The tigers of Wall Street

The Senate recently held a hearing to look into a series of trades that cost JPMorgan Chase over $6 billion last year, some of which was funded by federally insured deposits. They have come to be known as the “whale trades,” but beyond indicating the scale ofthe loss, the description is a misnomer. You see, likening whales to rogue traders is unfair to whales. A more accurate metaphor is the Siberian tiger, one of the most awesome creatures on earth.

The Siberian tiger was brilliantly engineered to be the world’s ultimate killer, far surpassing the shark, the barracuda and the piranha. Tigers kill with their fearsome combination of size, speed, strength and cleverness, not to mention razor-sharp claws and teeth.

But tigers don’t kill just to meet the Darwinian imperative of satisfying their ravenous hunger. They also kill for the sheer joy of it, preferably while inflicting the maximum amount of torture on their terrified victims. It’s just their nature.

An example of this occurred on Christmas Day 2007 at the San Francisco Zoo, when three teenage boys who had consumed too much beer thought it would be great fun to yell taunts and obscenities at Tatiana, the zoo’s 400-pound Siberian tiger, from outside her enclosure.

After the boys had tired of the game and started on their way, Tatiana sought vengeance. She leaped to the top of the 12-foot wall surrounding her enclosure, hid behind some bushes along the pathway she figured the boys would take, and leaped at them with a mighty roar as they passed.

Tatiana killed the first boy instantly with a bite to the neck . She whacked the other two into semiĀ­ consciousness with blows from her powerful front paws. But as she set upon them, a team of zookeepers reached the scene and killed Tatiana with a shot to the head from a high-powered rifle, saving the lives of the remaining two boys.

For all their strength, intelligence and murderous instincts, Siberian tigers are in danger of becoming extinct in their natural habitats, because each adult requires roughly 400 square miles of unspoiled wilderness stocked with tasty animals to survive on its own. A burgeoning human population and development pressures are making such outsized land hunger increasingly impractical.

So the best future for Siberian tigers is in regulated environments like the Bronx Zoo’s Tiger Mountain. There they can roam large wilderness compounds that replicate their natural habitats as they are fed fresh meat daily so they no longer have to kill other animals. They are tended by skilled keepers who entice them into playing games that delight human spectators and maintain their physical fitness and fighting instincts without requiring them to indulge in the worst aspects of their serial-killer nature.

In many respects, markets are also serial killers. From a social perspective, the best future is for them to also exist in regulated environments where their survival is pretty much assured, their many benefits can be harnessed to serve the public good, and the downsides of their nature are properly restrained.

As the financial meltdown of 2008 reminded us, under-regulated markets have a long history of going on periodic murderous rampages, just like hungry tigers. They rip jobs and homes away from millions of people who depend on them, gulp down trillions of dollars in hard-earned savings, and ravage the flesh of thousands of small businesses whose bones are flung on the ash heaps of bankruptcy.

There are two possible solutions:

One is to learn how to regulate markets and their participants sensibly, to rein in their potentially murderous behavior before it gets out of hand by building a system in which the ups and downs of capitalism are sufficiently tempered to avoid destructive booms and busts.

You don’t want to know what the second solution is. But if you happen to be an immigrant from the former Soviet Union, you already know what it’s like to be subjected to absolute state authority. 

originally published: March 23, 2013

How (not) to address America’s transportation infrastructure

Americans have been told with monotony that intelligent investment in transportation infrastructure will help grow the economy and create good paying jobs from both sides of the political divide. Still it’s plain by now that between sequestration and budget cutting to deal with America’s deficits, the country will not do the unthinkable and move aggressively to acquire the additional transportation capacity we need to grow the economy. So we have to consider other courses of action.

In simple terms, we have only three options.

Option 1: Do nothing. Forget about spending huge sums of money to build the new transportation capacity our economy needs. Learn to live with what we’ve got, and stop bellyaching about bottlenecks that diminish our mobility.

Leave earlier in the morning to accommodate a more time-consuming trip to work; have dinner an hour or two later in the evening after the kids are in bed. Make fewer discretionary trips. Spend more time at home watching TV. At least this way we’ll be able to keep more income in our own pockets instead of paying it out in higher prices and taxes to support transportation.

Of course, this assumes our incomes won’t shrink as transportation bottlenecks choke off economic activity, leaving a smaller pie to be divided among more people as the nation’s population increases.

The do-nothing option will force us to pay higher prices for consumer goods and services because of the added costs congestion imposes on their producers. Our reaction to higher prices will likely be to buy less. With consumer spending accounting for 70 percent of the nation’s economy, the result will ultimately be a lower standard of living.

Sharp entrepreneurs will exploit this decline of American society. As Rhett Butler told Scarlet O’Hara in “Gone with the Wind,” “There are as many fortunes to be made from the decline of a society as from building one.”

Let’s keep our fingers crossedthat we can be among the lucky few.

Option 2: Have the federal government move aggressively to deliberately shrink the nation’s economy to a level where its mobility needs can be comfortably met by existing transportation capacity.

The assumption here is that a formal national policy of planned shrinkage can spread the inevitable pain more equitably among the American people. The main focus of this policy would have to be the nation’s top 100 metropolitan areas because that’s where most of the economic action is. They generate three quarters of the nation’s gross domestic product and are home to two thirds of the people. Their dominance as economic engines means the effect of shrinking their economies will spill over to the rest of the nation, placing all but the very rich on a low-cal diet of reduced living standards.

On the other hand, think of the money we’ll save by not paying for elaborate new transportation programs, even if most of the savings quickly run through our fingers to pay the extra costs imposed by a society in decline.

Option 3: Convert our top 100 metropolitan areas into true 24-hour societies so we can make use of existing transportation capacity now lying idle during the hours when most people sleep.

By spreading economic activity more evenly throughout the day, we can effectively acquire new transportation capacity without spending billions to build it. Just like factories that operate three shifts per day so the money invested in their plant and equipment can generate profits around the clock.

Roughly half the people living in each of these 100 metropolitan areas would have to switch from living during the day; working, shopping going to school or religious services and seeking medical attention at night.

Of course, the social engineering needed to accomplish such a transformation would be overwhelming. Some heroic regulation and policing would no doubt be needed to assure the right balance (as defined by government planners) between the day and night-time populations.

But just think how cheaply we could obtain additional transportation capacity this way. It’s for the best, right?

originally published: March 19, 2013