Corporate Profits & Income Inequality

Tyler Durden's picture

Submitted by Lance Roberts of STA Wealth Management,


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WarriorClass's picture

Wall Street advisor: Actual unemployment is 37.2%, ‘misery index’ worst in 40 years

RebelDevil's picture

and it's about to get even worse with this upcoming meltdown in china.

LawsofPhysics's picture

Could you be more specific?  Been hearing about this "meltdown" for quite some time now...

RebelDevil's picture

More likely than not, this will be the trigger that pops the greatest bubble in the world - The Chinese credit bubble.

LawsofPhysics's picture

So, your "source" is Bank of America?  Good luck with that.  The Chinese are a culture of hardworking, singlularly focused people, with a single-party system with everyone focused on making China, the world superpower.  Their "elite" party members have sacrificed the peasant population for the greater good of China before and will certainly do it again.  Don't hate the players, hate the game.  What sort of "sacrifices" wood the average American make for the greater good in America?  That's all that matters, many I know are brushing up on their Mandarin.

Hedge accordingly.

RebelDevil's picture

No, my source is ZH.

The most important aspect of this site I believe is how the Tylers connect the dots for you with those litttle blue hyperlinks to past articles.

redd_green's picture

Re "Chinese are a culture of hardworking, singlularly focused people, with a single-party system with everyone focused on making China,"   AAHHHAAAAA HAHAHHAHAHAAAAAAA HAAA Thanks I needed the laugh.   You obviously never visited China, and don't know any Chinese.

LawsofPhysics's picture

Well, the two that I have working for me certainly are and they certainly lit a fire under the asses of a few "locals" on my team.  But sure , perspective is indeed important.   Now get back to work.

zanez's picture

Running-dog crypto-fascists!

El Vaquero's picture

I'll believe that is the trigger when I see it.  Our economy should have imploded in 2008-2009, and it has instead been put on life support.  It should have imploded at any given time after that as well.  There are so many potential triggers and the assholes at the Fed and other central banks have done better than most could have dreamed of at stopping the disasters from getting really bad.  Of course, they make the distortions that will eventually be corrected that much worse every time they avert a disaster, but you never know what they're going to pull out of their collective asses.  So, maybe this will be the pinprick that pops the bubble, maybe it won't.  I'm not playing in the markets and I'm not holding my breath. 

LawsofPhysics's picture

"Our economy should have imploded in 2008-2009, and it has instead been put on life support by force."  -FIXED, we must never forget Hank "tanks in the streets" Paulson holding a gun to CONgress and bailing out the financial sector and banks...

El Vaquero's picture

You'll get no arguments from me when it comes to Paulson being a cocksucker and a bully. 

Dr. Engali's picture

That's already common knowledge and priced in. That's one of the scare stories to introduce some fear. Rest assured that when this bubble pops, the trigger will have come from some place that we don't see and only a select few will know of it in advance.

RebelDevil's picture

It is possible that this default could pass over easily, but defaults in the (near)future may not.
"The potential first default, even if it’s not CEQ1 on 1/31, would be important based on the experience of what happened to the US and Europe; the market has tended to underestimate the initial event."

SDShack's picture

Yep, the BoA note is just to lure in some shorts, then when nothing happens and the crisis is "averted", rally on and fleece the shorts. Rince and repeat ad nauseum. The real trigger is either a real event that comes out of nowhere (probably from something that spirals out of control), or it is an engineered event known only to a select few and unreported until it is sprung. Either way, it's going to be unreported until it happens.

OldE_Ant's picture

Wasn't the meltdown in Japan?

Or was that two meltdowns (NIKKEI, FUKISHIMA) and one melt up(NIKKEI) my glowing brain can't seem to process that well anymore.

Even so.  Expect similiar meltdowns and more coming to your country soon.

At some point we'll all be eating shit (almost there), and glowing (working on it) about it.


max2205's picture

The poor= just another guy waiting to take your job 

midtowng's picture

This article is bullsh*t.

if there's anything to be done about income inequality, we should focus on how to give people greater capacity to serve their fellow man, namely raise their productivity."

