What ME Worry? Part 2
In Part 2, we continue down the path to see what happens when private and public investment decline while real estate and stock market speculation run amok.
A quick recap... In Part 1, although real gross private domestic investment appears to be on the rise, net private domestic investment, real net private domestic investment, and fixed investment EX-residential reveal a grim truth spanning decades of decline.
In I Want To Believe? and Trust No One? we demonstrated how labor markets have been effected by the above. Moving West...
50 years of servitude with John Q. taking it the hard way... wages as a share of GDP steadily declining since 1970.... translated as prices continue to rise, less to spend.
and exhibiting the BIG SQUEEZE, PCE as a share of GDP rising since 1966 and near an all time high... translated, producing less, spending more to buy essentials.
Exports as a share of GDP, confirming less production for the last 72 years, declining since 1947, and for the last 39 years to be NEGATIVE (since 1980) viz. we don't make anything anymore, other than loans and our principle export is our own debt....
What happens when corporations pay little to no tax, repatriate profits for stock buybacks, outsource to labor at the margin, and stop making domestic investments? Bearing witness to that multinational free trade fact...
Far be it from government, corporations and self entitled individuals to rack up less debt on conspicuous consumption. Who wants to pay more taxes or save, and invest the savings in real economic endeavor for the future? That would be asking too much because?
The ME first generation (I WANT it ALL, and I WANT it NOW) might find out soon enough. The first result is stock market and housing assets become disconnected asset bubbles.
Meanwhile the real economy stinks up the joint, viz. over 70% of the emasculated economy becomes service based and reliant upon consumer spending and the largess of others (foreign US debt holders). What else could go wrong?
More to come in the conclusion What ME Worry? Part 3, stay tuned, no flippin.
Recommended reading: America’s biggest economic problem: Nobody is investing for tomorrow; The Truth Is Out There?; What ME Worry?; I Want To Believe?; Trust No One?; The Architects Of Their Own Demise ; H1B Visa and Labor; Restoring Investment in America’s Economy; The Hutchins Center Explains: Public Investment
A quick recap... In Part 1, although real gross private domestic investment appears to be on the rise, net private domestic investment, real net private domestic investment, and fixed investment EX-residential reveal a grim truth spanning decades of decline.
In I Want To Believe? and Trust No One? we demonstrated how labor markets have been effected by the above. Moving West...
50 years of servitude with John Q. taking it the hard way... wages as a share of GDP steadily declining since 1970.... translated as prices continue to rise, less to spend.
and exhibiting the BIG SQUEEZE, PCE as a share of GDP rising since 1966 and near an all time high... translated, producing less, spending more to buy essentials.
Exports as a share of GDP, confirming less production for the last 72 years, declining since 1947, and for the last 39 years to be NEGATIVE (since 1980) viz. we don't make anything anymore, other than loans and our principle export is our own debt....
Deregulation, tax cuts and repatriation holidays have resulted in massive increases in corporate profits. Those profits have not been reinvested in productive, entrepreneurial activity as promised (nor, of course, have they gone to labor). Instead, they have simply flowed into financial markets and remained there. Without sufficient investment into productivity-enhancing technologies, facilities, equipment, and the like, productivity has inevitably stagnated, and the economic prospects for future generations have deteriorated. - The Contradictions of Shareholder CapitalismNew investment projects are postponed and cancelled to meet short-term earnings targets? Even if it means sacrificing long term value creation? Your only as good as your last quarter? Short term financial based thinking by the E-suite?
A reminder... Investment increases the following: the nation’s capital stock, aggregate production and demand for labor, the economy’s potential output and thus its standard of living in the long run. - Trust No One?Another reminder, as opposed to the BEA's false doctrine, house flipping or what is capitalized consumption in taking out a mortgage on already existing product, does not constitute economic investment, and generates non economic productive transfer payments which only profit the house of finance.
Trebek queries... This basic right of life has been misappropriated as a commodity and asset form which speculators have perverted into something that has been grossly mistaken for organic economic output which has masked the gradual morphing of our economic base. Alex, what is sticks n bricks or a home.
The solution? Seek margin in video games or cars or stereos or durable manufacturing, not financial instruments tied to the necessities of life. When you turn your own backyard into a major source of wealth, that's when the trouble starts. - Let Me Warn You?One must not confuse saving: income not spent, with financing: debt incurred against future income for current expenditures. We will come back to this.
Far be it from government, corporations and self entitled individuals to rack up less debt on conspicuous consumption. Who wants to pay more taxes or save, and invest the savings in real economic endeavor for the future? That would be asking too much because?
The ME first generation (I WANT it ALL, and I WANT it NOW) might find out soon enough. The first result is stock market and housing assets become disconnected asset bubbles.
Meanwhile the real economy stinks up the joint, viz. over 70% of the emasculated economy becomes service based and reliant upon consumer spending and the largess of others (foreign US debt holders). What else could go wrong?
More to come in the conclusion What ME Worry? Part 3, stay tuned, no flippin.
Recommended reading: America’s biggest economic problem: Nobody is investing for tomorrow; The Truth Is Out There?; What ME Worry?; I Want To Believe?; Trust No One?; The Architects Of Their Own Demise ; H1B Visa and Labor; Restoring Investment in America’s Economy; The Hutchins Center Explains: Public Investment
Comments
A financial oligarch, disequilibria in market power, viz., the Sherman, Clayton, & Federal Trade Commission Acts, etc., and a government of, by, and for the people, simply cannot exist side by side.