Today U.S. President Barack Obama is going to get up behind a podium and castigate Wall Street for being greedy and shortsighted. He’ll defend his administration’s timid attempts at slightly regulating the financial industry more tightly.
No doubt people on Fox News and other parts of the right wing Looneysphere will express outrage and rage about the “sea of socialism” washing over America. Lots of lefties will denounce the lack of punitive, profit-punishing actions being taken against “fat cats” and demand that the government take over everything, or at least make finance an industry no one would want to invest in. And lots of intelligent economists and analysts will be totally ignored. Such is the state of our public discourse in Western Civilization.
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I’ve got to say I’m amazed at how badly the Obama administration has let go this once-in-a-century opportunity to fix the financial industry and get it back to the boring, predictable and functioning utility we had for decades. Everything being talked about right now seems pretty minor. That doesn’t stop people having extremely strong views one way or the other. But when I cast my mind back a year I can remember a host of issues that just seem to have faded as the Obama admin got bored with all this complex finance stuff and switched to healthcare. From what I can see, there’s not going to be much done to make some of the ratings agencies independent, accountable and liable for their – as it turns out – worthless and misleading ratings of many complex securities. The biggest Wall Street banks have gotten bigger, going from Too-Big-Too-Fail to now Much-Too-Big-To-Fail. And they’re making huge profits. Just check out Goldman Sachs and Morgan Stanley’s results this week. The government bailouts of these folks has let them take over even more of the industry, as they have swallowed up the business of smaller and Small-Enough-To-Fail institutions like Bear Stearns and Lehman Bros. So Wall Street’s going to be able to act like the collapse of 2008-09 was a short term thingy, and the government is going to go “tut-tut,” alter a couple things in a couple of small ways, and be done with that, it seems.
My markets editor, D’arce McMillan, is actually going to be going to the White House next week during the North American Agricultural Journalists conference. Perhaps he’ll be able to bring these concerns up with Obama and get some action going.
This post really does have something to do with ag commodities and this is it: often a big shock can make something happen, like reforms to the finance industry. And often a big shock will turn something from the direction it was going to the opposite. In the long term commodity bull market that began in the late 1990s, there was – once its breadth was acknowledged in the mid-2000s – massive investment in all sorts of commodity-production capacity as everyone tried to be where the action was. Some of it increased productive capacity, and some just changed ownership. Just look at how big Canadian companies like Alcan were bought up at – so it seems now – near the top of the market.
But the slump of 2008-09 hammered down commodity prices and sucked away capital. As prices fell, a lot of commodity production expansion projects were delayed or cancelled around the world as investors got jitters and financiers drew in their remaining horns, and much of the anticipated expansion probably won’t happen.
I wonder what has happened here in Canada with agricultural investment. There doesn’t seem to have been much trouble for farmers to get financing for reinvestment. I wonder if that’s true in the U.S.
And is that true overseas? Prices are good by historical standards and making North American farmers reinvest, but it’s a lot harder to get money in lots of overseas places, like Russia, so I wonder what we’ll see there.
If the long term commodity bull market still exists – no one knows right now whether it’s still with us – and ag commodities are part of it, then we up here on the cold northern prairies might be the big beneficiaries, because we’ve been able to reinvest to take advantage of it while others have not. If prices reignite in coming years, farmers across the prairies should be in a good place to collect.
Sure would be nice to know if that long term commodity bull market exists, wouldn’t it?
