Welcome to the Wall Street Casino and Resort

I think it’s funny how everyone pays so much attention to the stock market and yet we know so little about it. The stock market is not an indicator of the health of the economy, not for real people at least. The stock market is an indicator of the speculative investments of a very wealthy few and the mutual funds of the poor schmoes trying to save for retirement. The stock market doesn’t really mean anything, its gambling with an MBA. Now some will argue that the stock market keeps companies honest, that it reflects their value and performance, while providing the necessary capital to keep them going. To some degree, yes this is true, but not really.

The stock market only represents the perceived value of a company. The perception of a company’s profitability is never its actual value. A company’s stock will go up and down according to the whims of stock traders. If they feel like a stock is worth more, they’ll buy/sell high and visa versa. Why they feel this way, doesn’t matter. Often it doesn’t correspond to reality. That’s why we have things like market crashes. Folk buy up stock on the assumption that they’ll keep going up. Not because the company is actually worth anything, but because investors think they can sell to the next guy for a higher price. That is until the bubble bursts and there’s no one else to buy the stock. A stock market bubble is essentially a pyramid scheme; the new guys fund the profits of the old guys till the whole thing falls apart.

What’s worse is that the stock market doesn’t really apply to you or me. Its health is never our health. Corporate stocks go up when profits go up, and raising profits is often accomplished through unsavory means. When GE lays off a thousand workers, it’s stock shoots up 2-3 dollars at least. New labor saving technology cuts costs, boosts stock and undercuts labor’s bargaining power. If a logging company chops down a national forest, then the money rolls on in. We all suffer from increased environmental destruction, but hey, DuPont’s up 3 points!

The media’s fascination with the stock market demonstrates its upper class bias. They don’t really care about the little people. If they did, more journalists would talk about unemployment, gentrification, and all the not so fun symptoms of a healthy stock. But they don’t, because the news media, especially the business media, is owned and controlled by 5 large corporations, staffed largely by relatively well off reporters and driven solely by profit motive. It’s a bit different at the local newspaper where reporters make pretty modest salaries, but those newspapers aren’t in the business of investigative reporting, corporate HQ wants to make money, and stories like that could only upset advertisers.

It’s all part of a growing and willful ignorance amongst most of the population on all matters of economics. Few people, let alone the reporters themselves, notice that capitalism today isn’t about making things anymore. That’s not where the big money is. Most investment today is in speculation. Now that may involve speculation on productive assets like companies and land, but its still speculation. The problem with speculation is that it doesn’t add any value. At least industrial capitalists build stuff and develop technologies. But speculation is just blackjack with much higher bets, an exclusive casino for the ultra wealthy.

The danger is that over speculation isn’t only unproductive, it’s also incredibly risky. Imagine the economy as a line on a graph, going up and down in a cyclical stable line. Well, the more speculation you add, the deeper and longer those bumps and troughs get. Speculation doesn’t create value, but it is very good at creating volatility. The reason is pretty simple, if you have 50 people trading a stock, its range isn’t going to differ that much over a day or a week, there’s only so many people and so much money. But if you had 50,000 people, you could generate wild fluctuations. Those are the fluctuations that cause a Black Tuesday or an East Asia crisis. If you don’t know about the East Asia crisis, basically around 1997 a bunch of currency speculators drained most of the capital out of the region in a matter of weeks. Factories were sold off piecemeal, bank after bank collapsed, there was hyper unemployment. It wasn’t very fun. Especially when it cascaded into Russia, causing the ruble to crash and eviscerating any gains those poor folk had managed to claw out of the capitalist “shock therapy” of 1992.

Obviously we’ve got a bit of a problem here. We have an economy built on speculation and it’s ready to blow. The cracks have already appeared; in fact they’re fissures at this point. The housing bubble was built on speculation and that has come back to destroy several large mortgage companies (Countrywide is a good example). Fuel prices continue to skyrocket. Why? In the long term its lower supplies and increased demand from India and China. But that’s not the case right now, actually right now its oil speculators bidding up the price and hoarding oil futures because they’re anticipating that increased demand. Food? Yeah that too, in 2004 there was 15 billion sloshing around the food commodities markets, now it’s 150 billion. Of course there are many other problems, but speculation is one of the root causes for about every economic calamity we’ve got right now.

This is dangerous, because speculation is not the cause of people’s problems. Capitalism, oppression, exploitation are the problems. But during these depressions and panics certain sections of the ruling class, the industrialists and the small time owners, start to wax about the power of the “evil bankers.” They start saying that all of you disaffected industrial workers are loosing your jobs and your way of life to that evil transnational banking elite. And we gotta ally together to fight those dastardly bankers, and secure the health of the nation, which only grows more powerful through the strength of industry and the hard working values of traditional heartland folk. If you haven’t realized, this is what we call fascism, add some comments about “jewish bankers” and you get Nazism. During times of capitalist crisis the industrialists and other capitalists co opt parts of the working class, usually the more disaffected, conservative sections, and then brutally assault leftist/revolutionary working people. There’s a reason why Hitler called it “National Socialism,” he actually brought some workers along with him. However Hitler did wipe out the more “socialist” elements during the Night of Long Knives. But hey, I’ll take a dead Nazi however I can get em.

Anyway, before this gets too meandering and silly, let me sum it up. Speculative capital is bad, and it is going to cause another recession, if not another depression sometime soon. The problem is we cannot allow conservative reactionary types to derail working folk into some sort of right wing, neo fascist movement. When the shit hits the fan, we need to articulate a vision that is revolutionary and makes it clear that speculation isn’t the problem, but a problem, a symptom of the larger disaster known as capitalism and hierarchy. Getting rid of speculation won’t end layoffs, wage cuts, racial hatred, etc. It just strengthens one section of the rulers against another.