A recent piece by Ryan Avent in the Economist asked a wonderful question:

“The question is not why Apple doesn’t employ more Americans. The question is why there aren’t more Apples. Maybe it’s insufficient demand. Maybe it’s technological stagnation. Maybe it’s a dearth of qualified workers, and maybe it’s poor regulatory policy. There’s little harm in trying to do better on all of those counts. What is harmful is to look at one of the great American corporate success stories and fret over its audacity in providing good jobs for workers in America and in China. How dare they!”

Avent was discussing the fact that Apple employs twice as many foreign workers as domestic workers.  The usual talking point is that this is the result of a decline in American competitiveness and the shipping of workers overseas.  But that misses the point as Avent notes.  The real question is not why Apple is shipping jobs overseas.  The real question is why there aren’t more Apples?

I have a rather simple opinion on this one.  The modern day Steve Jobs doesn’t start an Apple.  He starts a hedge fund.  We don’t ship our best and brightest into productive lines of work en masse anymore.  We ship them to Wall Street.  Hence, the financialization that we have all come to know and hate becomes self perpetuating.    Unfortunately, this is part of the curse of wealth.  As we have become such an enormously wealthy nation we have seen a boom in the demand for Wall Street’s services as wealth needs to be protected and nurtured.

It’s not a horrible problem to have.  But I believe Wall Street has exploited this surge in demand via products and services that add little to no value.  I attribute this in large part to the ignorance of the common man/woman.  And how can you blame them?  Most people are too busy doing what they do best to ever worry about their investment portfolio.  It’s easier to outsource that to an “investment professional”.  Unfortunately, that “investment professional” isn’t always concerned about your best interests, but is often times more concerned with fee maximization and maximizing the revenues for a firm that is only interested in maximizing shareholder value.

This country needs a very serious shift in what it values.  While it is important to value wealth and those who can protect it, I think we need to better educate ourselves about the various forms of wealth protection that are available.  This doesn’t mean that Wall Street is necessarily all evil.  It just means that Wall Street as a proportion of the total US economy has become disproportionately important in the minds of most Americans and the fees and revenues generated by these firms have allowed them to attract the very best and brightest minds.  What we need is a Wall Street that adds real value and is leaner and meaner.  I think the financial crisis was the markets attempt to impose this self correcting mechanism on this industry, but the government and the Fed clearly had no interest in allowing that to happen.  And so here we are back where we started with a crisis wasted and little resolved….

There’s an obvious cannibalization of capitalism that is occurring here and it is an incredibly serious risk to the US economy and our way of life.  We have allowed the power to concentrate itself in one largely unproductive industry which we refuse to allow fail.  That is the antithesis of the democratic and capitalist world that has made America so great.  While better regulation can help to some degree, the only real sustainable fix is via education and better understanding of the financial world in which we live so that the average American can reduce their dependence on Wall Street.


Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Peter D

    Cullen, God bless you! As I keep repeating, the real crowding out comes not from the govt but from the financial industry.

  • LVG

    This is a brilliant summary of our current problems. Thanks.

  • Seth

    I’d like to point out the flip side of your argument — the price of the increasingly burdensome level of regulation federal, state and local governments impose on old-fashioned capitalist businesses, be it zoning, accounting requirements, health coverage requirements, environmental regulations, licensing, you name it.

    I’d venture that the reason it’s easier to start a new hedge fund than a new technology firm has much to do with these factors, maybe more so than with “excessive” demand for Wall Street services as you argue.

  • http://www.pragcap.com Cullen Roche

    My point is not that we need greater regulation in all US industries. I am primarily in favor of greater regulation on Wall Street.

  • http://DollarMonopoly.com Craig Austin

    uhh where is your blog’s share features so people can tweet your articles. you need to get your best and the brightest on that cullen! :-)

  • Sixx

    This should be the story of the day… (er, decade?).

  • Dexter

    If we actually allowed true free market capitalism to blossom in this country (not crony capitalism, or kleptocracy), the free market would better allocate resources to productive pursuits, and correct mal-investment.

  • quark

    “No taxation without representation!” hmmm could one imply that taxation should be levied relative to influence in Washington? If so then one would conclude that all income derived from Wall Street should be taxed at 99% and main street at 1%.

    This would achieve your objective of driving the brains out of Wall Street and back onto main street whereby the evolution of our society can resume…problem solved.

    Now to be fair, practical and self reflective this would require participants on this blog to employ their talents toward endeavors that provide a greater benefit to society as a whole. While this blog is educational for enriching ones pocket through the discourse of macroeconomic minutia and the speculation which motivates markets it does little for the betterment of society as a whole.

    That said, I don’t see compensation derived from shenanigans on Wall Street being taxed at 50% let alone 99% so blog away!

  • REN

    Canada had a State bank, 1935 to 1974 if my memory serves. By 1974, Canadian industry became self financing. In other words, the people of Canada tended to stop going to the banks for loans. By this time, Canada had free health care, they had built out their waterways, and had a national railroad. Government had direct spent into the economy via the state bank, and that capital had accumulted amongst the people. Those savings were then being used to generate new wealth. In that environment it would be easy to gather capital from your friends and neighbors to start new business. After all, your money supply had been a store of wealth and capital flowed to labor.

    Don’t get me wrong, I’m not a fan of state banks. They can be used for fascism. But, the message is clear, direct spend by the government (through the state bank) ended up supplanting credit money. Usury vectored back to labor by way of their savings. In this way, financialism was undone and Capitalism was made to work serving the needs of the people.

    So, until we have a system that allows the average Joe to accumulate savings, and those savings are not wiped out by financial games, then the garage entrepreneur is in danger. Worse, if the economy signals incorrectly, the entreprenur cannot see where the holes are.

    Already, the patent system is under attack, and the new bill is supported by corporate interests,which hose down the little guy. Financialization and centralization of power is a type of STATISM. We are becoming a feudal oligarchy of corporations, private banks, and government.

  • El Viejo

    The only reason our form of Democracy has worked for as long as it has is that Regulation wasn’t needed so much in the past. Regulation is expensive. The police and criminal justice system is expensive. People in this country used to be better behaved. They were a “law unto themselves”.

    Also, the Me generation has not left us. They are alive and well. The cry for tort reform is just a symptom. Greed does not exist only on Wall St. Can’t you see the increase in the number scams? How about the ‘quality’ of the spam you get by email. Money is now a benchmark of how well you are doing. Certain professions are just a means to six and seven figure salaries. Ad naseum.

  • Aaron

    So Cullen, why not lead out in this? Leave your portfolio manager job, and start up a tech company :)

  • http://www.pragcap.com Cullen Roche

    There is an incredibly important role being played by small websites like my own. We help sew the seed of truth that can then be spread throughout the entire population. It has to start somewhere. Someone with the knowledge and understanding of the system has to stand up and point out its faults so we can make progress. I know for a fact that I have had a positive influence on thousands of people’s lives because I get the email to confirm it. Not that I am so great, but I know the website is not detracting from society in any way….

    Would the world be better served if I started a company specifically designed around me educating people on these matters? Maybe. But the website has a pretty big reach. I personally think it’s a great resource for people. And gauging from the number of comments you’ve left here over time I’d be inclined to argue that you agree ;-)

  • http://www.pragcap.com Cullen Roche

    If I had the talent I would. But I don’t. I am only trained in economics and finance. Perhaps I am better suited by teaching people about these misconceptions and helping lead the charge in weening us off this Wall Street addiction????

