Comments: Alice in Billionaireland

Your link tells us that Asness managed to lose half of his hedge fund's money. No wonder His Royal Assness needs a tax cut from Ryan.

When do we get to chop off their heads?

Posted by bobs at July 18, 2011 09:04 PM

This is an awesome post, J. Schwarz. One reason we need progressive taxation, and I mean real 30s-40s-50s style progressive taxation with the highest rates well north of seventy percent, is because it renders the ownership class somewhat less powerful. (That's assuming, of course, we mean to save capitalism. Sometimes I think the people who will most hanker for violence against the owners will be previously deluded tea party types who subsequently figure it out, as some eventually will.)

Posted by Jonathan Versen at July 18, 2011 11:01 PM

bobs: when ~35 million Americans wake up one morning and see each other as part of the same tribe and not rivals in a banal, sedate, isolated struggle over "naturally" scarce resources.

We chop off their heads that afternoon.

Less violent-rhetorically --- at this point I think we're beyond just taxation as a cure, though that's obviously important. The wealth itself has got to go, and the notion that any degree of wealth can be used for any sort of political or mass public action needs to be given the esteem we usually reserve for child rapists.

Change the taxes without changing the mores and we'll undo it all within a generation.

Posted by No One of Consequence at July 18, 2011 11:18 PM

"Paul Ryan was recently spotted downing two $350 bottles of wine..."

I think when the Great Depression hit the U.S., Congress voted itself a pay decrease, although it wouldn't surprise me if they had their Ryans.

Economist Michael Hudson warns that the U.S. has a rentier economy. According to him, classical economics, now mostly forgotten, was devoted to devising ways to avoid unearned income such as rents or interest, or at least keep them under control. Income should reward productive activities.

Asness sounds typical of privileged and powerful people throughout history. I am reminded of some fairly annoying testimony by one of the Bushes (Jeb?) during a trial for his involvement in the S & L scandal. He more or less justified his criminal behavior as being necessary because he needed the money.

How many Jack Abramoffs and Leona Helmsleys are out there?

Posted by Edward at July 19, 2011 07:54 AM

fabulous post

The FIRE sector in the developed world and the third-world production it financed have indeed had extraordinary growth since 1980, but at the expense of everyone else. It should be no surprise that financial markets played a key role in enriching themselves, or that the lower-cost overseas producers financed by their capital investments thrivec. Not paying people enough to survive has always been profitable if you can get away with it, and that got a lot easier in some of those big players from 1980 onward.

We 'market naysayers' are ready to argue that "worldwide wealth" would be higher if financial institutions had not developed as they did, but that hardly matters, because the folks who drink such pricey wine very much want to think they deserve it, so they typically tell naysayers to fuck off instead of listening.

Don't expect this to change, because anger is more intoxicating than wine, and its effects last much longer.

Posted by N E at July 19, 2011 09:00 AM

The real financial overlords have a pair don't they?

Posted by Dredd at July 19, 2011 11:26 AM

I like the fact that this post is about a guy named Cliff Asness. That's just funny. Like in, "Good morning, your Royal Asness." Heh heh.

Posted by DRK at July 19, 2011 10:08 PM

To think these guys may have been genuinely nervous in 2008.

I'm sure Barack Obama passed inspection with flying colors, but that new color model still made things a little queasy. The way this country was practically in heat for democratic change and got spun right into disaster capital is still kind of breathtaking to me. Alchemy ain't no joke.

Posted by BenP at July 20, 2011 03:15 AM

Jon, Once again you make it glaringly obvious that we have a financial problem, not a deficit problem.

The President needs to stop playing hopscotch with deficit spending.

I have no idea what that means. I just made it up.

But it sounds good, doesn't it?

And I'm willing to wager that if I bombarded congressional offices with it, within a week we would hear some right-wing Congressman saying, "The President needs to stop playing hopscotch with deficit spending!" along with all the other meaningless claptrap we've been hearing on the evening news to conceal the plutocratic takeover of our country.

Posted by Paul Avery at July 20, 2011 08:47 AM

Paul --

You just hit on an important element in politics. Once you have unmoored political discussion from actual facts, you can never be called out for saying absurdities because the entire web of analysis is dependent upon absurdities. The only thing that matters is what you feel.

The problem is, Asness and his ilk actually believe this crap. Thus, we have a massive social class dedicated to pointing out his shit don't stink. They are the translators, the intercessionists. Asness et. al. say something inane, and then their legion of kissasses raise the statements to high art.

Btw, one of the truly messed up things about an unthreatened aristocracy is that it's far stupider than one in the middle of violent turmoil with other elites. I'd get more truth from any of a set of warring princes than I'll get from any modern day elites who sleep soundly every night. Aristocracies are exactly as stupid as they can be and still survive.

Posted by No One of Consequence at July 20, 2011 09:15 AM

Aristocracies are exactly as stupid as they can be and still survive.

Ha ha ha. Right on.

Posted by Jonathan Schwarz at July 20, 2011 09:26 AM

Well, for some people the sky is green: Eugene Fama and his finance friends have had their wealth grow quite enormously since around 1980.

Thems other little people don't count.

Posted by michael at July 20, 2011 12:46 PM

Edward wrote, thoughtfully: "According to him, classical economics, now mostly forgotten, was devoted to devising ways to avoid unearned income such as rents or interest, or at least keep them under control. Income should reward productive activities."

