From "Who Killed the Disneyland Dream?" a Dec. 25 New York Times essay by Frank Rich, at http://www.nytimes.com/2010/12/26/opinion/26rich.html
"...How many middle-class Americans now believe that the sky is the limit if they work hard enough? How many trust capitalism to give them a fair shake? Middle-class income started to flatten in the 1970s and has stagnated ever since. While 3M has continued to prosper, many other companies that actually make things (and at times innovative things) have been devalued, looted or destroyed by a financial industry whose biggest innovation in 20 years, in the verdict of the former Fed chairman Paul Volcker, has been the cash machine.
"It’s a measure of how rapidly our economic order has shifted that nearly a quarter of the 400 wealthiest people in America on this year’s Forbes list make their fortunes from financial services, more than three times as many as in the first Forbes 400 in 1982. Many of America’s best young minds now invent derivatives, not Disneylands, because that’s where the action has been, and still is, two years after the crash. In 2010, our system incentivizes high-stakes gambling — “this business of securitizing things that didn’t even exist in the first place,” as Calvin Trillin memorably wrote last year — rather than the rebooting and rebuilding of America...."
And now we have a president who used to work near, if not on, Wall Street, who hobnobs with megabusiness CEOs, who hires Wall Street wunderkinder for Treasury and financial advisors. Not that this president marks any sort of change in that respect.
Part of our problem is that we have come to believe that the gambling game that we call the stock market is our financial system, and that it's welfare is our welfare, that it is the most visible epitome of American business. It isn't.
There are connections between a stock's performance and the performance of the company that issued the stock, but they are not identical and in most instances are purely psychological. Wall Street has as much to do with American business as paramutual betting has to do with horse raising.
At best, we have fostered a species of middlepersons, who feed off business and society the way sharks feed off schools of fish. At worst, we have created a parasite that is devouring us from within.
"...How many middle-class Americans now believe that the sky is the limit if they work hard enough? How many trust capitalism to give them a fair shake? Middle-class income started to flatten in the 1970s and has stagnated ever since. While 3M has continued to prosper, many other companies that actually make things (and at times innovative things) have been devalued, looted or destroyed by a financial industry whose biggest innovation in 20 years, in the verdict of the former Fed chairman Paul Volcker, has been the cash machine.
"It’s a measure of how rapidly our economic order has shifted that nearly a quarter of the 400 wealthiest people in America on this year’s Forbes list make their fortunes from financial services, more than three times as many as in the first Forbes 400 in 1982. Many of America’s best young minds now invent derivatives, not Disneylands, because that’s where the action has been, and still is, two years after the crash. In 2010, our system incentivizes high-stakes gambling — “this business of securitizing things that didn’t even exist in the first place,” as Calvin Trillin memorably wrote last year — rather than the rebooting and rebuilding of America...."
And now we have a president who used to work near, if not on, Wall Street, who hobnobs with megabusiness CEOs, who hires Wall Street wunderkinder for Treasury and financial advisors. Not that this president marks any sort of change in that respect.
Part of our problem is that we have come to believe that the gambling game that we call the stock market is our financial system, and that it's welfare is our welfare, that it is the most visible epitome of American business. It isn't.
There are connections between a stock's performance and the performance of the company that issued the stock, but they are not identical and in most instances are purely psychological. Wall Street has as much to do with American business as paramutual betting has to do with horse raising.
At best, we have fostered a species of middlepersons, who feed off business and society the way sharks feed off schools of fish. At worst, we have created a parasite that is devouring us from within.
A personal note. I have been interested in investing for years, starting as a student watching Lou Ruykeyser's "Wall Street Week" and continuing through "Adam Smith's" clever books, The Money Game, Paper Money and Supermoney and on to contrarianism and the teacher that guided Warren Buffet's emphasis on fundamentals. But I have come to believe that the whole thing is not "investment," but a form of socially acceptable gambling, that has only token benefit to the economy as a whole.
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