What does this chart make you think?

Several weeks ago I asked, "What does this chart make you think?"

I appreciate the responses which can be read here...   

Anonymous said...

Here is my comment:

I wonder if that shade of blue would look good in my bathroom?

Travis

Chad Morrison said...

It's all relative huh

denise said...

Okay, you asked for it:

1. There's a pattern.

2. What's the definition of "company"?

3. What do the "IV III II I" mean after the years?

4. 2008 just sucked.

5. "Companies" are still making a nice tidy profit during our recession.

6. I hope Coe doesn't want my business major back.

Anonymous said...

Tells you companies have figured things out much better than cost cutting you cannot go on on life support ad infinitum, at some point you have to take a hair cust and let the market clear. What companies have done is adjusted, sadly that has meant reducing work force but it has helped their bottom line. One of the biggest issues we face in the US today is the housing issues (bubble) one arguement is to perhaps buy a lot of houses dynamite them thereby reducing suply - as good as any idea out there as currently it is chinese water torutre...fly by the seast of your pants and hope that time will heal things like in the 80's south american banking crisis. Unfortuantley this is bigger and years of living beyond our menas is catching up so adjustments need to be made, companies have done them (perhaps not to our liking but they have)- there is another chart showing how much cash companies have also horded - sometihng huge number which is also rather interesting...if they have record profits and record cash holdings why are they not spending it more aggressivley what gives?

my two bits

Rahul

cthurston said...

I'm skeptical of the context the information is presented as. I mean, it's saying "the rest of the economy"... well if the rest of the economy goes to shit and the big corporations do slightly better than "shit" then they will go up as a percentage of economy.

The first thing I think, is that less money is going into independent businesses, more consumers are shopping/buying with their money going to corporations in an attempt to save money; obviously this hurts the little guy and makes it so the corporations get more profit, especially as a % of national income.

Also, Screw Wal-Mart. *shakes fist* AND GET OFF MY LAWN YOU DAMN KIDS!

So Travis is painting his bathroom this color, Chad is correct that it is all relative and Denise is concerned that her degree will be taken away.  (To answer your questions, the I, II, III, IV refer to the different quarters in a year.  I'm not sure how they measure corporate profits for this.)

Chip, you are right to say a larger percent of a lower total is not growth.  In this case, however, the economy only shrunk a little and has been growing for almost a year and a half.  So this is showing a larger percentage of the economy is corporate profits... and it does mean corporate profits have done quite well in the past two years.  

Rahul, the resident economist/financier commenter, has an interesting suggestion:  Why not buy all of the excess houses and simply blow them up.  It would do wonders for the housing industry and miraculously housing prices would stop falling.  There's a twisted logic there if you think about it!

Rahul's last point is the one I wanted to make:  "if they have record profits and record cash holdings why are they not spending it more aggressivley what gives?"

Exactly.  Both the Obama administration and Republicans favor tax credits to urge new hiring.  It might work a little but the fact is corporations are making record profits now.  (Not all, obviously, but the chart is proof that this recession has not hurt corporate profits.)  If they wanted to hire more and expand they could.  They just don't want to... and I don't blame them.  Until demand picks up there's not much point expanding.  Having your scared workforce put in 60 hours/week and denying all pay raises is doing wonders for the bottom line and there's no need to hire more.

It's also why I think extending the tax cuts for the wealthy was foolish.  If the wealthy have a great idea they can borrow at very low interest rates to fund a new business.  Hoping they'll use the tax cut to fund a new business is wishful thinking.

My preferred stimulus would have been revenue neutral, meaning it wouldn't add one cent to the deficit:  Allow the tax cuts for those over $250,000 to expire.  Take that money and invest in schools, bridges and hospitals.  It would lower the unemployment rate, put money in working people's back pockets and thereby help demand for everything.  It would get a hell of a lot more bang than what just passed congress.