435 billion dollars...

I was listening to Bloomberg radio today and heard one of the stock analysts say that US corporations are so flush with cash they don't know what to do with it - so US corporations plan $435 billion in stock repurchases next year.

Think about that for a minute.

In the time period 2008 - 2010, US taxpayers pushed about $700 billion into the US economy, almost exclusively in the form of finanical support for people who buy things; the unemployed, policemen, firemen, teachers, tax breaks for the middle class including reductions in payroll taxes, support for small businesses, etc. They poured money into people who would spend it, and thus would multiply it. US corporations were the beneficiaries of that, and they have logged record profits since then. US corporations have banked around 1.5 trillion dollar in excess cash. It's so much cash their boards of directors are telling those CEOs they need to do something with it - they can't just let it sit in the bank.

So those corporations have a couple of options - they can do some hiring, some expanding, some R&D, some replacement of aging equipment. Or they can buy back stock so they can raise stock prices and increase earnings per share (a totally theoretical and irrelevant number). So do they hire? Do they expand? Do they spend it on R&D? No. They buy back stock.

When they buy back stock, they don't funnel the money into the economy where it can multiply like the stimulus money did. Since the money doesn't multiply, it doesn't help the deficit or expand the consumer middle class. It goes to investors. And those investors pay roughly 1/2 the tax rates that average people do (the conservative-beloved "capital gains" tax rate of 15%), so the deficit continues to explode.

What would you do if you loaned a friend money to start a business because you really believed in him, and he got rich, then gave the money to the richest guy he knew? That's what America just did.

Capitalism is an engine that runs like this - people get ideas to start businesses, they hire workers to make their vision a reality, those workers express their inner creativity and productivity, the business thrives, the owner makes money and he pays his workers well, who go out and spend money on other products made by other creative and productive people, who make money and they spend it on other products made by other creative and productive people...

But we don't do that today. Today, we take the value of creativity and productivity and pour it into a dead end called the uber rich 1%. I guess that's how a capitalist country stops being capitalist and becomes an oligarchy.