Merriam Webster defines socialism as the following:
1: any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods
2 a: a system of society or group living in which there is no private property
b: a system or condition of society in which the means of production are owned and controlled by the state
3: a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done.
The basic definition, that a state has control over distribution and production of goods, is not what is currently going on with the government. We will constantly hear that Obama is a socialist from any single right wing source, but the test fails the BS detector. He is NOT controlling EITHER the means or production of goods at all! The pundits this morning used GM as an example of how we are socialist. Obama told GM to fire their boss so the government is controlling the company,
"We are socialist, we are a socialist nation!!!", they were ranting on the radio this morning.
It is what I called the radio station to talk about today, and I will explain WHY this is not socialism, it is not even close to socialism.
GM is going bankrupt, they have already received over $15Billion in government aid to get them through to this point. They are in dire states financially, have neither the resources nor the credit rating to get through this stretch with out any help. Their ONLY solution is to have the government loan them money so they can stay afloat. Now pay attention here, when the government lent GM the money a couple of months ago, there was a certain set of conditions they had to meet in order to not only remain afloat, but to go back if they needed to get more working capital infused into their business. GM failed to meet the goals stated by Obama, so the only possible thing they could have done was to remove the GM from office. If the did not, the government would not let them receive any more money, and it still may not right now. This is not socialism, the government is not running the company, nor do they want to. They are merely stating that GM did not follow the guidelines to streamline their business enough, so they would not be eligible for an additional round of funding to keep them afloat. They have a CHOICE on what to do! They can either accept a government's offer, or not. It is similar as if they went to a bank, and a bank said I will give you the money, but you need to remove the bad apples from your company first. Socialism would be if the government took control of GM, took control of their stock, fired the entire board, and forced government appointees to run the business. This is decidedly NOT what happened.
In terms of AIG, they HAD to bail them out as well. If AIG failed, the dow would have tanked to under 1000, and we all would have seen a lifetimes worth of savings completely gone. The reason for this is the $55Trillion dollar derivatives market. Yes, you read that right, that is TRILLION with a T. The US derivatives market is currently worth more than than the entire GDP of the world. The reason it is this high? Well, it is because deregulation made it legal to operate on the derivatives market with no oversight, which in turn means that you can leverage at any ratio you want, with no collateral. In other words, you can completely gamble with the money you don't have and it is perfectly legal. You could place a $25million credit default swap on some company XYZ, then use your hedge to short sell XYZ, drive them into bankruptcy through naked shorting, and collect on both your short sells, as well as the CDS insurance. This is what hedge funds were doing, and it was bringing them on the order of 30% ROI's for most of this decade. It was perfectly legal as well, because Washington deregulated the industry. This is coming to a stop now, because it was one of the things that destroyed the market.
My argument on the radio, and one that still stands is there is a large amount of greed inherent in man. There is a definitely ugly side to man, one you see as you start to look through the BS in life, and start to see how truly nasty he can be. It is how you got oil up over $4/gallon with no added influx of demand. It is how you got companies going under left and right through naked short selling, it was how we got into this mess in the first place. It is why we are going to be paying for it for a long time, and it stems all at the heart of man. . . greed.
You see, for everything Milton Freeman and Ann Raynd talked about, for all they rallied about the free markets, and the benefits of capitalism, they completely missed the boat in understand the nature of man. They completely misjudge the deceit, the lies, and the outright dishonesty man is capable of, especially when money is involved. Remember Gordon Gecco?
Greed is Good! Remember the speech?
Well, I appreciate the opportunity you're giving me, Mr. Cromwell, as the single largest shareholder in Teldar Paper, to speak.
Well, ladies and gentlemen, we're not here to indulge in fantasy, but in political and economic reality. America, America has become a second-rate power. Its trade deficit and its fiscal deficit are at nightmare proportions. Now, in the days of the free market, when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake. Today, management has no stake in the company!
All together, these men sitting up here [Teldar management] own less than 3 percent of the company. And where does Mr. Cromwell put his million-dollar salary? Not in Teldar stock; he owns less than 1 percent.
You own the company. That's right -- you, the stockholder.
And you are all being royally screwed over by these, these bureaucrats, with their steak lunches, their hunting and fishing trips, their corporate jets and golden parachutes.
Cromwell: This is an outrage! You're out of line, Gekko!
Gekko: Teldar Paper, Mr. Cromwell, Teldar Paper has 33 different vice presidents, each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can't figure it out. One thing I do know is that our paper company lost 110 million dollars last year, and I'll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents.
The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated.
In the last seven deals that I've been involved with, there were 2.5 million stockholders who have made a pretax profit of 12 billion dollars. Thank you.
I am not a destroyer of companies. I am a liberator of them!
The point is, ladies and gentleman, that greed -- for lack of a better word -- is good.
Greed is right.
Greed works.
Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.
Greed, in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind.
And greed -- you mark my words -- will not only save Teldar Paper, but that other malfunctioning corporation called the USA.
Thank you very much.
I sure do, and do you remember what he did with Teldar Paper? He liquefied it and fired all of the employees. It was the personification of corporate America, and what the problems are with capitalism in ANY society. The greed in man causes the downfall of man. The greed in man causes the downfall in markets, and the failure of society. Call me cynical, but I like to think I am a realist. All of the great philosophers in history share my point of view of man, and they all understand the problems inherent in greed. It is what caused THIS market to crash, it is what caused the market to crash that caused the depression, what caused the market to crash in the 1850s, and what will cause future markets to crash. Greed, it is inherent in everyone, and if you give man enough power, they will use it to their full advantage bar none. It is why our system of government is set up with checks and balances, and why there is not a single branch that is more powerful than the others. It is what our founding fathers knew, and it is what I also am aware of.
Greed is NOT good, greed is one of the downfalls of man, and greed NEEDS to be looked out for. A government is established to protect its citizens, it is there to look out for the people and to insure an even playing field. When you give the keys of the candy store to business, they will eat all the candy, then burn the place down for insurance money once all the candy is gone. That is the way of society. Understanding how man, greed and human behaviors operate is not socialistic at all. Nope, instead it is just rational thinking, and thinking that our country direly needs. It is being honest with yourself, understanding your own faults, and seeing the world with out the BS blinders on. It is no more socialist than Reagan was, it is good government to be skeptical. It is what we need to do, and it is what we ARE doing. Hats off to Obama and the crowd for understanding how money and power corrupts, then trying to do something about it. God knows someone needed to step up, and I for one am sure glad it was him!
Peace Out,
Michael
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