Legislating greed…

Once you have everything, what else is there?

                

By Jack E. Lohman

We obviously can’t eliminate greed, but we can apply protections for the good of the public. For too long politicians have disregarded the destruction that massive wealth inequality has caused society.

If our economy were viewed as a pie, some people would want more than their share. If viewed as a lake, some will over-fish until there are no more fish. It is simple greed. Can you imagine a game of poker with only one player having all the chips? The card game must stop.

And so would society stop, except that it is made of people and they can get guns and fight back. Take away their food and ability to feed their family, and trouble lies ahead. It has many names — insurrection, anarchy, rebellion, uprising — none of them very pretty.

Greed is so unfair and so unnecessary, and far more harmful to our society than all the terrorism in the world. And it’s being done to us by our own. To fill the pockets of the rich we must empty those of the poor. 

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Source: Thomas Piketty and Emmanuel Saez, “Income Inequality in the United States, 1913-1998,” Download high resolution TIF

Note the spike in inequality in 1928, just prior to the 1929 crash, as compared to the spike in 2006. And the 1994 takeover of Congress by the Gingrich Republicans. ‘Nuff said.

Yea, I know; some people deserve a bigger piece of the wealth. It’s the CEO thingy, don’cha know. They were shrewd enough to negotiate large wages and benefits and golden parachutes — not because they are worth it, but because they have a conflicted board of directors.

The CEOs sit on each other’s boards and vote to increase each other’s salaries, and the shareholders have little say in the process. And they hire “compensation consultants” to provide themselves cover and lock in a major transfer of wealth from the little guys to the big guys. It’s a good deal, for them.

The recent $50 billion Ponzi scheme should not surprise us. One guy, Bernard Madoff, took money from a few investors on a fake promise. Then took from a few more to show a financial return to the first, and kept going until the bubble burst. That 25 hedge fund managers, in 2006, made at least $230 million didn’t concern them. Smart investors these.

In this case we had laws against fraud, but the SEC failed to report the scam even though they were alerted a decade earlier by industry whistle blowers. When this is over we’ll likely find that the SEC backed off because of pressure from politicians taking campaign money from Madoff. Remember the Keating Five?

On another front, deregulation allowed the oil speculators to bid up oil prices without ever taking delivery, and then after the economy crashed they jumped out, took their profits, and let oil settle to its natural level. Intervention by politicians would have prevented this, and the best way would have been to make speculating illegal.

But speculators are big campaign contributors, so don’t even think about going there. And I know of no law prohibiting oil executives from speculating themselves. How about that?

Enough has been said about the sub-prime and credit mess. None of this would have happened without greed and without deregulation, and deregulation doesn’t happen without politicians taking bribes. Legal bribes, mind you; they call them campaign contributions.

We can regulate industry and we must, though free-marketers will object and the politicians who get bribed to not regulate industry will also object. But we must force the politicians to cease letting the fat cats rule the game and start doing the job they were elected to do.

Only public funding of campaigns will fix the system.

  • Tidbits:
  • For starters, how about letting Adjustable Rate Mortgages (ARMs) go up or down, but never beyond the original rate? Let’s retroactively apply the rule to the mortgages that are still a problem!

    So Bush says we’ll give the auto industry money and if they don’t have a plan by March we’ll take the money back! Huh??? They will have spent the money by then and forcing a payback puts them into Chapter 11. Good thinking, Dubya!

    GM has a legacy problem they helped create. Congress must mandate that all workers (everywhere) pay into the public social security system,  even at a more realistic rate, or if privatized, be run by a third party with sufficient insurance to cover defaults. The same for Medicare.

    Neither extreme is good, not even total equality. There must be incentives for people to want to move up the ladder. But leaning too far to one side or the other is bad and we need balance. Fair, but balanced.

    Oh, I know. Let’s have another tax break for the wealthy! If it worked the first time, as they claim, it will work again, and we can sure use something that works.

    5 Responses to Legislating greed…

    1. Ken Van Doren says:

      Jack, once again you add 2 and 2 and get five. You promise something for nothing on the health care issue. Government is not, never has been efficient. As the government has paid more of the health care costs, health care costs have skyrocketed. The more it interferes in the marketplace, the more failures it will create. Do not believe me? Check back in 4 yrs or so as we continue the massive socialization of our economy.

      You want equality? Check out the most equal societies in the world and I will show you the most primitive. When we are all equal, we will all be equally poor.

      The problem is not money or even greed per se. IF I respect your rights, IF I can not use the force of government to steal from you what I do not have the strength or courage to steal from you directly, the only way I can acquire some of your wealth is to beg for it, or produce a product or service that you are willing to purchase. It is this “greed” and the specialization of labor that have made the West, and the US in particular the richest countries these last 200 yrs or so.

