While the government is the focus of the public's wrath over our current situation, other factors have certainly played a critical role in our dilemma.
Over the years, our capitalist system has devolved and been constantly exploited by the few at the expense of our common good.
One is the area of wealth concentration. At no time since just prior to the great depression has wealth concentration in this country been the highest, for example:
In the 22 years between 1976 and 1998, the share of the nation's private wealth held by the top 1% nearly doubled, going from 20% to 39%. In 1982 the wealthiest 400 individuals in the “Forbes 400” owned $92 billion. By 2000, their wealth had increased to over $1.2 trillion. Since 1987, the adjusted gross income or AGI of the top 1% has risen 386% while their share of total tax burden has risen 53%.
With wealth concentration, inevitably comes concentration of power. As evidenced by the gridlock in Congress, people today feel totally powerless against the rich and corporations, which the Supreme Court has regrettably now bestowed the same rights as an individual.
As a nation, shouldn't we be concerned more about developing the next generation of millionaires rather than preserving the wealth of current millionaires?
The stock market is no longer about investment but traders focus on how their co-ordinated efforts can be used to manipulate share prices, currencies, or interest rates to their advantage. The exchanges have sold out to the holy god of high frequency trading which has resulted in the SP500 going nowhere over the past 5 years despite the combined earnings of the companies in the SP500 growing 45%.
The primary rationale of investing in stocks was to benefit in the success of a company, but high frequency trading steals the wealth these companies create away from the shareholders to the investment firms running these programs. Once again enriching the few at the expense of the many.
If the SP500 index had just grown at the same rate as earnings of the SP500 firms over the past 5 years, shareholders would be $4 trillion richer.
The ability to manipulate investment markets ranging from equities to the LIBOR has lead to widespread corruption. Hardly a week goes by, without word of a large fine against a major investment house. Over the past 40 years, there have been 7 financial scandals that have cost this nation trillions of dollars, yet very few have paid for their roles in these scandals.
On a number of accounts, corporations are also not blameless either for our current plight.
The dividend yield of the SP500 was fallen from 4.2% from 1970 to 1990 to average under 2% during the past ten years. While many executives believe they can get a better return for their shareholders by reinvesting profits back into their companies rather that paying dividends, this practice is defeated by high frequency trading that suppresses share prices, effectively transferring the wealth corporations create to Wall Street.
Non-financial corporations, now hold a record $1.7 trillion on their balance sheets, but this capital is providing little return for shareholders and some firms primarily use it as a war chest for acquisitions. While I see nothing wrong with non-organic growth, a Goldman-Sachs study found that only 30% of all acquisitions between 2000-09 met the goals of the acquiring firm.
Corporations warn Washington about high corporate taxes, but a growing number of firms such as Seagate, Apple, and Google, set up shop in such countries as Bermuda, Ireland, and the Cayman Islands to avoid paying taxes.
So while our angst is focused on the dysfunctional Congress, there are primary forces beyond politics that are driving our current plight.
These kinds of c & p propaganda posts are worthless -- why it got 4 "thumbs up" is a mystery -- unless a merry band of followers does so for more show:
"In the 22 years between 1976 and 1998, the share of the nation's private wealth held by the top 1% nearly doubled, going from 20% to 39%. In 1982 the wealthiest 400 individuals in the “Forbes 400” owned $92 billion. By 2000, their wealth had increased to over $1.2 trillion. Since 1987, the adjusted gross income or AGI of the top 1% has risen 386% while their share of total tax burden has risen 53%."
The US GDP has also grown. In 1976 it was 1.824 tril and in 1998 it was 8.793 tril for an increase of 482% -- plenty of it was inflation that Volcker finally shut down in 1981 with 15% T-Bond rates. The GDP in 2010 was $14.508 tril.
The wealth held by individuals in the "400" or the "1%" and all the numbers above are at best gross estimates because they are not tracked by the BLS or any other institution using any kind of precise procedures. This post is propaganda.
1. Begining this year SP500 index is basically unchanged from early 2007, while 2007 SP500 earnings were $82.54 versus $119.35 currently projected for this year. Rightfully or wrongfully, the poster attributes that to the rise in HF computer trading. I also believe the rise of hedge funds and tilting the table to the short side of the trade has caused stocks to go nowhere. Also go look at a long term chart of the DJIA or SP500, prior to 2000 steadily increase for 50 years, from late 1990s sideways.
2. Corporations are hoarding cash. This doesn't help shareholders and they are not rewarded by Wall Street.