Government deficits are the biggest driver of elevated corporate margins

I think it goes without saying for those of you who have been using the sectoral balances approach, government deficits are what have been driving corporate profits in the U.S. to record levels. Most analysts and news outlets focus on the micro factors, using a bottoms-up approach. But, looking at it top down from a macro perspective, it is significant to realise tha government is driving the profit bus because this means austerity will kill margins.

Here's a typical bottoms up analysis via B...

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