Sunday, October 19, 2008

Burn Wall Street, Burn

Using a government bailout to boost the market is a lot like giving a junkie enough money to pay for another fix. It might fix the short term problem of him passing out on your couch, but it doesn't fix the long term problem created by his addiction. It just enables it.

Wall Street habitually creates its own problems by tying its fate and fortunes to bogus investments and whether it's dot com companies with no business plan or bad mortgages, the bubble sooner or later bursts. Greed builds the sand castle but plastered sand can't hold back the tide of economic reality. And like all forms of irresponsible behavior, it creates the justification for overreaching government regulation and intervention, in other words socialism. The last stock market crash created the virtual dictatorship of FDR which ended the Second American Republic (1865-1933. This one may well do the same for the reign of Obama that will bring an end to America altogether.

The real problem is the extent to which our economy and industries are centered around Wall Street. America's industries were once built up by men of initiative who had a vision and turned it into profit. Today America's industries are run by self-promoting CEO's whose job is to somehow create enough hopeful expectations for their company's next quarter to raise the stock and then get out with a golden parachute before the whole thing tumbles down on them.

That has meant outsourcing American industry and just about everything else to Asia in order to cut short term costs, despite the fact that this has wiped out entire industries in the United States. It has also meant outright fraud, pointless gargantuan mergers, companies senselessly rushing after trends they don't understand and pushing corporate socialism, another short term gain for a long term loss.

What Wall Street has done to American industry in a nutshell, is wiped out long term thinking and planning. CEO salaries have become ridiculously inflated because the CEO has become the superstar figure who provides credibility for the company's short term plans. The CEO meanwhile doesn't need to think about the future of the company or his industry 20 years from now. He likely doesn't even have an industry and if he lasts more than a few years before jumping on board as the CEO of a completely different company in a completely different industry, then he's already a marathon man.

Meanwhile corporations have eagerly formed entangling alliances with the Federal government to gain the financial benefits of corporate socialism, without actually caring about what government entanglement means in the long run. The real lesson of socialism is that you don't have to accept responsibility for your mistakes. Socialism is insurance against failure, individual failure and corporate failure, at the cost of freedom and income. It's no wonder that corporations have learned to play the same victim game that minorities have. "We're destitute, we're victims, give us money."

Despite the macho posturing of Wall Street brokers and analysts who like to pretend that they're playing a man's game, the stock market is part casino and part three card monte. It isn't honest industry, instead it's destroying honest industry. The old monopolies crushed private enterprise through sheer power, today's companies destroy it through their incompetence and fraud and complete the process by inviting in the government to clean up their failure.

Extended worldwide the global economy is an entangled mess of financial chicanery in which billions can go missing without anyone noticing, because the fortunes being moved around are themselves fictional. The modern way of economics has made money abstract and in doing so it has also made it unreal. People rack up credit card bills because instead of spending money they were passing around a plastic card. Banks dole out bad mortgages because in the end it's only numbers on a balance sheet that can be sold to someone else. Insurance companies invest in securities that are themselves composed of debt, because debt long ago became a commodity. Meanwhile operators in India put on their best American accents and call American households to collect their debts. The problem is circular and it isn't going away.

America can't be ruined if the stock market collapses. It can only be ruined if the stock market persists. America's real wealth is in land and free enterprise. The collapse of the economic house of cards that people mistake for our economy can cause chaos, but it can't take away America's real wealth. The vastness of the frontier combined with individual initiative and a lack of regulation is what made American enterprise great.

We have the land and the individual initiative exists too, though diminished by socialism's incursions. But the regulations from the government have squeezed free enterprise on on side while a stock market oriented business model has destroyed the traditional values of American business. The collapse of the entire structure might well be the best bet for a clear cutting that may allow traditional American free enterprise to emerge unrestricted again.


Anonymous said...

I have mixed feelings about this article.

On one hand every bubble is created and eventually pops thanks to greed. Yet, the system has also energized tremendous growth. The market was started as a way to gage future needs and temper the cost of doing business. It is also one source of finance for growth. So, it is not inherently evil nor is it absolutely good. The question is, would we better with a different system or is this the best that can be found? In spite of all its problems I really think it has served us well.

There is a story about how Joe Kennedy kept his wealth in 1929. Supposedly he heard his maids speaking about how they would make a fortune by leveraging in the market. He said to himself that if these simple folks are jumping in then it is time for him to get out.

Similar thoughts have been expressed by others.

So it is not the market but the fools that fund it, who are to blame.

Another point that needs to be made is that much of the subprime market was created by the Democrats. True, the Republicans did not stop it. But, then nobody wants to get saddled with the anger that the poor will have against those that demand good business policies. Yet, when it comes to blame, the money made/greed was set in motion by those who initiated the scheme.

Lemon said...

Wall Street should be allowed to die quietly in the back alley.

Keli Ata said...

I have mixed feelings on Wall Street but to hand over millions or billions to CEOs and CFOs for either gross incompetence or gross corruption is just plain wrong.

I don't know...this whole investing thing seems like a big gamble to me. I'll invest money and cross my fingers and hope I'll make a profit out of it. Too risky in my book.

Government getting involved in private business affairs? Not good. Government health care? not good either.

Anonymous said...

There is a saying that one should not throw the baby out with the bath water. Before suggesting that Wall Street should die, a business concept that has served us well, one needs to investigate the alternatives. A vacuum is worse. The alternative to capitalism is socialism. Is that what we want? We would be no better then many socialistic countries.

Capitalism carries many risks and sometimes things go bump in the night, but the overall benefits outweigh the "corrections."

As the market establishes a bottom one can make a lot of money as the market rises. Now may be a great time to start putting small sums back into the market. How often can one buy GE at these prices?

Sultan Knish said...

that's the point

wall street doesn't reward thrift or wise planning or good business practices, it rewards risk taking and image over substance

Lemon said...

Wall Street is bad. End of story.
It is an immoral way to make money.
Those who love money, however, like Wall Street because the love of money comes before anything else. They will tolerate evil if it puts a buck in their pocket.
You have pimps and madams, drug dealers and loan sharks for the same reason.

No one who has good values should be ambivalent about Wall Street. It is wrong on all levels.

It is wrong and sinful to gamble on your nations economy.

Anonymous said...

When someone invests in their own business, they may make it or lose it all. When someone puts money into someone elses business, they may make it or lose it all. Wall Street is a global way of risk taking. It can be abused and it can be the only way for some businesses to raise needed funds.

There is a lot to be angry, especially when things go bad (did anyone complain about greedy brokers when the market made new highs?). However, no one has offered a better alternative.

Give us a practical alternative.

Anonymous said...

Love this thought-Socialism is insurance against teh cost of freedom and income.
Money does not equal opportunity.

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