This terrifying moment is our one chance for a new world(guardian.co.uk)
guardian.co.uk
This terrifying moment is our one chance for a new world
http://www.guardian.co.uk/business/2008/oct/05/banks.marketturmoil
37 comments
This is a familiar tune. Take a heavily regulated market with massive government intervention, watch it get tied in knots, and then declare that the "free market" has failed. The most dramatic historical example is perhaps the U.S. economy leading up to the Great Depression, but we've seen plenty others in recent years: the "deregulated" energy markets in California, "free market" healthcare, and now the subprime meltdown. I'm beginning to suspect people will never learn.
The US is going to need to go through a complete meltdown. A Great Depression probably wouldn't make people angry and organized enough to cause the change that we need.
My prediction is that the United States won't stick around for too long (if you take a history textbook perspective on this, which you can see other failed societies have made the same mistakes that we are now repeating).
I think we have a fighting chance to create the desirable society that eliminates corporatocracy. Did you know the planet contains 13,000 zettajoules of geothermal energy? The entire world uses 0.5 zettajoules of energy per year. And we can harvest this, but there are patent wars to suppress this from easily happening.
Let's look at the other resources available, which cost us nothing at all. Wind? 3 states of wind energy can power the entire United States. Water? The UK alone could be powered by water/tide energy alone. Solar? One hour of thermal energy in the day could power the United States for an entire year if we harvested it properly.
Travel by plane? Who does that when you could travel by AT3's mag-lev trains, which can reach speeds up to 4,000 MPH with zero moving parts and zero emissions. Oh, and it uses about 10% of the energy of an airplane. Yes, they work in land and water.
What happens when technology replaces humans? You no longer need to work. In our capitalistic society, it's called unemployment. If you look into the Venus Project, it's called you get bored and start thinking about space exploration.
Once people figure out that we don't really need these corporations, we'll never have this type of problem come up again. The corporations are holding us back and creating scarcity (real or perceived) at every opportunity. Like I said, I don't think the United States is going to get it right, we're in far too deep over our heads. And the attitudes and apathy of the American people never ceases to amaze me (in a bad way) as an undergraduate.
My prediction is that the United States won't stick around for too long (if you take a history textbook perspective on this, which you can see other failed societies have made the same mistakes that we are now repeating).
I think we have a fighting chance to create the desirable society that eliminates corporatocracy. Did you know the planet contains 13,000 zettajoules of geothermal energy? The entire world uses 0.5 zettajoules of energy per year. And we can harvest this, but there are patent wars to suppress this from easily happening.
Let's look at the other resources available, which cost us nothing at all. Wind? 3 states of wind energy can power the entire United States. Water? The UK alone could be powered by water/tide energy alone. Solar? One hour of thermal energy in the day could power the United States for an entire year if we harvested it properly.
Travel by plane? Who does that when you could travel by AT3's mag-lev trains, which can reach speeds up to 4,000 MPH with zero moving parts and zero emissions. Oh, and it uses about 10% of the energy of an airplane. Yes, they work in land and water.
What happens when technology replaces humans? You no longer need to work. In our capitalistic society, it's called unemployment. If you look into the Venus Project, it's called you get bored and start thinking about space exploration.
Once people figure out that we don't really need these corporations, we'll never have this type of problem come up again. The corporations are holding us back and creating scarcity (real or perceived) at every opportunity. Like I said, I don't think the United States is going to get it right, we're in far too deep over our heads. And the attitudes and apathy of the American people never ceases to amaze me (in a bad way) as an undergraduate.
It's not like if you outlaw corporations, suddenly a new form of organization will appear where nobody is greedy any more. It's not like "the corporations" are sitting on the secret to infinite wind energy and they're just afraid of change. Corporations are made up of people. They are not perfect because people are not perfect and organizing large groups of people is hard. Outlawing corporations will not solve either of those problems.
Which would you rather have:
A resource-driven society where technological advancements allow humans to offset work with newer innovations.
Or a financially-driven society where technological advancements put humans into unemployment and make a few guys at the very top extremely wealthy.
I'm not saying get rid of corporations. I'm saying we don't need them. They fight to maintain the status quo.
A resource-driven society where technological advancements allow humans to offset work with newer innovations.
