'Tis the season, like almost every season, for financial growth and profits that trump moral merit. But can there be peace on earth without financial justice, truth and goodwill toward all who live responsibly?
On December 18th, 2014, CNBC's Jim Cramer, David Faber and Carl Quintanilla kicked off their popular morning show, Squawk on the Street, with a discussion of the previous day's notable rally in stock prices. The 288 point rally on December 17, the biggest for the Dow Jones Industrial Average (DJIA) in more than a year, was attributed to a new pledge made by Federal Reserve Chair, Janet Yellen, that the Fed would remain patient in its ultra-low interest rate stance--her market-deforming assurances putatively known as the "Yellen Put."
Not surprisingly, the Fed's repeated pledges to Wall Street are widely admitted to serve as an incentive for moral hazard, the Fed quietly protecting the backs of macro-risk-takers. Fed pledges also work as a subsidized form of financial insurance: bailout protection serving to reduce the big firms' credit costs. Additionally, Fed assurances function as an asset-redistribution scheme to benefit members of the financial intelligentsia well-positioned in easy money environments by informational, associational and structural advantages.
The losers, not surprisingly, are members of the general public who get next-to-nothing on their savings, including certificates of deposit, bank accounts, conservative bond positions, and under-performing mutual funds (into which they're often herded). What would the masses think if they realized that the uber-rich don't care about the 1% annual return they get on a government bond as long as they can use the government security as collateral to leverage easy money loans for purposes of Fed-facilitated investment speculation?
THE LOGIC OF THE MONSTER RALLY
Little did Cramer, Faber and Quintanilla know as their morning show began that by day's end the DJIA would be up 421 points in a monster rally. Added to the previous day's 288 point gain, the dual-mandate driven episode created the largest back-to-back two-day DJIA gain in more than six years. Nonetheless, Jim Cramer and his co-hosts did know something; namely, that Wall Street's "spin" concerning the consequences of the oil-price plunge had changed dramatically in just two weeks.
According to Jim Cramer, the previous logic was that low crude oil prices could break Russia, get southern European banks into trouble, and cause unrest in under-developed oil-producing countries. The new spin--just in time to move prices for a nice Santa Claus rally--is that oil is not going to $30 a barrel after all but will stay in the $60 range. Hence, Russia will be okay and the rest of the world will lumber along. Unhindered by global financial contagion, U.S. equity markets can rally: low oil prices putting more money into consumer pockets and onto corporate balance sheets.
The trigger (strategic cover) for the altered Wall Street logic came from Fed Chair Yellen's remark that the crude oil's reduction of moderate inflation (the Fed's self-serving and cunning goal) was merely temporal and a net positive for the economy--a sentiment in-line with the public stance of Saudi Arabia's oil minister, Ali al-Naimi. Apparently, the Fed Chair is not overly concerned about the way Fed policy is helping Warren Buffett's Berkshire Hathaway close ground on Exxon-Mobil's market cap: the phenomenon providing subliminal testimony that in the monetary environment created by central banks the crafty timing of acquisitions and sales can bring higher rewards than does industrial development.
Thus considered, how does one convert speculation into shrewd acquisition activity? The answer is to buy critically positioned companies with access to strategic information, as Berkshire Hathaway is doing with its acquisition of Charter Brokerage--a third-party logistics provider to the oil industry. Winning on a disproportionate basis over an extended period does not happen by accident. That's why Wall Street makes sure it has the most important advantages: members of Congress to write laws on its behalf, regulators to strategically skew market architecture, a central bank to supply the speculative fuel, the best information before anyone else gets it, and data-analysis by highly paid Ivy League graduates.
MORALIZE AND MISS-OUT
At some point in the December 18th Squawk on the Street conversation, David Faber raised the question of whether it is appropriate to allow central banks hold markets like water in their hands. The question's moral implications raised Jim Cramer's hackles, as evident in a mini-tirade that followed. Perhaps with a small minority in mind, but maybe generalizing, Cramer seemingly suggested that one could leave Wall Street, become a professor, and moralize to one's heart's content. Or, one could stay in the real world where profiteers remain in good standing. Cramer went on to allege that on Wall Street a person could acquire enough money-power to become, name or influence the President of the United States.
