"Please pay no attention to the problems we are failing to address"
January 5, 2009 12:12 AM Subscribe
The End of the Financial World as We Know It. "We have a brief chance to cure ourselves. But first we need to ask: of what?" How to Repair a Broken Financial World. "There are obvious changes in the financial system to be made, to prevent some version of what has happened from happening all over again."
Good source for further information and discussion here:
http://www.calculatedriskblog.com/
and here: http://www.ritholtz.com/blog/
and here too: http://globaleconomicanalysis.blogspot.com/
posted by robbyrobs at 12:40 AM on January 5, 2009
http://www.calculatedriskblog.com/
and here: http://www.ritholtz.com/blog/
and here too: http://globaleconomicanalysis.blogspot.com/
posted by robbyrobs at 12:40 AM on January 5, 2009
This article really pissed me off this morning.
I have no more useful feedback other than that if more people read it, and get pissed off, we have an eeensy weensy chance of making sure these jackasses don't get to do it again.
posted by Lord_Pall at 1:36 AM on January 5, 2009 [1 favorite]
I have no more useful feedback other than that if more people read it, and get pissed off, we have an eeensy weensy chance of making sure these jackasses don't get to do it again.
posted by Lord_Pall at 1:36 AM on January 5, 2009 [1 favorite]
It's worth mentioning that the author of this piece Michael Lewis is the author of Liar's Poker and has had articles mentioned before in MeFi recently. He has a new book out about the financial crisis Panic: The Story of Modern Financial Insanity.
Has anyone on MeFi read the book?
posted by sien at 2:18 AM on January 5, 2009
Has anyone on MeFi read the book?
posted by sien at 2:18 AM on January 5, 2009
Interesting article. Two long-term questions stood out for me:
a) Will the culture of Federal overseers simply putting their time in during their 30's and early 40's to cash in on Wall Street with a cushy sinecure during their mid-40's to their dying day ever change?
b) Will Americans ever stop thinking of Wall Street CEO's as the "masters of the universe," given that in a few years, after what amounts to a massive redistribution of taxpayer money to said Wall Street CEO's and their firms, things will pick up a little and we'll go back to business as usual?
I'm thinking the answers are "No" and "Hell fucking no, what kind of dipshit are you?"
The foxes will continue to monitor the hen-houses.
posted by bardic at 2:38 AM on January 5, 2009 [4 favorites]
a) Will the culture of Federal overseers simply putting their time in during their 30's and early 40's to cash in on Wall Street with a cushy sinecure during their mid-40's to their dying day ever change?
b) Will Americans ever stop thinking of Wall Street CEO's as the "masters of the universe," given that in a few years, after what amounts to a massive redistribution of taxpayer money to said Wall Street CEO's and their firms, things will pick up a little and we'll go back to business as usual?
I'm thinking the answers are "No" and "Hell fucking no, what kind of dipshit are you?"
The foxes will continue to monitor the hen-houses.
posted by bardic at 2:38 AM on January 5, 2009 [4 favorites]
The foxes aren't monitoring the henhouses.
At this point, they walk in, slaughter all of the hens, walk out, knock on the farmer's door and ask for his credit card so they can buy more chickens, which he does after they tell him that the work they're doing is very important and integral to the stability of the farmyard.
A few ducks and geese quack and quack about oversight and how untrustworthy the foxes are, but they're foxes, decked out in swanky red fur, bright eyed and bushy tailed.
Plus they all went to Harvard business school, so they must know what they're doing.
So the farmer gives them his credit card. And they go buy more chickens, which they promptly eat. The cycle repeats.
Then the farmer is upset because his credit card bill is so high.
posted by Lord_Pall at 2:50 AM on January 5, 2009 [50 favorites]
At this point, they walk in, slaughter all of the hens, walk out, knock on the farmer's door and ask for his credit card so they can buy more chickens, which he does after they tell him that the work they're doing is very important and integral to the stability of the farmyard.
A few ducks and geese quack and quack about oversight and how untrustworthy the foxes are, but they're foxes, decked out in swanky red fur, bright eyed and bushy tailed.
Plus they all went to Harvard business school, so they must know what they're doing.
So the farmer gives them his credit card. And they go buy more chickens, which they promptly eat. The cycle repeats.
Then the farmer is upset because his credit card bill is so high.
posted by Lord_Pall at 2:50 AM on January 5, 2009 [50 favorites]
Its an interesting article with some good points but at times doesn't go far enough to clarify or provide supporting information.
For example, while discussing the ratings agencies (disclaimer: I ran the EMEA Division for one of them), he calls them "actually sanctioned by the S.E.C. ", seemingly giving a causal reader the false impression there is a duopoly on some aspects of the credit ratings market.
This simply isn't true; Moody's and Standards and Poors are but two examples of what we call an NRSRO, or a Nationally Recognized Statistical Rating Organization.
There currently are no fewer than ten NRSROs in The United States. NRSROs play a critical role in the modern financial system, specifically pertaining to rule 15C3-1 (the so-called "Net Capital Rule"). The Net Capital Rule incorporates credit ratings calculated by NRSROs in certain of its provisions, specifically the amount of regulatory capital that must be maintained by financial entities to support positions.
Clearly there are conflict of interest problems when agencies were paid to rate offerings, but as recently as 2006 SEC was looking into these conflicts and attempting to open the market up to even more NRSROs; previously this distinction was granted by SEC staff who performed what amounted to ad-hoc market research in an attempt to determine if ratings from any eligible agency were used widely and considered reliable - a classic chicken and egg problem - i.e., who is going to use your ratings it they aren't already widely used? And nobody could use your ratings until officially sanctioned.
Unfortunately SEC didn't issue any formal rulings on this process until June 2007, when we saw the publication of CFR 240 and 249b, the Oversight of Credit Rating Agencies Registered as Nationally Recognized Statistical Rating Organizations [ .pdf ].
The Gotham Partners paper was indeed widely circulated in financial circles [ .pdf ] and lots of people made good money off the back of their research. It is still a good read for anyone seriously interested in the subject as some of the points are still relevant to other firms, many of which are still solvent but susceptible to collapse.
I agree fully with his call to recapitalise the banking sector with common stock; the problem I've always had was twofold - preferred is non voting and typically doesn't has as much upside as common. If we're giving (lending) then banks money we damn well better get an equitable return on our funds, and this MUST include a reasonable risk premium. Being top of the equity pecking order isn't my idea of a reasonable risk premium when management of the banks have in many instances, clearly failed.
He touches a couple of times on bubbles, but ignores the elephant in the room - the enormous bubble in US Treasuries. We know significant amounts - if not 100% - of funds governments provided to banks flowed into US Treasuries.
