Fun with vampire squids: The post on Goldman Sachs you must read
[I'm leaving this sticky because a synonym for "economic rent" would be really nice to have and propagate. -- lambert]
Go read Numerian for a lucid explation of how GS is making its money. I'll wait.
Now, I want to pull out two paragraphs:
We’ve seen this year the scandal over High Frequency Trading, where Goldman and other firms have computers positioned at the New York Stock Exchange getting information on trades a millisecond before they are posted publicly. Goldman sees where the market is going second by second, positions itself for very short term profits, and in effect extracts a tax on trading by individual investors and mutual funds.
This tax is, exactly, a "rent," a concept which -- lambert blushes modestly -- we were hammering on rather early on, and which our tribunes of the people on the A list still haven't latched on to.
The second paragraph:
Why is the government allowing Goldman Sachs to function this way? It now has access to the Fed discount window and lender of last resort facilities, it gets funding from the Fed at close to zero percent, it is no longer subject to market runs on its stock because the FDIC backs up its deposits, and supposedly it is now visited routinely by Fed examiners who can see exactly what is going on. Yet there is not a peep of objection from the Fed, the Treasury, the White House, or even Congress about a soi-disant investment bank now converted into a commercial bank, which openly disdains any suggestion it should act like a commercial bank, which is struggling in its traditional investment banking businesses, and which is still allowed to make money hand over fist through outright speculation and what we might call “trading with advantages.”
We could ask the same question of GS that Anthony Weiner asked of the health insurance companies: "What value do they add to the transaction?" None at all. They're parasites, both Goldman Sachs and Blue Cross/Blue Shield, Anthem, Aetna, and all the rest of 'em.
Back in the populist era, the term for parasites like Goldman Sachs was "robber barons." The metaphor was from Germany in the middle ages: Barons with castles along the Rhine would install a chain across the river, and for a boat to pass, they'd have to pay a toll, or the Baron wouldn't raise the chain. The toll, exactly, is a rent. What value did the baron bring to the transaction? None. The baron was a parasite.
Of course -- and the lightbulb just went on for me on this two seconds ago -- that metaphor sounds old-fashioned today. However, in the populist era, it would not have: Working class German immigration was huge, and they would have understand the metaphor immediately.
So, for today we need a better metaphor. Parasite doesn't quite do it, because parasites are sneaky and weak; but the robber barons extracted their rent by force, by controlling a central artery -- just as the banksters and health insurance companies do today, except the rivers are of money, not water. Perhaps vampire squid is an even better metaphor than I thought... Readers?