Blame the Banks! Blame the CEO’s! But Don’t Blame Me!
The Dot Com bust is the most famous event as we moved officially into the 21st century. Every American with a 401K was negatively affected. The financial chaos of 2008 was the most recent event that wiped out the rest of the 401K’s and any other type of investment.
Each time the financial market has a major free fall we demand more regulations. Our Congress and Senate assign their sub-committees to investigate and regulate the financial markets. Creating more government regulation and killing free enterprise.
Free enterprise has come under fire as the root cause of these failures as if the concept of capitalism is to blame for the financial chaos. Liberal thinkers are quick to point their fingers to the excessive pay of corporate executives but are they pointing their finger in the right direction.
No! They and anyone else who believes capitalism is failed must point their finger into a mirror because they are the point of failure. Any system is only as good as its weakest link and “We the People” are the weakest link.
When CitiBank, Merrill Lynch, Lehman, Bank of America or any other corporation pays out billions in annual bonuses to their top performers what do you do? First you complain about the abuse then you go out and buy more of their stock. Which do you think the executives hear? Your complaint or the increase in stock prices as the economics of supply and demand takes effect?
Stock prices should NOT be based on supply and demand they should be based on realistic metrics – profits divided by outstanding shares. When we complain about the greed of executives we really need to complain about the greed of everyone who owns stock in company’s paying the executive bonuses. Our own greed supports corporate greed.
You may not personally buy the shares but your pension, 401K, IRA or other money management firm does. You demand to see your quarterly reports demonstrate double digit growth and you’ll fire your money manager if you don’t. If you don’t believe this just look at your own financial statements. You have lost money twice in the last decade. Those looses are a direct result of investing in the companies providing the highest returns.
Government regulation will not work because it just takes more money out of the economy. Government intervention requires increases in taxes to fund the team of people to manage the regulations. And the government has yet to prove they can efficiently manage their resources.
Free enterprise will manage the markets when you and I accept the reality that single digit annual growths are enough. We have to accept longer term results because they do work. Just look at the mortgage industry. A 30 year loan generates over $500,000 in profits! “We the people” have to stop rewarding companies operating get rich schemes. There is no difference between you and Bernie Madoff. You want to get rich quick.
The only way to stop the nonsense is for “We the People” to stop buying their stock since the executive bonuses are based on the increase in the value of the stock.