The wages of QE are dividends, but Bernanke is up for more of it

False dividend bonanzas don’t benefit anyone but the rich

The first six months of what should be a flatlining year for business is showing big returns for those who are, um, big. And multinational. And being handed cheap aka free money by a combo of QE and Zirp from those Libor-fixers careful money managers at the Bank of England.

Q2 dividends paid to shareholders by large UK-based companies leapt 18% to hit just under £23bn. The 2012 half-year total so far is £41.4 billion – up 21%. The slow-down reflects the fact that there was less free money in Q2 than in Q1…and Mervyn King was outvoted in his desire to have another bash with QE3 last week. Very litle of this profit growth reflects ‘business’. It is simple treasury investment by finance directors on the whole. The global business picture is awful, but that hasn’t stopped UK directors from slashing out on big dividends for investors in their own concerns.

The reason for this isn’t hard to discern: big dividends and profits push up share-prices, which in turn allow stockholders on the Board to cash in and take out cash at relatively low tax rates. But here’s the bad news for Britain…and capitalism:

1. The real sales picture in many cases is pretty dreadful. Now would be a good time, in fact, to invest in having better products and greater productivity, ready for the time when consumers start to consume again. Unfotunately,

2. The corporate investment sector is very depressed indeed. As in, lower in relative terms than it has been at any time this century.

It’s bad for capitalism because it’s just more short-term greed, and the vibrant, creative small business sector – the future – doesn’t have the economies of scale and financial clout to profit from slump…and central bank giveaways. But it’s good for omnivorous globalism, and even better for banks…still officially rebuilding their balance sheets.

Those banks, of course, are NOT lending to small business, thanks to a “heightened risk of default”. Monopolists, you see, don’t do risk: that’s what capitalists do. Corporate lending to the SME sector shrank by nearly 9% in the first six months of this year. Once again, the banks are being shored up with taxpayer money, and sitting on it – which stifles innovation and organic economic growth. The multinationals use the money to create false accountancy growth, but not to invest. And the stockbrokers, shareholders and stockholding directors take the money home, Ithangyoo.

Sitting above the real, struggling economy is a carpet-bagging class – the usual 3-7% – creaming off the easy monopoly money, and starving the real entrepreneurs. They could not be more selfish, anti-social and ethically dysfunctional in their behaviour. And what’s more, little birdies in New York and san Francisco are telling me that Ben the Money-sprayer is rumoured to be, finally, up for another round of QE. Watch that Dow rise on this expectation. Watch Obama talking about growth and profits. Watch the unemployment lines get longer. Wait for the first eurobank collapse and sovereign default.

You could take some gambling money and bet on NYSE’s top 50 for a month or two. But QE3 will put too many demands on an already obscene US deficit, and the smart money will move into gold at the next drop. I shall be among them.

44 thoughts on “The wages of QE are dividends, but Bernanke is up for more of it

      • @Gemma: As far as I know, 10yr bond yields are the result of a calculation between current bond prices set by the bond market and the relevant coupon, not just the new coupon demanded by lenders. So it isn’t just the banks but all other bond owners who theoretically gain. The high yield reflects the perceived investment risk.

      • BT

        I understand that it is a “calculation” – – – the problem as always is of “perceived risk”. The markets, as with most modern institutions have their own perceptions, not all of which tally with the local circumstances. The bigger problem is that they still rely on the published data, and Britain is fudging the numbers just as any decent EU peripheral has (or does). The reliance on “evidence” is becoming a serious problem.

      • @Gemma: It’s always for any lender to make his own assessment of risk. But I agree with you that some of the inputs to his assessment may be inaccurate or (as in the case of Libor) deliberately manipulated. But any lender worth his salt will be aware of the issues and price them in when making his assessment. Not a perfect world …but …

      • BT
        I am sure you are right – the devil as always is in the detail, in this case “deliberately manipulated”. How much is there that is not deliberately manipulated these days?

        The ECB would love to manipulate more – the Germans are sticking to their own concepts and reasonings on this one. The Bank of England is manipulating via QE. The markets are manipulated by the likes of the Goldman Sachs wolves, terrorizing the markets and causing stampedes.

        The problem is that the markets are made of people whose powers of thinking do not stretch to the Goldman wolves. They lay themselves open to manipulation thereby. Anyone wanting a career (see below) is opening themselves to manipulation – that is why the unions started up after all! That management was not able to deal with their (the union’s) manipulations, meant that they had to get the government to intervene on their behalf.

        Truly, manipulation is everywhere – JW as a marketing man will be well aware of that! There are ways to use these abilities without coercion though.

