Robert Borosage Nails It

For decades now I have been saying that the ratio between short term and long term investors is way out of balance. Long term investors have traditionally looked at the stability of a company, its book value, and its potential. The research and development that allowed companies to get ahead of the competition or at least keep pace with the competition was considered essential by long term investors who wanted steady growth and a steady appreciation of the value of the stocks they purchased. Short term investors, on the other hand, have always been risk takers who are looking for quick rewards. They do not think much about long term growth. If the system is not rigged “betting the spread” is a more a accurate description than "playing the spread" because short term investors are gambling.

In short, it was my opinion that the number of short term investors and their economic power exposed the long term investors to much more risk than was desirable. I must admit that my view was the view of an informed layman. As such it was simplistic. What is actually happening is far more complex and far worse than I realized!

Check out Rober Borosage's July 17, 2015 article, “Hillary on Quarterly Capitalism: Big Challenge, Timid Reform,” on Campaign for America's Future. In this article, Mr. Borosage uses Hillary Clinton's comments to show us how bad it really is. He begins his article by saying:

“Last week, Hillary Clinton opened an important 'conversation' about what she calls 'quarterly capitalism' or excessive 'short-termism.' She noted how the rules have been rigged to pressure executives to focus on the next quarter’s stock return rather than the long-term health of the company. The result, reaching new extremes in recent years, is that large public corporations are using 'eight or nine of every 10 dollars they earn' to pay out dividends or purchase stock buybacks. CEOs suggest that they would hold off making significant long-term investments if that meant missing the next quarter’s targeted return.

This 'culture of short-term speculation' is 'out of balance,' and fixing it, Clinton argues, is vital to 'save capitalism for the 21st century.'

In stark contrast with Republicans presidential candidates who want to cut or eliminate capital gains taxes, Clinton calls for reforms that will reward longer-term horizons. She suggests she wants to revive what used to be called stakeholder capitalism, with corporations focused not simply on shareholder return but on insuring that workers, consumers, communities, the country and the globe share in the rewards of long-term growth.

But in what is becoming a signature of the Clinton campaign, the fundamental problem is addressed with underwhelming reforms. To abandon the culture of short-term speculation, Clinton does not call for a financial speculation tax that might slow computer-driven, nanosecond trading programs. She does not endorse taxing the income of investors at the same rate as the salaries of workers. She doesn’t mention breaking up too-big-to-fail financial institutions or reducing the bloated size of our financial community that helps drive risky financial transactions. She doesn’t penalize companies for excessive CEO compensation packages.

Instead, she offers five areas for reform – four essentially exhortations and one of substance. This gives her scope for rhetoric that echoes Sen. Elizabeth Warren while offering policies that won’t offend Silicon Valley or Wall Street donors.”

Mr. Borosage goes on from there to accurately describe in detail the problems Hillary identifies and the timid reforms she advocates. Believe me his discussion is well worth the effort to read it!

I want to add here that Hillary's rhetoric goes beyond trying to appease the left. It is not just a sop to the much vaunted Elizabeth Warren wing of the party or to the people supporting Bernie Sanders. It is rather a recognition that the party of Roosevelt has awakened and is now demanding that we do something about the threat posed by the unbridled greed of the plutocrats. Hillary's inability to propose effective reforms to meet this crises is also indicative of the problem posed by the influence of money on our political system. Sadly, I have to say that even her anemic response to the problems caused by such a rigged system is more desirable than the Republican Party's Hooveresque denial that there is a problem or, in the alternative, their denial that the problem is caused by a lack of regulations and a rigged system that enriches the rich at the expense of everyone else. Those GOP morons actually want to double down on their failed trickle down policies!

Bless Elizabeth Warren and Bernie Sanders. They have changed the rhetoric, and that is a first step. Unfortunately it will take someone who is not beholding to Silicon Valley and/or Wall Street to do what we so desperately need done.  Could Bernie be the answer?