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An anti-capitalism poster from 1911, published in the Industrial Worker, a socialist-anarchist newspaper
Fire, the wheel, the printing press...and the capitalist economic system.

When listing all the numerous inventions that improve our lives, one of the most important is usually ignored: the capitalist economic system.  With recent market turmoil causing some observers to claim capitalism itself has failed, it's apropos to take a closer look at the technology behind it.

Capitalism is an invention, no different than the transistor or the automobile. Like those others, it's comprised of many smaller inventions: the corporation, the bank, the stock market, commodities, securities, futures, etc. All together, they are a group of technologies invaluable for efficiently converting labor and resources into goods and services. Nothing we've devised has ever worked so well.  Most of our prosperity and standard of living derives from it.

Take Russia. By far the world's largest country and the richest in natural resources, it has a highly educated and hard-working populace. Yet when Putin took over, their GDP was barely larger than the tiny island of Hong Kong's, and despite quintupling in the last few years, it's still a tenth of the US economy. Or consider China which, after allowing a small bit of capitalist endeavor to penetrate its system, transformed into the world's fourth-largest economy nearly overnight.

One of the reasons so many people (including some misguided economists) have trouble accepting capitalism is its apparent simplicity. It just seems impossible that a system so seeming chaotic can outperform something intelligently planned by trained economists. But that assumption is itself incorrect. Where a planned economy is like a single-core processor, capitalism is a neural-net processor with millions of nodes. A socialist economy is run by a few government-appointed individuals. But in a free market, every time you buy or sell a product, you're adding a calculation to the system. Whether you buy a car, rent a movie, or get a haircut, you're contributing to the price and quantity of goods and services. Cut a trip to the mall because gas went up another 5 cents, and you've input data to force down the price. Go anyway and you've voted to raise the price further.

The system appears simple, but in reality it's an enormously complex, self-regulating, highly adaptive mechanism. And like most mechanisms, it works best when no one pours sand in the gears.

There's a strong theoretical basis that any intervention in a market reduces its efficiency. But still governments keep trying to tinker under the hood. Their shade-tree efforts invariably do great damage. Our current fiscal mess is a marvelous case in point. It's been cast as something too difficult for average people to understand, but it’s really very simple.

Consider.  A couple applies for a loan. They make $60K a year, and need to borrow $700K. Their credit history is poor or nonexistent. The house has doubled in value in recent years-- only because all the other homes around it have as well. And the only reason they can afford the payments is because interest rates are so low and they're being offered a balloon mortgage that, if rates climb or their house depreciates will surely bankrupt them.

Does it really take a rocket scientist to know how risky this is? And that a bank with a large portion of its portfolio in such loans is also in peril?

So why did so many banks take such risks for so long? Here's the key to the whole problem: government intervention. In a free market, interest rates will rise in step with rising risks. They didn't -- thanks to the Fed. And government-sponsored enterprises (GSEs) such as Fanny Mae, Freddy Mac, and the Federal Home Loan banks kept the music playing. With most of the risk ultimately guaranteed by the federal government, no one really cared.

The bailout will ultimately cost a trillion dollars. It's also left us an industry that's effectively been nationalized, and a precedent that will encourage future industries to take more inappropriate risks. But worst of all, we have people on both sides of the political aisle calling for still more government involvement. Capitalism hasn't failed here-- government intervention has.

What goes up must come down. When a market rises too fast, it must eventually decline. The longer one prevents that, the harder that fall will be. Very simple. It's a shame our politicians can't understand that.

But the technology itself is still sound. And if we just leave the machine alone, very quickly it will start working again.

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The worst system except all others
By kyleb2112 on 9/22/2008 5:08:47 AM , Rating: 5
That quote about Democracy being the worst form of government except all the others is also true about capitalism. It's the worst economic system except all others. But you have to get to a certain age and/or experience to realize that. Unfortunately, the idealistic youth of every new generation think that some form of collectivism will finally work THIS TIME--contrary to all historic examples and basic human nature.

RE: The worst system except all others
By arazok on 9/22/2008 9:43:37 AM , Rating: 5
I’d disagree. I see lots of flaws with Democracy, but few with Capitalism.

I imagine you would be referring to the rich/poor gap, I see that as one of the strengths of Capitalism. It only rewards those who contribute to the system, and the more valuable your contribution, the greater your reward.

I’m one of those evil bastards who don’t pity the poor. I believe that their plight is largely of their own making, with few exceptions.

RE: The worst system except all others
By rvd2008 on 9/22/2008 10:39:07 AM , Rating: 2
so, how who decides if poor is an exception and how to deal with it? Do you really believe those who contribute to the system are rewarded the most in capitalism?

RE: The worst system except all others
By pmonti80 on 9/22/2008 10:40:46 AM , Rating: 2
Don't bother answering him, just don't bother ...

By erikejw on 9/23/2008 11:39:43 PM , Rating: 4
"The point is, ladies and gentlemen, that: Greed, for lack of a better word, is good. Greed is right; greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms, greed for life, for money, for love, knowledge — has marked the upward surge of mankind and greed, you mark my words — will not only save Teldar Paper but that other malfunctioning corporation called the USA.”
Gordon Gekkos

By clovell on 9/22/2008 11:19:43 AM , Rating: 2
Welfare reform, progressive taxes, etc. A lot of it has already been implemented.

RE: The worst system except all others
By arazok on 9/22/2008 11:22:34 AM , Rating: 3
so, how who decides if poor is an exception and how to deal with it?

In some cases it’s obvious. If it’s a disability, I’m all for giving these people a hand.

Do you really believe those who contribute to the system are rewarded the most in capitalism?

Absolutely. As an example, the company I work for was founded in 1991 by a 30 year old ex pitney-bowed sales rep. He risked everything he owned to create a small business, with no guarantee it would work out. Within 10 years, he grew the company into a medium sized business employing 250 people with offices in Canada and the US. He sold the company for $30 million and retired at 42 years of age.

Some people would view him as a greedy capitalist. What a bastard, he made millions off the labour of others! What about that poor guy cleaning his shop floors for minimum wage!

I see a man who provided jobs for 250 people. I wouldn’t have a job if it wasn’t for him, or people like him, because I don’t have the balls to risk everything I own on a venture. So, in this capitalist system, he risked more, and was rewarded more. I am not willing to risk more, and I am rewarded with less. You reap what you sow.

RE: The worst system except all others
By rvd2008 on 9/22/2008 11:47:16 AM , Rating: 2
So, you are not "one of those evil bastards who don’t pity the poor" as you put it after all if you are "all for giving these people a hand"? Well, at least in well defined disability cases...

I see your point and there are examples like that. However, the gap between poor and rich is widened and the middle class became poorer. How can this happen if capitalism rewards those who work hard and deserve? Where is the problem?

RE: The worst system except all others
By jgvandemeer on 9/22/2008 11:51:30 AM , Rating: 4
How can this happen if capitalism rewards those who work hard and deserve?
Ooh! Oooh! Easy one, pick me! Because the poor don't work hard and aren't deserving. Most of them also didn't take advantage of the free education they were offered when they were younger.

Now, give me my cookie.

RE: The worst system except all others
By rvd2008 on 9/22/08, Rating: -1
By Hieyeck on 9/22/2008 12:46:44 PM , Rating: 4
Harvard educations are hardly free. I think he's talking more about things like... oh... I don't know... COMPLETING HIGH SCHOOL. Honestly, if those people really believed that 'being the man' and 'gangsta' was going to help them succeed in life, they deserve it. Charisma; cunning; intelligence - pick any two and succeed. Pick all 3 and you're swimming in a pool filled with Benjamins.