  • Andrew

    I don’t understand this. Haven’t you been saying that there isn’t enough demand, and that’s why people don’t have jobs?

    Are you asking why someone isn’t out there fighting Apple for market share? Isn’t what what Google and Verizon and HP are doing?

    Are you asking why someone isn’t coming up with something new and cool? Apple didn’t come up with much particularly new or cool — progress is incremental. Apple couldn’t have come up with the iPhone until the processors and networks got fast. Apple’s claim to fame is marketing, isn’t it? They do seem to execute better than others in terms of product, but that isn’t always necessary to be successful (witness MS Windows).

  • rvm

    Education is the way. That’s why it is very important the first macroeconomics MMT textbook to be published as soon as possible and hopefully be used in the universities around the world.

  • http://DollarMonopoly.com Craig Austin

    Your blinded by ideology and you don’t even know it. Let me explain. Everything needs to be managed to be productive­. Political arrangements defined by law though property rights, the corporatio­n, and the creation of money serve to “manage the system.”

    The market does not exist as an independent entity. its an managed creation of the state to benefit society by reducing risk and drive economic development. The problem we are having today is that the mainstream economists are confused by how monetary operations impact the system. Essentially we are suffering from poor management at the top…i mean that not as a political statement by rather operationally. The objective is not to balance the budget at any given level. The objective is to optimize the budget at any given level based upon what currency users are doing with their money. If users are saving the issuer needs to spend. If the users are spending the issuer needs to back off. The issuer simply needs to react to what the currency users are doing.

    Think of savings as points on a scoreboard­. There is no reason there should be a shortage of points to play a game of football. Now you could play the game without keeping score or you could play the game with a scorekeeper. The currency issuer is the scorekeeper of money…be­cause he is the monopoly producer of money. Remember issuer debt is user savings as a matter of accounting­. The more savings you have the more debt the issuer will have. Hows that…doe­s that help?

    this stuff is counterintuitive at first but once you get it – dude it’s like moses parting the sea.

  • http://DollarMonopoly.com Craig Austin

    and yes moses did part the sea…cause thats where all the dinosaurs died – duh!

  • http://www.pragcap.com Cullen Roche

    You’re confusing my secular view with a cyclical view. The demand problem is not permanent. The lack of innovators (or the decline in their numbers) potentially is….

  • Chaos

    CR says: “While it is important to value wealth and those who can protect it, I think we need to better educate ourselves about the various forms of wealth protection that are available.”

    Not a worse question though would be: “what exactly wealth is?”, financial capital is one form of wealth, and is the less important in the long run. I ain’t american but I still think USA was once a great nation (and to some point, still is); but the financial shenanigans are not real wealth, accounting is not real wealth, real wealth are resources, sustained biosphere, industry, production and consumption, infrastructure, knowledge, education, culture, social justice, and shared progress overall (not plutocracy and extreme inequality) etc. Financial shenanigans is the lesser form of wealth, and if all of the above disappears, it’s just a count down until financial shenanigans disappear as a screen of smoke always does.

  • http://DollarMonopoly.com Craig Austin

    hire me. i’ll bring it. and yes i have no experience or training in the field of economics or finance but i do know how to read, write, drink and play guitar really good. well not so much on the writing. what do you expect i live in austin.

  • http://www.pragcap.com Cullen Roche

    Right. Real wealth lies in our ability to create real good and services that enhance our standard of living. Figuring out ways to maximize fees or protect a certain portion of the population from inflation or taxes is not real wealth creation. It all flows together….We need more innovators and fewer wealth protectors.

  • PWM

    CR, on rare occasions I want to add my two cents to this interesting forum.

    From your post: “Unfortunately, this is part of the curse of wealth. As we have become such an enormously wealthy nation we have seen a boom in the demand for Wall Street’s services as wealth needs to be protected and nurtured.

    “It’s not a horrible problem to have.”

    It is, indeed, a part of the curse of wealth, but that curse also contains the seeds of our rapidly growing inability to compete in the world markets. America’s wealth carries with it the Achilles Heel of high costs, across the board.

    The USA is an extremely high cost place to live and work relative to the rest of the world. Just ask all those folks investing and managing in Asia and elsewhere, where costs are quite low. Then go to virtually any USA retailer and check out where the goods were produced. Does anybody ever consider the implications?

    The signs of our growing inability to compete are all around us. For example, Airbus ate Boeing’s lunch in re new orders at the recent Paris Air Show.

    Think back to the key reasons for the absence of profits in the USA auto industry over several decades when foreign producers were making money. Look at how our government on all levels has expanded to a point where its costs are proving highly stressful. Look at a health care industry with costs growing substantially faster than productivity. It goes on and on.

    A major motivating factor underlying the real estate and credit bubbles was that too many Americans wanted to “keep up” via consumption rather than production/value creation, buying McMansions, expensive cars, electronics, clothes, gadgets and stuff using readily available credit rather than patience, savings and lower expectations from life. Today’s WSJ has an article discussing $300 jeans; they’re nothing but a damned pair of pants, fergodsakes!

    Yes, Wall Street and its minions have certainly provided fuel for the stupidity, but the rest of the world has seen an opportunity to capitalize on our spendthrift culture.

    Bottom line: We are spending our wealth in foolish ways, thereby pricing ourselves out of the markets

    You also said: “This country needs a very serious shift in what it values.”

    You got that right!

  • jt26

    Actually, in addition to Hedge Fund Stevie, Web 2.0 Stevie is being over funded. This tells me that only quick fail/return and low-capital ventures are being funded. That’s why the next Apple, TI, Applied Materials, FedEx will never be funded … the VCs will cry “what, you have to do materials research? what, you have to build a pilot process? what, you have to buy planes? what, no one has ever done that before?” … Y2K NY and San Jose American Capitalism suffers from a lack of patience and vision.

  • Chaos

    Anyway, I think we have to look at structural problems related to employment. It has to happen soon or later: with ever increasing productivity, at some point it will be hard to invent ‘more jobs’.

    This wouldn’t be so much of a problem IF (big if) productivity was shared amongst all the population for real: we would be all be richer, and would have access to cheaper goods. Along this we wouldn’t need to work as long to have better quality of life, more spare time and we would continue to develop services or stuff like cooperative projects and free sharing of stuff over the Internet would happen even in a more massive war than now. But when the reality is that what happened is over indebtedness and too much leverage, and that profits and better productivity are not shared, the wealth effect does not flow down.

    And then the employment problem is of a totally different kind, and the pressure to solve it too. And the possible solutions? These too are of a different sort, too.

  • AK

    Great summary. I think our current financial system will kill capitalism unless we do something about it. Bush got us into deep trouble and Obama is not doing much about it. Not a single banker went to jail when it was obvious that Greenspan-Rubin-Summers policies in the 90’s and the super-banks got us into this mess. Mr. Obama hired same people and applied same policies that got us into this mess. Frank-Dodd Financial Reform Bill was a joke.

