Once again we hear the hackneyed and ubiquitous rationale “too big to fail” as governments bailout yet another irresponsible enterprise! This time it’s a country, Greece. Looming on the horizon are Spain, Ireland, and California. Who knows maybe the entire economic system is threatened! When you think critically about the situation then several embarrassing questions immediately arise:

WHO’S PAYING FOR ALL THESE THESE BAILOUTS?

Unfortunately the answer is simple, WE ARE. Each and every one of us but primarily it is the seniors and retirees that will bear the brunt of the bailout costs via inflation as the government “prints” (via “borrowing”) more and more worthless money to “pay” for the bailouts. Those of us who have diligently worked and saved all our life are getting screwed. In short the “grasshoppers” have managed to take charge of the economic system and are busy plundering the ants storehouse. Somehow the hedonistic grasshoppers seem to think that the ants are simply suckers to worked so hard and saved for the future (as the President said recently no one needs that much money). The end result for everybody is unemployment and poverty. Finally we’re all “equal”. I guess that seems “fair”, at least it is to the grasshoppers.

Moreover the grasshoppers justify this looting by citing fairness or morality or some other philosophical tenet (but never responsibility). They truly believe they have a moral obligation to lie, loot, and impose tyranny in order to achieve their goals (always justifying their actions by citing concepts of democracy, fairness or compassion). Combating such “true believers” is difficult as they see nothing wrong in their methods in order to achieve their goals. When things do go wrong then it is always somebodies else’s fault never theirs. The grasshoppers never seem to take responsibility for their actions (isn’t this the definition of a politician?). This goes hand in hand with perversion of economic thought that is destroying our industrial base and exporting jobs while unemployment grows and the national debt escalates.

As the situation escalates then it’s likely our money will become more and more worthless. Hopefully before the economy crashes under the onslaught of hyperinflation we can take corrective action but if recent indications of greed and complacency are any indication of the future I’m not hopeful.

HOW DID WE GET IN THIS SITUATION?

This is an interesting question. For fifty plus years we have modified our basic economic system via tax and tariff policies, encouraged misguided free trade policies, gutted our anti-trust laws, ignored the lessons of the past by allowing corporate merger after merger to concentrate more and more economic power in the hands of fewer and fewer individuals, and repealed or ignored the regulations enacted by past generations after some bitter and painful lessons. Aided and abetted by congress, indeed sometimes even forced by congress, an incestuous relationship of money has forged an economic system without consequences except of course for the ultimate consequence of complete economic collapse.

The result is that there are no checks on greedy excesses or wishful thinking (i.e., ASD or arrogant self-delusion). This change in our economic system has actually made it more profitable to be irresponsible than prudent. Fewer and fewer corporations are run for the benefit of the stockholders. Instead the corporations are run by corporate executives for their own personal benefit. Stockholders while technically in charge actually have abrogated their responsibility to CEOs and other corporate executives who really run the board of directors and determine policy rather than prudently running the company. In part this is because more and more stockholders indirectly own stock via mutual funds, retirement accounts, 401k plans and the like. The corporate executives gather voting proxies from these sources and are able to run the companies as their own personal fiefdom to be exploited by them.

This disastrous situation produces such weird results as the “golden parachute” whereby incompetent executives can’t be fired unless a significant fraction of the companies net worth is payed out in termination benefits. Or the succession problem where when a competent executive retires it becomes problematic whether a competent and prudent replacement can be found (unfortunately the successor is often based on nepotism or selected from a network of corporate buddies and has little to do with qualifications or competence).

Or worse yet is the all to frequent occurrence of generating a large cash flow by taking risky gambles, selling off corporate assets (hence lowering the value of the corporation), and leveraging their assets to the hilt. By tying executive pay to this felonious cash flow the executives enrich themselves at the expense of the stockholders and there are no consequences imposed on these executives when the inevitable failure occurs. When things go bad these perpetrators used to simply walk away with whatever loot they can carry but nowadays they have added a new twist,”too big to fail”.

By allowing more and more concentration of economic power in the hands of fewer and fewer individuals we have removed responsibility from the economic system by making the corporation “too big to fail”. Failure of these huge enterprises now creates huge unemployment, social upheaval (e.g., the recent troubles in Greece), and REWARDS those greedy or incompetent people that created this dire situation via bailout money. Now when a corporate or government entity screws up then bailout money is made available. Since this creates some additional cash flow then the people responsible now have managed to not only pillage their corporations but they have been able to “convince” the government to use its power to loot the taxpayers of the country for their benefit.

Well, why don’t we stop all this you might ask. Not likely! Government employees and politicians are often promised lucrative jobs after the termination of government service to support this corrupt and ultimately destructive system. Hence effective laws are repealed, regulations ignored and laws proposed to further enrich those in charge as the country goes down the drain.

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Tags: Economics, politics

This entry was posted on Friday, May 14th, 2010 at 2:50 pm and is filed under Economics, Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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