Wall Street: A modest proposal

posted at 6:45 pm on April 2, 2011 by Jazz Shaw

In a brief era when the entire world seems to have reform on its mind, one portion of America’s open market plumbing has gone sadly overlooked. Even as we discuss the emergence of nascent democracies on the Arab Street and stripping down the corrosive costs of public sector unions at home, there remains one canker on the stiff upper lip of our free market republic which still awaits a salve. I speak, of course, of Wall Street and the public trading of so-called “stocks” in corporations around the globe.

Problems with Wall Street have been rampant for some time, but they were brought to light yet again this week when a friend of Warren Buffet’s was accused of fleecing the unwashed masses through the practice of insider trading. This particularly odious form of corruption has been rampant in the market since its inception, but there has never been a viable solution offered which might curb it until after the fact. It’s akin to assigning a pack of gray wolves as park rangers in charge of monitoring the herds of elk based on their solemn promise that they would never use the herd data they collect to single out and attack the oldest or weakest of the stags.

But insider trading is hardly the only problem inherent in the system. In fact the entire concept of “public trading” of shares in corporations has proven to be nothing but a recipe for disaster. Do any of us honestly believe that the “value” assigned to a company’s stock at any given moment bears any relationship to the true worth of the corporation? When the markets crashed in 2008, taking the biggest, bluest chips down the drain with them, were we to believe that the true total value of General Electric – with all of its buildings, equipment, patents and investments – had suddenly plunged by one third overnight?

Perhaps that was a poor example. Some of us might take GE’s failure to owe any federal taxes as an indication that they have no measurable net worth. But I digress.

The basic flaw in this system is that the public trading of shares absent any rational link to the company’s value has turned Wall St. into little more than a rigged Atlantic City casino with a patina of expensive business suits covering up the spilled drinks and cigarette burns. The time has come for change.

Most of you who, by definition, are a bit less swift than the leaders of the pack, are doubtless having one of those forehead slapping, “I could have had a V-8″ moments right about now. But you are doubtless equally perplexed as to what can be done to right this unimaginable wrong. “What can we, as private citizens, do in the face of such an entrenched system?” I hear you saying. “We’re like a massive herd of millions of corrupt piggies, gorging at the trench of illicit gains, mired in a system which is too deeply embedded in the American economy to reform!

Not so. A solution lies before us if only we have the collective will and fortitude to reach out and grasp it.

Step One: We shall make it illegal to trade shares in any company between individual investors, firms or any other financial entity. Any company wishing to publicly issue shares in their firms may do so based on an audited accounting of the true worth of the corporation. Any individual or group may purchase them, providing investment capital to the company. If the company prospers and their true value rises, the value of the stock will rise and everyone profits. If the firm does poorly, then it was a poor investment and everyone bears the weight of the loss. Investors may only sell the shares back to the issuing firm.

Step Two: Since the first step does nothing to address the corrupt inequities of past practices, redress must be made. In keeping with the principles of social justice and equality, the government shall seize all of the massive profits and bonuses paid to all of the Wall Street investment house executives and traders for the past 37 years. Not only will this settle the score in terms of fairness, but the resulting haul should pay down roughly 12.7% of the national debt. Given the concern we all share for the woeful state of the nation’s purse, this idea will prove wildly popular. It is, in the words of many less literate political pundits, a “win-win.”

Now, thoughtful observes will doubtless notice the glaring problem arising from Step Two above. What of these Wall Street executives who are suddenly faced with a bill amounting to tens if not hundreds of millions of dollars? There is more than a passing chance that they’ve already blown most of that cash on yachts, caviar, mansions and well heeled prostitutes. Others – even if they can pay off the tab – would be left without jobs… a tragedy none of us wish to face. What of them?

Not to worry. Having forseen these concerns I have already prepared…

Step Three: Wherein the federal government shall institute a time limited, scope limited period of indentured servitude where the former stock traders and investment bankers will serve as employees of the public, typing up stock certificates and doing the bean counting, investigative work required to determine the correct holdings value of the companies seeking to issue shares. Further, the towering offices of the brokers and investment firms shall be immediately converted to affordable, rent-controlled apartments where this new army of workers will be able to serve out fairly assigned terms of indenture with warm, clean living quarters and nutritious meals.

