Friday, April 12, 2013

Vegas Street

Play for money is ancient, but we understand the Vegas mentality today all too well.  High risk, smart plays, and you just might hit it big.  If you could gamble with someone else's money, you'd have a ball!  Someone loses, someone (perhaps you) wins; it's appealing on many fronts.

There's little today to distinguish the casino floor from the trading floor in the financial marketplace.  Over the last century, the similarities have synced up rather nicely.  Two decades of deregulation; then in 2000 with CFMA, we legalized betting (credit derivatives, or credit default swaps; ), removing the last semblance of responsible management from the banking communities worldwide.  (It was illegal during most of the 20th century under the gaming laws, but in 2000, Congress gave Wall Street an exemption and it has turned out to be a very bad idea.) After the change, financial firms went wild.  Countries that refused to play found their national economies battered down by the international activity.  2008 gave us the first price tag; many Americans lost a quarter to half of their savings.  Many elsewhere in the world just went hungry and more than a million died in just the first year of fallout.
Vegas casino floor and Wall Street trading floor, much the same down to the last detail

Many things that happen on Wall Street and in London's financial district are "socially useless," says Lord Adair Turner, chairman of Britain's Financial Services Authority (FSA). The values that are created there are often not real or of any use to society, Turner adds. Paul Volcker, the former chairman of the US Federal Reserve, once remarked that the only truly useful financial innovation in the past 20 years is the ATM.

"The sector's high salaries tend to attract the best and brightest university graduates. The members of this youthful elite don't devise new products that make people's lives better, nor do they found new companies that further progress. Instead, these young financial wizards invest a great deal of money and effort to develop sophisticated financial products, the sole purpose of which is to generate more profit for both their employers and, ultimately, for themselves -- sometimes at the expense of other market players or even their customers."
"The truth is that the financial markets are controlling the politicians. If Sarkozy interrupts his vacation, the markets interpret his sudden return as a sign that the situation there is worse than they thought -- and promptly set their sights on the country. And if there is an argument between Italian Prime Minister Silvio Berlusconi and Finance Minister Giulio Tremonti, then the markets target Italy, because they doubt that the Italian government is serious about introducing austerity measures. The markets take advantage of every weakness and every rumor to speculate against one country after the next.
In doing so, they aggravate the crisis. Once a country has become the subject of rumors and speculation, other investors become nervous. Fearing further price declines, pension funds and insurance companies also start selling stocks and bonds. In the end, fear nurtures fear and a panic ensues."  ~Spiegel.De DIETMAR HAWRANEK, ARMIN MAHLER, CHRISTOPH PAULY, MICHAELA SCHIESSL AND THOMAS SCHULZ
Governments had the chance following the crash to reign in the financial industry and significantly reduce the allowable risks, but they failed to do so.  Regulatory changes, constrained by the influence Wall Street wields in governments, are known to be inadequate.  Title VII of the act is subject to numerous exemptions that will limit its effectiveness.

This morning's news, JP Morgan has posted a $6.5 Billion profit for the first quarter this year.  They provide no goods, no services, no resources, no consumables, no benefit to society.  These are their gambling winnings taken from the world economies.

Wall Street doesn't need to be regulated.  On the basis of behavior, it needs to be walled off, locked down, disconnected, and abandoned until they've zombie-ized and eaten each other instead of us.  Or, perhaps we should move them all from New York's Wall Street to the Las Vegas strip where everyone plays the same games.  At least then we could quit pretending they're somehow different.

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