Fifty-six out of the hundred people interviewed in the financial district responded "I deserve more" when asked if their bonus was fair. The survey, conducted by Foster Kamer of Esquire Magazine, isn't really all that scientific. Kamer basically just went down to the financial district and walked up to people with a bunch of questionnaires. There's no telling how representative the results are. But, let's face it, the results sound about right. Only 2% admitted that they deserve less. – MSNBC
Dominant Social Theme: They work hard; they need to get paid.
Free-Market Analysis: In this article we will examine the reemergent issue of paying Wall Street types large bonuses (see article excerpt above) even though the larger economy in America (and the rest of the West) continues to suffer from "the Street's" financial excesses. We shall point out what the REAL problem is and also what may be an even bigger problem to the system-as-it-is. The bonus problem points out the struggles that the power elite will have in trying to keep the current system of manipulation going. It is breaking down because of the system's overall stress and because people now have doubts about its fundamental fairness and credibility.
In order to understand how the system actually works – and why even people who work in the financial industry could be confused about it – we need to go back in time. (We have done so in other articles, but those who recall the explanations should either skip the following or look upon it as a refresher course.)
The French invented modern equity trading more than 700 years ago as a way to fund significant private projects. The trading was done by auction. People bid on shares. Auction trading took place in America until after the Civil War. Once states could no longer secede, the power elite of the day began to centralize every kind of American enterprise, public and private. The New York Stock Exchange itself gobbled up dozens of small exchanges in New York on its way to becoming the dominant player.
One of the last stock exchanges the backers of the NYSE tried to purchase was made up of what was referred to as the "uptown boys." This stock exchange was a tremendous success because the uptown boys had figured out something called "continuous trading." That is, stocks traded whenever someone wanted to buy and sell, not just during a pre-scheduled auction. Because of continuous trading, none of the uptown boys wanted to travel downtown.
Eventually a deal was made. The uptown boys were granted lucrative individual stock franchises to merge with NYSE. The uptown boys with these franchises eventually became known as specialists. The franchises were lucrative because those who held them were made aware of the order flow and which way the stock was headed. This meant they could for the most part front-run the stocks with their own money. (Selling short if there was selling pressure and buying into the market if there was upward pressure.)
In order to make sure that these franchises were justifiable to the public, Wall Street came up with the idea that its specialists were in charge of "stabilizing" the market. That meant that those who had been granted the front-running franchises were now solemnly charged with the responsibility of making sure their stocks did not move too fast in either direction. After the great crash of 1920, the SEC and the NYSE enshrined this awesome responsibility in regulatory code. (Front-running turned into a solemn market duty.)
Ever since the end of the Civil War, American stock markets have been a particular kind of racket. That doesn't mean they didn't serve a capital-raising purpose, but they were primarily an exercise in self-enrichment (for those lucky enough to work on the floor of the exchange) because few knew how easily centralized order flow could be manipulated. In the 20th century, working at the NYSE was like working in a gold mine – without getting dirty or sweating too much.
Because the markets were perceived as honest, there was a cultural affinity for stock trading in the US that did not exist anywhere else in the world. Money poured into the NYSE (which had been purposefully built into the biggest stock market of them all to receive it). The Anglo-American power elite took advantage of this credulity to build a powerfully centralized system that institutionalized all sorts money-siphoning practices.
Central banking was the last piece of the puzzle when it came to the centralization of stock-trading that the power elite had created in America. The Federal Reserve was set up in 1913 along with the graduated income tax. Today, in hindsight, we can see how all three of these entities meshed together in a way that allowed the elite to drain a maximum amount of money out of the American economy, while gradually bankrupting the middle class. This process, albeit weakened, is ongoing today.
Like most things in life, the process is not complex. The Federal Reserve prints money-from-nothing and gradually that money flows into the stock market where it is "invested" in America's largest multinationals – which are likely owned (or at least controlled) behind-the-scenes by the Anglo-American banking elite. As stocks go up, Americans give in to temptation and "invest." The market travels higher still.
Since Austrian economics and explanations of the business cycle were repressed in the 20th century – and since the mainstream media cheered on stock trading 24-hours-a-day, people had no idea about the cyclicality of the economy or its purposeful manipulation by central banking minions. Thus investors resembled Bill Murray in Groundhog Day. Every once in a while they woke up to the same scenario – a stock market crash – and were always surprised at its advent. Of course, in the aftermath of a crash, investors lost money, houses, jobs and companies. Those with the real money – the elites, corporate or otherwise – were able to continually centralize power and wealth due to the cyclicality of central banking.
The powers-that-be made money when stocks were going up. They made money after crashes as well. The middle class, squeezed by inflation, stock trading losses and massive taxation, kept shrinking. The Federal Reserve kept printing money. The US mainstream media kept up non-stop cheering for "blue chips" no matter where the business cycle was. "Other" stocks might be considered risky. But investing in a blue chip company was like buying an heirloom!