Celeberties are lucky. Capitalists tend to be charasmatic and cunning.

RE: The worst system except all others
By FITCamaro on 9/22/2008 12:55:03 PM , Rating: 2
They also didn't expect things to be handed to them. He never said they were college graduates. He said they took advantage of the free education through high school that the government provides. They did what they had to do to succeed. Look at the guys who formed Google. They're not from rich families. They went to school and had a good idea. Now they're billionaires. Idiotic liberal ones at times but still billionaires.

There will always be people born into money. They are not to blame though for the poor staying poor. Anyone can go to college today. Regardless of financial situation. In fact kids with poor parents are almost better off because they qualify for so much more in financial aid. If you're someone like me who the government decided his parents made too much money, you get loans, thats it. My parents didn't help me pay for college. I took out loans.

If someone doesn't make it today its because they didn't try. No one held them down, repressed them, or anything else. They choose not to do well in school. It largely the parents fault. But its not the fault of "greedy" businessmen. I hope to be one of those people one day.

I have absolutely no pity for the poor. Do I like the fact that others have it harder than me? No. But I don't feel that its my fault or anyone else's (except their parents) that they are where they are.

RE: The worst system except all others
By BuddyRich on 9/22/2008 1:52:16 PM , Rating: 2
That is not true. There are well documented invisible barriers for both people of colour and barriers based on gender at truly reaching the pinnacles of success. These are systemic to our own cultural biases and are slow to change, if they change at all. I don't think idiotic quotas or affirmative action are the way to go either, but to say that hard work is all it takes is just as naive as expecting a handout. Hard work will get you far, but only so far, then you need luck and/or help from the established to really make it, and it really is still much an "good old boys" club in getting that help, leaving one only luck. It is a self propagating cycle that helps keep the rich, rich as there is a similar cycle that keeps the poor, poor.

There are socio-economic factors that play into one being poor. They aren't excuses, but factors that make it X times as hard for someone to succeed from a poor background as opposed to one from even a middle class background. Averages alone will say a greater percentage of the poor will fail comapred to their middle and upper class compatriots and continue the cyclic nature of the poor being poor with their own families. Are the parents to blame? Perhaps, or maybe it was a grand-parent, or perhaps just circumstance... who knows, but I choose to have pity and advocate changes to help the poor, just as you choose to have none and be greedy and protect your stash... That's the beauty of democracy, I have the right to my opinion, and if I can enough people to believe what I believe it can be enacted.

Ultimately though, you only have to look at Maslow's hierarchy of needs. Until people have the basics taken care of (food, shelter, saftey) their thoughts will not be on anything else, that is just human nature. Its easy to say "work harder" but if you don't know where your next meal is coming from, its alot harder to think about bettering yourself vs. thinking about your next meal.

That's why I think a socialist/welfare state mixed economy is the best vs. a truly capitalistic one. The basics are met and allow someone from all walks of life to truly make it. Then there are no excuses for those that fail, and they truly do have only themselves to blame.

RE: The worst system except all others
By theendofallsongs on 9/22/2008 2:00:53 PM , Rating: 3
factors that make it X times as hard for someone to succeed from a poor background as opposed to one from even a middle class background.
Sure. If your parents are poor and lazy, they're probably going to instill that kind of behavior in you also. If your parents are hard working and well educated, chances are you're going to be as well. No big secret there.

RE: The worst system except all others
By BuddyRich on 9/22/2008 2:17:36 PM , Rating: 4
And do you chose your parents? There is that luck again, nothing to do with hard work.

Something at least has to be attempted to stop the cycle, IMO. Otherwise it will keep propagating itself. Which is fine if you are outside of that cycle, but man, I would hate to be caught in it.

I suppose this could also be seen as the nature vs. nurture debate... perhaps I am placing too much emphasis on the nurture side (in this case upbringing) but I definitely think it has an affect...

By FITCamaro on 9/22/2008 2:24:20 PM , Rating: 2
Yes and I'll feel sorry for people who had poor parents and thus were never taught to make good decisions. Not give them everything for free because of it.

In the end everyone has a choice. You can live in squalor like your parents, complaining because others have more. Or you can work hard to get out of it and take responsibility for your actions. Because in the end, they are your own. You can't choose your parents. You can choose how you live your life. If you make the choice that depending on the government to solve your problems is the way it should be because your parents told you so, that's your fault. Not mine.

RE: The worst system except all others
By porkpie on 9/22/2008 3:55:51 PM , Rating: 4
And do you chose your parents? There is that luck again, nothing to do with hard work.
The hard work is what YOU do, not what your parents do. Plenty of kids had poor parents and still got a good education and learned the value of hard work themselves.

All you deserve is a CHANCE in this country. You don't deserve a free ride.

By therealnickdanger on 9/25/2008 8:35:01 AM , Rating: 3
Wait... so you're saying that I shouldn't continue to collect food stamps and live in section-8 squalor while riding on 30" rims? I shouldn't buy that gold chain? I shouldn't buy so much weed and alcohol? I shouldn't buy a plasma instead of paying off my trailer? You make it sound like I actually have a choice! How dare you mock my condition! You racist! You sexist! You class-ist!

By murphyslabrat on 9/26/2008 3:31:10 PM , Rating: 2
Dude, chill. If a kid has a great enough desire to succeed, they will. They will use computer resources, available for no cost at school and at libraries, to research their options; options which include the Pell Grant, which is currently paying 110% of my education. Or, they can find a mentor in a teacher or some other adult. Maybe such is not true for larger schools, but most teachers are willing to answer questions, as long as you show that you will take the answer to heart.

You guys talk of a cycle. That cycle is not unbreakable, it makes things harder when you don't have a father or mother that pushes you to excellence, but that does not rule out excellence. The resources are there, the opportunity is there; all anyone really needs is a will for there to be a way.

Really, there are only two situations where a kid is screwed, and the first is if they are unwilling to chase-down success. The second, is if the kid is mentally which case they are really screwed.

By jtemplin on 10/8/2008 1:22:18 PM , Rating: 2
Its good to hear some others on this forum have a background in Psychology! They BOTH matter BUT consider this example. You could have the deck STACKED genetically ok. This baby is going to be perfect in every category, no genetic disorders, propensity for intellect and athleticism. Then you implant this embryo in the womb of a crack addicted mother.

Now your perfect embryo is going to be a crack baby. Not so perfect anymore.

A competing (but likely complementary) idea is that of canalisation, where the phenotype is buffered against environmental change--a sort of phenotypic predestination. To integrate thoughts: I feel in the crack baby case its fair to say that the environmental extreme represented by crack will necessarily drag the child's capability for achievement down as compared to the same genotype in a crack-free high-SES mother.

By Spuke on 9/25/2008 7:09:37 PM , Rating: 2
There are socio-economic factors that play into one being poor. They aren't excuses, but factors that make it X times as hard for someone to succeed from a poor background as opposed to one from even a middle class background.
It IS harder for the poor to succeed. The environment of the poor is not conducive to success hence the reason why they are poor and continue to be so. I was born and raised poor (government housing, single mom on welfare). In defense of my mother, she did not stay in those conditions. She moved off of welfare, got a good job (eventually got laid another, not so good, job) and owns a home.

