Why are profits still low?
Despite a clear economic recovery and surge in economic activity, most companies are still having trouble making much in the way of profits. Kevin Hassett has a pretty interesting analysis here of current economic trends and what they might portend. What it amounts to is this: either low profit margins are a new facet of the "new economy" and unlikely to change any time soon, or, Enron has caused some positive changes in most publicly-held corporations.
If you're yawning and saying "who cares?" just remember that profits do determine things like how many people a company may hire in the future and how well your retirement fund does.
Dean;
You might find some of the comments of Kevin Phillips, a research fellow of the Pew Center interesting. An author, economist and self described conservative Republican who finds himself saddened by the ENRON situation. His most recent work chronicles the history of wealth in America from colonial times to the present. I have not read it but his interviews and commentary on NPR and CSPAN have intrigued me. The following link is to a recent article covering some of the same ground as above. I found his writing a little more lucid and his insights provocitive.
http://www.wealthanddemocracy.com/article.htm
Thanks Paul, I'll have a look. Although I'm surprised to hear that Kevin Phillips would describe himself as a "conservative" Republican. Conservative groups used to give out an annual joke award in his name: the Kevin Phillips RINO award. RINO standing for "Republican In Name Only," in tribute to his NPR commentaries.
A standing joke in conservative circles is that his real first name must be "Even." Why? Because they so often hear sentences from NPR fans start like this: "Why, Even Kevin Phillips thinks Newt Gingrich is a jerk!" "Even Kevin Phillips thinks these tax cuts hurt the poor!" "Even Kevin Phillips says that..."
He's been viewed as a kind of fig leaf at NPR for years--their lame effort at lending "balance" to their at times ridiculously slanted commentary and coverage. Hey, at least he's a Republican, right?
Note that by saying all this, I am a regular NPR listener, and a fan, because their content is so good.
two points:
first, I find the theory of competition interesting. To the extent that the internet, globalization etc. has really created a frictionless market, it has also moves us toward the profitless market where price equilibirum is more than an academic ideal.
Second, it would be interesting to see how sales correlate to profits over the last several years. Once again, we may have again hit the Keynesian wall. After about two decades (75-95) of the worst wage growth performance in american history; rising unemployment, the end of the wealth effect, and a pervasive sense of being maxed-out on credit cards would logically dampen both optimism and demand.
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In other words, he might as well be hanging out at a donut shop drooling on the table and muttering to himself.
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