IdeasConnect

The "Shareholder Democracy in Public Companies" Fairy Tale!

Felix Salmon: “At risk, then, is the shareholder democracy that America forged, slowly, over the past 50 years. Civilians, rather than plutocrats, controlled corporate America, and that relationship improved standards of living and usually kept the worst of corporate abuses in check…..”
(http://www.nytimes.com/2011/02/14/opinion/14Salmon.html)

Wha..at! In public listed corps, when was the last time shareholders that actually supervised the running of the business, eh!? THAT only happens in closely held companies…exactly the ones whose increase in numbers Salmon’s lamenting! In public listed companies, all stock'holders' are mere pocker players, with their bets, for the most part, outsourced to mutual fund managers at that. "Shareholder Demo" ' s just a nice sounding term. Salmoan's whole piece is heterogenous mumbo jumbo aimed at...dunno what.

Gov policy (of decreasing returns from fixed return instruments) has been squarely to “credit” for the returns people got from the stockmarket casino, NOT the delusionary “shareholder democracy” (whaz-zat!?)

http://economiccircuit.blogspot.com/2011/02/intelligent-design-is-intelligent.html

Circular Hoodwink!

From, "Wall Street's Global Race to the Bottom"

http://robertreich.org/post/1245725732

"Their main argument is if regulations are too tight, the big banks will be less competitive internationally. Translated: They’ll move more of their business to London and Frankfurt, where regulations will be looser.

Meanwhile, Wall Street is warning Europeans that if their financial regulations are too tight, the big banks will move more of their business to the US, where regulations will be looser.

Two weeks ago, after the Basel Committee on Banking Supervision (a global financial regulatory oversight body) came up with a new set of rules to toughen bank capital and liquidity requirements, European officials threatened to get even tougher. They approved a new system of European regulatory bodies with added powers to ban certain financial products or activities in times of market stress."

Demand Pull is the ONLY Good Inflation

Good Stuff:

winterspeak.com/2010/09/real-problem-with-higher-inflation.html

"
In the current environment, yes, I am saying that only large fiscal stimulus will raise inflation rates.

More generally, the non-Govt sector has some endogenously determined desire to net save. This desire can only be funded by Govt deficits (via the fiscal channel). If the desire is underfunded, you get deflation. If it's overfunded, you get (demand pull) inflation. if it's funded just right, you get full employment with no inflation.

This desire also changes over time, so Govt needs to always fund it appropriately."

Externally Inflicted Self Interest!

http://blogs.reuters.com/felix-salmon/2010/06/30/why-banks-are-self-defeating-on-housing/

"But, alas, not. Banks are also bureaucracies; Weber is as relevant as Friedman. Speeding this process would involve massive hiring. Since there aren’t enough qualified people – short-sales used to be comparatively uncommon – that means that there will be a substantial lag as staff is trained. Moreover, banks are both loath to hire staff for what they perceive to be a short-term problem, and reluctant to expand payroll at this moment in time. And it goes beyond hiring. Few banks view restructuring, short-selling, or foreclosure processing as core to their missions. These are unglamorous areas of the bank. The executives in charge rank low on the totem poll, and are poorly positioned to press for the necessary changes. Finally, there’s outright denial. Executives are never interested in recognizing their own failures. That’s painful. They’d rather avert their eyes, even if that proves costly. Every short-sale is an admission of error, and forces the bank to pay the piper. No one is going to make a performance-related bonus for completing transactions faster that cost the bank huge amounts of money – even though that’s precisely the sort of performance that the bank ought to reward, because it results in long-term relative savings.

This is precisely where regulatory pressure is most useful – in compelling businesses to do things that are in everyone’s interest that they might not otherwise be willing to do themselves. But admitting that a free market might not produce such an outcome is simply too painful for leading economic policy makers,"

Remodel. Repainting is More of the Same..

"The Crisis happened because the economic structure could not be sustained. Restoring that structure does not change the fact that it is unsustainable."

"The Financial Crisis, however, invoked a bi-partisan reactionary response, and an effort, not to adapt through structural change, but, rather, to restore the status quo ante. This reactionary effort has brought about the bear market rally of all-time in the Stock Market, and a calm in banking and international finance. But, the determination to push all the losses on to Middle Class home owners and taxpayers, while holding unharmed, the banks and the financial sector, leaves the country weaker and unprepared."

http://comingperfectstorm.blogspot.com/2010/05/storm-cloud-on-horizon.html

"In the Clinton years, the advent of the Internet and the Tech Boom, gave American international economic leadership an Indian Summer revival, but in the Bush years, the costs of hegemony mounted, as the U.S. sold off much of the Middle Class' home equity to buy more electronic junk from China, while American manufacturing was devastated.

When the Financial Crisis arrived, nothing should have been more clear than the need to radically change everything in the structure of the American economy and its relation to the world. Al Gore was quoted in Rolling Stone:

"Right now we are borrowing huge amounts of money from China to buy huge amounts of oil from the most unstable region of the world, and to bring it here and burn it in ways that destroy the habitability of the planet. That is nuts! We have to change every aspect of that."

"

Banking System and the Government: Lifting the " ~Corporate Veil "

http://winterspeak.blogspot.com/2010/06/to-what-end.html

Truly great observations here:

"It should be obvious to the most casual observer that the financial industry is not part of the private sector. The charter it gets from the Federal Reserve, and the role it shares in the payment system with the US Treasury, means that it is a public/private partnership.

Access to reserve accounts at the Fed mean that banks can print money, just as the Government can. The reason they exist at all is so the State can have investment decisions made by the private sector, with private capital being in first-loss position before (ultimately) public capital."

And I also agree that the USG panicked actions between Oct 2008-09 "perverted the role of the financial sector by putting public capital in first loss position before private capital."

At that time, nobody was thinking straight, neither the Govts nor the public, so we had that perversion. The establishment and functioning of the Financial Resolution Authority should put private Capital squarely in the first loss position. I do share the thought that, given its ability to draw credit from Fed and lend it forth, the banking system is but an quasi-extension of the Government, a Private-Public system. I further opine that reckless cheap credit creation via zero interest rates is no different than running a Fiscal Deficit. In fact, running a fiscal deficit is better than artificially cheap credit - at least the fiscal spend is in the control of the Govt (distorted by lobbying though), it can be specifically laid out on investments such as Education, Health, Nutrition, Transportation Infrastruture, Fundamental Research, Green Energy et al. The monetary mechanism, on the other hand, gets everything out of hand - the helicopter load of money could go into Gold, Stocks, Property, and what have you bubbles, finally yielding more pain than what was attempted to be averted

Innovation

http://winterspeak.blogspot.com/2010/04/alternative-healthcare-reform.html

"But, if healthcare is riddled with all the inefficiency from private insurance claimed by the left, and inefficiency in delivery claimed by the right, then this should get market forces acting to reduce costs and improve service as consumers exercise their choices..." | GOOD THINKING.

Great Job!

http://finance.yahoo.com/news/Senate-passes-massive-Wall-apf-921238202.html?x=0&sec=topStories&pos=3&asset=&ccode=