Saturday, January 5, 2019

Asher Schechter - “US Regulators Have Essentially Become Do-Nothing Institutions”

Two arch capitalists argue in a new book that we don't have capitalism in he US anymore, it's a rigged oligopoly.


In an interview with ProMarket, Jonathan Tepper talks about the rise of America’s oligopoly problem, why he believes antimonopoly is not a left-right issue, and how a passionate fan of free markets came to write a book titled “The Myth of Capitalism.”

Something has gone terribly, terribly wrong with American capitalism. This argument, put forth by Jonathan Tepper and Denise Hearn, lies at the heart of their explosive new book The Myth of Capitalism: Monopolies and the Death of Competition. Instead of delivering on its stated promise to provide more opportunity, prosperity and choice, they argue, Americans today are subjected to a system that encourages and rewards predatory behavior, in which corporate monopolists and oligopolists are allowed to bleed consumers dry (and sometimes literally make them bleed) with impunity because the government has been “captured to rig the rules of the game for the strong at the expense of the weak.” 

The two, it should be noted, are no Marxists—quite the opposite. A staunch and passionate advocate for free markets, Tepper is the founder of Variant Perception, an investment research firm that caters to hedge funds, banks, asset mangers and family offices. A senior fellow at The American Conservative, he has previously worked at SAC Capital and Bank of America (where was he was Vice President in proprietary trading).

How does a self-professed fan of markets end up writing a book titled “The Myth of Capitalism”? For one, argues Tepper, what is often called capitalism today is not, in fact, capitalism: competition is the essence of capitalism, and there is almost no competition in the American economy today. “Capitalism,” write Tepper and Hearn, “has been the greatest system in history to lift people out of poverty and create wealth, but the ‘capitalism’ we see today in the United States is a far cry from competitive markets.” Instead, the US economy has been overtaken by a “fake version of capitalism,” with government officials allowing (even cultivating) the concentration of economic and political power in the hands of few powerful monopolists who “cozy up to regulators to get the kind of rules they want and donate to get the laws they desire.”

A clear and incisive indictment of the United States’ increasingly monopolized economy, where rising market power has led to less competitionlower productivitylower wages and staggering inequality, The Myth of Capitalism is also an urgent call to action for both the left and the right to support the restoration of America’s antimonopoly ideals. [We published an excerpt from the book last week. Read it here.]

In a recent interview with ProMarket, Tepper talked about the rise of America’s oligopoly problem, explained why he believes antimonopoly is not a left-right issue, and called on those who believe in free markets to support meaningful reforms. “If the people who love capitalism and competition don’t reform markets,” he warns, “people who don’t like capitalism are going to do it, and I think that we’ll all be worse off.”


More here -

Pro Market

https://promarket.org/regulators-do-nothing/

21 comments:

Andrew Anderson said...

I would add that I’m not in favor of more regulation on its own. High levels of regulation create higher barriers to entry, and the most regulated sectors tend to be the ones with the highest concentration. What I’m in favor of is principles-based regulation rather than rules-based regulation. Glass Steagall was 35 pages long and worked for about 70 years, while Dodd-Frank is 2,200 pages and we’ve basically seen almost no new banks Jonathan Tepper

Andrew Anderson said...
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Andrew Anderson said...

So the problem isn't that citizens may not use their Nation's fiat in convenient, inherently risk-free account form at the Central Bank or Treasury itself? But that smaller sharks (small banks) can't compete against bigger sharks (large banks)?

Note that Mr. Tepper is a bank consultant.

Note also that pseudo bank reforms have been proposed and implemented for centuries without dealing with the root cause - implicit and explicit government privileges for the banks.

Kaivey said...

Richard Werner was saying how the ECB was laying on lots of regulations to deliberately put out of business Germany's small non profit private banks on behalf of the big banks. He said these small banks may only employ 4 or 5 people but to understand the regs it takes another department with about 4 or 5 people so it's not viable. Some of these banks are trying to amalgamate to save costs.

Andrew Anderson said...

Profit isn't the problem with banks since even non-profit government-privileged banks steal from the poor to lend to the rich.

Konrad said...

Decriminalization of financial crimes is a cornerstone of neoliberalism.

Konrad said...

“Two arch capitalists argue in a new book that we don't have capitalism in the US anymore, it's a rigged oligopoly.”

We have neoliberalism, which is neither capitalistic nor socialistic. It is feudalistic, in which a handful of oligarchs own everything and everyone.