      • @Gemma: Fair comment. It would be politically correct to say that markets have only been manipulated in recent times. But the truth is they’ve been manipulated for very many years, probably centuries. I recall saying to a friend when I was age ~25: “to make money in the markets you have to be very close to the market.” By that I meant one had to either work in the markets or be in receipt of insider information. Absolutely nothing has changed since then. In fact it’s only got a lot worse as we see with Libor, QE, Zirp etc. We are now living under crony capitalism, aka fascism. Hard to say where it will all end.

      • BT

        the only way out of this – is the way out of all major problems for a struggling business. Invention.

        The powers that be have not the foggiest clue what invention is. My recent Troll was an excellent example of just how little invention there is around right now. Everyone is doing precisely the same thing, time and time again, thinking that they are doing something different. Most people are limited by the fact that they think everyone thinks as they do. Which is possibly true since most people use logic (the lowest form of thinking) the problem is that the starting assumptions can be very different – which means two equally logical people given the same facts can give two equally justifiable but very different answers.

        Understand this and you will begin to understand where the Goldman wolves come from. They are inventive, truly inventive because they know what initial assumptions were made. To do this, you must first understand your own – the easiest way to do this is to learn someone else’s culture (and language, thinking patterns and so on). To do that, you first have to learn your own to a degree of intimacy that really hurts. It hurts because you discover some nasty truths about yourself. That puts most people off this kind of thing; it also sets apart the dull adult from the inventive one.

        Inventiveness is thinking outside of the box. It is far from easy but well worth the effort of attaining. If you want a business adviser, make sure that they can think outside the box. Otherwise you will have the same problems in a year’s time. Just like the Eurozone, just like the BoE and the Fed. Just like the markets!

      • @Gemma: I have spent my life thinking outside the box with a fair amount of success (and a lot of raised eyebrows and battles). This has required thinking logically, so I disagree with you that logical thought is the lowest form of thinking. Far from it. It’s a superior skill. A majority of people are incapable of thinking logically or even of understanding logical argument because they’re driven by weak emotive minds (they’re followers, not leaders), a desire not to be different (group-think) and a set of beliefs (true believers) which frankly don’t stand up to scrutiny (cognitive dissonance). The lies and corruption of progressive socialism has succeeded in dumbing people down to the lowest common denominator, which is to look to the State for the very means of existence.

      • “The lies and corruption of progressive socialism has succeeded in dumbing people down to the lowest common denominator, which is to look to the State for the very means of existence.”

        Maybe BT or are they just playing to their ( the people ) inherent strengths?

      • BT

        if logical thinking is “inside the box” then “outside of the box” is more powerful, let us say. Inside the box implies it is limited; outside implies less limitations (although there are still limitations).

        If you are to communicate your ideas to those only endowed with the ability to think inside the box, you must therefore deliver it in terms that are inside the box. Getting this accepted is therefore the problem – as you have already mentioned.

        You are right in what you say about logical thinking – most people simply accept the cultrual norm without any question, and certainly without any clarity.

        Logic is at least clear and defined. It works when there is a clearly defined set of starting points – and those are usually cultural, rarely individual. The ability to understand one’s own emotions is however the key to understanding the limitations of logic. Logic will give you one answer, not two. It is reductionist. If you wish to define things, you must “pigeon hole” them, then you can use them.

        As to the lies of progressive socialism, to be honest with you, they share the same weakly defined logic as those who accept them. I will give you an example: exams. There are things you can examine relatively easily, and things you can’t. A modern maths syllabus is made up of those things you can. Why? Because schools need to teach children well, and the schools are measured on passes. They are not measured by whether their last year pupils are happy or not, that is too subjective. You need “evidence” and “evidence” means paper. Too much of that sort of thing leads inevitably to people thinking that it is important, to thinking that anything else has no value.

      • Nope still not right, before you respond BT, it is still not clear. Let me try this way, what I am suggesting is that the Left capitalises on the inherent weaknesses within the populace before it actually creates those same weaknesess. (Is weaknesses a word, who knows?)

      • You’d certainly be left with that impression Jwoo from the succession of wide arsed track suit wearing ‘guests’ that frequent the Jeremy Kyle show.

        I often remind the doom laden armageddonists, when their apocalyptic imagary of the four horsemen reaches its most vocal, of two things: –

        1. Revelation was all about the hell that would be visited upon Earth a couple of thousand years ago.

        2. We’re still living it, through the medium that is daytime TV

        Anyone inclined to ask God to forgive those that socialist against us, for they know not what they do, are usually reminded of a couple of other things.

      • Happily ( I think ) @ Monk I have no idea what you are talking about, having not seen TV of any sort for three years and never having seen daytime TV. Does this prove I have made a sensible lifetime choice for once? Hope so.

