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Friday, September 2, 2011

GE Receives $100B In State Subsidies Per Year

This is very interesting. GE has $471B in debt on its books. (I'm looking at "Total Debt".)

You might say "So what?" Suppose that the average interest rate on that debt is 5%/year, and true inflation is 30%+/year. In that case, GE is receiving a State subsidy of $100B+ per year.

GE borrows at artificially low real interest rates of negative 20% or less. They use that money to build factories or buyout smaller competitors. When you can borrow at -20%, even the stupidest investment will be profitable.

This wealth doesn't go to shareholders. It goes to the insiders who control GE. GE shareholders still get returns that underperform true inflation.

Notice that with a $100B State interest subsidy, GE only has profits of $75B. If GE couldn't borrow at negative interest rates, GE would be *LOSING* $25B per year!

That was very shocking. GE has nearly $500B of debt on its books. They are paying a real interest rate of -20% or even less, because interest payments are less than true inflation. Enter your favorite corporation into that page, and see how big of a State debt subsidy they receive per year. (Other examples: Goldman Sachs (GS): $485B debt, Citigroup (C): $688B debt, Bank of America (BAC): $771B. With negative interest rates, that's a huge State subsidy per year.)

That was very offensive. GE receives an indirect State subsidy of $100B+ per year. They borrow at artifically low interest rates and pay it back with inflated dollars. All they have to do to profit is borrow cheaply, buy tangible assets, and wait for inflation. It's pure corruption capitalism.

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