Comments on: "...market fundamentalism for the last 25 or so years. And now that world is collapsing... "

"...market fundamentalism for the last 25 or so years. And now that world is collapsing... "

[expletive deleted] — Sat, 11 Oct 2008 17:24:00 -0800

Bill Moyers interviews George Soros on the financial crisis. Soros discusses market fundamentalism and the causes of the current crisis, as well as what can be done, and how this meltdown will change the global economy. (via The Big Picture)

It begins with Moyers violating the behavioral norms of modern journalism:

In the interest of full disclosure, you should know that I served three years on the board of George Soros' foundation, the Open Society Institute, dealing with such issues as a free press, the rule of law, and human rights. But I've had no involvement in his political activities and nothing to do, with his business interests unfortunately.

By: spock

spock — Sat, 11 Oct 2008 17:29:18 -0800

I have a cousin who moonlights by shuttling people from the Salt Lake City airport up to the ski resorts in the mountains. He's had the opportunity to shuttle three generations of Soros' from their private jets: George, a son, and a grandson. All three of them stiffed him on the tip.

By: [expletive deleted]

[expletive deleted] — Sat, 11 Oct 2008 17:37:10 -0800

Thanks for that totally relevant anecdote.

By: bonaldi

bonaldi — Sat, 11 Oct 2008 17:38:15 -0800

spock: The rich don't get rich by giving away money. It has to be taken from them.

By: bonaldi

bonaldi — Sat, 11 Oct 2008 17:44:33 -0800

Though, yes, this link is a great watch. Thanks, [expletive deleted]. Listening to a man who made untold billions from markets admit that they're ultimately "unsustainable and self-defeating" if not regulated by the government, and also saying that the "market caused this" ... it is "teetering on the edge of disaster" rather than blaming poor people or immigrants as some have, is always worth my time. Especially when he's right.

By: acro

acro — Sat, 11 Oct 2008 17:54:53 -0800

Charlie Rose on PBS recently interviewed Warren Buffett.

By: Auden

Auden — Sat, 11 Oct 2008 17:58:57 -0800

excellent interview, thanks. I'm always incredulous when I hear the absolute loathing and hatred for Soros from the political right.

By: weston

weston — Sat, 11 Oct 2008 18:01:05 -0800

I have a cousin who moonlights by shuttling people from the Salt Lake City airport up to the ski resorts in the mountains. Airport shuttles drivers should be tipped? Apparently I stiffed a guy last week, then.

By: Eekacat

Eekacat — Sat, 11 Oct 2008 18:19:12 -0800

weston is a Soros?

By: rokusan

rokusan — Sat, 11 Oct 2008 18:19:40 -0800

Soros is to the right as Rove is to the left: the mythical evil mastermind. As manufactured villains go, it's a little odd to me how the "brains" and the "money" stereotypes are reversed here. Shouldn't the dirty-politics guy be a (Chicago-style) Democrat? Shouldn't the legendary zillionaire secretly running the economy be a (Monty Burns-style) Republican?

By: rokusan

rokusan — Sat, 11 Oct 2008 18:19:59 -0800

Airport shuttles drivers should be tipped? Apparently I stiffed a guy last week, then. Yup and yup.

By: Clave

Clave — Sat, 11 Oct 2008 18:20:31 -0800

Airport shuttles drivers should be tipped? A Buck a bag at least.

By: any major dude

any major dude — Sat, 11 Oct 2008 18:50:08 -0800

when the ocean ecosystem becomes unbalanced is it wise to look to the sharks for solutions?

By: ardgedee

ardgedee — Sat, 11 Oct 2008 18:50:42 -0800

> I'm always incredulous when I hear the absolute loathing and hatred for Soros from the political right. He got on their radar by backing gun control campaigns and by donating millions to 527s aligned against George Bush (such as MoveOn) during the 2000 and 2004 presidential campaigns.

