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a great piece in today's financial times by Andrew Smithers
subtle a world awash with debt the
net Nadav which is that we need to stop the policy that ronald reagan started in
the mid-nineteen eighties
allowing CEOs to be paid stock because if that
CEOs are having corporations do all kinds of things the most recent is that
they're borrowing money to buy their own stock back
so the stock becomes more concentrated in the sport valuable so that the CEOs
can cash in
their stock options at a higher profit at you make more money up the stock
options
screws the customers screws the economy
screws the the company
instead of investing in the business
and set a growing the business they're simply jacking up the stock price
because their paper stock when he did we need to put an end to this
back to the rules we had before the reagan revolution
for the only way that you can pay employees have a company's with dollars
actually wrote a chapter about this my book rebooting American Dream it's a
it's a
it's a big deal bad and
in reagan's tax cuts were some of the greatest crimes at the sky
perpetrated in sick against economy the United States that to this day are
setting us up for the crash
2016 or maybe 2015 or maybe even 2014
and
you know here it is in today's financial times couple of shocking thing miss
Anderson users I illustrate the situation the US in the chart a ball
it is
any and he says so non-financial business debt is higher than it has ever
been since the second world war
and well above its level in 1929
it was 56 percent of GDP in 1929 out
eighty percent GDP non-financial business debt
said the underlying position seems worse than this
as companies have shifted so much in their debt off balance sheet by the way
other countries are just as bad
specially UK you know margaret thatcher ronald reagan
same stuff then he says
when governments ran large deficits the private sector has a cash surplus secure
repay its debts now why would he say that
because the government dad is
savings in the private sector it's private sector catch
the larger the government that the larger the private sector debt
cash so companies can pay their debts
but instead he but again endorsement is rights
unfortunately this has not happened this time around
this time around he's talking about the cycle between 1929 and today
in the UK and the US the reasons are quite simple
companies have been leveraging up another resident borrowing money to buy
back their stock their equity buying back equities is
latest figures show UK companies by Mac equity an annual rate of 3 percent of
GDP in the US a 2.3 percent
so why would they be doing this is his claims are often made the today's low
investment companies are not investing
in growing their business then act they're not creating jobs why
he says people say it's because a deal averaging mothers they
companies trying to get outta debt is this is nonsense but the figures
published on March 6th by the US Federal Reserve show the corporate debt has
risen by nine percent over the last year
what's actually going on Smithers says and I quote
companies in the UK and US prefer to buy back shares rather than invest equipment
why
because their managements are paid huge bonuses which are posted by buybacks
and this held and and held back by investment in other words
CEO's make more money when a company borrows money
and buys its own stock than they do when their company
invests in new products this
is insane and its setting up a crash
this is the Thom Hartmann program it's like TS eliot you know this is the way
the world chillin
a *** but a whimper and most people are unaware of this