More Anti-Capitalist Hypocrisy from the Left

Liberals want to force Goldman Sachs out of warehouse business.

Democrats in Congress and their allies at The New York Times are preparing for another assault on Goldman Sachs, this one based on the claim that an aluminum warehouse owned by Goldman is increasing the prices of canned beverages.

A Democratic Senator from Ohio, Sherrod Brown, plans a hearing Tuesday and wants the Federal Reserve to get banks out of the warehouse business. The New York Times previewed the hearing with a 3,600-word article that ran at the top of its Sunday front page and that blamed Goldman for costing American consumers more than $5 billion over three years in higher costs for canned soda, beer, and other products.

The Times followed up with a series of staff Twitter posts telling readers what to think about the news: “Don’t miss: damning story on how Goldman Sachs manipulates aluminum market….This story will fuel notion that Goldman is a ‘giant vampire squid.’”

There you have left-wing hypocrisy in a nutshell. When a government official like New York mayor Michael Bloomberg tries to reduce the public consumption of sugary beverages with a tax that makes the drinks more expensive, he’s a public health hero. But when it’s a profit-generating company that stands accused of increasing beverage costs, it’s a greedy manipulative Wall Street blood-sucker.

In Goldman’s case, it’s not even clear that the firm has increased the price of beverages or of other aluminum products. In February 2010, when Goldman announced it was buying the metal warehouse Metro International Trade Services, a metric ton of aluminum cost about $2,053. Last month, it cost about $1,815.

And if Goldman were increasing the cost of aluminum cans, it’s not clear that the practices are in any way related to its status as a bank. Some non-bank firm could also buy an aluminum warehouse and try to jack up rent to customers.

The best way to deal with the problem of aluminum can prices — if that is a problem at all — is not for the government to decide who can or can’t buy an aluminum warehouse. It’s allowing the market to address the issue, either through new entrants — competition — or vertical integration.

Slate’s Matthew Yglesias noted the Times article failed to explain why someone else doesn’t just open up an aluminum warehouse that moves faster than the one Goldman runs, or charges lower rent. It’s not like the warehouse business has such high barriers to entry or is so capital intensive that no one else can compete.

Another possibility is that the aluminum end-users, such as the beverage or aluminum foil companies or Boeing, can own and operate their own warehouses. If they think they can do it cheaper or better than Goldman, nothing is stopping them from trying.

For the Federal Reserve, or Congress, to tell banks they can’t be in the warehouse business, though, is a risky proposition. The flip side of it is the regulators telling the bankers that they can only invest in certain government-approved things, such as bonds that are AAA rated by a nationally recognized rating agency, or mortgage debt backed by Fannie Mae or Freddie Mac. And we all know how that ended up.

Sure, if bank deposits are going to be backed by Federal Deposit Insurance or the institutions themselves are going to be subsidized or backstopped by the taxpayers, then there needs to be some oversight of how the banks invest capital. But there what regulators need to be watchful for is bank investments that lose too much money, not investments that make too much money, as the Goldman aluminum warehouse is accused of doing.

The best public policy outcome would be to take a hard look at the subsidies and the taxpayer backstops, so that a bank owning an aluminum warehouse wouldn’t be any different from any other company owning one.

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  • Doctor Whom||

    Doing something for our own good is completely different from doing it to make a pr*fit. Results don't matter; only purity of heart matters.

  • -Umbriel-||

    You're on the right track. I don't think it's really accurate to describe this double standard as "hypocrisy". Large segments of the Left really do believe that higher prices aren't bad per se -- it's excessive (as they deem it) profit that's immoral, not higher prices. That extends all the way to monetary inflation, where it's perfectly righteous to depress the value of the currency through deficits and drive up _all_ prices to produce illusory growth. Monetary inflation would hardly happen anyway if greedy capitalists didn't insist on raising prices to compensate for the diminishing value of the currency.

    But it's not just that only purity of heart that matters. They really think it's a "market failure" when prices go up or down on "the wrong things" and, like the Soviets before them, are convinced that only the meddling of greedy capitalists prevents their central planning from creating a better world for all.

    That's pretty consistently the mirror image of reality, but it's not, strictly speaking, hypocritical.

  • GILMORE||

    TO WIT =

    In the beginning, the Soviets attempted to turn peasant farmers against the kulaks by denouncing them, in Mr. Lenin's illiberal words, as "bloodsuckers, vampires, plunderers of the people and profiteers, who fatten on famine."