By: DU

DU — Sat, 11 Oct 2008 18:57:51 -0800

Soros is to the right as Rove is to the left: the mythical evil mastermind. Are you saying Rove isn't evil or that he isn't a mastermind? He engineered the election and re-election of the worst President in history. That counts for both in my book.

By: stbalbach

stbalbach — Sat, 11 Oct 2008 19:19:33 -0800

The Warren Buffet and Soros interviews are required viewing (at least, for understanding the past week or so). Both of them are brilliant high-level view. I was thinking about putting together a combo "Old Wizard" FPP with both links (maybe others) but glad to see they made it here.

By: mattoxic

mattoxic — Sat, 11 Oct 2008 19:20:08 -0800

Mahathir has a thing against Soros, and that makes Soros OK in my book

By: ardgedee

ardgedee — Sat, 11 Oct 2008 19:22:44 -0800

I think what rokusan means is that both Rove and Soros have been attributed with greater powers of control and reach than are realistic. They've both been thoroughly demonized by those ideologically opposed to them.

By: weston

weston — Sat, 11 Oct 2008 19:27:36 -0800

A Buck a bag at least. So is it the bag-handling that's recognized as the service for which the tip comes, or is it the driving itself?

By: illiad

illiad — Sat, 11 Oct 2008 19:29:03 -0800

The rich don't get rich by giving away money. True enough, but tipping adequately (or even generously) if you're a billionaire is going to affect your bottom line less than a rounding error would. Also, look at people like Warren Buffett. He's generous to a fault, yet remains in the top ten list of wealthiest people in the world.

By: Postroad

Postroad — Sat, 11 Oct 2008 19:49:50 -0800

I love the way in which the comments switch between how much to tip for a bag on way to ski and the possible financial disaster we now face.

By: grouse

grouse — Sat, 11 Oct 2008 19:53:31 -0800

It's awesome that spock managed to derail the discussion here from the very beginning with an unverifiable attack on Soros's tipping practices. Because we totally need another discussion of tipping on this web site.

By: Auden

Auden — Sat, 11 Oct 2008 20:02:49 -0800

Tomorrow's This American Life will once again focus on the economic crisis. It will probably be a good way to maintain your sense of panic and upset on an otherwise sleepy Sunday.

By: kliuless

kliuless — Sat, 11 Oct 2008 20:03:32 -0800

GEORGE SOROS: ...this belief that everybody pursuing his self-interests will maximize the common interests or will take care of the common interests is a false idea. It's a suitable idea for those who are rich, who are successful, who are powerful. It suits them to justify you know, enjoying the fruits without paying taxes. via rw2, douglas rushkoff sez: "Without getting spiritual or mushy, we can agree that there are self-perpetuating cycles of greed and generosity in which we can participate. The more we commit to one or the other, the more of the world conforms to its rules." while jeremy grantham goes:

I ask myself, "Why is it that several dozen people saw this crisis coming for years?" I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even [U.S. Treasury Secretary] Hank Paulson and [Fed Chairman Ben] Bernanke -- none of them seemed to see it coming. I have a theory that people who find themselves running major-league companies are real organization-management types who focus on what they are doing this quarter or this annual budget. They are somewhat impatient, and focused on the present. Seeing these things requires more people with a historical perspective who are more thoughtful and more right-brained -- but we end up with an army of left-brained immediate doers. So it's more or less guaranteed that every time we get an outlying, obscure event that has never happened before in history, they are always going to miss it. And the three or four-dozen-odd characters screaming about it are always going to be ignored. If you look at the people who have been screaming about impending doom, and you added all of those several dozen people together, I don't suppose that collectively they could run a single firm without dragging it into bankruptcy in two weeks. They are just a different kind of person. So we kept putting organization people -- people who can influence and persuade and cajole -- into top jobs that once-in-a-blue-moon take great creativity and historical insight. But they don't have those skills.

moyers' interview with andrew bacevich is worth revisiting in this regard, and btw... from the buffett interview: "Confidence in markets and institutions is like oxygen... when you have it you don't think about it... but you can't go 5 minutes without it." & "If AIG had to unwind their derivatives book, it would have hit every institution in the world." (cf. lehman) also see paul volcker on charlie rose on the adjustment process, which one way or another involves state capitalism, viz. "From central bank to central planning?" :P cheers!

