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Markets are constantly in a state of uncertainty and flux and money is make by discounting the obvious and betting on the unexpected. - George Soros

It is time to work honorably for a better epoch and one where capitalism is founded on just and sustainable principles.

Oct.09, 2008 in Market Outlook

We’re in jeopardy primarily because we mismanaged the use of debt so as to accelerate economic growth. Bubbles are created by unsustainable borrowing. Leverage creates a rosier picture than underlying fundamentals warrant. When asset prices move too far from replacement value, the game of passing the buck stops. Subtract the debt leverage and the downside threat to pricing becomes more mild.

We’re brought to edge of calamity because we would not corral market excesses. When lobbyists said to Congress, ‘We want what we want, when we want it,” Congress capitulated. Now, we live in a world of piracy where it is every knave for himself. The motto: Leverage boldly on the way up, then lobby hard on the way down. Every store of paper based assets is ripe for pillage. Every income stream is a target for siphoning. Every new regulation an opportunity for exploitation. No wonder investment bankers don’t trust each other: They know themselves (but not as well as Thomas Jefferson and Andrew Jackson knew their kind.)

I spoke recently with the jewel laden wife of an East Coast hedge fund manager. While she teaches social morality at an Ivy League school, her husband exploits financial calamities as they unfold. “Conflicted,” is how she described her deepest feelings. Well, Americans ought to feel conflicted in many areas – medicine, law, education, religion, and world trade, to name a few reform deficient sectors. Debt is only one expression of greed and irresponsibility: there are others. Irresponsible maneuvers in the financial sector will not be rooted out as long as the underlying culture is sick with greed and legalized graft.

We now watch collectively as Rome burns and as every able-minded speculator gets what he can while the getting is ‘good.’ Some will win big; others will jump from high windows. Every trading day is just another pirate movie. To what end will it come?

When it is done, no one will have confidence that any person connected with financial markets is not puffy with ill-gotten gain. In the melee, the barons of banditry will likely escape with their loot because society will be so pockmarked with predations that it will be difficult to distinguish deeply culpable financial cabalists from those who just tried to wade in the money stream. The cabalists will triumph and the small time speculators will become their pawns. Nevertheless, while Wall Street’s “geniuses” may be able to establish a temporary global regime, a world government founded on such toxic grounds will not long endure. It is time to work honorably for a better epoch and one where capitalism is founded on just and sustainable principles.

Dr.Benevolence

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