I'm not an economist, never having progressed beyond the intro course in college, though I have been trying to educate myself. I've often expressed what I can only call my intuition that all the Wall Street folks are doing at this stage is skimming money out of the economic system without providing anything of value in return. So, it was with a great deal of interest that I read this excellent post at Wall Street on Parade about the Senate hearings currently examining the workings of Wall Street. Read the entire post. Here's what caught my eye, as I always love to see my intuitions reinforced:
In that April 28, 2014 speech, Bogle, the founder of the giant mutual fund family, Vanguard, provided a broader indictment of today’s Wall Street casino, stating:
“But it is only capital formation that adds value to our society. Trading, by definition, subtracts value. Indeed, the casino mentality remains in the catbird seat of finance. Is that good or bad for investors and for our society? As Nobel Laureate in Economic Sciences and New York Times columnist Paul Krugman recently put it, “society is devoting an ever-growing share of its resources to financial wheeling and dealing, while getting little or nothing in return.”
“I might go even further, and suggest that we are getting less than nothing in return. More broadly, be warned by these words of wisdom from the great British economist John Maynard Keynes in 1936: ‘When enterprise becomes a mere bubble on a whirlpool of speculation, the position is serious. For when the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.’ ”
Forever seared in my brain is the image of Laura Flanders having her own epiphany of what motivated Wall Street in the lead up to the bust of 2008. Flanders, in 2009, was interviewing Andrew Cockburn and Leslie Cockburn, producers of the documentary, American Casino, on her show on Grit TV. After the Cockburns explain how the scam worked, fueled by the “crackpot” deregulatory prognostications of then Federal Reserve Chairman Alan Greenspan, Flanders asks, with a blend of contempt and genuine shock frozen on her face: “So you think it was all really a scam to transfer money from the vulnerable and the poor to the wealthy.”
As we have been telling our readers for the past eight years, under its current structure, Wall Street is simply an institutionalized, government-enabled, wealth transfer scheme. (We have even placed a menu heading titled “Wealth Transfer Schemes” on our top menu bar to assist average Americans with achieving their own asymmetric information.) That Wall Street has now deployed high-speed computers, Ph.D.s writing artificial intelligence algorithms, co-located servers inside the stock exchanges to gain micro-second speed advantage, off-exchange, dark pool trading of 100 and 200-share lots of retail customer orders, special order types to fleece other customers – is all simply a high tech acceleration of the wealth transfer scheme to loot the savings of hardworking Americans struggling to put a little aside for their own future and that of their children.
It’s encouraging to, at last, hear and see members of the Senate Banking Committee asking the hard questions that show an awakening to this long, crippling, wealth stripping nightmare.
Alas, the hard questions will be asked, partly answered, but never addressed. The corrupt and corporate bought and paid Congresses of the early twentieth century look like models of progressivism compared to ours.
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