Simon Johnson writes What Is Goldman Sachs Thinking? "The next financial boom seems likely to be centered on lending to emerging markets. Sam Finkelstein, head of emerging markets debt at Goldman Sachs Asset Management, summed up the prevailing market view – and no doubt talked up his own positions – with a prominent quote in Monday’s Financial Times (p.13, front of the Companies and Markets section):
‘Debt-to-GDP ratios in the developed world are about double those in emerging markets and they’re growing. This makes emerging markets interesting because you’re pick up incremental spread [higher interest rates compared with developed world rates], and in return you’re actually taking less macroeconomic risk.’
This is a dangerous view for three reasons."
"Goldman Sachs knows all this, of course. But, as they will tell you correctly, reforming incentives or even discouraging this kind of cycle is definitely not their job. Their role is to make money, pure and pretty simple given their market share. It’s the responsibility of government to make the world financial system less dangerous. "
2 comments:
I know what Goldman Sachs is thinking, all the time.....
They are thinking (individually, and hence collectively) "how do I make as much money in as short a period of time as possible?".
Here's something for the rest of us to think about (excerpted from Ellen Brown on Huff Post).
"While Congress caters to the banks, the states (and individuals) have been left to fend for themselves. Where is the money to come from to pull off the impossible feat of balancing their budgets? Bleeding a VAT tax out of an already-anemic working class is more likely to kill the patient than to alleviate the disease. A more viable and equitable solution would be to tap into the only major market left on the planet that is not now subject to a sales tax - the "financial products" that are the stock in trade of the robust financial sector itself.
A financial transaction tax on speculative trading is sometimes called a "Tobin tax," after the man who first proposed it, Nobel laureate economist James Tobin. The revenue potential of a Tobin tax is huge. The Bank for International Settlements reported in 2008 that total annual derivatives trades were $1.14 quadrillion (a quadrillion is a thousand trillion). That figure was probably low, since over-the-counter trades are unreported and their magnitude is unknown. A mere 1% tax on $1 quadrillion in trades would generate $10 trillion annually in public funds. That is only for derivatives. There are also stocks, bonds and other financial trades to throw in the mix; and more than half of this trading occurs in the United States.
A Tobin tax would not generate these huge sums year after year, because it would largely kill the computerized high-frequency program trades that now compose 70% of stock market purchases. But that is a worthy end in itself. The sudden, thousand-point drop in the Dow Industrial Average on May 6 showed the world how vulnerable the stock market is to manipulation by these sophisticated market gamblers. The whole high-frequency trading business needs to be stopped, in order to protect legitimate investors using the stock market for the purposes for which it was designed: to raise capital for businesses. As Mark Cuban observed in a May 9 article titled "What Business Is Wall Street In?":
Creating capital for business has to be less than 1pct of the volume on Wall Street in any given period. . . . My 2 cents is that it is important for this country to push Wall Street back to the business of creating capital for business. Whether it's through a use of taxes on trades, or changing the capital gains tax structure so that there is no capital gains tax on any shares of stock (private or public company) held for 5 years or more, and no tax on dividends paid to shareholders who have held stock in the company for more than 5 years. However we need to do it, we need to get the smart money on Wall Street back to thinking about ways to use their capital to help start and grow companies. That is what will create jobs. That is where we will find the next big thing that will accelerate the world economy. It won't come from traders trying to hack the financial system for a few pennies per trade.
Besides protecting legitimate savers and investors by exempting stock held five years or more, they could be exempted from a Tobin tax on total stock purchases of under $1 million per year. That would make the tax literally a millionaire's tax -- and a small one at that, at only 1% per trade."
Now back to me.
Since the Democratic Congress and the President apparently don't have the courage to properly regulate these organizations, maybe they can at least tax them appropriately. I doubt it, even though imposing new taxes is the one thing, according to most Republicans, that Democrats do best.
Imagine that, controlling a destructive force in our society, and reducing the deficit/debt at the same time.
So why won't it happen?
TT
Even before I could hit the send button on my rpevious post this was probably already on the wires...
So why won't it happen?
Because Sen. Dodd and others are owned by Wall Street and would rather tax FDIC accounts than tax Goldman Sachs and JP Morgan. These FDIC accounts (and the associated tax) would be mostly hitting low and middle class depositors as $250,000 dollars of insurance is chump change for Wall Streeters and their clients.
WASHINGTON (Reuters) - Senator Christopher Dodd is considering a proposal to change the funding of the financial reform bill to a funding source that would raise the Federal Deposit Insurance Corp premium ratio to 1.35 from 1.15, according to a memo being circulated on Tuesday.
Dodd, the chief architect of financial reform in the Senate, is circulating the possible offer as an alternative to a $19 billion tax on financial firms -- a proposal that has threatened its final passage.
God forbid we put an actual tax on the financial firms who took us to brink of economic armageddon 2 years ago.
This is the leadership that the democrats are showing. What a joke.
We are all being fleeced to maintain the status quo for the uber-wealthy and their posse (aka our political leaders and financial services industry fraud-based bonused executives).
Sorry for the ranting nature, but this is like watching someone steal the future of the nation in slow motion.
TT
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