I am now upper middle class, married, have a degree and a great career. Was it hard? Hell yes! Poor people generally don't know how to succeed so I had to teach myself. I was literally on my own for the most part as my family just didn't know how to get where I wanted to go. This is the plight of many poor people. They are literally stuck where they're at and without motivation, are doomed to perpetuate their plight. But the opportunities are there.

My brother also has a degree but my sister does not and lives at home with my mother. My friends from my neighborhood have no degrees, one did not graduate from high school, and all but one bounces from job to job. One of them has had the same job since high school but has no motivation to move on. All are very intelligent and are quite capable but have no motivation to succeed.

I am an example of how it can be done but it DOES take some creativity, motivation and hard work. Not everyone is capable of leading themselves (most people are sheep) and therein lies part of the problem. There may be some people that would intentionally stand in your path but those are not the majority and, nowadays, those types are irrelevant. I did it and I'm not a genius. Others can to but they need some guidance (that can be helped) and motivation (must be self generated).

By jtemplin on 10/8/2008 1:12:00 PM , Rating: 2
Good post BuddyRich +1

RE: The worst system except all others
By arazok on 9/22/2008 12:45:44 PM , Rating: 3
However, the gap between poor and rich is widened and the middle class became poorer. How can this happen if capitalism rewards those who work hard and deserve?

Easy, because the middle class (or the poor) are not getting poorer, only the gap is widening.

The poor’s income is stagnant because of the same things that make them poor to begin with. In 20 years, a bus driver isn’t going to be any better off then he is today. If you don’t ever attempt to do anything other then drive a bus, you shouldn’t expect to be rewarded for it.

The rich are becoming richer because they excel at what they do. They identify what sectors of the economy provide wealth, and they go there. Some get computer engineering degrees and work in that field, others take chances and create businesses.

As the economic pie grows, nobody is getting less, but some are getting more. People only feel poor because they see others with more.

By FITCamaro on 9/22/2008 1:05:52 PM , Rating: 2
Well said. If you never aspire to do more, you deserve nothing more. You don't deserve a big house, a luxury car, and yearly trips to Europe solely because other people have it. But the government is giving them more for nothing (in their minds) each time they raise the minimum wage. Of course the reality of that is that its just getting more people fired, cutting others hours, and made it harder for small businesses to stay in business.

But oh right they're letting people go or cutting hours because they're greedy businesses right? *rolls eyes*

RE: The worst system except all others
By mattclary on 9/22/2008 2:32:35 PM , Rating: 2
the gap between poor and rich is widened and the middle class became poorer

Totally disagree. Compare the Rockefellers to the poor around 1900. The poor then didn't have a pot to pi55 in. Today the "poor" have color TVs, satellite dishes and iPods.

I think anyone can theoretically make something of themselves, no matter how poor they are, but you really have to have the DRIVE and that is rarer and harder to come by than money.

I have a small computer repair business that provides a nice little supplemental income. If I was as driven as some, I could quit my day job and do nothing but do my own thing.

RE: The worst system except all others
By on 9/22/2008 3:40:13 PM , Rating: 2
Capitalism means the poor are having to eat free government cheese while the rich are riding around in their million dollar yachts. Why should I suffer because my parents didn't get a good education? The government should provide equally for everyone. Don't we all have equal rights?? Tax the rich at 90% and that'll pay for free education and healthcare for all!

By Andy35W on 9/23/2008 1:38:48 AM , Rating: 2
The poor then didn't have a pot to pi55 in. Today the "poor" have color TVs, satellite dishes and iPods

All bought for on credit.




By jtemplin on 10/8/2008 1:07:38 PM , Rating: 2
Interesting excerpt from a National Alliance to end Homelessness fact book about a study in New York on homelessness. The homeless people that cost the most to our society ARE the ones who need help the most. That is because they have staggeringly high rates of mental illness.
Although chronic homelessness represents a small share of the overall homeless population, its effects on the homeless system and on communities are considerable. Chronically homeless people are inefficiently served by the systems they interact with, including emergency shelters, emergency rooms, hospitals, and police departments. These systems in turn are adversely affected by chronic homelessness.

A landmark study of homeless people with serious mental illness in New York City found that on average, each homeless person utilized over $40,000 annually in publicly funded shelters, hospitals (including VA hospitals), emergency rooms, prisons, jails, and outpatient health care. Much of the cost was for psychiatric hospitalization, which accounted for an average of over 57 days and
nearly $13,000.

When people were placed in permanent supportive housing, the public cost to these systems declined dramatically.
The documented cost reductions—$16,282 per unit of permanent supportive housing—were nearly enough to pay for the permanent supportive housing. If other costs, such as the costs of police and court resources and homeless services were included, the cost savings of permanent supportive housing would likely have been higher.

In other words, the study found that it cost about the same or less to provide permanent supportive housing as it did for people with serious mental illnesses to remain homeless. But while the costs were the same, the outcomes were much different. Permanent supportive housing results
in better mental and physical health, greater income (including income from employment) fewer arrests, better progress toward recovery and self-sufficiency, and less homelessness.

Oh please
By NullSubroutine on 9/22/08, Rating: 0
RE: Oh please
By FITCamaro on 9/22/2008 7:47:34 AM , Rating: 3
So go live in a socialist country if you already don't.

RE: Oh please
By BuddyRich on 9/22/2008 10:42:02 AM , Rating: 2
My problem with capitalism is more to do with how it developed than anything else.

Like any other system, it didn't start in a vacuum, and has come along way since Adam Smith wrote about the invisible hand of the market. As it currently is right now, it is a long way from the laissez-faire model that Libertarians and others like to promote and that probably makes it worse than collectivist/socialist systems... As it is run right now, it is probably more a form of state-sponsored neo-colonialism than anything else.

I don't think regulation is necessarily bad, but bad regulations do get passed. Good ones get passed to. Unrestrained greed leads to things like what happened in China with the baby formula. Food regulations are a good thing, how they implemented and the specifics of the regulations are what need to be addressed. If it was left to the market it would be like my favourite quote from Fight Club:

"A new car built by my company leaves somewhere traveling at 60 mph. The rear differential locks up. The car crashes and burns with everyone trapped inside. Now, should we initiate a recall? Take the number of vehicles in the field, A, multiply by the probable rate of failure, B, multiply by the average out-of-court settlement, C. A times B times C equals X. If X is less than the cost of a recall, we don't do one"

Are peoples lives no more than their production units and costs to these big corporations? You can bet if there were no regulations, companies would make decisions like the above and that is sickening...

I suppose my real problem is two things, both involving corporations. Corporations are given the rights of individuals, but exist in perpetuity, whereas a normal human dies. Some of these rights weren't meant to exist forever. Second, the limited-liability nature of corporations already limits risks to the individuals engaged in the venture, which directly affects risks taken by the corporate entity. This means riskier behaviour can be undertaken by corporations than an individual alone. Doesn't that in and of itself throw the traditional market feedback loop off?

Finally this is more a historical footnote, but private property (which is essential for the capitalist system to work) has been fought over and stolen from individuals since time began. I don't think there is really a non-violent way to establish at least initial ownership of something. And these wrongs over the centuries have been carried forward into the present with no real resolution, and capitalism doesn't propose one. Yes, people should just "forget" past injustices and move-on, but its easy to say when you weren't one affected by said injustices... This isn't a problem that capitalism created (maybe perhaps it did but was it truly capitalism or colonialism then I don't know) but it is one that still affects things today.

