It seems fitting that the very same week that Citibank and Merrill Lynch go begging hat in hand to foreign investors to bail them out of the sub-prime debacle, the Chicago Merc is recognized as the dominant exchange in the world.
I believe there are only two great films about business; Robert Wise's Executive Suite and Oliver Stone's Wall Street. Fittingly, the commentary track on the DVD of "Executive Suite" features the narration of Oliver Stone. Stone points out that in 1954, when the film was made, American manufacturing was morphing from a culture dominated by engineers to one run by accountants. This is the central theme of Executive Suite. William Holden represents the innovative engineer, working with a skilled team to research and develop manufacturing processes that improve the company's products. Fredric March represents the accounting, profits at all cost, mentality that began to take hold in the 1950s and found its logical conclusion in Enron.
This same struggle was reflected in Wall Street between the characters of Charlie Sheen, the money guy, and Martin Sheen, the working class airline mechanic. Stone foretold the future with the character of Gordon Gekko, the next step in the evolution of the Charlie Sheen and Fredric March characters.
The Gekkoian drive for financial engineering, as opposed to the engineering of real products, finally resulted in Wall Street firms manufacturing and selling products backed by subprime loans. The products are so complex that not even their issuers understand them, nor can they set a market value to them. Well, in the real world, when you don't have any buyers for what you are trying to sell, the value of what you have is zero. This is why Wall Street keeps upping into the tens of billions their guesses on how much capital they have destroyed.
Fifty years ago, the William Holden character won out in Executive Suite. If his character ran Wall Street, he would raise capital for worthy companies that actually make things, real things to better the lives of others. Unfortunately, Fredric March and the accounting engineers have been running Wall Street for the last 20 years, and they have run it right into the ground.
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Since Wall Street has minimal government oversight, they can invent profits by bundling mortgages as equities. This allowed banks to make bad loans then sell them upstream to become everyone else's problem. That this practice has finally bit back, why is everyone surprised?
We can't make a living taking in each other's laundry.
Today there is enormous liquidity in world markets. Yet the answer is for central banks to run the printing presses to put more money into circulation? And Congress is talking about a combination of deep cuts to interest rates while at the same time printing more money? I don't think so.
That's like trying to dig your way out of a hole. Election year politics reeks.
Plato said that democracy's fatal flaw was bread and circuses. (OK. Not in those exact words.) Politicians avoid pain until it kills us. And yet they have nerve enough to wage a war on drugs? Who's kidding who? It's exactly what happened to cause Easter Island to collapse. Read "Collapse."
By 2005 the financial sector accounted for over 30% of the profits of the S&P 500.
We trade more and more paper every year and call it growth.
Ever read "The Theory of the Leisure Class" by University of Chicago and Gilded Age economist Thorstein Veblen? Or his book, "The Engineers and the Price System"? Or another Veblen favorite, "The Theory of Business Enterprise"?
The battle was long lost before the 1950s. It occurred during the industrial revolution when entreprenuers and engineers were replaced/displaced by business managers, executive boards, stockholders and their profit motive.
G.O.P.
PS: Anybody remember a man named Tucker and his car?