“The Rich Man's Marxism The Daily Reckoning Paris, France Wednesday, August 29, 2007 --------------------- Oh...and here’s an interesting item. Remember, the present economic system is not capitalism...it’s a kind of Marxism for rich people...in which the elite make the profits while the losses are redistributed, shared throughout the entire population like Mao jackets and influenza. The genius of the present system is that it dupes the masses into thinking they are capitalists, making it possible for the speculators and hustlers to offload their risks onto them. You can see how it works by looking at the mortgage industry. Lenders make a profit by writing mortgages...the mortgages get sold on, repackaged, and bought up by hedge funds, insurance companies, and even pension plans. There are more than a trillion dollars worth of CDOs around and about. No one knows exactly who loses money when they go bust because the downside has been socialized...spread to the masses. In the old days, the banker who provided the mortgage loan would have taken the loss when it went bad. Not today. Now, it’s likely to be a retired teacher in Anaheim...and millions of other make-believe ‘investors’ just like him. Likewise, the LBO mavens make a fortune in fees. Ultimately, their creations are taken up by the lumpeninvestoriat . Again, the dealmakers and speculators take their profits...and then the risk of inevitable loss – when the stock goes down – is borne by average investors. And when the speculators get in trouble, the feds rush to their aid with liquidity – more cheap money. But wait, the problem at the heart of the economic system is not a lack of credit...it’s that too much easy credit has loaded too many people and too many deals with too much debt. More credit just postpones the inevitable loss...which, as we’ve been saying, will not be suffered by the capitalists who caused it...but by the masses. ”
