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Rodney's Ramblings: Envy And Greed

"Why can we not take a community approach to economic performance and growth, with reasonable increases and advances that can be shared far more widely, and not just meeting the obscene greed of the few?'' demands Rodney Gascoyne.

The markets are almost back to all their old tricks, that caused the Global Financial Crisis in the first place. The banks, brokers and financial services outfits, plus Hedge Funds and other big market players, see no need to change their games.

In some senses, the risks are much higher as they continue to develop newer instruments and offerings to an unsuspecting public, with ever increasing sophistication. Just watch the ads on business channels, to see how they attempt to reel in new victims, to try out their macho tools very few can understand, including most of those involved in the selling and trading.

The main inducement is Envy at the published profits and income claimed can be made by all, if they only try it themselves. This also works on semi-professionals too, and you may have heard of massive losses by state and local governments, when investing their cash resources, trying to maximize returns, to make their budgets eek out as far as possible. To do this, they take risks and try new ideas, at the encouragement of the real pros, without fully understanding the nature of the instruments they start to use. Think of derivatives and sophisticated bets that can be tried, as well as options and the newer offerings of ETFs, that also expand those who can speculate inappropriately. These latter unit tools, together with ultra fast computer trading methods, are now thought by some to be the most likely next threat to the markets, and the possible source of the next crash or crisis.

They still donít know exactly what caused the micro crash back a few years ago, that saw NYSE prices dip and soar by enormous changes in values in just a few minutes.

Added to all this, the public are at a great disadvantage to the professionals these days, and there is no longer a level playing field of knowledge. We are all at their mercy. The sales techniques employed by investment bankers, brokers and others, also work on the envy temptation to lure people in, offering new investment vehicles that can be almost impossible to comprehend, as if they are sexy new trends and things that everyone should be into. Have you seen the invites to people to try various day trading schemes and programs, presented with a macho array of monitors and charting tools, making it look as if we can all make a fortune easily each day, by sitting down at a computer and trading in real time? Just image the risks of most of us trying to do that, and I definitely include myself in that. Is it just me or does it all seem to resemble more and more the treats of the casino at every turn? At the same time the professionals selling all this to us canít fail but make a fortune out of our ignorance and stupidity. You should always be wary when being offered unbelievable and excessive returns.

Think also of the impact of elections in the US and some wins by Republicans. They intended to reward their supporters and financers, by repealing or watering down all the terms of FinReg, and even international agreements if they could, that are attempting to increase transparency and regulation on all the market players and make them accountable. Even while that legislation was being created, enormous pressure was brought to bear to reduce the impact of some possible changes, such as the plans to create a clearing house for all derivatives, to make all trades visible. That was seriously diluted in the final bill, after reconciliation between the houses of Congress. This has all cleared the way for many of the old games to be back on and possibly with the same results in due course. Will we never learn what little change money can buy in D.C.?

For the professionals, they have a clear field of operations again, with little or no accountability to the public and without changes in those still too big to fail plus the continuation of systemic risk to us all. They can continue their march after greed with little change from before. Although much of it is staged for PR effect rather than being substantive, we continue to hear of huge fines and prosecutions of Wall Street firms by the SEC and Statesí Attorneys General, showing there seems to be no slow down in the fraud and misrepresentation, we are subjected to on a daily basis.

Bank and Wall Street profits seem to ratchet up quarter by quarter, and they are all back to paying themselves enormous bonuses, while large numbers of the public remain out of work and still recovering from the massive losses in retirement savings, from the crash of just five years ago. My own sense is that we still have all the old risks but these have been added to, by new ones such as possible out of control ETF trading, computer auto trades, and the various insider trading opportunities of the big players, that presents them an unfair advantage and time advantage of access to new news and facts, and even market movements, that puts us more at a disadvantage than previously. Take into account Ďdark poolsí and other unfair advantages they continue to create to make suckers of the rest of us. New York is not alone in this.

If you wanted to know what advantage can be gained by influence in Washington from employing lobbyists, just take a look of what shares benefited in the markets, when the final version of legislation or action was agreed upon in Congress. With the Health reforms put in place, it was the HMOs, Insurance companies, pharmaceutical and health related companies that shot up in value almost immediately. Then it was the banks and Wall Street that gained in the markets after the final version of FinReg was agreed, and they benefited too when Basel III was watered down, on setting new capital requirements internationally. They seemed to all gain at every turn, over the interests of public safety.

Greed is back and almost in as much awe in the markets as before the crash. We are just getting this seasonís earnings releases, as companies report their quarterly profits. Brokers and analysts have upped the expectations and speak positively about every release of statistics or reports on the economy, almost as if they can lift the markets by sheer faith.

Washington, the White House and Treasury are also trying to talk the US economy up, and then look at Bernanke and his QE2+, a rather obviously dishonest move to generate growth, while beggaring all their neighbours and trading partners, by artificially lowering the US$ to advantage US exports. The G20 in Seoul failed to deal with that one with any urgency, but other Central Bankers are following that lead, with Japanese efforts now causing the dollar to rise back to more normal levels. The currency and liquidity fight is heating up amongst the Bankers.

Then there are the machinations of the EU and ECB as they attempt to fool the markets again that the Euro can survive. All this so the markets can keep rising, but with enormously increased risk of the next collapse and Crisis. This also puts huge pressure on companies and their boards to come up with increasing returns each year, at a risk of encouraging another Enron or Worldcom response to satisfy their wild appetite and rising requirements.

Why can we not take a community approach to economic performance and growth, with reasonable increases and advances that can be shared far more widely, and not just meeting the obscene greed of the few. One manís increased dividend can be another manís unemployment. It is obvious in all advanced countries and many others, there is increasing polarization between the haves and have nots. Are not market excesses, matched together with Government austerity, likely to lead to civil unrest and possible revolution, unless we correct these developments and find better ways of meeting the basic needs of all our people?

The excessive spending of the last decades and the huge debts we have collected in most nations, will only exacerbate this trend to make more paupers in the West, unless we start to find new means of addressing problems piling up. We need clear and inspired leadership to make such adjustments, but looking at our governments, it is hard to be optimistic we can make progress here any time soon.


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