Comments on: Profits call the tune

By: michael roberts

michael roberts — Fri, 29 Jun 2012 19:56:19 +0000

Barry
Very interesting. Will have a look.

By: Barry Finger

Barry Finger — Fri, 29 Jun 2012 13:58:11 +0000

An excellent ongoing discussion of the decline in return on assets in the American economy, and much neglected by Marxists, can be found in Deloitte’s Shift Index studies. These studies have followed 20,000 publicly traded firms between 1965 and 2010 to yield a comprehensive measure of profitability. All iterations (2009. 2010, 2011) are accessible on the web. It shows that the rate of return on assets (not simply “fixed capital”) has been in dramatic decline for the past 45 years. It moreover demonstrates this decline both with and without integrating the banking sector. However, once the banking sector is included, which now accounts for 60% of total assets (30% in 1965), the decline is even more pronounced.
More specifically, this comprehensive review found that “US companies’ return on assets (ROA) have progressively dropped 75 percent from their 1965 levels despite rising labor productivity”, a near doubling of labor productivity to be more precise.

By: sartesian

sartesian — Thu, 28 Jun 2012 12:24:04 +0000

Except the marketplace always has “insufficient wages to sop up the commodities.” The basis of surplus value is that the wage only covers the cost of the reproduction of labor and is not the value equivalent for the entire labor time commanded by capital. Don’t think the predicament of capital is ever one of “insufficient– pick one– wage/demand/consumption” since insufficient wage/demand/consumption is, at core, the very heart of profit.

By: Mike B)

Mike B) — Thu, 28 Jun 2012 00:39:38 +0000

Keeping real wages below levels reached in 1964 helped the capitalist class with the problem of a falling rate of profit. Working class consciousness about the nature of the wage system was never put on the political agenda by the radical liberals who call themselves ‘the left’. To be made, profits depend on sales and if the marketplace has insufficient funds/wages to sop up the commodities, the wage system sputters and spits and the ruling class wonders where to put all the unemployed it doesn’t already have in prison or the military.

By: sartesian

sartesian — Wed, 27 Jun 2012 13:20:56 +0000

Very nice. My investigation concurs with the ROP peaking in 1997-1998, and that in the “recovery” after the 2001-2003 recession the ROP did not exceed that level.

In the 2004-2007 recovery, profitability did increase from its recession levels based on maintaining wages below their 2000 level and rigid controls on capital expenditures. As the recovery increased, that control is relaxed and the peak in the ROP for this period in 2006 coincides with a increases in capital spending, increases which continue into 2007.

By: michael roberts

michael roberts — Wed, 27 Jun 2012 09:35:45 +0000

Reid is talking about the four-year Kitchin trade cycle. If the last trough was mid-2009, then the next trough would be in mid-2013. Reid has reduced that cycle to to 39 months, so the trough comes this August, according to him. We already have a slowdown in the US economy to justify this trough. My high frequency data do not suggest the Kitchin trough will mean an outright recession this year (it does not always mean a recession). My best bet for the next recession is maybe next year or 2014. But don’t hold me to that! For more on various cycles, see my book, The Great Recession.

By: Manit

Manit — Wed, 27 Jun 2012 02:49:44 +0000

Dear Sir,
I read an article from zerohedge.com and here is the quote
from Deutsche Bank’s Jim Reid

“Our shorter business cycle theory (or return to normal length ones at least) first discussed two years ago was based around what we saw as a future lack of policy flexibility from the monetary and fiscal side. It feels like Europe has proved us right but that the US has the ability to disprove the universal nature of our theory. If this US cycle is of completely average length as seen using the last 158 years of history (33 cycles) then the next recession should start by the end of August. The average expansion has been 39 months over the period. One way the US can disprove us over the next 6-12 months is if they find a way of maintaining what are record peace time budget deficits thus showing that they retain fiscal flexibility where virtual every other country has had this reduced. Perhaps much depends on the election, the next budget ceiling point and crucially the Fiscal cliff debate.”

What do you think?

Thank you
Manit