  • http://DollarMonopoly.com Craig Austin

    Here is an MMT textbook: William Baumol & Alan Blinder – MACROECONOMICS – Principles and Policy – Eleventh Edition.pdf

    Its pretty dry reading but helpful from the pages i read. I found a copy out on the web

  • rvm

    @Craig Austin,

    Liked your site and attitude – MMT really needs promoters and marketers.
    I know that Prof. Mitchell and Prof. Wray are working on MMT textbook which hopefully be ready by the end of the year.

  • REN

    I’m in high tech and I hold many patents. I’ve had to look up from my work to figure out why my industry is shifting overseas. I wanted to know why my family and country are in jeopardy. Why is my labor and output absorbed and mal-invested.

    If you want to be the next Hewelett Packard or Steve Jobs, then good luck Chuck. If you have an idea that doesn’t cost much in the way of capital, then you can probably do it. But, the medium to big stuff, and complex stuff, you have to go to the banks. If you go into debt, then all the risk is borne by you, not the banks. The bankers get their cut regardless if you go bust or not. If you go the venture capital route, then their risk is rewarded by owning increasing shares of your company over time. They are called vulture capitalists for a reason.

    That is why it is important for capital to accumulate among labor as I pointed out earlier. If capital formation accrues only to a plutocracy or bankers, then society shifts toward feudalism. The money mechanism then becomes the source that destroys our grand American experiment. Entrepreneurism and ferment is ripped out of the economy as people throw in the towel. The risk reward element no longer works due to the wealth shifting.

    There was tremendous American wealth generated by industry during the 80’s and 90’s. Much of it has vaporized or been shifted out of producer’s hands.

    The money system is the feedback node for Capitalism. If it gets jacked with, then the system becomes like Frankestein repeatedly walking into a wall. He doesn’t respond to the stimulus, or responds inappropriately. If the money system signals “send jobs to China” then that is what will happen. If the money system has been perverted to help wall street, then that is what will happen.

  • http://exertia.wordpress.com/ exertia

    Cullen, I am a great supporter of your website, but let me take a contrarian view for a moment: name one good tech startup in recent times that originated outside the US. We are still the birthplace for Facebook, Google, Groupon, Zynga and several others.

    While Wall St. does suck up a lot of good minds, I’d say it’s more the money minded than the best of the brain pool. Besides as long as America keeps an open door policy that doesn’t antagonize bright minds from outside to come here to chase the American dream, any “brain drain” from Wall St will be sufficiently compensated by the other inflow.

    Just my 2 cents…

  • Somnolento

    Agree here, to an extent. We really need to improve our immigration policy though. We keep out a lot of great minds by our asinine quota system.

  • http://DollarMonopoly.com Craig Austin

    i gotta say this is my new favorite site after discovering it this weekend. cullen makes an effort to bring clarity and brevity to a dense subject. its refreshing to hear a pragmatic voice of sanity in this deluge of opinion turds that are raining down on all of us all the time. cullen your like nice little umbrella.

  • Somnolento

    Pure free market capitalism *leads* to cronyism (see the Robber Barons). Rampant market fundamentalism got us into this mess with the deregulation of the banks.

    Government has a role in making sure certain essential services operate within fairly stringent frameworks, for the greater good. Commercial banks ought to function as they did post Glass-Stegall, pre-Graham-Bleach-Liley–like regulated utilities.

  • http://DollarMonopoly.com Craig Austin

    somewhere i read bill gates say that his biggest competitor was wall street for talent. obviously this was pre google.

  • SS

    Love the commentary, but let us know Cullen – are you selling into this rally yet?

  • Randy

    I would like to know how many Americans truly understand the term: Sweat Equity
    There is no such thing on Wall St. The place should be regulated into not-for-profit status for no other reason. As well, Sweat Equity should never be confused as profits from crime. For example: JPM today was ‘rewarded’ today by the SEC with a $100+ million fine for massive systematic Muni debt fraud. I say rewarded because this was lower than the cost of doing business for JPM, no one admitted fault and no one went to jail. I rest my case.

  • Somnolento

    Same here. Ditto. Me too.

  • ES

    > the average American can reduce their dependence on Wall Street.

    It cannot happen until 401Ks exist. 401K was a brilliant move on the part of the financial industry, they hooked most of the country on stocks.

  • ES

    Great post. It is no surprise that most of the latest successful businesses are all itnernet based, which require few resources to start. To start actually producing something tangible, it is almost impossible. You have to go to China for that.

  • Mike C


    “Muller is the founder of Morgan Stanley (MS)’s Process Driven Trading group, or PDT, a 70-person band of Ph.D.s and computer jockeys. They use algorithm-rich programs to bet Morgan Stanley’s money on pricing discrepancies in global markets.
    Definitely a great use of brainpower there (sarcasm off). Not sure what the solution is though if any. Fact of the matter, the potential rewards working in finance are greater than any other sector of the economy by orders of magnitude.

  • honestann

    No change will happen as long as fiat, fake, fraud, fiction, fantasy, fractional reserve practices are COMPLETELY TERMINATED. As long as one group of predators can create unlimited sums of debt-money out of thin air and speculate or “sure things” and very risky things as well (albeit with massive insider information advantages), the USSA has ZERO chance. ZERO. ZERO. ZERO. ZERO. ZERO.

    Until the:

    predators DBA government
    predators DBA corporations
    predators DBA central banks

    are treated like predators (caged or shot/hung/injected), there is ZERO hope for anyone who is honest, ethical, benevolent and productive. ZERO. Oh, they might eek out a living for a few more years, but that’s not what we’re discussing here.

  • ed

    Why don’t we have anymore Steve Jobs?

    BECAUSE THEY’RE ALL ON RITALIN!!!!!!!!!!!!!!!!!!!

    The effing feminist movement has taken over schools and destroyed boys in favor of girls.

    Boys no longer learn about male role models to inspire them but have to sit through a bunch of crap about obscure feminist heros.

    Girls are given most of the support and encouragement to go to college. Hence the 60/40% ratio of girls while boys are left to die on the educational vine.

    Boys are naturally better at math and engineering but our engineering schools are instead full of foreign students

    And still the crazy feminists are trying push girls into these classes.

    That is like planting the wrong crop in the wrong field. We would get more bang for our educational buck and have Americans graduating from US engineering schools if we cut out this self destructive affirmative action crap

  • http://macronomy.blogspot.com Martin

    How about Criteo? That’s one good start up born outside the US for a start. Skype, another…

  • http://www.selling-a-business-without-stress.com martin

    Your mention of Canada having a state bank is incorrect. It did and does have a central bank called the Bank of Canada. However it functions in a way similar to the US Fed. Although it is owned by the government.

    Fortunately, Canada and its government have largely resisted populist tendencies to encourage making mortgage loans to those lacking the ability to repay them. This tendency in the US gave rise to a huge and extremely profitable activity involving government guarantees, securitization, and related largely unproductive activities. All to shift the risk to parties that were unsophisticated and misinformed. Or just plain greedy.

  • OTS


    Could you expand on the idea that the financial industry is the real culprit in the crowding out argument? Or provide a link tot a more in depth discussion? Are you saying that the financial industry is hogging capacity that could be put to use in more productive ways or is there more to it than that?


  • Gerald P

    REN, you are right, but the vital question is ‘what is a realistic solution’? Wall Streets’ influence, media timidity, ignorant voters, maldistribution of income, are all powerful constraints on intelligent change.