“What is often called capitalism today is not, in fact, capitalism: competition is the essence of capitalism, and there is almost no competition in the American economy today. “

Neoliberalism is all about eliminating competition. Neoliberals call this elimination the “free market.”

Andrew Anderson said...

because the government has been “captured to rig the rules of the game for the strong [banks] at the expense of the weak [banks].”

There, fixed it for you.

What, KV? Did you think they were talking about PEOPLE? The authors are complaining about small pirates ships (banks) being unable to compete with large pirate ships (banks) in their looting of US, especially the weak.

The Economists Challenge said...

" Americans today are subjected to a system that encourages and rewards predatory behavior,"

Oh wow! You just noticed???

"the government has been “captured to rig the rules of the game for the strong at the expense of the weak.”

Really?? You're claiming this is something new???!!???

"Tepper is the founder of Variant Perception, an investment research firm that caters to hedge funds, banks, asset mangers and family offices."

LOL...What a hypocrite! Brokering the very predatory behaviours he criticizes!!!

"“Capitalism,” write Tepper and Hearn, “has been the greatest system in history to lift people out of poverty and create wealth, but the ‘capitalism’ we see today in the United States is a far cry from competitive markets."

That is utter BS. First of all, what sort of capitalism are you describing you moron? The one where you broker between two conflicting parties, or the one where you lend money at interest without creating anything of value, or the one where you benefit from capital appreciation without creating a sweat, or the real capitalism where you take an actual real resource like a tree and you create a fruit from it with your own sweat? You are only concerned with financial capitalism and writing and selling a book proves it.

Second, how are you defining wealth? Real wealth such as real resources and trust between people, or the funny wealth where you hold financial claims against others and where you hold assets like houses purely so you can benefit from free appreciation which you convert into more financial claims against others?

"Instead, the US economy has been overtaken by a “fake version of capitalism,” with government officials allowing (even cultivating) the concentration of economic and political power in the hands of few powerful monopolists who “cozy up to regulators to get the kind of rules they want and donate to get the laws they desire."

WTF did you expect? You claim that competition is good and then you complain when those who are better at the game are winning. What the hell are you complaining about? Ohhhh, the game is rigged, there aren't enough winners, there are too many losers, cry sob sob sob. What a twat!

We are all so stupid. We all claim we believe in this concept of free markets and free competition and yet as soon as someone begins to win we complain. I have never known a sport where the rules said that no one is allowed to win except when it is children playing.

How exactly is it you all claim we should be living and operating?

Please explain to me what a free market and free competition world will look like? Please define winning and success for me where everyone on earth is winning and succeeding, and please explain to me how such a world will exist without poverty and bankruptcy? How does someone win without a loser? How does someone succeed without there being a failure? How does beautiful exist without an ugly, or a skinny without a fat?

Please explain to me how this world we claim we should be living in can exist without brokers, lawyers, politicians, economists, bankers, insurers, advisors, judges, police, and every other job or occupation or industry that exists purely to benefit from human conflict and suffering?

Please explain to me why, if people believe in the concept of real capitalism, as opposed to financial capitalism, people are buying lottery tickets, people gamble, people speculate, people are buying houses, stocks, bonds, gold, or anything else they believe will appreciate in value? Please explain to me why, if free markets and free competition is such a great idea why people have dreams of big careers which create lots of wealth so they don't have to work a normal day job, why young people are encouraged to do better than the rest at their school so they become doctors, lawyers, or some other occupation that most others will never become?

If working a job was such a noble activity, why is it most people hate their jobs and dream of something that most others will never have?

The Economists Challenge said...

"So the problem isn't that citizens may not use their Nation's fiat in convenient, inherently risk-free account form at the Central Bank or Treasury itself?"

Andrew,

This is not a bad idea. I have created a model which will allow individuals to do just that, although I have yet to meet anyone who agrees with my model in it's entirety.

So, this begs a question for me to you. What sort of conditions would you apply to those who operated with an account at the central bank or treasury? Would these individuals be able to speculate with that money, lend it at interest, or buy property such as homes with it, etc? Or would this money only be allowed to be used to purchase goods and services?

The Economists Challenge said...

"Richard Werner was saying how the ECB was laying on lots of regulations to deliberately put out of business Germany's small non profit private banks on behalf of the big banks. He said these small banks may only employ 4 or 5 people but to understand the regs it takes another department with about 4 or 5 people so it's not viable. Some of these banks are trying to amalgamate to save costs."

This sort of thing happens everywhere and all the time in a competitive world.

