Capital drought

U.S. corporations are flush with cash. As of the end of the third quarter, they had $1.8 trillion in cash, bonds, and other liquid financial assets on hand—and I’m talking about nonfinancial corporations, not banks or insurance companies. Profits are very high, and firms are gushing with cash flow. But they’re not investing all that much—in things, that is, like buildings and machines. Usually, corporate capital spending tracks closely with cash flow (profits plus depreciation allowances). Firms typically invest all their cash flow, and very often more (borrowing the difference). Over the… Read More

Profitability: high, and maybe past its peak?

As every Marxist schoolchild knows, the profits “call the tune” for the capitalist economy, as Michael Roberts put it recently. He writes: Despite the very high mass of profit that has been generated since the economic recovery began, the rate of profit stopped rising in 2011.  That’s a sign that the US capitalist economy will not achieve any significant sustainable growth over the next year so so.  The rate remains below the peak of 1997.  But the rate is clearly higher than in was in the late 1970s and early 1980s at… Read More