Why are corporate margins continuing to widen even as demand sinks.

Widening margins in the face of stagnant demand signify several things:

1. Increasing productivity due to improved automation and practices - which is definitely going on
2. Decreasing competition due to industry consolidation taking players out of the market - this could be happening in certain markets, consolidation could also be driving scale economics
3. Decreasing competition due to new entrants not entering the market - this is definitely true, new business creation is at a very low ebb
4. A lack of innovation which leads to less competition and therefore fatter margins - I'm not sure about this one
5. A lack of innovation/investment which leads to lower costs, both expense and depreciation - I don't think this is true
6. Lower financing costs - with ZIRP this is definitely true

Overall I think part of what is going on is the continuing fruits of the information revolution exploding consumption in things like bandwidth combined with lower innovation and starts driven by pessimism about the future governance of the nation and an increase in consolidation and oligopoly driven by the Federal Government's preference for Corporatist economic policy.

It's a witches brew of bad portents for the future.  And it stinks.