Left I on the News

AP analyzes the current "recovery," the "end of the recession":

Corporate America is turning a profit again, but only by spending less, not making more.

While recent bullish profit reports have fueled the stock market, a true economic revival will depend on consumers opening their wallets. So far, there's little evidence of that.

Big names such as Caterpillar, IBM, Whirlpool, Pfizer, 3M and Lowe's boosted profit forecasts for 2009 following a slew of second-quarter earning reports that blew past lackluster expectations. Yet the gains aren't coming from sales.

Rather, companies are slashing everything from jobs to officer perks to boost the bottom line and please investors who have responded by pushing the major stock indexes to their highest levels in months.

None of this is surprising coming out of a recession. But the increase in the major stock indexes is raising questions about whether investors are getting ahead of themselves. Companies can only cut costs so much, and the profits and the stock surge aren't likely to last without a sustained economic recovery that puts people in the mood to spend again.

"Cost saving is not going to be the source of future earnings," said Fred Fraenkel, vice chairman of the Beacon Trust Company, an investment management firm. "The source is going to be revenue, and that can't happen until the economy starts growing."

The only thing missing from this article is the last stroke in completing the circle. The economy can only grow when people start spending. But, since "companies are slashing everything from jobs to officer perks," there's no way that can happen. It's the fundamental contradiction of capitalism - if companies are to make a profit, then they can't possibly pay their workers the full value of what they have produced. And if the workers (collectively, not at any one factory) aren't paid the full value of what they have produced, they can't buy all the output. Which means there will be more output than can be sold - the crisis of overproduction.

And where better to see that these days than in the housing market? There are an absolutely astonishing, mind-boggling, 18.7 million homes vacant in the United States right now. Enough to easily house every homeless person in the United States (estimated at 3.5 million) with enough left over to house one heck of a lot of the people in the country living in substandard housing units.

If housing were produced for human need, and not profit, of course. The big "if".