This plan, as I am sure you will all agree, will not only eliminate a vastly flawed and corrupt system of fiscal impropriety, but address long term issues of social and economic justice while, in the same breath, gaining great ground in returning America to a course of fiscal stability. Let us all pledge to forward this plan to our elected representatives at once and have it crafted into appropriate legislation.

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the true worth of the corporation

limited period of indentured servitude where the former stock traders and investment bankers will serve as employees of the public, typing up stock certificates and doing the bean counting, investigative work required to determine the correct holdings value of the companies

I thought April 1 was yesterday.

AshleyTKing on April 2, 2011 at 6:53 PM

Where’s the “April Fools”? I don’t see it anywhere.

kingsjester on April 2, 2011 at 7:03 PM

I thought April 1 was yesterday.

AshleyTKing on April 2, 2011 at 6:53 PM

It was in the Greenroom yesterday. But I suspect some lefties will nod in approval.

rbj on April 2, 2011 at 7:07 PM

If this isn’t a delayed April 1 post, I suggest the denizens of the Groan Room be sent back to the minors.

MrScribbler on April 2, 2011 at 7:08 PM

MrScribbler on April 2, 2011 at 7:08 PM

In fact, I suggest it anyway. Jazz Shaw often misses the mark and gets wrapped up in the trite and uber-obvious even when he’s not trying to be *cough* “funny.”

MrScribbler on April 2, 2011 at 7:10 PM

Given that greed and corruption live in the human heart, there is no perfect solution. But we have rules, and when the rules are broken the cheater needs to be punished.

Slowburn on April 2, 2011 at 7:18 PM

The issue is that it does not address government corruption. Government corruption is an infinitely more dangerous issue. I’ve lived a lot of places in Asia and America. The problem is that people are human and tend to take personal advantage of available opportunities. The only way to eliminate corruption is to eliminate humans.

Linh_My on April 2, 2011 at 7:20 PM

Linh_My on April 2, 2011 at 7:20 PM

Summary executions for those convicted of corruption?

I wouldn’t have a problem with that.

BuckeyeSam on April 2, 2011 at 7:23 PM

Speaking of Wall street,and where the Stimulus Bailout Cash
went,screwing over,the American Taxpayer,Obama,has engineer
ed,the Crime of the Century!!
================================

Fed Names Banks That Drew Loans During Crisis
Supreme Court Rejects Banks’ Plea To Keep Information Secret
Updated: 6:06 pm EDT March 31, 2011
************************************

WASHINGTON — For the first time in its 98-year history, the Federal Reserve on Thursday identified banks that borrowed from its oldest lending program.

The Fed was compelled to name the banks that drew emergency loans during the financial crisis after the Supreme Court rejected a bid by major banks to keep that information secret. It’s the latest sign of how the Fed is becoming more transparent – either by choice or by force.

The central bank lent up to $110 billion through its emergency “discount window” at the height of the crisis. After Lehman Brothers collapsed in September 2008, banks turned to the Fed as a lender of last resort because their credit had frozen up. The Fed argued then that naming those banks could have stirred a panic, leading to a run on those banks and defeating the program’s purpose.

But foreign banks also relied heavily on the emergency lending program. On one day in late October,

************************************************************
Dexia, a Belgian-based European bank, and Depfa, a German subsidiary headquartered in Dublin, each drew about $25 billion in overnight loans.
************************************************************

That represented about half of the money that was borrowed by 44 banks that day.

The documents also show that the Arab Banking Corporation took out loans from the discount window during the financial crisis.

************************************************************
The central bank of Libya owns a large stake in that bank, according to the bank’s web site.
************************************************************

Most of the Fed’s crisis-era lending – more than $3 trillion – came through those other programs.

