Wednesday, May 23, 2012

The Bane of Capitalism

IMHO, Bain Capital should be an issue in the 2012 election.

Clearly, there is something wrong with the world's financial system. The world is in dire need of substantive financial reform. I contend that the way different political groups approach Bain Capital will tell us a lot about how they will approach financial reform.

For example, if we see a partisan group immediately deflect all discussions of Bain Capital, then we can conclude that the partisan group is unlikely to engage in substantive reform. To such partisan groups, politics is about protecting friends and attacking enemies. Reform efforts by such groups will be biased.

Likewise, groups that immediately fall into apologetic form on hedge funds are unlikely to engage in deep discussions about reform.

President Obama's approach to Bain seems interesting.

A politician who was weaned on socialist thought is caught up in the question of whether equity should be privately owned or state owned.

Barack Obama appears to be struggling with the very concept of private ownership. Marx promised a utopia that would magically appear when everything is state owned and under the direct thumb of political leadership.

I am a die hard free marketeer. I look at our market dominated by huge equity firms, my every gut instinct tells me that something is dreadfully wrong.

A market dominated by large politically connected equity pools is not really a free market. If you are dominated by some artificial political contrivance, you aren't exactly free, n-est-ce-pas?

I've been studying demographic changes. The United States was conceived as a nation of property owners. In the progressive era, the small property owners have been systematically shoved aside by a combination of big government, big finance and big business.

The huge private equity firms seem to be about using insider political connections combined with huge leveraged capital pools to dominate entire markets.

The equity firms start with a large pool, then take outlandish leveraged position against the pools to dominate and control a market.

This structure concentrates wealth and power in the center. Financial history seems to show that concentrating power in this way leads to systemic faults in the economy and economic collapse.

If we were wise, we would seek leaders who would work to restore the concept of widespread property ownership and who would stand against the massively leveraged equity pools that currently dominate the market.

Mitt Romney's career is one in which the son of a governor skipped seamlessly between big government, big finance and big business. Romney appears to be a creature groomed by the political establishment that seeks dominance over industry and not a person who has been trying to build businesses in adverse climate.

The highlight of Mitt Romney's political career was the passage of RomneyCare.

RomneyCare seeks to fund health care through the confluence of big finance, big government and big medicine. RomneyCare leaves little room for privately owned health resources or private medical practices.

Since financial reform is the most important issue of the day, I hope that we will see deep and substantive discussions about Romney's business history.

The debate is important not simply in helping us judge the candidates. It is important because it will help determine the direction of financial reform.

The position that political leaders and pundits take on this issue tells us a lot the political leaders and pundits. If a person is complaining about private ownership, we will know that person to be a socialist. If a person automatically dismisses or launches into apologetics, we know that that person is a partisan.

Since there is clearly something wrong with our financial system, I am hoping to see independent thinkers challenging these massive, highly leveraged equity pools.

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