Parasitic capitalism becomes canabalistic
Well, I called it… Following my trip to the US in May, I wrote a piece about an economic model that caused me great concern, parasitic capitalism. Who would have thought that only a short 6 months later my concerns would find solid ground?
The World has leveraged itself too far and now there’s no more debt to carry things forward. Sadly, the tax payers in most countries are footing the bill and the fat cat bankers that cooked up this mess are in many cases sitting pretty by living off the ridiculous bonuses they earned the last few years. Perhaps a windfall tax on the last 3 years bonuses of bank executives involved in CDO’s and subprime lending might be a good starting point? Surely, there are a few billion of “ill-gotten gains” that could be put to better use getting us out of this mess.
Bankers have always called for deregulation and self-regulation stating that free markets regulate themselves. It’s a shame that we believed that their motivations were honest and not, as they actually are, self-serving. Free markets are not controlled by market forces, oh no, they are controlled by people and people are inherently selfish and greedy (sorry guys, it's in our genetic material).
I hope the lessons learnt from this crisis include the recognition that capitalism is far from perfect and we should stop trying to cram it down everyone’s throats. What’s so bad about a bit of socialism? So what if certain industries are run effectively “not-for-profit”? It’s been proven that when company are run “for-profit” they end up doing whatever is necessary to produce good number for the next quarter. In the case of banks, this was supposed to deliver superior returns for shareholders. Well, oops, many of these banks are now nationalised or bust as a result and the shareholders have nothing…
I wonder if all of the bailouts will have the desired effect. I hope they do and some strict regulation is put in place to ensure that this mess doesn't happen again so soon. However, I suspect that this is only the beginning as soon more tranches of debt will become due and can't be rolled over...
We seem to be in market limbo. How low can it go?!?