Or a financially-driven society where technological advancements put humans into unemployment and make a few guys at the very top extremely wealthy.
I'm not saying get rid of corporations. I'm saying we don't need them. They fight to maintain the status quo.
Yeah. And you can't exactly say that corporations never do good, either. Because an overwhelming amount of the time, they do. Even when they do bad things, they often do it at the whim of the public. (To pick a lesser example: remember that the people really DO like sensationalist news and cheesy, humorless sitcoms.)
Blaming corporations does nothing. Trying to FIX corporations, yes. Trying to REMOVE them is ignorant and short-sighted.
Blaming corporations does nothing. Trying to FIX corporations, yes. Trying to REMOVE them is ignorant and short-sighted.
A broadcast medium, or a mass producer, makes more money making something a lot of people like a little, than something which polarizes customers into love and apathy.
From this springs every horror and alienation in the 20th century pop culture.
Upside: it's a passing technological phase, and we're nearly all the way through.
From this springs every horror and alienation in the 20th century pop culture.
Upside: it's a passing technological phase, and we're nearly all the way through.
I wish it was a passing phase. But people love it everywhere. I saw it two years ago on Reddit, and have since seen it flame up into a ridiculous deluge of fringe theories and an absolute death of everything interesting.
People like everything but fair and detailed reporting. News reflects this. Same with culture. People like buying vast amounts of worthless things. It doesn't matter what field it's in. Geeks collect as much as rifle hunters, they just collect different things. That's led to an industry that specializes in creating excess.
People like everything but fair and detailed reporting. News reflects this. Same with culture. People like buying vast amounts of worthless things. It doesn't matter what field it's in. Geeks collect as much as rifle hunters, they just collect different things. That's led to an industry that specializes in creating excess.
Reddit is still a mass producer of sorts, and the score stands in for money - the same dynamic occurs. That which titillates the many out-scores that which fascinates the few. (Reddit has tried with limited success to protect enclaves: subreddits. They have created smaller and more elite lowest-common-denominators. Better than nothing, for now.)
I say it's a passing phase because where tech is headed is: auto-generated completely personal everything. The limit of "the few" is "the one", and the mass production dynamic breaks down at that limit.
I say it's a passing phase because where tech is headed is: auto-generated completely personal everything. The limit of "the few" is "the one", and the mass production dynamic breaks down at that limit.
They've been predicting that since, what, the 20s? I've seen every attempt to give personalized information and it never works. In fact, every attempt I've seen is nothing short of laughable.
The problem with that concept is that it assumes we know exactly what it is that we like, and that it's easy to communicate that. Neither assumption is correct. As we learn, we constantly adjust what we like, at a fairly extreme rate, and it tends to be impossible to express in any way other than the extremely specific.
The problem with that concept is that it assumes we know exactly what it is that we like, and that it's easy to communicate that. Neither assumption is correct. As we learn, we constantly adjust what we like, at a fairly extreme rate, and it tends to be impossible to express in any way other than the extremely specific.
I'll point out this is straight out of "Zeitgeist: Addendum", should someone dig that point of view.
http://www.zeitgeistmovie.com/
http://www.zeitgeistmovie.com/
Which jmtame submitted an "ask HN" about earlier today. I don't know how realistic its premises are, if they are to be found in jmtame's comments in this thread. The first few minutes sound pretty fruity and pretentious, but I'll withhold judgement until I've given it a few more minutes. But, I'm suspicious of folks who think they understand a huge array of topics well enough to make pronouncements on them that are contrary to a majority of experts in each field. (And, of course, I realize the irony of making such a statement in a thread that I started by pontificating on a topic on which I am clearly an interested amateur rather than an expert in the field.)
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It cuts both ways. Take a heavily state-controlled market like the entire US system during and after WWII and claim the gains are due to the free market.
It's true that we should be wary of the post hoc, ergo propter hoc fallacy. In this case, I think the right lesson is that markets are so robust that they can tolerate a lot of abuse before buckling. For example, to bolster agricultural prices during the New Deal, the federal government paid farmers not only to stop growing crops, but to plow perfectly good crops under. Frédéric Bastiat himself (of broken window and candlemaker petition fame) couldn't come up with a better reductio ad absurdum, and yet it was implemented as real policy in a time of mass hunger. Nevertheless, America, and the world, survived and prospered. Recall also that even the Soviet Union, with an economic system about as bad as you can imagine, still lasted ~70 years.