I work in the trucking industry, and my wife works in the childcare industry. Both of these industries have had nothing but regulation plus regulation lumped on them which is doing nothing but crushing the small operator and benefiting the big operator. But in a society which encourages competition from the moment a child is born, it should come as no surprise.

The other day my daughter came home and told me of how one of her high school teachers told her that getting good grades and excelling in life is all that matters. My daughter asked the teacher why then was he a teacher? Must one excel to become a teacher? The teacher had no response. I wonder if this teacher has any idea what he was really saying. I wonder if this same teacher would complain if my daughter was to become an oligarch a result of her excelling? I shouldn't think so, as he didn't define what he meant by excelling, and in fact, in a world based on self-interests and competition, maybe no one has the right to define such a term except for themselves only.

Does anyone agree with my daughters teacher here?

Does anyone think they should define what 'excelling' means and that this definition should be applied to all of us, or does the right to operate in a competitive world carry with it the right to define excelling in your own terms?

Noah Way said...

The arch-capitalists are sugesting that THEY change the system themselves in order to protect their benefits.

Trickle-down: the idea that that if you feed a pig enough, a few small morsels will pass through undigested for the rats to eat.

It's time for a pig roast.

Ralph Musgrave said...

The Economists Challenge,

Letting anyone have a risk free account at the central bank is part and parcel of full reserve banking, first set out by Irving Fisher and the rest of the Chicago lot in the 1930s and subsequently endorsed by Milton Friedman and many others. Or to be more accurate, some versions of that system involve people having safe accounts at COMMERCIAL banks, but every cent in such accounts must be backed by reserves (aka base money) held by commercial banks at the central bank. But that comes to the same thing.

Re your question as to what “conditions” are put on the use of that money, the answer is that under full reserve there are no conditions (or at least no more conditions than there are on the use of money in bank accounts at present.) The only exception is that where someone wants a bank to lend on their money (maybe the actual bank where they have their safe account), the relevant bank cannot guarantee the bank customer will get $X back for every $X deposited: that is, in effect the customer buys shares in some sort of fund which lends to mortgagors, small business or whatever. If silly loans are made, then rather than the bank failing or taxpayer coming to its rescue, all that happens is that the value of those shares fall.

The latter full reserve conditions were imposed in money market mutual funds in the wake of the recent crisis, though I believe some of those conditions have been rolled back, thanks no doubt to wads of $100 bills being stuffed into the back pockets of politicians.


Andrew Anderson said...

What sort of conditions would you apply to those who operated with an account at the central bank or treasury? The Economists Challenge

Based of the theory that all citizens have an inherent right to use their Nation's fiat in safe, convenient, inherently risk-free account form* at the CB or Treasury itself, all citizens would be allowed a single individual citizen account FOR FREE up to a reasonable limit on account balance, say $250,000 or so.

Individual citizen accounts above that limit and all other accounts would be charged negative interest to cover overhead costs, penalize fiat hoarding, and fund a Citizen's Dividend.

Would these individuals be able to speculate with that money, lend it at interest, ibid

Yes and yes but note that loans would be actual fiat and not mere liabilities for fiat, aka "bank credit", so savers would not be bypassed involuntarily.

or buy property such as homes with it, etc? ibid

Certainly every citizen should be allowed to buy a comfortable primary residence but limits on land ownership, as on every other finite resource, should apply so that no citizen owns too much while another citizen owns too little.

*And not just as: 1) unhygienic, 2) prone to loss, destruction, theft, and robbery, 3) totally unsuited for electronic commerce, physical fiat, coins and bills, aka "cash".

Andrew Anderson said...

Or to be more accurate, some versions of that system involve people having safe accounts at COMMERCIAL banks, but every cent in such accounts must be backed by reserves (aka base money) held by commercial banks at the central bank. But that comes to the same thing. Ralph Musgrave [bold added

No, it does not! What if the commercial bank happens to be physically closed when one wants to withdraw from his "safe" account? Or their account server down? And shall the commercial banks charge for those accounts? When the monetary sovereign should provide them for free up to a reasonable account limit for individual citizens?

And who says banks should have ANY part in what should be a 100% liquid at all times payment system that is meant to bypass them?

Stockholm Syndrome is the kindest thing I can say about those who insist that private banks are essential to the use of a Nation's fiat.

Ralph Musgrave said...

Andrew Anderson wants to know what happens if "the commercial bank happens to be physically closed when one wants to withdraw from his "safe" account?" My answer is.....wait for it......go to an ATM.!!! (Genius aren't I?)

As to what happens when the commercial bank's "account server" is down, well that can be a problem at central banks as well.

