Sombre Econ News – Aug 16

[davelj]

[quote=CA renter] Middlemen, dealmakers, and “capitalists”…these are the people who have benefitted most in the past few decades. They are hardly productive.[/quote]

I wouldn’t say they are “hardly productive.” I think even you would acknowledge that there is *some* value added by the “middleman” to most transactions, otherwise they wouldn’t get paid at all. The issue is whether they are overpaid given their contribution. And that very well may be the case (I would argue that it is the case). But it does beg the question… why do they continue to get paid so much? Whether through ignorance or because they actually believe value is being added, folks continue to pay the middlemen. I’m curious as to the answer myself.

At a prior firm I did a fair amount of investment banking (at the small level – transactions generally under $100 million) and always thought everyone involved, including myself, was overpaid to some degree. And I’m still in the industry although I don’t do as much transaction-oriented work anymore, but I still look at a lot of deals and everyone’s still making a pile of money. And yet the firms involved still pay the fees. If you ask them why, the typical answer is, “It was expensive but it was worth it.” And while I don’t fully understand it, it’s hard to argue with that logic. They’re the ones paying, after all (or, more specifically, the investors are paying – but they’re fully aware of the fees as well).

[jficquette]

[quote=CA renter][quote=CA renter]Great stuff, SD Transplant. Thanks for sharing the links with us.

From the ZH link, I especially liked this part:

“All of these areas are totally non-productive and the only beneficiaries are the participants in the financial industry. And the rewards have been absolutely astronomical. In investment banking, hedge funds and private equity in particular, the most massive wealth has been created. Many players have become billionaires or created fortunes of tens to hundreds of millions of dollars in the last 10-15 years just by shuffling money around. In the past fortunes were created by building factories and industries. But today any normal employee working in Wall Street or the City in London will, by just showing up to work, make hundreds of thousands to millions of dollars. This is the proof of a world totally out of balance when people dealing in money become the richest segment of society. Since this activity contributes very little to the prosperity of a nation (but very much to its participants) it is not sustainable. The biggest reason why it exists is the massive amount of money that governments have created or printed and the fact that the financial industry has developed into a fractal wealth creation machine for the benefit of its participants.

For the last 40 years in particular the rich are getting richer and the average person has seen very little increase in real income. In the US, the real annual income of the bottom 90% of US families has increased by only 10% since 1970. And in the expansion between 2002 and 2007, median US household income dropped $2,000. The perceived increase in wealth for the majority of Americans derives from an increase in their debt level not from an increase in real earnings. So the improvement in living standards that the average American and many other Western countries have enjoyed in the last 40 odd years is primarily based on debt – debt that can never be and will never be repaid with normal money.”[/quote]

BTW, this is why I absolutely refute the notion that the wealthiest people are the most productive. Quite the opposite, from what I’ve seen.

The wealthiest are the ones who have the right connections and are able to insert themselves in the middle of every legitimate transaction so they can take a cut of every transaction around the world. Then, there are those who literally control the flow of money — either in an executive position or in finance. They make the most because they are the ones who decide where money goes. Middlemen, dealmakers, and “capitalists”…these are the people who have benefitted most in the past few decades. They are hardly productive.[/quote]

You have an example? Someone who “inserted themselves” in the middle of a transaction that didn’t have any skin in it?? Other than a politican? Rangel, Blago etc?

[jficquette]

[quote=CA renter][quote=CA renter]Great stuff, SD Transplant. Thanks for sharing the links with us.

From the ZH link, I especially liked this part:

“All of these areas are totally non-productive and the only beneficiaries are the participants in the financial industry. And the rewards have been absolutely astronomical. In investment banking, hedge funds and private equity in particular, the most massive wealth has been created. Many players have become billionaires or created fortunes of tens to hundreds of millions of dollars in the last 10-15 years just by shuffling money around. In the past fortunes were created by building factories and industries. But today any normal employee working in Wall Street or the City in London will, by just showing up to work, make hundreds of thousands to millions of dollars. This is the proof of a world totally out of balance when people dealing in money become the richest segment of society. Since this activity contributes very little to the prosperity of a nation (but very much to its participants) it is not sustainable. The biggest reason why it exists is the massive amount of money that governments have created or printed and the fact that the financial industry has developed into a fractal wealth creation machine for the benefit of its participants.

