Feeding The Beast

We have a habit of creating Beasts in America.  The friendly creature that at first seems so helpful and productive that we feed it and nourish it and come to rely on it, until it grows bigger, and hungrier, and soon we realize that we can't live without it. We realize that It demands sacrifice.

If you're a conservative that is probably your view of the federal government - hence the conservative concept of "starving the beast" by cutting taxes to necessitate the cutting of programs.

I now understand that perspective better because although I don't view the government as a Beast (at the moment), I do see the Beast that is the financial sector.

We have gotten to the point in this country where we have hitched so many wagons to the stock market and investment culture, most notably the retirement savings of a generation, that our entire national morality has been warped into the Cult of the Stock Market Beast.  It was good to us, and now we are obsessed with its every twitch and grimace because our livelihoods depend on its mood.  What was good for the Beast was good for everyone.

The problem is that investments have gone from being the fuel for progress to being parasites on productivity.  A pretty standard Return On Investment for a hedge fund is 20+%.  That means if I have $500,000 to invest I could make $100,000 a year DOING NOTHING.  Whereas if I was an Engineer, Farmer, Funiture-maker, someone that actually does something or makes something - I have to work for a living.

Not only that, but the investment culture, because it is naturally populated by the more powerful and more well connected, has lobbied government to tax investment income differently than regular income.  So even if I make $100,000 as a Doctor, Lawyer, Farmer, Engineer, Filmmaker, whatever, I'll pay more in taxes on that income than I would if I made $100,000 as an investor.

Isn't that kind of insane?  Investment has its purposes, but we've developed a culture surrounding it that is entirely unhealthy - it's a culture in which the stock market's response to world events and policy announcements is given tremendous weight in the public mind.  We get hordes of financial commentators worshipping the market and viscerally reacting positively to anything that makes it go up and negatively to anything that makes it go down.  We get scenes like these, in which Peter Schiff repeatedly warns throughout 2006 and 2007 that the market isn't behaving rationally and is destined for a fall, while investment-class blowhards literally laugh in his face - because anything that is making them money MUST be right and shouldn't be questioned.

If we learn anything from this economic crisis, it has simply got to be that producing goods and services should be valued more highly than having a good return on investment.  We put too high a value on the ability to shuffle money around to create more money, because we only looked at the percent return on paper.  The financial sector grew into a Beast because when we fed it money, it gave us back more money - and we didn't question how it did it, we just celebrated that it did.  Now it has turned on us and instead of shitting out money it's just shitting all over us.