Stephanie Pomboy was of the speakers at our TBP conference earlier this month. You can see her presentation below video

Corporate Profits Are Thanks to Government Stimulus

Stephanie Pomboy argues that the record profits being enjoyed by corporations are caused not by economic recovery, but by the government stimulus programs, and likely to be short-lived

Corporate Profits Are Thanks to Government Stimulus from The Big Picture on

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Category: Financial Press

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4 Responses to “Pomboy: Can’t Handle the Truth”

  1. Livermore Shimervore says:

    There is no getting around the fact that average US wages and household net (not derived from positive RE fluctuation) have been stuck in park since before the credit bubble. The first remedy was securitization of every kind of the debt and the kitchen sink. And it worked at hiding stagnant wages for 4-5 years. All throughout that credit bubble, to debacle, wages made no foundational progress in the upward direction. If wages are not rising corporations can only reach these profit levels, and thereby create a bubble in the equity markets, if credit markets spike the punch bowl, foreign consumer markets really spike theirs (ahem Brazil) or there is a metric tonne of stimulus by the govts of the US and/or China. When my 401K is up 20% that points to a macro bubble. Certain sectors should absolutely be rising at robust levels, but not all. This anemic level of wage growth over this long a period of time can not possibly lift every corporate boat in a sustainable way, unless crony capitalism gets those rails greased.

    • willid3 says:

      wages have been stagnant far longer than just the bubble would show. go back to the 1970s. thats how far back it goes. all that changed that hid it since was 2nd incomes (spouses working). and credit. well unless we change the laws, you can only have one spouse. so that left credit to keep consumers able to spend. then in the last decade, credit got on steroids, and falling. but credit was driven more by private demands (some thing about having figured out you could sell the notes to ‘investors’ before they cratered. and make money on both making the loan and selling.)

  2. constantnormal says:

    “… are caused not by economic recovery, but by the government stimulus programs, and likely to be short-lived”

    Only to the extent that government stimulus programs are short-lived.

    Until the US economy is in a state where it can collect tax revenue sufficient to support the increase in debt load that a rise in rates will bring — either through higher tax rates or more people working at decent wages — I expect to see the Fed continue to find reasons to maintain an easy money policy.

    Easy money policies cannot continue forever, but seeing as how we have had them pretty much since Greenspan began his tenure (some several decades ago), I can imagine things continuing the glide to a halt without incident.

    If one undertakes to imagine a scenario wherein the Fed is forced to raise rates, and then look around for the signatures of those circumstances, I think you will have trouble finding them.

    And if that DOES turn out to be the case (I can be as wrong as anyone else on matters of this sort), then I see no reason why corporate profits will not continue to be floated along by easy money … where are the voices in government or industry speaking out against this?

    This is not an optimal or even a desirable state of affairs, but I think it represents the way things are, for the past few decades, as well as stretching off into the future.

  3. constantnormal says:

    … pls read “debt load” as “debt service costs” … I don’t think that a total national debt on par with a single year’s GDP is much concern, so long as the debt is laddered out into time and rates are kept acceptably low …