For the last 40 years in particular the rich are getting richer and the average person has seen very little increase in real income. In the US, the real annual income of the bottom 90% of US families has increased by only 10% since 1970. And in the expansion between 2002 and 2007, median US household income dropped $2,000. The perceived increase in wealth for the majority of Americans derives from an increase in their debt level not from an increase in real earnings. So the improvement in living standards that the average American and many other Western countries have enjoyed in the last 40 odd years is primarily based on debt – debt that can never be and will never be repaid with normal money.”[/quote]

BTW, this is why I absolutely refute the notion that the wealthiest people are the most productive. Quite the opposite, from what I’ve seen.

The wealthiest are the ones who have the right connections and are able to insert themselves in the middle of every legitimate transaction so they can take a cut of every transaction around the world. Then, there are those who literally control the flow of money — either in an executive position or in finance. They make the most because they are the ones who decide where money goes. Middlemen, dealmakers, and “capitalists”…these are the people who have benefitted most in the past few decades. They are hardly productive.[/quote]

You have an example? Someone who “inserted themselves” in the middle of a transaction that didn’t have any skin in it?? Other than a politican? Rangel, Blago etc?

[jficquette]

[quote=CA renter][quote=CA renter]Great stuff, SD Transplant. Thanks for sharing the links with us.

From the ZH link, I especially liked this part:

“All of these areas are totally non-productive and the only beneficiaries are the participants in the financial industry. And the rewards have been absolutely astronomical. In investment banking, hedge funds and private equity in particular, the most massive wealth has been created. Many players have become billionaires or created fortunes of tens to hundreds of millions of dollars in the last 10-15 years just by shuffling money around. In the past fortunes were created by building factories and industries. But today any normal employee working in Wall Street or the City in London will, by just showing up to work, make hundreds of thousands to millions of dollars. This is the proof of a world totally out of balance when people dealing in money become the richest segment of society. Since this activity contributes very little to the prosperity of a nation (but very much to its participants) it is not sustainable. The biggest reason why it exists is the massive amount of money that governments have created or printed and the fact that the financial industry has developed into a fractal wealth creation machine for the benefit of its participants.

For the last 40 years in particular the rich are getting richer and the average person has seen very little increase in real income. In the US, the real annual income of the bottom 90% of US families has increased by only 10% since 1970. And in the expansion between 2002 and 2007, median US household income dropped $2,000. The perceived increase in wealth for the majority of Americans derives from an increase in their debt level not from an increase in real earnings. So the improvement in living standards that the average American and many other Western countries have enjoyed in the last 40 odd years is primarily based on debt – debt that can never be and will never be repaid with normal money.”[/quote]

BTW, this is why I absolutely refute the notion that the wealthiest people are the most productive. Quite the opposite, from what I’ve seen.

The wealthiest are the ones who have the right connections and are able to insert themselves in the middle of every legitimate transaction so they can take a cut of every transaction around the world. Then, there are those who literally control the flow of money — either in an executive position or in finance. They make the most because they are the ones who decide where money goes. Middlemen, dealmakers, and “capitalists”…these are the people who have benefitted most in the past few decades. They are hardly productive.[/quote]

You have an example? Someone who “inserted themselves” in the middle of a transaction that didn’t have any skin in it?? Other than a politican? Rangel, Blago etc?

[jficquette]

[quote=CA renter][quote=CA renter]Great stuff, SD Transplant. Thanks for sharing the links with us.

