
Goldman Sachs May Be Forced to Fundamentally Question Capitalism - kohito
http://www.bloomberg.com/news/articles/2016-02-03/goldman-sachs-says-it-may-be-forced-to-fundamentally-question-how-capitalism-is-working?cmpid=google&google_editors_picks=true
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nefitty
Can anyone elaborate on this point? I found the article too short and too
technical for me to understand.

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Thomas_Lord
Profit margins are very high compared to historic trends. Why?

GS notes that _costs of production_ have been going down. Firms move jobs from
parts of the world with higher wages, to parts with lower. Firms eliminate
jobs through mergers.

GS notes that some _commodity demand_ has been strong as places like China
develop.

Lowering costs and keeping demand strong has kept profits high, says GS.

After a time, that should end. Beyond a certain point, mergers are less likely
to pay off. Beyond a certain point, there aren't many jobs left to ship to
low-wage regions. At the same time, global demand for commodities is
weakening.

Those trends should cause immediate drops in revenue, hence profit margins. As
these drops take hold, the price of capital assets like factories or tankers
of oil or silos of wheat should fall. This should result in job losses, wage
reductions, and generally a spiral that further reduces demand, increases
deflation, and shrinks profit margins.

Many would argue that deflation and collapse in the corporate profit rate
should already be going on, yet it hasn't been. Why? (There are good
explanations but this article doesn't talk about them.)

GS quipped, roughly, that if the profit margins don't fall, maybe that means
capitalism is broken and doesn't work anymore.

\-------------------

Not in that article but just FYI: A marxian argument can be made that the real
rate of profit is, on average, already negative. If so, that is a sign that
capitalism is, as GS suggests, maybe self-destructing at long last. The GS
quip is, I think, kind of a wry nod to the marxian view.

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nefitty
Thanks for the explanation. Can we expect to see large financial firms
throughout the US economy begin questioning the basis of capitalism? I am also
interested in the explanations as to why deflation and collapse in profit rate
is not occurring. Any resources you could point to would be appreciated!

~~~
Thomas_Lord
[https://therealmovement.wordpress.com/2015/10/10/the-
hidden-...](https://therealmovement.wordpress.com/2015/10/10/the-hidden-
conflict-within-the-fascist-state-for-control-of-economic-policy-5/)

