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Lending: The Good, Bad, And Ugly

Lending: The Good, Bad, And Ugly

Aristotle said, “The most hated…

The Chatroom Cartel Running Global Bond Markets

The Chatroom Cartel Running Global Bond Markets

Eight major banks have been…

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Our 'Lawnmower' Economy

Financiers Skim Profits While Main Street Stagnates

With Charles Hugh Smith & Gordon T Long
27 Minutes - 21 Slides

Charles Hugh Smith and Gordon T Long share their thinking on why the middle class in America has been experiencing a steady decline in their real standard of living over the last four decades and why the decline has recently accelerated. Their is a fundamental reason why productivity is falling while corporate profits soar and the employment participation rates falls.


The "Crippled" Capitalist System

The Capitalist System is based on the construct that savings are invested into productive assets which increase productivity and in turn increase the standard of living of the whole society within which it operates. This mechanism has worked well for a century and and half. It no longer is working.

Savings come from two sources:

  1. Household Savings
  2. Corporate Profits

Oor 'Lawnmower' Economy

Today Household savings borders on being an extinct concept and what there is of it, is invested in financial securities. Therefore savings to be invested into productive assets comes primarily from corporate profits or "Wall Street" financing. We would argue that the capital is no longer flowing into productive assets but rather being directed to other venues which are unproductive and fail to increase the standard of living for society. Be assured how22$100M going to change in their lives?

In fact three approaches today are skimming billions of dollars of that "savings" from investment that will lead to rising standards of livings. This is one of the reasons that standards of living are falling for the vast majority of Americans.

Three of those major skimming mechanism are analyzed in this video:

  1. High Frequency Trading (HFT)
  2. Stock Buybacks
  3. The "Carry" Trade

Oor 'Lawnmower' Economy 2


A Financialized Economy Flows profits to The Fiancial Sector

There is nothing wrong with making profits. However, there is something wrong in an economy when those profits don't flow into productive assets but rather "circularly" flow back into financial products.

Oor 'Lawnmower' Economy 3


The Financialization "Skim" is Killing The Middle Class in America

This insidious and effectively "unsupervised" process has resulted in:


The Results

Falling Real Incomes

Wages and Salaries a % of GDP

The Wealthiest Now Almost Eclusively ReapThe Benefits

Ownership Society

The Middle Class Has Effectively Been "Gutted"

Growth of Family Income

There is much, much more in this 27 Minute video discussion which is illustrated with 21 slides.

 

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