Next, Andrew asks "who says banks should have ANY part in what should be a 100% liquid at all times payment system that is meant to bypass them?" The answer to that is that certainly Irving Fisher and Milton Friedman suggested commercial banks should play a role in administering safe accounts, and there is a very good reason for that, which is that commercial banks have a HUGE infrastructure devoted to organising payments, providing physical cash for those who want it etc in the form of tens of thousands of ATMs, bank branches, etc.

For a central bank to duplicate that lot in a hurry would involve HUGE costs.

Finally and re Andrew's claim that someone is "insisting" that private banks are essential to "use of a nation's fiat", no advocates of full reserve say that far as I know. Certainly I know of none of them who object to the many central banks who are at the moment actively considering letting anyone have an account at the central bank. I.e. where someone wants to deal in fiat PURELY by electronic means, having an account at the central bank and never using a commercial bank or an ATM would perfectly OK by advocates of full reserve. But the reality is that many people still like using physical cash, and like going into a physical bank branch to do business.

Andrew Anderson said...
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Andrew Anderson said...
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Andrew Anderson said...

For a central bank to duplicate that lot in a hurry would involve HUGE costs. Ralph Musgrave

No it wouldn't since the services a Central Bank may PROPERLY provide don't include lending or other things that require much human intervention. Properly staffed Post Offices, ATM machines and the Internet should suffice.

Plus, how much did it cost to end slavery? And was it worth it? And you'll quibble over relative pennies in comparison?

So do you wish to end slavery to the banks or perpetuate it? It seems to me like the latter. There's no surprise there given my experience with most so-called bank reformers.

The Economists Challenge said...

"Letting anyone have a risk free account at the central bank is part and parcel of full reserve banking, first set out by Irving Fisher and the rest of the Chicago lot in the 1930s and subsequently endorsed by Milton Friedman and many others. Or to be more accurate, some versions of that system involve people having safe accounts at COMMERCIAL banks, but every cent in such accounts must be backed by reserves (aka base money) held by commercial banks at the central bank. But that comes to the same thing. "

Quite a number of court cases exist where parties have refused to pay their mortgages (and other loans/debts) on account of the fact that our banking system is not full reserve banking. In many of these cases the individual gets a mortgage to buy a home, and later on gets involved in some conspiracy theory groups or has seen Zeitgeist or read the 2014 Bank of England publications etc, finds out our banking system is not full reserve at all, and then refuses to pay the mortgage on grounds their loan was created out of thin air (or more correctly, backed only by others debt) and not backed by actual cash or gold etc, but then they also refuse to give the house back to the Bank, saying the Bank has committed fraud. So then these cases make it to court (if anyone is interested in the cases let me know and Ill post them).

In all these cases, the court judges in favour of the banks, and so the individuals then claim the courts are in bed with the Banks. But it is obvious when one reads the cases that under a full reserve banking system, it would be impossible for everyone to own a home under a market system where the prices of homes are allowed to float and hence appreciate.

As some of these court cases clearly point out, when banks extend credit the bank is providing 'purchasing power' because that is what the borrower is demanding. The borrower at the time of wanting to buy a house (which in 99% of times is an emotional decision) does not give a rats ass whether there is physical cash backing the loan, all they care about is being given purchasing power so they can become the owner of a house which they can then call their own, and which they too hope will appreciate in value over the years to come. The more people demanding homes (the more emotion sweeping over the housing market), the greater will be the prices of those homes, the more purchasing power must be created.

If we then apply the same process to all other asset classes (particularly considering the size of the retirement funds) it then becomes increasingly obvious how important it is for banks to have the ability to create purchasing power.



Andrew Anderson said...

If we then apply the same process to all other asset classes (particularly considering the size of the retirement funds) it then becomes increasingly obvious how important it is for banks to have the ability to create purchasing power.
The Economists Challenge

The problem is not that banks create deposits but that citizens have no other option besides mere physical fiat, aka "cash", to being a bank depositor. Thus the corresponding liabilities for fiat that banks create 1-for-1 when they create new deposits are largely a sham since the non-bank private sector may not even use fiat except, as mentioned, mere physical fiat.

Hence the negative feedback role that genuine, not sham, liabilities would play in a honest banking model is missing in ours as is the honesty of genuine accounting.

Besides that, though (imo) banks should not be forbidden to create deposits, nevertheless we could have the monetary sovereign distribute new fiat equally to all citizens to provide new purchasing power and then let banks act as mere intermediaries between lenders and borrowers of fiat, i.e. the "loanable funds" model so many mistakenly believe we have now.