I've never been very interested in business news, always had difficulty remembering the difference between puts and calls, much less the definition of a credit-default swap. I did have a strong sense that high finance had wandered away from investing in things — in actual commodities, in new products and services — and had lurched toward creating paper profits…in ways too complicated to explain. In the past year or so, however, this lack of knowledge has become a severe professional limitation — given the financial wreckage that surrounds us — and so I decided to rectify it, to the extent possible. When I heard that John Lanchester, an excellent novelist, had written a book about the financial crisis, I pounced. And it was very much worth it. I recommend the book strongly for those, like me, who are financial nitwits. I now, finally, understand what a credit-default swap is … And it seems to me — this is no great insight — that a fundamental change has to take place in the culture of Wall Street, an end to casino-game financial ploys and a return to what capitalists are supposed to do: investing in products that will help to build our economy. There are two ways to insure that this will happen: through regulation and taxation. – Joe Klien, Time Magazine
Dominant Social Theme: Let's get ‘em, boys!
Free-Market Analysis: The Internet, in our opinion, has been a big impediment to the plans of the power elite to drive global hegemony forward based on the latest financial crisis. It has taken a long time to organize an international response and there is no certainty that the over-arching regulatory makeover will take place, or certainly not at the aggressive level that may have been wished for.
The ‘Net has at least partially sabotaged these plans by rendering the latest financial crisis more transparent than previous ones. It is harder these days to establish the idea that private enterprise is bad and more government solutions are needed to save private industry and finance from itself. Not only this, but as people read about the issues online, it occurs to them that government is already intricately involved in finance and banking – and thus any further regulation only increases the incestuous relationship between so-called private and public entities. The West's entire economic system is, in fact, one of mercantilism. The most powerful private players endlessly pull public levers behind the scenes for their own profit and aggrandizement.
Just as the global game is moving slowly, so the American response is sputtering. Barack Obama's rhetoric has certainly been fiery enough – within the ambit of his professional demeanor – but the appetite for Congressional realignment of American finance seems more rote than inspired. The idea that Barney Frank or Chris Dodd – two men as driven by political corruption in Congress as any – should oversee new Wall Street regs is likely a turn-off for many Americans. Why? Because thanks to the Internet too much is known about the inter-relationship between Wall Street and Congress and how much Congressional culpability exists when it comes to ongoing ruin of America's entrepreneurial culture.
Yet like all dominant social themes, this one is not about to die. And so comes Time Magazine's Klein to try to reintroduce the promotion that never goes out of style – that Wall Street is infinitely corrupt and that only political oversight and additional regulation can protect individual investors from the machinations of evil bankers. And yet … as we have said, 'Net-based media seems to have reduced the inevitability of these conclusions. People may finally be willing to cry "a pox on both your houses."
The phony delineation between public and private players is increasingly exposed for the canard it is, in our opinion. What exactly has 100 years of regulation done after all? The SEC, the CFTC and a virtual blizzard of other government agencies, all with acronyms, all equally incompetent as they must be, have not seemingly made a bit of difference. The middle class is on its way to ruin, the rich are richer, and it is hard to imagine that more regulatory change will provide a panacea.
The idea is to retool the regulatory structure, but how can one retool corrupt bureaucracies endlessly subject to regulatory capture of the powerful industries they are supposed to regulate? The only possible effect of additional regulation will be to raise barriers to entry (benefiting Wall Street) and to slightly comfort anguished investors who have lost so much in the past two years. In fact, it will be both false comfort and thin gruel, as it must be. Free-market orthodoxy (marginal utility, etc.) holds that is impossible to "regulate" industry. Every regulation distorts the market in some way. Each law is a further price fix, making a marketplace less efficient and creating a shortage, a queue or both.
In fact, the idea that regulation helps protect the little guy is fairly absurd on its face, as well. How is it possible that a legislative process that is lubricated by vast sums of institutional money will at some point decide to ignore this funding stream and "do the right thing" for the average joe – not that regulation (especially in the current environment) is ever in any sense the right thing anyway.
Klein, armored in implacable ignorance, has decided that Barney Frank et al. are perfectly placed to put into law the regulatory and tax policies that will rein in a corrupt Wall Street. Well who does Klein think pays the bills in Washington? The idea that something significant will be done about Wall Street corruption – which is mostly an intense concentration of order flow – is fairly risible. The Congress is the least apt body to do something of significance.
In fact, every regulation likely only concentrates order flow even more, enabling Wall Street to shoulder aside even more competitors. It is the small firms and entrepreneurs that cannot keep up with the blizzard of regulatory mumbo jumbo emanating from Washington DC. And it is the small firms and the entrepreneurs that inevitably become the targets of the regulators as it is infinitely easier to enforce regs on smaller players.
Time magazine is a mainstream mouthpiece of the power elite. Back in the mid-20th century its writers supposedly travelled abroad with CIA agents, furnishing the government cover and providing "spin" for whatever intelligence adventures the US government wished to indulge in. The dominant social theme that "Wall Street is bad and government is good" is just one more promotion to be trotted out to confuse the masses. In fact, the power elite runs both Wall Street and main-street and the idea that one entity can somehow fix the other is a pipe-dream.
The Western model is now fiercely mercantilist – and no one can tell where the public good (whatever that is) ends and private interests begin. One solution would be to reduce government bureaucracy to such a point that it can no longer be manipulated by the power elite on behalf of "the people" that they care not a wit about. Another would be to shut down central banking and a third would be to step back and let a private gold and silver standard take root and provide real security and honest value to those in the West whose lives are cyclically shattered by fiat money instability.