morphing capital: Is it Greed or is it The System?

Thursday, October 27, 2011

Is it Greed or is it The System?

In an article in The Guardian, Slavoj Žižek states: "The problem is not corruption or greed, the problem is the system that pushes you to be corrupt."

Žižek is absolutely correct. The OWS calls for ending greed & corruption are off the mark. It's the system (the current form of capitalism) that sets up the environment for greed & corruption to flourish. Actually the system demands it as the rate of profit falls. The globalization of the labor market has produced a downward spiral in wages and the financialization of the US economy - money making money, in other words - speculation: CDOs, ABSs, SWAPS, astronomical leverage and so on. This is the formula for financial crises, each more drastic than the prior one. Is the disintegration of the Eurozone our next crisis?

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Why Morphing Capital

"The times they are a changing"
Bob Dylan

As an individual equities trader since 1985 (mostly part-time), I've been through several business cycles, through market tops and bottoms. I believe this time is different. (And yes, I'm aware of the overuse of this phrase) My belief evolved from my participation in the markets and my observation of the world around me.

Capitalism I believe, has entered a different phase and cannot be modeled on systems of the past decades. First, we had Industrial Capital, which gave us the industrialization of England, Europe, the US and the rest of the industrial world. It gave us the Equities Bull Markets from the mid 30's to the late 60's. A change came in the 70's. Making things, became less profitable, i.e. Industrial Capital's rate of profit began to decline, despite the squeeze it put on labor in the industrialized world. Globalization (use of cheap labor & resources, new markets) prolonged this phase but the rate of profit continued its decline. Then, with deregulation in the 1980's, came Finance Capital. It gave us a booming stock market from mid 80's to 2000 via buyouts, increased leverage and a private equity boom. Capital's squeeze of Labor intensified. It's last hurrah came with the mortgage securitization boondoggle, which pulled in the people who had avoided the dotcom bubble but could not resist nodoc loans. In the crash of 2008, government bailouts transferred the private losses of Finance Capital to government balance sheets in an attempt to stabilize it. Now, Finance Capital (money making money) is imploding and taking down the sovereigns with it. Who or What is left to be exploited?

The purpose of this blog is two fold:

First -- my selfish need to understand. My trading, my research (see book list) and readings of other blogs (see blog list) are swimming around in my brain and I need a place to organize my thoughts and synthesize my ideas.
Second -- I need feedback. My hope is that the questions raised here will stimulate others and start a conversation.

Disclaimer: I am not a trained economist nor a professional trader.