In fact, on the long end of the yield curve we've seen an eye popping 35% return! At the same time yields across the entire curve are at record lows, Treasury is issuing eye popping amounts of product - some $2T in 2009 alone.
The collapse of this bubble will be another one for the textbooks (just what we need after all the other collapses), and even though its anyones guess when it's gonna pop the warning signs are there.
He seems a little off base regarding current discussion of mark to market; The SEC certainly isn't pushing to suspend this rule, so I'm not sure who he is referring to when he claims "...the authorities are placing enormous pressure on the Financial Accounting Standards Board to suspend “mark-to-market” accounting.".
FASB has repeatedly said they wouldn't suspend, and SEC is publicly supporting them. So I'm really foxed on who he's talking about here.
His comments about regulating credit-default swaps are spot on; increased regulation is clearly needed but a little historical context: almost every derivative - futures, stock options to name but two - were first used correctly as risk hedging vehicles. Then abused, sometimes widely, and, finally, reigned in i.e., regulated. From that point on, used properly, derivatives do precisely what they were engineered to do. There is no reason to believe that Credit Default Swaps will be any different. After all, they aren't going away (i.e., legislated out of existence as Stock Options have been in the past), as they provide a necessary market closure function. So the sooner we see these derivatives migrated to formal exchanges the better.
The Capital Requirements paragraph ignores the fact that most American banks were allowed to "opt out" of Basel II, unlike European and Asian institutions. In fact US Regulators adopted them only for the handful of the most internationally active banks, while EU Regulators kept the capabilities of small banks in mind when defining Basel II, so it clearly was possible for all EU banks to adopt the standard.
Basel II differed from its predecessor (Basel I) in many ways, but most significantly in that B2 formally adopted capital requirements for Operational Risk. Curiously, it seems Chinese banks were the most pragmatic, rolling on something known colloquially as Basel 1.5+ which is simply Basel I with an Operational Risk component grafted on.
His revolving door comments are interesting but I'm not sure are totally workable; the SEC and other agencies already have problems attracting the best and brightest. I'm not sure what government could offer to get folks to work the for SEC, etc if what could be viewed as career constraints are placed on prospective employees.
Surely he's not suggesting that SEC staff be paid Wall Street salaries? That wouldn't go over too well in other parts of the Government, so I'm really now sure how workable this constraint is.
Interesting article; I've mailed the links to some colleagues who, like myself, would have otherwise missed it. Many thanks.
posted by Mutant at 2:52 AM on January 5, 2009 [27 favorites]
For example, while discussing the ratings agencies (disclaimer: I ran the EMEA Division for one of them), he calls them "actually sanctioned by the S.E.C. ", seemingly giving a causal reader the false impression there is a duopoly on some aspects of the credit ratings market.
This simply isn't true; Moody's and Standards and Poors are but two examples of what we call an NRSRO, or a Nationally Recognized Statistical Rating Organization.
There currently are no fewer than ten NRSROs in The United States. NRSROs play a critical role in the modern financial system, specifically pertaining to rule 15C3-1 (the so-called "Net Capital Rule"). The Net Capital Rule incorporates credit ratings calculated by NRSROs in certain of its provisions, specifically the amount of regulatory capital that must be maintained by financial entities to support positions.
Clearly there are conflict of interest problems when agencies were paid to rate offerings, but as recently as 2006 SEC was looking into these conflicts and attempting to open the market up to even more NRSROs; previously this distinction was granted by SEC staff who performed what amounted to ad-hoc market research in an attempt to determine if ratings from any eligible agency were used widely and considered reliable - a classic chicken and egg problem - i.e., who is going to use your ratings it they aren't already widely used? And nobody could use your ratings until officially sanctioned.
Unfortunately SEC didn't issue any formal rulings on this process until June 2007, when we saw the publication of CFR 240 and 249b, the Oversight of Credit Rating Agencies Registered as Nationally Recognized Statistical Rating Organizations [ .pdf ].
The Gotham Partners paper was indeed widely circulated in financial circles [ .pdf ] and lots of people made good money off the back of their research. It is still a good read for anyone seriously interested in the subject as some of the points are still relevant to other firms, many of which are still solvent but susceptible to collapse.
I agree fully with his call to recapitalise the banking sector with common stock; the problem I've always had was twofold - preferred is non voting and typically doesn't has as much upside as common. If we're giving (lending) then banks money we damn well better get an equitable return on our funds, and this MUST include a reasonable risk premium. Being top of the equity pecking order isn't my idea of a reasonable risk premium when management of the banks have in many instances, clearly failed.
He touches a couple of times on bubbles, but ignores the elephant in the room - the enormous bubble in US Treasuries. We know significant amounts - if not 100% - of funds governments provided to banks flowed into US Treasuries.
In fact, on the long end of the yield curve we've seen an eye popping 35% return! At the same time yields across the entire curve are at record lows, Treasury is issuing eye popping amounts of product - some $2T in 2009 alone.
The collapse of this bubble will be another one for the textbooks (just what we need after all the other collapses), and even though its anyones guess when it's gonna pop the warning signs are there.
He seems a little off base regarding current discussion of mark to market; The SEC certainly isn't pushing to suspend this rule, so I'm not sure who he is referring to when he claims "...the authorities are placing enormous pressure on the Financial Accounting Standards Board to suspend “mark-to-market” accounting.".
FASB has repeatedly said they wouldn't suspend, and SEC is publicly supporting them. So I'm really foxed on who he's talking about here.
His comments about regulating credit-default swaps are spot on; increased regulation is clearly needed but a little historical context: almost every derivative - futures, stock options to name but two - were first used correctly as risk hedging vehicles. Then abused, sometimes widely, and, finally, reigned in i.e., regulated. From that point on, used properly, derivatives do precisely what they were engineered to do. There is no reason to believe that Credit Default Swaps will be any different. After all, they aren't going away (i.e., legislated out of existence as Stock Options have been in the past), as they provide a necessary market closure function. So the sooner we see these derivatives migrated to formal exchanges the better.
The Capital Requirements paragraph ignores the fact that most American banks were allowed to "opt out" of Basel II, unlike European and Asian institutions. In fact US Regulators adopted them only for the handful of the most internationally active banks, while EU Regulators kept the capabilities of small banks in mind when defining Basel II, so it clearly was possible for all EU banks to adopt the standard.
Basel II differed from its predecessor (Basel I) in many ways, but most significantly in that B2 formally adopted capital requirements for Operational Risk. Curiously, it seems Chinese banks were the most pragmatic, rolling on something known colloquially as Basel 1.5+ which is simply Basel I with an Operational Risk component grafted on.