 The fact is the productivity of the working class is America is going up every single year. If the writer of this article gave even a modicum of effort he would know this. Productivity is NOT going to the worker. His simplisitic notions are from some economic model, not from reality.

disabledvet's picture

i understand the sentiment...and by no means is this meant as an excuse for MBS's, CMBS's, CDO's, CDO's (squared), Insurance Companies "on the other side of that risk trade", ummm..."liar loans", off balance sheet vehicles, "slapping triple AAA on that thing", Ponzi schemes, etc...etc...etc...etc...etc...etc. HAVING SAID THAT...these are TAXPAYERS. And this matters to me because my friend is coming home. I hope all his friends are coming home too.

What happens after that is of little to no consequence to me. And I mean ABSOLUTE FRIGGIN' ZERO.

OldBoy's picture

John Stossel on the O'reilly factor tried to make the case that even though the rick get more pie than everyone they cause more pies to be made so everyone gets more. Not sure I by it though. I fear that human greed is getting in the way and the rich just keep gettin richer. Reduce the greed and increase the generousity.

barroter's picture

The "rich," already own 9 slices of a 10 slice pie.   And they want that last piece too...


LawsofPhysics's picture

The two new CEO mantras to their employees;

1) "We performed great, so my friends and I will take the profits while you shoulder the burden of the company's debt". 

2) "Should my leadership result in the failure of this company, you with lose your job and the taxpayer will pay back any creditors while my wealth remains intact".


Show of hands, how's this working out for everybody?  Good, now back to your regularly scheduled propaganda...

YC2's picture

Except in many instances when government rigs the game with crony capitalism, income is mostly a result of one's productivity and the value that people place on that productivity. 


There is a lot wrong with this sentence and what is implied in it, starting with the fact that the wrong half was bolded.


LawsofPhysics's picture

First of all, "value" implies that there is a mechanism for true price discovery, definitely not the case today.

taeonu's picture

This also ignores the fact that productivity is at an all time high while middle class wages haven't risen since the 60's. Income is a result of how much of the profits of productivity one can keep. A look at the incomes of the holders of capital over the same period shows where all the income gains have gone. 


They have learned that you don't have to pay someone $15 an hour when you can pay them $7.50 and loan them the other $7.50.   The worker is also less likely to quit or go on strike when they have debt payments to make. 



Bill of Rights's picture

. Corporate profits, both as a percentage of GDP and relative to labor income, are at or near record levels.

Winning one SNAP recipient at a time

AccreditedEYE's picture

While I'll agree to this conclusion I'll also state that capital/management/ "The Rich" bear some responsibility here as well. They keep moving "ways to be productive" off shore without coming up with "new ways to become productive". This gets compounded by a government who doesn't act for the benefit of the economy due to the cover provided by the Federal Reserve. (which, incidently, also helps capital/management/ "The Rich"). Labor provides work/service, not ideas. They aren't paid to provide ideas and shouldn't have to. Labor should be self-sufficient but that is all because they aren't paid to take any more risk than that.

LawsofPhysics's picture

"Labor provides work/service, not ideas" - I don't think you understand how the manufacturing of goods and services of real value works.  90% of the time solutions to problems and new innovation comes right from the person doing the real work, not some stuffed shirt ivy league fuck in the office.  Now if you are implying that the white collar workers have become completely disconnected from the people they are supposed to be managing (often because they have never really worked day in their life and often don't even understand what the company really does), then yes, I am inclined to agree.

AccreditedEYE's picture

I thought that statement spoke for itself in that, yes, Management/capital HAS become disconnected from the worker. Off-shoring shows you just how disconnected they have become; treating all labor equally like a commodity. (Who cares about quality) On top of this, they expect labor to fend for themselves in this horrible employment environment, as if everyone without a job wants to be a risk-taker/entrepreneur. They never remember that this entails giving up benefits and having a large chance of failure. Not really good options for a family of 4 and entails an entirely different skill set.

LawsofPhysics's picture

In short, moral hazard.  Of course corporate leadship does not understand "risk" anymore, not since Hank "tanks in the streets" Paulson held a gun to the taxpayer's head and said "you will bailout the financial sector."


barroter's picture

"Ideas."  Whatever happened to that phrase "vision" CEO's use to bandy about?  Vision my ass...BULLSHIT is what they're good for.

arkady's picture

Can corporate profits be also a function of corporations no longer willing to invest into expansion?   

