Nothing shows how America’s reins are held than our out-of-control corporations, enriching their executives at the cost of the future of their businesses — and ours. Here’s another status report on this sad but fixable story. http://wolfstreet.com/2015/10/08/ho...e-america-with-stock-buybacks-while-we-sleep/
They're only doing what they've been incentivized to do by the federal reserve. Get the fed out of the business of managing the economy through unsound money and corps will invest in capex rather than stock buybacks.
The government recently repealed a law that specifically incentivized small businesses to make capex purchases by allowing accelerated depreciation on the newly purchased equipment. So many small business owners would take their profits and use it to buy capex equipment. This lowered their current tax burden and created more jobs and helped build up America's manufacturing base - something that has been decimated in the last 30 years. Now those business owners are taking those profits and doing different (less productive) things: like putting it in their brokerage accounts.
Do you know what Bill # that was ? I'd like to look-up and see which reps and senators said no to the law.
Laws to incentivize capex through accelerated depreciation are just another example of the gov't trying to 'manage' the economy. Just like the fed is doing with monetary policy. When they make those laws, what generally happens is it just robs the future of capex and brings it into the present. What's wrong with just letting the economy manage itself? We have no evidence at all the the economy performs better when the gov't controls it. None.
It's a simple case of people reacting to incentives. If you have the choice to finance a business by borrowing money below the rate of inflation or selling equity in the business, what would you choose?