Saturday, July 03, 2010

Return On Investment

Goldman Sachs executive/Obama economic policy advisor uses CDS payout to add to the indoor heated pool at his Hamptons spread.

I know The Krugster means well, and he is a Nobel laureate and all, but it's almost as if someone needs to break the news to him:

For the last few months, I and others have watched, with amazement and horror, the emergence of a consensus in policy circles in favor of immediate fiscal austerity. That is, somehow it has become conventional wisdom that now is the time to slash spending, despite the fact that the world’s major economies remain deeply depressed.

This conventional wisdom isn’t based on either evidence or careful analysis. Instead, it rests on what we might charitably call sheer speculation, and less charitably call figments of the policy elite’s imagination — specifically, on belief in what I’ve come to think of as the invisible bond vigilante and the confidence fairy.

Uh-huh, and the bond vigilante and the confidence fairy usually convene at that off-ramp from the Suck It Expressway to Go Fuck Yourself Boulevard, near the tent city. (See what I did there?)

I don't think Krugman really needs to be told that this all falls under the general rubric of "it's not a flaw, it's a feature", but sometimes you wonder. Any investor, whether it's someone like Warren Buffett who generally invests in tangible assets, or some bookmaking hedge-fund scumbag, cares only about getting a return. If they thought more profit could be generated by encouraging and laundering more stimulus pelf, they'd gladly sign on to it, so the fact that they're not interested is more troubling than even Krugman characterizes it.

One aspect of this is that institutional investors really do seem to have allowed themselves to dumb down considerably. This may be attributed to a variety of reasons: the lack of accountability and proliferation of politically purchased moral hazard; the preponderance of automated spreadsheet algorithms doing most of the day-to-day trading, rather than people investing in ideas and things; the indifference to the inevitable consequences (see reason #1).

What you have here is a very small cadre of highly privileged -- yet not necessarily competent or qualified -- people controlling an increasing share of the nation's aggregate wealth. Worse yet, since they know that the peons will bailout their careless fuckups, they have almost zero incentive to maintain even modest standards of intellectual or moral rigor in their profession.

So you have what you have -- a fat, bloated carapace of a nation being hollowed out by financial parasitism. I don't think anyone envisions or desires perfect economic equality; it is impossible and unenforceable. However, when your level of income disparity is behind such workers' paradises as Vietnam and Yemen, and is actually closer to Zimbabwe than to those two, you have a real problem. Take a look down the whole list; the US is basically neck-and-neck with banana republics and sub-Saharan despotates.

It seems that, between their pension fund shell games, their shameless greed, and their credit-default-swap shenanigans, they may have reached that magical equilibrium where they don't need the masses to perpetuate their scam. Therefore any "stimulus" or "infrastructure" spending is a waste for them; they would make more money taking put options on Paraguay's World Cup chances. I think Krugman suffers from the same problem Obama does -- the belief that if you make rational appeals to people's better angels, truth and reason eventually will out.

This would be true if we had an economic elite that cared about creating things, instead of merely owning shit. But once you get past the public philanthropy of the likes of Buffett and Bill Gates, whaddaya got? A sub-class of people whose vocation is the acquisition -- and, more importantly, valuation -- of phantom wealth, paper profits. Keep in mind what the mechanics of the "financial reform" bill have been about -- the ability to peddle worthless securities to credulous institutional investors (a huge mode of control in leveraging pension funds, and thus the working-class chumps who depend on them to, you know, survive); the ability to leverage bad bets at asset ratios of over 30:1; the ability to basically force the next two generations of taxpayers to negotiate at gunpoint, to pay for someone else's deliberate mal-fee-ance.

These things are not "mistakes" nor "accidents". These are all very easily foreseen consequences of decisions made with indifference, if not outright malice, aforethought. And now that their bad bets have been paid off for them, and the ROI is in Asia rather than Oceania and Europe, they couldn't possibly give less of a shit what happens to displaced workers and the foreclosed homeless.

This is a very important, fundamental point that seems to escape many commentators, who dance around the issue and wonder that the Masters of the Universe don't get the ramifications of what they're doing or proposing. I assure you, they get it all too well, they know precisely what they are doing, and what the results will be. Every time I see the Dow average go up, I automatically assume that it happened on the backs of the peons, that unemployment or foreclosures or family murder/suicides are experiencing an uptick. More often than not, that appears to be the case. Wall Street seems to routinely profit, exult even, in the misery of the masses.

The sooner people start disabusing themselves of the weird, wild notion that the top 10%, which controls 70% of the nation's wealth, has any sort of moral or practical stake in the bottom half's 2.5% piece of the pie -- beyond how to use government leverage to forcibly extract that -- the more clear the picture will be for them. In the meantime, the middle class, the most consistent element of political stability, is decimated, paving the way for the corporate robber barons and their idiot demagogue apologists.


Bob Hopeless said...

I used to argue with my right wing old man about these issues and the trend towards massive differentials between the haves and everybody else. My point being, you can't have a decently functioning society with these kinds of disparities. It just won't work. I honestly used to think that even the corporate class and mega rich would have an investment of some kind in a functioning society, just so they could continue to exploit it. But you're right and it is all too clear now--they care no more about the consequences to the "average" American than a spider does about the ongoing quality of life of the fly whose husk lies dangling from its web.

chrisanthemama said...

Eat the rich.