Layers of money managers that don't bear the brunt of losses but walk away with big payouts when things go well have turned the US economy to a type of "ersatz capitalism," Joseph Stiglitz, Columbia University professor and Nobel laureate, told CNBC Tuesday.Of course, he fails to mention that it is the government that socializes the losses and it is tax laws that have a lot to do with the structure of pension funds that keep them at a significant distance from the supposed beneficiaries.
"An awful lot of people are not managing their own money," Stiglitz said. "In old-style 19th Century capitalism, I owned my company, I made a mistake, I bore the consequences."
"Today, (at) most of the big companies you have managers who, when things go well, walk off with a lot of money. When things go bad the shareholders bear the costs," he said.
Even worse, those giving the money to the companies are entities like pension funds that are managing money on behalf of other people, so there are "layers and layers of agency costs," Stiglitz said.
It's a system where "you socialize the losses and privatize the gains," which is not capitalism, he said.
There's "moral hazard everywhere," he added
Since he completely misses how government regulations to date and government interventions in the economy have caused the moral hazards he naturally calls for more government regulations and interventions.
Hey, give the man a Nobel Prize. Oh, he already has one.
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