His revolving door comments are interesting but I'm not sure are totally workable; the SEC and other agencies already have problems attracting the best and brightest. I'm not sure what government could offer to get folks to work the for SEC, etc if what could be viewed as career constraints are placed on prospective employees.
Surely he's not suggesting that SEC staff be paid Wall Street salaries? That wouldn't go over too well in other parts of the Government, so I'm really now sure how workable this constraint is.
Interesting article; I've mailed the links to some colleagues who, like myself, would have otherwise missed it. Many thanks.
posted by Mutant at 2:52 AM on January 5, 2009 [27 favorites]
Oh comrades, come rally, and the last fight let us face...
posted by ford and the prefects at 2:57 AM on January 5, 2009
posted by ford and the prefects at 2:57 AM on January 5, 2009
No one with any money is interested in "fixing" the financial markets, and congress is pretty much at their beck and call.
posted by delmoi at 3:14 AM on January 5, 2009 [4 favorites]
posted by delmoi at 3:14 AM on January 5, 2009 [4 favorites]
His comments about regulating credit-default swaps are spot on; increased regulation is clearly needed but a little historical context: almost every derivative - futures, stock options to name but two - were first used correctly as risk hedging vehicles. Then abused, sometimes widely, and, finally, reigned in i.e., regulated. From that point on, used properly, derivatives do precisely what they were engineered to do.
I've seen this assertion before, and while I don't doubt it, I wonder why the response to these issues always seems to be on a case-by-case basis. Why should we be condemned to repeat history? Why not legislate on the development of any new derivative instrument and build regulation into it? Say, for example, requiring a kind of financial FMEA to be performed by an academic board and reviewed by a government committee to propose legislation once any unregulated derivative constitutes more than a certain proportion of the total market? Boom and bust in regulation is no more helpful than the same thing in investment. We need to srep back and take a longer term view rather than just dealing with the immediate crisis in front of us.
posted by Jakey at 3:19 AM on January 5, 2009
I've seen this assertion before, and while I don't doubt it, I wonder why the response to these issues always seems to be on a case-by-case basis. Why should we be condemned to repeat history? Why not legislate on the development of any new derivative instrument and build regulation into it? Say, for example, requiring a kind of financial FMEA to be performed by an academic board and reviewed by a government committee to propose legislation once any unregulated derivative constitutes more than a certain proportion of the total market? Boom and bust in regulation is no more helpful than the same thing in investment. We need to srep back and take a longer term view rather than just dealing with the immediate crisis in front of us.
posted by Jakey at 3:19 AM on January 5, 2009
What bothers me the most is this: people who push money around for a living can no longer be trusted to do so in a remotely ethical or sustainable way. Even the "clean" people and the people in charge of oversight are crooked and complicit in some dodgy shit.
posted by chuckdarwin at 3:21 AM on January 5, 2009 [2 favorites]
posted by chuckdarwin at 3:21 AM on January 5, 2009 [2 favorites]
One good effect of all this: I haven't had to listen to any douchebags saying "trust the free market" or "the market will right itself" or "the market this, the market that, the market the other" or "oh, oh, oh, MARKET, MARKET, MARKET!! (fap, fap)" for several weeks.
posted by chuckdarwin at 3:23 AM on January 5, 2009 [4 favorites]
posted by chuckdarwin at 3:23 AM on January 5, 2009 [4 favorites]
Jakey -- "I've seen this assertion before, and while I don't doubt it, I wonder why the response to these issues always seems to be on a case-by-case basis. Why should we be condemned to repeat history? Why not legislate on the development of any new derivative instrument and build regulation into it? Say, for example, requiring a kind of financial FMEA to be performed by an academic board and reviewed by a government committee to propose legislation once any unregulated derivative constitutes more than a certain proportion of the total market?"
Very reasonable and consistent with how we approach the trading of any new instrument in a bank; you simply can't get capital for an sizable positions (or sometimes even trade, depends upon the institution) until the New Products Committee have given approval.
New Products will have folks from Compliance, Risk, Modeling, Legal and a few other functions represented. They'll give the new instrument a through examination, making sure they fully understand how it is intended to work.
But the other side to this is competitive advantage; lots of money is made by firms who initially deploy a given derivative, and these margins are eroded over time as other firms reverse engineer the product and enter the market.
The example I always put forward here is Interest Rate Swaps; when I first worked on a swaps desk relatively few firms were engaged. We could earn well over one hundred basis points for arranging a swap - significant money when we're talking about $500M or $1B or (now even larger) nominal. These days there are so many firms providing this service that most participants will do plain vanilla interest rate swaps for free, in the hopes of securing other, higher margin business.
So there clearly would have to be a middle ground, I'm just not sure where you'd place the divider between allowed and unallowed trading.
After all, if we know how a product works thats one thing; everyone at a bank is in it together, and nobody is gonna tell a competitor (assuming we're still gainfully employed and haven't left for greener pastures). However telling the regulators will most certainly place proprietary knowledge (and hence a certain degree of investment as derivatives as Financial Engineers create these instruments, they aren't discovered) in jeopardy.
Hard to see how that could be carried out in practice, but this is clearly something that should be pursued.
But then, of course, you'd have the problem that finance is global. If the US did approach this as suggested who says the EU would follow? And even if you've got both the US & EU operating in tandem (doubtful given the rather fundamental differences in securities regulation but let's ignore that problem for the moment) how to regulate the off shore financial centres?
In many instances they don't even regulate the flow of capital, as many of these centres don't have any industry other than financial services. If one tried to tell a hedge fund what they could / could not do with funds on deposit in their country, surely other countries wouldn't follow suit solely to capture needed business. So the only way this would work is if constraints on the flow of capital were put into place. Now that's a tough one.
It almost seems as though we've got to move most - if not all - of the OTC derivatives onto organised exchanges.
At least then you've got the exchange monitoring counterparty risk, and guaranteeing performance.
Once upon a time banks did indeed fail due to futures contracts moving against them. Now they don't fail if futures move the wrong way because these derivatives are typically traded on organised exchanges, the exchanges guarantee performance and will close positions out if necessary variation margin isn't ponied up.
So yeh, this probably would work if we first got OTC derivatives onto exchanges, and second, started to ring fence the off shore financial centres.
Controlling the flow of capital still would be problematic, but I guess we've got to start someplace.
posted by Mutant at 3:56 AM on January 5, 2009 [4 favorites]
Very reasonable and consistent with how we approach the trading of any new instrument in a bank; you simply can't get capital for an sizable positions (or sometimes even trade, depends upon the institution) until the New Products Committee have given approval.
