The (People's Republic of China) is a backward, corrupt anachronism run by decrepit tyrants: old apparatchiks clinging to their dying regime
Republican House Majority Leader Tom DeLay
Dave Lewis
Media deregulation, accounting scandals, Jayson Blair, PM Blair, President Bush and weapons of mass disappearance fill the airwaves these days and there is one simple thread which ties them all together, deception. Trust in the institutions of our times is fading fast and yet the powers that be continue to play the same old tired games.
Consider the latest from the G8, "We are confident in the growth potential of our economies." Yet, if this were true then the need to enact economic policies of support, given the distortions imposed by such measures, would not exist. Imagine a visit to a doctor's office where the doctor told you he was confident of your ability to live a healthy life while handing you 8 prescriptions for drugs and you might share the sense I have of this "happy talk."
While channel surfing last night I caught a few discussions on media deregulation. The financial networks focused on the profits which might accrue to the local broadcasters willing to sell out. The more general news outlets engaged in an expert driven concentration vs. variety debate. As today's newspapers report, both sides in the debate claim to have the "public interest" in mind, yet I wonder how these partisans define that phrase.
Critics of deregulation claim that further media concentration would be "bad", which would seem to indicate a sense that the current situation is "good" or at least "better." Yet large segments of the American public believe, inter alia, that Saddam Hussein's government supported Al qaeda (45%) and that Wall St. benefits the country more than it harms it (66%) because (I love this) it provides the money businesses must have for investment (66%). Gee and I thought the financial sector was an intermediary, maybe I need to watch more CNBC. To the extent one measures the success of the media by the public's awareness of the truth, these numbers are not encouraging. Then again, in an industry driven by advertising, or the business of imprinting ideas on the public consciousness regardless of truth, perhaps the media is quite successful. Plato's cave becomes ever harder to leave.
IBM and Wall St. executive suites are once again in the news as, surprise, securities regulators are worried that someone might not be telling the truth. In the case of IBM, who might want to consider opening an SEC satellite office in their Armonk headquarters given the number of probes they seem to inspire, revenue figures for 2000 and 2001 are under review. Wall St. is under investigation for failing to "properly supervise research analysts." Now there's a twisted euphemism, defrauding clients by touting the investment virtues of, in the analysts' own words, "dogs" becomes a "failure to properly supervise."
Meanwhile PM Blair and President Bush are under the gun for failing to demonstrate proof of Iraq's WMD, the, according to Wolfowitz, bureaucratic reason upon which all could agree as rationale for the War. Also lost in the sauce these days is talk of Iraqi self-determination, which has been put off for at least a year. I hope the current drive for Middle East peace produces something of substance, for if not, Western credibility in the Arab world, already at a low point, will take decades to repair.
Returning to the public faith in Wall St. or to be more specific, the financial sector, let's examine today's graph. The aspect of the data which caught my attention was the enormous growth of financial sector debt. From a mere 8.6% of GDP and 6% of total debt in 1965, financial sector debt has ballooned to nearly 100% of GDP and 50% of of total debt today. For a sector that is supposed to intermediate, the finance buys sure seem to be borrowing lots of money.
I wonder if this growth in financial sector debt is related to the Federal Reserve's willingness to act as lender of last resort, or as an economist comic might ask, "can anyone spell moral hazard?" To what ends are these debts incurred?, not profits at least if you consider that 1987's 38:1 ratio of financial sector debt stock to profits has become 2002's 49:1. Of all the deceptions out there, this one takes the prize. Fiat money is not money and to the extent the system only operates if the financial sector becomes ever more leveraged, we are likely to discover just how un-money-like fiat money can be.
Dave Lewis
www.chaos-onomics.com
dave.lewis@chaos-onomics.com
June 4, 2003
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