The bonuses earned by the bankers, hedgers and various fund managers arise as a result of making fast, smart decisions about price movements in currencies, commodity prices, food, energy and key resource shortages, mergers and acquisitions and the like. The quick returns from such deals ensure that mini speculative bubbles keep getting inflated, and the smarter fund managers make money when the bubbles burst as well as when they inflate. And the smartest and biggest fund managers are able to create bubbles and control their inflation and bursting, that is except the really big, conglomerate bubbles that gather once in a while. So speculative trading continues to grow and the problem of how to spend the resulting bonuses keeps on growing too. It really is quite a problem.
It’s not as though it’s a one off. And it comes on top of a basic salary which very much more than pays for living expenses at quite a generous level. You can do the Veblen thing and go for some conspicuous consumption – conspicuous waste is really not regarded as attractive today even if one was so inadequate as to find it intrinsically appealing. But conspicuous consumption is still seen as admirable. The Financial Times ‘How to Spend it’ Saturday supplement provides some ideas. For example, £81,000 for the Philip Treacy hat as worn by Princess Beatrice (??) at the royal wedding, except it looks so silly. Or £78,000 for the ex-Kate Middleton St Andrews dress. Or a wrist watch, amount spent depending mainly on the weight of gold and diamonds. But really such spends, even if one felt desperate to bolster one’s identity that way, could only provide relatively minor contributions to solving the problem.
For most, the houses, cars and boats have all been paid for. They may be fairly conspicuous, but they can’t continue to soak up a huge amount of money. So, if it can’t be spent, it has to be parked somewhere till a solution can be found. Mostly it is placed with professional fund managers to look after. And their task is simply to maximise the fund’s growth, by smart bets on movements in currencies, commodity prices, food shortages etc, or even such cleverly contrived non-products as carbon trading (See ‘Pity the Poor Banker’ posted 6.2.2011). So the problem of how to spend it continues to grow bigger at an ever increasing rate, further exacerbated by professional expertise devoted to ensuring the returns are subject to minimal taxation.
The problem of how to spend it will go on growing till the final bust (See ‘The Big One is Coming’ posted 16.5.2011). That may solve the problem. And the regime that follows the bust will have to be fundamentally different. It would be so much better if ‘the madmen in authority’ took decisive action ahead of that catastrophe. But there’s little sign of that, despite people increasingly on the streets, angry about having no jobs and no money, and their governments cutting back further on social security, healthcare, education, pensions and all the publicly funded facets of a civilised society, in order to continue their support for the overblown financial speculators.
You would think the ‘madmen’ would make some connections.