First of all Fannie Mae, Freddy Mac are not the main and only contributers to this mess. You also have a lot of private capital being lost, that never went through Fannie or Freddy.
AIG is not goverment's mess. They decided to insure insane amount of CDO, which are not regulated, and being used not for hedging, more like bets in the market. Lehman Bros/Bear Stearn are not governments mess. They decided to leverage themselves at an absurd 1/30+ ratio. The goverment has been staying away from them, and look what happened.
Also, if you noticed, that there are banks that are actually doing really good, mainly because were smart enough to stay away from this madness.
And there have also been major crashes (1929, or 1873) where the gov. was almost non-existent, and the dollar was backed by gold.
For some reason, just like in reddit, there is always post "Blame the goverment about everything for over-regulating".
How about blaming the individuals for taking too much credit card debt, and too many loans(may they be greedy or stupid), and the people that led these companies to ruin for once.
AIG is not goverment's mess. They decided to insure insane amount of CDO, which are not regulated, and being used not for hedging, more like bets in the market. Lehman Bros/Bear Stearn are not governments mess. They decided to leverage themselves at an absurd 1/30+ ratio. The goverment has been staying away from them, and look what happened.
Also, if you noticed, that there are banks that are actually doing really good, mainly because were smart enough to stay away from this madness.
And there have also been major crashes (1929, or 1873) where the gov. was almost non-existent, and the dollar was backed by gold.
For some reason, just like in reddit, there is always post "Blame the goverment about everything for over-regulating".
How about blaming the individuals for taking too much credit card debt, and too many loans(may they be greedy or stupid), and the people that led these companies to ruin for once.
AIG is not goverment's mess. They decided to insure insane amount of CDO, which are not regulated, and being used not for hedging, more like bets in the market. Lehman Bros/Bear Stearn are not governments mess. They decided to leverage themselves at an absurd 1/30+ ratio. The goverment has been staying away from them, and look what happened.
I don't disagree. At least not entirely. Where I disagree is in the distinction between what government should and shouldn't do, and how the "didn't do" played out in this particular disaster. If government is to take part in a free market economy, it's purpose is to enforce contracts, prevent fraud, and come down hard on those that lie, cheat or steal: trust is the most important currency in a market economy, and when it's lost, nothing works anymore. Pyramid or Ponzi schemes are illegal in the United States. Seems to me that a very strong case can be made that CDOs are merely the modern equivalent. At the very least there was significant deception happening at the point where junk debt was re-branded as quality debt, and that claims that this junk debt was "insured" against loss were simple fraud.
We have laws for all of that, and in a just world, there would be consequences. But, we're talking about some of the wealthiest people on earth...consequences aren't really their style, and our government agrees with them.
I'm not saying the finance industry, or a large percentage thereof, is free of blame. I'm saying it's like bike theft and the New York and San Francisco black market: it's a wholly unpunished crime, and so it is rampant. For the kind of people willing to do anything they can get away with to make money, the US government extended an open invitation to lie, cheat, and steal your way to a few million or billion bucks.
I don't disagree. At least not entirely. Where I disagree is in the distinction between what government should and shouldn't do, and how the "didn't do" played out in this particular disaster. If government is to take part in a free market economy, it's purpose is to enforce contracts, prevent fraud, and come down hard on those that lie, cheat or steal: trust is the most important currency in a market economy, and when it's lost, nothing works anymore. Pyramid or Ponzi schemes are illegal in the United States. Seems to me that a very strong case can be made that CDOs are merely the modern equivalent. At the very least there was significant deception happening at the point where junk debt was re-branded as quality debt, and that claims that this junk debt was "insured" against loss were simple fraud.
We have laws for all of that, and in a just world, there would be consequences. But, we're talking about some of the wealthiest people on earth...consequences aren't really their style, and our government agrees with them.
I'm not saying the finance industry, or a large percentage thereof, is free of blame. I'm saying it's like bike theft and the New York and San Francisco black market: it's a wholly unpunished crime, and so it is rampant. For the kind of people willing to do anything they can get away with to make money, the US government extended an open invitation to lie, cheat, and steal your way to a few million or billion bucks.