From this view, moralizing gets you nothing, while money-power buys you and your cultural fraternity a big chunk of the world. It is not righteousness but raw money power that triumphs and buys the military security necessary to defend the wealth through a new world order. In this viewpoint, nothing should get in one's way: especially not scruples or altruism. It is good, however, to have a politicized family philanthropic foundation to shape appearances and provide strategic cover so that plutocracy can be spun as the patrician support of civic interests.
Is Jim Cramer's viewpoint defensible? Not rationally. Without a sure foundation of moral deservedness, the spirits of tyranny and injustice escape from Pandora's box. If liberty means that anyone in a highly developed society has the right to acquire dramatically more than he or she prudently deserves--based upon the real value of his or her contributions to the sustainable public good--what checks remain against tyranny? Who stops the Hitlers of the future?
How can anyone be called to proper accountability once moral deservedness is thoroughly discounted? If ethical undeservedness is as rewardable as moral merit, and if morally defective laws legitimize winnings as much as honorable laws, who has the right to stand in the way of anyone's chutzpah? Hitler had the German constitution of the Weimer Republic changed to legitimize his power grab. Doesn't Wall Street do much the same with the laws and regulations the SEC and CFTC are supposed to enforce? If so, why should CNBC's Jim Cramer--as a poster child for many moral delinquents on Wall Street--boast because he is able to exploit the system's flaws and privatize wealth that in a sane world would belong either in the public domain or in a much fairer distribution arrangement.
It is evident that democracies with mass-based politics and powerful interests do not know where to draw the lines. The people at-large are not prudent in national financial matters, especially in the context of today's complex financial markets. This gives the captains of money power a long leash to exploit the circumstances of world commerce and economic development. In the process the exploiters, here and abroad, amass fortunes and power not warranted by the value of their work, at least when their "contributions" are judged by a morally prudent metric.
LEGITIMACY AND DESERVEDNESS
Jim Cramer apparently went on his December 18th mini-tirade because his co-host, David Faber, had the impertinence to question the legitimacy of a market system overly dependent upon the rhetoric (or machinations) of powerful elites for the pricing of publically held assets. Since ownership of important corporate assets is increasingly skewed in favor of financial elites, and since central bank easy money tends to concentrate the world's future earnings in the vaults of today's dominant market actors, David Faber correctly questioned the sustainability, and thus the justice, of the extant wealth distribution system.
The legitimacy of wealth distribution is important. Once the distribution strays too far from legitimate patterns, chaos can follow--a chaos that injures the innocent along with the guilty. Currently, the U.S. federal government and Federal Reserve operate so as to secure the power and security of those who have most dramatically enlarged their wealth during the last several decades by reason of crony capitalist financial maneuvers that have become the signature economic phenomenon of our times. Indeed, today's militaries, mercenaries and defense contractors do not serve as much for national security as they do to secure and stabilize the wealth of the world's elites. Little wonder, then, that David Stockman calls the situation a great deformation, while describing the U.S. economy as a leveraged buyout (LBO) operated for the benefit of private equity raiders and their camouflaged ilk.
Once a nation turns its back on a resolute determination to cultivate moral deservedness, political and financial superintendency passes to those who gain power illegitimately--a fact described eloquently by President Theodore Roosevelt. The causes and consequences of the French Revolution, the iron fist of Bolshevik Communism, and the dehumanizing totalitarianism of Nazi power all stand in testimony to the hazards of allowing money-power to trump prudently measured deservedness. While the excessive power arrangement that Wall Street and the Fed share may create a feel-good market vibe for a few more years, or even a decade, anarchy and suffering will eventually be in the wind. If so, what will the Jim Cramers of the world exploit then? Or where will they hide?
In the meantime elites will continue to have out-sized opportunities to make unwholesome money. How much better it would be if financial markets were designed to distribute rewards fairly in conjunction with people's just deserts. In that vein, Christmas cheer includes the hope that someone like Elizabeth Warren will get the better of Wall Street's Hillary Clinton, with newcomers appearing in the GOP that have better sense of financial justice than is evident among the party's blind leaders today.