Dear Friends,
It seems to me that one of the ways a person gets rich in government, is to create a problem, announce that there is a problem, then claim it is only government that can solve the problem.
The big investment banks have announced their earnings. They have earned enough so that, when Goldman Sachs pays it’s employees 43% of the quarterly earnings, it will amount to around $500,000.00. So we can extrapolate that if $500,000.00 is 43% of each employee’s total value to the company, in that quarter, they produced $1,162,790.00, in that quarter. That is a lot of production.
“They have a printing press in their basement and all they do all day is coin money”- from Bloomberg radio, referring to Goldman Sachs. But whenever a company produces so much profit it’s a red flag. To produce this much profit with so few employees the environment the company exists in must be tempered by government. Or it is a monopoly.
If a company is not a monopoly it cannot charge monopoly prices. Unless there is some strain on the market’s ability to provide the good or in this case service. Because without constraint on supply, from somewhere, others would jump into the market and undercut the monopoly profit forcing the older companies to lower their profit margins to compete. If there were “perfect competition” in that market companies would post very little profit.
The way companies like Goldman Sachs and Morgan Stanly keep competition, especially perfect competition, from lowering their profit margins, is to pay lawmakers to pass laws that limit entry into their markets. Cutting the small trees so the big trees can grow bigger. The bigger the trees the more shade for lawmakers.
Now our lawmakers are rattling their swords over the huge bonus’s that Investment Banks are paying their employees. The government will not stand for it! The rhetoric from ours and other governments borders on vitriol. But one thing we have stressed in our blogs and bbs posts is that it is foolish to look at what a politician says. It is always a lie. Look at the politician’s actions. They show the reality of the who the politician is.
In this case what do we have for evidence… Well, if lawmakers were serious, the people in the crosshairs would certainly fund the opposition to get a better chance. But we see that the democrats have almost exclusively gotten Big investment bank money. In fact Obama refuses to give back the million of dirty money he got from Goldman.
What action do we see on the regulation front? Rhetoric. Nothing but empty words. The threatened regulation will put a clamp on big fat bonuses. But how? The only plan I have heard about is to tax big banks and investment houses at a sliding scale depending on the bonuses they hand out. But let’s think about it for a moment.
Would you argue that an auto mechanic should not get 43% of his production back as pay and benefits? How about a factory worker? In fact a contractor is lucky to make 10% on a laborer let alone 57%. If he did, communists, socialists and progressives would be saying the contractor was exploiting the worker. But the worker at an investment bank is not exploited when the bank he works for gets 57% of his production? Moreover, is it good public policy and right use of government power to determine the rate at which an employee of a private firm gets paid?
No, the real problem is that government coddles and protects the Wall Street Elites as members in the club. Remember the “Bailouts.” When government basically gives you money to loan, free, and you loan it dearly, a simpleton can make a profit like that. But what does it say about Government Elite and Wall Street Elite?
They are both complicit. They are two nuts from the same burr. Corruption in government and on Wall Street have joined to protect both by vilifying one while under the table government cannot give the Wall Street Elite enough money, special regulations and favorable business climate. Look at the actions… NOT their words. No one, intentionally, drops their toast on the ground butter side down…
Government creates the problem of not allowing the market, (in this case investment banking), elasticity to increase the supply of this type of service. Then market forces drive up the profits of the companies that government gives the franchise to. Government decries the bonuses (profits), thus tapping into public anger over the exorbitant profits of that industry. This allows government to fund the corruption, use the corruption to get elected, and get campaign funding from the corrupt actors… What a deal!
The best part, is that the argument for government keeping others out of Goldman Sachs markets, is that customers might get ripped off by shady characters…
