In large part the Japanese bubble was augmented by “zaitech,” or financial engineering – a pun on “high-tech.”
As Japan returns to recession despite, or in fact because of, massive monetary intervention, we see the US repeating history.
Bloomberg reports that S&P 500 companies are spending essentially all of their profits on share buybacks instead of capital investment.
They’re poised to spend $914 billion on share buybacks and dividends this year, or about 95 percent of earnings, data compiled by Bloomberg and S&P Dow Jones Indices show. Money returned to stock owners exceeded profits in the first quarter and may again in the third. The proportion of cash flow used for repurchases has almost doubled over the last decade while it’s slipped for capital investments, according to Jonathan Glionna, head of U.S. equity strategy research at Barclays Plc.
This is a slow-motion disaster for the US as the capital stock in plant and equipment rolls into obsolescence and decay.
The reluctance to raise capital investment has left companies with the oldest plants and equipment in almost 60 years. The average age of fixed assets reached 22 years in 2013, the highest level since 1956, according to annual data compiled by the Commerce Department.
Recovery from the coming depression will require massive investment, a domestic Marshall plan to replace the infrastructure destroyed by the Fed’s manipulations. Massive investment will require massive savings, implying a drastic change in lifestyle for the US.