  • quark

    Yes…and there are angels working in the 5th dimension that will keep at bay those who still conduct themselves as if they were in the 2nd dimension.

    Adam Smith and Teddy Roosevelt understood that certain men and women are simply lawless and there must be an invisible and determined hand to slap them down! Our nation is wanting of such a hand.

  • quark

    Indeed I do.

  • Jack

    There are only 2 ways of creating wealth, you either dig it out of the ground, or you bash it into shape. Every other activity is an overhead that simply shifts wealth about. Salesmen and transport services may be necessary, but they comprise an overhead. Entertainers only create wealth while they are performing, and the wealth that they create is consumed the moment they stop… unless it is recorded (using stuff that is dug out of the ground or bashed into shape). Wall St. does not get dig or bash, so it creates no wealth, it just redistributes it. One gets wealthy by creating wealth, that is why the UK was the wealthiest nation in the world in the 19th Century, it had the industrial revolution first. The US was the worlds largest manufacturer in the 20th century, so it became the world’s richest country. Now look what’s happening to China. This stuff is not rocket science, and any historian could see this obvious link.

  • quark

    I’ll concede the fact that Americans became undisciplined in their accumulation of debt for consumption while business and political leaders enabled them for their own financial and political gain.

    As for America becoming uncompetitive…by whose standard? We’ve protected our middle class through labor laws and are moving to protect our workers and fellow citizens through environmental law albeit slowly. These other countries who are out competing us operate outside of these modern and essential laws. This simply is wrong and the blame is to point the finger at the American worker…you are wrong!

    Again this problem is not complex but it does require taking responsibility and taking those responsible to prison.

    Imported consumer goods should be taxed at 99% just like the gains and salaries made on wall street. Corporate officers and managers should get their head out of their collective arses and stop hiding their incompetent management through the shifting of their production facilities overseas and exploiting undeveloped countries with little to no worker protection and zero environmental laws or by exploiting the US’s lax financial regulations. This has exposed American workers and taxpayers to financial increased taxes/lost benefits for what…so corporate leaders can fool Americans into believing that if it were not for their superior leadership skills their companies would be toast. All in order to increase corporate profits in order to trigger incentive clauses in their compensation packages.

    The fact that the likes of Jack Welch, Jamie Diamond and so many other business leaders over the past 30+ years are held in high esteem for others to emulate is a pathetic joke. They have ruined this nation. Unfortunately their underlying incompetency has been masked by the collapse of our economy and due to the chaos we now find ourselves in we are unable to gain our wits about us in order to recognize we’ve been duped…nor do we understand the reasons why.

  • gf

    Oh Boy what rock did you crawl out from under?

    Yes we have a problem with boys and education but try to think for yourself instead of having Rush do it all for you.

  • El Viejo

    I’m not suggesting that corporations or govt or other organizations don’t need regulation. I’m suggesting that without morality and conscience and fair play we are adding additional costs to business and especially investment administration through monitoring, alarm systems and very expensive criminal justice. Bernie Madoff should come to mind. I’m suggesting now that politician’s lip service to increasing the authority of the SEC was disingenuous at best. Just this very morning Arthur Levitt on Bloomberg Radio revealed the BS in Washington concerning the SEC. They told the SEC (in the not too distant past) that they wanted more oversight and ‘management’ and so the SEC went out and appropriatated more (very expensive) office space in preparation. Then congress reduced the SEC budget by 30%.

    The real ideologues are those that cling to the deregulation mantra. Since Reagan we have blown right past the diminishing returns of maximum responsible deregulation into the territory of negative (criminal) returns of deregulation.

  • dsfjsffsdf

    “We are still the birthplace for Facebook, Google, Groupon, Zynga and several others.”

    All worthless NWO crap.

  • El Viejo

    This site could be the most valuable thing you ever do. You are training untold numbers. Making people aware. Revealing the truth. Planting the seeds of change.

  • brianr820

    Or what about a couple of kids who made good inventing some stuff, manufacturing it, selling out. Think about them for a moment. They could

    A. Try to do it again. Now they face down a small army of govt agencies who complicate their lives and the generally bad attitude of american workers, and the fact that this is very hard to do and takes great effort.

    B. Run a ” hedge fund” for themselves and sit on the couch all day employing nobody.

    Which would you do?

    It really, truly, is the financial industry that crowds out and… creates no value.

    Another terrific blog.

    Differentiated tax rates come to mind… and several years of pondering it intimately worth of ideas come to mind…

    But ultimately, folks, this is a cultural problem. Society penalizes entrepreneurs far more than it appreciates them (in my experience). Society doesn’t penalize me for sitting on a sofa occasionally shorting fax ( or whatever) . Until that changes…

  • Fabian Hug

    This explanation is a little bit to easy. First, how many SJs did the previous generation produced? 5, 10, 20? Not that many considering its size. If I recall well they are all in the IT sector. So, the real king is Von Neumann. That was THE generation and we haven’t found a new one. The best and brightest in science are still mainly working on their legacy. The new frontier in genetics seem to promise new spaces. I read yesterday that the first guy to live 150 years is already alive. Fine with me but they still can’t regrow my hair!
    As to Wall Street, it creates some value of which a lot goes into its own pocket. However, I think it is nonsensical to talk about value in Wall Street when every mistake is bailed out. Furthermore, if there was some Einstein, Fermi or Von Neumann in Wall Street, we’d be all rich.
    Without a new scientific breakthrough new Apples will be scarcer and our best best is in biotech, so far.

  • Ben W

    Elimination of the minimum wage law is what will make America more competitive in the global economy.

    I think that’s the real issue underlying this debate, which is very difficult to discuss anywhere. I believe John Stossel is one of the few individuals in the media to openly discuss the fallacy of the minimum wage law.

    In essence, the sophistry of the minimum wage law prevents true innovation, while jobs get shipped overseas . . .

  • LRM

    In response to Martin who said

    “Fortunately, Canada and its government have largely resisted populist tendencies to encourage making mortgage loans to those lacking the ability to repay them. This tendency in the US gave rise to a huge and extremely profitable activity involving government guarantees, securitization, and related largely unproductive activities”
    If you would care to visit the site I refer to here
    you will get a very different point of view. The author of this site was a Member of Parliment for the current Conservative government and has been exposing the banking practices that have been happening in Canada for the past 5 years. He was tossed from the Conservative caucus because he spoke out against these “American like” home financing policies. I know that he is been viewed as a chicken little regarding his prediction of an American style housing correction that has not happened yet but you should explore the fundamentals for Vancouver and Toronto and see if you can disagree with his thesis..
    I feel that the image of the Canadian real estate market as viewed by many Americans is somehow not totally understood and Mr. Turner may help change that perception.

  • JWG

    In the USA we are regulating to death manufacturing, natural resource development, transportation and all of the other aspects of a traditional, wealth producing economy. We are regulating to death the employer-employee relationship. We heavily tax the self employed while we heavily subsidize idleness and allow the carried interest charade to subsidize Wall Street. We deregulated the one aspect of our economy (banking and finance) that is primarily a sovereign function (e.g., banks create money) that deserved to be heavily regulated and have developed a doctrine of too big to fail that ensures one way bets and an abundance of absurdly cheap and abundant leverage for Wall Street. We embraced and heavily subsidized Wall Street’s complete failure in 2008, leaving the parasite class fat and sassy.