************************************************************
Fed documents showed it gave trillions in emergency aid to U.S. and foreign banks
************************************************************

as well as other companies. The disclosures were required under the financial overhaul law enacted last year.
(More…..)

http://www.wpxi.com/money/27384178/detail.html

canopfor on April 2, 2011 at 7:25 PM

FYI if anybody cares, Congress has exempted itself from insider trading laws.

redfoxbluestate on April 2, 2011 at 7:55 PM

for those interested, here’s the wiki entry on the original

http://en.wikipedia.org/wiki/A_Modest_Proposal

r keller on April 2, 2011 at 8:34 PM

Do any of us honestly believe that the “value” assigned to a company’s stock at any given moment bears any relationship to the true worth of the corporation?

Only if you are an idiot. That’s why it was bullshit to have “corporations too big to fail”. They should have let them fail. At least the idiots at the top would have gotten fired and would not now be collecting those 7 figure bonuses.

Was PanAm too big to fail? TWA? American Motors? They all went bankrupt and their assets sold off. The world did not come to an end.

GarandFan on April 2, 2011 at 8:40 PM

The stock market used to be an investment vehicle. Not as efficient as hoped or as touted, but eventually a tense, piecemeal equilibrium underlay the whole shooting match. With the occasional (but never quite predictable) forays into “irrational exuberance”; whether up or down.

The biggest problem today stems from automated trading. The market is now little better than a database for trend analysis by sophisticated data sniffers. When you have millions upon millions of shares to play with, a quarter point is a big deal, and surely pays your salary today. So the algorithms churn and churn, and grab when the stars data are properly aligned. Bingo! You’ve earned your princely commission today.

These movement take whole market sectors with them, though. So I, as a tiny little 100-share guy, can no longer look to the market as an investment opportunity, because what is going on in the market is NOT investment; it’s statistics, purely and simply. The company may be a wonderfully run entity, with solid performance and steady management, but that all means nothing if some institutional investment can get the proper gain on a massive trade. And my tiny little stock holding goes down the drain with the share price collapse in the face of this programmed profit taking.

The stock market is no longer an investment institution. I cannot even assess risk properly, because algorithms are not investors. I can research the corporate financial statements all I please – but they mean nothing. So don’t talk about “investing” in the stock market. It’s gone.

ss396 on April 2, 2011 at 8:44 PM

This has GOT to be an April Fools column…

…either that or Jazz Shaw has lost his mind and needs a remedial course in free-market economics.

There are abuses in the market, but allowing investors to set the value of the company’s shares is NOT ONE OF THEM!!!

landlines on April 2, 2011 at 9:02 PM

Someone got into the liquor cabinet and published this a day late…

phreshone on April 2, 2011 at 9:07 PM

For God’s sake, don’t give the government any ideas.

tbrosz on April 2, 2011 at 10:08 PM

The stock market is no longer an investment institution. I cannot even assess risk properly, because algorithms are not investors. I can research the corporate financial statements all I please – but they mean nothing. So don’t talk about “investing” in the stock market. It’s gone.

Sigh. This is just wrong. While I myself have concerns about HFT (High frequency trading) it isn’t clearly evident that it has a deleterious effect on pricing. If anything it makes it more efficient. That being said, I think HFT can at times increase volatility in a significant manner, frustrating investors (but not necessarily traders). While it’s still being debated whether or not HFT increases volatility I wouldn’t mind seeing a tax on transactions that are entered into and exited within minutes. A half penny a share would do the trick, HFT folks would have to devote their talents elsewhere.

While the effects of HFT can have impacts on share-prices in the near term, it has no effect on long-term pricing. What drives values over the long-term are the ever changing present value expectations of cash flows to be received from a particular investment in the future. The fact that one states investing in the stock market is “gone” probably means that now is an even better time to invest. Take a look at 10-15 and 20 year total returns of some solid bluechips and I think you’ll be surprised.

adurb44 on April 2, 2011 at 11:38 PM

Back these steps up with death squads and you’ve got something.