From the ZH link, I especially liked this part:

“All of these areas are totally non-productive and the only beneficiaries are the participants in the financial industry. And the rewards have been absolutely astronomical. In investment banking, hedge funds and private equity in particular, the most massive wealth has been created. Many players have become billionaires or created fortunes of tens to hundreds of millions of dollars in the last 10-15 years just by shuffling money around. In the past fortunes were created by building factories and industries. But today any normal employee working in Wall Street or the City in London will, by just showing up to work, make hundreds of thousands to millions of dollars. This is the proof of a world totally out of balance when people dealing in money become the richest segment of society. Since this activity contributes very little to the prosperity of a nation (but very much to its participants) it is not sustainable. The biggest reason why it exists is the massive amount of money that governments have created or printed and the fact that the financial industry has developed into a fractal wealth creation machine for the benefit of its participants.

For the last 40 years in particular the rich are getting richer and the average person has seen very little increase in real income. In the US, the real annual income of the bottom 90% of US families has increased by only 10% since 1970. And in the expansion between 2002 and 2007, median US household income dropped $2,000. The perceived increase in wealth for the majority of Americans derives from an increase in their debt level not from an increase in real earnings. So the improvement in living standards that the average American and many other Western countries have enjoyed in the last 40 odd years is primarily based on debt – debt that can never be and will never be repaid with normal money.”[/quote]

BTW, this is why I absolutely refute the notion that the wealthiest people are the most productive. Quite the opposite, from what I’ve seen.

The wealthiest are the ones who have the right connections and are able to insert themselves in the middle of every legitimate transaction so they can take a cut of every transaction around the world. Then, there are those who literally control the flow of money — either in an executive position or in finance. They make the most because they are the ones who decide where money goes. Middlemen, dealmakers, and “capitalists”…these are the people who have benefitted most in the past few decades. They are hardly productive.[/quote]

You have an example? Someone who “inserted themselves” in the middle of a transaction that didn’t have any skin in it?? Other than a politican? Rangel, Blago etc?

[jficquette]

[quote=CA renter][quote=CA renter]Great stuff, SD Transplant. Thanks for sharing the links with us.

From the ZH link, I especially liked this part:

“All of these areas are totally non-productive and the only beneficiaries are the participants in the financial industry. And the rewards have been absolutely astronomical. In investment banking, hedge funds and private equity in particular, the most massive wealth has been created. Many players have become billionaires or created fortunes of tens to hundreds of millions of dollars in the last 10-15 years just by shuffling money around. In the past fortunes were created by building factories and industries. But today any normal employee working in Wall Street or the City in London will, by just showing up to work, make hundreds of thousands to millions of dollars. This is the proof of a world totally out of balance when people dealing in money become the richest segment of society. Since this activity contributes very little to the prosperity of a nation (but very much to its participants) it is not sustainable. The biggest reason why it exists is the massive amount of money that governments have created or printed and the fact that the financial industry has developed into a fractal wealth creation machine for the benefit of its participants.

For the last 40 years in particular the rich are getting richer and the average person has seen very little increase in real income. In the US, the real annual income of the bottom 90% of US families has increased by only 10% since 1970. And in the expansion between 2002 and 2007, median US household income dropped $2,000. The perceived increase in wealth for the majority of Americans derives from an increase in their debt level not from an increase in real earnings. So the improvement in living standards that the average American and many other Western countries have enjoyed in the last 40 odd years is primarily based on debt – debt that can never be and will never be repaid with normal money.”[/quote]

BTW, this is why I absolutely refute the notion that the wealthiest people are the most productive. Quite the opposite, from what I’ve seen.

The wealthiest are the ones who have the right connections and are able to insert themselves in the middle of every legitimate transaction so they can take a cut of every transaction around the world. Then, there are those who literally control the flow of money — either in an executive position or in finance. They make the most because they are the ones who decide where money goes. Middlemen, dealmakers, and “capitalists”…these are the people who have benefitted most in the past few decades. They are hardly productive.[/quote]

You have an example? Someone who “inserted themselves” in the middle of a transaction that didn’t have any skin in it?? Other than a politican? Rangel, Blago etc?