    Any sane USA business that can offshore its industrial functions and related employment does so as fast as it can. White collar work is now also flowing offshore courtesy of the internet for the same reasons that industrial employment flowed offshore. The USA’s sense of entitlement, litigation risk, bureaucratic burden and aversion to traditional productive enterprises are creating an army of unemployed and idle that for now is content with EUIC, SNAP, squatter’s rent, Medicaid, Section 8 subsidies etc. etc.

    It is costing the USA many billions of dollars to feed, clothe, house and provide medical care to this army. In a sense, this army is already employed by the government and is fairly well compensated (if you apply a dollar value to noncash benefits like full medical insurance under Medicaid). The problem is that this army isn’t doing anything productive and isn’t creating any wealth; it merely consumes. Many more will join this army once they do the math and compare what the government pays for idleness (including an excellent health insurance program) to what the private sector pays for hard work (if you can find work at all).

    The USA’s problems are deeply structural, political and cultural. Somewhere along the line America forgot what being an industrial democracy was all about. China right now is full or people who work in factories, build things, live in crappy apartments, save like crazy and are building incredible wealth as a nation. Kind of like the USA I grew up in, circa 1959.

  • hamish

    Cullen, could you charaterise the influence of Wall St as a ‘tail wagging the dog’ type situation?

  • Peter D

    OTS, financial industry attracts a lot of bright people. Sciences and engineering majors that instead of promoting science and coming up with useful things turn into quants and traders. I am one. I see no public purpose in things I do for living. If I had more balls to back up my convictions, I’d leave. But the pay is good. And this creates the situation where industries that could attract all these people just cannot compete.
    Now, usually, there’d be some sort of correction mechanism. Financial crisis should have left a lot of these people unemployed. But the banks were bailed out and everything went hunky dory again. The correction hardly happened.

  • Mr Burns

    Ben W,

    So how do you explain Germany an Japan running trade surpluses with their wage structures?

  • brianr820

    Would only be effective in conjunction with a reduction or elimination of lhandouts/welfare. Nobody is going ho work for LESS than they can get for sitting

  • The Dork of Cork

    Yes nice article but there’s more to it then that.
    I live near a Apple site & I venture to guess they pay only minimum corporate taxes and employ people for 11 months before spitting them out.
    A imagined future……………

  • ed

    Does Rush say the same thing? I guess great minds think alike. It’s there for anyone to see, even an PC idiot like you

  • Randy

    Note to Jack:
    more than 2 ways to create wealth: you can also grow wealth, I live in a rainforest, trees grow several feet per year here, the USA is paying people NOT to grow things, how insane is that???
    harvest energy from the sun, pretty much the same as growing wealth but you have to bash stuff first, after you dig it out
    anyway, point is there are other ways to create wealth
    innovation has always been the most exciting, not necessarily most useful though

  • ed

    I refer to Facebook as Sheepbook. Everyone’s on it because everyone’s on it

  • http://ralphanomics.blogspot.com/2011/06/fast-fiscal-consolidation-would-not.html Ralph Musgrave

    Lord Turner, head of the UK’s Financial Services Authority said that much bank activity is “socially useless”. (And he’s Lord, so you can’t argue with him.)

    Mervyn King, governor of the Bank of England said, “Of all the many ways of organising banking, the worst is the one we have today”

    William Hummel said, “Far too much bank lending goes to support purely speculative activities which . . . .serve no useful purpose…”

  • GCT

    I am a tech geek and stay up with fabrication of end items for computers. Currently there is not alot of fab facilities inside the USA with the exception of Intel, IBM and TI. The apple phone is made in Taiwan by foxconn based on the design by apple. A cost analysis was done at apple and the cost to make the Iphone from foxconn is currently 325.00 per unit. An estimate was done to do it in the USA and it is 635.00, if you could even find a fab facility that will do it. We do not have these facilities outside of the names mentioned due to the cost of construction. These facilities cost 2 billion to construct in Taiwan. I would not even try and guess their price here. The bottom line is apple wants greater margins and this is how they do it.

    I do agree that bright folks are no longer in the manufacturing sector. Just look at engineers. Other countries place a premium on their education. Most people that are bright know where the money is in our current system. I cannot blame them for wanting to make more.

  • JH

    great threads, people.
    I’ve found this site to be among the best for polite and intelligent discussions.
    why not more Apples?
    I’m living in Taiwan right now, having grown up and educated in the USA.
    I’m finding out that as Asians grow more wealthy, they are also slowly become more like USA.
    1.Service sector is growing to be nearly as large as the US
    2.Mcjobs are the norm for young people with college degrees
    3. Financialization of the economy is becoming frighteningly similar thru the local housing bubble that just won’t pop
    4. obesity is more prevalent
    5. high income expectation, unwillingness to do physical work, is more prevalent.

    however, there are many many more Asian Steve Jobs here, especially in LED lighting, Solar and Wind power, Smartphones, touch screens, mobile gaming software, chip equipment and processes, etc…

    that’s the main difference, but in 20 years. I see the similar stagnant situation as USA here with high employment and a graying population.

  • roger erickson

    “There is an incredibly important role being played by small websites like my own.”

    Exactly. Any social group is, in effect, an analog computing system. Group intelligence is always held in the body of group discourse.

    Anthropologists will tell you that any highly adaptive human culture spends the bulk of it’s time in group discourse.

    What we’ve run into recently are hurdles in scaling up adequate ratios between inter-connectivity and interaction rates for the current population size.

    This ain’t rocket science, just simple network statistics.

    Here’s a simple rubric to growth of social species.
    a) the expanding, bleeding, edge slowly parses new options for Public Purpose;
    b) once defined, that additional PP channel receives a delegated bureaucracy;
    c) if a society doesn’t name names & kick ass in forcing lean operation in ALL of it’s bureaucracies, it will quickly be supplanted by societies that do

    All human populations are still Context Nomads, just not through geography anymore. As such, our survival still comes down to operational efficiency across constantly emerging contexts – NOT JUST THIS ONE.

    Given that over-adaptation to one context is evolutionary suicide, a requisite corollary is that the children of successful Luddites rarely, if ever, survive.

    A test of our financial Adaptive Rate? The half life of finding all the best MMT “mountain men”. If it takes every pragcap reader more than a day to find the key preceding & following MMT sites, then they’re still part of the problem, not part of the solution.

  • http://DollarMonopoly.com Craig Austin


    hell yeah small sites make a difference. the ten visitors to my website, DollarMonopoly.com (shameless plug), are on fire.

  • Pod

    I see. The solution is central planning. USA has become “too financialized” and the resources (labour primarily) could be put to “better” use in another sector. Not because the free market encouraged that labour to migrate to greater opportunities, mind you, but because someone “said so”. I know, I know, “government intervention and subsidies”, but those hardly explain the entire scope of the shift.

  • bub

    Or we could remove some of the profit motive of financialization by nationalizing the TBTF banks and using their income as a substitute for income taxes.

  • http://DollarMonopoly.com Craig Austin


    “central planning” uh-oh now you went and done used a dirty word. you know this ain’t the pragmatic socialist right?

