Random Thoughts in a Random World

It came out today that Homeland Security had worked with police in Portland regarding the Occupy movement, no kidding. Meanwhile CNN has published an article saying that America is not on a decline. It sure looks and feels like one, what am I missing? If this is things getting better than someone needs to tell me what better means.

Warren Buffet has been telling people for years what direction the nation is headed in and what is wrong with the way that Wall Street and big business are failing us as a society. I think it is important that people go back and read what he said; but, I will give some of the essentials. The biggest problem is that we set up a system of rewards for Wall Street and CEOs that was not based on how well a company performed within it's industry. Instead, we have set up a system that rewards people based on how it's stocks perform, not dividends; but, the value of the stock. It promotes short term trades rather than true investment in stocks. That is why CEOs can get bonuses even when the company if failing or in bankruptcy.

I wrote a very long time ago how option trading could be halted. Now, people are actively looking at ending such trading. I read an article about it today. The way business works today has a lot to do with insurance. People who don't have insurance for their decisions often make riskier decisions.

AIG insured bad investments. High risk and high return go together and that is fine; but, you shouldn't insure high risk investments because it promotes bad investments. Let us be very clear, that is not good capitalism. I personally believe in capitalism, though it is not about democracy, those are two different concepts.

Capitalism is the idea that individuals should be rewarded for their efforts if they result in improvements or production that is valued by others. Our system is not capitalistic and hasn't been for a long time. Instead we have a ponzi capitalism where government backed insurance protects those who are big investors and it is paid for by your taxes.

The housing bubble was backed by tax dollars as insurance, because of that the banks profited by lending to anyone regardless of their ability to pay. You see, the second aspect of real capitalism is that you have to live with the consequence of your bad decisions and that didn't occur for the wealthy that own the big banks.

What we really have is a form of oligarchical socialism for a few and an insurance class totalitarianism for the rest of us. Same for our so called democracy, our political class represents not the people; but, the privileged. After all they were the ones who got bailed out. People on both the left and the right understand this, they just differ on some of their solutions.

Who is against having a level playing field and having the rules apply to everyone equally? I was not a big supporter of the Tea Party because I saw how quickly it was overtaken by monied interests. One of the biggest supporters of the Tea Party was the Koch brothers and their history is a little questionable to say the least.

MF Global is an excellent example of how we are not living in a capitalist society. MF Global invested other people's money in commodities, if the value went up then the company benefited even more than the people whose money they invested. If the commodities dropped in value then the people who invested had to pay the debt. There was no risk for MF Global itself unless people couldn't pay the companies debt.

Here is a Huffington Post article that sums it up - The Koch Brothers and MF Global - Friends to the End. The reason I support the Occupy to any extent is firstly based on their right to air their grievances and secondly (and as importantly), it is an opportunity to identify what the problems with the system are rather than thinking that electing "new" politicians will change the system because it has not.

The problem with the system is that is it unfair, undemocratic and fixed so that some have no risk and others bare the risk for them. AIG went bankrupt; but, Berkshire Hathaway did not and their biggest investment is in insurance. So why didn't Berkshire Hathaway go bankrupt? The answer is simple, they didn't insure bad investments to an insane amount.

The highest purpose that the Occupy movement can cause right now is not in proposing legislation, it is in awakening the nation to how we were taken advantage of and how our system is no longer capitalistic. My question is how the protesters will now find a way to start consolidating on what needs to be fixed and in what manner, the same is true for the Tea Party and Cain is not the answer.

Here is an article from Market Ticker - Oh Oh. "Regulated" Derivative Markets About To Blow Up? I like the part where the investment broker says that the market is fixed the best.