Mason on April 2, 2011 at 11:51 PM

Swift of you Jazz.. Very Swift. Jonathan Swift almost.

yenober on April 2, 2011 at 11:52 PM

…and this article my fellow conservatives is the secret to a Republican sweep.

Champion reforms with an emphasis on severe, hard time punishment for the CEO’s and the end of esoteric instruments of greed that have raped and pillaged the working classes that have resulted in a massive disparity of wealth….and we win.

…and get over your “free market”, Ayn Rand fantasies about regulation…our economy is a crony capitalistic sham.

Of course the regulators need to be smashed and rebuilt from the bottom up as well.

rickyricardo on April 3, 2011 at 12:31 AM

This has GOT to be an April Fools column…

…either that or Jazz Shaw has lost his mind and needs a remedial course in free-market economics.

We live in a free market economy? lol.

The champions of the “free market” are the ones who were forced to take over the banks……see Greenspan, credit default swaps, Paulson etc….

rickyricardo on April 3, 2011 at 12:34 AM

ricky, the free market is not a fantasy. Caving to populist envy of the rich, now that is a plan!

AshleyTKing on April 3, 2011 at 12:47 AM

If Capitalism is good to you, you don’t complain. If it isn’t, you find someone to blame and still believe in it. It’s the carrot on a stick that some day you might get rich. Even if you never get there, you still believed you could your whole life. Madison Avenue and the other facets of modern Capitalism depend upon that. Even if you fail, you still helped produce more wealth for your suppliers and creditors while you were solvent.

And then you may try again.

But the Commies have a point about the few accumulating the majority of the wealth…the issue is whether that’s bad or not.

You simply have to accumulate capital in order run any business and certainly to expand it. You have to have money to make money.

But is there a problem when CEOs eat up so much of the wealth of a company? Those salaries and bonuses are no longer available to put back into the company. If they’re worried about economic failure and/or heavy tax burdens they won’t allow it to “trickle down”…they’ll shelter it.

Getting rich is fine. However, it used to be that the Captains of Industry enjoyed seeing their companies expanding. They took pride in hiring workers and contributing to society. They built opulent homes and yet had more than enough for reinvesting in their companies and for philanthropy.

Many of those companies are gone-couldn’t survive once their idiot children took over, or bean counters and golden parachute packers moved in like vultures. To paraphrase General Lee in The Killer Angels, we are prepared to lose some of them, but we are never prepared to lose all of them. That would be disastrous and all that would be left over is Socialism.

Dr. ZhivBlago on April 3, 2011 at 12:57 AM

…and this article my fellow conservatives is the secret to a Republican sweep.

Champion reforms with an emphasis on severe, hard time punishment for the CEO’s and the end of esoteric instruments of greed that have raped and pillaged the working classes that have resulted in a massive disparity of wealth….and we win.

…and get over your “free market”, Ayn Rand fantasies about regulation…our economy is a crony capitalistic sham.

Of course the regulators need to be smashed and rebuilt from the bottom up as well.

rickyricardo on April 3, 2011 at 12:31 AM

See, I don’t know whether this comment is a joke or not. I’m confused. Aren’t our “free market” Ayn Rand fantasies what we want the economy to become, not the “crony capitalistic sham” that it is?

I say I’m confused because I really have heard liberals say such stupid things and mean it.

Sharke on April 3, 2011 at 1:07 AM

Even if you never get there, you still believed you could your whole life. Madison Avenue and the other facets of modern Capitalism depend upon that.

No, I don’t think it’s true that capitalism depends on deluding people into thinking that they’re going to become rich. If you dream but don’t act, it’s nobody’s fault but your own. One of the magical things about capitalism is that if you are determined and able, nothing can stop you succeeding. Of course, we don’t live in a truly capitalist country and the government has the power to stop you and quite often does.

But the Commies have a point about the few accumulating the majority of the wealth…the issue is whether that’s bad or not.

It’s not a bad thing, no. If an economy is to keep growing, the bulk of the total sum of wealth in existence at any one time must be invested in the task of creating new wealth. General prosperity arises from the interest earned on this investment, not the investment itself. It stands to reason that for the economy to grow, the investment is best off in the hands of those who have proven the ability to make it grow, with plenty of room for newcomers who have yet to prove themselves.

