Juggling Dynamite

The world’s central banks have printed unimaginable amounts of money in recent years. Neil Macdonald explores what this means for the global economy and for your financial well-being.Here is a direct link.

This is an excellent piece. “Mark” comes off a bit agitated and a little smarmy with a condescending tone to interviewer “Neil”. But truthfully there have been many actors in this play. The bed we were making has been obvious for a long time. I wrote the following in Juggling Dynamite in 2007 before the credit bubble first burst:

“Those who spend more than they earn need to maintain excellent relations with their bankers. Over the past few decades, North American governments have become increasingly dependent on the kindness of lenders. Such support now forms the bedrock of our incredibly indebted nations. Spendthrift leaders are repeatedly elected to help the masses spend our way to prosperity. The majority is evidently not keen on electing fiscal restraint. A leader who suggests a life of restraint and paying down debt is, so far, unlikely to win the popular vote. The financial machine provides the products and the funding to support the vision of the have-mores. And so the vested interests favour the continued borrowing and spending of today without worrying about tomorrow.” (pg 70)

“I often liken leverage to an addictive drug. Although it may feel good in the moment, it is often dangerous to our long-term peace and health. Some people will tell you that crack cocaine is the most incredible high ever. Okay, I say, let’s concede that it is. Where does that take us?” (pg 133)

James Cotton, a retired International Business Machines Corp. lawyer, wrote a 1997 article in the Northern Illinois Law Review arguing public U.S. firms should disclose the ratio of their chief executives’ pay to their workers. In 2010, the rule was included in the Dodd-Frank Act, but hasn’t been implemented by the Securities and Exchange Commission. Here is a direct link.

All good, except that three years later the SEC has yet to implement a disclosure rule:

“Almost three years after Congress ordered public companies to reveal actual CEO-to-worker pay ratios under the Dodd-Frank law, the numbers remain unknown. As the Occupy Wall Street movement and 2012 election made income inequality a social flashpoint, mandatory disclosure of the ratios remained bottled up at the Securities and Exchange Commission, which hasn’t yet drawn up the rules to implement it. Some of America’s biggest companies are lobbying against the requirement.”

See a full report at: CEO pay 1795 to 1 multiple skirts US law.

The WSJ discusses how the slowdown in Europe is hurting U.S. company sales. Here is a direct video link.