    ...

    Before he was through, Stalin and his progressive pals killed off at least 5 million of these people either though starvation, ruthless deportation or outright murder.

    KULAKS AND WRECKERS IS TEH GOLDMANS

  • Libertarius||

    ...the value of the currency would not diminish if they did not inflate it in the first place.

    Maybe you were being sarcastic.

  • GLK||

    You wouldn't know purity of heart if it squirted skittles up your ass. Profit employs people. Profit creates wealth. Profit initiates expansion. Profit moves a country forward. People like you make me sick. You and your uninformed do-gooder reptile suck asses wont be happy until everyone sucks on the teat of the Government Borg. No different from the assholes that went along with the Holocaust. For the greater good, of course.

  • GILMORE||

    "Goldman is a ‘giant vampire squid.’”

    jerk didn't even give a H/T to Taibbi, who apparently coined the expression.

    ""The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money""

    Read more: http://www.rollingstone.com/po.....z2ZoO7AXvr

    I think the most telling thing about liberal rhetoric vis a vis 'Money-stuff' is that all you have to do is replace the names of "evil investment banks" with "Jews" and it reads like one of Celine's diatribes calling for the Final Solution.

    In essence, their claim is reducible to "they make money", ergo = EVIL. All profit is extortion, theft, manipulation...which is more deserved by teh poors and teh browns and der Wimmin and... Environment, something something...

  • Libertarius||

    Do you guys read Zero Hedge? That place used to be a libertarian/laissez-faire/gold bug fest, now it reads like Karl Marx is running the place.

    Every article is about "disparities in the 'distribution' of capital" and how the evil private banksters somehow own the governments with guns pointed at them, and the central banks are just helpless pawns of the Rothschilds/lizard people/fill in the blank.

    They still post gold articles, but it ain't much.

  • Palin's Buttplug||

    ZeroHead has always been anti-banking.

    The loopy goldbugs are anti-bank - not just the stupid progressives.

  • Free Society||

    Anti-central banking is not anti-banking. I love pizza, but as soon as the government monopolizes pizza and cartelizes all pizza shops into the Pizza Reserve System, I'll be leery of them too.

  • Torontonian||

    I read ZeroHedge daily.

    I also work as an investment manager, so it's not just for fun... the Tylers actually present really good contrarian perspectives on financial markets.

  • Michael Price||

    And you're saying that the bankers DON'T own the government? Ok then tell me, how does the government act differently than it would if bankers did own the government? It's hardly anti-free market to call out the government and banksters on their happily incestrous, corrupt relationship.

  • ||

    " blamed Goldman for costing American consumers more than $5 billion over three years in higher costs for canned soda, beer, and other products."

    I think we can all blame that one on the Fed.

  • Sevo||

    "I think we can all blame that one on the Fed."

    Naah, $5Bn ain't even close to what the fed has cost us over the last 3 years.

  • Free Society||

    Which makes it all the funnier that lefties come out swinging against this supposed rip-off of canned drinks.

    "First they came for our savings, then they came for our our mortgages, student loans and capital investments. And we're cool with that, but no one makes a profit on our canned beverages!"

  • Nyarlarrythotep||

    The comparison to Bloomberg is facile and ill-made. I think it's demogoguery.

    It's reasonable to believe that both he and Goldman-Sachs believe they are pursuing their most obvious outward goals: Bloomberg, to protect people from themselves, and Goldman-Sachs, to make money. Neither party's messages contradict these motives.

    You can dislike Bloomberg's actions while still believing him to be sincere.

  • ||

    You can dislike Bloomberg's actions while still believing him to be sincere.

    On the other hand, it's hard to tolerate the smell when you have your head shoved that far into your lower colon.

  • NotAnotherSkippy||

    That doesn't remove the hypocrisy. The net effect of Goldman's manipulation (if real) is to increase the cost of pop (fuck you, coasties, it's pop!) which protects people from themselves. We continuously hear from the Left that the ends justify the means. Stealing is OK as long as the right people get the money. In this case the ends would have been the same to the consumer.

    The only difference is that the government of NYC (read public sector unions) gets to keep the extra cash vs. Goldman. But if that's the case then why didn't the Crimes complain about that? All they talked about was what it cost consumers.