[CA renter]

[quote=davelj]quote]

I wouldn’t say they are “hardly productive.” I think even you would acknowledge that there is *some* value added by the “middleman” to most transactions, otherwise they wouldn’t get paid at all. The issue is whether they are overpaid given their contribution. And that very well may be the case (I would argue that it is the case). But it does beg the question… why do they continue to get paid so much? Whether through ignorance or because they actually believe value is being added, folks continue to pay the middlemen. I’m curious as to the answer myself.

At a prior firm I did a fair amount of investment banking (at the small level – transactions generally under $100 million) and always thought everyone involved, including myself, was overpaid to some degree. And I’m still in the industry although I don’t do as much transaction-oriented work anymore, but I still look at a lot of deals and everyone’s still making a pile of money. And yet the firms involved still pay the fees. If you ask them why, the typical answer is, “It was expensive but it was worth it.” And while I don’t fully understand it, it’s hard to argue with that logic. They’re the ones paying, after all (or, more specifically, the investors are paying – but they’re fully aware of the fees as well).[/quote]

IMHO, they get paid because they have control over the distribution channels (distribution of goods or services), sometimes by lobbying politicians to prevent others from getting in on their territory (the NAR lobbying against banks selling their own REO inventory, for instance), or laws which require a “licensed” salesperson to handle a transaction for another party, etc. This is obviously found in the financial services industry. While I understand why the govt would require these licenses when trying to protect the public from unscrupulous business people, a party should be able to use whomever they choose, and should be able to circumvent using a licensed individual or “authorized entity” as long as they sign a statement acknowledging the lack of a license, etc. Imagine having a qualified, but unlicensed, friend handling a RE transaction for you. This person might be far more qualified than a licensed realtor, but without a license, they’re not allowed to handle things for you. Try buying a house (listed on the MLS) “on your own.” You can’t do it.

The public is restricted to using licensed salepeople in many transactions (especially in the FIRE industry). We don’t have a choice in the matter, and it’s because industry lobbyists have pressed for these laws under the guise of “protecting the public.”

Also, so much information is withheld from the public, again for “our own good” and is only accessible to those who are licensed or work in a particular industry. Again, we are **forced** to use their services because we need access to information they have (that we’re not “allowed” to have) or because they control the entire distribution channel or flow of documents, information, etc.

Those who manage to restrict public access to information, or restrict public accesss to trade make the most money.

[CA renter]

[quote=davelj]quote]

I wouldn’t say they are “hardly productive.” I think even you would acknowledge that there is *some* value added by the “middleman” to most transactions, otherwise they wouldn’t get paid at all. The issue is whether they are overpaid given their contribution. And that very well may be the case (I would argue that it is the case). But it does beg the question… why do they continue to get paid so much? Whether through ignorance or because they actually believe value is being added, folks continue to pay the middlemen. I’m curious as to the answer myself.

At a prior firm I did a fair amount of investment banking (at the small level – transactions generally under $100 million) and always thought everyone involved, including myself, was overpaid to some degree. And I’m still in the industry although I don’t do as much transaction-oriented work anymore, but I still look at a lot of deals and everyone’s still making a pile of money. And yet the firms involved still pay the fees. If you ask them why, the typical answer is, “It was expensive but it was worth it.” And while I don’t fully understand it, it’s hard to argue with that logic. They’re the ones paying, after all (or, more specifically, the investors are paying – but they’re fully aware of the fees as well).[/quote]

IMHO, they get paid because they have control over the distribution channels (distribution of goods or services), sometimes by lobbying politicians to prevent others from getting in on their territory (the NAR lobbying against banks selling their own REO inventory, for instance), or laws which require a “licensed” salesperson to handle a transaction for another party, etc. This is obviously found in the financial services industry. While I understand why the govt would require these licenses when trying to protect the public from unscrupulous business people, a party should be able to use whomever they choose, and should be able to circumvent using a licensed individual or “authorized entity” as long as they sign a statement acknowledging the lack of a license, etc. Imagine having a qualified, but unlicensed, friend handling a RE transaction for you. This person might be far more qualified than a licensed realtor, but without a license, they’re not allowed to handle things for you. Try buying a house (listed on the MLS) “on your own.” You can’t do it.