      • @Jwoo: OK, I think I’m with you now. Yes, I have no doubt at all that the Left plays to those inherent weaknesses in people and then builds on them. Why? Because the Left itself is largely made up of similarly minded people. In my lifetime it has spent its time buying votes by offering ever more largesse and claiming it’ll all be paid for by the rich, meaning it’s free if you vote Left. If one removed this factor from elections, the Left would never win any election because it has nothing else to offer; history provides ample evidence that it cannot run an economy (except into the ground).

  1. One thing I miss in this gold-buggery. The application of the same “ethical investment” or “ethical business” standards you would apply to banks and other large businesses. You abhor “globalism” and yet nothing is more global than the international gold market, however distorted or manipulated it may or may not be.

    Making money by sitting on a pile of unused metal – real or virtual – seems to gainsay much of what the slog stands for.

    Confused? Yes. I’m puzzled, too

    • Well I’m more confused by this statement:

      “Once again, the banks are being shored up with taxpayer money, and sitting on it – which stifles innovation and organic economic growth. The multinationals use the money to create false accountancy growth, but not to invest”

      So the banks are sitting on all this printed money…. but somehow the multinationals are using it to create false accountancy growth? That’s a pretty clear contradiction.

      Also, where is the evidence for anything in this thread? According to the ONS public spending shrank by 0.8% last month but employment grew by 65,000. If that private sector growth is a mirage of accountancy then it seems to be leading to real jobs. I’ll settle for that. Lets face it, our finances are worse than Spain or Italy or Greece but whereas they are contracting at 6% per year with massive job losses we are holding our own and adding more jobs. I call that a success in the current environment.

      • Lets face it, our finances are worse than Spain or Italy or Greece but whereas they are contracting at 6% per year with massive job losses we are holding our own and adding more jobs.

        I am glad that you said it, for I would have been pilloried for such base accusations, coming as I do from afar.

      • JS
        Fear not, having recognised over time that you’re a bit thick, I’ll go easy on you. If you see a contradiction between banks sitting on SME money and globalists using it, then you don’t understand anything about how QE and Zirp favour the big company and the spendthrift individual.
        There is and never has been any connection between public spending and genuine private sector jobs that are economically productive.
        Lie down somewhere, and then have another go at trying to look clever.

      • @JW: Given that the overwhelming sums in QE have gone to the banks to buy up bonds, I cannot see how QE has helped big companies as you claim. Perhaps you’d like to explain?

    • It’s all distorted and manipulated, all the ‘systems’. Maybe J.W. is just trying to save his nest egg from disappearing altogether ?

    • ITG
      When everyone is shitting on you from a great height, raining on their parade is a minor misdemeanour…and preferable to starving.
      Don’t rush to judge.

  2. “Monopolists, you see, don’t do risk: that’s what capitalists do.”

    Bang on, though even we of the Insane Right concede that the structure of the enterprise need not be crucial. Mutuals, co-ops, partnerships large and small can flourish with our blessing.

    The whole point is to have a free market, regulated only to the extent necessary to protect the public, and to stop would-be monopolists cosying up to each other and to government, all to screw the customer and society as a whole.

    • @John Wood: “The whole point is to have a free market, regulated only to the extent necessary to protect the public, and to stop would-be monopolists cosying up to each other and to government, all to screw the customer and society as a whole.

      Agreed. Which is what Daniel Hannan advocates. Sadly, JW doesn’t get it and claims he’s on the unacceptable Right of politics. tch tch.

      • BT
        Wrong again
        Jeff
        Agree 100%
        You have to bear with BT, despite evidence to the contrary, he thinks I’m the love-child of Rosa Kleb and Jospeh Djugashvilli.

      • @JW: Forgive me, but have you not severely criticised Hannan on several occasions recently because he dared to complain about excessive government regulation? Is Hannan not one of your hate figures (another one being Delingpole – both on the political Right)?

        ps: I have no idea who Rosa Kleb and Jospeh Djugashvilli are.

      • Google quickly reveals the identities for those unfamiliar with the redness of his quipped parentage.

        It’s highly questionable that such a union would ever have taken place given that she was a devout lesbian.

  3. There is another side to this – the commodification of labour.

    Those who want stability of work, normal office hours, holidays and all that, are commodities for the use of businesses whose thoughts of entrepreneurship extend to “has it a good university degree and twenty year’s experience”?

    Most people do not want to have to work at doing their job. They just want to go through the motions. The bureaucrat is a good example. Anything that disturbs their systems is seen as an annoyance. It interrupts their routine. To my mind, that is why they don’t want to fix Europe’s Target 2. It works after all. Well, it does what it is supposed to, right? Taking the trouble to sort that mess out would only lead to trouble, so leave well alone. In other words “if it ain’t broke, don’t fix it” – which is the worst business advice on the planet.