By: Balisong

Balisong — Sat, 11 Oct 2008 20:13:13 -0800

I always tip 20%. That must explain why I'm poor.

By: damn dirty ape

damn dirty ape — Sat, 11 Oct 2008 20:46:48 -0800

All three of them stiffed him on the tip. huh? I tip cabbies and have taken a few airport shuttles in my day and I nor anyone who has ridden in a shuttle with me has ever tipped the shuttle driver. Perhaps its customary in Utah, but doesnt seem to be customary anywhere else.

By: rokusan

rokusan — Sat, 11 Oct 2008 21:03:24 -0800

I think what rokusan means is that both Rove and Soros have been attributed with greater powers of control and reach than are realistic. Oui.

By: Astro Zombie

Astro Zombie — Sat, 11 Oct 2008 21:12:19 -0800

It begins with Moyers violating the behavioral norms of modern journalism: Not really. Some journalists would recuse themselves from the story, but plenty would do it as long as there was full disclosure.

By: kliuless

kliuless — Sat, 11 Oct 2008 21:18:09 -0800

oh and the IMF has put some numbers around what 'collapsing' means, from lex:

Governments' ability to spend their way to growth is crucial. This goes against purist free market theology. But look at it this way. The IMF estimates that US and European banks need to shrink their balance sheets by $2,000bn a year over the next five years.* That is a terrifying contraction in the supply of global credit. If governments do not pick up the slack, the world risks falling into what is called the "paradox of thrift". Here, everyone cuts back spending simultaneously. Companies retrench, jobs are cut and consumption falls further. A deflationary spiral begins. This was the plight of Asean countries after their 1997 crisis. They only wriggled free thanks to growing exports – a solution that cannot work for the whole world.

this is why g7/20 coordination is necessary, cuz as greenspan actually observed: "Interestingly, the change in U.S. home mortgage debt over the past half-century correlates significantly with our current account deficit." it's conceivable that the fed's b/s expansion and treasury borrowing could take it on, altho the 10-year yield rising in recent days suggest they might be beginning to run into limits; like (gov't) rates are still rather low and foreign creditors remarkably accommodating... --- *so $10tn or 14.5% of outstanding bank credit (while raising another $675bn in capital)

By: SeizeTheDay

SeizeTheDay — Sat, 11 Oct 2008 21:33:05 -0800

Without getting too mushy about it, that's some brilliant fucking linkage there kliuless.

By: one_bean

one_bean — Sat, 11 Oct 2008 22:24:39 -0800

when the ocean ecosystem becomes unbalanced is it wise to look to the sharks for solutions? Actually...

By: rodgerd

rodgerd — Sun, 12 Oct 2008 00:24:20 -0800

As manufactured villains go, it's a little odd to me how the "brains" and the "money" stereotypes are reversed here. Shouldn't the dirty-politics guy be a (Chicago-style) Democrat? Shouldn't the legendary zillionaire secretly running the economy be a (Monty Burns-style) Republican? Rich Jews were long a bugaboo of the right, sometimes somehow tied up with socialism, until WW II made it an unfashionable thing to be paranoid about.

By: azpenguin

azpenguin — Sun, 12 Oct 2008 00:30:52 -0800

Airport shuttle drivers are like cows. They need to be tipped.

By: pompomtom

pompomtom — Sun, 12 Oct 2008 02:27:38 -0800

Firstly: thank you [expletive deleted] for this post. Secondly: if George Soros doesn't tip the shuttle driver, that's probably because that is the correct approach.