But is there a problem when CEOs eat up so much of the wealth of a company? Those salaries and bonuses are no longer available to put back into the company. If they’re worried about economic failure and/or heavy tax burdens they won’t allow it to “trickle down”…they’ll shelter it.

What is “the wealth of a company”? The total sum of it’s assets, or it’s earning potential, or it’s quarterly revenues, or what? If you look at it in terms of revenue, the salaries and bonuses of CEO’s are tiny in comparison. In fact the bulk of the revenue in, say, a typical manufacturing company, pays for the labor.

Getting rich is fine. However, it used to be that the Captains of Industry enjoyed seeing their companies expanding. They took pride in hiring workers and contributing to society. They built opulent homes and yet had more than enough for reinvesting in their companies and for philanthropy.

Such people still exist. The Koch brothers for instance.

Sharke on April 3, 2011 at 1:25 AM

I think I’ve seen this kind of brain-dead drivel before. Benito Mussolini circa 1921, if I recall. Nice try, though!

Lew on April 3, 2011 at 3:36 AM

Here’s my modest proposal: We roll back a century of case law treating corporations like individuals. We stop taxing and regulating them. In exchange, we let them know unequivocally that if they get out of line, we will criminally prosecute their senior officers. For example, if one of their employees is caught dumping industrial waste into the river, the CEO goes to a federal penitentiary for ten years. If a Congressman receives a complaint about dangerous working conditions, an investigation ensues and, if true, the Chief Operations Officer trades his million-dollar mansion for a 6X9 cell.

Kafir on April 3, 2011 at 7:39 AM

Yes, and children of the poor should be sold into a meat market at the age of one, thus combating overpopulation and unemployment, sparing families the expense of child-bearing while providing them with a little extra income, improving the culinary experience of the wealthy, and contributing to the overall economic well-being of the nation.

petefrt on April 3, 2011 at 8:13 AM

Kafir on April 3, 2011 at 7:39 AM

How is that different from regulating them?

Point is, businesses & corporations & what not will accumulate wealth: we want them to. But in that accumulation they also accumulate power. To a certain extent, that is fine, too, and under prudent management it is not a problem. The businesses need power in order to compete at the levels that their increased wealth & power afford them.

The problem is that they are still, ultimately, run by humans. Therefore, they will eventually abuse their power. That is called “human nature”. Back in the earlier days of our nation, when commerce was overwhelmingly local, people knew the companies and their products and made purchasing decisions based upon that knowledge. Nowadays, we don’t know our suppliers; we don’t know their products. We can only purchase and hope for the best.

In an unregulated economy, the unscrupulous will take grand advantage of that. (Even in a regulated economy they do!) As consumers we need some sort of countervailing power to constrain the abuses, and be a reliable quality guide. That’s where regulations come in. Left to themselves, the unregulated industries will go wilder and wilder and wilder. Eventually they will crash, but they will do a lot of damage, and a lot of folks will suffer greatly, until that happens. Government regulation should short-circuit that.

I said “should”. In fact, we know that that doesn’t happen either. Again, the regulatory agencies are run by humans, who are granted power, and will therefore ultimately abuse that power.

Which is why the Founders wrote the checks and balances into the Constitution.

ss396 on April 3, 2011 at 8:56 AM

Wherein the federal government shall institute a time limited, scope limited period of indentured servitude

You know, I wasn’t sure you were kidding until that line.
I always forget about April 1st.

Count to 10 on April 3, 2011 at 10:08 AM

Sharke on April 3, 2011 at 1:25 AM

Thank you for your comments/perspectives.

The bottom line is I don’t know, and I don’t think anyone really does. There are surely exceptions to this or that and also discussions on economics are predicated upon one’s belief in the system in a positive or a negative form. Mine has been negative for decades now.

