Your Lying Eyes

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18 June 2006

Profits - Who Gets to Make Them?

Brokerage powerhouse Goldman-Sachs reported a surge in profits in the second quarter. I bring this up because no one seems to have been bothered about this news - there were no calls for congressional hearings, Justice Department investigations, or a special windfall-profits tax - the way everyone was up in arms over the recent surge in oil company profits. And that's funny because what oil companies do - taking crude oil and delivering it to consumers in the form of usable petroleum products - is a helluva lot more critical to the well-being of Americans than what brokerage firms do. Anger at the $400 million dollar retirement package given to Exxon-Mobil's retiring CEO is one thing. But why would we want to deny big profits to the single most important industry in the modern economy?

Capitalism surely won its century-long war with socialism - won it in a rout. Outside of Cuba and North Korea private ownership of capital is generally the norm. The reason capitalism won out is due to two powerful mechanisms that socialism completely lacks. The first of these is profit, which provides an incentive for talented people to produce things. The second is free-market pricing, which communicates the relative supply and demand for goods and services.

Both these mechanisms right now appear to be working exactly as we'd want them to in the petroleum market. The high price of gasoline tells everyone that supplies are relatively tight but that people still need it. The ability of the oil industry to turn these high prices into big profits means they're going to keep supplying it. Mess with either the price or the profits and we will have one big mess on our hands, for sure.


Anonymous Anonymous said...

Good point, Ziel
Goldman-Sachs adds very little of value to our economy. In fact, as the most politically well-connected firm on Wall Street, Goldman-Sachs has had a central role in the wholesale transfer of U.S. economic assets to Communist China for years. And their outgoing CEO and new U.S. Treasury Secretary has long been the driving force behind this effort.

This is from an article by Bill Hawkins of the U.S. Business & Industry Council, "Treasury Nominee Paulson Has Supported China's Rise to Power"
(from - a site I highly recommend):

As required by Congress, the office of the Secretary of Defense issued its annual report on the Military Power of the People’s Republic of China on May 23. Exactly one week later, President George W. Bush nominated Henry Paulson as Treasury Secretary. Paulson is chairman and CEO of the Goldman Sachs Group, an investment banking firm that counts the Beijing government and several state-owned Chinese firms as clients. Goldman Sachs is not just in bed with the Beijing regime, they’ve married and raised a family. And predictably, once again, President Bush has shown that he doesn’t understand how national security and international economics interact – nor can he spot a conflict of interest staring him in the face.

Goldman Sachs works to facilitate foreign investment in Chinese industry, and thus to help Beijing become a more formidable rival to the United States. It claims to have helped raise more international equity for Chinese firms (including state enterprises) than any other international investment bank, and to be the only international bank to have participated as a lead underwriter in every sovereign debt program of the Chinese government. Goldman Sachs is also buying for itself stakes in several Chinese banks.

Paulson attended the Fortune Global Forum held in Beijing last year. Materials put out by the Forum stated that its focus was “how multinationals can tap into the enormous potential of China.” The October 4, 2005 issue of Fortune magazine was devoted entirely to China, in which it was reported that for Fortune 500 executives, China is “absolutely center stage right now.” According to the May, 17, 2005 issue of the Chinese regime’s newspaper The People’s Daily, Paulson told the Forum, “one thing which is critical to China to move the economy from low-cost manufacturing to high-tech value-added” production.

Goldman Sachs has been tied to China for some time. When John Thornton stepped down as president in 2003, he became a professor at Tsinghua University in Beijing and director of its Global Leadership Program. Thornton endowed the Brookings Institution in Washington with the funds to start a new China Initiative program in 2004. The mission of the Initiative is to “explore the dynamics of China's transformation and emergence as a political and economic power and the implications for the United States, China, the East Asian region, and the world.” The output of this program has been almost entirely concerned with how to keep trade and investment flowing, while dismissing any concern about trade deficits or geopolitical rivalry.

June 26, 2006 5:10 AM  

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