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The Fed printed money, gave it for free to rich people, who lent it to poor people at at nice profit instead of paying them wages

Regulatory tolerance of highly leveraged speculative activity by organizations and individuals is indeed a problem. However leverage is merely a description of income : debt levels.  Leverage is a substitute for income. Leverage is credit, a measure of debt capacity.

While leverage has enabled some firms to expand the market size and profitability of their operations, their wage and salaried employees have not captured a level of benefits commensurate with increasing productivity (profits). They have not captured profits because firm managers and investors prioritize distributions to themselves. Rather than even retire debts incurred by the firm, managers "roll over" principal by bond issue or worse pass through debt by M&A activity, so maintaining "interest only" fiduciary duties to employees and so-called equity holders.

The moral stands: no-low leverage is the result of no-low debt and retained earnings --which could fund CapEx and wage gains. Sadly, US don't do profit sharing with employees. US do 401(k), "defined contributions" to corporate debt.

Diversity is the key to economic and political evolution.

by Cat on Mon Feb 9th, 2009 at 03:09:15 PM EST
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