Vigilant Investor

You gotta love Robert Reich — perhaps the most collectivist of all Labor Secretaries we’ve had in the U.S. so far. Every now and then you can get dose of him if you listen to the generally collectivist-sympathetic NPR, where Reich gets his own commentary on the evening daily “Marketplace.”

In today’s edition [listen / transcript], Mr. Reich complains about several events in 2006. It’s not that he’s entirely wrong. Like so many with his beliefs, Reich has more than a few valid problems on his list of gripes. But, as is almost always the case with soclialistas, the blame is incorrectly assigned — half deliberately to malign what they hate (the free market), the other half out of ignorance. Robert is too intelligent to be among the later.

Still, we certainly can’t hold it against Roberto for criticizing most of what he does, especially when he is labeling the 2006 Congress as the porkfest that it was:

“A Congress that dispensed so much lard you’d think they had a pig-slaughtering operation in the cloak rooms…At last count, over $50 billion in earmarks - really favors for lobbyists who bundled campaign contributions on their behalf. Billions more in corporate welfare for Big Oil, Big Pharma, Big Telecom. And don’t forget the congressmen who put both hands into the trough and got back corporate gifts, junkets and outright bribes. The hall of shame grew bigger this year.”

Sor far, so good. Even Haliburton received its requisite mention for wasting billions. Reich then goes on to let Wall Street have it. He rips on investment bankers’ record bonuses, as well those of traders and hedge-fund managers. Notes Reich:

“How did they make all that money? Some, by timing trades. Or by taking companies private, loading them up with debt, cutting their payrolls, and then taking them public again. Or by monopolizing initial public offerings and getting in on the juiciest ones before the rest of the public.”

That may not be a perfect description, but it generally tells the correct story, that many big insiders closest to the deals get the richest while the rif-raf are supposed to invest blindly into index funds.

Reich then begins to show his true, scarlet colors:

“Most of the cost of this feeding frenzy among politicians, defense contractors and Wall Streeter’s has been borne by average workers, normal taxpayers and small investors.

But the real price of all this has been to our democratic-capitalist system itself. When people at the top abuse their power, the average person loses trust in that system. And then how can we possibly change it?”

Of course, this is where you’ve been fed the old bait and switch. Certainly those in power get the perks, and we sympathize not just with the little guy, but anyone, rich or poor, who is getting the short end of the stick in this game. (Yes, many entrepreneurial, non-connected rich are victims of the power brokers — they are among the top 5% of earners who pay for over 80% of all government, inflation, etc.)  But Mr. Reich is, by all standards, a major proponent of collectivist government — one where power is accumulated at the top. Reich really ought to be railing on the true problem: there is far too much centralized power, and as such, it is up for grabs to the highest bidders and strongest voting blocks. No matter how many freedom killing election reform laws you pass, it will remain. Youy see, the Reich’s of the world believe that if only the smartest of them — the ones that really know what’s wrong and how to fix it - were in charge (like him) then the world would certainly be a better place.

Note that he does not have a problem with a democratic capitalism, per say. Yet our problem today is partially the conventional emphasis and infatuation on the democracy above all other rights that has brought us to a situation where we have such a centralized power problem to begin with. If the Robert Reich’s of the world hadn’t put so much power in the hands of the government and instead left the republic as the consensualist democracy it mostly was at its inception, we’d all be better off. Instead we have central banks robbing the poorest blind with steady money supply inflation. The same inflation — created through massive credit expansion available primarily to Wall Street — that enables all Robert’s criminals noted above to earn their record bonuses and waste hundreds of billions on pork. It is the same Federal Reserve that funds the massive deficits of the U.S. government, either directly through open market operations, or indirectly by simply flooding the environment with so many dollars that the rest of the world does not know what to do with them other than to invest in U.S. Treasuries.

And how can we possibly change it, asks Mr. Reich? We know his answer: blame capitalism, and the put his “smarter than thou” cronies in charge to fix it, too bad if a few eggs get broken in the omelet begot of intelligentsia omnipotence.

No reader should be distracted to believing the U.S.A. is operating as a free market capitalist nation. No. It much more closely resembles, by definition, a blend of mercantilism and fascism, where major corporations and special interests are quasi government fixtures, running legislation in their favor while parasitically living off the masses. I personally prefer the term parasitic capitalism for what Reich pawns off as capitalism, pure and clean.

The real solution to this problem, I’m afraid, was long ago dead in the water: stop the out-of-control government growth. The end-game is now a forced-hand solution: serious trouble lies ahead for the U.S. balance sheet, the U.S. dollar, and the U.S. consumer — not to mention the tens of millions of beneficiaries of Mr. Reich’s own supported Government benefit largess. All of it is a free lunch house of cards built upon a soft foundation of massive credit expansion (e.g. expanding money supply). When this credit bubble breaks, look out below.

[If you are new to the site, and don't know of the credit bubble, please peruse the site for the details.]

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