Categories
Economics Financial Crisis

Theories of the Financial Crisis: Goldman Sachs Did It!

[digg-reddit-me]Matt Taibbi most famously posited that the financial crisis was the result of Goldman Sachs’ self-interested manipulations. He saw this single investment bank as the malevolent force behind the latest financial crisis – as well as speculative bubbles throughout history:

The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money…The bank’s unprecedented reach and power have enabled it to turn all of America into a giant pump-and-dump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere – high gas prices, rising consumer-credit rates, half-eaten pension funds, mass layoffs, future taxes to pay off bail-outs. All that money that you’re losing, it’s going somewhere, and in both a literal and figurative sense, Goldman Sachs is where it’s going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth – pure profit for rich individuals.

As over-the-top as Taibbi’s description might be, it wasn’t wholly inaccurate. Putting aside the exaggerated, macho, Hunter Thompson-esque prose, and even Felix Salmon, a mainstream blogger and financial writer for Reuters, finds a great deal of truth in this portrait of Goldman Sachs:

I don’t agree with all of Taibbi’s article, but I’m surprised at how much of it I do agree with…

Adding credence to this portrait of a massive bubble-making machine were the recent best-ever quarterly profits by Goldman in the midst of a recession for the rest of the country. Graham Bowley and Jenny Anderson of the New York Times summarized this state of affair simply in their piece:

Most of Wall Street, and America, is still waiting for an economic recovery. Then there is Goldman Sachs.

The free market digest The Economist immediately saw the significance of these profits so soon after government aid:

For a firm that probably would have collapsed without government capital, debt guarantees and fast-track approval to turn itself into a commercial bank (not to mention a multi-billion-dollar payout as a counterparty of American International Group), such largesse is cheeky at best, distasteful at worst. It has already drawn rebukes on Capitol Hill, even though Goldman has repaid the government’s $10 billion preferred-equity investment.

That Goldman Sachs was going to be a big winner in all of this was pretty evident as early as October when I included this as one of the 11 lessons I learned while trying to figure out the financial crisis: “Goldman Sachs always wins.” What was evident already was that – as Russell Roberts pointed out in the Times – Goldman Sachs had “won” the bailout game:

It is deeply disturbing that Lehman Brothers was a long-time competitor of Secretary Paulson’s former firm, Goldman Sachs. It is equally disturbing that the chief executive of CIT, Jeffrey Peek, has been a contributor to Republicans rather than Democrats. This could be mere coincidence. But the current and ad hoc bailout strategy inevitably creates suspicion and destroys faith in our economic and political system.

Aside from Taibbi – who sees Goldman’s tentacles at the root of most of America’s worst economic  moments through history – most observers do not see Goldman Sachs as the deliberate instigator of the current crisis. They see it instead as an opportunistic organization – one that navigated through the crisis with aplomb – as it saw its rivals vanquished and as it shored up its own business. It also played a significant role as the leader of the financial industry as it used political influence to push for various policies including a relaxation of regulation. The oversize influence of the financial industry should be the next Theory of the Financial Crisis I cover.

But the key point now is that Goldman Sachs – if successful in opposing most common-sense reforms – will be substantially to blame for the next crisis.

[Image by nydisccovery licensed under Creative Commons.]

Categories
Barack Obama Economics Health care Politics

The Lesson of 1993/1994

[digg-reddit-me]Like a lingering odor, the failure of Hillarycare in 1993 is hanging over this perilous moment in Obama’s presidency. It’s true that Clinton’s health care plan never got this far legislatively.  By presenting a complicated plan to Congress and trying to bully it through, the Clinton administration made a huge tactical blunder. But it is clear that both sides sense that this is the moment when health care reform could be derailed. While the Democrats and Obama have long been planning on pushing through health care, what is going on now is pure political blood sport. This is a zero sum game. This is a Democratic attempt to prove that they can accomplish something that is popular and helps the middle class and which they have been trying for sixty years with only moderate success to enact. This is the Republican attempt to protect the status quo and to slingshot their way back to power as they did in 1994.

Bill Kristol has said that this is the week to stop health care reform – to not worry about being obstructionist or trying to appear constructive:

There will be a tendency to want to let the Democrats’ plans sink of their own weight, to emphasize that the critics have been pushing sound reform ideas all along and suggest it’s not too late for a bipartisan compromise over the next couple of weeks or months.

