Wall Street Is Not The Creator Of Wealth Or The Nerve Center Of Capitalism.
“When I am on Wall Street and I realize that that’s the very nerve center of American capitalism and I realize what capitalism has done for the working people of America, to me that’s a holy place.” -- Phil Gramm in 2000
We wrote a very lengthy post on Phil Gramm's ideology back in July. Ideology espoused by those with his belief system contributed greatly to the corporate socialism we are now witnessing. If you didn't read it, the link is here.
Today in the New York Times, we have a new article about Gramm titled Day of Reckoning - A Deregulator Looks Back, Unswayed.
Anyone who believes American capitalism is defined by Wall Street is deluded. When working as it should Wall Street should simply be a transparent central clearinghouse where businesses or prospective businesses from around the country or globe are married with potential investors. That's it. Wall Street should have no legal authority to be pissing away society's wealth with any of the schemes we see today. And, politicians like Phil Gramm gave that power to Wall Street.
Over the last thirty years Wall Street increasingly tried to become the economy rather than playing its niche support role of financial clearinghouse for the economy. That could only be accomplished in partnership with politicians from both parties.
Sustainable wealth is not and never has been created on Wall Street. Wealth is created in the underlying economy. Wealth is created by the farmer, by the small business owner, by the inventor or by the corporation that adds economic value. Wealth is created by allowing the human mind to function of its own free will and its own free thought. Whether that human mind seeks investors via Wall Street is irrelevant. The only difference between Wall Street and the small town bank where the local farmer goes to buy a new tractor is that Wall Street operates as a central clearinghouse where larger capital requirements are more easily accomplished.
This may be a surprise to many people but we don't even need a Wall Street in its current form. In fact, the economy would be substantially better off without it. A better model that would develop if the free markets were allowed to work would be a distributed exchange where there was less concentration of power, less corruption, less distortion of free markets and less collusion. And, most importantly, no financial intermediaries extracting unnecessary fees and expenses simply because they have anti-competitive control over distribution of capital. Does a potential investor need a banker to intermediate their interest in a new company for some unnecessary or inflated fee? Just because they are forced to? Absolutely not. This anti-competitive racket actually distorts markets, disincents business and takes capital out of the real economy that would be better spent by those able to create wealth. Investors might need advice from a subject matter expert in energy or biotechnology or may need other services but most of these prospective services aren't the role of Wall Street or a banker. Many of the ancillary financial businesses that have grown up around Wall Street are more distortions of the same scheme.
A distributed solution to marry investors and business is becoming more viable as technology develops. Wall Street is becoming a dinosaur of sorts. Were capital allowed to flow freely in the economy as opposed to restricting it, as is now the case, Wall Street would not exist. It's simply a matter of when the technology completes this transformation to a superior economic model. If markets develop naturally, we will actually get to this point in some future. If cronyism and lobbying by power elites prevent a free market from developing, Wall Street will survive in some lesser form. Regardless, Wall Street will likely never again regain the glory achieved this cycle. Because by the time they are able to regain their glory decades from now, technology will have made much of their business obsolete. Remember, never is a long time. Frankly, if I had the capital to do so, I would be building a new medium to replace Wall Street's anti-competitive practices. But, at some point many with the capital will start picking off their businesses with more efficient models.
We wrote a very lengthy post on Phil Gramm's ideology back in July. Ideology espoused by those with his belief system contributed greatly to the corporate socialism we are now witnessing. If you didn't read it, the link is here.
Today in the New York Times, we have a new article about Gramm titled Day of Reckoning - A Deregulator Looks Back, Unswayed.
Anyone who believes American capitalism is defined by Wall Street is deluded. When working as it should Wall Street should simply be a transparent central clearinghouse where businesses or prospective businesses from around the country or globe are married with potential investors. That's it. Wall Street should have no legal authority to be pissing away society's wealth with any of the schemes we see today. And, politicians like Phil Gramm gave that power to Wall Street.
Over the last thirty years Wall Street increasingly tried to become the economy rather than playing its niche support role of financial clearinghouse for the economy. That could only be accomplished in partnership with politicians from both parties.
Sustainable wealth is not and never has been created on Wall Street. Wealth is created in the underlying economy. Wealth is created by the farmer, by the small business owner, by the inventor or by the corporation that adds economic value. Wealth is created by allowing the human mind to function of its own free will and its own free thought. Whether that human mind seeks investors via Wall Street is irrelevant. The only difference between Wall Street and the small town bank where the local farmer goes to buy a new tractor is that Wall Street operates as a central clearinghouse where larger capital requirements are more easily accomplished.
This may be a surprise to many people but we don't even need a Wall Street in its current form. In fact, the economy would be substantially better off without it. A better model that would develop if the free markets were allowed to work would be a distributed exchange where there was less concentration of power, less corruption, less distortion of free markets and less collusion. And, most importantly, no financial intermediaries extracting unnecessary fees and expenses simply because they have anti-competitive control over distribution of capital. Does a potential investor need a banker to intermediate their interest in a new company for some unnecessary or inflated fee? Just because they are forced to? Absolutely not. This anti-competitive racket actually distorts markets, disincents business and takes capital out of the real economy that would be better spent by those able to create wealth. Investors might need advice from a subject matter expert in energy or biotechnology or may need other services but most of these prospective services aren't the role of Wall Street or a banker. Many of the ancillary financial businesses that have grown up around Wall Street are more distortions of the same scheme.
A distributed solution to marry investors and business is becoming more viable as technology develops. Wall Street is becoming a dinosaur of sorts. Were capital allowed to flow freely in the economy as opposed to restricting it, as is now the case, Wall Street would not exist. It's simply a matter of when the technology completes this transformation to a superior economic model. If markets develop naturally, we will actually get to this point in some future. If cronyism and lobbying by power elites prevent a free market from developing, Wall Street will survive in some lesser form. Regardless, Wall Street will likely never again regain the glory achieved this cycle. Because by the time they are able to regain their glory decades from now, technology will have made much of their business obsolete. Remember, never is a long time. Frankly, if I had the capital to do so, I would be building a new medium to replace Wall Street's anti-competitive practices. But, at some point many with the capital will start picking off their businesses with more efficient models.
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