    Everything of value that is produced is managed at some level or another. Our modern free market system is no different. It’s rules are not naturally ordained but simply the outcome of political arrangements. Political arrangements defined by law though property rights, the corporation, and the creation of money. Among other reasons, this is why classical economists never spoke of “economics” but always of the “political economy.” The intended purpose of these political arrangements is to benefit of society by reducing risk and driving economic development.

    http://www.DollarMonopoly.com – “frame the argument/change the game”.
    wait i’m working up a whole KC warrior mythology thing. give me a couple days. should be funny as hell. had the idea this morning. check this link out:


  • Different Chris


    Checked out your site the other day. Well done. I think that TPC’s site is a very indepth explanation and commentary on MMT, macroeconomics and the market place (with a sprinkling of politics in the form of why politicians are wrong). I think the degree to how indepth TPC is on a complicated topic is what drives a lot of less open minded people away. I DM is a nice compliment in getting the basic ideas out to those less openminded.


  • Different Chris

    @ El Viejo


  • JohnnyBGood


    You are far too kind to Wall Street, and I think you are dead wrong when you assert that Wall Street expanded because Americans have more wealth.

    Time was, the financial sector provided a net benefit to the economy. Investment banks in particular actually invested in productivity and innovation. Today, their primary source of income is quite simply, theft. Wall Street and the financial sector in general, have learned they can make more money by extracting wealth, rather than investing in future wealth. To my mind, this is a sign that there has been a reduction in real wealth growth over the last 40 years or so, not an increase. The illusion of more wealth has been provided by debt.

    The financial sector uses inflation and debt to basically steel the wealth of the people. This has become so blatantly obvious after the crash of ’08, that any denial of this fact would force one to conclude that the denier must actually reside quite comfortably in some “happy place” on another plane of existence.

    Wall Street has been able to get away with because they have infiltrated government and changed the laws that made their shenanigans previously impossible. Wall Street is the government. Any serious analyst or researcher who actually looks into this and still comes out with questions cannot be taken seriously.

    The real problem is not that Joe Sixpack doesn’t understand ETFs. The general public has never understood finance. This has not stopped America from becoming prosperous in the past. THe problem is the whole system is corrupt, and wealth is being stolen. In a country as blessed and as rich as the USA, with its advanced economy and vast developed markets, this is the only possible answer. The solution is for the people to retake the power of government away from the banks. Then some financial education would be useful.

  • http://DollarMonopoly.com Craig Austin

    Thanks. In the next couple days I am going to reorganize it around a more engineering approach:

    The objective is never to balance the budget. The objective is always to optimize the budget. Fiscal optimization at any level of public spending requires balancing tax revenues with spending while running deficits at a rate corresponding to currency users saving rate.

    i think it will help people look at the importance and function of monetary options in a different light.

  • http://research.stlouisfed.org/publications/usfd/page3.pdf first

    Yes, and lets face it the financial industry has been moving money out of the US to new opportunities but also better rates and currencies. The fed is taking the dollar lower to encourage export by default but capital is often exported to better return.

    There are qualified workers. In the 50s good engineers came to the US and it took the Emigration Department 3 months to get all the needed documentation complete information including Police record Local and Federal, complete health record, complete financial information, finger printing, blood test, even X-rays you name it, academic credential etc etc. It was fast and efficient.

    To day the emigration bureaucracy will do this in up to 9 years. The process is ridiculously slow and qualified foreign student go back home and start there own enterprise.Its almost like a prohibition that also feeds illegal migration.

  • JH

    Why aren’t there more Tesla Motors?
    at least Tesla tries to re-occupy the old Fremont Plant and hire some American blue-collar workers.
    Facebook, Google, Zynga, Linkedin, etc.. are nice but they create only a few IT jobs mainly for the elite.
    we need more 3M, GM, and Whirlpool to build up the middle-class

  • JohnnyBGood

    While it’s great if Tesla is creating jobs in the US, they are not a great example to hold up. What do they make? Useless sports cars for the rich. Yeah, that’s going to revitalize America.

    Creative destruction is a vital part of capitalism, and largely what made America great. Do not lament the loss of dying or outmoded industries. Embrace innovation, create new technologies, products, companies and industries that will propel the nation ahead with greater productivity and wealth. This requires re-educating and re-training, but its the only way. Trying to hold onto jobs in labour markets where some other developing country can always outbid you is a losing strategy because the only way to compete is by lowering wages and thus living standards.

    Very high energy prices could bring more traditional jobs back if energy costs force economies to become more local, but then higher energy costs will also be a drag on living standards. No, the only real solution is innovative, environmentally sustainable creative destruction that creates competitive advantages for the US middle class. Another major war is another option (as long as it’s not on US soil). The first great age of globalization was halted because of WWI. After WW2 the US steamed ahead of the rest of the world. Not hoping for war. Just saying.

  • http://research.stlouisfed.org/publications/usfd/page3.pdf first

    “Fortunately, Canada and its government have largely resisted populist tendencies to encourage making mortgage loans to those lacking the ability to repay them.”

    Mumm… Not so sure Canadian banks mortgage loans are back by the Canada Mortgage and Housing Corporation (CMHC) its Canada’s national housing agency. Established as a government-owned corporation in 1946 . That does not show in the Canadian debts The total assets to liabilities could change very fast if a correction occurs in the present Canadian housing prosperity that many are starting to call Bumble. Expected Canadian interest rates increase have been postpone again perhaps to deffer or avoid a bubble bust.

  • pebird

    If we lose morality and conscience and fair play we have much more serious problems than higher costs.

  • pebird

    “Boys are naturally better at math and engineering but our engineering schools are instead full of foreign students”

    I also think we to take more logic classes.

  • F. Beard

    “Why aren’t there more Apples?” TPC

    Because our banking and money system has ruined our society? Because the parasite is killing the host?

  • pebird

    Yes, if we eliminated the minimum wage, we could get our engineers and technicians hired for $3 an hour and beat those Chinese!

    And lets bring back the Poor Laws and debtors prison while we are at it – marching backwards towards a greater standard of living!

  • http://www.pragcap.com Cullen Roche

    How about this. We let the women run the financial world and let the men do the dirty work building stuff. Perfect world?

  • pebird

    Also, pretty decent social safety net (relative to the US) and strong industry regulations. Also stronger labor unions. Hmmmmmm.

  • JH

    that’s the catch 22
    more innovation sounds fine and dandy.
    but in the internet age, it again creates a few neat jobs for the tech. elite. Yet this ultimately eliminates more blue-collar works thru process improvements, technology advancements, and off-shoring to Asia.
    the more innovation in IT and other tech advancement, the more middle-class jobs are lost in the USA.
    Retraining a 55 year old tool and die maker to be a computer networking guy sounds great, but in the real world is very unlikely to occur.

  • http://www.odumcapital.com capitalistic

    An entrepreneur will start a business if they choose to. Starting a business has nothing to do with Wall Street. After all, Wall Street helps entrepreneurs raise much need growth or liquidity capital.
    Look at all the new software and web-based companies that have been started within the last 10 years. Most of the founders could have succumbed to a job on Wall Street or IBM…instead, they took risks and started companies. Companies that gainfully employee a lot of Americans.

  • F. Beard

    The banking system system steals purchasing power from the entire population so that entrepreneurs and businessmen can make “better use” of that purchasing power. Well that stolen purchasing has been used to outsource and automate the population’s jobs away. Oops! Now few can afford the new products.

