I went down to visit the Occupy Wall Street protest yesterday and to do an interview with Geraldo Rivera. It was a beautiful day, a wild day, and an eye-opening day. My criticism of the protest was too harsh, but what's happening to any of the grassroots part is being commandeered by unions and even the very corporate titans that are supposed to be scorned by these young people that are afraid, angered, and disillusioned.
The mix of fear and anger has historically been the most toxic brew that any society could endure.
Down there yesterday I had an encounter with Russell Simmons, the uber-rich hip hop entrepreneur who has made hundreds of millions of dollars first through music (some social scientists claim he encouraged violence and crimes against women), then clothing, and now with a debit card business. I happen to think Simmons is the personification of the American dream, and it's a dream everyone should have a chance to realize. Sadly, the idea that profits should be capped or limited can only be championed by a few people making so much money that it doesn't matter or the other end of the spectrum of those that will never own a business, write a payroll check, or give another American a job.
Simmons bristled when I said he should simply write the government a check if he felt he was getting through loopholes (that he didn't have to take); he wants to write the extra check when everyone else does. This comment came after he told me he made $100.0 million and gave $10.0 million to charity. So I asked if a couple where the husband owns a small business and the wife is a school teacher with total household income of $400,000 should pay higher taxes. He was at a loss for words on that question. He moved on to say corporations have too much power in Washington.
This is the problem; some statements have some truth but when asked if unions have too much power he claimed they are for workers (I bet none of his businesses have union workers, certainly not the Chinese that made the Phat Farm clothes). When I told Russell he, Warren Buffett, and George Soros were hypocrites he was really pissed. But, that's the reality of it all.
The real problems in this country will not be solved by limiting corporate profits and taxing those rich households making more than $250,000 a year. Russell finally said maybe $250,000 was too low, but he was adamant that we should send the government more of our money.
The fact is our problems will become worse and less manageable. Yes, banks shouldn't get bailouts, and excessive debt is slavery. But, the idea that you can accumulate debt in the form of a student loan or home loan and then get others to pay for it is madness. This is the drama playing out in Europe right now. The hype is that everyone is scrambling looking for ways to bail out Greece, which lost its way, but lived a lie for decades to create the illusion socialism worked. Of course, what everyone is scrambling to do is to save European banks that actually made loans into that Utopian illusion.
Now, conventional wisdom is shifting to the idea that the scramble is focused on getting Greece out of the euro without triggering a domino effect. In the end, however, it will be working people that pay for the mistakes of bankers and a profligate nation that really thought two months of annual vacations and retirements at 50 to 55 was the path to prosperity. Of course, that means the onus is on German workers, but also taxpayers in less rich European nations like Malta and Slovakia. There is resistance there that echoes themes at Occupy Wall Street, but more so Tea Party gatherings I've attended.
Here's the rub. Slovakia, which gained its independence in January 1993, has worked diligently to embrace free markets with low taxes to become a player in the world. While it's the second poorest nation in the EU, it has enjoyed impressive GDP growth in recent years (8.9% in 2006 was highest in EU, and 10.0% in 2007) and strong foreign direct investment that climbed 600% from 2000 to 2006, reaching $22,000 per capita in 2008. The secret to this growth is the exact opposite of would-be economic cures in America, and already in place in older members of the EU.
Relatively educated workforce
Over the next 24 hours pressure will come hard on Richard Sulik, leader of the SaS party in Slovakia, to accept the increase of the emergency fund set up ostensibly to save Greece but really being readied to save banks. His minority party is the crucial swing vote and has already rejected the notion of bailing out Greek pensions and fat cat banks in Germany and Spain. His beef is smart and realistic. Why the hell would Slovakia pay for its richer neighbors to enjoy an easier life?
In the end, I fear Slovakia and Malta will agree and make their own citizens foot the bill to save Greece and big banks. There should be riots in the streets of Bratislava, not Athens, where strikes have left piles of garbage rotting in the streets.
Excessive debt is slavery, but the notion that others should pay for debt that has already been enjoyed by debtors is preposterous.
Okay, so Merkel has at least mastered the art of the Monday promise, and that has got our market looking higher this morning. There isn't much economic data out this week until Friday, and the big earnings reports come in a week. Numbers from Scotts Miracle Grow (NYSE:SMG) were mixed but a bounce in Netflix (NASDAQ:NFLX), where management is getting the message on its new scheme, and also Apple (NASDAQ:AAPL), seem to be providing just enough leadership for a decent open.