Beyoncé has hundreds of millions of dollars of wealth, but she has, presumably, provided hundreds of millions of dollars worth of joy and pleasure to the world. I'd be happy to increase her tax rate, but I don't view her or other successful artists as the main problem. Similarly, if someone invents a better battery and thereby becomes a billionaire, we can feel that his income was justified by his contribution.
What annoys me are people who become very rich without contributing much of value. I'm thinking especially of people who become rich by inventing or indulging in financial shenanigans. I think most of these shenanigans are counter to the public interest and should be forbidden or at least better regulated. (This is only loosely related to thread topic, but I couldn't find a better thread for these comments. There probably is one, but the Search function at TFT is bizarrely flawed.)
Recently in the news is the collapse of Archegos Capital. This was a family-owned "hedge fund" operated by Bill Hwang, a big-name hedge fund manager. (It is family-owned because, having been convicted of investment-related felonies, Hwang is prohibited from managing others' money.) Hwang/Archegos made
huge highly-leveraged bets on stocks including ViacomCBS. However, to keep his holdings secret from regulators and other investors, he didn't actually buy shares in ViacomCBS etc. Instead he let big banks (Goldman Sachs, Morgan Stanley, Nomura and Credit Suisse) buy the stocks and sell him "total return swaps." The number of big banks he had to involve gives some idea of the huge bets he was making.
ViacomCBS shares began falling, along with the other stocks that Archegos was long, and the banks had to react swiftly, selling their shares and demanding repayment of their massive loans to Archegos, which quickly became worthless. Of the four big banks I mentioned above, the two American banks managed to avoid significant losses while each of the two foreign banks have lost billions of dollars! (Unclear why. Were the American banks smarter? Or better poised information-wise? Or, most likely, conniving to pass on the big losses to their own customers?) What do huge LOSSES have to do with un-useful shenanigan-related WEALTH? Archegos won huge profits last year with similar shenanigans, and so did many other Wall Street players; headlines are made only when deals go belly-up.
And when the losses are too huge for Wall St. to handle, the U.S. taxpayer stands up, under direction of the bankers who run Treasury and the Fed, and take the losses, letting Wall St. off the hook.
Here's a YouTube about another multi-billion dollar collapse in the news, this time of Greensill Capital. The details get ridiculously complicated. They begin with "supply-chain lending", an invention patented(!) by one of the Greensill founders. Greensill founded a bank, hyped itself as especially tech-savvy, made short-term "supply-chain" loans, repackaged them, insured them and sold them to banks. The insurers passed the risk onto re-insurers; the banks passed the loans on to their customers who wanted returns slightly better than money market. The complicated network was fragile and, although AFAIK no criminal conduct is alleged, Greensill went bankrupt. Several court cases must be settled before the details of this collapse are known but it appears that, again, Credit Suisse will be a big loser.
For what? What happened to good old days when a businessman and his banker would shake hands and make a loan with no need for dozens of other financiers getting involved? I forget the number, but a very large percentage of U.S. and U.K. profits are NOT from mining or manufacturing, NOT from inventions or entertainment, NOT from useful services, but
from financial shenanigans: Shenanigans often so complicated that government can't begin to devise regulations.
Two interesting details in the story:
(a) The YouTube claims that the banks were motivated to lay off the loans because new regulations in response to the 2008 crisis created a disincentive for banks to keep loans on their books. If true, this confirms my belief that
governments do not know how to regulate finance.
(b) How in heaven's name could Greensill get a
patent on the idea of supply-chain loans? Supply-chain loans already existed, the patent probably just posits a computer program in the loop. Even if "novel", would this be "non-obvious"? (Novelty and Non-obviousness are two of the criteria for patent issuance in the U.S.)
As someone involved with patents for computer algorithms, I can speak to patentability. I've noticed that, sometimes, the MORE obvious an idea is, the EASIER it is to get a patent! That's because designers often don't bother to mention ideas that are very obvious, so obvious ideas don't show up in searches — and negative search results are taken by patent examiners as evidence of novelty and non-obviousness!
