On Rapacious Money

I was well into another post when I got an email from someone complaining of The Fed and the greedy rich. Yes, this is a bit of a unique character. But, I edited out some personal references and submitted my response:

It’s probably true that had The Fed not acted to keep interest rates low and buy American Treasuries, there might have been an even sharper fall in the American economy and stock market. And Bernanke might have quickly been run out of Dodge by this free-spending president and his Democrat Congress. But, it would have been a shorter term downturn and we would not be seeing the inflation of commodity prices that we are now, which will probably get worse. But a person of any means is not going to have them tied to the American currency that is being treated so incautiously. The “we averted another Great Depression” story is BS. We have not had this long a recession with this high unemployment since The Great Depression. And it’s because of the Democrats’ interference. Within a year after the 1929 stock market crash that supposedly initiated The Great Depression, unemployment was well below 7%. It worsened and BECAME The Great Depression AFTER Roosevelt’s government meddled in the market.

I don’t hold it against you. It’s a lifetime of marinating in a flawed worldview. I’m not saying that wealthy people don’t get the best price they can for what they sell. Of course they do. Everyone does. You probably didn’t, but the last time you sold a car, you might have put out an ad that said, “Looking for a widow who is living on a fixed income and needs a sound used car for well below market value. Please bring paperwork and picture ID to verify your low income.” But, you certainly wouldn’t have sold a product like that as an executive of a company that others, especially stockholders, were vested in. You’d soon be out on your ear before the company was out of business. In fact, you couldn’t sell much product like that as a small businessman who was married. Your wife would have you for breakfast. Anyway, wealthy people have no more virtue than anyone else, nor necessarily less, though Jesus informs us that wealth is easily the occasion for neglect and self-centeredness. But, it doesn’t give you the power to magically change markets, except insomuch as people naively believe anything your ad says and without verifying it, and pay extra for your product.

But, you don’t understand how the market works and its chastening and restraining function. Let’s just look at some of the world’s biggest corporations: Exxon and Shell have filling stations on a heavily trafficked metropolitan corner, selling gasoline within a penny of one another. I have told you that Bill O’Reilly is no conservative. He’s a bright man who worked his way to Harvard. But, he grew up in New York and like you spent his formative years immersed in a culture of cynicism about “the rich,” and delusion about reality. I assume that you like he, would suppose that oil companies collude to gouge the public on the price of their product. In the first place, that assumes that Exxon and Shell, rather than competing, hope to relatively split a pie of larger marginal profit. But in the second place, that’s just dumb (and I mean that in the nicest possible way; like one can’t “hear” something). Not only 1) would other American companies move or even form to pick up the trillions of pennies left on the table, but 2) gasoline is a worldwide marketplace: even if American companies didn’t do the job, foreign companies would.

Americans would buy cheaper foreigners’ gasoline just like they buy other foreign goods, even from low-wage oppressive China. I’m not anxious to support Venezuela’s Hugo Chavez but be assured, Citgo would sell one heck of a lot of gasoline for a nickel under the going price. Actually, they’d have to do it in a short period of time, because such as Exxon and Shell and BP would operate at a loss for the short time that it took to run Citgo out of the market. Why don’t they do that anyway? Because it would require an emergency for them to tell stockholders that they are going to take a loss for a quarter or two. Even then, their investors would sell and the stock would drop like a rock, but it’d be a matter of survival. Even the “fat cats” who run the world’s largest corporations are walking a tightrope on marginal profit rates.

The prices are within a penny of each other because the sellers are straitjacketed on the price that is supported by the market of competition and location. The only advantage that Shell and Exxon have is their existing extraction and refining capacities. But, there is such a massive amount of the product (gasoline) sold worldwide, that others would develop the capacity or even resell gas bought in quantity from existing providers. Basically, the economic vulturism you so loathe is an impossible phantom. All that is true is that some people have more money than you or I have, just as we have more money than some other people have. Envy about that is both a futile and an uncomely disposition. By the way, a top corporate CEO makes ten times or more than what O’Reilly makes. And O’Reilly makes a hundred times or more what the rest of us make. It’s all relative. And it’s all constrained by the market.