business failure

American businesses have failed us. Lured in by Wall Street they have become agents in the financial Ponzi scheme we talked about before. They corrupted their standards and defrauded us. Our public companies are acting in ways that are destructive to us ( their owners) in the long run. They became willing collaborators in the financial Ponzi scheme.

A little over two decades ago Wall Street financiers started convincing CEO's and board members that all business needed to do was to generate ever larger profits. They told management to put aside their standards and ethics and to focus on short term profits only. The next quarterly earnings report. And if managers had to take decisions that ignored the long term well-being of the business, so be it. Even the outright cheaters were not just condoned by praised.

Wall Street created a culture of lies and deception. A culture that fueled bubbles and made some people incredibly rich. Wall Street became an engine for shifting wealth instead of creating wealth.

Steering by quarterly earnings is bad business. Even kids know as much. It also ignores most duties an ethical business has. The Wall Street money men said to management: "Your fiduciary duty is to shareholders only and shareholders only care about revenues. Never mind laying off workers, as long as it helps the bottom line. Never mind uprooting communities, as long as profits soar." That was false and dishonest. That was not what the owners (the public) wanted.

Wall Street had the owners in its pockets though. By promising them ever greater returns they preyed on the greed of the ignorant. The financial "engineers" lured companies into their bubble game by forcing them to take on more debt. More debt not only made companies more dependent on financiers, it also generated commissions and fees everywhere. In return, Wall Street rewarded such mismanaged companies with higher share prices. They did so by talking up their prospects. They knew this could not last, but they were happy to cash in on fees while it lasted.

Well run companies, with responsible management that refused to take on excessive debt and make outrageous claims were punished. Their stock prices floundered, their managers were put down, their practices were called outdated. Their P/E went to 1.0. In many cases, eager young financial minds engineered hostile take-overs. Like buccaneers they could not wait to board the ship, fill their pockets, and lay the rest to waste.

We, the American public let it all happen. Because we were greedy. Because we got to have more microwaves, more TVs, more refrigerators, and bigger cars. We ignored the plight of so many who were robbed blind, because our 401K's were flying high. Hot air lifts all bubbles. 

Unfortunately the party can't last. No Ponzi scheme can run forever. And the higher one flies the harder the crash.