When Bill Gross Blasts Wall Street We Know Something's Wrong Big Time
Bill Gross's latest monthly column on the Pimco website finds him taking some serious shots at his fellow Wall Streeters. I wasn't surprised, since Gross likes to hold forth on ethical issues from time to time. But this time, I think he hits on a few points that show the depths of the problems we're facing as we work our way through this crisis.
His first comment that the financial profession has failed at its primary function - the efficient and productive allocation of capital - is a pretty clear statement of one of the reasons our economy almost collapsed in 2008: the inefficient and non-productive allocation of capital. The mere fact that the financial services industry at one point accounted for almost 30% of the value of the S&P demonstrated the extent of this problem, as the financial shenanigans of investment bankers and traders crowded out really productive business activities. If you're not sure that's true, think about how, for at least the last decade, probably more, the best and brightest coming out of college wanted to work on Wall Street, rather than becoming scientists, doctors, teachers, business owners - you know, people who make things or provide important services to the rest of us.
But that's all in the past - or is it?
In fact, as Gross points out, the last few years seem to have seen the "ressurection, instead of the reformation" of Wall Street. How right he is. So far, with all the talk of regulatory reform - a process that continues to drag on - we've just seen the greatest year of bonuses for Wall Streeters in history. Yep, those banks that we taxpayers saved are paying out record-setting bonuses this year. So what's new?
Gross winds up with this cold hard assessment of where we are right now. Central banks pursue a policy of "taking money from on class of asset holders and giving it to another." How are they doing this? They've been keeping interest rates low for what seems like forever. And that benefits banks. At the same time, the regular, prudent person - in other words the saver - makes virtually nothing on their savings.
Of course, the Wall Street folks will just tell you that you need to take on more risk - you know, buy their products - to make money. You can't expect to make money by putting your money anywhere "safe" - like a savings account, money market, treasuries, CD's etc. - right?
Well, I can't argue with Gross here, even though I have mixed feelings about it. After all, Gross has made a fortune (he's a billionaire) playing the Wall Street game. And he's notorious for "talking his book" - meaning he puts out ideas that lead to people wanting to put more money into his company's funds. But his points are hard to argue with, don't you think?
So Bill, are you going to lead the charge to straighten things out now? Will you and your cohorts at PIMCO take a stand against all this nonsense you're pointing out?
But wait! Didn't your firm put Alan Greenspan on some fat retainer to serve as an expert spokesperson of some sort. And wasn't Greenspan the guy who started the whole Fed policy of lowering interest rates during his endless term as Fed Chairman every time the economy teetered? And aren't those low interest rates the ones you're saying benefit Wall Street to the detriment of savers?
Aw, why nitpick.
His first comment that the financial profession has failed at its primary function - the efficient and productive allocation of capital - is a pretty clear statement of one of the reasons our economy almost collapsed in 2008: the inefficient and non-productive allocation of capital. The mere fact that the financial services industry at one point accounted for almost 30% of the value of the S&P demonstrated the extent of this problem, as the financial shenanigans of investment bankers and traders crowded out really productive business activities. If you're not sure that's true, think about how, for at least the last decade, probably more, the best and brightest coming out of college wanted to work on Wall Street, rather than becoming scientists, doctors, teachers, business owners - you know, people who make things or provide important services to the rest of us.
But that's all in the past - or is it?
In fact, as Gross points out, the last few years seem to have seen the "ressurection, instead of the reformation" of Wall Street. How right he is. So far, with all the talk of regulatory reform - a process that continues to drag on - we've just seen the greatest year of bonuses for Wall Streeters in history. Yep, those banks that we taxpayers saved are paying out record-setting bonuses this year. So what's new?
Gross winds up with this cold hard assessment of where we are right now. Central banks pursue a policy of "taking money from on class of asset holders and giving it to another." How are they doing this? They've been keeping interest rates low for what seems like forever. And that benefits banks. At the same time, the regular, prudent person - in other words the saver - makes virtually nothing on their savings.
Of course, the Wall Street folks will just tell you that you need to take on more risk - you know, buy their products - to make money. You can't expect to make money by putting your money anywhere "safe" - like a savings account, money market, treasuries, CD's etc. - right?
Well, I can't argue with Gross here, even though I have mixed feelings about it. After all, Gross has made a fortune (he's a billionaire) playing the Wall Street game. And he's notorious for "talking his book" - meaning he puts out ideas that lead to people wanting to put more money into his company's funds. But his points are hard to argue with, don't you think?
So Bill, are you going to lead the charge to straighten things out now? Will you and your cohorts at PIMCO take a stand against all this nonsense you're pointing out?
But wait! Didn't your firm put Alan Greenspan on some fat retainer to serve as an expert spokesperson of some sort. And wasn't Greenspan the guy who started the whole Fed policy of lowering interest rates during his endless term as Fed Chairman every time the economy teetered? And aren't those low interest rates the ones you're saying benefit Wall Street to the detriment of savers?
Aw, why nitpick.
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