The rise of Wall Street didn't only lead to financial catastrophe and oligarchy, it ushered in moral decay. Nothing demonstrates moral decay better than gambling. Once Wall Street mainstreamed bets on the market, the rise of casinos and lotteries (the poor/unsophisticated man's Wall Street) weren't far behind. We are now a nation of degenerate gamblers -- where investment in real and tangible production has been replaced by speculation.
I suspect we are headed for long term deflation. The reason is the engine of demand, the individual, in all Western economies has been severely damaged (potentially irreparably since there are no mechanisms to extract them from their peril, in fact, most actions being taken are increasing the risks/damage) and individuals are now aware of it (the psychological shift I have been waiting for for years). That damage alone is so central that all other factors, from monetary policy to stimulus to what have you, is merely noise. It dictates a deflationary spiral.
This is what happens when a functional social contract goes bust (the one that we had, unwritten and unstated, that people will share in the additional wealth generated by improvements in productivity). It's clear that the new social contract, one that is based on massive oversupplies of globally fungible labor at a globally normalized price, won't generate any meaningful increases in wealth, only volatility.
If the world's biggest pop star only made $25 million a year in total, something's very, very wrong. Where's the rest of the money? Why can't a resource as scarce as the King of Pop capture more value? The world's top hedge fund "managers" regularly pull in hundreds of millions. That's an order of magnitude difference. No wonder everyone wants to be a banker, investor, or [insert beancounter here]. There's no money left in anything else. That's the big problem behind the zombieconomy. We don't reward people for creating, growing, nurturing, or even remixing assets. We just reward them for allocating the same old assets.This is what an economy looks like when rentiers and not entrepreneurs dominate. Stagnant.
The current crisis could have been mitigated if increased household consumption had been financed through wage increases and if financial institutions had used their earnings to augment bank capital rather than employee bonuses. The current system has failed because it was built on an incentive system that did just the opposite.
A group of pensioners has been accused of kidnapping and torturing a financial adviser who lost over €2m of their savings. Mr Amburn (56) says he was burned with cigarettes, beaten, had ribs broken, was hit with a chair leg and chained up "like an animal".
That's a great term from the UK. It's the difference between generous public sector pensions and the weak/non-existent pensions the rest of us in the business world get (despite the fact that we actually produce the wealth).
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