May 26, 2016

It's time to take out the trash

"Greed is good" was a terrible idea. It pains me that it ever entered the American lexicon. However, it does not surprise me.

In order for us to move beyond the limits of "greed is good" thinking, we must find ways to incentivize self-improvement without punishing the successful. We can do this by finding ways to make it easier for individuals to start their own businesses, to manage their own money, and to study ways to improve their own lives through their own efforts.

For starters, get the Fed and all of the other central banks out of the stock market and stop using them to prop up failed business models. Higher interest rates would discourage debt and encourage saving while also allowing small or medium-size banks to generate profit from their loans rather than from a slew of fees. Instead of using federal and state regulatory agencies as punishing arms of government whose primary purpose is to generate revenue through fines and assessments, give government the primary role of using regulation to teach small and medium business owners a safer, more efficient way to serve their customers and improve their profitability. Teaching better ways of doing business without mandating prescribed ways of doing business should be the goal of both government regulation and regulatory agencies.

Government has become a weapon used by those in positions of influence to punish competition while making their own lives easier. Crony capitalism is the very essence of corruption and is the real source of many of our problems. Wall Street should not be held up as the leading indicator of economic health. Investors need to share equally in the risks of capitalism, regardless of whether those investors are hedge funds, pension funds, individuals, international banks, or business moguls. The key problem is that everyone in power or with access to power is depending on a healthy stock market to preserve their personal wealth. The Fed has become a babysitter for poor investment choices and excessive risk taking. It is time to remove the QE purchases and impossibly low interest rates that are propping up a failed market.

It is entirely possible that some form of anti-trust and anti-monopoly legislation is also needed. There really is no reason that multi-national corporations like GE, Wal-Mart, Macdonalds, Amazon, and Facebook should be in a position to dictate economic policy, social interaction, and political will. BP, Rosneft, Aramco, and other gigantic oil corporations should not be allowed to collude together with each other and with national governments to control the flow of energy products and the direction of research investments. Changhong, Huawei, Samsung, Phillips, and other electronics giants should not have such intimate relationships with national governments that they write trade treaties creating conditions which force smaller electronics makers and innovators to sell the giant or not sell at all.

I am not saying we need to punish rich Wall Street investors and successful international businesses. I am saying it is time to let the real world results of poor choices clean out the garbage so the genuinely successful can thrive. As traumatic and destructive as they are, market crashes and economic collapses are good for the multi-generational health of an economy. They clear out the weeds and underbrush so the true caretakers can continue improving the orchard. Right now the global economy is not operating on the basis of consumer demand, efficient productivity, and smart investment choices. The current world economy has become a web of economic superstars in business, politics, and entertainment who dominate the flow of capital through the global market to such an extent that no one else has a chance to compete. This is not free market capitalism. This is old-school aristocratic patronage and cronyism.

"Greed is good" and "too big to fail" both belong in the dustbin of history. It is time to take out the trash.