Wednesday, July 4, 2012

Cantlon: Another Great Recession is on horizon

I was a little startled to see how my friend Tom, whose style is normally quite carefully measured and his arguments stolid and calm, breaks out in today's column to a new level of alarm and apparent deep anger at the craven gamblers who hold our economy hostage to profit at any cost.

He's been reading Matt Taibbi, who's always inspiring in showing how to combine solid reporting with a strong point of view and emotional clarity. Taibbi takes no prisoners, and is often ahead of the pack in getting to the root of a complex problem.

The house always wins.
But I gather Tom's just reached his boiling point on the greed-is-good culture, which ought to soundly piss off everyone who cares more than a gnat's eyelash about social stability and economic security. It truly amazes me that Americans continue to tolerate the crazy casino that has accumulated on the foundations of what was once a perfectly sensible trade in equities as the basis for capital concentration to accomplish positive objectives. As we've seen over the past few years, everything we care about is at risk every day to the greedy whims of rank sociopaths.

The obvious question that Tom raises is how to go about containing the threat. Miles and miles of ink have been spent discussing how we could monkey around on the fringes and maybe do a little good. A tax on equity trades is one example of trying to rig incentives to make investors act more sensibly. I'm afraid it's too late for this kind of small thinking, though. Already the sociopaths have gathered  too much wealth to themselves to care much about fingernail parings from their profit margins, so this sort of reform would do little more than hurt people and companies who are already investing sensibly to serve real needs.

What makes sense to me is finding a way to legally define and strictly limit purely speculative and short-term investment, for example by requiring hard settlements and transfers, pricing equities according to investment term (like bank CDs, with penalties for early resale accruing to the invested company), and outright bans worldwide on computer-triggered trading. If we can slow the system down, we can hope that traders will think more carefully about what they're doing, and if we rig the system to favor longer-term investment, we'll see better reflection of real values.

Considering that even brief discussion of this area of public policy causes immediate eye-glazing in most people, I have to wonder what, with his call to the streets, Tom is hoping they will write on their protest signs. Perhaps he'll expand on this next week.

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