Some "normal" people did get very rich in the stock market too. A certain kind of mathematically inclined person who did not have "trust" problems with authority could do very well simply by buying and holding through umpteen upturns and downturns, assuming he or she had the fortitude to stick it out and the wherewithal to do so. But most people didn't have a chance. They saw the losses and panicked. Or they lost their jobs in the downturn and had to sell stocks to survive.
Even today, had people held on to their stocks during 2008 and 2009, they might have been able to recoup some of their losses. This makes it doubly agonizing. But who could afford to hold? Real unemployment is near 30 percent in the US. Very few people could buy and hold through a major financial crisis – especially families that have kids. How can you can hold a portfolio that has lost 50 percent of its funds and may go still lower? The children need to eat. You sell. And then … Ben Bernanke begins to stimulate. He prints money – effectively taxing citizens through inflation – and bails out the big banks that would otherwise go under. Some of that money finds its way into the stock market. And the result …
Stocks Up 17% Since Announcement Of Fed's Plan … The stock market's 17% rise since Federal Reserve chairman Ben Bernanke announced his plans for a second round of quantitative easing in late August has sparked further speculation that the economy may be on its way to recovery. Bernanke's push to reinvigorate the economy through a massive, $600 billion series of government debt purchases has been met with mixed responses. Though the move (dubbed QE2, for quantitative easing) is meant to boost employment and lower interest rates, others fear the possibility that it will instead fuel inflation. As its doubled its pre-crisis balance sheet to more than $2.3 trillion, the Fed's low interest rates and debt-buying programs have done much to enrich corporate coffers. But the program's effect on the larger economy is less clear. – Huffington Post/ First Posted: 12-17-10 02:48 PM
Now we note in the above article excerpt that the market moved up merely on anticipation of more Fed money-from-nothing. But in fact there is quite a bit of additional money sloshing around in the American economy from previous quantitative easings. Gradually, paper money is overwhelming the ruin of 2008, from a securities trading standpoint at any rate. The powers-that-be are determined to get the economy "back on track" – hyperstimulated into consumerism once more – before a civil insurrection breaks out, which is likely to happen eventually anyway. Additionally, the budget crisis will eventually have an impact on the military-industrial gravy train and will make America's serial wars less feasible. (See other article, this issue.) Tax revenues must be brought back on track.
The problem with the above economic methodology (outside of the general ruin that it brings down on almost everyone's head) is that in big downturns, it doesn't do much for employment. The PTB as we have often observed will be drawn-and-quartered before they will print money-from-nothing directly for individuals, in order to achieve maximum circulation. The paper money printing operations will make use of their banks or other financial entities. That's to preserve the mystery of the system – so people don't start to realize that the entire financial industry is nothing more than an aggregate distribution method for central banking/central planning and ultimately a redistribution process for American wealth.
The combination of this inefficient dissemination scheme and the bailouts themselves (which make it impossible to figure out if a company is a good investment or a bankrupt) means that Western economies will not recover from the latest financial debacle for years and even decades. That does not shut down the happy talk, however. Rather than acknowledge the reality of the faux-economic system that the power elite has foisted upon the world, mainstream media is once again hyping the hyped-up American stock market. Here's an "analysis" of the stock market's current "success" excerpted from an article in the Straits Times:
Wall Street climbs to fresh 2-year highs … WALL Street stocks closed higher on Tuesday, as the Dow Jones index reached fresh two-year highs, with markets boosted by strong earnings from firms including software giant Adobe. 'The major stock averages are enjoying some holiday cheer,' said Scott Marcouiller from Wells Fargo Advisors. 'Positive earnings from Adobe Systems and Jabil Circuit and corporate deal-making have put helped pushed the Dow and Nasdaq to new highs.' – Straits Times
Holiday cheer, huh? What the American stock market is enjoying is literally trillions of paper dollars printed from nothing by one of the elite's poster boys, Ben Bernanke. It has boosted the financial industry and in turn provided a rationale for financial industry workers to argue that they should receive, once again, super-sized bonuses. Many may not fully understand the mechanism whereby their businesses have been rehabilitated but that will not stop them from making the case that they ought to be justly compensated for toiling away in America's gold mine.
Now we note from a recent quavery interview on 60 Minutes, that Ben Bernanke has come to believe this is a public relations problem. Yes, he's got that right. That's the REAL issue for those who want to conduct business-as-usual. Yet because they support the system as it is, there's not a lot that can be done about it. Bernanke's handlers predictably have in mind more regulations, or more laws … or something. (And when did people's bonuses become the Fed's problem – just asking?)
For every action, there is an equal (in size) and opposite (in direction) reaction force. – Sir Isaac Newton
The bigger problem that Bernanke et al. have is that normal, everyday people – millions of them – have seen through the charade of central banks creating money-from-nothing. The crisis played out in front of the Internet and the downturn (a second depression really) was horrible; it focused people's attention on how the system really works. A growing number in the US and in Europe understand that something is Not Right. This is a bigger problem, even, than banker bonuses. We have wondered before if central banking (or the money system itself) will even survive in its current form. We can't help but think about how deep the black hole will be when "Dreamtime" of the past 100 years is really over.