Where the Greed is at Under Obama: Autos and Academics

Sep 9, 2014 by

It’s time to reconstruct the Federal Reserve Bank, that “monster” bank that has been at the heart of all that ails the Republic for over two decades. While liberals moan about tax inversions, the truth is that it is the inverted economy, made possible by inverted policies, made possible by an inverted central bank that has turned our world upside down.

As year six of the “recovery” stumbles along just as previous years have, giving uneven results in employment and economic growth, we can say for sure that the big parts of corporate America—the publicly traded companies—are doing well, at least on the surface.

Thanks in part to cheap debt made possible by the Federal Reserve, corporations are borrowing record levels of money to fuel make-believe profit growth by balance sheet arbitrage: Lowering interest rates on existing debt, borrowing money to pay extra dividends and borrowing money to buy back shares. And now that they have done all they can on that front, they are using tax haven arbitrage to goose things a bit more. Companies are moving from tax-heavy jurisdictions like the United States, to places that are friendlier to corporate profits.

“Corporate debt is at record levels – at 57% of gross domestic product,” reports the Wall Street Journal, “it’s the sixth consecutive quarterly record and the highest level since 1955.”

This is exactly how it should be.

In the real world, all of us, including corporations, take conditions as they are and figure out how to succeed under those conditions. Taking advantage of low interest rates and the stark fact that the United States can’t compete with other countries on tax policy are the natural defense mechanisms corporations will use against policies purposefully pursued by politicians who lack the wisdom and foresight to act responsibly.

On Main Street things are a bit different; not quite as rosy as the view from the corporate box suites.

On Main Street the Federal Reserve is bemoaning the fact that households are loathe to parting with money. Frankly, people aren’t spending money. As I’ve noted here and elsewhere, monetary velocity is at a record low while money supply is at a record high. That means that we have more dollars than ever before yet those dollars are changing hands less frequently than ever before.

via Where the Greed is at Under Obama: Autos and Academics – John Ransom – Townhall Finance Conservative Columnists and Financial Commentary – Page 1.

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