  • Free Society||

    Damn right it's pop. And the main difference between Goldman's and Bloomberg driving up the cost of anything is that Goldman's could hypothetically be undercut and out-competed. Meanwhile Bloomberg is immune to market pressures and backed by the force of his private army of rights trampling thugs AND his policies are destroying wealth as opposed to creating it.

  • Sevo||

    "And the main difference between Goldman's and Bloomberg driving up the cost of anything is that Goldman's could hypothetically be undercut and out-competed"

    Unless Goldman has the corner, it WILL be competed down to marginal value.
    OTOH, that asshole Bloomberg gets to have his thugs pull guns and demand the price.

  • Free Society||

    Not that I feel much sympathy for Goldman Sachs in all of this. They are cronyist beneficiaries of the Fed Reserve System too. But in principle there's nothing wrong with doing with your warehouse whatever the fuck you want, so long as you aren't trampling other people's rights.

  • mb||

    The thing you have to ask yourself is this, why would Goldman Sachs or any other company play around with inventory when it is pretty clear they could just raise prices and they would still have customers? Hmm.... why would a company waste money to make money? I am not sure
    Since the government screwed up pricing, the price signal to the suppliers (GS is the middleman) does not exist - so there won't be new supply.
    But why would someone use a market as screwed up as this? No one would shop at a grocery store that does this (moving inventory to raise prices), but yet this market still exist. Probably because this market has no competition, why is that?
    So to recap, government screws up the price signal with regulations that determine the price that can be charged, the “market” figures out a “loophole” to the regulation, no other market exists (government won't allow the competition – competition is another important market self regulatory feature) for customers to go elsewhere, liberals find out blame the “market”.

  • mb||

  • ||

    So to recap, government screws up the price signal with regulations that determine the price that can be charged, the “market” figures out a “loophole” to the regulation, no other market exists (government won't allow the competition – competition is another important market self regulatory feature) for customers to go elsewhere, liberals find out blame the “market”.

    Your Berkeley econ PhD will be in the mail.

  • Inigo M.||

    Why stop at a PhD in economics? Let's award him the Nobel Prize for economics.

  • Free Society||

    Why stop at a PhD in economics? Let's award him the Nobel Prize for economics.

    If Krugman can have one, I don't see why any slack-jaw repeater of basic logic (which is many steps up from Krugman) shouldn't have one too.

  • Curtisls87||

    This!

  • Anders||

    For those who are not paying attention, GS is balls-deep into the current regime. As they were the past one.

    This is a little bit of posturing by a nobody pol.

  • Matthew Brown||

    Yup, all politicians that matter are bought and paid for and wholly loyal in deed, if not in word.

    The only question I have about Goldman Sachs' actions here is: to what degree is government regulation involved in GS's decision to do this? In general, when business does seemingly irrational things, avoiding or taking advantage of the government is generally the reason.

  • Inigo M.||

    Apparently Brown didn't get the memo that Goldman is one of the biggest Democratic Party supporters out there (as is most of Wall Street). And then there's former Goldman bigwig John Corzine (D), who later went on to become a senator and then governor of New Jersey. It's not like they're Blackwater or Halliburton.

  • ||

    Of course, the one thing that will work to "get" G-S, which both wings of the Statist party will fight tooth and nail against even mentioning, would be to round-file the regulations and legalize competition with them. I.e., let the Free Market do its miracles.

  • plusafdotcom||

    Um, I remember some "minor point" in that NYT article that mentioned that the warehouses truck the aluminum from one warehouse to another and back again... something about an arcane regulation that says the warehousing must be a "temporary storage" between manufacturer and end-customer...

    But "temporary" has a specified time limit, so they move the goods back and forth to circumvent the "temporary" mandate and only deliver any when the spot price goes up.

    Sure, that's speculating, but if they got rid of that "temporary rule" bullshit, it would at least save a lot of Diesel fuel...

    And they're moving into copper now, too... even denser/heavier!

  • Michael Price||

    Oh that's how it works. I thought it was something like that, but I wasn't sure of the details.

  • sangdi||

    Not bad you say I very much agree!
    tobacco pipes
    www.tobaccopipesshop.com

  • VG Zaytsev||

    How the fuck is owning a warehouse supposed to increase the price of the warehoused product?

    Seriously WTF?