By: srboisvert

srboisvert — Sun, 12 Oct 2008 04:46:51 -0800

On the tangent of the rovian mastermind I like what Digsby quoted from Matt Tabbi (except for the homophobic part of course). Rove is not a genius, or even very clever: He's totally and completely immoral. It doesn't take genius to claim, as Rove ludicrously did last fall, that it was the Democrats in Congress and not George W. Bush who pushed the Iraq War resolution in 2002. It doesn't take brains to compare a triple-amputee war veteran to Osama bin Laden; you just have to be a mean, rotten cocksucker. The reason Rove continues to survive is the same reason that Johnnie Cochran was called a genius for keeping a double-murderer on the golf course — because this generation of Americans has become so steeped in greed and social Darwinism that it can no longer distinguish between cheating and achieving, between enterprise and crime, and can't bring itself to criticize winners any more than it knows how to be nice to losers. He survives because an increasing number of Americans secretly agree with Rove's vision of rules, laws and "the truth" as quaint, faintly embarrassing rituals that only a sucker would let hold him back. Rove's comeback is evidence that the attack on our civic institutions in the Bush years wasn't an isolated incident, something we can pin on a specific group of now-deposed politicians. It's a trend, a thing that grows in direct proportion to our greed and ignorance. We may be a country at war, facing one of the greatest financial meltdowns of all time. But in the end, the thing that could be our undoing is the kind of generalized boredom with legality and honor that empowers Rovian behavior. If we let it.

By: jeanmari

jeanmari — Sun, 12 Oct 2008 04:57:51 -0800

Good post, thanks. I also loved the This American Life post from last week (Another Frightening Show About the Economy) and can't wait to hear the one from this week. If Planet Money doesn't win a boatload of awards for this series, someone is seriously asleep at the wheel. (And I have only had ONE Airport shuttle driver in my decades of traveling even bother to look at my bag. That was in Seattle. He got tipped. The others? Nope. Nada.)

By: RussHy

RussHy — Sun, 12 Oct 2008 05:50:18 -0800

Great post. "Both Marxism and market fundamentalism are false ideologies." I hope Paulson is listening.

By: A dead Quaker

A dead Quaker — Sun, 12 Oct 2008 07:52:34 -0800

I ask myself, "Why is it that several dozen people saw this crisis coming for years?" I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even [U.S. Treasury Secretary] Hank Paulson and [Fed Chairman Ben] Bernanke -- none of them seemed to see it coming. My understanding--and I got this secondhand, so take it with a grain of salt--is that the bosses of the investment banks did indeed see this coming. But each one of them believed that they could get out of their risky investments ahead of the others. The problem seems to have been ego, not ignorance.

By: voltairemodern

voltairemodern — Sun, 12 Oct 2008 12:24:20 -0800

...the bosses of the investment banks did indeed see this coming. But each one of them believed that they could get out of their risky investments ahead of the others. The problem seems to have been ego, not ignorance. If all they anticipated was that someone was going to have to pay the piper, then they were definitely ignorant of the true gravity of the situation. It sounds more like ego aggravating ignorance, not one to the exclusion of the other.

By: kliuless

kliuless — Sun, 12 Oct 2008 12:44:33 -0800

hey slashdot picked up on a nytimes write-up of dyson's follow-up to taleb (that i linked to above, 'a theory' ;)

Somehow the genius quants — the best and brightest geeks Wall Street firms could buy — fed $1 trillion in subprime mortgage debt into their supercomputers, added some derivatives, massaged the arrangements with computer algorithms and — poof! — created $62 trillion in imaginary wealth. It's not much of a stretch to imagine that all of that imaginary wealth is locked up somewhere inside the computers, and that we humans, led by the silverback males of the financial world, Ben Bernanke and Henry Paulson, are frantically beseeching the monolith for answers.