      It is perhaps serendipitous that you choose the graph plotting incomes from 1913 to 1998. You correctly find the spike in 1928, and in the late nineties. You do not address cause and effect in a meaningful way, however. Both spikes are because of money manipulations. Both the downturn of the 30’s and the current one are because of mal-investments caused by a loose money supply. Farmer wants a bigger tractor so he can produce more corn, takes out a loan that is mostly money created out of thin air. He (and thousands of other farmers who did the same thing) produce a bumper crop of corn, which the market may not need. Supply and demand says price will fall, and it often does (except when we foolishly subsidize corn ethanol plants to increase the demand for corn.) So on net, the farmer makes the same income with higher payments. “Counterfeit money creates counterfeit businesses which can only be sustained by further debasing our currency.”

      Bankers love to collect interest on money they and the Federal Reserve counterfeit, but these dollars only have value as they dilute the purchasing power of the rest of us. Others, who get the money early, similarly benefit. Think stock brokers, real estate agents. Legally counterfeited money drives prices up, especially of capital goods, and usually the rich benefit the most.

      But the counterfeit currency boom is always followed by a deflationary bust, as the loans that created the money get wiped off the books. The more money that is created to sustain the boom (as in the last 8 yrs.) the more severe the bust is likely to be, and the more people who are likely to be hurt. The Great Depression was caused by the FED, and so is the current economic debacle. And the date 1913 is particularly apt, as that is the year that one of our worst presidents, Woody Wilson, signed the Federal REserve act into law.

      The dotcom bubble, the real estate bubble, the automobile bubble ( you know, when the bought forward the cars that folks were going to buy a few yrs from now by offering great credit terms a few yrs ago?) the rise in stock prices, Hank Paulson’s ability to create money into existence while head of Goldman Sachs, in order to drive stock prices, and commissions up, the concentration of wealth directed especially toward the money manipulators, all the product of the Federal Reserve and its policies. OH, and do not forget the bust. That too is a result of their shell game, their lie that something can had, if not for nothing, then for very little.

      Getting a little long here, but one last thing: IF government were limited in what it could do( like maybe is suggested in that GD piece of paper, the constitution ) then the amount of money one contributes could buy very little influence, except maybe to continue protecting the sanctity of our rights by preserving the integrity of government limited by said document. We have corrupt politicians because we, the electorate are corrupt in thinking we too can have something for nothing.

    2. Thanks for the note Ken.

      As to health care, I promise nothing for free. We will all pay for it, but just differently than our currently inefficient way of filtering it through a third-party make-work insurance bureaucracy that consumes 31% of the costs without ever laying hands on the patient. And incidentally, adding its costs for marketing, broker commissions, actuarial and legal costs, CEO salaries, bonuses, stock options, shareholder profits, and even campaign contributions and lobbying expenses.

      As well, there’s another 20% for over-utilization and fraud, so easily half of our health care costs are NOT for health care, and that’s why we spend twice per-capita than all other nations. The most efficient system would be a Medicare-for-all system that is funded by taxpayers and does not burden businesses, making them uncompetitive and driving jobs out of the US economy. The Big Three now make more cars in Canada than in the U.S.. They pay $800 per employee per year in Canada, and $6500 in the U.S..

      As to ‘equal societies,’ try Sweden, which socializes only medicine and education and is considered by many to have the highest standard of living in the world. Do they have as many rich money manipulators as we do? Probably not. But that’s because they essentially “socialize” their electoral system with public funding of campaigns, thus the money manipulators go elsewhere.

      Actually, they go to the U.S. where they can buy politicians and deregulation. I must at this point ask, how are you liking our unregulated free market now?

      I am basically a capitalist and believe in the free market, to an extent. I do not believe in the unregulated free-for-all market that began in the Reagan years (though I voted for him, and Bush, twice, and McCain).

      But our free market has gotten out of hand. It is bought and paid for, as your example of ethanol points out. Follow the money and you’ll find that Archer Daniels Midland has bought our politicians for years. And the corporate farming industry has virtually killed the small farmer. And just about every other industry has been bought by the special interests. (Get that? Bought! As in “bribes to politicians!”)

      As to the Constitution, I love most of what it has done for America. It’s a super start, but it’s only a start. Its framers did not foresee how “freedom of speech” could be distorted to mean “freedom to bribe your politician.” Or how corporations could be given personhood.

      There is one basic change in our system that would shut me up for good: Get the bribery and corruption out of our political system! At that point health care and bailouts and regulation and deregulation would all be taken care of in the best interest of the public.

      Without political bribery we would not be facing another Great Depression. We would not be spending twice for the health care we lucky 85% are receiving.

    3. […] massive inequality of wealth experienced in the US is no better than that experienced in third-world countries. As more of the […]

    4. Kathleen says:

      Here’s why greed and the resulting inequality in a society is related to health: See the evidence from British scholar who has looked at the data:

    5. An interesting video. but I think it is missing a very important graph: how inequality is directly proportional to political corruption. Inequality doesn’t just happen, unless the politicians (who share in the booty) write the rules to permit and fuel the process. Also see the “corruption index,” where the US is 22nd in the world. (Not 1st, 22nd!)

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