My advice, for what it’s worth: Resist the temptation. This is no time to pull punches. Go for the kill.

Beneath the veneer of policy disagreement that Kristol is using, it’s clear he is advocating pure obstructionism. He senses opportunity. Which is why he and many other Republicans are now all repeating the same talking points: Obama’s health care reform is an “experiment” with your health; it will ration health care; you will lose the insurance you have now; the government will impose itself between you and your doctor; socialism! These rather familiar refrains are being thrown about for one purpose – and it has little to do with health care.

As Senator Jim DeMint rather infamously declared in a secret call to anti-reform advocates:

If we’re able to stop Obama on this it will be his Waterloo. It will break him.

Newt Gingrich echoed this point:

This could be the bill that drags his whole presidency down and they look back on it and suddenly the whole thing is unraveled.

And the Democrats seem to agree – as the former Organizing for America sent out DeMint’s statements to rally supporters – and Mark Kleiman, a Democratic blogger said, “This bill is make or break for the Democratic Party.”

The Republicans are trying to break the Obama presidency – as they did Clinton’s. Clinton came back, but he never had the same political support.

Meanwhile, moderates play an interesting role in this political blood sport. They decry both sides for being mean – and suggest everyone get along. They talk about bipartisanship, suggest the Democrats move slowly, and they feel queasy at the prospect that the Democrats – by actually governing and doing what they promised they would do – might be overreaching. Matt Yglesias ably responded to this point:

It’s not as if what happened in 1994 was the congress passed Bill Clinton’s big health reform package, then the public didn’t like it, then in revulsion they turned against Democrats. Nor did congress pass the proposed BTU tax, then the public didn’t like it, and then in revulsion they turned against Democrats. The noteworthy thing about the first two years of the Clinton administration was the lack of ambitious progressive programs put in place. And you could say the same about Jimmy Carter. Whatever it is people reacted against in 1978, 1980, and 1994 it wasn’t actually existing left-wing governance.

Ezra Klein – on the same theme – explained the lesson one of the key architect’s of Obama’s strategy learned from 1993:

Emanuel has carried that lesson with him into the Obama White House. “The only thing that’s not negotiable is success,” he likes to say. The worst outcome for the party — in part because it’s the worst outcome for its marginal members – is defeat. Voters punish defeat.

If the Democrats succeed – as Bill Kristol explained in 1993:

It will revive the reputation of the party that spends and regulates, the Democrats, as the generous protector of middle-class interests. And it will at the same time strike a punishing blow against Republican claims to defend the middle-class by restraining the growth of government.

Despite this moment of peril, Obama’s strategy to get health care through is still intact. His administration has learned the lessons of 1993- 1994 well – perhaps too well.

But make no mistake as you see the charges thrown about by both sides in these next few weeks. This battle is no longer about policy for either the White House or the Republican Party. (Though the right policies will be essential to its long-term success.) Right now this is political blood sport – it is about whether or not the Obama administration will be broken by obstructionist elements. The short-term success of the administration will be determined by whether or not they succeed in the next few weeks to pass something substantial; their long-term success will depend on the policies they are able to include.

[Image not subject to copyright.]

Categories
Barack Obama National Security Politics The Opinionsphere The War on Terrorism

Sick of all this naivete about Obama

[digg-reddit-me]I’m sick of all this naivete about Obama.

And no, I’m not talking about those who moon over him and who believe he can do no wrong. I’m talking about those who now are on their high horse acting betrayed because Obama isn’t doing what they want.

Specifically I’m talking about this and this.

The problem as I see it is simple: under Bush, many critics of the power grab that was Bush’s War on Terror rallied together against him – and in 2008, many of them rallied around Obama. In working for a common cause they seemed to forget that between them they had some pretty serious disagreements.

For example, on one hand, there were those who I’m going to label progressives and/or libertarians who believed that the proper response to terrorism was law enforcement and believed the term “war” was inappropriate and who opposed:

  • the illegal war for oil against Iraq;
  • the warrantless wiretapping that violated the Constitutional protections of the Fourth Amendment;
  • any form of indefinite detention;
  • torture;
  • the practice of rendition (from Bill Clinton to its expansion under Bush);
  • the state secrets privilege.

Also, progressives opposed:

  • the practice of targeted killing;
  • the flouting of international law.