now i would say that to a large extent wealth (like community) is 'imaginary' -- to paraphrase locke (& dostoevsky), if everyone can agree, it could all happen at once -- as a store of socio-cultural 'memory', but of course it's also limited by its fungibility [cf. liquidity & 'moneyness', or maturity transformation via a discussion thereof ;] not just with current production and past (e.g. inventory & 'savings') but future estimates of production... so dyson's point, quoting von neumann, basically is that the indexical relationship between financial structures (memory castles) and what can reasonably be produced has broken down.* all of which comes back to the well tread, in short order, nub of (poor) underwriting & leverage, (lack of) regulation and what really any of us are producing that we can (sustainably) derive income? well, all i can say is, we're about to find out! it's a moment of reckoning as it were :P two quick points tho. TAL's show provided a great discussion on derivatives and understanding credit default swaps [cf. CDOs, not technically derivatives, but 'structured products', altho they can be synthetically, uh, derived from CDS] uncovering them not so much as insurance than as bets. what's happening now as defaults occur is a 'netting' process, which i like to think of as a building restack or hard drive (or file system memory) defrag, at which point faulty sectors are identified and (hopefully) damage routed around, freeing up resources (as they're more efficiently allocated). secondly, to continue the computer analogy, i think the US' financial system might usefully be considered like the x86 ISA; it's archaic and crufty, but so far it has worked good enough.. and while the temptation lies with abandoning it wholesale, like the dollar as reserve currency, the fixed (or sunk?) costs involved in the (developer) 'ecology' surrounding the architecture are such that it prevents an exodus, which doesn't mean it can't be improved, just that if it's not, and perhaps more importantly if something better comes along,** then the probability of eventually being dumped increases (as the limits of inertia and complacency approach). oh and finally another nice roundup and linkage (via rw2!) for your perusal and edification :P cheers! --- *elaborating on taleb's point that believing future estimates can be reasonably produced itself is folly, or at least the hardness of which is underappreciated and approached with insufficient humility... **say google effectively renders ISA level (nevermind OS) abstraction obsolete, declares independence (to carrier networks too?) and enters the promised land of the (ad/attention-supported) managed commons -- where social utility is recognised sans price with mutually reinforcing positive externalities and public goods (viz. idleness ;) as far as the eye can see!

By: rodgerd

rodgerd — Sun, 12 Oct 2008 14:52:46 -0800

...the bosses of the investment banks did indeed see this coming. But each one of them believed that they could get out of their risky investments ahead of the others. One of the problems of working in a market economy where the sharemarket has established the idea that companies must aggressively pursue profit quarter-on-quarter or face evisceration is that one could, as a boss of a publicly-held investment bank say, "I am very concerned that in a year or two this is all going to turn to shit," but you'd then do... exactly what everyone else is doing. Because trying to convince your shareholders that they should accept lower returns, now, as a hedge against a failure at some indeterminate time in the future is something of an exercise in futility. Even if our hypothetical investment bank CEO were altruistic enough to try, she'd most likely be replaced by someone who wasn't. What a rational actor would do (for certain values of rational) would be to recognise it's all going to turn to shit at some point, and try and maximise personal return in as short a period as possible.

By: srboisvert

srboisvert — Sun, 12 Oct 2008 15:20:34 -0800

By: five fresh fish

five fresh fish — Sun, 12 Oct 2008 22:43:12 -0800

What a rational actor would do (for certain values of rational) would be to recognise it's all going to turn to shit at some point, and try and maximise personal return in as short a period as possible. Meh. Canada's banks are ranked as the best in the world, but it's only because they weren't allowed to do what they wanted to do: namely, get a more free market, merge, and wheel-and-deal a lot more than traditionally allowed. The problem we face is that we govern with short-term objectives in a long-term world. When we give in to the easy and immediate, we harm ourselves in the long run. Until humanity as a whole recognizes this problem for what it is, we will always be fighting fires caused by our stupid shortsightedness.

By: internationalfeel

internationalfeel — Mon, 13 Oct 2008 09:45:40 -0800

I've heard BBC reporters use the term "market fundamentalism" as if it's a popularly understood concept. Probably be a while before we hear Douglas Rushkoff's phrase "market fascism" used in this way.

By: ZenMasterThis

ZenMasterThis — Mon, 13 Oct 2008 19:49:55 -0800

Why is it that several dozen people saw this crisis coming for years? The rest were in denial?