New Products will have folks from Compliance, Risk, Modeling, Legal and a few other functions represented. They'll give the new instrument a through examination, making sure they fully understand how it is intended to work.
But the other side to this is competitive advantage; lots of money is made by firms who initially deploy a given derivative, and these margins are eroded over time as other firms reverse engineer the product and enter the market.
The example I always put forward here is Interest Rate Swaps; when I first worked on a swaps desk relatively few firms were engaged. We could earn well over one hundred basis points for arranging a swap - significant money when we're talking about $500M or $1B or (now even larger) nominal. These days there are so many firms providing this service that most participants will do plain vanilla interest rate swaps for free, in the hopes of securing other, higher margin business.
So there clearly would have to be a middle ground, I'm just not sure where you'd place the divider between allowed and unallowed trading.
After all, if we know how a product works thats one thing; everyone at a bank is in it together, and nobody is gonna tell a competitor (assuming we're still gainfully employed and haven't left for greener pastures). However telling the regulators will most certainly place proprietary knowledge (and hence a certain degree of investment as derivatives as Financial Engineers create these instruments, they aren't discovered) in jeopardy.
Hard to see how that could be carried out in practice, but this is clearly something that should be pursued.
But then, of course, you'd have the problem that finance is global. If the US did approach this as suggested who says the EU would follow? And even if you've got both the US & EU operating in tandem (doubtful given the rather fundamental differences in securities regulation but let's ignore that problem for the moment) how to regulate the off shore financial centres?
In many instances they don't even regulate the flow of capital, as many of these centres don't have any industry other than financial services. If one tried to tell a hedge fund what they could / could not do with funds on deposit in their country, surely other countries wouldn't follow suit solely to capture needed business. So the only way this would work is if constraints on the flow of capital were put into place. Now that's a tough one.
It almost seems as though we've got to move most - if not all - of the OTC derivatives onto organised exchanges.
At least then you've got the exchange monitoring counterparty risk, and guaranteeing performance.
Once upon a time banks did indeed fail due to futures contracts moving against them. Now they don't fail if futures move the wrong way because these derivatives are typically traded on organised exchanges, the exchanges guarantee performance and will close positions out if necessary variation margin isn't ponied up.
So yeh, this probably would work if we first got OTC derivatives onto exchanges, and second, started to ring fence the off shore financial centres.
Controlling the flow of capital still would be problematic, but I guess we've got to start someplace.
posted by Mutant at 3:56 AM on January 5, 2009 [4 favorites]
But the other side to this is competitive advantage; lots of money is made by firms who initially deploy a given derivative, and these margins are eroded over time as other firms reverse engineer the product and enter the market.
This is a problem of short term incentives. It's clear from the repeated outcome of derivatives bubbles, that they are not good either for the market as a whole, nor for individual entities, in the long term. In the short-term, however, they are very lucrative for individual entities, and, more importantly, individuals. It's clear that self-regulation does not work in these circumstances, so the onus is on wider society to impose restrictions from outside the sector.
But then, of course, you'd have the problem that finance is global. If the US did approach this as suggested who says the EU would follow? And even if you've got both the US & EU operating in tandem (doubtful given the rather fundamental differences in securities regulation but let's ignore that problem for the moment) how to regulate the off shore financial centres?
This is at once an aspect of this problem and a separate problem of its own. The rush to the bottom in terms of financial regulation has been almost headlong since the eighties. Again, in the long term, this is not beneficial to either the market at large, or individual institutions, or even nations. Ask Iceland. I don't have the background to suggest specifically how this should be done, but just because it's a hard problem doesn't mean that it should be given up on. IMHO the major complication is the political will to do it, given that the legislative bodies are inordinately beholden to the owners of the capital that we would wish to regulate.
posted by Jakey at 4:21 AM on January 5, 2009 [1 favorite]
This is a problem of short term incentives. It's clear from the repeated outcome of derivatives bubbles, that they are not good either for the market as a whole, nor for individual entities, in the long term. In the short-term, however, they are very lucrative for individual entities, and, more importantly, individuals. It's clear that self-regulation does not work in these circumstances, so the onus is on wider society to impose restrictions from outside the sector.
But then, of course, you'd have the problem that finance is global. If the US did approach this as suggested who says the EU would follow? And even if you've got both the US & EU operating in tandem (doubtful given the rather fundamental differences in securities regulation but let's ignore that problem for the moment) how to regulate the off shore financial centres?
This is at once an aspect of this problem and a separate problem of its own. The rush to the bottom in terms of financial regulation has been almost headlong since the eighties. Again, in the long term, this is not beneficial to either the market at large, or individual institutions, or even nations. Ask Iceland. I don't have the background to suggest specifically how this should be done, but just because it's a hard problem doesn't mean that it should be given up on. IMHO the major complication is the political will to do it, given that the legislative bodies are inordinately beholden to the owners of the capital that we would wish to regulate.
posted by Jakey at 4:21 AM on January 5, 2009 [1 favorite]
Excellent Op Ed; comments above are helpful, too. But why are we only seeing such sharp insight now that it's too late? Is it unreasonable to hope reporters can send up the alarm?
posted by AppleSeed at 4:35 AM on January 5, 2009
posted by AppleSeed at 4:35 AM on January 5, 2009
Nothing will change.
Pay close attention to the spin of the talking heads that the financial industry has been continuously trotting-out to explain things to the media, public, and pols. This was all government regulator's fault. Or the public's fault. Once the new administration and Congress are open-for-business, the lobbying will begin in-earnest.
Don't expect any real change to occur. Just smoke, mirrors, and shell games.
posted by Thorzdad at 4:41 AM on January 5, 2009 [2 favorites]
Pay close attention to the spin of the talking heads that the financial industry has been continuously trotting-out to explain things to the media, public, and pols. This was all government regulator's fault. Or the public's fault. Once the new administration and Congress are open-for-business, the lobbying will begin in-earnest.
Don't expect any real change to occur. Just smoke, mirrors, and shell games.
posted by Thorzdad at 4:41 AM on January 5, 2009 [2 favorites]
The problem is that there is no incentive for the financial sector to change, most of the big guns who run the show made obscene amounts of money last year (the 2007 CEO of Lehman Brothers made over $30 million). So who cares if the company failed, or if unemployement rises to 10% or higher, I've made my money.
posted by Vindaloo at 5:16 AM on January 5, 2009
posted by Vindaloo at 5:16 AM on January 5, 2009
Why ratings agencies? I mean, if they're so smart why don't they take the risks they rate for others. How are they any different than a bond version of a stock picker or Cramer except that as noted they actually officially get paid to pump.