If Capitalism is not sustainable then the economists and free enterprisers were wrong-not all the way through but rather in the long run. If us doubters and the Commies are wrong, then we’ll resume economic prosperity in the future. If so, when? Will we go up, or stay the same?

One of my major hang-ups is what is taken out of a company to pay executives and stockholders. Every penny taken out is simply not available to go back into the company-unless maybe they buy more stock in it. There’s a finite amount of money at any given time in any business unless you want to include possible credit lines, but that’s only promissory.

Look at Sam Walton. I don’t remember him making the headlines about receiving huge bonuses. He seems to have been about reinvesting the maximum amount of $ back into his company-and it expanded greatly, quickly and at an obviously sustainable rate…he didn’t allow Wal-Mart to overextend itself, make a few very rich and run the company into the ground. He was like the turn of the century Captains of Industry in that regard.

Another thing is that during the Golden Age of Capitalism of 100 years ago is that half of us still lived on farms-more of us were at least partially self-sufficient. In the Great Depression there were no complaints of high gas prices (that I’ve ever heard of) because we had the Texas oil fields and as a nation were more self-sufficient. People still had money to spend on movies and LPs…only a fraction were in bread lines. Public workers weren’t squeezed and at the center of political/ideological battles, and in fact government expanded under FDR (not that I agree with that).

But things are obviously different now. Capitalism survived and even prospered under those conditions, but can it thrive under these conditions?

It’s not a bad thing, no. If an economy is to keep growing, the bulk of the total sum of wealth in existence at any one time must be invested in the task of creating new wealth. General prosperity arises from the interest earned on this investment, not the investment itself.

But is that how ‘real’ wealth is created? To me that’s done through the exploitation of resources, that is, taking materials out of the ground and fashioning those materials into something tangible.

Interest-if you pay me interest, we’re only shuffling money around; we’re not creating wealth.

Now if both you and I both count that interest money on our books at the same time, for that time that money has been doubled…until it’s paid up or not after an agreed upon time interval.

Credit-Similar to above. If you authorize me $50,000 in credit that’s $50,000 on your books and on mine=$100,000 dollars in the system…until the credit is paid back or defaulted upon. In the meantime the monetary system has to be expanded to “cover” that money. Possible inflation. Probably need some kind of organization to oversee all this…like the Federal Reserve Board.

Dr. ZhivBlago on April 3, 2011 at 12:13 PM

The problem is that they are still, ultimately, run by humans. Therefore, they will eventually abuse their power.

As long as they are bound by the same laws as everyone else, i.e. they are barred from using physical force, are legally bound to the contracts they enter, cannot enslave anyone etc, then what form does this “abuse of power” take? Unless of course, you’re talking about the abuse of power which arises when companies form lucrative relationships with corrupt politicians who have the power to grant them unnatural favors over their competitors. Once again, capitalism gets the blame for the ills of statism when people are too lazy to distinguish between the two. The only “abuse of power” that we have to worry about is abuse of government power, since the state has a legal monopoly on the use of physical force. This one fact alone is a sufficient argument for small government.

Nowadays, we don’t know our suppliers; we don’t know their products. We can only purchase and hope for the best.

That’s not true in the slightest. We have access to more information than at any time in history. Word spreads fast. You are quite capable of researching an company and quite within your right to organize an economic boycott of any company you have a problem with. Of course, this aspect of free competition is distorted and made less effective by a government who can favor one company over another and make them more or less immune to the power of free consumer choice.

As consumers we need some sort of countervailing power to constrain the abuses, and be a reliable quality guide. That’s where regulations come in.

I simply do not understand what makes people more trustworthy of politicians and bureaucrats than private business owners. It’s as if none of the lessons of the last 2000 years have been learned. Politicians are just as corrupt as everybody else. In a free market, however, there are immediate consequences to that corruption. If you want standards and regulation, then a private regulatory body would be far more effective. Companies pay for its seal of approval, which gives them a competitive advantage over companies whose products don’t have that seal. The incentive for the inspection company to remain honest is far stronger than with bureaucrats. If a private organization is found to have accepted bribes or falsified inspections, their seal of approval is worthless in an instant. This is not the case with a government body that has a monopoly on regulation. There are no consequences. They get caught in acts of corruption and continue on as if nothing happened.