> I'm saying it's like bike theft and the New York and San Francisco black market: it's a wholly unpunished crime, and so it is rampant.
I totally agree with you.
Regarding Credit Default Swaps and Interest Swaps, a lot of this is due to the fact that they weren't regulated like insurance, even though that is how they were being used.
I read the other day that some hedge fund had sold CDSs to Lehman to insure against losses on $2 billion of asset backed securities. The hedge fund only capitalized the subsidiary selling the CDSs with $4 million.
There is a reason we regulate insurance companies... to make sure they maintain adequate capital to back up their policies. This creates trust in the market that buying insurance will actually protect you.
So, like you said, the government has a role in enforcing contracts and preventing fraud. In this case they failed to regulate CDS instruments to ensure proper capital ratios.
I totally agree with you.
Regarding Credit Default Swaps and Interest Swaps, a lot of this is due to the fact that they weren't regulated like insurance, even though that is how they were being used.
I read the other day that some hedge fund had sold CDSs to Lehman to insure against losses on $2 billion of asset backed securities. The hedge fund only capitalized the subsidiary selling the CDSs with $4 million.
There is a reason we regulate insurance companies... to make sure they maintain adequate capital to back up their policies. This creates trust in the market that buying insurance will actually protect you.
So, like you said, the government has a role in enforcing contracts and preventing fraud. In this case they failed to regulate CDS instruments to ensure proper capital ratios.
The future generations will look in the history books at "societies that were greedy" and instead of advancing technology and efficiency, they stifled and discouraged it because it went against established corporate profit motives.
This is about greed, and you're right in saying that government programs have caused this. The greed takes over your logic and diligent decision-making, and we end up trying to make a lot of money on things that are nothing more than speculative.
And so now look at what we're doing from 40,000 feet: we're trying to instill confidence by TAXING firefighters and school teachers all over the country? Are we actually creating value? Are corporate profits going up because value has been created in the market? Is there anything really coming out of this? Is this a reason to be more confident? Is there an economical justification for "bailing out" these firms that have made poor investment decisions? Are the toxic mortgages going to magically "pay for themselves" after all of this money gets circulated?
What really have we solved from any of this?
This is about greed, and you're right in saying that government programs have caused this. The greed takes over your logic and diligent decision-making, and we end up trying to make a lot of money on things that are nothing more than speculative.
And so now look at what we're doing from 40,000 feet: we're trying to instill confidence by TAXING firefighters and school teachers all over the country? Are we actually creating value? Are corporate profits going up because value has been created in the market? Is there anything really coming out of this? Is this a reason to be more confident? Is there an economical justification for "bailing out" these firms that have made poor investment decisions? Are the toxic mortgages going to magically "pay for themselves" after all of this money gets circulated?
What really have we solved from any of this?
I would go so far as to call this a false flag event. The american people are being called to rally around a stupid idea with the threat of catastrophe if we don't.
In America these problems are systemic because government has gotten in bed with powerful banks to create a monopoly via the Federal Reserve. We have given all economic power over the issuance of credit to very few with zero oversight. We have centralized (economic) power. "The fundamentals of Keynesian economics are sound" Just keep saying it to yourself, Mr. Hutton.
In Britain they have their own central bank monopolizing their credit issuance, as well, through their confiscatory Bank of England.
We yammer on endlessly about the evils of capitalistic greed and never once consider that governments(i.e., the people with the guns) are the ones controlling this entire system.
Mr. Hutton seems to be suggesting what Mr. Frank Shostak sarcastically suggests: "If central bankers and government bureaucrats can fix things in difficult times, why not in good times too? Why not have a fully controlled economy and all the problems will be fixed forever?" http://mises.org/story/3131
In Britain they have their own central bank monopolizing their credit issuance, as well, through their confiscatory Bank of England.
We yammer on endlessly about the evils of capitalistic greed and never once consider that governments(i.e., the people with the guns) are the ones controlling this entire system.
Mr. Hutton seems to be suggesting what Mr. Frank Shostak sarcastically suggests: "If central bankers and government bureaucrats can fix things in difficult times, why not in good times too? Why not have a fully controlled economy and all the problems will be fixed forever?" http://mises.org/story/3131
I am deeply fearful that the current economic problems will lead to the resurgence of the kind of idiotic socialist ideas represented by this Guardian piece.
