Some investors have used the Kalecki profits equation to break corporate profits into its fundamental macroeconomic elements, specifically:
Profits = Investment – Household Savings – Government Savings – Foreign Savings + Dividends
From this equation, investors can see that corporate profits have expanded to such a large share of GDP due to large government deficits. Therefore, if the government implemented a deficit reduction plan, corporate profits could suffer.Read it at PIMCO | Equity Focus
by Neel Kashari
(h/t Scott Fullwiler via Twitter)
Scott tweets: "PIMCO does the Kalecki profits equation, precursor to Godley sector balances."