  • TheMightyKC||

    This article explains how GS manipulates the price of aluminum by making the wait period longer to get your metal:
    http://www.motherjones.com/kev.....r-beer-can

  • Free Society||

    This article on motherjones, a reservoir of economic illiteracy.

  • Michael Price||

    "Did you follow that? Some genius at Goldman apparently had a brainstorm after reading the detailed rules that determine the spot price of aluminum."
    The "detailed rules that determine the spot price of aluminium", so they're not determined by simple supply and demand? Sounds like the hand of government in their somewhere. Anyone know anything about that?

  • Tony||

    GS is like history's greatest champion at figuring out how to make money without actually doing anything. Surely there's room in libertarianism to distinguish between valuing profiting from adding value to the world and profiting from manipulating rules and moving money (and aluminum) around.

    The financial services industry isn't a natural market phenomenon but was always understood to be a (highly regulated) tool for social purposes. Investment banking was supposed to be for things, like funding innovation. If all this vast sector is doing is finding ways to manipulate markets and screw people for profit, then it doesn't really deserve to exist in its current form. That's not capitalism as any defender of the virtues of capitalism would describe it.

  • Free Society||

    The financial services industry isn't a natural market phenomenon but was always understood to be a (highly regulated) tool for social purposes

    Ah so the financial backing for the agricultural and industrial revolutions was the product of socially conscious and benevolent kings and queens. If it weren't for the government, there'd be no such thing as loans or demand for capital.

    Capital investment is intended to achieve profit, innovation is a by-product of that quest for profit. No one invests money for "social purposes", that would be called charity and no one expects to earn a return on charity.

    Which is to say, finance is meant to be a support function to actual commerce--people complaining about it being too big and profitable aren't on a moral crusade, they mean it has ceased being useful and started being a giant parasite on the economy. And any clear-eyed view of finance over the last couple decades could come to no other conclusion.

    If you had a clear eyed view of the finance industry you'd question the central planning and government granted monopolies in this industry. You even acknowledge that it's highly regulated, but never doubt the regulation itself.

  • ||

    GS is like history's greatest champion at figuring out how to make money without actually doing anything. Surely there's room in libertarianism to distinguish between valuing profiting from adding value to the world and profiting from manipulating rules and moving money (and aluminum) around.

    That puts them in the same league as Paul Krugman.

    If all this vast sector is doing is finding ways to manipulate markets and screw people for profit, then it doesn't really deserve to exist in its current form. That's not capitalism as any defender of the virtues of capitalism would describe it.

    Ok, then get your Democrat pals to really stick it to GS. I won't be holding my breath.

  • Tony||

    Me either. What's good about this commodities thing is that beer and soda and other industries that use aluminum are actually powerful enough to fight the banks.

  • Sevo||

    Tony| 7.23.13 @ 12:39PM |#
    "Me either. What's good about this commodities thing is that beer and soda and other industries that use aluminum are actually powerful enough to fight the banks."

    Yeah, shithead, to you it's all about who gets the government thugs to point the guns.

  • DarrenM||

    GS is like history's greatest champion at figuring out how to make money without actually doing anything.

    Ah. That explains why the administration is continually going goes to GS for expertise and political appointments.

  • Sevo||

    Tony| 7.23.13 @ 9:59AM |#
    "GS is like history's greatest champion at figuring out how to make money without actually doing anything."

    Right, shithead, people just pay them since they like them.
    What a steaming pile of shit.

  • Ron||

    isn't that what George Soros does

  • Tony||

    Which is to say, finance is meant to be a support function to actual commerce--people complaining about it being too big and profitable aren't on a moral crusade, they mean it has ceased being useful and started being a giant parasite on the economy. And any clear-eyed view of finance over the last couple decades could come to no other conclusion.

  • Torontonian||

    I work in finance.

    I will be the first to say that the industry as a whole does not generate nearly enough value for its non-financial clients (households and businesses) to justify the excessive headcount and compensation.

    I expect much consolidation and downsizing, along with falling compensation for the industry's lower and mid-hierarchy employees (the folks at the top will see to it that they're still very well compensated).

  • Torontonian||

    I have also worked in government.

    I will also say that the government as a whole does not generate nearly enough value for its non-governmental clients (households and businesses) to justify its excessive headcount and taxes (although I will not be the first to say this, as it has been said many, many times before).

