I am expecting at least one significant new article to hit the press in the very near future on Private Equity in general and Bain in particular, and that will be posted here immediately. While we wait for that, here’s a link to an interview with David Stockman on the issue of crony capitalism. This link comes from Mike Shedlock’s Global Economic Analysis blog, one of the best on the internet. Confession: I haven’t had the opportunity to watch the full video before posting this, and I’m relying on Mish’s excerpts. Generally this blog isn’t a fan of Bill Moyers, and one has to be very careful in making statements aout what is good for “society as a whole.” If there’s too much that is objectionable embedded here this post may disappear from this blog! Nevertheless I expect the background information provided here will be helpful in evaluating Private Capital.
DAVID STOCKMAN: A massive amount of resources are being devoted, being allocated or being channeled into pure financial speculation that has no gain to society as a whole, has no real economic contribution to the process by which GNP is created, GDP is created and growth occurs.
By 2007 40 percent of all the profits in the American economy were coming from finance companies. 40 percent. Historically it was 15 percent.
So the financialization means that as we attracted more and more resources and capital, and we made speculation easier and easier, and we funded it with almost free overnight money, managed and manipulated by the Fed, that’s how the economy got financialized. But that is a casino. Casinos — they’re, you know, places for people to go if they want to speculate and wager. But they’re not part of a healthy, constructive economy.