Wednesday, May 1, 2013

Economy: The Amazing Profit Machine

If we believe the media the U.S. economy is still in a deep mess. The headlines are lamenting about slow growth, high unemployment, large public debts and more. Many see the next recession just around the corner.

But the reality is much better than the media want us to believe. "First-quarter earnings for leading U.S. companies (those that are members of the S&P 500) currently stand at a average of $26.44, the highest ever for a single quarter, beating the prior record of $26.36 for the fourth quarter of 2012", reports CNBC (finance).

How can companies reach record profits in such a sluggish economic environment? It shows that companies are learning organisms. They are managed by humans who are getting better and better over time by continuously improving themselves and their companies. This is part of the evolution process described by Charles Darwin.

As a result, companies also are getting leaner and more efficient all the time - the survival of the fittest (the term was coined by Herbert Spencer wikipedia). The last recession especially forced them to squeeze out a lot of their costs, which now leads to strong productivity gains. Helpful is the technological progress: New developments in Internet, business software, robotics and more are used to reduce costs continuously.

Hence the rise of company profits will carry on and fuel the further advance of the global economy and more gains on the stock market.

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