The Men Who Make Money But Produce Nothing

Meet David Harding, hedge fund manager. According to this interview, he is paying his share. His latest tax bill was £34 million. He also gives away a lot of money, but what does his hedge fund actually do? In short, it hedges, namely his small army of 110+ so-called researchers study the markets, and according to the dictates of that research, Mr Harding buys and sells all day every day: government bonds, shares, currencies...His aim is to buy low and sell high. He is certainly successful at making money, which is what all of us aim to do, because we need money in our pockets to pay our mortgages, keep our cars on the roads, top up our phones, and of course to eat. The big question though is what does Mr Harding produce? He doesn’t grow food; he doesn’t manufacture anything we can wear, drive or use in any other way, manner, shape or form. He doesn’t entertain us like a songwriter or a crossword puzzle. If his company disappeared off the face of the Earth tomorrow, the world would not be a poorer place.

He or his apologists might argue that he is making money for his investors, but a closer look shows that what he is really doing is redistributing wealth according to a distinctly non-socialist principle. The only people who make money, ie who increase the money supply, are governments and banksters, usually the latter. So when in the real world we talk about making money, what we mean is redistributing it. A grocer sells food, and makes money from his customers; a plumber fixes a burst pipe and makes money from a householder or insurance company, but to do so he is performing a service. What service is Mr Harding performing though? If he makes money for his clients, it is at the expense of someone else. If he loses money, it is at the expense of his clients, and of himself, because hedge fund managers invest their own money too, but at the end of the day hedge fund managers, and all other so-called investment managers be their managing unit trusts, pension funds or something else, all they do is buy and sell, producing no goods and no services, but taking their own rake, be it bonus, commission, salary, or usually all three.

[The above blog was first published October 15, 2012.]

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