And then there were the liberals who believed that “war” was the correct term for the nation’s struggle against terrorism, but who opposed:

  • the “dumb war” against Iraq – on the basis of the fact that it would hurt our interests;
  • the defiance of the FISA statute that limited the power of the executive branch;
  • indefinite detention at the sole discretion of the executive;
  • torture;
  • the expanded rendition program under George W. Bush;
  • the overuse of the state secrets privilege.

Also, liberals opposed:

  • the use of signing statements to eviscerate laws passed by Congress;
  • the defiance (even denial) of the checks and balances between the branches of government.

The liberals and progressives/libertarians agreed that they needed to oppose Bush’s power grab. They disagreed though on the proper response to terrorism.

Obama, being a politician, did not seek to emphasize these differences among those who supported him. He finessed the issues by stating the liberal positions strongly – but at the same time, he made no secret of the fact that he was a liberal instead of a progressive.

Obama has made his positions clear. As he said in the campaign:

Just because the President misrepresents our enemies does not mean we do not have them. The terrorists are at war with us…When I am President, we will wage the war that has to be won, with a comprehensive strategy with five elements: getting out of Iraq and on to the right battlefield in Afghanistan and Pakistan; developing the capabilities and partnerships we need to take out the terrorists and the world’s most deadly weapons; engaging the world to dry up support for terror and extremism; restoring our values; and securing a more resilient homeland.

He has since maintained that he believes we are “at war” with Al Qaeda:

Now let me be clear: we are indeed at war with al Qaeda and its affiliates. We do need to update our institutions to deal with this threat. But we must do so with an abiding confidence in the rule of law and due process; in checks and balances and accountability.

On Iraq, he famously said:

I don’t oppose all wars… What I am opposed to is a dumb war. What I am opposed to is a rash war.

When Obama voted for the FISA compromise, he did so on the grounds that the program was needed. He explained that he had opposed it because Bush had enacted it in defiance of the Congress and established law:

The exclusivity provision makes it clear to any President or telecommunications company that no law supersedes the authority of the FISA court. In a dangerous world, government must have the authority to collect the intelligence we need to protect the American people. But in a free society, that authority cannot be unlimited.

Obama has repeatedly stated that he opposed indefinite detention at the whim of the executive – but did not say he was opposed to it in every form.

In our constitutional system, prolonged detention should not be the decision of any one man. If and when we determine that the United States must hold individuals to keep them from carrying out an act of war, we will do so within a system that involves judicial and congressional oversight.

On rendition and torture, Obama has kept his word. On state secrets, he has not so far.

This isn’t to say that progressives and libertarians shouldn’t criticize Obama – but on most of these issues Obama has been clear and consistent. And given the reasonable alternatives, it’s hard to see who was a better candidate. (Though I can already see the comments about Ron Paul being written.)

The fact is: Obama is a significant improvement over Bush – and the changes he has made and is making are significant. It matters whether or not there is a check on the executive branch; it matters whether or not we have a president who does not flagrantly disregard the law. That’s not a reason to give up what you believe – to keep pushing the civil libertarian case against Obama.

But at least be honest about it.

Categories
Economics Health care Politics

A Distinctly American Health Care System

Jacob Weisberg in Slate has an interesting take on health care systems as reflecting the society of which they are a large part. The piece is worth checking out. Here’s his short description of America’s health care:

America’s evolved, undesigned system is also an expression of our culture at its best and it worst. Health care in the United States is innovative, entrepreneurial, expensive, litigious, and wasteful. It is decentralized, driven by self-interest, excellent at the high end, and increasingly unequal. It resists acknowledging trade-offs or limits and is characterized by shocking gaps in basic care.

Categories
Economics Environmental Issues Health care Politics Videos

Health Care Reform To Stimulate the Entrepreneurship

[digg-reddit-me]

Paul Gigot of the Wall Street Journal editorial page makes the same argument many Obama critics have been making – beginning with Rush Limbaugh who attempted to blame the financial collapse on the fear markets had at the prospect of an Obama victory in the 2008 election to the present, as Gigot attempts to blame any lingering effects of this financial collapse – and its economic aftereffects – on fear of “the Obama agenda.”

But neither Gigot nor Limbaugh nor any other right-wingers seem to give any consideration to those drags on risk-taking that our current status quo creates.

