This criticism of the “Occupy” movement comes from an investment manager's newsletter.
“...despite their claims to be the 99%, they represent a small minority of Americans. However, more disturbing are the polls which show that “tax the rich” redistribution politics just might work. This suggests that the entitlement mentality has become ingrained in many of our citizens.
We have only to look at much of Europe to see what this entitlement philosophy does to an economy in the long run. Also, even though most people in Europe realize that austerity must now occur, civil unrest like that in Greece ensues as various factions resist the inevitable.
The U.S. is now facing a similar dilemma. The budget deficit must be reduced but no one can agree on what spending to cut. This leads to the “tax the rich” approach which, while it may be popular, is unlikely to be good economics. First, there are not enough rich to tax to solve the problem. Second, those very taxes could be a drag on the economy and actually make the problem greater in the short run. Finally, in the long run, that approach could have a chilling effect on incentives to work, save, and invest. All of which are needed to ensure a viable growth economy.
One way to grasp this conundrum would be to consider a lottery game where the winner would be forced to “redistribute” his money to all those who did not win. It is hard to imagine anyone purchasing a ticket to play in such a game.”
There are a number of “out of touch” representations in this article. I have yet to hear a credible financial expert or economist suggest that we can balance the federal budget through tax cuts alone. Yet, that seems to be the approach of the leading conservatives on the national scene. Sure, you can argue that spending is too high, but this coddling of the wealthy is really getting ridiculous. Tax rates for the wealthy have been at historic lows since the 1980's and business investment has not increased as a result.
Here's an interesting debunking of the rhetoric on this issue by a long-term Republican advisor.
Raising Taxes on the Rich: Not Whether, but How
This commentary about how jobs are created is also convincing.
Finally, A Rich American Destroys The Fiction That Rich People Create The Jobs
The common refrain to arguments in favor of higher taxes on the wealthy is “class warfare.” This isn't about class warfare; it's about fairness. When the rich keep getting richer, and the poor keep getting poorer, we have a societal problem. The solutions are complicated, and there are no easy answers, but let's not ignore the problem. It will only get worse.
This one is kind of fun. The world's largest custodians are accused of manipulating foreign currency exchange transactions to “skim” a profit from every transaction – on top of the fee that they make for processing the transaction.
In the FundFire article, “Managers to Blame for FX Woes, BNY Boss Says,” by Maureen Brody, BNY Mellon CEO, Gerald Hassell, is aggressively defensive about BNY's responsibilty –
“When asked yesterday about BNY Mellon’s fiduciary duty to the funds, Hassell indicated that the investment managers hired by the pension funds are the ones with that duty, not BNY Mellon. He said BNY Mellon is a principal trader for profit and is not bound by the fiduciary role it usually has in other services to these clients. He told reporters in a Q&A session after a speech Tuesday at Boston College that those investment managers all knew they were paying “convenience store prices” for the transactions in question, according to the Globe.”
While it's true that managers use the custodians to process their transactions, they really don't have a choice.
This one will be settled in court as virtually every pension fund that does international investing is pursuing a suit against the FX processors. I predict that it will get ugly for the custodians as they pay big settlements.
Of course, this is an accepted practice on Wall Street – find a clever way to take someone else's money. If you get “caught,” it's “let the buyer beware.”
The Goldman Sachs Connection
Here's an alarming story about the former Treasury Secretary tipping off a group of hedge fund managers in a way that allowed them to profit from the information.
How Paulson Gave Hedge Funds Advance Word of Fannie Rescue
Let's file this under the category of “Why we shouldn't have a former Goldman Sachs employee leading the U.S. Treasury” or “Why the fox shouldn't guard the hen house.” You can't make up this stuff!
At first glance, this one may seem a little nitpicky, but it is kind of interesting. In a heated moment at a recent Republican debate, Mitt Romney challenged Rick Perry to a $10,000 bet over one of Perry's claims.
Romney doesn't disavow $10,000 bet
This comes on the heals of an infamous exchange at the Iowa State Fair in August that is quoted in the above article.
Romney stood on bales of hay and shouted down a questioner who accused him of favoring corporations over average Americans who rely on programs like Social Security. "Corporations are people, my friend!" Romney shouted back.
Seriously? Apparently, Romney agrees with the recent U.S. Supreme Court decision that allowed unlimited campaign contributions from corporations. That has to be one of the worst decisions in history. The current system of campaign financing in the U.S. is the root of all evil in government. If ever a system needed to be reformed, this is it. And now it's worse than ever.The Republicans never want to be known as the “party of the rich,” but sometimes the shoe fits.