Exactly. It's with great sorrow that I see members of my ilk not making any attempt to differentiate income (rewards) stemming from truly productive investment of capital, and parasitic rent collection.

Posted by liberal at July 20, 2011 01:38 PM

If, for whatever reason, some meddling stranger decided to criticize my restaurant order, I'm pretty sure my response would not have been anywhere near as polite.

Posted by Gump at July 20, 2011 01:44 PM

N E wrote, "We 'market naysayers' are ready to argue that "worldwide wealth" would be higher if financial institutions had not developed as they did"

That's very possible, but we don't need to make that argument to rail against FIRE. A weaker but easier to justify point suffices: the fraction of income consumed by FIRE has grown dramatically since 1980. The evidence is that it's all rent---if all that increase went to more efficient allocation of capital, why has GDP in e.g. the US simply continued its long, secular decline?

If it's all rent, then we can tax the living $4it out of it with no harm to the broader economy.

Posted by liberal at July 20, 2011 01:44 PM

Gump wrote, "If, for whatever reason, some meddling stranger decided to criticize my restaurant order, I'm pretty sure my response would not have been anywhere near as polite."

So? Do we think it a good thing that such arch-criminals be harassed in public places? The answer is most assuredly "yes".

Posted by liberal at July 20, 2011 01:46 PM
Posted by: Gump at July 20, 2011 01:44 PM

If, for whatever reason, some meddling stranger decided to criticize my restaurant order, I'm pretty sure my response would not have been anywhere near as polite.

Well, I can assure you that if you ripped off billions of dollars from me and mine over the course of nearly a generation, you'd get a damn sight more from me than a critique of your fucking wine list.

Here's the thing about high crimes: they're always relevant to whatever you're doing. You can commit a felony or two -- assault with a deadly and medicare fraud, say -- then apply for a library card and you're still just a person applying for a library card. You rip off an entire nation and corrupt its politics, and you can't even buy a cup of coffee without being the shitstain of Satan. Your sins are eternally and permanently in context so long as you are.

Posted by No One of Consequence at July 20, 2011 02:08 PM

Heh. Krugman gives you a nod and a link today.

Posted by shargash at July 20, 2011 02:51 PM

When you scratch a wealthy libertarian, you will usually find someone who is a beneficiary of a government subsidy or largesse.

Think about Asness. Derivatives get favorable tax treatment (e.g. cap gains on futures taxed on LT basis, even if held for one day). Derivatives have easier leverage regulations than more conventional assets. CDS get even more favorable treatment. The govt safety net eliminates counterparty risk and reduces lending rates. Capital requirements are lower for derivative exposures than normal mortgages & loans. Risk-taking is protected by limited liability. His firm pays no corporate taxes as an LLC. And of course he pays a 15% personal tax rate on income by the carried interest rule. He benefits from a confluence of subsidy and government-bestowed privilege, and then not only proclaims himself an intrepid entrepreneur but condemns everyone else as envious free-riders. I am sure there are other means I have overlooked.

He's a cowbird, not a freebird--like most libertarians.

Posted by Scaevola at July 20, 2011 03:06 PM

When you scratch a wealthy libertarian, you will usually find someone who is a beneficiary of a government subsidy or largesse.

Think about Asness. Derivatives get favorable tax treatment (e.g. cap gains on futures taxed on LT basis, even if held for one day). Derivatives have easier leverage regulations than more conventional assets. CDS get even more favorable treatment. The govt safety net eliminates counterparty risk and reduces lending rates. Capital requirements are lower for derivative exposures than normal mortgages & loans. Risk-taking is protected by limited liability. His firm pays no corporate taxes as an LLC. And of course he pays a 15% personal tax rate on income by the carried interest rule. He benefits from a confluence of subsidy and government-bestowed privilege, and then not only proclaims himself an intrepid entrepreneur but condemns everyone else as envious free-riders. I am sure there are other means I have overlooked.

He's a cowbird, not a freebird--like most libertarians.

Posted by Scaevola at July 20, 2011 03:07 PM

Reading this blog (from Krugman's link) inspired me to google "virus kills host", an action I've long thought analogous to what the vast majority of Republicans and The Rich have been doing in fits and starts for a few decades. But I'm staggered by how much the process has accelerated.

The things I read in the web surfing simply pointed out that while there are similarities, viruses are more adaptive and are the superior life form to the R & R group -- and they have nothing specifically against the middle class.

Posted by Cool Breeze at July 20, 2011 04:23 PM

Of course, Fama makes most of his money from his relationship with Dimensional Fund Advisors, not from the U. of Chicago business school (now named the Booth School, after David Booth, the founder of DFA). And of course, both DFA and AQR (Asness' firm), make tons of money managing money for corporate and public pension funds, which I'm sure they find both funny and entirely appropriate.

Posted by 3 factors forever at July 20, 2011 05:37 PM

Even though they closed down the stockyards, there seems to be no shortage of bullshit still to be had in Chicago. That smell seems to cling to you regardless of your future station in life.

Just sayin'...

Posted by JerseyJeffersonian at July 20, 2011 06:37 PM

The sky IS green - for them.

It's the raygun philosophy: I'm rich. Fuck you.

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