{"id":53642,"date":"2020-06-12T19:19:16","date_gmt":"2020-06-13T00:19:16","guid":{"rendered":"https:\/\/olduvai.ca\/?p=53642"},"modified":"2020-06-12T19:19:18","modified_gmt":"2020-06-13T00:19:18","slug":"our-wile-e-coyote-economy-nothing-but-financial-engineering","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=53642","title":{"rendered":"Our Wile E. Coyote Economy: Nothing But Financial Engineering"},"content":{"rendered":"\n

Our Wile E. Coyote Economy: Nothing But Financial Engineering<\/a><\/h3>\n\n\n\n

Ours is a Wile E. Coyote economy, and now we’re hanging in mid-air, realizing there is nothing solid beneath our feet.<\/em><\/p>\n\n\n\n

The story we’re told about how our “capitalist” economy works is outdated.<\/strong>\u00a0The story goes like this: companies produce goods and services for a competitive marketplace and earn a profit from this production. These profits are income streams for investors, who buy companies’ stocks based on these profits. As profits rise, so do stock valuations.<\/p>\n\n\n\n

It’s all win-win: consumers get competitively priced goods and services, workers have jobs producing goods and services and investors earn a return on their capital.<\/p>\n\n\n\n

Sadly, this is a fairy tale that no longer aligns with the reality that the U.S. economy is now a decaying billboard of “producing goods and services” behind which the real money is made in\u00a0financial engineering<\/em>, a.k.a.\u00a0legalized fraud.<\/em><\/strong>\u00a0Take everyone’s favorite stock, Apple. The fairy tale is that Apple is in the business of making mobile phones and providing services to this customer base.<\/p>\n\n\n\n

According to the fairy tale, Apple’s rise in value from $400 billion to $1.4 trillion is based on higher operating earnings, i.e. profits. But if we look at Apple’s operating earnings (see chart below), we see that they’ve been flat for years. So why is Apple worth $1 trillion more than it was a few years ago if profits haven’t risen, much less tripled?<\/p>\n\n\n\n

The answer is\u00a0financial engineering<\/em>:<\/strong>\u00a0Apple sells bonds that pay a paltry rate of return and then uses the proceeds from this debt (and most of its actual profits) to buy back its own shares–an astounding $338 billion over the past 7 years.<\/p>\n\n\n\n

But look at the return on this\u00a0legalized fraud<\/em>: $338 billion added $1 trillion in “value”<\/strong>\u00a0which can be sold by insiders to\u00a0greater fools<\/em>\u00a0who believe the fairy tale.<\/p>\n\n\n\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

Our Wile E. Coyote Economy: Nothing But Financial Engineering Ours is a Wile E. Coyote economy, and now we’re hanging in mid-air, realizing there is nothing solid beneath our feet. The story we’re told about how our “capitalist” economy works is outdated.\u00a0The story goes like this: companies produce goods and services for a competitive marketplace […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[111,24078,4803,950],"class_list":["post-53642","post","type-post","status-publish","format-standard","hentry","category-economics","tag-capitalism","tag-charles-hugh-smith-2","tag-financial-engineering","tag-fraud"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/53642","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=53642"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/53642\/revisions"}],"predecessor-version":[{"id":53643,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/53642\/revisions\/53643"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=53642"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=53642"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=53642"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}