Now that the grease in the wheels of the American money machine is working its way, the next phase of the recovery is afoot — proper attention to what Bob Rubin calls “the yields”, the place where creationists and monetarists converge in one simple notion of human nature: man’s fundamental motivational need for profit. Lots of it.
Make no mistake: Arch-incrementalists, like Obama and his soul mates, the “Nudgites” at U. of Chicago, division of behaviorist economics, practice good old-fashioned trickle-down economics. And the pump from which the trickle flows is not primed until the yields are up. Have faith. “We are seeing evidence now that clients are looking to take on more risk to earn a higher return,” said Larry Fink in Business Week last month. Fink’s fund, BlackRock, has $2.7 trillion under management. The pent up demand for profit is paying off: Economists at UBS estimate that net worth is on track to increase by $3 trillion this quarter. Trickle, trickle.
Pumps are calibrated in billions. In all fairness to former Treasury Secretary (FTS) Rubin, his former colleague at Goldman Sachs, FTS Paulson, and top Obama economist FTS Summers, none has achieved billionaire status, although Rubin and Paulson are close. Summers is way behind, but if past performance is predictive, the one-day-a-week gig at the hedge fund in 2008 at $5 million a year has potential. (FTS Summers can leak: he is faulted for losing $1 billion of Harvard Endowment money as a result of some poorly chosen interest rate swaps. But that wasn’t his money. Besides, he had a lot on his plate, including de-linking women and science. Honestly, what does it take to be kept out of Barach Obama’s White House?)
If you’re going to talk money you have to talk Bill Gates. He was said to have made 70 per cent per annum on his software, year after year. That’s serious money. Too bad he’s never figured out the relationship between gouging for essential info technology (used in the making of medicines) and the appalling conditions (especially lack of medicine) in Africa today, the very continent Gates is saving.
Gates shared more than a fanatic enthusiasm for bridge with the bosses at Bear Stearns. They too appreciated sky-high returns… at one point in the subprime run up, Bear was making 40 per cent every two months turning around collateralized debt obligations. Bear CEO Jimmy Cayne was over the billion mark at one point, taking choppers to golf dates and otherwise providing content for Architectural Digest. But selling subprime, high-interest mortgages to people with declining wages had some built-in limitations.
One outstanding profit leader, billionaire George Soros, is a man with very few limitations—author, educator, civil libertarian, lecturer, speculator. This leading Democrat is a billionaire many times over — although we can only guess as to that fortune because he operates mostly outside the US where all-important privacy etiquette is still practiced.
Soros and other leading pump primers, including Larry Fink and BlackRock, are putting money where the mouths are: food. This exciting new profit center is experiencing huge demand and rising prices— this amidst much deflation in other sectors. Soros himself bought a piece of Argentine agribusiness, Adecoagro, which owns 650,000 acres of farmland in South America. Ted Turner owns lots of land down there too, though you wouldn’t know that watching CNN. Again, privacy uber alles. One wealthy American bought a piece of farmland in southern Sudan the size of Rhode Island. These men practice what President Obama preaches (everyday): Free Markets.
You may recall some nasty riots in dozens of countries in spring 2008 as food prices spiked and people who don’t understand democracies took to the streets. By the end of that year prices had fallen 50 per cent — as the credit squeeze affected staples. Now they are up and the broad trend is solid: today, grain prices are above their 20-year average and food stocks around the world are near 40-year lows. Says Fortune, “The fundamentals are in place for a long-term boom in the prices of everything ag-related.” You heard it here.
For the non-Nudgites, those who don’t understand how a 40-year low in food stocks will build a better world, you have to remember that human creativity – especially in today’s White House – works in strange ways. Big profits on speculation in rising costs of food helps us all. And Bill Gates is saving Africa.
CARL GINSBURG is a tv producer and journalist based in New York. He can be reached at email@example.com