WALL STREET'S MOTTO: Give us your corrupt, selfish, super aggressive sons yearning to breathe greed!
If Raj Rajaratnam, the latest sensation of Wall Street charged with insider trading, instead of immigrating to the USA, stayed back in Sri Lanka and applied corrupt tactics to make money regardless of how ingenious or how innovative he would have been he couldn't have amassed more than 20 or 30 million dollars. It is because in a society like Sri Lanka, (similar to the USA as to 1% controlling over 95% of wealth), the amount available in dollar volume to one of those at the top 1% is limited to only about 20 or 30 million dollars. In other words Sri Lankan Central Bank, as opposed to the Federal Reserve Bank (the Fed) in the USA, cannot create unlimited amount of money. But in the USA that 1% who control more than 95% of wealth could make billions because the Fed has found a way to create unlimited amount of money and selectively pass it on to that 1%.
Raj Rajaratnam affair should send a clear message to all the corrupt leaders in the developing world as follows: Stop emptying the country's treasury causing starvation, decease and consequential crime and terrorism. Instead send your children yearning to be super wealthy overnight to the USA, send them to the best schools and get them jobs on Wall Street. In one year they will make in annual bonus more than their parents could make a lifetime of stealing from their country. Also the money any leader in the developing world makes through any corrupt ways may get exposed sooner or later making them to end up in jail. But in the USA the top one-percent has written the legislation for them to grab a disproportionate share of gross domestic income with no negative consequences. In fact the media hails those who do that as genius.
So Raj Rajaratnam's parents were smart to send him to the USA and Raj was smart enough to pick "Wall Street" as the place to make his fortune. It is important to keep in mind that if Raj picked to be a medical doctor or an engineer or any other noble professional in the USA he might as well stayed back in Sri Lanka and made his score there. Because medical doctors, engineers, scientists and other professionals are dammed to live middleclass lives of insecurity in the USA. The only guys who can score billions are the ones end up on Wall Street either as a middleman or as a stockholder of a public company (which is nothing more than a racehorse in the biggest casino in the world). Don't take my word for it, ask Warren Buffett and he will be honest enough to affirm this. Although he may be more diplomatic since he is scared to annoy the statuesque.
This was not the case in the USA historically at least to this extent. This extreme situation began with the arrival of the 1980s. Before the 1980s the USA was the major creditor nation of the world and even though there were budget deficits, the country corrected those periodically. Therefore let me explain what happened in the USA to create this laughable economic imbalance between those who could make billions and those who could make enough to settle in the middleclass or live from pay check to pay check and in deep debt.
The USA began to apply Keynesian economic theory properly at the outset of the 1929 economic collapse until the 1980s. But beginning the 1980s the USA began to change their strategy and began to apply only one side of the Keynesian policy that benefit the top 1% in the country. Not happy with the money the top 1% could make via this modified version of Keynesian the USA added the Monetarism which due to its simplicity engulfed the world like a plague devaluing currencies and destroying global economies like dominos.
Before elaborating on application of Keynesian in the 1929 and misapplication of Keynesian beginning the 1980s let me give a brief historical perspective of what led to the 1929 crash (you could get a detailed perspective by reading John Kenneth Galbraith's "The Great Crash of 1929"). From its very beginning the USA had economic cycles where there is an economic boom as people make wealth and create demand for additional goods and then a bust as supply of goods supersede demand and as demand decreases. Although it was not a perfect system, due to disparity in income, still it was quite healthy and the society functioned without any major collapse. Then with the 1913 "Federal Reserve Act" USA created the monster "the Federal Reserve Board." Although it was partly a good idea it also begot Monetarism that so far has created havoc in many parts of the world.
Actually monetarism was nothing new. It was practiced or experimented in France by John Law as France's Controller General in the 1700s that brought the most disastrous results all over Europe and America. The theory in its simplest form is to stop economic recessions or temporary busts by creating money to increase demand for goods. So beginning the 1913s with the blessing of the Federal Reserve to control the money supply, the USA began on a no-bust economic expansion giving the political leaders a sense of security of a Goldilocks economy. Goldilocks economy is defined as an economy, which is not too hot or cold with moderate growth, backed by market friendly monetary policy. But the problem with this theory was that the money being created ended up only in the hands of a very few people at the top. It might as well be so or it would have created runaway inflation if all the money being created ended up in the hands of the general population. But when the money is in the hands of a few, instead of general inflation, it creates selective inflation manifested as asset bubbles.
Thus as we approached the 1929s various asset prices including the stock market prices were so over-valued making it a bubble economy and as it happens the whole thing popped accelerating a great economic crash throughout the world. Keep in mind that throughout history a bubble in one nation spread to other neighboring nations like a wildfire. In 1929 the Secretary of the Treasury was Andrew Mellon who was the mastermind of the Calvin Coolidge economic boom of 1920s. Also keep in mind each economic boom ends up in a bust with the boom enriching a selective group of people disproportionately with ensuing bust causing agony disproportionately on the poorest. As 1929 approached, Mellon's policy was to let the free market takes its own course without any government interference to remedy the situation. This prolonged the depression.
It took the election of Franklin Roosevelt to apply Keynesian to solve the economic crisis in the USA. The main tenets of Keynesian are first during a major economic downturn to stimulate the crumbling economy by reducing taxes and by giving government funding. The government Keynes argued should spare no effort to fund a crumbling economy and should do so by both borrowing and by printing money. His argument makes sense since if there is no employment due to an economic collapse then people will not be able to survive and with no people to create demand for goods the industry will crumble.
Then the second part of Keynesian theory is to reverse the process he recommended to remedy an economic bust when the economy is booming. It is this second part of the Keynesian argument that the USA has conveniently chosen to ignore. So as we began the 1980s with an economic downturn, the government applied Keynesian in full force but then as the economy began to expand the US government continued to apply more and more Keynesian policies that meant to be applied only during an economic downturn. In other words the government continued to give more and more tax reductions thus running a huge deficit and turning the greatest creditor into the biggest debtor nation from which still it has not recovered. One does not have to be a genius to recognize that if there is no tax revenue then this budget deficit will continue forever. However, the powerful lobbyists in the USA argue that budget deficits could be brought down by cutting down expenditure. This is true to some extent, however the major expenditure in the USA is incurred on the command of similarly powerful lobbyists in the industries such as defense and on subsidizing healthcare industry. (Keep in mind this healthcare subsidy only enriches the insurance and the providers of healthcare. It hardly benefits the general population; thus is the power of lobby in a democracy gone awry). The point is cutting down expenditure that supports huge industry is no easy matter, especially when both the congress and the media are highly influenced by powerful wealthy interest groups.
To sum up, it is this perpetual application of one-sided Keynesian remedy added to the power of the Federal Reserve to print money and put into the market where most of this newly created cash going to the top 1% is what has created the current US crisis. The question is why should people care about this situation. It is because the corruption is the major reason for human starvation, hunger and abject poverty that translates into decease, heinous crime and terrorism that affects most of us. There are enough resources in this world for all its population but if a tiny percent controls most of it then we cannot expect this sorry situation to change any time soon.
However, there is hope because there is one region in the world that practices perfect democracy and applies both sides of Keynesian that can be used by the world as the example of a success story. That is the Scandinavian region, which I consider the heaven on earth. I hope that most of the emerging world will duplicate Scandinavian model to solve their economic problems.
Meanwhile all the wealthy individuals in the developing world could continue to send their children yearning to be rich overnight to the USA, to the best schools here and to settle down on Wall Street. The good news is that there is no discrimination on Wall Street since all they look for and see is the color of money.