The Washington Times
Sunday, May 25, 1997

BILKING 'MAIN STREET' TO FINANCE WALL STREET'S GREED
By Bob Djurdjevic

It used to be a "government of the People by the People and for the People," as Abraham Lincoln put it in his Gettysburg Address, echoing similar ideas from the U.S. Constitution. It has become a "government of Wall Street by Wall Street's DC protégés for Wall Street's benefit."

It is in Greed, not God, that the materialistic Wall Street has taught America's Main Street to trust. As a result, Main Street is voluntarily taking the Wall Street's poison which has turned the People into the plebes of the New World Order; its "cannon fodder."

"Our job is to do or die, not to ask why," a former U.S. Army NCO recently summed up the sad state of our Union today more eloquently than most writers. "But only after paying the taxes," this writer added. So that Wall Street could use the People's money to enslave the People.

What perfidy. What moral corruption. Which is why such a massive pollution of the Americans' minds is our country's biggest risk.

How is Wall Street's brainwashing done?

Well, we can start with incest, for example.

Incest?

Yes, incest. Unlike the odds from the Las Vegas "Strip," which are tucked in the back pages, the bombastic headlines and statistics from New York's financial "Magic Kingdom" are published on the front pages of the Wall Street-owned or controlled media, and its country cousins elsewhere in the U.S. and around the world, as if they were some earth-shattering news.

This makes the media a co-conspirator in one of the world's greatest scams.

So, if you're one of about 57% of American adults who still DO NOT invest in the stock market, chances are, you may be feeling peer pressure about not being in on such a "hip" action. Especially considering that the number of American stock market investors has doubled in the 1990s, according to a Jan/97 survey conducted on behalf of NASDAQ Stock Exchange by Peter Hart Associates, a market research firm.

(Chalk up another notch on account of Wall Street incest - a NASDAQ-sponsored survey is used to hype-up stock market investments).

So the "great sucking sound" which can be heard across America in the 1990s is the sound of personal savings being sucked out of mattresses and savings accounts, as the greedy Main Street citizens join the Wall Street feeding frenzy. The sound is intensified as the federal and private pension funds, which traditionally used to invest in the U.S. Treasury bills, also invest in the Wall Street's pyramid scheme.

A pyramid scheme? Isn't that something that happens in some distant and undeveloped countries, like Albania?

Indeed. In fact, it almost led to a civil war in Albania. But greed and gullibility aren't the exclusive traits of citizens of distant lands.

"The stock market IS a Ponzi scheme," says Dr. Michael Hudson, a respected economist who heads up the Institute for the Study of Long-Term Economic Trends (ISLET) in New York. "It reflects a flow of funds."

By the way, Dr. Hudson is also a research fellow at the Levy Economics Institute of Bard College, author of many books on international finance, and editor of 42 books on economic history. He is a former balance-of-payments economist for the Chase Manhattan Bank and Arthur Andersen & Co.; the chief economist of the Hudson Institute; and a consultant to UNITAR, US, Canadian and Mexican government agencies and corporate clients.

"The stock market sends a large flow of salary-withholding money into a relatively closed system, namely, the existing array of stocks and bonds that have been issued over the years (augmented by only a small trickle of new IPOs)," he says. "The effect is to bid up these stocks and bonds."

Everyone SEEMS to be getting rich, he says, even if there is little or no actual EARNINGS growth to support prices. The People also SEEM to be getting rich, as long as the stock market’s price/earning (P/E) ratios can rise without any growth in earnings support.

As the stock market "becomes utterly decoupled from direct investment," Dr. Hudson argues, "it certainly is not 'investment' as the world used to know it (i.e., a direct investment in creating new means of production). But it is the kind of gambling that Donald Trump and Las Vegas set up - a source of great revenue for themselves!" "This is akin to real estate rising in excess of rental value," he says. "It is the growth of an illusion, or a 'virtual reality'."

Now, if you ever wanted to find out what "virtual reality - up close and personal" really looks like, you should have attended the IBM shareholders April 29 annual meeting in Dallas. It was the epitome of the "Greed over God" Wall Street culture. And it was an example of how the Wall Street media assists in the deception of the People..

"IBM Boosts Payout 14%, Plans Buyback," read the headline of the WALL STREET JOURNAL Apr. 30. Yet, the WSJ article never reported the full story of what happened in Dallas... During the Q&A period which followed IBM chairman's speech, this writer asked Lou Gerstner the following question:

"As I stand here before you, I am reminded of the question I asked of one of your predecessors, John Opel, at the Boston annual meeting in 1983. 'Why are you mortgaging IBM's future?'... I never thought I'd have to ask the same question again. But here we are."

"Today, you and this IBM Board are doing the same thing with the stock buyback program. IBM could have bought hundreds of promising IT companies for the (more than) $13 billion of IBM shareholders' money which it spent on stock buybacks, not to mention the additional $3.5 billion which the IBM Board has just approved," this writer argued.

"In other words, you and this IBM Board chose to invest in the P/E ratio, rather than the 'E' - the new sources of FUTURE earnings... And you even sounded proud of it(!?)," this writer raised his voice to emphasize the ludicrousness of it.

Mr. Gerstner replied that the amount of money spent on the stock buyback program is "dwarfed" by the amount (of money) IBM spent on future earnings. "So I don't see your arithmetic," he concluded. "It does not add up to ours."

But this writer's main point was that ANY amount spent on stock buybacks is a waste of capital. For, how many new jobs or products did IBM create in America (or in the world, for that matter) for the $17 billion which it has invested in, or is about to spend on, the buyback of its stock?

Zero!

So the economic scoreboard reads: IBM/Wall Street $17 billion;

America/Main Street 0.

To put things in perspective, the amount of REAL money which IBM spent without creating ANY REAL benefits to the country's economy is equivalent of about four Albanian GDPs!

Now add to this the thousands of Wall Street's publicly-traded companies which may be doing the same thing as IBM, and you will begin to sense the awesome size of the financial "tsunami" which will crash on America's shores when this pyramid scheme collapses.

When will that be?

When the "Baby Boomers" start to cash their pension checks en masse - at the latest. "No wonder the Dow has soared above 7000," explains Dr. Hudson. "Until payments to retirees come to exceed contributions by currently employed wage-earners, there will be a net flow of funds INTO the stock market, continuing to push it up."

But it may also happen sooner...

If Main Street wises up about the Wall Street scam, and starts pulling its money out of the stock market before the institutions do. After all, although IBM, for example, has over 600,000 shareholders, the mere 0.13% of them - the Wall Street banks and other institutional shareholders - own more than 51% of the Big Blue. But that's admittedly an unlikely scenario (that Main Street will outsmart Wall Street).

Or it may happen if our legislators outlaw the stock buybacks. After all, besides being a tremendous waste of capital, the stock buybacks are a scam on a par with a homeowner bidding with the prospective buyers so as to raise the price of his/her property. Yet, IBM's Mr. Gerstner was even boastful about it! And Wall Street applauded the move by pushing IBM stock price close to its all-time high. Guess there is no such thing as "conflict of interest" in a world ruled by Greed?

THAT is a story America's Main Street deserves to hear, even if it may fall on deaf ears in Washington, which also takes its cues from Wall Street, although it takes most of its money (taxes) from Main Street. And Main Street needs to hear it NOW - before the Wall Street pyramid scheme leaves the People holding the bag. Again.

Bob Djurdjevic
TRUTH IN MEDIA
Phoenix, Arizona
e-mail: bobdj@djurdjevic.com

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