Friday Toles Rant - Nutshell edition

[n2doc]

By Tom Toles
“To get higher returns, you have to take on more risk.” There it is. That sentence is our problem in a nutshell. And if ever a people woke up to find themselves living in a nutshell, it is us, now. That bit of deceptive wisdom is the root of what happened to us, and BOTH halves of it are the problem.

First half: “To get bigger returns.” Nothing wrong with that on its face, until it led us to fall flat on ours. The real trouble began when the acceptable size of “bigger returns” got inflated to an unhealthy degree. Here I will go out on a limb and blame the Forbes 400 list of richest Americans culture of greed/envy that started in the beloved Reagan Era. The Forbes list began appearing in 1982, as non-coincidence would have it. Cutting taxes on the rich opened the door to the possibilities of fantastic personal wealth, and SURPRISE!, people who were positioned to take advantage, TOOK ADVANTAGE! Five percent returns? Bah! Kids’ stuff! Ten percent? Pikers! We’ll NEVER move up the list with such stale peanuts! TWENTY PERCENT! NOW you’re talking! NOW we’re salivating!

But how the heck do you GET twenty percent returns?? Here we go: “take on more risk!” But not “risk” as in “MY risk.” No no, that would be too, well, risky! Let’s figure out a way to keep the RETURNS over here in MY pile, and shuttle the RISK over there, to YOUR pile. Will people direct a bulging eye at this new arrangement? NOT IF THEY CAN’T UNDERSTAND IT! So bring in the math geniuses to construct an investment apparatus that NOBODY can understand! It will churn out our massive returns and the groaning, grinding noises inside the machine will be drowned out by the applause and cheering until the whole thing explodes. THEN we can all act surprised, and show our repentance by talking about how we need to do PENANCE with AUSTERITY and CUTBACKS and JOBLESSNESS, and, oh, yeah, those will be over on YOUR pile. We’ll keep the riches, thank you very much.

http://www.washingtonpost.com/blogs/tom-toles/post/friday-rant-nutshell-edition/2011/11/03/gIQAJN7tiM_blog.html

[dtexdem]

1. Well, the real truism is: To get higher returns, make someone else take on more risk.

And the corollary: If you took on the risk yourself and lost, find away to make someone else pay for it.

There's recent economic history in that proverbial nutshell.