Perhaps instead of AAA we should have "Lock of the week" and instead of AA we could have the "Shoe-in of the week". And then municipalities could have charters that say that they can't buy anything that doesn't have a shoe on it.
posted by Wood at 5:23 AM on January 5, 2009 [1 favorite]
Perhaps instead of AAA we should have "Lock of the week" and instead of AA we could have the "Shoe-in of the week". And then municipalities could have charters that say that they can't buy anything that doesn't have a shoe on it.
posted by Wood at 5:23 AM on January 5, 2009 [1 favorite]
AppleSeed: But why are we only seeing such sharp insight now that it's too late? Is it unreasonable to hope reporters can send up the alarm?
Very good point. Made by Paul Kedrosky earlier in People Who Got Lost Suggesting Path Forward.
posted by gen at 5:32 AM on January 5, 2009
Very good point. Made by Paul Kedrosky earlier in People Who Got Lost Suggesting Path Forward.
But my trouble with Lewis is that while he is a felicitous and funny writer, he missed most of what was important about the current crisis. He has spent more than two decades trafficking in Wall Street superficialities and light entertainment, rather than using his insider status to help people understand why systemic financial risks are growing and likely to cause immense societal damage. To treat him now as an objective and informed observer with an eye to the financial path forward is, well, difficult to justify.Note that the other author of this two-part op-ed is David "shorted Lehman in May 2008" Einhorn (New York Magazine profile, Portfolio Magazine profile) who saw the concerns with Lehman long before Lehman was willing to go public with their actual positions. Einhorn and his Greenlight Capital are probably one of the few who made money this year (along with Nouriel Roubini/RGE Monitor and Nassim Taleb most likely.)
posted by gen at 5:32 AM on January 5, 2009
I wanted to post this today but got sidetracked with my post on the Brittany Murphy and ramen movie... so thank you homonculus!
posted by gen at 5:34 AM on January 5, 2009
posted by gen at 5:34 AM on January 5, 2009
One good effect of all this: I haven't had to listen to any douchebags saying "trust the free market" or "the market will right itself" or "the market this, the market that, the market the other" or "oh, oh, oh, MARKET, MARKET, MARKET!! (fap, fap)" for several weeks.Well, don't get too used to it. The silly "Roosevelt prolonged the Great Depression" meme seems to be gaining traction among conservatives. What we actually needed, it goes, was less regulation, less public works spending, and, I assume, more Herbert Hoover. Go figure.
posted by Flunkie at 5:48 AM on January 5, 2009 [1 favorite]
Gosh. How could anyone have predicted this?
posted by shetterly at 7:29 AM on January 5, 2009 [1 favorite]
posted by shetterly at 7:29 AM on January 5, 2009 [1 favorite]
Flunkie, a capitalist economist answers that one well: John Maynard Keynes: The Abridged Version .
Not that I expect rightwingers to listen to him. Rightwingers believe the right is the center, and anyone to their left is a Stalinist with a rifle. Why they don't notice that there's no one to their right, I dunno.
posted by shetterly at 7:35 AM on January 5, 2009 [1 favorite]
Not that I expect rightwingers to listen to him. Rightwingers believe the right is the center, and anyone to their left is a Stalinist with a rifle. Why they don't notice that there's no one to their right, I dunno.
posted by shetterly at 7:35 AM on January 5, 2009 [1 favorite]
Mutant for Secretary of the Treasury.
> a little historical context: almost every derivative - futures, stock options to name but two - were first used correctly as risk hedging vehicles.
I have a problem with the financial market being allowed to engineer ("cook") up such financial products as derivatives and CDOs and CDSs and worse, because it seems to me that most non-financial people don't really understand them, and at some level even alot of the financial market insiders only understand that they can make a sh!tload in the short-term by trading in these mysterious entities.
I suppose that if any such mystery-products were only traded in a formal exchange as you suggest, there might be enough transparancy and awareness to make these products better understood. But to me, and perhaps to most people not in the financial business, these products are little more than fancy new coconut shells in a shell game.
It's my oversimplified belief that the financial markets should really only exist to facilitate the movement of capital into industries that actually produce something. To me, the last 20 or so years was all about the market creating/earning money for the market, at some point becoming, essentially, a fraud.
posted by Artful Codger at 7:45 AM on January 5, 2009 [2 favorites]
> a little historical context: almost every derivative - futures, stock options to name but two - were first used correctly as risk hedging vehicles.
I have a problem with the financial market being allowed to engineer ("cook") up such financial products as derivatives and CDOs and CDSs and worse, because it seems to me that most non-financial people don't really understand them, and at some level even alot of the financial market insiders only understand that they can make a sh!tload in the short-term by trading in these mysterious entities.
I suppose that if any such mystery-products were only traded in a formal exchange as you suggest, there might be enough transparancy and awareness to make these products better understood. But to me, and perhaps to most people not in the financial business, these products are little more than fancy new coconut shells in a shell game.
It's my oversimplified belief that the financial markets should really only exist to facilitate the movement of capital into industries that actually produce something. To me, the last 20 or so years was all about the market creating/earning money for the market, at some point becoming, essentially, a fraud.
posted by Artful Codger at 7:45 AM on January 5, 2009 [2 favorites]
Einhorn and his Greenlight Capital are probably one of the few fashionable NY media darlings who made money this year (along with Nouriel Roubini/RGE Monitor and Nassim Taleb most likely.)
Nevermind all the people/funds who made plenty of money but aren't interested in having their name plastered all over the New Yorker, NY Times, Portfolio Mag, etc (the "Malcom Gladwell effect," if you will).
posted by jckll at 7:48 AM on January 5, 2009
Nevermind all the people/funds who made plenty of money but aren't interested in having their name plastered all over the New Yorker, NY Times, Portfolio Mag, etc (the "Malcom Gladwell effect," if you will).
posted by jckll at 7:48 AM on January 5, 2009
Until conservatives start conspiring to overthrow Barack Obama a la "The Plot against FDR" I will know that we have not gone far enough to fix this thing. These fuckers need to feel real pain. The more I see them cheering the moves by the Treasury and the Fed on CNBC the more I know things are only going to get worse.
posted by any major dude at 8:17 AM on January 5, 2009 [1 favorite]
posted by any major dude at 8:17 AM on January 5, 2009 [1 favorite]
Gosh. How could anyone have predicted this?
Unfortunately he missed the crushing of the Unions and infantisation of the Proles. The ruling classes read his manifesto, understood it was true, and spent the past 100 years ensuring the Proles would never revolt.