Those are some faults of capitalism... Are they worse than other alternative systems faults... I don't think so... but I've never lived in a strict alternative where my freedoms are curtailed. I do live in the great white socialist north where some of my freedom is curtailed for the benefit of all, and I am ok with that.

RE: Oh please
By masher2 on 9/22/2008 11:02:00 AM , Rating: 3
> "Are peoples lives no more than their production units and costs to these big corporations? You can bet if there were no regulations, companies would make decisions like the above and that is sickening..."

But such decisions are made every day, not only by corporations, but by our government. Tens of thousands of people die each year in auto accidents...if we had unlimited resources to make roads and cars safer, most of those would be prevented. Do we put up a $100K safety rail and 24-hour lighting around this curve which has had three fatal accidents in the past year? What about this nearby one, which hasn't had any...yet?

Dozens still die from tainted food each year. Do we run multiple tests on each and manufactured food product sold in the country? Do we test every dish sold in every restaurant? Or do we decide at some point that things are "safe enough" for the amount of money and resources we spend?

What about slips and falls in the home? Shouldn't we mandate that bathtubs and other hard surfaces be immediately replaced with safer, softer materials that would wear out faster? Even if it would cost hundreds of billions?

The safety of *everything* in society-- cars, bridges, buildings and homes, food, clothing-- is set by cost-benefit analysis. Society cannot function without us making a rational decision about how much resources we're willing to spend to avoid death or injury.

The idea that "one cannot put a price on life" is one that can't exist in the real world. Resources are not unlimited. Using them wisely means accepting a certain degree of risk for a given cost level.

RE: Oh please
By pmonti80 on 9/22/2008 11:14:05 AM , Rating: 3
The idea that "one cannot put a price on life" is one that can't exist in the real world. Resources are not unlimited. Using them wisely means accepting a certain degree of risk for a given cost level.

The thing is that to some extent we pay government to make that decision. But we don't pay the enterprises to make that decision. That is the scary thing.

RE: Oh please
By arazok on 9/22/2008 11:30:01 AM , Rating: 2
We do pay enterprises to make that decision. Every time you buy a product, you encourage the enterprise to make more of that product. If you deem a product unsafe, and don’t buy it, the enterprise will either improve the product, or stop making it.

RE: Oh please
By rvd2008 on 9/22/2008 11:28:19 AM , Rating: 2
Good point. This really comes down to "what is the price of human life". Everybody could have a different opinion on this, but I am pretty sure that we all price our own lives very high (we are better after all than poor black homeless at the street corner, aren't we?). Unregulated capitalism will put a (very) low price tag on (any) human life.

RE: Oh please
By masher2 on 9/22/08, Rating: 0
RE: Oh please
By rvd2008 on 9/22/2008 11:53:34 AM , Rating: 2
People with the money will be untouchable in unregulated capitalist society. There will be no court hearing for the poor. And consumers will not even be aware of a death threatening product if corporations are not overlooked. Welcome back, 19th century!

RE: Oh please
By FITCamaro on 9/22/2008 1:00:35 PM , Rating: 2
Tell that to companies who've been sued for millions because someone was a freakin idiot.

Why do you think Superman costumes have a tag that says "Does not endow the wearer with the ability to fly"?

Why do you think McDonald's coffee cups say "CAUTION: VERY HOT!"?

Why do you think household cleaning products have directions not to eat them? (Small kids don't read so it isn't for them.)

RE: Oh please
By BuddyRich on 9/22/2008 2:02:36 PM , Rating: 2
But then lawsuits and the like are only for money. They become a "cost of doing business" and some things like safety shouldn't have a price. Start holding CEO and Boards of Director members criminally responsible and then things truly would change.

I mean if I kill someone, I am charged with murder and my freedom is taken away if convicted. Even if it was unintentional I'd still get charged with manslaughter and still go to prison for a few years. As an added bonus I can still get sued civilly in a wrongful death suit and liable for a lot of money too!

If I am a company and build a car that has an unintentional design flaw that kills a couple hundred people, I write a cheque, maybe for millions, to settle a lawsuit...

Millions of dollars vs. an individuals freedom. Somehow the above doesn't seem fair to me.

RE: Oh please
By theendofallsongs on 9/22/2008 2:14:06 PM , Rating: 2
Why is it people with your attitude always seem to know so little about law and business? Executives can already be held criminally responsible for product injuries, if you can prove intentional neglect. It's no different than personal manslaughter. If your hand slips on the wheel and you kill someone: no charge. But if you accidently killed someone because you were drunk or talking on the phone, you can wind up with jail time.

RE: Oh please
By BuddyRich on 9/22/2008 2:30:06 PM , Rating: 2
True. But the nature of a corporation obfuscates who is truly responsible and makes that intentional neglect almost impossible to prove in most cases. With the government, their actions are supposed to be transparent, and with the aid of the Access to Information Act, and the like fall under far more public scrutiny than a corporation which has no obligation.

Look at all the cover-up the cigarette companies tried when they were sued (again civilly, not criminally), and this was evidence that was destroyed that was covered under subpoena.

RE: Oh please
By FITCamaro on 9/22/2008 2:21:17 PM , Rating: 2
So who should go to jail for an unintentional design flaw? All the engineers who designed it? The engineering lead? The product manager who signed off on it? The CEO?

Corporations exist to protect those who own them and who work for them. You can't have people going to jail because a product was defective. You hitting someone with your car and killing them because you weren't paying attention is your fault. And if you hit and someone and kill them and it isn't your fault, you don't go to jail. If you're playing with a gun and accidentally shoot someone and kill them, it's your fault. All the employees of a gun manufacturer should not go to prison because someone decided to use their product to kill someone.

RE: Oh please
By BuddyRich on 9/22/2008 2:49:31 PM , Rating: 2
So you are saying that mistakes when made by a collective are forgivable, but a mistake made by an individual is not? Is it the problem that you can't assign individual blame appropriately in the case of the collective that no one should be blamed?

Its a bad example but lets say it was a specific engineer who nodded off and forgot to carry a one and something was designed sloppily... should that individual engineer be charged, just like I would be if I nodded off at the wheel? I think he should be, people would be a lot more careful in their work if that was the case. And if blame cannot be ascertained, it should fall on the CEO, who would also ensure that fewer mistakes are made.

All I am illustrating is that without the same level of deterrent that exists at an individual level a deregulated market will never work for the interests of individuals, particularly in matters like safety, etc. because there is not a big enough deterrent in market forces alone for corporations to ensure safety.

RE: Oh please
By on 9/22/2008 3:43:55 PM , Rating: 2
Simple solution: ban all corporations entirely! Their good for nothing but greed and coruption and sqeezing the rights of the common man. I dont understand why we ever allowed them to get started in the first place.

RE: Oh please
By FITCamaro on 9/22/2008 4:01:06 PM , Rating: 2
If your idea were to happen every business in the world practically would be out of business. It is impossible to completely eliminate any and all defects from every product. No all the lawsuits might not be successful, but the legal fees would destroy companies. As others said, if there is intent to create a product that is dangerous, an employee can be sued.

And when it comes down to it, a company is successful by having trouble free products. A company constantly being sued for defects that kill is not one that lasts very long. Hell look at Firestone. Some lies were spread about their tires being defective and it nearly put them out of business. Nevermind that people were driving the tires under-inflated, over rated speeds, and on vehicles that, regardless of the tire, were known to flip.

