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Market Commentary: Faux Statesmanship

Market Commentary: Faux Statesmanship

April 5 – New York Times (Dealbook): “’It doesn’t take a genius’ to know capitalism needs fixing. Capitalism helped Ray Dalio build his investment empire. But in a lengthy LinkedIn post, the Bridgewater Associates founder says that it isn’t working anymore. Mr. Dalio writes that he has seen capitalism ‘evolve in a way that it is not working well for the majority of Americans because it’s producing self-reinforcing spirals up for the haves and down for the have-nots.’ ‘Disparity in wealth, especially when accompanied by disparity in values, leads to increasing conflict and, in the government, that manifests itself in the form of populism of the left and populism of the right and often in revolutions of one sort or another.’ ‘The problem is that capitalists typically don’t know how to divide the pie well and socialists typically don’t know how to grow it well.’ ‘We are now seeing conflicts between populists of the left and populists of the right increasing around the world in much the same way as they did in the 1930s when the income and wealth gaps were comparably large.’ ‘It doesn’t take a genius to know that when a system is producing outcomes that are so inconsistent with its goals, it needs to be reformed.’ Stay tuned: Mr. Dalio says that he’ll offer his solutions in another essay.”

I’m reminded of back in 2007 when Pimco’s Paul McCulley coined the term “shadow banking” – and the world finally began taking notice of the dangerous new financial structure that had over years come to dominate system Credit. Okay, but by then the damage was done. As someone that began posting the “Credit Bubble Bulletin” in 1999 and had chronicled the prevailing role of non-bank Credit in fueling the “mortgage finance Bubble” fiasco (on a weekly basis), it was all frustrating.  

 …click on the above link to read the rest of the article…

Paul Tudor Jones Warns Disastrous “Wealth Disparity” Will End In “Rev

Paul Tudor Jones Warns Disastrous “Wealth Disparity” Will End In “Revolution, Taxes, Or War”

Having previously warned of the “disastrous market mania,” and told Janet Yellen to “be terrified” in April, legendary trader Paul Tudor Jones has a new message for CEOs, urging them to stop embracing the profit-above-all-else ethic creating massive wealth-inequality, or face the “tearing down of our civilization via war, revolution, or taxes.”

“One of the key things that always ends up tearing down great civilizations and countries is wealth disparity. It’s not sustainable,” explained the billionaire hedge fund manager at the Forbes Under 30 Summit in Boston, telling corporate chiefs that they have gone too far in embracing economist Milton Friedman’s profit-above-all-else ethic and they need to change how they do business.

Corporations have paid too much attention to prioritizing shareholders, said Jones, who’s backing a nonprofit called JUST Capital that will rank companies on how well they treat their employees, consumers, communities and investors.

Bloomberg reports that Jones said that even Friedman would rethink his ideas if he could see how divided the U.S. has become in terms of wealth, and worries about the outcome…

“The way wealth disparity has been historically dealt with is either wars, revolution or taxes. My guess is in the future it’ll be one of those three in this country.”

At the time of Friedman’s 1970 article, “The Social Responsibility of Business Is to Increase Its Profits,” the maximum federal individual tax rate was 70 percent, versus about 40 percent today. The wealth gap was one-fifth of what it is today, said Jones.

Friedman believed corporate executives should make as much money as possible while “conforming to the basic rules of the society.”

…click on the above link to read the rest of the article…

Energy limits: Why we see rising wealth disparity and low prices

Energy limits: Why we see rising wealth disparity and low prices

Olduvai IV: Courage
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Olduvai II: Exodus
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