BUSINESS REFUSES TO REINVEST: FREE MARKETS FAIL. Again!

What Are Companies Doing With All Their Cash? Not Investing.

Recall that Faustian urGe wrote on September 7th, Thinking About Labor Day 2010, that

American employers — more than employers in other nations and more than American employers in previous downturns — have imposed the costs of the recession and the costs of doing business on their workers, while hoarding for themselves nearly all the earnings from doing business.

The chart below confirms what many of us Intellectual Elites have been whining about: Companies are spending money on buybacks and mergers and not anything that will create new business or jobs.

Specifically, this chart clearly delineates that equipment and software spending seem pretty delinked from profit.

Of great note… see that the digression takes off at the start of the W. Bush administration — clearly, the ascension of W announced and ushered in a profound disconnect of American businesses’ success and the nation’s success.

The odd thing is that American citizens somehow don’t “get it,” that this is their economic death knell.

Like the ghetto kids who innocently but foolishly think their way out of poverty is to be a professional athlete — despite the reality that a few hundred such slots exist for the millions seeking them — American working adults blindly believe that they are the special ones who will win/earn a seat at the table of success… if they just work hard enough (excuse me, I just vomited in my mouth a little bit). Pretty much, for most Americans, you won’t.

To mix metaphors, Americans seem content to obliviously dance to the band on deck of the Ship of State while bulkheads collapse in the compartments below… and the Titanic sinks. Meanwhile, everyone is feeling good, secure they will be one of the lucky to get onboard a lifeboat.

The truth, though, is that some do have the funds and assets to survive, while most do not. And it is the vast majority who will drown that ignore the warnings.

Well, if nothing else, please learn to speak and read Chinese (more about their success and future later).


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