Recovery in U.S. Is Lifting Profits, but Not Adding Jobs … A Growing Divide: As federal budget cuts begin, high productivity and low interest rates help corporations but not job seekers. … "So far in this recovery, corporations have captured an unusually high share of the income gains," said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. "The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist." The result has been a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India. – New York Times
Dominant Social Theme: If we print enough money the jobs will come.
Free-Market Analysis: This was predictable. Keynesian monetary stimulation doesn't work. The US has a bifurcated economic system now, which is really the European royalist system.
This would seem to be the result of deliberate economic policies that have virtually split the US into a nation of have-more and have-less. Often much less.
Perhaps Occupy Wall Street was right! We will explain below.
Yes, even the nation's largest media organizations cannot avoid affirming it (see above). The economic policies put in place revolve around monetary stimulation and predictably are benefitting the largest special interests and multinationals at the expense of everyone else.
The United States was exceptional in the past because its economy functioned within a free-market paradigm that allowed people to pursue their self-interest without artificial barriers getting in their way. But that is changing. Here's more from the article:
… The Federal Reserve's efforts to keep interest rates ultralow and encourage investors to put more money into riskier assets, prompted traders to send the Dow past 14,000 to within 75 points of a record high last week.
While buoyant earnings are rewarded by investors and make American companies more competitive globally, they have not translated into additional jobs at home.
Other recent positive economic developments, like a healthier housing sector and growth in orders for machinery and some other durable goods, have also encouraged Wall Street but similarly failed to improve the employment picture. Unemployment, after steadily declining for three years, has been stuck at just below 8 percent since last September.
With $85 billion in automatic cuts taking effect between now and Sept. 30 as part of the so-called federal budget sequestration, some experts warn that economic growth will be reduced by at least half a percentage point. But although experts estimate that sequestration could cost the country about 700,000 jobs, Wall Street does not expect the cuts to substantially reduce corporate profits — or seriously threaten the recent rally in the stock markets.
"It's minimal," said Savita Subramanian, head of United States equity and quantitative strategy at Bank of America Merrill Lynch. Over all, the sequester could reduce earnings at the biggest companies by just over 1 percent, she said, adding, "the market wants more austerity."
Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.
"There hasn't been a period in the last 50 years where these trends have been so pronounced," Mr. Maki said.
Step back, observe the general trends and the justifications for them, and what has taken place becomes fairly clear. It all starts with who controls the money. In this case, the ability to print money is controlled by just a few people and special interests. These people are supposed to be "priest-like" in their dedication to the common good. But that is impossible.
Human beings act out of self-interest, and when you set up an economic system that involves monopoly money and offer the control of that system to only a few, then you have the beginnings of a European-style mercantilist system.
Add to that a corporate paradigm that declares certain legal constructs can shield people from liability – from both a litigation and tax standpoint – and you have a recipe for a two-track economy.
In a sense, OWS has it right: There is an inordinately powerful one percent that takes advantage of the US system and gains privileges that others do not have.
But OWS strategists are wrong in terms of their analysis of what needs to be redressed. A system that legally provides power – Money Power – to only a few needs to be dismantled. Money needs to be competitive again and gold and silver need to be allowed to operate as money.
Unfortunately, instead of emphasizing a removal of barriers to make the system freer – and thus fairer for everyone – OWS and similar entities emphasize government solutions to the problems that government and the legal system have set up in the first place.
The solution, as we have mentioned many times, is not simply to prosecute Wall Street "fraudsters" using more government force but to revitalize the system in fundamental ways.
The best changes that could be made would be to remove the awesome power of central banking that continually polarizes society and sends vast money flows into the hands of only a few mostly multinationals that then use money power to advance commercial interests around the world.
As this process continues, fewer and fewer individuals control more and more of society's productive assets. The US system begins to parallel the European royalist system that works similarly.
Ironically, the US system was designed to ensure that all people had an equal opportunity to succeed and prosper. Outcomes were not assured but the opportunity to succeed was to be pro-offered. This element of US exceptionalism is embedded in the country's cultural DNA, yet because of the current money-system, the US sociopolitical structure is moving in another direction.
Ultimately, this is not a trend that many in the US will let go unchallenged. It offers the possibility of considerable civil unrest.