The public is restricted to using licensed salepeople in many transactions (especially in the FIRE industry). We don’t have a choice in the matter, and it’s because industry lobbyists have pressed for these laws under the guise of “protecting the public.”

Also, so much information is withheld from the public, again for “our own good” and is only accessible to those who are licensed or work in a particular industry. Again, we are **forced** to use their services because we need access to information they have (that we’re not “allowed” to have) or because they control the entire distribution channel or flow of documents, information, etc.

Those who manage to restrict public access to information, or restrict public accesss to trade make the most money.

[CA renter]

[quote=davelj]quote]

I wouldn’t say they are “hardly productive.” I think even you would acknowledge that there is *some* value added by the “middleman” to most transactions, otherwise they wouldn’t get paid at all. The issue is whether they are overpaid given their contribution. And that very well may be the case (I would argue that it is the case). But it does beg the question… why do they continue to get paid so much? Whether through ignorance or because they actually believe value is being added, folks continue to pay the middlemen. I’m curious as to the answer myself.

At a prior firm I did a fair amount of investment banking (at the small level – transactions generally under $100 million) and always thought everyone involved, including myself, was overpaid to some degree. And I’m still in the industry although I don’t do as much transaction-oriented work anymore, but I still look at a lot of deals and everyone’s still making a pile of money. And yet the firms involved still pay the fees. If you ask them why, the typical answer is, “It was expensive but it was worth it.” And while I don’t fully understand it, it’s hard to argue with that logic. They’re the ones paying, after all (or, more specifically, the investors are paying – but they’re fully aware of the fees as well).[/quote]

IMHO, they get paid because they have control over the distribution channels (distribution of goods or services), sometimes by lobbying politicians to prevent others from getting in on their territory (the NAR lobbying against banks selling their own REO inventory, for instance), or laws which require a “licensed” salesperson to handle a transaction for another party, etc. This is obviously found in the financial services industry. While I understand why the govt would require these licenses when trying to protect the public from unscrupulous business people, a party should be able to use whomever they choose, and should be able to circumvent using a licensed individual or “authorized entity” as long as they sign a statement acknowledging the lack of a license, etc. Imagine having a qualified, but unlicensed, friend handling a RE transaction for you. This person might be far more qualified than a licensed realtor, but without a license, they’re not allowed to handle things for you. Try buying a house (listed on the MLS) “on your own.” You can’t do it.

The public is restricted to using licensed salepeople in many transactions (especially in the FIRE industry). We don’t have a choice in the matter, and it’s because industry lobbyists have pressed for these laws under the guise of “protecting the public.”

Also, so much information is withheld from the public, again for “our own good” and is only accessible to those who are licensed or work in a particular industry. Again, we are **forced** to use their services because we need access to information they have (that we’re not “allowed” to have) or because they control the entire distribution channel or flow of documents, information, etc.

Those who manage to restrict public access to information, or restrict public accesss to trade make the most money.

[CA renter]

[quote=davelj]quote]

I wouldn’t say they are “hardly productive.” I think even you would acknowledge that there is *some* value added by the “middleman” to most transactions, otherwise they wouldn’t get paid at all. The issue is whether they are overpaid given their contribution. And that very well may be the case (I would argue that it is the case). But it does beg the question… why do they continue to get paid so much? Whether through ignorance or because they actually believe value is being added, folks continue to pay the middlemen. I’m curious as to the answer myself.

