{"id":6243,"date":"2015-03-06T06:50:32","date_gmt":"2015-03-06T11:50:32","guid":{"rendered":"http:\/\/olduvai.ca\/?p=6243"},"modified":"2015-03-06T06:50:32","modified_gmt":"2015-03-06T11:50:32","slug":"thanks-for-the-corporate-bond-bubble-fed","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=6243","title":{"rendered":"Thanks For The Corporate Bond Bubble, Fed"},"content":{"rendered":"<h3 class=\"entry-title\"><a href=\"http:\/\/davidstockmanscontracorner.com\/thanks-for-the-corporate-bond-bubble-fed\/\" target=\"_blank\">Thanks For The Corporate Bond Bubble, Fed<\/a><\/h3>\n<p>Once upon a time businesses borrowed long term money\u2014-if they borrowed at all\u2014-in order to fund plant, equipment and other long-lived productive assets. That kind of debt was self-liquidating in the sense that it usually\u00a0generated a stream of income and cash flow that was sufficient to service and repay the debt, and to kick some earned\u00a0surplus into the pot as well.<\/p>\n<p><em><strong>Today American businesses are borrowing like never before\u2014-but the only thing being liquidated is there own equity capital.<\/strong><\/em>That\u2019s because trillions of debt is being issued to fund financial engineering maneuvers such as stock buybacks, M&amp;A and LBOs, not the acquisition of productive assets that can actually fuel future output and productivity.<\/p>\n<p>So it amounts to a great financial shuffle conducted entirely within the canyons of Wall Street. Financial engineering deals invariably\u00a0shrink the float of outstanding stock among the companies visiting underwriters. Likewise, they invariably leave with the\u00a0mid-section of their\u00a0balance sheets bloated with fixed obligations, while the bottom tier of\u00a0shareholder equity\u00a0has been\u00a0strip-mined and\u00a0hollowed out.<\/p>\n<p>At the same time, none of this vast\u00a0flow of capital leaves a trace on the actual operations\u2014-such as production, marketing and\u00a0payrolls\u2014of the businesses involved. Instead, prodigious sums of debt capital are being sold to yield-hungry\u00a0bond managers and homegamers via mutual funds and then\u00a0recycled back\u00a0into windfall gains for stock market gamblers who chase momo plays and the stock price rips that usually accompany M&amp;A, LBO or stock buyback announcements.<\/p>\n<p>&nbsp;<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Thanks For The Corporate Bond Bubble, Fed Once upon a time businesses borrowed long term money\u2014-if they borrowed at all\u2014-in order to fund plant, equipment and other long-lived productive assets. That kind of debt was self-liquidating in the sense that it usually\u00a0generated a stream of income and cash flow that was sufficient to service and [&hellip;]<\/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":[86,88,3955,3954,2120,303,305],"class_list":["post-6243","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bond-bubble","tag-bonds","tag-corporate-bond-bubble","tag-corporate-bonds","tag-david-stockman","tag-fed","tag-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/6243","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=6243"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/6243\/revisions"}],"predecessor-version":[{"id":6244,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/6243\/revisions\/6244"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6243"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6243"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6243"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}