RE: Oh please
By BuddyRich on 9/22/2008 11:38:07 AM , Rating: 2
I agree with what you are saying, but bringing everything back to a CBA calculation makes human existence seem shallow and cold...

I agree some risk needs to be taken, however for whatever reason, I prefer the government to make those risk calculations. With the government I can hold them accountable (in a democracy at least) if they get it wrong, companies are ultimately only accountable to their shareholders in the long run, so they don't necessarily have my best interests in mind. Of course with lobbying efforts, etc, should I really be so trusting of the government? I don't know.

Still food is one area that should be regulated by government, not industry, just like traffic laws are passed by the government and not the car industry. Two examples where I think deregulation and a move to a laissez-faire model are inappropriate.

I could buy into deregulation more if corporations could somehow be held responsible (more than monetarily, ie. criminal charges) when they take short-cuts that end up costing lives. Sarbanes-Oxley did it with accounting, making the CEO responsible on what gets reported, but by and large the nature of a corporation shields individuals from the consequences of their actions, which encourages the companies to take the risks (and sometimes short-cuts) they do.

RE: Oh please
By pmonti80 on 9/22/2008 11:42:02 AM , Rating: 2
So true, some people just don't want to see it.

RE: Oh please
By Spuke on 9/26/2008 4:32:01 PM , Rating: 1
With the government I can hold them accountable (in a democracy at least) if they get it wrong, companies are ultimately only accountable to their shareholders in the long run, so they don't necessarily have my best interests in mind.
In America (not sure where you're from), we can sue as well file criminal charges against companies. Ever heard of a class action lawsuit? Have you ever heard of Enron? Maybe you can't where you live but we sure as hell can (and have, ad nauseam) here.

RE: Oh please
By Ringold on 9/22/2008 6:16:49 PM , Rating: 2
Are peoples lives no more than their production units and costs to these big corporations?

Yes, that's all labor is. Puppy dog kisses are nice, but like all other non-monetary/unmeasurable things, they don't put food on the table. "He has a hundred-megawatt smile" is a just a metaphor, unfortunately.

Here's your problem; the world isn't nice, and you need to accept it already. :P

RE: Oh please
By mattclary on 9/22/2008 2:37:21 PM , Rating: 1
But you have the power to become your own feudal lord. Under feudalism, if you were born a peasant, you and your children would die as peasants.

By MAIA on 9/22/2008 7:31:19 PM , Rating: 3
This is a neo-liberal point of view of the capitalist system. It has been fed to us for so long it already stinks ...

Just look around you. Do you think a self-running system based in money wouldn't draw man greed till exaustion. Then you say we shouldn't take action and control it ? For god sakes ...

I think we, as human beings, are much more than just pieces of papper, metal or plastic. Damn this greedy hipocritical religion of capital !

RE: Neo.liberal
By Ringold on 9/22/2008 9:30:01 PM , Rating: 1
Thanks for the emotional plea to revert to economic theory based on things that can't be measured, compared, analyzed or anything else.

Unfortunately, 5 year olds can make valid arguments when all rigor is thrown out. "I wanna go to Disney, because my happiness is worth more than the mere green paper Disney charges!" Whose to say the kid is wrong? Everything is relative, and nothing matters!

When you find a framework with rigor than can be demonstrably more successful than capitalism instead of just damning it, then try again. Neoliberalism has survived not because of a lack of competition, but because nothing else has succeeded.. And because calculus, as it turns out, is pretty darn handy.

RE: Neo.liberal
By MAIA on 9/23/2008 5:29:35 AM , Rating: 2
Oh my oh my... "Just don't touch my capitalism !!!"

Well I know libertarians are unabashed free marketeers, and generally can see no wrong with the market, either historically, philosophically, or economically. In this they overlap strongly with neoliberals. The rest of the world can though. Libertarians generally hysterically reject anything criticizing capitalism, such as the notion of classes, despite the fact that capitalism is well known to have severe problems.

Let me give you the example of New Zealand. It was one of the "neoliberal good examples". But it has been so long since anyone in the business press has praised the New Zealand "miracle," it's almost as if we imagined the whole thing. But, of course, the current silence is really no mystery. The 15-year free market experiment has been an unmitigated disaster. The suffering caused among ordinary New Zealanders is well known: the highest youth suicide rate in the developed world; the proliferation of food banks; huge increases in violent and other crime; the bankruptcy of half the farms in the country; the economic disruption of hundreds of thousands of lives; health care, education and other social services devastated by the mad marketplace scientists.

But, of course, neo-liberal ideologues don't hold much truck with the human consequences of their experiments. So let's examine those things they do care about. The revolutionaries promised to tear down the "debt wall," unleash spectacular economic growth, spur foreign investment and productivity, create enormous new wealth and new and better jobs.

They failed on every count. Instead of a brave new economy, they delivered an economic version of Frankenstein's monster. The initial wave of changes -- deregulation, privatization, tariff elimination -- was justified by the infamous debt crisis. This was a ruse all along.

As for the debt in 1984, it was NZ$22-billion, but after 10 years of experimenting, it had doubled to NZ$45-billion -- in spite of the sell-off of NZ$16-billion in state enterprises . Today, it has finally returned to 1984 levels, but only through more Crown asset sales.

And economic growth? In the years 1985-92, average economic growth in the OECD countries totalled 20%, while in New Zealand it was negative, at -1% . The promised creation of enormous new wealth went into reverse: Real GDP in 1992, at 5%, was below the 1985-86 level. A burst of growth from 1993 to 1995 petered out, and the economy steadily declined until it dipped into negative territory in 1998, posting the fourth-worst growth in the OECD.

The transformation of the economy was supposed to spur foreign investment, but it mostly meant a feeding frenzy on domestic corporate assets. In 1993, the proportion of GDP in investments was just 70% of what it was in 1984.

The restructuring of the economy failed most dramatically on the unemployment front, and the country has never managed to get back to anywhere near the 1984 level of 4%. The "workless and wanting work" figure peaked at more than 18% in 1993. In 1999, that figure had been reduced only to 11.2%.

The radicals also promised increases in productivity, but again, they failed to deliver. After eight years of restructuring and massive labour deregulation, New Zealand's productivity began a steady decline in comparison with its neighbour, Australia. From 1978 to 1990, the rates had been similar. The gap steadily increased between 1990 and 1998, with Australia posting a 21.9% increase and New Zealand just 5.2%.

Only the wealthy in New Zealand could see any benefit from this destructive exercise in social engineering. Between 1984 and 1996, the top 10% of income earners measurably increased their share of total income. The lowest 10% lost 21.6% of their 1984 income. More than 50% of the total working population had lower real income in 1996 than in 1984.

There are lessons from New Zealand, but they do not involve adopting that tortured country as a model.

The first lesson is that the unfettered application of ideology is inevitably destructive -- not just to democracy, social peace and equality but to the economy. Even as the revolution continued to deliver disastrous results, its promoters claimed it was because it had not gone far enough.

The second lesson is that parliamentary democracy Anglo-Saxon style has proven extremely vulnerable to the ravages of ideology. A virtual executive dictatorship can implement policies that are never even debated during elections -- as happened in New Zealand in 1984. The only thing that stopped the zealots from going even further was the introduction of proportional representation in the early 1990s and the subsequent election of minority governments.