    Who-could-a-node that government backed, systematic theft could damage a society?

  • nldmaster

    The simple solution is allowing the bad firms to fail, no matte how big they are. There are many firms that manage money much better than Wall Street or Joe Six Pack could ever imagine. Those firms should be allowed to thrive, rather than have to compete with the incompetents that are backstopped by Politicians.

    I get very frustrated with the idea that the general public knows how to manage money, even their own. It has been proven that small, ‘dumb’ money is just that, buys high and sells low. If people would allow professionals that have long term goals and investment themes, we would be much better off.

  • Nomo

    Would Cullen Roche quit the financial industry to ‘help’ shrink the proportion of FIRE in the economy? Nope. CR thinks he is helpful to society being a financial professional.

    Would Cullen Roche quit the financial industry if it took 25% of the FIRE workforce with him, shrinking its impact on society? Nope. Because that is the Japanese way where the collective is more important than the individual.

    Everyone in FIRE either thinks like CR – I am too valuable, so if anyone should quit it should be the other guy. Or they are simply a leach on the system and happy to milk it. So you are asking the impossible. This is the incentive system and unless you are willing to jump ship first to set an example, its just funny to talk high and mighty. And yes I know you are a “positive” FIRE, but trust me a lot of negative FIRE think they are positive or could care less about the system.

    You’re spitting in the wind.

  • http://DollarMonopoly.com Craig Austin

    Nomo – you have it all backwards. jobs are being commoditized. i’m have an MS in engineering but interested in finance because of the money. this will occur until the system is properly managed. this is an operational failure by the economic profession. don’t shoot the messager cullen’s ideas are the solution not the problem. we suffer from groupthink more than anything else. blame human nature if you want to blame someone…just like your caustic comments towards cullen

  • beowulf

    Excellent post Cullen. Kevin Phillips has made similar points… about the Spanish, Dutch and British Empires.

    “Each time, finance rose at the expense of industry, agriculture, and other earlier forms of economic activity. This alone could fill an entire book. The provincial parliaments of Spain complained about how wealth was being taken away by foreign bankers, lenders, and merchants. Holland’s example worried Britons who were all too well aware of it, but the United Kingdom ultimately followed a similar path.”
    Phillips’s thesis, essentially, is that when moving money around becomes the engine of a great power’s economy, it’s a sure sign of decline and fall.


  • http://www.pragcap.com Cullen Roche

    I didn’t say the entire FIRE industry was useless. In fact, it should be obvious to anyone that most of us are pretty useful. But there’s a lot of dead wood out there. There were a lot of people out there selling phony mortgages that should have never been sold. There are a lot of people out there selling stocks for 3% per sale. There are a lot of people out there building products that don’t do much aside from sound fancy.

    Have I been all good? No. I used to be one of the guys selling stocks for 3% per sale. And it made me sick. You won’t find a single client of mine who feels that they’ve been ripped off or lied to. EVER. And if people don’t see any value in this website and the message I am trying to send then you’re just flat out blind. I am not perfect. But I am trained in this industry, I understand it, and if anyone is going to help get us out of it I feel like it should be someone who understands the disease. I don’t see anyone else trying to help. Do you? Would you rather I just go flip burgers, call myself an honest man and shut my mouth? Or would you rather I try to make things right however I can?

  • beowulf

    Michael Kinsley once made the point that unless you’re Gandhi, there’s nothing hypocritical about opposing tax loopholes that you yourself benefit from. Indeed, you should get points for arguing against interest when you think it conflicts with the greater good. Likewise, there’s no reason to get on Cullen’s case for arguing against self-interest. Would that we had more people willing to do that.

    In the mean time Roger Martin’s book Fixing the Game looks fascinating, he compares the economy to the NFL since pro football has both a “real market” (games) and an “expectations market” (gambling). The NFL is fanatical about keeping them separate, namely, players and coaches are barred from gambling.

    “In other words, the NFL has managed the division between the real and expectations market in a manner that is exactly the opposite of the way we have managed it in business. American capitalism encourages, and in many cases even mandates, the players in the real game to invest heavily in the expectations game, and has built structures that bring the key players from the two markets into almost constant contact.”

  • Ben W

    The most rapid acceleration in the standard of living and GDP growth are occurring in countries like China, India and Brazil, and obviously not in the countries of Western Europe, the USA, and Japan, which are stagnating in comparison. Some could validly argue that the standard of living in the USA has spiraled into a relentless downward trajectory, especially if one were to consider the seemingly implacable loss of purchasing power of the US dollar over the past few decades, most especially since the dollar was unpegged from gold in 1971. Of course there are greater potentialities for growth to begin with in the aforementioned countries with lower per capita incomes, but that’s exactly the point. The bottom line is, if they are better at attracting industries like Apple, then it will only logically follow that they will be better at future innovations like Apple also.

    The question being asked by the Economist writer is somewhat convoluted. It tends to sidestep many important causal relationships, which he tends to admit with the numerous references to “maybe” this and “maybe” that. Cullen follows by saying, essentially, that the Too Big To Fail mentality should end, which would represent an important shift in values. Of course this is entirely true. I would add that such an extraordinary unwinding of capital, by allowing the necessary failures on Wall Street to occur, would subsequently unleash many pent up reserves of creative energies and entrepreneurial spirit. This would lead inexorably to wealth creation and innovation.

    However, this does not settle a larger practical question, without delving into hypotheticals in the form of maybes ad infinitum, as presented by the Economist writer.

    Tangibly, huge transfers of wealth have been occurring for decades from the older industrialized countries into BIC nations and others like them because the innovators know that there is greater productivity available with less stringent capital requirements in those places.

    While Wall Street may have much to do with creating a climate that allows for those transfers of wealth (or not preventing them) on a national level, I think Wall Street is simply exploiting the status quo, and since no one seems to be hell bent on making those rapacious investment banking firms [insert favorite here] fail when they deserve to do so, it only follows that they will continue to exploit the system in the manner the system allows them to do. I would disagree that more regulation is the answer. Just as someone should not be allowed to rip off taxpayers for welfare money, probably not extending TARP funds would have been more reasonable.

    It is only with a transformation of values that you have a change or reinterpretation of the laws of the land. Those laws that do not allow, enhance, spearhead, galvanize, and unleash the human instinct for progress, development, and innovation should simply be allowed to fall to the wayside. You cannot force someone to pay you X amount to do that, and you cannot force someone to join X group to make you do that either. That only makes people trust you less, and unfortunately for some, that’s the simple truth.

    Wealth creation, rising living standards, innovation, job creation – all of those things simply require a modicum of unassailable honesty and freedom in the climate best suited to provide them. Innovators and their innovations, with capital in hand, travel there fast!

  • Nomo

    Dear Cullen,

    You’ve put your argument in a box.

    First I never said FIRE is all bad, neither did you.

    But you want part of FIRE to move along into other industries so they can create jobs outside of FIRE. But your argument to me is that there is a lot of dead wood

    You wrote:
    “But there’s a lot of dead wood out there. There were a lot of people out there selling phony mortgages that should have never been sold. There are a lot of people out there selling stocks for 3% per sale. There are a lot of people out there building products that don’t do much aside from sound fancy.”

    So the implication is we dont need those people in FIRE. Yet your original argument is the best and brighest are going into FIRE, not other areas of the economy.

