Did that headline grab you? Thought it might. It was suggested by some of the language I’ve read in the last day or two as writers struggle to explain just why Wall Street’s investment banks are so critically important that the SecTreas says we have to ditch capitalism in favor of a $700 billion gummint bailout.
George Will, in today’s column, calls financial services " the commanding heights of America’s economy." OK, maybe so.
But I had to object to the main leader in The Economist this week, which proclaimed that "Finance is the brain of the economy." It goes on to explain that "For all its excesses, it allocates resources to where they are productive better than any central planner ever could."
OK, but brain? I don’t picture it as being that high in our anatomy. It’s more like the gonads, driving us on with a remorseless libidinal beat, like Snoop Dogg in "Old School" chanting "make money-money, make money-money-MONEY…"
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It should be the brain, but has become the gonads. Thinking with wrong head kind of thing.
Individual self interest, Adam Smith’s “invisible hand,” is the brains behind the economy. Why? Individuals acting in their self-interest have access to more information, can process it more efficiently, and act in deploying energy and assets better than any centralized processor or group of even really smart folks can.
The specialty of finance becomes more important as the size of capital requirements increases. Until it went out of bidness last week, Wall Street was renown for its ability to identify and deploy loads of loot to those with big ideas that it judged savvy, productive, and promising. For its ability to raise that capital, financial enterprises received, and in some cases earned, large fees.
Wall Street’s preeminence has evaporated, done in by a bubble. Venture capital will be harder to come by and big deals will be less frequent. But overall growth will continue as soon as we can liquidate all the bad loans and investments out there.
Always keep in mind that the heart and circulatory system can direct blood flow to only one major organ at a time, so if the brain ain’t getting it in the circumstances you are in, try not to drop anything if you want to avoid surprises.
If Wall Street is the gonads of the economy, where’s the womb?
In my adult lifetime, I have not seen markets act with anything that looked like discerning thought.
But on second thought, perhaps I should have said "viscera" instead of gonads. That’s more to the point. Although I think Billy Ray Valentine had a point when he described what underlies the actions of some players when they are panicking.
Mike, I don’t subscribe to the conventional wisdom that economic growth is inevitable. The world’s supply of fossil fuel energy that has enabled the fabulous growth over the last 2 centuries is beginning to peak. Is it possible that we can find new sources of energy to power economic growth? Yes, but it’s probably not going to be easy, especially with all the folks who push this drilling fiction that glosses over the geological facts. Simply put, we will need different ways to power our future and these methods may not be as conducive to growth as the old sources that have served us well for so long.
But I’m an optimist. We may have to modify our expectations for material wealth in the future but that’s not a big concern to me provided the wealth is based on merit and not on birthright or the ability of someone to muscle their way into a corporate CEO position.
The Europeans have pretty much decided to do with less in the way of material goods in exchange for a healthier, more leisure way of living. That would suit me just fine.
Adderall.
Adderall xr. Adderall treating anxiety in adults. Adderall 15 mg. Adderall.