Sunday, September 02, 2012

The Social Contract is Void

From CWE:

And wages as a percent of the economy have hit an all-time low.

Wages as a percent of the economy are at an all-time low. This is both cause and effect. One reason companies are so profitable is that they’re paying employees less than they ever have as a share of GDP. And that, in turn, is one reason the economy is so weak: Those “wages” are other companies’ revenue.
~Business Insider

The chart below shows corporate profits.  You may notice that regulations and the fear of taxes are not inhibiting business profits.  You may also note that conservatives are pushing for further tax breaks for large corporations and espousing the view point that somehow too much government intervention is making it difficult to be profitable.  Right.

The chart below shows the rate of credit (red) vs. the rate of the economy (blue).  We are a credit driven economy.  Some could call that a House of Cards.
Put differently, the growth of our borrowing (red line) has wildly outpaced the growth of our economy (blue line).
This chart shows American GDP when you subtract out what we borrow to fuel the economy.  WOW.
In fact, here's what the last half-century of GDP looks like when you subtract the amount we've borrowed from the amount we've made. (Yes, that's a very big negative number).

MY COMMENT: We borrow to pay for wars, we borrow to drill for oil, we borrow to pay for unemployment benefits, we borrow to finance tax cuts, we borrow to maintain consumer spending, we borrow for everything.  

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