THE following has happened several times, and I assume that it is not unusual. The family, or a group of friends, have a picnic and decide to play softball. The grownups play for real. However, “exceptions” are made for the smaller children. They are allowed to swing, endlessly, until they hit the ball. Then their mothers usually lead them to first base. Then the child is praised, excessively, and led off the field. The game then goes back to being “real,” even if still only a friendly contest. The child is placed into a condition where he can not fail. I get annoyed when this happens, but, if I were still a child, I probably would like it a lot.
The following does not happen, ever. Albert Brooks made a movie, and I forget the name. A Yuppie couple sells everything deciding to live like nomads on their cash. They go to Las Vegas where the wife gambles away almost every dollar. The husband, having been in advertising, then offers the following proposal to the casino manager. The money can be refunded, and the casino then identified as the “casino with a heart.” The manager declined this public relation triumph.
Games have rules, conditions, preconditions, understandings, etc, otherwise they do not really exist, as when a three year old is at bat. Investing is a game. The ONLY difference between it and legal (or illegal) gambling is… well, actually there is no difference, other than the names, i.e. investing versus gambling. The casino manager kept repeating one thing. Our business is gambling. If we gave the money back it would not be gambling. Both gambling and investing need to have a loss possibility. Otherwise they become like the child at the family picnic. The gambler can not be allowed to play, without risking money, an infinite number of times until he “hits.” Casinos would not stay in business if the patrons were immune from bad betting.
Recently JP Morgan-Chase, a BIG bank reported a big loss, at least according to the Mass Media. Let us assume that this is true. The story also points out that the company, as a whole, made an EVEN bigger overall profit. But one section gambled, that is invested, and lost. To be clear and perhaps even silly, no depositor’s funds were involved. No one was “hurt” except that section of the company. So, an investment firm took its own money and invested it, and gambled badly, and lost. So what? These things happen, right? It is the way of the world, is it not?
Apparently not. The Congress is upset. Calls for additional regulations and regulators are being made by federal legislators. In other words, the system must be changed so that the investment houses can not invest, or so that they can only invest in winners. I do not know how this can work. Will the regulators pick the investments, and then get a law passed that no loses may be incurred? Are the firms to be considered like the children at bat? Are they to “buy” stocks, but never have to pay. This way their actions do not matter. But, of course, they are allowed to sell and collect the profits. Are the trading partners to be “brokers with a heart,” in that they will refund the money when the purchase results in a loss?
Capitalism and a Free Market (and these are NOT the same) require that the prudent, the knowledgeable, or the lucky, be rewarded, and rewarded precisely from the funds of the imprudent, ignorant or unlucky. The gain of one is precisely the loss of another. Without this nothing involving investments can work. And without investments progress stops, and the current economy will fall apart. This is simply another attack on what the USA economic system is, or used to be.
When the USA should be “playing hardball,” the game is being transformed into softball. And it is a game that we all will lose.