Tuesday, August 6, 2013

China's "Growth" Story in One Chart

Click to enlarge.

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Sarcasm Disclaimer

Source Data:
St. Louis Fed: Custom Chart


Anonymous said...

So what does this chart mean? Businesses have been able to extract excess (or at least greatly increased) profits from their customer base. How have they managed to do this - through increased monopolistic tendencies in economy or cartels or what? Why couldn't it continue if the monopolies are not addressed - and since when has US gov gone against monopolies.

Thanks again for your wonderful chart-making!

Anonymous said...

Oops - the preceding comment was supposed to be on real dividends per capita.

Stagflationary Mark said...


I could point to many factors, and in my opinion very few (if any) are sustainable over the long-term.

Here's one of the more important ones.


But the remarkable rebound in the financial sector isn’t quite what it appears. Despite all that has happened since 2008, banking remains a very peculiar business—peculiarly cosseted, peculiarly financed, and peculiarly risky. Indeed, its current prosperity reflects not just the over-all economic recovery but the persistence of many of the factors that got us into the financial crisis in the first place: an emphasis on trading rather than lending, a high degree of leverage, and implicit subsidies from the taxpayer.

Stagflationary Mark said...

Here's another important one.

When companies outsource manufacturing to China they don't tend to cut the prices as fast as the costs are coming down. They'd rather pocket the extra profits. Who wouldn't?

Meanwhile, the displaced U.S. workers eventually start to run out of money to buy those products. That tends to give us things like Great Recessions. Sigh.

Eventually, profit margins will come back down though. Global competition should see to that. That certainly happened in the big screen TV industry anyway. So many choices!

As a side note, picture the first major grocery chain that opted to stay open 24 hours. It was a really smart move at first. Market share no doubt increased with only a small increase in costs (more hours of lighting, heating, cooling). Now that most chains are doing it the advantage is gone. Now that same chain is only left with extra costs. Further, can't repeat that process again. Can't open for more than 24 hours per day. Right?

Meanwhile, Costco opted not to compete. Didn't make sense for it to stay open 24 hours and slightly increase its costs. It's competing on price, not convenience. And price is what should matter most for most people. Just shoot me if I am ever tempted to pay full price for Coca Cola in a grocery store. I have no great desire to burn money! Can't understand why others would.

until many others had to do it to compete.

Stagflationary Mark said...

Disregard that last phrase. I was moving sentences around and didn't spot the leftovers. :)

Stagflationary Mark said...

Here is yet another one.

We have very few companies left that are rated AAA. We are continually told that they are sitting on piles of cash. to the point I'm sick of hearing it.

Thought experiment.

If a company has a ton of debt at 5%, does a cash out refinance at 4%, then uses that cash to pay extra dividends, then should I jump up and down with joy over the company's long-term prospects?

I'm not saying it is happening. Why would I assume it isn't though? Or even worse? Perhaps I'm biased. There was much cooking of books where I once worked (front page of the Wall Street Journal style financial fraud).

On that note, I distinctly remember reading about people (homeowners) using cash out refinancing to fund their lifestyles, at least until they couldn't anyway.

And as we all know, corporations are people too! ;)

Anonymous said...

Very interesting - especially boosting dividends via debt, probably to keep share price high...and resultant bonuses to management. thanks. Fred

Stagflationary Mark said...


These 7 tips can help your small business cash in like a big business.

7. Careful accounting tricks. There are many techniques that large corporations use to "manipulate" sales or profits. Here are a few that can be used with the help of excellent accounting advice:

No provisions for bad debts even though the debts are old and the customers are out of business.

Recognizing the income of a long-term contract when it is signed rather than when the income will actually be realized.

Selling fixed assets (property, machines, computers) and recognizing the income as normal sales.

Changing the depreciation policy.

Treating some operating costs as investments.