THE BACK PAGE: Imagining a recovery
And after all who can doubt the ability of capitalism to renew itself? If imagination has anything to do with spurring economic activity one would always have to give high marks to the Americans. Corporate profits are up, and nowhere are they higher than among the very institutions that were rescued, either directly or indirectly, by the government last year. Goldman Sachs’ earnings last quarter were four times higher than the year prior. The combination of fewer competitors and access to gobs of low-cost government capital has proved a powerful elixir for them and others.
The firm’s “activities have become more profitable after the crisis reduced competition and governments injected funds in the banking system,” says The Financial Times. Bill Bonner of The Daily Reckoning adds that Goldman “can borrow at almost no cost. Then it can use the money in a variety of ways, such as lending it back to the government for guaranteed profits or speculating on oil or gold or whatever. If you can borrow at zero cost you can do a lot of speculating. Many speculators are using the government’s money to bet against the U.S. dollar - and making a lot of money.”
Ain’t that grand?
Corporate profits are up elsewhere as well, fueled, unfortunately, far more by cost-cutting than anything positive on the top line. But that won’t matter when bonus time comes. As we head into another austere holiday season get ready for a fresh round of demoralizing executive compensation tales, and how, even as unemployment continues to rise, the economy moves sideways, and many individual employees actually experience declining incomes, a comparatively few winners are making out like bandits. As Nell Minnow of The Corporate Library, a renowned expert on governance and the lack thereof, recently put it, irresponsible and ineffective corporate boards are doing far more to kill capitalism than Marx ever did.
Down in the valley, people are doing what they can to jump-start things. In the space of a few days last week a woman in Ohio posing as a lottery winner hired a stretch Hummer and drove to a Burlington Coat Factory store and announced all sales up to $500 were on her. And a father was arrested for claiming his 6-year-old boy untied a balloon purportedly designed for storm-tracking from the roof of his home and floated several thousand feet over suburban Denver before the craft crashed unmanned to Earth, setting off fears that the poor child had met a cruel end. Of course, by now, anyone with a television remote knows that it was all about generating publicity for a reality TV show that will never happen now. Or will it?
In seriousness, people are taking matters into their own hands in all sorts of ways, and there’s some wisdom in that, as well as some long-term impacts. For instance, social media could be the paradigm shift that permanently alters the intra-industry conversation about networked gaming, which has been discussed for years as the next potential driver of new machine sales and revenue growth. It hasn’t happened yet, but the opening of CityCenter next month with 2,000 fully networked slot machines at Aria is a key development for the industry. The one thing that has held back server-based gaming is that operator benefits are straightforward, the upside for the player less so. But this is a conversation that started before anyone even knew what Facebook was, and the age of personalization is here and intensifying daily.
For all of the turmoil at the north end of the Las Vegas Strip, there just might be the beginnings of a recovery coming out of the rubble - if we can only get this whole jobs and income thing sorted out.