For example in today's economy where banks are unwilling to lend due to scary economic forecasts, corporations too would hang on to cash and "ride out the storm".  They would also be more willing to lay off the workforce as labor is the #1 expense for all businesses.

Thus we might be able to easily explain that rising profits is as much of a function of today's economy and entrepenuers afraid of investment rather than "squeezing" the worker.  

Ghordius's picture

excellent alternative point of view. I'd add another aspect of it: the biggest job creators (I know, trademarked) in aggregate have never been big stock-listed companies. big biz has always been good at buying up and then streamlining. meanwhile small and medium businesses face even more the need to "ride out the storm"

arkady's picture

Indeed, I believe you are spot on there.  I think small business (not sure how that is defined currently) represents over 70% of job creation.  Thus large corporations themselves are indeed the engines of streamlining rather than job creation per se.

Of course you have your WALMARTS that employ an ungodly amount of people too, but that is probably one of the most hated companies in America for the very reason of streamlining.  Still, I personally hold no grudge against Walmart that pays ever so slightly less than the general retail sector.   Walmart's benefit to society, IMHO, is the ability to deliver cheaper goods to people - and that is always a good long term benefit for America where wealth and capital formation is difficult to come by.  Yes that is gained via cold streamlining, but the overall benefits outweigh the negatives.

One And Only's picture

There is no human way of solving the income inequality problem. The same reason you can't make stupid people geniuses. There simply is no excersize to solve it.

The harder you try the greater polarity you get and the more problems you create.

Free markets resolve these issues. Too bad we haven't had one in at least 100 years.

Bill of Rights's picture

Sort of like the $10,000 dollar bet to turn the Three Stooges into Gentlemen.

RebelDevil's picture

Try Harder - ... to see that QE is the great divider.

(WTF is with people!? The Tylers are WAY ahead of all of you .... because you're not paying attention?)

Flakmeister's picture

I guess trickle down didn't work as advertised, at least how it was advertised to Joe Sixpack....

For many SNAP and Earned Income Tax Credit are in reality nothing more than corporate subsidies. Any corporation with more than 1000 employees (including all subsiduaries and franchises) should have a min. wage of $15.00 (basically what it was in 1965)...

enloe creek's picture

100% inheritance tax
problem solved

Flakmeister's picture

Run a simple spread sheet model...

Progressive wealth tax starting at $10,000,000 with rates of ~5% for anything over $100,000,000...

The rentier class will need to make real investments and not merely clip coupons to get richer....

Dr. Engali's picture

Income inequalities is one of the more ridiculous notions I've encountered. There always has been and always will be differing levels of income, and that's a good thing. Otherwise why would I want to go through all that schooling to become  a doctor if I can serve burgers for the same salary?  What I don't expect is for my income stream to be syphoned off through inflation and taxation to feed both sides of the income extremes.

RebelDevil's picture

"What I don't expect is for my income stream to be syphoned off through inflation and taxation to feed both sides of the income extremes."

Well isn't that the norm?

Dr. Engali's picture

Edit...Pardon my error in grammar. Even though I used a doctor as an example, I am not a real doctor.  I have however, flipped a few burgers in my life. 

redd_green's picture

If you think its feeding both sides, take another look.  

El Vaquero's picture

EBT goes to the poor and QE/ZIRP goes to the rich.  Yes, it is feeding both sides, just not equally. 

cro_maat's picture

Sorry but MOST taxation goes to pay the interest on national debt which goes to the bankers along with QE.

El Vaquero's picture

False.  The current interest paid on the national debt is artifically low due to Fed and other banker manipulation of treasury yields, and at the current time, is not the lionshare of where your taxdollars go.  DOD and HHS are the two behemoths of the on the books stuff, and then there are the unfunded liabilities. 

Colonel Klink's picture

No it doesn't.  You should check your facts first.  In 2012 only about 6% went to pay interest on the national debt.  Even if you say that we're spending over the incoming tax revenue by 50%, the cost in terms of tax revenue is still under 10%.  Which is also a big lie when they say we'll default on the debt.  What we'll ultimately default on is the entitlements they've "promised"!

Yes I down voted you for passing bad information.