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October 30, 2015


Demand is a six and not a four-letter word and is not innately unprintable, but it is hard to find in some of the columns spun out by business writers nowadays in the mainstream media when they are attempting to explain Wall Street’s version of “what went wrong” with the market in specific instances of failure. For example, I read a full two-page article yesterday in The Washington Post entitled “Economy grows an anemic 1.5 percent in third quarter” in which the term demand could have been used several times but is mentioned only once. I am not a conspiracy aficionado but there seems to be some perhaps unwritten Wall Street directive afoot to minimize use of the term, and if so, why? Could it be because Wall Street doesn’t want to publically discuss the root cause of lack of demand – wage inequality – for fear of stoking the gathering tsunami for an end to decades-old rates of compensation paid to corporate workers? No? Then why?  After some background to set the table, let’s speculate.

The piece in the Post yesterday used several phrases that are congruent with the term demand but not the word itself. Its very first paragraph alludes to “a side effect of the broader weakness in the global economy.” The writer could have substituted international demand (currently weak, as is ours) for “global economy” but opted otherwise. It’s the same thing in this context; there are few if any weaknesses in an economy which is enjoying robust demand – quite the contrary. Strong demand cures many if not all economic woes in a given economy.

The writer breaks out the usual suspects in explaining the lackluster performance of our economy last quarter (take your pick): the poor performance of exports, the slowdown of the Chinese economy, the crash of the commodities market of the emerging economies which had fueled previous runaway Chinese growth, the high-dollar currency problem in pricing of American exports, uncertainty as to what the Fed will do with interest rates and, of course, among other things, the threat of shutdown of the government (since resolved but not in the third quarter) in which the corporate economist of the Navy Federal Credit Union (Alan MacEachin) correctly noted that “Just the risk of these (failure to fund the federal government and raise its debt ceiling) can be harmful for the economy.” While hard to measure, I think the threat alone by the rabid right wing of the Republican Party did in fact harm the economy in ways also difficult to measure, though it does cost millions to government in costs to even prepare for shutdown, known costs that can be measured in concrete terms. Perhaps a bill for such provable costs should be sent to the Republican Party, a party that prides itself on “saving money” of taxpayers.

The costs of “overregulation” and petroleum were not cited by the writer, but you can expect them to be added as usual suspects in future scripts by Wall Street’s scriveners, especially the former, an all-around excuse for market failure and even criminal acts committed by Wall Street banks. Right! If we didn’t have overregulation in the form of laws or regulations against mortgage fraud and bribery, for instance, then there would be no criminal act to be prosecuted by those pesky regulators and the AG.

Wall Street holds that less regulation and less law are key to business success, however conducted, in this increasingly libertarian world of Social Darwinism in the market. The weak need no protection from the rich bullies in this dog-eat-dog marketplace, the theory goes; it’s every man for himself with no holds barred, survival of the fittest, “creative destruction” and the like (all libertarian credos endorsed by the libertarian Koch Brothers). The superrich know how to allocate resources and risk to assure a healthy and stable market (in spite of numerous failures in history when entrusted with such tasks and especially before the New Deal era of increased regulation) and need no help from an overreaching anti-business government via standards set and enforced by regulators pursuant to law. Leave us alone so that America can prosper! goes the propaganda line over and over.

Such logic! We’ve tried that laissez faire route of inviting the foxes into our henhouse to make the safety rules and it didn’t work; the hens definitely did not prosper. Indeed without laws and regulation there would be no market. Whatever happened to the public’s democratic right to set the standards for right and wrong in the public conduct of its own business – was its disappearance as an issue from the business press and selective use of terms such as “demand” due to the political influence of Wall Street? Did anyone reading this ever see mobs in the streets demanding less regulation of banks and our corporate culture? I haven’t. I have instead seen massive campaign contributions (formerly known as bribes) spread liberally among politicians in order to assure the rich a place at the regulatory table, a result I daresay Madison and Jefferson would have found reprehensible – as do I.

It’s our market, not that of Wall Street; they are mere participants, and participants shouldn’t be making the rules by which our market abides. Thus when I buy shoes at a shoe store I don’t presume to set their rules of employment or store hours; it’s their business, not mine. It is clear to me that we need more and not less regulation of Wall Street and especially more regulation of its big banks which with their reckless trading practices following the repeal of the Glass-Steagall Act led them to overnight insolvency and had them coming on bended knee to government for taxpayer bailouts. These are the same people who brought us Bush’s Great Recession marked by millions of home foreclosures, massive unemployment, and a near international depression, from which we have not yet fully recovered – and they want us to “leave them alone?” I think rather that they should leave us alone to conduct our own business in a way that most benefits all of our people and not just a narrow slice of profit seekers.

I will explore possible economic answers to what ails us in Part II. Stay tuned.  GERALD    E


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