    So if we transfer the dead wood from FIRE – the useless folks – do you think they are going to create the next Apple or (insert company here)? Hell no – they will be a leach in any system or industry. They might be taht salesman that sits at the golf course for 6 hrs twice a week. They are not creating the next (super company).

    You want Jim Simons or Cullen Roche to move. My argument is they will not – because they feel they are too important to the FIRE industry. Or have far more rewards in FIRE.

    So the dead wood you are pointing to wont help us in whatever industry they are in. The stars of the financial world however might, but why should they move out of FIRE if you wont? Why should any of you move out when the incentives in the system are set this way by society?

    Again spitting in wind.

  • http://www.pragcap.com Cullen Roche

    The point that you’re missing is with regards to the value society places on these jobs. I am not just saying that the industry needs to be downsized. I am saying that its rewards need to be downsized. There is no reason why banks should make so much money. But they do because people value their services even though much of their service is valueless. If the top earners in this country didn’t all work for banks and hedge funds and were instead doctors or engineers I think we’d see a very different outlook from college graduates and wannabe entrepreneurs. So I think you’ve misinterpreted my argument a little bit.

    I don’t know exactly how you fix that. Got any ideas? I am all ears. Or maybe you don’t think it’s fixable. I don’t have all the answers. I just know it’s a problem….

  • Ben W

    1. Balanced Budget Amendment
    2. Flat Tax
    3. Honest Money (see Section 10 of the US Constitution)

  • http://economicdisconnect.blogspot.com/ GYSC

    WAY late to add to this but I feel TPC’s ideas and points are really sharp.

  • Jesse

    Well, I don’t why one problem precludes the other. Yes, of course it would be nice to have more productive companies. Yes, it would be great to imprison all the Wall St. thugs that extort the economy and are aiming at a global monopoly. But why does a company go to China? Because it is profitable to do so. On the whole, corporations are machines, and yet they are treated legally and mythically as persons. This is an intellectual calamity. Either nations and the communities within them have rights that have priority over the rights of commercial entities, or else we will live in a corporatized world. As Brzezinski said years ago: “The nation state as a fundamental unit of man’s organized life has ceased to be the principal creative force: International banks and multinational corporations are acting and planning in terms that are far in advance of the political concepts of the nation-state.”
    [Brzezinski, Zbigniew, Between Two Ages: America’s Role in the Technetronic Era (New York: Viking Press, 1973), p. 246.]

    That is precisely what is happening, and we seem to be too stupid and spineless to see it for what it is and to do anything effective about it. At least the Greeks do something, and the Icelanders actually threw them out. In our country, they get away with everything, and hence we are losing everything.

  • http://DollarMonopoly.com Craig Austin


    Our current problems has nothing to do with ideology but rather poor monetary management. Fiscal optimization at any level of public spending by a currency issuer requires balancing tax revenues with spending while running deficits at a rate corresponding to users saving rate. MMT is trying to explain to the gatekeepers why the system is f@cked up. Nothing to do with politics – this is a management failure. The teacher’s asleep and the kids are all choking each other.

  • phsmith

    Cullen – This is an excellent post. I too work in the FIRE industry and I can tell you that a lot of what we offer adds very little net value to the economy. How does it get fixed? Well, probably the hard way – financial collapse. It should have happened in 2008 but the Fed/Gov’t forestalled it. But we are still on that trajectory. It will be painful but I’m excited about what the other side will look like for the future generations.

  • Sam

    Not to be disobliging, but really, only someone seriously deficient in awareness would say that money management is at the root of this country’s problems. It is an element of the problem, but most assuredly it is not the root of them.

  • F. Beard

    Not to be disobliging, but really, only someone seriously deficient in awareness would say that money management is at the root of this country’s problems. Sam

    How could a money system historically rooted in fraud, based upon theft of purchasing power from the poor among others and upon usury between fellow countrymen possibly be the root of evil in this country?

    The wicked earns deceptive wages, but he who sows righteousness gets a true reward. Proverbs 11:18

  • Anonymous

    Apparently no one on this website has been noticing the new wave of technology start-ups that are sprouting up all over the US. Talk to anyone in silicon valley right now, its impossible to hire engineers at the moment because of the huge wave of new innovative companies being started.

    Or to put it another way, Facebook is 5 years old and is already a huge business. We are starting the new Apple’s here in America and they aren’t being created anywhere else in the world

  • everyman

    Cullen I usually do not like your ideas much, although I do agree with you major premiss that the market is a mess and most of what we are doing is making it worse, and I also do not agree with your take on MMT, however, credit where it is due, you stated the whole American Workforce problem and clarified in in one short concise point, you are to be applauded!

    “I have a rather simple opinion on this one. The modern day Steve Jobs doesn’t start an Apple. He starts a hedge fund. We don’t ship our best and brightest into productive lines of work en masse anymore.”

    we basically train people to work in financial firms and figure out new ways to skirt laws or outright lie to separate masses from their money without producing a product or anything useful or of value. This is exactly why the Financial Speculation and economic thinktanks all need to die a quick and horrible death as a sector. It is complete BS.

  • JH

    I heard even facebook is trying go to Ireland to reduce it’s taxes.
    let’s face it. the US fed and local gov has made it uncompetitive for businesses to remain in the US. so for those corp’s that are lucky enough to be able go offshore, get a Cayman Island subsidiary, manufacture or do engineering in Asia, then sell products/services back to the US consumers, they have the right to go.
    Apple itself go thru a cayman island account to avoid taxes. so wall street is not even a big factor, although indirectly perhaps someone on wall street may have helped Apple go offshore.

  • Dan Kervick

    This is the biggest beef I have with the financial sector, Cullen. Rarely does anybody argue that truck drivers need to be paid for their hauls according to the market value of the stuff they are hauling, and that absent that kind of compensation arrangement they will not be properly incentivized to do a good job. But many financial pros argue that financial services will go to hell unless the people managing and moving money around in our economy are not allowed to claim huge portions of the money they move for their services.

  • http://pragcap.com/10-for-2011 jack

    Labor creates ALL wealth. (even labor on wall street).
    But he is correct, much too much driving people to work for it on wall street.

    Since yr ALL ears, i suggest:
    25% interest on speculation,
    .05% interest on INDUSTRIALIZATION,

    assembly line fusion plants AND free freight and free passenger on MAG-lev trains,
    (ya see not all americans have bin brainwashed into thinking big is bad, etc).
    (local freight to run on natty gas).

    The simple interest rate change(above) would drive the Republic to brains on Industrialism.

    A refreshing site, some Americans can think outside of the POURING trash of “free enterprise” confines, ie: their “rights’ to buy and sell people and everything…I think we had a war or two over this same issue…

    And if this fails, a Moratorium on DEBT, you can cash yr fed bonds in 20 years
    you do not mess with our abilities to industrialize. (if you DO- forget yr return).
    A new National Bank, (dissolve the FED), and a new start(w/out the huge burden of mis directed Capital- we have now).

    This will of course start a national debate OUTSIDE of the confines of the C.F.R. and such groups…their “big is bad/small is beautiful” confines do not fit, and be seen (rightfully) as an attack on the new fledgling U.S.Republic.

    Our Republic had to do this after the revolution, and it worked. (back when we could not make our own hats..stick a noodle in yr hat..”