A Few Thoughts On The Occupy Wall Street Movement

"The machinery by which Wall Street separates the opportunity to speculate from the unwanted returns and burdens of ownership is ingenious, precise and almost beautiful. Banks supply funds to brokers, brokers to customers, and the collateral goes back to banks in a smooth and all but automatic flow. Margins - the cash which the speculator must supply in addition to the securities to protect the loan and which he must augment if the value of the collateral securities should fall and so lower the protection they provide - are effortlessly calculated and watched. The interest rate moves quickly and easily to keep the supply of funds adjusted to the demand. Wall Street, however, has never been able to express its pride in these arrangements. They are admirable and even wonderful only in relation to the purpose they serve. The purpose is to accommodate the speculator and facilitate speculation. But the purposes cannot be admitted. If Wall Street confessed this purpose, many thousands of moral men and women would have no choice but to condemn it for nurturing an evil thing and call for reform. Margin trading must be defended not on the grounds that it efficiently and ingeniously assists the speculator, but that it encourages the extra trading which changes a thin and anemic market into a thick and healthy one. Wall Street, in these matters, is like a lovely and accomplished woman who must wear black cotton stockings, heavy woolen underwear, and parade her knowledge as a cook because, unhappily, her supreme accomplishment is as a harlot."

- The Great Crash: 1929, John Kenneth Galbraith, First Published 1955

The More Things Change…

It’s amazing to read the quote above from John Kenneth Galbraith’s great book on the stock market crash of 1929 and consider where we are today. Despite the fact that the events above happened over 80 years ago, it’s plain to see that the modus operandi of Wall Street writ large has changed little.
Smoke, mirrors and heavy doses of propaganda laden obfuscation are required to keep the masses complacent and ignorant of the dangers Wall Street places on the shoulders of ordinary people.
Virtually unlimited leverage for investment banks? Check. CDS markets traded over-the-counter and away from any transparent exchange? No problem. CMOs and CDOs as healthy vehicles to efficiently distribute and allocate risk? Foolproof. It all works fine until it doesn’t. Enter stage right, the crash of 2008.

The average American citizen is quickly falling behind their global peers in terms of education levels and many find the topics of economics and finance far too dense to comprehend. So it’s no small accomplishment that the enormous amount of taxpayer bailouts and Fed monetary injections have finally awoken the American middle and lower classes up to the reality of a terribly unbalanced financial system. This awakening is currently represented by the Occupy Wall Street protests. However, lest you think these protests will simply go away once winter sets in, think again. Even if the official Occupy Wall Street protest dissipates in the next few months, the word has gotten out and the message is finding an interested audience that fails to conform to traditional political boundaries.

How Occupy Wall Street Will Change Things

Suddenly, all over this country students are questioning their economics professors about the standard dogma they are being taught which is visibly failing all around them. How can the PhD.’s preparing tomorrow’s generation of finance and economic leaders continue to teach Keynesian doctrine with a straight face? How can they possibly defend the bailouts and the Fed’s enormous hand in manipulating asset prices as anything even remotely resembling capitalism?

As these students graduate and begin their own careers over the next few years (assuming they find jobs in the first place) they will enter the workforce much more aware of the slight of hand that has taken place whereby organic growth was replaced with extremely dangerous debt growth. Then they’ll stop and think about their own student loans and how the non-dischargeable nature of those loans chain them to the very system they are questioning. These students will be heavily in debt, face few good job prospects and will thus have plenty of time on their hands. Hello political volatility.

And what about the lower and middle classes? It really doesn’t matter what your political affiliation is, if you make less than some magic number defined as “rich”, say the $250k that is currently bandied about, neither political party is really working for you. Both parties have contributed wildly to the overspending that currently burdens our fiscal and monetary accounts. Both parties are deeply in bed with the banking industry. Arguing over who supports Wall Street more is simply a matter of degree.
Both parties support the monetary intervention of the Fed and the inflation that has slowly rendered our country uncompetitive since 1971, a role the Fed was never originally envisioned to play.

If you’re unemployed due to your job being shipped overseas, have been kicked out of your house by a robo-signing bank, worry about the tax burden your kids will face down the road, concerned that your public or private pension will be woefully inadequate to maintain your current living standards or have mountains of non-dischargeable students loans owed to Sallie Mae, you should be paying close attention to and likely supportive of the OWS movement.

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