The latest from Charles Hugh Smith….
The balance between QE and Treasury supply will begin to shift in July. The underlying bid it has provided for stocks and Treasuries will begin to fade.
This report tells why, and what to look for in the data and the markets. GO TO THE POST
Global Corporate America has decoupled from the American middle class; its interests are now international rather than domestic. Global Corporate America has been decoupling from its country of origin for a long time, and the last weak bonds appear to be snapping.
Longtime correspondent Cheryl A. recently submitted this snippet from a recent The Atlantic article The Rise of the New Global Elite and this summary: “This is disturbing on so many levels.”
Let’s look at the number of consumers of global U.S. corporations’ goods and services in aggregate. According to the FDIC, about 25% of Americans have little or no access to credit. This is an excellent metric of proverty: in other words, 75 million Americans are too poor to purchase much more than rent (subsidized by Section 8 vouchers, etc.) food (subsidized by SNAP food stamps), minimal healthcare (subsidized by Medicaid), toothpaste, cable TV, mobile phone service and fancy footwear made in Asia. (Every “poor” person above the level of homeless I see on the subway or bus has fancy footwear and a cellphone.)
That leaves about 225 million Americans with enough discretionary income to be more rabid consumers of global corporate America’s goods and services.
Alas, the U.S. is a mature consumer economy and the limits of consumer debt and leveraging seem to have been reached. As a result, corporate revenue growth in the domestic market is limited to GDP growth (most of which is generated by Federal borrowing and spending at this point): roughly 2-3%.
You can’t “grow profits” 10% a year on this sort of tepid growth. So Corporate America’s focus on international markets is not just rational but essential: there is no other way to grow revenues and profits.