And that leads to the last lesson : Globalization is not inevitable, nor is it irreversible. The current New Zealand government (a coalition of a chastened Labour party and the left-wing Alliance) is unfortunately still committed to signing free trade and investment agreements. But it is reversing many of the most destructive policies. Included in this rethink are a reversal of the privatization of Accident Compensation Insurance; an immediate rise in pensions; a halt to the sale of public housing and a commitment to rebuilding the public housing stock; the appointment of a review committee on electricity pricing; the freezing of tariffs on clothing and footwear; and the re-recognition of unions.

The pity is that New Zealanders had to suffer through so much in the first place. Now, how come some people still say this neoliberal religion is going to get us anywhere ? It doesn't, it's all a mirage. It's a system that works only for a few and destroys most of the social warranties many people need to survive. Neoliberalism is an ABOMINATION of man's greed and it must be stop as soon as possible.

Less emotional now ?

RE: Neo.liberal
By sigilscience on 9/23/2008 2:17:10 PM , Rating: 2
Nice cut and paste job, but if you're trying to make us feel sorry for New Zealand, it won't work. It's one of the richest economies in all of Asia, and has one of the lowest unemployment rates in all the OECD. Compared to the terrible state of their economy 20 years ago, the experiment has succeeded wildly.

RE: Neo.liberal
By Ringold on 9/24/2008 9:54:47 PM , Rating: 1
Less emotional now ?

Not really; instead of doing any sort of analysis including multiple countries, you chose a single data point. How about that fantastic unemployment rate in Belgium, eh? See, I can pick outliers as well.

You also happened to pick a country that's located in an part of the world, and is relatively small, so I'm not going to bother double-checking your entirely uncited data that fell from the sky.

Also not sure why you call neo-liberals revolutionaries. Pretty darn sure Smith (born 1723) and Ricardo (1772) predates Marx (1818). And in your entire wall-o-rant, made lots of absolute claims of causation and complained about globalization and free trade agreements, but didn't try to tackle any of the underlying theories at the heart of neo-liberalism, such as comparative advantage in trade. Of course, that'd require intellect. You're also pigeon holing a whole group as opposed to any regulation; that's a lie. Adam Smith himself made such provisions for the necessity of oversight.

But we do agree on one thing! Democracy has serious flaws. I for one wonder if the Chinese are proving their current model superior. Time will tell.

RE: Neo.liberal
By jtemplin on 10/8/2008 1:38:07 PM , Rating: 2
Whatever wind was left in the sails of your reply left
Of course, that'd require intellect.

I dont see this as accurate.
By rudy on 9/22/2008 1:24:22 AM , Rating: 2
Capitalism also created the great depression. And having spent time in countries who have dealt with capitalism unbridled I can say it doesn't work out so well. Rules need to be in place to guide capitalism. Picking the right ones at the right times can definitely be difficult though. Other wise monopolies form and people play terrible games with the market who have power. The low interest rates are not why people kept giving out loans a serious miscalculation on your part. The reason was because people were willing to buy those loans. So the lenders saw no risk cause they were passing the loan onto some investment bank or china or whatever and in turn they were making a quick cool grand or more without actually needing to take any risk. I don't think they ever thought the US government would bail anyone out back then. They just figured they would not be the ones hurting. The low interest rates did not help the problem because the world savings not happy with low interest rates moved investment to alternatives and mortgage backed securities with high interest yielding ARMs was the hot item. But banks were not lending to idiots with nothing because of low interest rates they were doing it cause other idiots were buying the mortgages.

RE: I dont see this as accurate.
By rudy on 9/22/2008 1:35:31 AM , Rating: 3
Another way of looking at it. Someone is selling dog poop for 100K would you buy it? If I gave you a low interest loan to buy the piece of dog poop would you do it? I don't think you would in either case. But if jason mick walked up to you and said I will give you 1000$ if you give me a piece of dog poop would you take out a loan and buy that poop? Of course you would because you don't care what jason mick is going to do with that dog poop which you find worthless you only care that he is giving you 1000$ and you will make a quick buck. What you don't know is that jason mick is packaging up thousands of pieces of dog poop and using it to increase the weight in his box of gold. Then he sells that box of gold mixed with dog poop to someone who doesn't bother to open it and make sure it is all gold.

I do not really agree with what the government is doing but if they don't bail these companies out in some form 1 of 2 things will happen. Either they will get bought by much more cash rich companies mostly out of china, or we will slip into a massive world wide depression. Or perhaps both when presented with no good alternatives this is what they have chosen.

RE: I dont see this as accurate.
By theendofallsongs on 9/22/2008 9:41:59 AM , Rating: 2
Um, hello? Capitalism didn't create the Great Depression, the federal government did. The recently created Federal Reserve tried to short-circuit normal business cycles by hold interest rates down. The final trigger was protectionist laws like Smoot-Hawley that cut foreign trade.

RE: I dont see this as accurate.
By mattclary on 9/22/2008 2:34:36 PM , Rating: 2

Smart man.

By Proteusza on 9/26/2008 5:38:41 AM , Rating: 2
Being against regulation assumes a perfect economy, with companies that never cooperate with each other, and are guided by competition (Adam Smith's invisible hand as it were) to act honourably.

The reality, as we've seen time and time again, is that because corporations are made of people, and people are greedy, they will break the law, influence the law for their own good, and cooperate with each other to fix prices. All of these things affect corporations positively and consumers negatively. They have all happened many times before, and will continue to happen as long as the beings who make decisions in corporations are human. Regulation, at the moment, is the only answer, although I feel a better one would be to send any corporate price fixers, fraudsters, creative accountants to jail. What happened when supermarkets in the UK conspired to fix the price of milk? Nothing, they got a small fine after making millions. Someone should have gone to jail for that. What happens when a CEO reports the company's finance incorrectly, thus affecting the stock market? He has to resign if he is found out - he should go to prison!

We either need regulation, or criminal punishment, or both.

RE: Regulation
By arazok on 9/26/2008 2:55:44 PM , Rating: 2
Clearly, you are not familiar with Adam Smith’s theories, or the current economic crisis.

Adam Smith’s was all about free markets revolving around individuals making self interested decisions, and the invisible hand’s ability to self regulate (it’s much deeper then competition).

I have seen a wealth of evidence (much of it quoted by others in this very blog) to suggest that the current crisis is the result of regulation, not a lack of it. Regulation is a result of human nature and our desire to control things. This is not the time to tighten our grip on a system that is to complex to control.

RE: Regulation
By jtemplin on 10/8/2008 1:47:32 PM , Rating: 2
This is not the time to tighten our grip on a system that is to complex to control.
Good thing you aren't making the big shots. They have plenty of regulations so they damn well better try to control this beast--no matter how complex it may be.

I'm not talking shoulds or ifs, regulation exists. And not all regulation is created equal. We need regulations that work, regulations that reward and punish their intended targets. If we agree that the current crisis is a result of a government economic intervention (GSEs) we most certainly won't agree that those interventions are necessarily representative of all market regulation. You would have us believe that all regulation is bad and will always lead to the Fannies and Freddies.

Sounds like a case of the chicken little complex... If regulation must exist, then it must exist only to positively benefit main street and wall street alike.

By phattyboombatty on 9/22/2008 10:28:01 AM , Rating: 2
and a precedent that will encourage future industries to take more inappropriate risks.

