Posts
The black line represent the percentage of corporate domestic industries' profits coming from financial sources (i.e. domestic industries' financial profits / (domestic industries' financial profits + domestic industries' non-financial profits)). The dotted black line is just a linear trend line through it. (This does not include profits made overseas.)
The red line shows the annual growth in domestic corporate profits (both financial and non-financial). I used a 4th order polynomial to create the dotted red trend line through it. It kind of looks like a business cycle, doesn't it? It might be worth noting that our last consumer recession was in the early 1990s.
I am not a believer in the financial innovation story. It is doing little if anything to create actual prosperity. It is simply redistributing the wealth in a rather inefficient way. I think we're finding that out all too clear as we look to the subprime mess for answers. No matter how hard you try, you'll never be able to repackage rotted meat and end up with a fat juicy steak once you are done. To think it could be done with credit was yet another example of hoping to get "something for nothing."
Our next "something for nothing" scheme appears to be extracting "blood from turnips." Somehow I don't think that's going to work out so well either, especially if we slip into a recession.
Trapped in Debt: The Growth of Payday Lending in Ohio
Payday lending has exploded in Ohio and the nation over the past decade, mushrooming from an occasional presence in the most troubled urban neighborhoods to a ubiquitous challenge in nearly every Ohio county. Nationwide, the payday lending industry has doubled since 2000 to 25,000 payday loan stores selling more than $40 billion in loans. Payday lending costs American families more than $4.2 billion in 2005, with Ohioans paying more than $209 million in fees. These numbers do not include the massive growth in the Internet payday loan market, which is difficult to quantify across state boundaries.
Source Data: Gross Domestic Product and Corporate Profits (and archived versions of same)
More information (and the inspiration for doing the chart) can be found at OK, Here We Go.
9 comments:
Mark - you might want to add a graph showing total corporate profits over the same time span, just for comparison purposes. The kicker in this new recession is that it is reversing the trend for the 2001 recession, which was caused primarily by a big drop in business spending.
Over the last year or so private domestic investment has been weak, and it is possible that we could see a slump in general corporate profits, financial profits, and consumer spending all at the same time. Retail-spawned private domestic investment is very definitely declining.
The employment report for August was interesting because it picked up a decline in government jobs. Well, many localities have been living high off the big rise in property taxes caused by the housing bubble, and many localities have a severe problem with pensions. So it is exceptionally likely that one of the contributors to this recession will be a downturn in state and local employment.
I think this is turning into a work in progress as I learn more about the data.
maxedoutmama,
Why are we using the financial and nonfinancial numbers in lines 3 and 4 in Table 12 and not the ones further down that appear to use "inventory valuation and capital consumption adjustments?"
I'll post this question on your site as well in case you don't spot it here.
Nevermind. I think we're using the right data now. I was just a bit confused about how the data was laid out.
While reviewing the data I found an error in one of the data points. A new chart has been posted.
After pulling numerous strands of hair from my head (okay, maybe not numerous ;)) sifting through 1992 chained dollar data, 1996 chained dollar data, and 2000 chained dollar data I instead opted to simply calculate the year over year growth one report at a time as best I could (staying within the same report to do it so I wouldn't have to convert data).
I now declare it close enough for government work (hopefully).
Mark - it is a business cycle, and one which is probably given more strength by demographics. Specifically, boomer demographics. As people approach retirement they first buy (cars, houses) and then they cut spending substantially.
maxedoutmama,
We're going to "business cycle" ourselves right over the cliff and into the abyss if this keeps up.
You have a right to be concerned. Check out what Libor has been doing.
cf,
Why are we in this basket and where are we (libor rates) headed? D'oh!
http://www.bankrate.com/brm/ratewatch/other-indices.asp
Post a Comment