Capitalism Is Broken If Record Profit Margins Don’t Revert
Commentary
According to British investor and co-founder of the Boston-based asset management firm GMO, Jeremy Grantham, “Profit margins are probably the most mean-reverting series in finance. And if profit margins do not mean-revert, then something has gone badly wrong with capitalism.”
While there are certainly many complaints that capitalism is “broken,” such is not the case. Yes, there are problems with economic inequalities, the majority of which can be directly traced to monetary and fiscal policies and a rise in corporatism. However, that is a discussion for another article.
In the economy today, capitalism is alive and well. The reason we know this is due to both the surge in inflation and corporate profitability since 2020. If capitalism were broken, as the economy was flooded with $5 trillion in fiscal stimulus, inflation would not have resulted. This was a point previously discussed in “Corporations Are Causing Inflation.”…