Are times changing?


Dear Mr. Berko: Some newsletters are becoming alarmingly negative on the economy and the stock market. What is your opinion here?
— TC, Wilmington, N.C.

Dear TC: I’m concerned but carefully positive until June 2017. The economies of the European Union, Asia, the Middle East and Latin America have lost their zip-a-dee-doo-dah. Worldwide growth has slowed to a crawl, and some of those who claim wisdom suggest it will crawl for years to come. The sluggishness has been led by China and the United States, which together produce about 70 percent of the world’s goods and services. China, with an $11.4 trillion gross domestic product, runs the world’s second-largest economy. And the U.S., with our $18 trillion GDP, has an economy that is larger than the combined GDPs of Canada, Spain, South Korea, Australia, Russia, Mexico, Japan, Germany, the United Kingdom and France and feels as if it’s running out of steam. The slowdown seems to be accelerating. China has sharply cut imports of copper, nickel, aluminum and other commodities. Now suddenly the world has an abundance of copper, nickel, etc. This oversupply has trashed commodity prices, attached anchors to corporate revenues, put a lid on profits, stifled wage growth and suppressed employment. We seem to be entering an era of stagflation — with low interest rates, low wages and low growth. I’m reminded of a Mary Hopkin song: “Those were the days, my friend. We thought they’d never end. We’d sing and dance forever and a day.” That was the American dream.

Procter & Gamble, American Express, FedEx, Morgan Stanley, Chipotle, Goldman Sachs, Nestle, Caterpillar, IBM, Wal-Mart, General Electric, DuPont, Kraft and other big names are reporting lower revenues, lower earnings or both. For the third consecutive quarter, a growing number of Standard & Poor’s 500 companies are reporting lower revenues or lower earnings.

Now most pension plans are caught in this mess, especially union plans rife with benefits that would warm the heart of a cynic. Pensions are being culled, cut and frozen to maintain solvency. Thousands of UPS employees will have their retirement checks chopped by 50 percent. The Teamsters’ Central States Pension Fund is shagged and lacks the funds to pay promised benefits to 400,000 participants. Chicago, Detroit and San Jose are freezing pension benefits. Police and firefighters in Jacksonville, Florida, will have their retirement benefits reduced, and other Jacksonville employees are certain to be next. And the union-designed plans of millions of employees in the private sector — those at IBM, U.S. Steel, The Washington Post, Boeing, American International and Lockheed Martin, to name a few — are changing benefits. Also, union plans in West Virginia, New Jersey, Illinois, Massachusetts, Pennsylvania, Connecticut and Kentucky are in big-league trouble and hugely underfunded. This creeping reduction in retirement benefits is adding a new layer of financial stress to America’s middle class, which has been struggling with flat wages, slow economic growth and record personal debt. Revenues and profits have peaked for the industrialized world, and it may take several generations for the world to adjust.

During the 1970s, American multinationals boosted profits by expanding overseas, generating 35 percent of our long-term growth. But emerging economies have ended a 15-year boom cycle. So the banking and finance industries have stopped expanding worldwide. General Electric Credit Union, General Motors Financial, Goldman Sachs et al. financed everything from 747s to raisin farms until 2007, when the financial crisis forced regulatory clampdowns on those “shadow banks.” Between 2007 and 2014, big corporations held wages down to maintain profit growth. This year, the new temporary fix is the “share buyback,” with corporations spending over $750 billion annually to boost earnings. Still, that’s like washing your feet with your socks on. Pshaw!

The remaining option is to forget high-octane growth. Embrace the slowdown; live with lower growth; and accept the fact that low interest rates and lower profits are the new normal. Most of the middle class has been hoodwinked by the Obama administration, and a recovery will be tedious. Warren Buffett believes that the S&P 500 index trades about 30 percent over its 10-year average and that future market gains will be glum. Other observers believe we will enter another recession by mid-2017.


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at
© 2015


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