Record Profits, Banking and Globalization

I always thought that the economies are still in trouble, due to the economic crisis.

Today Justin Fox states in → The Real Story Behind Those „Record“ Corporate Profits the following piece of information, which made me think that it is over:

Corporate profits hit a new record in the U.S. in the third quarter of this year

Perfect….! But, ….. what is this…. If you read this article up to its end, you will find that it is by far not over. But the development still continues to run into the wrong direction.

Today I will be writing an article about my second hobby – Economics and the economy!

Growing Tensions

The current (fiscal) year is approaching its end, and many companies are starting to publish positive results. On the other hand, the newspapers are full with articles about economies-in-trouble, such as for example Ireland. Other articles warn us about huge fiscal deficits, for example in the US, which might cause future trouble.

The next articles attribute all problems in the world to Germany and China with their trade surplus, like Paul Krugman recently did (see → Axis of Depression):

„Hence the axis of depression. No doubt some of Mr. Bernanke’s critics are motivated by sincere intellectual conviction, but the core reason for the attack on the Fed is self-interest, pure and simple. China and Germany want America to stay uncompetitive; Republicans want the economy to stay weak as long as there’s a Democrat in the White House.“

To me it seems as if there were a lot of tension and misperception out there.

The Real Story Behind Those „Record“ Corporate Profits

In his article → The Real Story Behind Those „Record“ Corporate Profits, Fox  runs some calculations in a spreadsheet program, and comes to the following conclusion:

„So the reason that corporate profits are near their all-time highs would appear to be that financial corporations (mainly big financial corporations) and multinationals are making lots of money and paying less of it out in taxes. Hmmmm. …“

„The money is increasingly going to a select group at the very top of the economic food chain, who are able to reap the rewards of global growth, play the financial system astutely, and avoid taxes.“

So basically those gamblers, äh banks who had to be rescued with a large amount of money, and who are now putting entire countries into trouble, earn the most?! And those companies that find „creative“ methods to cut their tax-expenses?

The Double Irish,…

..The Dutch Sandwich, and Bermuda – How to evade taxes, if you are large.

Bloomberg recently published an article about the taxation tricks of large multinationals (see → Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes).

In this article can you read how it works, if you are at the top of the foodchain:

„Google, the owner of the world’s most popular search engine, uses a strategy that has gained favor among such companies as Facebook Inc. and Microsoft Corp. The method takes advantage of Irish tax law to legally shuttle profits into and out of subsidiaries there, largely escaping the country’s 12.5 percent income tax….

The high corporate tax rate in the U.S. motivates companies to move activities and related income to lower-tax countries, said Irving H. Plotkin,….

Google’s transfer pricing contributed to international tax benefits that boosted its earnings by 26 percent last year, company filings show. Based on a rough analysis, if the company paid taxes at the 35 percent rate on all its earnings, its share price might be reduced by about $100, said Clayton Moran, an analyst at Benchmark Co. in Boca Raton, Florida. He recommends buying Google stock, which closed yesterday at $607.98.

The company, which tells employees “don’t be evil” in its code of conduct, has cut its effective tax rate abroad more than its peers in the technology sector:…“

(I recommend you to read the other parts of the article in original)

The REAL Axis of Depression

Banks that were bailed out with taxpayer’s money are now better of, or global corporations that cheat at us. The working population who pays the bill is worse.

To me THIS is the real Axis of Depression, Mr Krugman.

Another Axis of Depression is if we „forget“ to mention the real reasons for our current economic trouble:

• As I have learned, the economic crisis was neither created by these surplus countries, nor do these countries have any interest in an uncompetitive America. Remember: The crisis was the result of deficit spending, and a bursting bubble, initiated by the subprime crisis in the US.
• A different reason was the wrong strategy of the last years. In these dark years, we  concentrated all our power in gambling with the big bugs in high finance, while we were offshoring all production facilities to China, and other tiger countries. And now we wake up and have suddenly learned that gambling does not buy food. No, we must work for it!

Further Information

Das Original dieses Artikels ist auf →Der Produktmanager erschienen (©Andreas Rudolph). Regelmäßige Artikel gibt es über die (→Mailingliste), oder indem Sie →mir auf Twitter folgen. In der Online Version finden Sie hier die versprochenen weiterführenden Links:

This entry was posted on Mittwoch, November 24th, 2010 at 8:44 pm. It is filed under Thema des Tages, Wirtschaft and tagged with Bubbles, Economy, English Content, Globalization, Stabilität. You can follow any responses to this entry through the RSS 2.0 feed.