Seriously though, how bad would things need to get for the average worker to revolt against the current Political and Economic system? They might stand up to their Government and force a change in Political Party... but changing the system... I think the Free Market and Parliamentary Democracies are here to stay. Unfortunately.
posted by twistedonion at 8:26 AM on January 5, 2009 [1 favorite]
Unfortunately he missed the crushing of the Unions and infantisation of the Proles. The ruling classes read his manifesto, understood it was true, and spent the past 100 years ensuring the Proles would never revolt.
Seriously though, how bad would things need to get for the average worker to revolt against the current Political and Economic system? They might stand up to their Government and force a change in Political Party... but changing the system... I think the Free Market and Parliamentary Democracies are here to stay. Unfortunately.
posted by twistedonion at 8:26 AM on January 5, 2009 [1 favorite]
In many instances they don't even regulate the flow of capital, as many of these centres don't have any industry other than financial services. If one tried to tell a hedge fund what they could / could not do with funds on deposit in their country, surely other countries wouldn't follow suit solely to capture needed business. So the only way this would work is if constraints on the flow of capital were put into place. Now that's a tough one.
I don't understand this line of thinking. Governments restrict the flow of capital all the time. Want to fund terrorism? We'll seize your assets. Drugs? Same thing. Did you write a poker program that was legal in the country you live in? You'll be arrested as soon as you step foot on US soil and fined $300 million. And Party Poker has caused much less harm than 37:1 leveraging.
I guess if Goldman really wanted to they could offshore their entire operation to Dubai. But there's no reason why irresponsible behavior that threatens global financial stability needs to be tolerated in the US.
posted by ryoshu at 8:49 AM on January 5, 2009
I don't understand this line of thinking. Governments restrict the flow of capital all the time. Want to fund terrorism? We'll seize your assets. Drugs? Same thing. Did you write a poker program that was legal in the country you live in? You'll be arrested as soon as you step foot on US soil and fined $300 million. And Party Poker has caused much less harm than 37:1 leveraging.
I guess if Goldman really wanted to they could offshore their entire operation to Dubai. But there's no reason why irresponsible behavior that threatens global financial stability needs to be tolerated in the US.
posted by ryoshu at 8:49 AM on January 5, 2009
Can some reputable organization, like the Atlantic, please hire Mutant to do nothing but author articles about finance? Please?
posted by leotrotsky at 9:12 AM on January 5, 2009
posted by leotrotsky at 9:12 AM on January 5, 2009
No Recession for Me.
I enjoyed that viral. I make something. I'm going to make it better. (this was already my plan to get through the recession).
posted by autodidact at 9:17 AM on January 5, 2009 [1 favorite]
I enjoyed that viral. I make something. I'm going to make it better. (this was already my plan to get through the recession).
posted by autodidact at 9:17 AM on January 5, 2009 [1 favorite]
Krugman: Fighting Off Depression
Is Obama relying too much on tax cuts?
posted by homunculus at 9:43 AM on January 5, 2009
Is Obama relying too much on tax cuts?
posted by homunculus at 9:43 AM on January 5, 2009
wait, there's an article called the end of the world as we know it and no one has snarked about it? as in apocalypse 1, snark 0?
sheeeeeeeeeeeeeeet
posted by doobiedoo at 11:15 AM on January 5, 2009
sheeeeeeeeeeeeeeet
posted by doobiedoo at 11:15 AM on January 5, 2009
Maybe we could get the Nevada Gaming Commission involved - at least they understand gambling and probability.
posted by and for no one at 11:31 AM on January 5, 2009
posted by and for no one at 11:31 AM on January 5, 2009
Wood wrote:Why ratings agencies? I mean, if they're so smart why don't they take the risks they rate for others. How are they any different than a bond version of a stock picker or Cramer except that as noted they actually officially get paid to pump.
Rating Agencies are privy to insider information about the issuers of the bonds/deals they're rating, and are therefor prohibited from trading on their own research. It's also part of the reason why there is so much anger when they get it so drastically wrong.
posted by ShadowCrash at 12:42 PM on January 5, 2009
Rating Agencies are privy to insider information about the issuers of the bonds/deals they're rating, and are therefor prohibited from trading on their own research. It's also part of the reason why there is so much anger when they get it so drastically wrong.
posted by ShadowCrash at 12:42 PM on January 5, 2009
Einhorn and his Greenlight Capital are probably one of the few who made money this year
Actually, they're down 20%. And here's a PDF of their Q3 letter to investors (very good read since they're one of the few firms that give examples of individual trades)--they were down 15-16% at that point.
But, of course, down 20 is the new killing it.
posted by mullacc at 1:30 PM on January 5, 2009 [1 favorite]
Actually, they're down 20%. And here's a PDF of their Q3 letter to investors (very good read since they're one of the few firms that give examples of individual trades)--they were down 15-16% at that point.
But, of course, down 20 is the new killing it.
posted by mullacc at 1:30 PM on January 5, 2009 [1 favorite]
The (first) article's main point seems to be the crux of the issue, not just economically, but environmentally, socially, etc. No one wants to sacrifice *any* short-term benefits to succeed sustainably in the long term.
"Who cares about 100 or even 50 years from now? I could die tomorrow. I'm going to get as much as I can *now*."
Half of the world's current food supply is wasted. Housing costs should continue to fall from overproduction. Some McMansions could support 4-5 small families, living reasonably together. We don't need 100 million pounds of plastic toys from China, etc.
As long as we have adequate food and shelter (and the political will to provide them to everyone), what's so bad about a "Great Depression II?" It seems like it could be an effective counterbalance to the current practices of overproduction and waste, and it could spur some needed political and social changes in the US and the world.
That's not a rhetorical question, btw. IANAE, and I am curious about the negative consequences of a depression. Everyone talks as if it would be the "end of the world" but no one really explains why. The last U.S. depression certainly didn't end the country. It seemed to improve the country's infrastructure and prepare us for the austerity needed to fight World War II.
And Mitch McConnell is a douche.
posted by mrgrimm at 3:35 PM on January 5, 2009
"Who cares about 100 or even 50 years from now? I could die tomorrow. I'm going to get as much as I can *now*."
Half of the world's current food supply is wasted. Housing costs should continue to fall from overproduction. Some McMansions could support 4-5 small families, living reasonably together. We don't need 100 million pounds of plastic toys from China, etc.
As long as we have adequate food and shelter (and the political will to provide them to everyone), what's so bad about a "Great Depression II?" It seems like it could be an effective counterbalance to the current practices of overproduction and waste, and it could spur some needed political and social changes in the US and the world.
