Wall Street Pay: a record $144Billion

What is lost in the soul searching and hand-wringing (or hand rubbing depending on who you are), is that this is not a surprise. It is not and should not be a surprise.

In a debt based fiat monetary system, as the dynamic of debt based currency develops, the system must gradually but necessarily become more statist. The logic of debt based money must necessarily lead to the state becoming progressively more intrusive as it gradually and by necessity becomes the largest actor in the economy.

By implication, this means two things – first: at the outset, nominal and intrinsic value are closely related but as the fiat money dynamic develops nominal value decouples from intrinsic value at increasing speed (financial value decouples from intrinsic value) – second: as financial value runs away from intrinsic, profit gradually concentrates in fewer and fewer sectors till towards the end only the financial sector enjoys any profit. This is because the financial sector is first in line to make use of the currency thus it benefits most and, as the currency implodes, it benefits last too.


Excerpts and comments:

Profits, which were depressed by losses in the past two years, have bounced back from the 2008 crisis.

Profits have bounced back due to government direct and indirect intervention. Direct intervention took the form of the various support programs like TARP that gave public funds outright to banks and financial corporations. Indirect intervention takes the form of preferential and exclusive accounting treatment of financial institutions that are allowed to disregard losses. Indirect intervention is in fact much more insidious and destructive because as government allows banks to appear solvent, banks can attract institutional money from pension and insurance funds for example. Thus, the public is robbed twice. The first time it is done overtly if by coercion but the second time it is done by stealth without the express knowledge of the public.

The pay numbers show that firms, benefiting from low interest rates and strong international markets, continue to base their pay on economic and market conditions rather than the level of pressure coming from regulators in Washington and overseas.

Economic conditions!? Usage of food stamps is at an all time high and increasing, unemployment as counted by U6 is at an all time high and increasing, the currency markets are in disarray, there is gross industrial overcapacity and waning demand globally, Credit Default Swaps on sovereign debt are increasing … and bank bonuses reflect market conditions???? Can you imagine what bonuses would be like if the economy was actually doing well?

Goldman’s revenue is expected to decline by 13.5% this year to $39.1 billion from $45.2 billion in 2009. Compensation remains projected higher than last year, up 3.7% to $16.8 billion, from $16.2 billion in 2009, according to the Journal survey.

Compensation is taken out of total revenue. When government allows banks to appear solvent, banks can attract institutional money thus enhancing total revenue. Do you understand how the gig works?



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