009. Earnings appear to have risen again in the July-September quarter.