That's not a rhetorical question, btw. IANAE, and I am curious about the negative consequences of a depression. Everyone talks as if it would be the "end of the world" but no one really explains why. The last U.S. depression certainly didn't end the country. It seemed to improve the country's infrastructure and prepare us for the austerity needed to fight World War II.
And Mitch McConnell is a douche.
posted by mrgrimm at 3:35 PM on January 5, 2009
I love this line in the Greenlight report:
We’ve given up on MSFT for now as we feel better investing in companies where management at least appears to be trying to work for shareholders.
posted by pwnguin at 4:41 PM on January 5, 2009
We’ve given up on MSFT for now as we feel better investing in companies where management at least appears to be trying to work for shareholders.
posted by pwnguin at 4:41 PM on January 5, 2009
Until conservatives start conspiring to overthrow Barack Obama a la "The Plot against FDR" I will know that we have not gone far enough to fix this thing. These fuckers need to feel real pain.
What, you think Wall Street checks didn't flow to Obama? Get a grip. Money men don't have politics. They have interests. And as to Obama, he seems to have been cool with that whole bailout thing.
posted by IndigoJones at 7:26 PM on January 5, 2009
What, you think Wall Street checks didn't flow to Obama? Get a grip. Money men don't have politics. They have interests. And as to Obama, he seems to have been cool with that whole bailout thing.
posted by IndigoJones at 7:26 PM on January 5, 2009
As long as we have adequate food and shelter (and the political will to provide them to everyone), what's so bad about a "Great Depression II?"
It would be soul destroying.
Talk to some of the people who were present at Great Depression I. Read the many books, watch the many documentaries. Use your imagination. Adequate food could mean soup lines, shelter could mean Hoovervilles. If you were lucky to have a job, and if your spouse had a job, chances were she (not he, surely) would be pressured if not required to give it up. For the benefit of others. Men in once good suits would shamble to your door and ask if there was something, anything they could do for you for a pittance, and you'd be torn between compassion and the fact that your own finances didn't run to helping the poor guy, not least because you knew there would be another dozen just like him later that day. And the next day, the next month, the next year, with no end in sight. If you were an optimist, the guy with the shit eating grin in the White House might give you an emotional boost- but then, so would Fibber McGee and Molly, and temporary good feeling doesn't pay the rent.
We tend to think of those time in terms of the young folk who would later go off to WWII and give rise to post war prosperity. Whew, thank God that's over! Think instead of their parents, the men and women who were, say, in their forties in 1929. Everything they worked for was wiped out, and nothing suggested it would get any better. Look at the news reels, the photographs, and try to read their faces.
Enough to say that you will be hard pressed to find anyone who lived through the depression who would say that it's something they would wish on their worst enemy.
Really, I find the question jaw dropping.
posted by IndigoJones at 5:54 AM on January 6, 2009 [1 favorite]
It would be soul destroying.
Talk to some of the people who were present at Great Depression I. Read the many books, watch the many documentaries. Use your imagination. Adequate food could mean soup lines, shelter could mean Hoovervilles. If you were lucky to have a job, and if your spouse had a job, chances were she (not he, surely) would be pressured if not required to give it up. For the benefit of others. Men in once good suits would shamble to your door and ask if there was something, anything they could do for you for a pittance, and you'd be torn between compassion and the fact that your own finances didn't run to helping the poor guy, not least because you knew there would be another dozen just like him later that day. And the next day, the next month, the next year, with no end in sight. If you were an optimist, the guy with the shit eating grin in the White House might give you an emotional boost- but then, so would Fibber McGee and Molly, and temporary good feeling doesn't pay the rent.
We tend to think of those time in terms of the young folk who would later go off to WWII and give rise to post war prosperity. Whew, thank God that's over! Think instead of their parents, the men and women who were, say, in their forties in 1929. Everything they worked for was wiped out, and nothing suggested it would get any better. Look at the news reels, the photographs, and try to read their faces.
Enough to say that you will be hard pressed to find anyone who lived through the depression who would say that it's something they would wish on their worst enemy.
Really, I find the question jaw dropping.
posted by IndigoJones at 5:54 AM on January 6, 2009 [1 favorite]
IndigoJones wrote:
What, you think Wall Street checks didn't flow to Obama? Get a grip. Money men don't have politics. They have interests. And as to Obama, he seems to have been cool with that whole bailout thing.
Maybe what I wrote reads like I think Obama is going to save the world but I do not. I suffer no false illusions that Obama will do much more than provide lip service to the middle class during this coming depression. I was just stating the fact that FDR ended a lot of quick money games for the rich that got them very upset and until I see the rich getting very upset again I don't believe anything is going to change. I think Obama is a coward like every other democrat. I hope he proves me wrong but I don't think it's possible at this point in our history to have a president that supports the middle class without some form of revolution.
posted by any major dude at 8:13 AM on January 6, 2009
What, you think Wall Street checks didn't flow to Obama? Get a grip. Money men don't have politics. They have interests. And as to Obama, he seems to have been cool with that whole bailout thing.
Maybe what I wrote reads like I think Obama is going to save the world but I do not. I suffer no false illusions that Obama will do much more than provide lip service to the middle class during this coming depression. I was just stating the fact that FDR ended a lot of quick money games for the rich that got them very upset and until I see the rich getting very upset again I don't believe anything is going to change. I think Obama is a coward like every other democrat. I hope he proves me wrong but I don't think it's possible at this point in our history to have a president that supports the middle class without some form of revolution.
posted by any major dude at 8:13 AM on January 6, 2009
Billionaire kills himself over financial crisis. Adolf Merckle, German billionaire industrialist who suffered huge losses when share price bets he made went badly wrong, has committed suicide.
posted by terranova at 8:53 AM on January 6, 2009
posted by terranova at 8:53 AM on January 6, 2009
It would be soul destroying.
Talk to some of the people who were present at Great Depression I.
My paternal grandfather's family were rich Manhattanites. He rode around in limousines, or so I hear. They lost pretty much everything in the stock market crash. He had a promising career in the minor leagues for the Yankees, but eventually became a shoe salesman to help his family. He later went on to raise my dad and my uncle in New Jersey. He had a great life.
My maternal grandfather also experienced major financial troubles on his family farm. Later, he would only pay for items (car, house) with cash. He too had a great life.
These people lived through the Great Depression as 25-30 year olds, and saw their material prosperity crushed as young adults. They survived and had great families. Most of us could do it too, I believe. Yes, we can!
posted by mrgrimm at 6:32 PM on January 6, 2009 [1 favorite]
Talk to some of the people who were present at Great Depression I.