Left to themselves, the unregulated industries will go wilder and wilder and wilder. Eventually they will crash, but they will do a lot of damage, and a lot of folks will suffer greatly, until that happens.

I’m sorry but that’s just wild conjecture which fails to take into account the self regulation in a free market free of government corruption.

I said “should”. In fact, we know that that doesn’t happen either. Again, the regulatory agencies are run by humans, who are granted power, and will therefore ultimately abuse that power.

Which is why the Founders wrote the checks and balances into the Constitution.

Where are those “checks and balances” when NYC crane inspectors are taking bribes and falsifying reports? They didn’t stop the deaths of 9 people in two separate accidents a few years ago.

Sharke on April 3, 2011 at 12:19 PM

In an unregulated economy, the unscrupulous will take grand advantage of that. (Even in a regulated economy they do!) As consumers we need some sort of countervailing power to constrain the abuses, and be a reliable quality guide. That’s where regulations come in. Left to themselves, the unregulated industries will go wilder and wilder and wilder. Eventually they will crash, but they will do a lot of damage, and a lot of folks will suffer greatly, until that happens. Government regulation should short-circuit that.

ss396 on April 3, 2011 at 8:56 AM

But as these corporations thrive and we thrive, there’s no problem.

The trap is that we expect somebody out there to create wealth and give us jobs and opportunities to help them accumulate even more.

Will it always be that way? And if it isn’t? What then?

Also, if these businesses are controlled and restrained from prospering by government, how does that help? Can government officials distinguish between their own best interests, their ideologies and what is moral and immoral (what should be legal and what shouldn’t be)?

Dr. ZhivBlago on April 3, 2011 at 12:27 PM

While not up to historical standards, it was an interesting read. It kind of lost the humor for me when the first proposal was actually an interesting idea and might have some merit.

As for utilizing all of these bankers for some form of work, they may need kid skin gloves to protect their delicate hands.(see Mr. Swift for an explanation).

Fighton03 on April 3, 2011 at 1:22 PM

In an unregulated economyGovernment, the unscrupulous will take grand advantage of that. (Even in a regulated economyGovernment they do!) As consumers we need some sort of countervailing power to constrain the abuses, and be a reliable quality guide. That’s where regulationsthe constitution come in. Left to themselves, the unregulated industriespoliticians will go wilder and wilder and wilder. Eventually they will crash, but they will do a lot of damage, and a lot of folks will suffer greatly, until that happens. Government regulationPersonal Responsibility should short-circuit that.

ss396 on April 3, 2011 at 8:56 AM

There is no discipline like ‘SELF’ discipline, and no teacher like failure.

Fighton03 on April 3, 2011 at 1:31 PM

One of my major hang-ups is what is taken out of a company to pay executives and stockholders. Every penny taken out is simply not available to go back into the company-unless maybe they buy more stock in it.

Why is that bad? The whole point of making an investment is to take a return on it. You could say the same about every business. Every cent that I transfer from my business account and post to owner’s draw is a cent that I could have kept in the business. But I gotta live, and that money is the reason I’m in business in the first place. Remember, the #1 reason a business exists in the first place is to make money for individuals – not for economic growth, or to create jobs, or to redistribute wealth, or for it’s own sake.

Public workers weren’t squeezed and at the center of political/ideological battles, and in fact government expanded under FDR (not that I agree with that).

FDR has a lot to answer for. Government growth is never a good thing. Look where it’s got us today. The state has been responsible for every major economic crash in history and is responsible for the massive debt we find ourselves in today.

But things are obviously different now. Capitalism survived and even prospered under those conditions, but can it thrive under these conditions?

Capitalism didn’t thrive under the conditions of the Depression. It survived, in spite of it. It will survive today, despite the folly of government. That is it’s strength. Whether or not it thrives very much depends on whether or not government comes to its senses and takes a step back.