I disagree with this assertion. Companies do not base decisions on whether a "bail out" is available. Ultimately, there are actual human beings (i.e. CEO's) calling the shots for these corporations. Usually, this a short-term, very high paying job with the opportunity to obtain a substantial bonus for immediate, profitable results. Almost always, there is a golden parachute awaiting these individuals no matter how poorly they perform.

These CEO's have every incentive to obtain short-term profitable results, even if their decisions ultimately are harmful to the company's long-term future. They want to bring in the huge bonuses while they are in charge, even if it means creating a giant mess for the next CEO to handle. The CEO's couldn't care less about whether a bail-out is available in the future. They either won't be around when the sh*t hits the fan, or they will have already reaped their millions from the company.

If their is a bail-out, they know that they will be canned. If their isn't a bail-out, they know they will be canned. Either way, it makes no difference to them, because they still get their golden parachute and can retire in Florida with their millions saved away.

RE: Precedent
By masher2 on 9/22/2008 10:45:52 AM , Rating: 1
> "These CEO's have every incentive to obtain short-term profitable results, even if their decisions ultimately are harmful to the company's long-term future"

While true, their actions are not as disconnected from company performance as you think. A CEO reports to a board of directors...if the board doesn't agree with a course of action, they can (and have) ended a CEO's tenure immediately. Similarly, directors on that board are themselves elected at shareholder meetings, giving the ultimate responsibility to those who own the company.

Obviously, excesses can and do occur. But the notion that CEOs can run rampant, destroying shareholder value without oversight, is false.

RE: Precedent
By pmonti80 on 9/22/2008 11:12:20 AM , Rating: 2
The problem is when shareholders are led to believe that great short term benefit every year is good and normal and forget that some decisions may harm greatly long term benefit. Usually people want short term benefits out of everything, so it's just in the interest of the CEO to do it. Both because the CEO will loose nothing if things go south and because he has a LOT to gain if benefits rise sharply in little time. This is the reason all economic bubbles are formed; everyone (economic world, political world and normal people) benefits benefit when the economy is rising a lot each year, so they forget to take precautions.

Article image
By thepalinator on 9/22/2008 11:29:03 AM , Rating: 2
That picture is great. I'd love to have that as a poster in my living room, to remind me of how stupid liberal rhetoric can get.

RE: Article image
By sigilscience on 9/22/2008 10:58:45 PM , Rating: 2
It reminds me of the bomb-throwing anarchists around the turn of the (19th) century and all the havok they caused.

Sad to see some of those same old ideas are still around today.

Something Different
By Narcofis on 9/25/2008 10:24:14 AM , Rating: 2
It's nice to see some information on something that everybody takes for granted (Capitalism). I really enjoyed this article.

It feels philosophical which is actually nice because it makes you rethink on how things are suppose to work and how interventions can break the system either by the government or poor judgment from 3rd parties with a lot of influence. It also reminds us that we should always questions our actions with an open mind. I do mean question in a objective way because we all know what happens when emotions take over the judgment.

Always point to yourself before you point to others.
My 2 sense

By Andy35W on 9/25/2008 5:51:06 PM , Rating: 2
New home sales at a 17 year low and jobless total the biggest in 7 years and the stock market goes up 200 points. Go figure.

It's just sentiment for the moment rather than rationalisation of the long term it seems.



By Hlafordlaes on 10/1/2008 9:13:56 AM , Rating: 2
"The system appears simple, but in reality it's an enormously complex, self-regulating, highly adaptive mechanism. And like most mechanisms, it works best when no one pours sand in the gears.... There's a strong theoretical basis that any intervention in a market reduces its efficiency."

Just one of many sources you might check to see if your faith is up to date. Yes, capitalism is by far the best economic system, but dogmatic belief in laissez-faire policies leads one to ignore, as you do, the emergent properties of an agent-based system.

By SpudNick on 9/27/2008 12:47:17 AM , Rating: 1
Wow. Well said. Brilliantly put. Nicely done. (insert more accolades here).
History has shown that the capitalist system of government is the most effective and efficient system. Sure, we have seen our economic downturns in the past, but capitalism isn't at fault here. Bad choices are. Capitalism is fantastic. If a person produces an effective and desirible product, people will seek to purcahase it. When more people seek to purchase it, the product grows and becomes a better product. More people want the product and you find ways to improve it. This is supply and demand. This is capitalism. Capitalism is the best form of government. You've just gotta look.

now, that was pathetic
By rvd2008 on 9/22/08, Rating: -1
RE: now, that was pathetic
By Andy35W on 9/22/2008 2:10:53 AM , Rating: 2
I don't agree with some of the individual points but I think the general argument was valid and well written.

I'm not sure if the total cost will be $1 trillion, it might be nothing at all, but probably it will be more than $100billion to the taxpayer. So not only is the common tax payer suffering because or repossessions from the banks, who are trying to cut their losses after faulty selling pracitices, but now those same people have to bail out the banks as well with tax money. Does seem rather unfair on the havenots.

The financial institutions are completely merciless and without compassion unfortunately. All of them have statments about putting the customer first but when it comes to it that is a total lie and it is the $ that always comes first. That's why every few years they lose billions through greed and then repeat the process, ie junk bonds, Enron/Worldcomm and now subprime. Bailing them out this time will mean they will continue as in the past and once again in a few years time provide another problem.



PS Seems to be a bit of a race on at the moment between Bush and Chavez who can nationalise the most industries :)

RE: now, that was pathetic
By pmonti80 on 9/22/2008 3:25:45 AM , Rating: 2
I don't agree to everything with masher here. But a least the final chapters are so true that it's impossible to be against.
What kind of example will this "socialization of the economic losses" will set for the future? Next time there is some kind of economic bubble forming, the enterprises will go for it instead of trying to be cautious about that bubble. They will make a lot of money and they know that when the economic bubble will burst, if the problem is big enough, the government money (OUR MONEY) will solve all their problems. So it's better for them when the problem is very big, the help is assured, "We are too big too fail".

RE: now, that was pathetic
By pmonti80 on 9/22/2008 3:33:25 AM , Rating: 2
I don't agree to everything with masher here. But a least the final chapters are so true that it's impossible to be against.

I meant paragraph, not chapter.

RE: now, that was pathetic
By Hieyeck on 9/22/2008 10:07:01 AM , Rating: 1
masher is spot on. Why is it that I readily disagree with you?
I'm not sure if the total cost will be $1 trillion, it might be nothing at all, but probably it will be more than $100billion to the taxpayer.

Because someone doesn't pay attention to the news.,2933,425663,00.html
You can't put bias on $700 billion.

RE: now, that was pathetic
By Ringold on 9/22/2008 6:35:03 PM , Rating: 4
Okay, slow down, and consider what is happening with those 700 billion, because it has to do with accounting, not bias.

If a soldier shoots a government-bought-and-paid-for bullet in Iraq, that's just plain expense. Money out the door, one asset up in smoke, never to return. Welfare spending? SSI? Medicare? Money out the door, nothing gained on the government balance sheet.

This 700 billion on the other hand will be used to buy assets at possibly a depressed market value. They can either turn around later during a better point in the economic cycle and sell those assets at a potential profit, or depending on what they are exactly, hold them to maturity. For all 700 billion in assets to go up in smoke would require such an economic catastrophe that frankly this would be the least of our concerns.

