“Here’s To The Americans”

There has been strong argument recently shunning methods of accumulating wealth through unethical and socially unjust investing. These include, but are not limited to: shorting stocks, buying into the “Commodities Bubble” as a hedge against further inflation, leveraging, selling mortgages, and the list goes on.

Let us break apart a few of these fallacies one by one.

Since the day of the earliest market exploiters, “shorting” (the act of selling an issue on loan and then later buying it back, offering the issue back to the creditor plus interest, dividends and fees) has been known as an act synonymous with treachery and monetary deceit.

While this may indeed be the case, it is so on the reverse side as well. Acts of manipulation are done with equal zeal, if not greater, on the “long-side”. I heard one older fellow say to me “They shorted all my shares of Citigroup! Those unamerican traders!” He probably meant traitors… But have these shares vanished? Are these traders really traitors?

Warren Buffett, once asked regarding his opinion on shorting said “Let them short as many shares as they want! Any share that is sold must eventually be bought back”. And indeed. From a purely economic perspective there is absolutely no loss whatsoever, merely trade of one good or service for another.

Buying Goods
“Buying Goods is bad” people say. Before we would even delve into the matter as it relates to the current state of affairs, I would like to pose some questions:

Are “goods” not made for the sole purpose of their distribution and thereafter consumption? Does the prudent minded not understand that when demand increases and production has diminished (partly due to the fact that producers got sick of shelving out product at a loss relative to cost) there are only two alternatives, a) shortage or b) price increase? Do we only care about ourselves and not the farmers, miners and drillers who put their capital and often their lives at risk for our wellbeing? Why must there be an emphasis on commodity price rises only in times of scarcity? What about the fact that we may be indebted to over 20 years of falling prices?

I love this one. There are actually people who propose that the act of using leverage uncalled for. The arguement is that these traders use funds provided by banks and investment funds for greater and loftier profits.

My first question is this: What is “leverage”? Is leverage not another form of debt? If so, there can be nothing more American than to use credit to increase ones wealth, contrast with the actions of consumers the world over who use credit and mortgaged monies to purchase delicacies and pleasures that will very soon pass into worthlessness.

Are the banks and financial institutions at fault for loaning out this money that they will certainly retrieve plus a hefty interest that will, in one way or another be passed onto the very customers who hold interest yielding accounts by that bank?

This above would follow through for the argument of offering mortgages. Yes, there are in every day and age lenders who seek to profit from those who will be forced into higher rates due to their insolvency of credit, or even to foreclosure due to default.

But is this not inverse with the greedy borrowers who wished to bite far more than they can chew? Have the speculators and holders of maxed credit card not yet learned from where depression of wealth derives itself? After all, many of these brokers seemed to be merely offering a service that we, ourselves demanded.

These are the underlying factors of basic capitalism. Unfortunately many Americans, and even non-Americans, fail to understand them. America is the country that stands for nothing more than “Life, Liberty and The Pursuit of Happiness”. Yet, wealth is lost as easily, if not easier, than it comes. Babylon once the richest of the rich owed its empire to the prudence and discipline of its inhabitance.

For America to thrive throughout the 21st century it will be necessary to either learn monetary solvency or forever be lost to the tales of ancient Babylon, Greece and Rome.


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