But is that how ‘real’ wealth is created? To me that’s done through the exploitation of resources, that is, taking materials out of the ground and fashioning those materials into something tangible.

Interest-if you pay me interest, we’re only shuffling money around; we’re not creating wealth.

Yes wealth is created by the exploitation of resources but primarily, by the application of the mind to everyday problems. Resources aren’t a finite pie – what is useless today may be a resource tomorrow, as oil became a resource with the birth of the combustion engine.

Interest IS the part that’s been created. So you’re not just shuffling existing wealth around. If you were sharing the seed corn (capital) out, then THAT would be shuffling it around.

Now if both you and I both count that interest money on our books at the same time, for that time that money has been doubled…until it’s paid up or not after an agreed upon time interval.

Credit-Similar to above. If you authorize me $50,000 in credit that’s $50,000 on your books and on mine=$100,000 dollars in the system…until the credit is paid back or defaulted upon. In the meantime the monetary system has to be expanded to “cover” that money. Possible inflation. Probably need some kind of organization to oversee all this…like the Federal Reserve Board.

Alternatively, we could return to the gold standard and make money real again.

Sharke on April 3, 2011 at 3:10 PM

Why is that bad? The whole point of making an investment is to take a return on it. You could say the same about every business. Every cent that I transfer from my business account and post to owner’s draw is a cent that I could have kept in the business. But I gotta live, and that money is the reason I’m in business in the first place. Remember, the #1 reason a business exists in the first place is to make money for individuals – not for economic growth, or to create jobs, or to redistribute wealth, or for it’s own sake

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The point is to make sure the business thrives and expands so that even more can be made. If the CEOs run it into the ground and parachute out, how are the stockholders (and the CEOs) going to make any more money out of that company?

FDR has a lot to answer for. Government growth is never a good thing. Look where it’s got us today. The state has been responsible for every major economic crash in history and is responsible for the massive debt we find ourselves in today.

That depends on what your view of the role of government is, especially in making it so that intra- and interstate commerce can thrive. As for the last bit, I guess that depends upon whose theory you adhere to. I believe those who say that the Great Depression was caused mostly by too many investors buying on margin rather than putting up the full amount up front for the stock. These current bank failures are occurring for a similar reason-loaning out money on margin based on their assets and being faced with multiple write-offs of loans that they can’t cover within an allowed percentage based on those real assets.

Yes wealth is created by the exploitation of resources but primarily, by the application of the mind to everyday problems. Resources aren’t a finite pie – what is useless today may be a resource tomorrow, as oil became a resource with the birth of the combustion engine.

I can’t eat or drive your mind, nor can your mind necessarily solve my economic needs, wants or problems. If that were so, we wouldn’t be having this discussion.

Good point about resources…but what if oil didn’t exist?

Alternatively, we could return to the gold standard and make money real again.

Ooooh, that’s a sticky one!

We wouldn’t have much of what we do have if it weren’t for the Federal Reserve notes, extended credit, double-entry bookeeping and so on…great things that have allowed for great things. But, is there a limit?

I don’t buy this idea that losses are ‘covered’ when the economy gets better. Every failure leads to a loss in the system, and these are constant and unrelenting. Maybe if more resources can be found and exploited, these losses can be minimized, and sort of made up for by advancing wealth, but this cannot occur forever.

It takes X amount of time and energy to manufacture a widget. If that widget is sold under what is needed to cover the manufacture of that item, that time and energy is lost and can never be recovered. The capital that represents that time and energy goes with it into a black hole. Whether that loss is a large percent or a small percent is immaterial (not to the company surely), but I’m seeing it all as additive and looking at the entire structure.

Overall, I get what you’re saying. I’m just looking at it from the point of view that resource-driven Capitalism is in trouble. I think we’re heading into a Socialist-Capitalist hybrid…the Corporate System.

Dr. ZhivBlago on April 3, 2011 at 4:36 PM

I thought you were serious Jazz until I saw “time-limited, scope limited” in Step Three. Very convincing. Good work.

BKennedy on April 3, 2011 at 5:03 PM