In Defence of Marxism

This is for those readers of the "Them and Us" column for April 7, 2008, who felt depressed at the fact that 10% of the US population had to rely on food stamps, or that 2 million US households faced eviction. Help is at hand!

The recent edition of "Trader Monthly" - described as a "life-style" magazine for financial traders who have an average income of over US$ 450,000 or net worth exceeding US$ 2million; with a worldwide circulation of about 110,000 - disclosed that one man improved the position of his hedge fund enough to enable him to take home an estimated US$ 3 billion (yes - billion) in 2007. This was more than twice the amount of the top earner in the previous year!

John Paulson managed this by betting that house prices would decline on a National basis and that mortgage bonds would fail. What he did was to sell securities that he did not own with the hope of buying them when the price fell; a practice known as "short selling" or "shorting". He would therefore profit from the expected decline in the price of the security. He produced nothing, but made money from money - in fact it was not even his own money!

Every year "Trader Monthly" carries these details in its top 100 best paid hedge fund managers survey. This year these people earned (by gambling) a total of US$ 30.3 million, 26% more than in 2006.

Details of the sub-prime mortgage crisis have been carried elsewhere but Mr Paulson was not worried; he made $26 for every one of the 114 million US households or over $1300 per threatened property. Isn't capitalism wonderful!!