    However, I expect never-ending broadening and expansion of government power, along with ever rising compensation and benefits for all the government's bureaucrats and contractors... until the system inevitably collapses.

  • Tony||

    Only if you toss aside all the things government does to maintain a relatively stable society in which commerce can exist, for no apparently logical reason.

  • ||

    But, at that point, you haven't gone much past minarchism. If you want to meet somewhere in the middle between pure anarchy and minarchism, in the spirit of true compromise, then you're in our club.

    Unless somehow we just can't have society and commerce without constantly increasing government control of our money and lives.

    I still can never follow the whole "you want a society, so you want government, and that's arbitrary, so you should have no problem with the size of government anywhere anytime" argument.

  • Tony||

    I have no problem with you specifying the roles of government you prefer, so long as you don't give yourself the unearned extra credit of claiming your specific agenda is the One True Way and all your programs and the taxes that pay for them are exempt from absolutist claims about taxation being immoral taking.

    It so happens that you can't deliver basic services on a universal scale without a measure of public subsidy, which is completely to be expected, and which is nothing to moan about.

  • ||

    I have no problem with you specifying the roles of government you prefer, so long as you don't give yourself the unearned extra credit of claiming your specific agenda is the One True Way and all your programs and the taxes that pay for them are exempt from absolutist claims about taxation being immoral taking.

    And you take every opportunity to point this out, even if the person you're replying to doesn't claim moral high ground. If you'd like, you can create an alternate login and argue with yourself, if you think that's more comfortable.

    t so happens that you can't deliver basic services on a universal scale without a measure of public subsidy, which is completely to be expected, and which is nothing to moan about.

    That's actually not true. You can't deliver basic services on a universal scale that people don't voluntarily want to achieve universally without government forcing them to.

    Universality is, after all, an arbitrary criteria. Should we guarantee power and running water for people who move to Antarctica? That would be universal, but not efficient.

    Why does universality trump everything else? Because you say so?

  • LynchPin1477||

    If it so useless, why are people continuing to voluntarily invest their money it?

  • Free Society||

    for social consciousness apparently. what kind of fantasy he must live in...

  • Sevo||

    Tony| 7.23.13 @ 10:11AM |#
    "Which is to say, finance is meant to be a support function to actual commerce"

    You stupid pile of shit, finance isn't "meant" to be anything.
    Go suck sewage someplace and die.

  • Michael Price||

    It's not that it's too big or too profitable, it's that it's size and profitiability have nothing to do with real wealth creation. They aren't making anything or helping to make anything that is worth the expense of creating it, not even anything intangible like risk-negation.

  • Rhino||

    Sounds an awful like the Equalization of Opportunity Act from Atlas Shrugged.

  • Rhino||

    Not sure how this could be considered Constitutional. Storing something certainly doesn't cross state lines. I suppose under the Obamacare ruling's justification, they could penalize banks for NOT liquidating whatever inventories they have.

  • Free Society||

    it doesn't have to cross a state line, it only has to affect anything that does cross a state line, no matter how minuscule or tenuous the connection.

  • Sevo||

    Rhino| 7.23.13 @ 5:52PM |#
    "Not sure how this could be considered Constitutional."

    Uh, I guess you missed the personal blog by the court jester a couple of weeks back.
    The court decreed it, therefore it applies. That's all.

  • JWatts||

    Not sure how this could be considered Constitutional. Storing something certainly doesn't cross state lines. I suppose under the Obamacare ruling's justification, they could penalize banks for NOT liquidating whatever inventories they have.

    When's the last time Obama seemed deeply concerned about whether a Presidential action was Constitutional or not?

  • Michael Price||

    During the Bush II presidency.

  • Bill Dalasio||

    To this day, I still remember the Wall Street Journal front page announcing that Dodd-Frank had passed. On the same front page was a story that Goldman had settled with the government for an oddly small sum.

    It was all theater. Anyone with even the remotest understanding of financial markets knew the accusations against Goldman were risible. It didn't matter. It was all to stir up resentment to pass bad law.

  • setTHEline||

    Shocking that Matthew Yglesias said something halfway intelligent about markets. People love to talk about antitrust and monopoly stuff like it happens every day. Truth is that there are virtually no real cases of monopoly market distortion without government help. Great book: Antitrust - The Case for Repeal. Also, screw GSachs in general.

  • LifeStrategies||

    What's need is more competition, NOT more regulation!

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