  4. Pingback: John Ward – The Wages Of QE Are Dividends, But Bernanke Is Up For More Of It – 23 July 2012 | Lucas 2012 Infos

  5. ‘Wait for the first eurobank collapse and sovereign default.’
    We are waiting, and boy are we waiting….Once one goes, perhaps it will bring down the whole rotten system.

    • KFC

      are you really sure you want a collapse? It will take longer to recover from than the sell-by dates on your stashed corned-beef.

      There are ways of thwarting rotten systems that do not necessarily destroy them. It takes patience and courage though.

      • @Gemma.
        The corruption of the whole system is so endemic that
        no tinkering at its edges will work.
        If we manage to get through the coming collapse without a
        totally repressive police state and war,y it will decades before
        we get a real recovery.
        That recovery will be very different from what we perceive it
        now.The standard of living vastly different,a shorter life span,
        but maybe a better quality of life.
        Nature will win,no matter what do to try and manipulate it.

      • Winston

        the sort of collapse I envisage would leave you wishing for a state, let alone a police. The corruption I see around me is way beyond the “endemic”. It is total, and the problem is that most people accept the situation – wanting secure jobs, homes and cars, pensions even. They are the last ones who will buck the system, for they live by it. Judging by the comments on this site, that includes 95% of the population.

        On the other hand, were such people to really start thinking about the reality of the situation that they themselves find themselves in – they could change things in their immediate circumstances. Standing up for their rights for one thing, or telling their boss to stuff off when they are told to drive a lorry that is overladen. Sure, it is petty stuff, but it is a start. If you do not start somewhere, where will it stop?

        The governments have allowed things to carry on unabated for too long. They are part of the problem, not part of the solution. Iceland’s peaceful political revolution was based on a small and secure community – and Iceland’s population is the size of Utrecht or Bristol.

        As to nature winning, I have serious fears about various elements of human activity which would ensure some sort of desertification. That helps nobody. It does not help Gaia either.

        The solution lies in JW’s mutualization, but on a country (Europe)-wide scale. It is time that everyone took responsibility for their actions, each and every action.

  6. What I love about JW is the massive contradictions at the heart of his thinking.

    When it is the UK and US he is against money creation

    When it is in Greece he demands that debt be written off in order to conteract recession.

    What he doesn’t realise, because he isn’t knowledgeable in such matters, is that if you write off debt the debt no longer circulates in the system and you end up with a massive “balance sheet” recession. This is why the EZ is in big trouble right now – the debt is either being written of or paid off and then there is nothing to replace it, because the EZ has banned money printing. Debt is being paid off or written off in the UK too, but the BofE is replacing the collapsing quantity of debt with injections of freshly printed money at the same time. Consequently inflation is fairly low and we don’t see the huge contractions in the economy that the Greeks are seeing.

    JW doesn’t understand all this, and apparently prefers to pontificate on economic matters without referring to any schoolboy text that would explain about money supply and “broad money” and why allowing the monetary base to contract always results in a recession.

    • @Just Saying
      I think he understands at a visceral level but does not
      understand the mechanics.Hence his favour of gold.
      Fiat currently, is a store of debt.
      Money is supposed to be a store of value.
      Only a truly psychopathic mind could have come up with a system
      like the current. one.Doomed to fail from inception.
      Like all things though,its timing .

  7. I’m not a conspiracy theorist, but it does seem to me, that governments of all hues these days only have eyes for big corporations. They fear the independence of SMEs, and want to crush them, whether unwittingly or on purpose, who can tell.
    There are such things as ISO 9001, ISO 14001, ISO 6001, BIM. All hopelessly useless standards, demanded by government and their sycophants, which can only be achieved if you have a huge turnover and a huge no. of staff to dilute the costs of accreditation. Most of them deal with generating bucket-loads of paperwork, and audit trails, and risk assessments, and superfluous and perpetually out-of-data data, and carbon-content, and lifetime cost, and multi-layered management, and demand third-party consultancy by the yard.

    Only big is beautiful need apply.
    If government can suffocate the real private sector, and herd everyone into working for the corporate giants, then they perhaps can control wages, taxes, inflation, pensions, and move all cash into electronic, accountable ‘money’,

    Big business can be a special friend to Government, after, they are on the same side; they can help ‘simplify’ the law, and can also help support ex-government. BigBiz can raise their profits, and off-shore what they want, having privileged status.

    I don’t understand why this has to be, but it certainly seems part of a specific and conscious plan, even though all these monsters are useless, inefficient, greedy, and will doom us to a third-world future.

    I see only more bad times ahead.

  8. Pingback: At the End of the Day | A diary of deception and distortion

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