Gigot apparently thinks that raising taxes on a handful of powerful individuals has a greater effect on reducing risk-taking than the prospect of global warming, than the lack of a health care safety net has on potential entrepreneurs.

The difference between Gigot and myself is that Gigot is concerned that this handful of powerful people will be less likely to take risks with their vast sums of money – along with a dozen or so major corporations having less ability to generate major profits by externalizing costs for pollution and health care to the society at large. If a corporation has to pay for the damage it causes, then it is – by Gigot’s standards – less free. This is true only in the sense that a tyrant is less free than an ordinary citizen because he is no longer able to impose his way upon others.

If one wants to stimulate the economy by encouraging small businesses and entrepreneurship, there are few better ways to do it than to pass some sort of health care reform that makes it cheaper and more available outside of large employers. As Daniel Gross, financial columnist for Newsweek and Slate, explains:

An affordable national health care policy, which could allow people to quit their jobs and launch businesses without worrying about the crippling costs of premiums or medical costs, might be a better spur to risk-taking than targeted small-business loans.

I say this as a former small business owner and entrepreneur myself. One of my biggest concerns in working outside of an established business was that I was not able to get my health care through my job – which meant astronomical monthly premiums for a service I did not use – but which I could not be sure I would not badly need.

Gigot and other right-wingers are not focused on small business and entrepreneurs – although they does invoke them as a fig leaf for political reasons. If they were they could see the advantage of a public health care option. Instead of defending the free market, Gigot and other right-wingers seek to defend a corrupt status quo in which decisions are made by a princely few rather than being made in the competition and varied decision-making bodies of a free market. Health care reform – if done right, with a public option – will remove a major obstacle to individuals taking their own risks, starting their own businesses; it will be a small step to diversifying decision-making and creating a more free market.

Gigot – by taking the dogmatic position he does – proves he is not serious about protecting the free market; he is only interested in protecting the interests of his cronies among the monied elite.

Categories
Criticism The Media The Web and Technology

The Associated Press Jumps the Copyright Shark

[digg-reddit-me]The Associated Press has apparently jumped the shark. In a headlong rush to protect their business model from the Future, the Associated Press has in the past year launched lawsuits against bloggers for posting the full text or excerpts of their articles without advance permission, against Shepherd Fairey for being inspired by an image of Barack Obama that was published by the Associated Press (though the photographer who took the photo alleges he was not an employee of the Associated Press and thus has independent rights to the photo), and against news aggregators for posting the titles and first sentence of Associated Press stories.

Clearly, the Associated Press feels under siege. So, at some point Associated Press has launched what I think is the most pervasive use of iCopyright by a major news organization. While a normal web page offers you buttons to format for printing, embedding, emailing, or social bookmarking a news story, if you click on the equivalent link on an ap.org news story, it launches its iCopyright page. (Given its wariness about this scary web, its of little surprise that the page offers no social bookmarking links.) For example, here’s the range of options I found on an article entitled “Obama challenges GOP critics on health care.”

Under “Post,” it does offer is a handy way to embed the article on your site – or a portion of the article. Now, I can understand the AP wanting some way to make money off of embedding a whole article on your site – or objecting to people doing so. This undeniably detracts from their revenues. But I love the fact that they expect people to pay $12.95 to embed an EXCERPT of one of their articles. Then at the bottom of the page, it warns you against piracy. The Associated Press seems to be asserting that Fair Use does not exist at all!

But this is where they really jumped the shark. They offer to allow you to email the article to “6 or more recipients” for a fee. Seriously:

I’m a bit surprised that the Associated Press does not have a section on who is allowed to link to their site or this article – demanding some form of payment for incoming links.

Categories
The Web and Technology

Brief Thoughts for the Week of 2009-07-17

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Categories
Financial Crisis Foreign Policy Politics The Media The Opinionsphere

Sympathizing with AIG, Peace with Islamists, Senator Al Franken, Jay-Z, the Newest Lost Generation, and the Future of Journalism

1. Sympathizing with AIG. Michael Lewis has another piece plumbing the depths of the financial crisis. Except this time he is somewhat strangely sympathetic to AIG. His piece is a useful counter to Matt Taibbi’s angry screed on the same subject – but the lack of outrage in Lewis’s piece is discomfiting – like a writer who begins to sympathize with his serial killer subject. Still – worth reading – as Lewis concludes:

And yet the A.I.G. F.P. traders left behind, much as they despise him personally, refuse to believe Cassano was engaged in any kind of fraud. The problem is that they knew him. And they believe that his crime was not mere legal fraudulence but the deeper kind: a need for subservience in others and an unwillingness to acknowledge his own weaknesses. “When he said that he could not envision losses, that we wouldn’t lose a dime, I am positive that he believed that,” says one of the traders. The problem with Joe Cassano wasn’t that he knew he was wrong. It was that it was too important to him that he be right. More than anything, Joe Cassano wanted to be one of Wall Street’s big shots. He wound up being its perfect customer.