At a prior firm I did a fair amount of investment banking (at the small level – transactions generally under $100 million) and always thought everyone involved, including myself, was overpaid to some degree. And I’m still in the industry although I don’t do as much transaction-oriented work anymore, but I still look at a lot of deals and everyone’s still making a pile of money. And yet the firms involved still pay the fees. If you ask them why, the typical answer is, “It was expensive but it was worth it.” And while I don’t fully understand it, it’s hard to argue with that logic. They’re the ones paying, after all (or, more specifically, the investors are paying – but they’re fully aware of the fees as well).[/quote]

IMHO, they get paid because they have control over the distribution channels (distribution of goods or services), sometimes by lobbying politicians to prevent others from getting in on their territory (the NAR lobbying against banks selling their own REO inventory, for instance), or laws which require a “licensed” salesperson to handle a transaction for another party, etc. This is obviously found in the financial services industry. While I understand why the govt would require these licenses when trying to protect the public from unscrupulous business people, a party should be able to use whomever they choose, and should be able to circumvent using a licensed individual or “authorized entity” as long as they sign a statement acknowledging the lack of a license, etc. Imagine having a qualified, but unlicensed, friend handling a RE transaction for you. This person might be far more qualified than a licensed realtor, but without a license, they’re not allowed to handle things for you. Try buying a house (listed on the MLS) “on your own.” You can’t do it.

The public is restricted to using licensed salepeople in many transactions (especially in the FIRE industry). We don’t have a choice in the matter, and it’s because industry lobbyists have pressed for these laws under the guise of “protecting the public.”

Also, so much information is withheld from the public, again for “our own good” and is only accessible to those who are licensed or work in a particular industry. Again, we are **forced** to use their services because we need access to information they have (that we’re not “allowed” to have) or because they control the entire distribution channel or flow of documents, information, etc.

Those who manage to restrict public access to information, or restrict public accesss to trade make the most money.

[CA renter]

[quote=davelj]quote]

I wouldn’t say they are “hardly productive.” I think even you would acknowledge that there is *some* value added by the “middleman” to most transactions, otherwise they wouldn’t get paid at all. The issue is whether they are overpaid given their contribution. And that very well may be the case (I would argue that it is the case). But it does beg the question… why do they continue to get paid so much? Whether through ignorance or because they actually believe value is being added, folks continue to pay the middlemen. I’m curious as to the answer myself.

At a prior firm I did a fair amount of investment banking (at the small level – transactions generally under $100 million) and always thought everyone involved, including myself, was overpaid to some degree. And I’m still in the industry although I don’t do as much transaction-oriented work anymore, but I still look at a lot of deals and everyone’s still making a pile of money. And yet the firms involved still pay the fees. If you ask them why, the typical answer is, “It was expensive but it was worth it.” And while I don’t fully understand it, it’s hard to argue with that logic. They’re the ones paying, after all (or, more specifically, the investors are paying – but they’re fully aware of the fees as well).[/quote]

IMHO, they get paid because they have control over the distribution channels (distribution of goods or services), sometimes by lobbying politicians to prevent others from getting in on their territory (the NAR lobbying against banks selling their own REO inventory, for instance), or laws which require a “licensed” salesperson to handle a transaction for another party, etc. This is obviously found in the financial services industry. While I understand why the govt would require these licenses when trying to protect the public from unscrupulous business people, a party should be able to use whomever they choose, and should be able to circumvent using a licensed individual or “authorized entity” as long as they sign a statement acknowledging the lack of a license, etc. Imagine having a qualified, but unlicensed, friend handling a RE transaction for you. This person might be far more qualified than a licensed realtor, but without a license, they’re not allowed to handle things for you. Try buying a house (listed on the MLS) “on your own.” You can’t do it.

The public is restricted to using licensed salepeople in many transactions (especially in the FIRE industry). We don’t have a choice in the matter, and it’s because industry lobbyists have pressed for these laws under the guise of “protecting the public.”

Also, so much information is withheld from the public, again for “our own good” and is only accessible to those who are licensed or work in a particular industry. Again, we are **forced** to use their services because we need access to information they have (that we’re not “allowed” to have) or because they control the entire distribution channel or flow of documents, information, etc.

Those who manage to restrict public access to information, or restrict public accesss to trade make the most money.

[Author]

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