rcored profits rising authoritarianism

by **darkbeforedawn** » Fri Mar 31, 2006 10:09 pm

Record Profits and Rising Authoritarianism The Ascendancy of Finance Capital By James Petras 03/31/06 "ICH" -- -- No sector of the US economy, in recent years, can match the rate and size of profit which have accrued to the biggest financial institutions. For the first quarter of February 2006, Goldman Sachs (GS) broke Wall Street records by reporting new profits of $2.48 billion dollars (annualized at over $10 billion dollars). Earnings were up 64% over the same period last year (which was also a very lucrative year). Return on equity rose to 38.8%, topping the record for a top investment house. Total revenues rose $10.3 billion dollars. GS has had record earnings in five of the past nine quarters (Financial Times (FT) 3/15/2006, p 1). Morgan Stanley reported a 17% increase in net income to $1.64 billion dollars for its first quarter in February 2006. Revenues rose by 24% compared to 19.7% last year. Lehman Brothers reported a 24% increase in profits in the first quarter to Feb. 2006 to a record $1.1 billion dollars. Revenues increased 17% to $4.5 billion dollars. Bear Stearns (BS) joined the dance of the billions of Wall Street, reporting first quarter profits of $514 million dollars; earnings were up 34% from the year earlier. BS new revenues grew 19% to $2.3 billion, while return on stockholders equity rose 20.1% in the first quarter of 2006. The combined profits of these 4 banks total $5.73 billion dollars for the quarter November 2005 – February 2006, or $22.9 billion annually – and that does not include the profits for three of the top 5 banks (Citigroup, JP Morgan and Merrill Lynch) whose quarter runs January to March 2006, which are expected to have equally high returns, doubling the new profits to over $12 billion dollars for the first quarter and increasing profits to nearly $50 billion for 2006. No other sector of the economy can boast such high rates of return, nor can any top seven enterprises even approach the record profits. The banks draw their biggest profits in facilitating the concentration and centralization of capital (dubbed “mergers and acquisitions”), charging lucrative fees for “advising” and underwriting bonds to fund the mergers and acquisitions. The second source of profits is speculating, including debt trading, betting on global equity markets – especially in energy where Goldman and Morgan “have been making a fortune in recent quarters”. While US consumers, demagogic politicians and anti-war activists have blamed the oil producing countries, they have entirely overlooked the big speculative banks in pushing up the price of oil. The key political point is that the driving force of the most important economic sector – services – in the US is the financial sector, the one least engaged in productive activity, meaning production of goods and services for the population. Moreover its high profits, the astronomical bonuses and income of its leading elites, and its role in promoting the concentration of capital play a major role in increasing income inequalities. The costs they impose on enterprises for their “services” contribute to indebtedness which in turn leads to massive layoffs, reduction in health and pension benefits, as part of the “advisory” messages of the implicated banks. In addition to their speculative activity, the banks have become significant equity holders in non-banking sectors. They play a major role in cutting labor costs as a route for maximizing short-term profits as the expense of long-term investments in research and technology. Finally the most lucrative and dynamic source of speculative profits is in overseas expansion, particularly in Europe and especially in Asia. For example, Lehman Brothers announced in mid-March 2006 an “aggressive expansion in Asia”. While overall revenues were up 17%, overseas revenues rose 30%, while Asian revenues rose by 67%. David Goldfarb, Chief Administrative Officer stated that Asian expansion was Lehman’s “number one priority”. All the major banks have or are in the process of securing beachheads in the banking sectors of China and India. Financial imperialism is becoming a major vehicle for market-driven empire building in the 21st Century. <a href="http://www.informationclearinghouse.info/article12...">www.informationclearingho...ticle12...</a>

by **Gouda** » Sat Apr 01, 2006 1:35 pm

Why are Google, Gates, Buffet and all those Captains of Capital amassing it? Pure short-sighted greed, or waiting for something to play out? Just a question. **** <a href="http://www.marketwatch.com/News/Story/Story.aspx?guid={C4257910-8351-437A-8C00-E4CF3B782091}&siteid=mktw&dist=">www.marketwatch.com/News/...mktw&dist=</a> <blockquote>Quote:<hr>Profits surge to 40-year high When will corporations spend some of their hoard? WASHINGTON (MarketWatch) -- U.S. corporate profits have increased 21.3% in the past year and now account for the largest share of national income in 40 years, the Commerce Department said Thursday. Strong productivity gains and subdued wage growth boosted before-tax profits to 11.6% of national income in the fourth quarter of 2005, the biggest share since the summer of 1966. See full story. For all of 2005, before-tax profits totaled $1.35 trillion, up from $1.16 trillion in 2004 and just $767 billion in 2001. Meanwhile, the share of national income going to wage and salary workers has fallen to 56.9%. Except for a brief period in 1997, that's the lowest share for labor income since 1966. "It's a big puzzle," said Josh Bivens, an economist for the Economic Policy Institute. "If this is a knowledge economy, how come the brains aren't being compensated? Instead, the owners of physical capital are getting the rewards." [Edit: Duh!! - Gouda] Despite the flood of cash coming in the door, corporations are investing comparatively little in expanding their operations. Capital spending has been below average, especially considering the strength of the economy, the level of profits and the special tax breaks given to boost investment. In the fourth quarter, business fixed investment increased just 4.5%. In the past year, investment has risen 6.8%. The growth rate has been falling for the past four quarters. Some economists are counting on the corporate sector to pick up their investments in the coming year, to replace the economic stimulus that will be lost as the housing market cools. Profits have been so high because almost all of the benefits from productivity improvements are flowing to the owners of capital rather than to the workers. While profits are up 21.3% in the past year, labor compensation is up just 5.5%. After adjusting for inflation, population growth and taxes, real disposable per capita incomes are up just 0.5% in the past year. Competition, tight labor market may force rise in labor income But as the labor market tightens, labor's share of income will likely rise, economists say. "Capital spending will stay strong," said Gus Faucher, director of macroeconomic research at Moody's Economy.com. He theorizes that, to maintain productivity growth in a hypercompetitive world, companies will be forced to invest in capital as labor becomes relatively more expensive. Corporations certainly have the means to invest, but they've been cautious, said Ken Goldstein, an economist for the Conference Board. In 2005, corporations retained $460 billion of their profits, while handing back $514 billion in dividends. Consumers, as always, hold the key. If labor income rises enough, consumers could keep up a healthy pace of spending even if they lose ready access to their home equity as a source of purchasing power, Goldstein said. But consumers are very wary of rising prices. So far, their incomes have not kept pace with inflation. Goldstein expects consumer spending to slow this year. And if consumer spending slows, corporations will become more hesitant about expanding their productive capacity. Unless there's stronger demand from overseas markets. Goldstein figures there's less than a 50-50 chance that business investment will rise significantly in the coming year. The Conference Board expects the U.S. economy to grow 2.5% in the next four quarters, after growing 3.5% in the past four quarters. That's not horrible, but it's not a boom either The happy scenario could still play out. But "there are a lot of 'ifs'," Bivens said. <hr></blockquote> Edited by: <A HREF=http://p216.ezboard.com/brigorousintuition.showUserPublicProfile?gid=gouda@rigorousintuition>Gouda</A> at: 4/1/06 10:37 am

by **Gouda** » Sat Apr 01, 2006 1:55 pm

Gouda said: <blockquote>Quote:<hr>Pure short-sighted greed, or waiting for something to play out?<hr></blockquote> Not meant to be understood as mutually exclusive.

rcored profits rising authoritarianism

rcored profits rising authoritarianism

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