Hereís Michael Hudson at Naked Capitalism, explaining what all those job-creators are really up to:
Well, companies themselves have been causing this crisis as much as speculators, because companies like Amazon, like Google, or Apple, especially, have been borrowing money to buy their own stock. And corporate activists, stockholder activists, have told these companies, we want you to put us on the board because we want you to borrow at 1 percent to buy your stock yielding 5 percent. Youíll get rich in no time. So all of these stock buybacks by Apple and by other companies at high prices, all of a sudden yes, they can make that money in the short term. But their net worth is all of a sudden plunging. And so weíre in a classic debt deflation.
PERIES: Michael, explain how buybacks are actually causing this. I donít think ordinary people quite understand that.
HUDSON: Well, what they cause is the runup Ė companies are under pressure. The managers are paid according to how well they can make a stock price go up. And they think, why should we invest in long-term research and development or long-term developments when we can use the earnings we have just to buy our own stock, and thatíll push them up even without investing, without hiring, without producing more. We can make the stock go up by financial engineering. By using our earnings to buy [their own] stock.
So what you have is empty earnings. Youíve had stock prices going up without really corporate earnings going up. Although if you buy back your stock and you retire the shares, then earning the shares go up. And all of a sudden the whole world realizes that this is all financial engineering, doing it with mirrors, and itís not real. Thereís been no real gain in industrial profitability. Thereís just been a diversion of corporate income into the financial markets instead of tangible new investment in hiring.