Goldman should be dead. Door knob. A chapter in American finance history, but a chapter about the past. It should no longer exist. It is not an example of American capitalism. It is crony capitalism at its worst. It is a bailout bank. It took from you because of its mistakes and “profited” with ill gotten funds. You kept Goldman Sachs alive. The government gave you no other choice.
That ain’t capitalism amigo.
In the below article Goldman Sachs examines corporate profit margins. They fret that if corporate profit margins remain high that means there’s something wrong with “capitalism.”
First, corporate margins are well within the norm and well within historic trends even according to the embedded graph. Second, why would Goldman Sachs, a bank which has sought to insert itself at the highest levels of governments around the world, which has systematically sought to place its people in the top echelon of central bank power around the world, concern itself with the health of “capitalism”?
It doesn’t give a damn about capitalism that’s why. A more or less honest economy where prices are free, where hard work is rewarded, where meritocracy generally rules, where entrepreneurialism flourishes is not in Goldman Sachs’s interests. It is now fat, oh so fat, and happy. It wants to maintain, and to expand the quazi-socialist/crony capitalist system in which it has flourished. Goldman hates real capitalism. An honest economy conflicts with its government-centric business model.
We should have let capitalism kill Goldman when we had the chance.
Goldman wrote: “We are always wary of guiding for mean reversion. But, if we are wrong and high margins manage to endure for the next few years (particularly when global demand growth is below trend), there are broader questions to be asked about the efficacy of capitalism.”
In other words, profit margins should naturally mean-revert and oscillate. The existence of fat margins should encourage new competitors and pricing cycles that cause those margins to erode; conversely, at the bottom of the cycle, low margins should lead to weaker players exiting the business and giving stronger companies more breathing space. If that cycle doesn’t continue, something strange is taking place.
Indeed if that were to happen that would of course indicate there’s something “strange” taking place. It would indicate that all the government and central bank intervention of the last decade or so has failed and has screwed up the natural ebb and flow of the economic ecosystem.
The market doesn’t just change its nature. Supply and demand doesn’t just stop working for some reason. Supply and demand is as natural as water flowing downhill. It simply IS. If corporate profit margins were for some reason to be stuck at abnormally high levels this doesn’t mean that the universe is somehow broken. It means that our efforts to prop and manipulate markets and the economy have failed (like they always do, only this time it’s on an almost unimaginable scale). State intervention has failed. Not capitalism.