All that talk of GDP growth and corporate profits? Well, I’ve been telling you guys for months now not to believe it. Its all so much smoke and mirrors – the government fudging its numbers while corporate America plays fast and lose with its accounting. Here’s a bit about how one expedient is to rob the future in order to boost the current quarter’s profits:
…The trouble is that those GDP and productivity growth figures could be significantly overestimated—perhaps by one percentage point or even more.
That’s because the official statistics are not designed to pick up cutbacks in “intangible investments” such as business spending on research and development, product design, and worker training. There’s ample evidence to suggest that companies, to reduce costs and boost short-term profits, are slashing this kind of spending, which is essential for innovation. Without investment in intangibles, the U.S. can’t compete in a knowledge-based global economy. Yet you won’t see that plunge reflected in the GDP and productivity statistics, which are still too focused on more traditional sectors, such as motor vehicles and construction…
…Here’s a sobering sign that companies are robbing the future to pay for short-term profits: Over the past year, U.S. employment of scientists and engineers—the people who create the next generation of products and make the U.S. more competitive over the long term—has fallen by 6.3%, according to a BusinessWeek tabulation of unpublished data. Yet overall employment has fallen only 4.1%…
The “profits” of late come about a lot of ways – not buying as much inventory; cutting back on employee benefits and pay; not hiring temporary/seasonal workers; squeezing overhead expenses, etc, etc, etc. Boiled down, though, is that when you get a “profit” by such expedients you really haven’t accomplished anything.
This is, also, nothing new – do you really think that we can’t build a factory in the United States to compete with the Chinese factory your kitchen table came from? Sure we could – but it takes time and effort to build or renovate a factory, and that eats in to this quarter’s profits. Much better to just close the outdated factory you have, order the goods from China and beam with glee over your increased quarterly profits even as your firm makes less stuff and employs less people. Meanwhile, as you’re patting yourself on the back and offering huge bonuses to retain the “talent” which carried out this program, America’s economic base shrinks to the point where it can’t sustain the profligate lifestyle American’s have grown used to.
Pay no attention to the shell game Obama, Pelosi, Reid, Big Corporation and Big Government are playing. Until we start working our way out of this, we won’t get out. They’ll continue to fudge the numbers, print money, swap various toxic assets back and forth, increase taxes, increase spending and it’ll all amount to nothing, in the end. Except more debt for me and you, and a longer, harder task of working our way out of it.
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