Thursday, August 11, 2011

A conspiracy theory I can subscribe to

Conspiracy theories are the province of cranks, and for good reason. After all, "Never ascribe to malice what can be explained by stupidity," and "Hydrogen and stupidity are the two most common elements in the universe."

Still, I can't help but notice that hedge funds make money when the market is unstable. And that hedge funds control vast quantities of capital, thus exerting huge influence on the market. And, that markets are currently unstable.

Does anyone else see anything wrong with allowing the interests of the rich and powerful to include global financial instability?

These people leveraged and gambled the entire world into a financial crises. Then they made taxpayers around the world bail them out. Our financial recovery depends on some stability, but stability doesn't make hedge funds money, and by golly those fund managers have a lot of lost bonuses to make up for! So somehow, we wind up with massive financial unstability again.

I am no Communist. I understand and appreciate the necessity and value of a capital market. Buying and selling stocks really does add value to our economy. But hedge funds are a different beast. They work in exotic derivatives and leverage margins so high that there is really only one word to describe what they do: gambling.

We are allowing a relatively small group of people to gamble with our economy. Worse, when their bets fail, we bail them out. Even worse, their bets only pay off when the economy is volatile. Worst of all, we coddle these blood-sucking parasites as if they were the best and brightest - as if they were "job creators." There is simply no reason to allow hedge funds to exist. The SEC already bans all sorts of transactions indistinguishable from gambling. It just needs to ban a few more. Corporations exist not by divine right, but because of the value they bring to society. When they stop creating value for society, there is no moral reason society needs to allow them to continue to exist. It is past time that we revise our corporate statues to exclude legalized gambling that requires market volatility.

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