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Gordon Gekko Redux


Capitalism without greed is a carnival without a roller-coaster.  To paraphrase Gordon Gekko, the villainous Wall Street investor portrayed by Michael Douglas in the movie “Wall Street,” greed is good. Now,  I can hear every liberal in America screaming their condemnation, especially in light of the Goldman-Sachs allegations, but hear me out before you misinterpret my comments.

Our system is built on the business cycle and that cycle runs the full gamut from bust to boom. In another context, the economy is fueled by fear and greed. Fear corresponds to the bust cycle and greed corresponds to the boom cycle.

What has happened over the last few years offers a class in Capitalism 101. Let’s trace the cycle. During the late 90’s and into the early 2000’s we saw the dot com boom. The stock market broke 10,000, basically tripling in seven years, and people were jumping onto the Wall Street bandwagon as fast as they could.

Think about it. Prior to 1999, had anyone even heard the term day trading? Just as fast as you could quit your job in order to day trade, the markets tanked, signaling the decline in the economy that lasted until 2003. We would have gotten out of the funk sooner if it had not been for 9/11. Be that as it may, from 2003 until 2007, we killed it yet again and the market soared to an all time high of 14,200 on the Dow.

What you need to remember about this period is that it featured several historic governmental interventionist events. First, Glass-Stegall was repealed in 1998. That allowed the banks to buy the brokerage firms.  Make no mistake, it was the banks who fueled the sub-prime crisis because the government, through the repeal of Glass Stegall, put the rooster in charge of the hen house.

Now, I have to get a little bit spiritual on you. First, because it is my nature, and secondly, it illustrates what I am talking about; and that of course is man’s propensity for greed. We are born, all of us, with an instinct for self interest. We all act in a self-interested way. It is the nature of mankind. We are fallen, broken, far from perfect. The issue is whether or not we are good people who occasionally do bad things, or flawed people who occasionally do good things. I will leave that to all of you for self examination. But, frame the argument in the context of the business cycle and you can see how that narrow self interest can be catapulted into full-blown greed.

If there is an easy way to make money, people are going to find it in a free society. So, the issue now becomes should we become less free in order to reign in self-interest. There is the Goldman-Sachs argument in a nutshell. So, how is greed good? Without a clear sign of self interest, how will we ever be able to identify the top of the business cycle?  Without that ability, nobody would ever profit. It would become impossible.

You see, folks, capitalism requires winners AND losers. That becomes the sticking point in the liberal argument. Liberals believe that nobody should ever lose. That goes for everybody getting a trophy even if their soccer team stinks, right up to Wall Street not having the right to make money unless everybody gets to make the same amount.

In my context, greed isn’t really good; but, it certainly is necessary.

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