While I'm also fearful of this, I feel like I missed something.
After all the talk about creating a 'fairer' system, it seemed like he just suggested that Britain create its own version of Paulson's plan. What were his suggestions for making things more 'fair'? Did I miss something?
After all the talk about creating a 'fairer' system, it seemed like he just suggested that Britain create its own version of Paulson's plan. What were his suggestions for making things more 'fair'? Did I miss something?
Right-wing governments are busy nationalizing banks at an unprecedented rate, and you're worried about some left-wing rag's putative influence?
:O :O :O
:O :O :O
I think the idiotic right wing politics and rethoric is what caused this thing in the first place. Perhaps it's time to look for alternatives. Unless you still believe what the right wing idiots are saying about the economy being strong.
I just love his proposal:
It can require the banks to behave differently – to move from financing casino capitalism to productive enterprise. There can be a new emphasis on relationship building and offering cheap long-term loans to business
The banks were not financing "casino capitalism". They were providing artificially cheap, long-term loans to unqualified homebuyers. Swap out "unqualified homebuyers" with "unqualified businessowners", and you can see the full extent of this guy's idiocy.
It can require the banks to behave differently – to move from financing casino capitalism to productive enterprise. There can be a new emphasis on relationship building and offering cheap long-term loans to business
The banks were not financing "casino capitalism". They were providing artificially cheap, long-term loans to unqualified homebuyers. Swap out "unqualified homebuyers" with "unqualified businessowners", and you can see the full extent of this guy's idiocy.
>based on fairness instead of naked greed
Would somebody please send that man a copy of "Atlas Shrugged"? And to every school child too.
Would somebody please send that man a copy of "Atlas Shrugged"? And to every school child too.
Coincidentally, I started (re)reading Atlas Shrugged a couple months ago. It's been a surreal counterpoint to events in the real world.
I reread it every 6 months or so. It's really fascinating not only because each time you read it you become aware of the nitpicky flaws in it, but because you become MUCH more aware of how there are really people who do talk like Rand villains, and it's scary.
Rand's number one rule of characterization: if someone says their ought to be a law. They are a bad character.
This is what I like least about Rand detractors: they never actually seem to have read the book.
Rand gets very specific about what constitutes a useful law and what doesn't. Mainly, she says that government should protect the people with law enforcement, protect their rights with courtrooms, and protect the nation with a defensive military - all things that private enterprise can't be trusted to do. She believes in government in a limited capacity, but she believes it should exist.
And one thing people don't seem to get while reading Atlas: she's aware that she's writing about a pipe dream. Her story is merely a hypothetical ideal, not an idea of what she actually wants to happen. Her writing worked, too: it made millions of people think about self-reliance and freedom. And that's not a bad thing at all.
Rand gets very specific about what constitutes a useful law and what doesn't. Mainly, she says that government should protect the people with law enforcement, protect their rights with courtrooms, and protect the nation with a defensive military - all things that private enterprise can't be trusted to do. She believes in government in a limited capacity, but she believes it should exist.
And one thing people don't seem to get while reading Atlas: she's aware that she's writing about a pipe dream. Her story is merely a hypothetical ideal, not an idea of what she actually wants to happen. Her writing worked, too: it made millions of people think about self-reliance and freedom. And that's not a bad thing at all.
I am not a Rand detractor I am a card carrying libertarian. FountainHead page 137 supports my claim. You misunderstood me I like her writing and her ideals. Its my fault for making a quick joke anyway.
atlas shrugged is too controversial to make a strong impact. too many people dismiss the salient points by pointing to some weird ones.
send everyone a copy of Mind the Gap and How to Build Wealth by PG.
send everyone a copy of Mind the Gap and How to Build Wealth by PG.
So much for Disaster Capitalism (http://www.naomiklein.org/shock-doctrine) then, huh?
Didn't the same people just get 850bn dollars more to play with?
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And, to boot, it's being used as an example of a failure of markets. The whole sub-prime fiasco has nothing to do with markets. In a free market, government does not guarantee that a risky investment will be repaid (as has largely been the case in the home lending market since 1999). We're simply not talking about a free market. We're talking about government programs gone horribly (but predictably) awry.