My paternal grandfather's family were rich Manhattanites. He rode around in limousines, or so I hear. They lost pretty much everything in the stock market crash. He had a promising career in the minor leagues for the Yankees, but eventually became a shoe salesman to help his family. He later went on to raise my dad and my uncle in New Jersey. He had a great life.
My maternal grandfather also experienced major financial troubles on his family farm. Later, he would only pay for items (car, house) with cash. He too had a great life.
These people lived through the Great Depression as 25-30 year olds, and saw their material prosperity crushed as young adults. They survived and had great families. Most of us could do it too, I believe. Yes, we can!
posted by mrgrimm at 6:32 PM on January 6, 2009 [1 favorite]
These people lived through the Great Depression as 25-30 year olds
You're missing IndigoJones' point. Sure, the relatively young will do relatively fine, and the little kids will grow up with a good sense of the value of things (like the people you know today who are aged 70-85).
Anyone here 45 or older?
posted by aeschenkarnos at 9:35 PM on January 6, 2009
You're missing IndigoJones' point. Sure, the relatively young will do relatively fine, and the little kids will grow up with a good sense of the value of things (like the people you know today who are aged 70-85).
Anyone here 45 or older?
posted by aeschenkarnos at 9:35 PM on January 6, 2009
I'm not sure I'm missing the point. It will be much harder for older people? Well, yeah. *Everything* is harder the older you get.
My point is that the human mind is almost infinitely adaptable. Our shit-for-brains economic system will not destroy civilization. My bet is on nuclear weapons and/or climate change.
If you were lucky to have a job, and if your spouse had a job, chances were she (not he, surely) would be pressured if not required to give it up. For the benefit of others.
Actually, maybe I am missing the point. I don't understand this part. How would giving up a job benefit others?
Fwiw, I've been preparing for an eventual lifestyle of hunting, foraging, and scavenging (and possibly growing food, if possible) for many years now, so my perspective is likely skewed.
posted by mrgrimm at 9:30 AM on January 7, 2009
My point is that the human mind is almost infinitely adaptable. Our shit-for-brains economic system will not destroy civilization. My bet is on nuclear weapons and/or climate change.
If you were lucky to have a job, and if your spouse had a job, chances were she (not he, surely) would be pressured if not required to give it up. For the benefit of others.
Actually, maybe I am missing the point. I don't understand this part. How would giving up a job benefit others?
Fwiw, I've been preparing for an eventual lifestyle of hunting, foraging, and scavenging (and possibly growing food, if possible) for many years now, so my perspective is likely skewed.
posted by mrgrimm at 9:30 AM on January 7, 2009
How would giving up a job benefit others?
If a husband and wife are both employed, he predicts that one--presumably the wife--will likely be pressured to give up the job, so that one--presumably the husband--of a both-unemployed couple may have it.
posted by aeschenkarnos at 2:45 AM on January 8, 2009
If a husband and wife are both employed, he predicts that one--presumably the wife--will likely be pressured to give up the job, so that one--presumably the husband--of a both-unemployed couple may have it.
posted by aeschenkarnos at 2:45 AM on January 8, 2009
Obama announces the end of 'an era of profound irresponsibility'
posted by homunculus at 11:37 AM on January 8, 2009
posted by homunculus at 11:37 AM on January 8, 2009
I was just stating the fact that FDR ended a lot of quick money games for the rich that got them very upset and until I see the rich getting very upset again I don't believe anything is going to change
Indeed yes! The hilarious part is that he hired a thief to put a stop to the thievery, in the person of old Joe Kennedy, who had gotten rich by means he immediately made illegal. Imagine Obama hiring Madoff for the SEC. (I suppose bring Robert "I had no idea this was going on under my watch at Citibank" Rubin might be more politically acceptable.)
If a husband and wife are both employed, he predicts that one--presumably the wife--will likely be pressured to give up the job, so that one--presumably the husband--of a both-unemployed couple may have it.
This was in fact mandated by law for state workers in at least some states (my grandparents had to make the choice). After the war, it was this same thinking that prompted companies like IBM to insist that women quit once they got married- many post war economists assumed a resumption of Great Depression One. The same share the wealth thinking, wealth here meaning jobs, has gone into some policy decisions in France. Whether that's economically wise I leave to others.
*Everything* is harder the older you get.
I don't find this to be true, nor, even if true, do I see it as a reason to embrace a depression. Certainly if you're steadily gathering and nurturing money you will find things easier at 50 than at 25. Barring economic collapse. Which is the whole point here. In a better normal world, old people with money are there to lend it to young people without out, so they can start up families, business, houses. Everybody gains.
Fwiw, I've been preparing for an eventual lifestyle of hunting, foraging, and scavenging (and possibly growing food, if possible) for many years now, so my perspective is likely skewed.
I can respect that, but it's not going to work for everyone. Indeed, it's not going to work for hardly anyone. And the unintended consequences are really not pretty to contemplate
posted by IndigoJones at 7:44 AM on January 10, 2009
Indeed yes! The hilarious part is that he hired a thief to put a stop to the thievery, in the person of old Joe Kennedy, who had gotten rich by means he immediately made illegal. Imagine Obama hiring Madoff for the SEC. (I suppose bring Robert "I had no idea this was going on under my watch at Citibank" Rubin might be more politically acceptable.)
If a husband and wife are both employed, he predicts that one--presumably the wife--will likely be pressured to give up the job, so that one--presumably the husband--of a both-unemployed couple may have it.
This was in fact mandated by law for state workers in at least some states (my grandparents had to make the choice). After the war, it was this same thinking that prompted companies like IBM to insist that women quit once they got married- many post war economists assumed a resumption of Great Depression One. The same share the wealth thinking, wealth here meaning jobs, has gone into some policy decisions in France. Whether that's economically wise I leave to others.
*Everything* is harder the older you get.
I don't find this to be true, nor, even if true, do I see it as a reason to embrace a depression. Certainly if you're steadily gathering and nurturing money you will find things easier at 50 than at 25. Barring economic collapse. Which is the whole point here. In a better normal world, old people with money are there to lend it to young people without out, so they can start up families, business, houses. Everybody gains.
Fwiw, I've been preparing for an eventual lifestyle of hunting, foraging, and scavenging (and possibly growing food, if possible) for many years now, so my perspective is likely skewed.
I can respect that, but it's not going to work for everyone. Indeed, it's not going to work for hardly anyone. And the unintended consequences are really not pretty to contemplate
posted by IndigoJones at 7:44 AM on January 10, 2009
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Everyone else. Wall Street is the place money ends up when it's owner doesn't know where else to spend it. If you've got money and a working idea, you don't need Wall Street.
posted by pwnguin at 12:35 AM on January 5, 2009 [12 favorites]