2. Peace With the Islamists. Amr Hamzawy and Jeffrey Christiansen have a thought-provoking, and somewhat discomfiting piece, in Foreign Policy suggesting that America make peace with non-violent Islamist groups – pointing out that many of them actually rely on America’s support for democracy for their success in a region of the world dependent on America and filled with dictatorships, and pointing out the signs that many of these groups are open to such a peace offer.

3. Senator Al Franken. John Colapinto profiles Al Franken in a typically humorous and in-depth New Yorker piece. More important than the piece is that this man is a Senator. Congratulations Senator Franken.

4. Jay-Z, Hegemon. Marc Lynch has written a few pieces this week applying principles of hegemony in international relations to Jay-Z and how he maintains power in the hip hop world – including specifically how he is responding to The Game’s recent attacks on him.

5. Europe’s Newest Lost Generation. Annie Lowrey discusses the problems that are facing Europe’s youth.

6. Shirsky on the Future of Journalism. Clay Shirsky has an excellent post over at Cato Unbound discussing without really predicting the future of journalism. As always with Shirky, thought-provoking and worth the read. He makes a point that I have been ruminating about in a number of posts recently (here and here) – that:

[J]ournalism is about more than dissemination of news; it’s about the creation of shared awareness.

In my posts, I labeled this “shared awareness” the “conventional wisdom.”

[Image by me.]

Categories
Economics Financial Crisis Politics

Tear down our capitalist system and replace it with a free market.

[digg-reddit-me]It’s Friday morning, finally finished with a week while living for the weekend, so I’m feeling loose.

My modest proposal for the day: Tear down our capitalist system and replace it with a free market.

The two terms are usually used synonymously – and I’m sure I am guilty of this myself. But after a long night of fevered dreams about politics and policy (yes, I really do dream about such things) I woke up realizing there is an important difference between the two ideas. (Perhaps as my unconscious mind dredged up some forgotten piece of writing from years ago.)

The free market is a commonsensical idea – as it is based on the values of competition, individual opportunity, and liberty. Adam Smith (from what I know of him) was only a proponent of this system – which he called “the system of natural liberty” – rather than a proponent of “capitalism” – a term he never actually used. Smith – arguing for this system – argued against government being used to prop up industries or to direct them. What he did not argue for though was “capitalism” as it has been understood for the past century. In many ways, the idea of capitalism evolved to defend our system from Marxist ideas – so it evolved to preserve the status quo rather than to describe an ideal system.

In this way, America’s economic system is different from its political system. The political system was created by men who held certain agreed-upon ideals and who attempted to write a governing document incorporating and protecting these ideals. This allowed later generations to try to better follow these ideas – to constantly seek “a more perfect union.” Rather than merely defending the status quo, it created an ideal to strive for. Our economic system though was created in an ad-hoc manner – and the ideology which grew up to defend it lacked any clear ideals. So, this ideology was defined then by what it opposed rather than a positive protection of certain principles. Capitalism then means less government interference, less centralized control of the means of production, less regulation. What this capitalism has created though is a rather unfree market – in which a small number of individuals own most of the capital – in which competition is thwarted by monopolistic practices, by bigger and bigger mega-corporations, by regulations proposed by the mega-corporations to keep out competitors, by bailouts.

Our capitalist system is based on valuing capital over labor, of seperating mangament and labor from ownership, of limiting the liability of individuals for their actions in corporate environments, of externalizing as much cost as possible to the public commons, of profit over all things. It is hard to see what most of these principles contribute to the creation of a free market. Indeed, many of them undermine it – creating a closed market, profitable only for a princely few who have the capital. This new feudalism is called freedom – but it is only free to an elite class of “ultracitizens” while the overwhelming majority of people get by in a “Sharecropper’s society” (to use terms introduced by David Rothkopf and Warren Buffett respectively.)

