Generational theory, international history and current events
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After I reposted this on the previous page, I wondered why the graph of corporate profits showed that corporations made about $1.8 trillion in profits in 2012 vs the $1 trillion I estimated. I'm guessing it was because I estimated margins to be close to the historical average of about 7% when really they were 11% in 2012. If QE is slowed down or stopped I think margins could level off at somewhere around 2% after they go negative (they might do that no matter what the Fed does, as inflation might eat into corporate profits just as much). But even if margins go back down to the lower end of the historical range, that implies a serious cut in the stock market as both PEs and margins contract.Higgenbotham wrote: Fri Jul 20, 2012 7:10 pm The US GDP is about $15 trillion and if we assume for simplicity (in order to get a maximum number) that all of the GDP is created by corporations, then corporate profits are about $1 trillion per year.
The US federal deficit is about $1.5 trillion per year. How ever you slice it or dice it, that excess gets spent into the economy and in general there a two main beneficiaries - large corporations by way of government contracts, bailouts and subsidies and poor people who can't save money. When poor people spend a government handout, of course the corporations only take their cut because they also have to provide something in exchange. Let's say a poor person goes to Wal-Mart with a food stamp card to buy a hunk of Kraft cheese. Kraft gets their 7.5% of wholesale (probably higher), Wal-Mart gets their 7.5% of retail (probably not that high), the media conglomerate that Kraft pays to advertise gets their cut and so on down the line.
