[lbo-talk] Stock Markets vs the Real Economy

[michael perelman]

Regarding reverse finance capital, I suspected everybody here is
already familiar with the way the automobile companies and General
Electric came to rely on finance.  Private equity companies create an
artificial kind of reverse financial.  The idea is to buy a company,
often using the company's own resources in order to raise funds for
the purchase, then milk.  The company for all it's worth in terms of
fees, then mess with the books to make it look profitable, and finally
market the company to investors before the balloon payments come due.
Stock buybacks also make money flow from the companies to the markets,
which then causes the stock values to increase, which then makes money
flow back to management bonuses.  Another wrinkle on increasing stock
prices is to boost productivity by jettisoning activities which are
not making a high enough rate of profit.  This practice can lead to
outsourcing or just plain deindustrialization. In effect, the vampire
of capital feeds upon itself.

I don't think any of this really conflicts with Barbara Garson's great book.

PS, the New York Times has an obituary for John Teets, who led the
financialization of Greyhound.

-- 
Michael Perelman
Economics Department
California State University
Chico, CA
95929

530 898 5321
fax 530 898 5901
http://michaelperelman.wordpress.com