What we need is a founding economic document – that will describe the free market as it should be. A free market based on competition instead of capital; in which the government’s role is clear, predetermined, and predictable – rather than arbitrary and constantly contested; where regulation is seen as a protector of the free market rather than an encroachment upon it – as it forces externalized costs which are imposed on the society at large to be taken into account by the market; where the government’s role is in protecting and enhancing the opportunity of its citizens – rather than protecting the status quo and mega-corporations.

The fact is – capitalism as it is currently practiced has undermined the free market at every turn. While our current capitalist system has proved more productive than many other systems in the past, it has clearly fallen short of those implicit promises of what a free market should be. This economic crisis we are still going through – even as the financial crisis has passed – will offer up an opportunity to redefine the social bargain underlying our economic system if we are bold. So, we must be bold then – as soon as we figure out how to approach this.

[Image by me.]

Categories
Economics Political Philosophy The Opinionsphere

The Success of Goldman Sachs as a Repudiation of the Free Market

[digg-reddit-me]David Rothkopf – commenting on Goldman Sachs – sees their success as a repudiation of the free market – and I tend to agree with him:

I’m a dyed-in-the-wool capitalist. I love free markets. I hope a free market marries one of my daughters some day. But if some people have too many advantages and others simply can never catch up, the markets aren’t free, regardless of law or intent. Even if the advantages are in part derived from talent and hard work, fairness can remain an issue if other components of the success are linked to access, influence, history and other intangibles. [my emphasis]

From this insight comes the inevitable conclusion that – contrary to the doctrine of the right-wing – the government is not the antithesis of the free market, but rather plays an essential role in creating and maintaining it.

Goldman Sachs – with their obscene profits so soon after needing public assistance – demonstrate that our system has become less free and more feudal. As I wrote several weeks ago:

[T]he free market is effective because it prevents any small set of individuals from monopolizing decision-making. Especially in the world today with so much information available and events moving so quickly, the “right” business choices to make aren’t always clear. A free market – by allowing each business to make its own choice – prevents decision-making from falling victim to individual follies. But our current economic system – with it’s enormous corporations – ends up recreating the feudal system in which power is not centered in a single place, but in a handful of powerful “princes.” While these “princes” push for free market reforms, it is not in their interest to actually achieve this ideal free market – as Yglesias points out:

As a market approaches textbook conditions—perfect competition, perfect information, etc.—real profits trend toward zero. You make your money by ensuring that textbook conditions don’t apply; that there are huge barriers to entry, massive problems with inattention, monopolistic corners to exploit, etc.

George Will himself has pointed out that those “reforms” that are passed tend to be of a specific sort, following what Will calls, “the supreme law of the land…the principle of concentrated benefits and dispersed costs.” What free market supporters rarely seem to admit is that the free market exists not in spite of the government, but because of it. And today, our market is far from free because the government has failed to protect it – and has instead allowed the worst characteristics of capitalism (exploitation of labor; externalizing as much cost to society as possible, for eg. pollution) with the worst characteristics of socialism (concentration of power and limitation of competition) to create a kind of modern feudal society. In  this feudal society, freedom is enjoyed by the “princes” of finance and industry while the creative ferment of a real free market is formally protected but effectively quashed.

David Rothkopf expresses the same thing with different terminology:

These guys [at Goldman Sachs] operate as ultra-citizens in our society, virtually able to tell the government to heel and fetch in ways the rest of us can only fantasize about.

Warren Buffett seems to agree – as he claimed that America is moving from an aspiring “Ownership Society” to a “Sharecropper’s Society” – with its suggestions of a feudal structure. Of course, Buffet now owns a significant portion of the very Goldman Sachs that epitomizes this trend.

Goldman Sachs – along with other major corporate powers – rise by exploiting inefficiencies in the market – and eventually must try to create inefficiencies in the market in order to maintain their profitability (which is the hyperbolized point of Matt Taibbi’s recent piece). This contradicts those who see the market as supremely efficient – as Warren Buffet admitted, he would “be a bum on the street with a tin cup if the markets were always efficient.”

Goldman Sachs proves – with its successes – that our system is not a truly free market – but a more feudal one – in which those with sufficient money can secure power and tilt the system to their advantage.

[Image by saebryo licensed under Creative Commons.]