Speculation versus investment

 

I heard yesterday, for the first time, the proportion of “proprietary trading” versus actual investment in assets and businesses on Wall Street.

$40 trillion in proprietary trading versus $200 billion dollars actually going somewhere to capitalize a business, provide liquidity to enable infrastructure spending, things like that.

200:1

0.5%

That means that the rest of Wall Street, the 99.5% of its activities, are really the residents of the Street betting against each other, shorting the naked long shot of the slingshot, securitization of the unstable, insurance against the insane, going bullish on bears or piggish on bacon, or something. High frequency, collateralized, centralized, swapping, swigging, swirling.

$40 trillion is triple the entire US economy, more than half of the entire measured economic activity of the planet. Going round and round in a circle inside a wheel, inside a gearbox, opaque and complex and requiring lots of acronyms.

OK, meanwhile, food costs more, healthcare costs more, education costs more, and your kid is living in your basement. That’s NON-confusing side of reality, just to touch base for a moment.

Back to finance – $40 trillion is sloshing around, bonuses are paid, your retirement account is kinda…stable? Kinda OK?

BUT!!!

We’re constantly on the knife edge of collapse, you know! Things are unstable! Uncertain! There’s the European debt crisis! Weaknesses in consumer spending! The United States government constantly knocking its head into a debt ceiling! Sears and Kodak, kaputski! Chaos! It’s impossible to tell what’s next! The balance sheets are unclear!

But 99.5% of this activity is comprised of banks making up fictional assets on which to bet against each other. Auctions of the bonds of countries that will never pay them off. Default swaps that cannot possibly be honored. Agreements to buy gold that is no longer there.

200:1

Let’s say the financial system “collapsed.” How long would it take the rest of us who aren’t using supercomputers to bet against other Ivy Leaguers with supercomputers to coordinate capital for the 0.5% that it took to apparently run the actual farms and mines and rail lines and retail shops?

Let’s say that half of the whole game STOPPED! A collapse of historic proportions! $20 trillion in activity just halted! What if that was the $20 trillion you never saw anyhow? The slooshing of bonds between financiers and central banks and secret central banks and countries and other financiers and supranational institutions and bond vigilantes and bond pirates and bond acrobats and James Bond? Would you, wrapping pork chops in your job down at the local butcher shop…would you notice?

Would the corn still come up at the end of summer?

Would kids still be getting bigger every year requiring new shirts?

Would somebody find a use for that coal and petroleum left in the ground?

Would people still love the sound of music and still pay money to hear some, live or at home?

What do you think?