I actually think the tax payer might end up making a profit out of all this years bail outs in the end. Hank Paulson has negotiated some great concessions. This is fundamentally different than all other government "spending."

RE: now, that was pathetic
By FITCamaro on 9/22/2008 7:52:31 AM , Rating: 3
I think your comment is worthless.

His article is well written and spot on. This financial crisis is largely due to government intervention. Democrats have pushed and pushed for lending institutions to give more loans to those who cannot afford them because they wanted to raise minority home ownership. Now the rest of us have to pay the consequences.

If we add Obama to the equation of this already spend happy Congress, things are going to get very bad indeed. Honestly I think regardless of what McCain says, if elected he's almost going to have to raise taxes because of these massive bailouts. Nothing is free. Obama we already know will raise taxes. And for more than just those who make over $250,000 a year.

RE: now, that was pathetic
By Master Kenobi on 9/22/2008 8:20:32 AM , Rating: 5
The problem is that the government is to blame here. The government oversight of the GSE's (OFHEO at the time) mandated that Freddie and Fannie needed to take in more loans to help with lower income families that could not normally afford it to promote "the american dream". Had this not happened, the GSE's would have continued to say no, and refuse to buy those loans. Historically, the GSE's do not dabble in the non-performing loan category or the sub-prime category either. You can thank congress for this entire mess though, since they ultimately hold the leash to OFHEO. /Rant off.

*Disclaimer: I work for one of the GSE's*

RE: now, that was pathetic
By FITCamaro on 9/22/2008 9:11:44 AM , Rating: 2
Yeah I agree with you.

RE: now, that was pathetic
By rtrski on 9/22/2008 9:19:50 AM , Rating: 2
And whose oversight was it that pushed that policy change? (I'm not asking an intentionally leading question - I don't know the answer or how to search for it quickly, so I'll use your response as a starting point to do so.)

Does sound like a bit of a smoking gun though. I find it hard to believe all the "balloon" ARM mortgages the news likes to screech about solely lead to the current fiasco. Certainly they played a part, but usually those were used by people (at least in my personal knowledge) who could've afforded something smaller to get something bigger, e.g. the greedy overreaching, not the low income who wouldve' been below the threshhold).

Something else I rarely see mentioned is new fair-value accounting standards suddenly coming into play in the last year or so meaning everyone had to come clean about what their assets and derivatives were worth "if they were to sell them today". The accounting standards of course didn't create the risk, just suddenly made it glaringly visible to everyone in the room.

RE: now, that was pathetic
By FITCamaro on 9/22/2008 12:43:57 PM , Rating: 2
Bush and others pushed for more oversight of Fannie and Freddie back in 2003 and the Democrats wouldn't have it. They were busy putting their people in there so they could get huge amounts of money.

Love it how Obama says the situation is deplorable when Jim Johnson who's made $90 million of it is on his f*cking staff and one of his key advisors.

RE: now, that was pathetic
By Ringold on 9/22/2008 9:43:05 PM , Rating: 2
And whose oversight was it that pushed that policy change?

If he's talking about what I think he's talking about, it was the mid-90s Clinton years. Thank ACORN, the Marxist housing group, among others.

I find it hard to believe all the "balloon" ARM mortgages the news likes to screech about solely lead to the current fiasco.

Everybody is really to blame; government, banks, consumers, and especially lazy consumers who didn't understand the products they were using and probably didn't care to -- or worse, knew what they were getting in to, but didn't even care.

The accounting standards of course didn't create the risk, just suddenly made it glaringly visible to everyone in the room.

I'm not 100% set on it, but I think mark-to-market isn't quite the great beacon of light you seem to imply. Marking asset values to market is great.. when there is a market! I suppose technically there is a market for these toxic things, but it's so distressed and frozen up that these accounting rules would destroy modern finance for the sake of ideological purity. In reality, most of these things that're going for pennies on the dollar will work out, but god.. 3 month T-bills selling at par? Long bonds traded below 4% today for, I think, the first time in history. Where is the logic in marking to market when the market has gone absolutely insane? Marking to model seems to me to only delay disaster for a firm that bets wrong, not avoid it entirely, while allowing a bank to ignore the vicissitudes of the market in the mean time.

RE: now, that was pathetic
By rtrski on 9/23/2008 9:53:15 AM , Rating: 2
Thanks for the reply. After posting my initial question, I've started to see an awful lot of the same sort of responses in editorials re: Fanny and the congressional (and lobbyist) 'push' to get into low-income mortgages, etc.

And I think I agree with you about the 'fair value' accounting. Makes sense when there is indeed a market, but when there isn't, it becomes undefined in a hurry: how do you assign a liquid value to an aggressively illiquid asset? Still, if they'd been doing so all along, then the fact of the assets being illiquid due to lack of demand would, one hopes, have raised red flags long before they ballooned to the point they did...?

What's really pissing me off now is this continual Obama mantra that "deregulation" lead to this, when the deregulation he's talking about allowed comingling of banking and investment offerings (from his purported economic arch-nemesis, Gramm) and near as I can see is what allowed some banks and investment houses to actually merge and avoid the bailout bandwagon. The ones that had diversified in such a manner were the healthiest remaining.

RE: now, that was pathetic
By sigilscience on 9/23/2008 10:31:45 AM , Rating: 2
What's really pissing me off now is this continual Obama mantra that "deregulation" lead to this
He sings that song because he knows his followers are the type that believe that government is the cure to all ills.

When they hear "more government is the solution", they don't even think. Their brains click off, and they experience a warm flood of emotion over their entire bodies. Sort of like lying in a fresh puddle of urine.

RE: now, that was pathetic
By pmonti80 on 9/22/2008 8:24:04 AM , Rating: 2
I think it all depends on how you see it. The problem is probably too much intervention, but the problem is hardly all democrat. Bush is the one that wasted so much money and he was there for the last 7.5 years. Democrats have been there for a year and a half, their capacity for destroying USA economy has been more limited.
Greenspan and company are much more at fault than either democrats or republicans. And Mr. Paulson's "socialitation of the economic losses" is hardly non-interventionist.

RE: now, that was pathetic
By pmonti80 on 9/22/2008 9:30:36 AM , Rating: 2
You should also take into account that from now on interventionism is here to stay for a looooong time. After your money (you USA citizens) saved the banks asses. Now in order to prevent that in the future governments will want much more interventionism.

RE: now, that was pathetic
By Ray 69 on 9/22/2008 10:09:33 AM , Rating: 2
Democrats are more responsible than you give them credit for. The origins of this mess can be traced back to the Bill Clinton era and he's a Democrat. However, the Republicans are hardly blameless for this mess either.

RE: now, that was pathetic
By TheDoc9 on 9/22/2008 11:32:37 AM , Rating: 2
Both parties are to blame, along with the Fed and other banks.


- The Gov. encourages banks to give high-risk loans while the Fed keeps interest rates low.

- After some time everything starts to implode, the Fed then creates money out of thin air and loans it to the Gov. at interest in order to 'save' the economy.

- The Gov. and other banks begin purchasing these failed banks and groups, the reasoning is to ensure stability.

Whats really happened here is a consolidation of banking into a more centralized system, directly controlled by fewer people - i.e. the large banks have just gotten larger by buying these failing banks and groups. They've done this with money loaned by the Fed and GIVEN to them by the government.

-The fed has insured that it will make even more money over the next 20 - 30 years, because of payments to interest on these loans paid for by tax payers on money it created with a pin stroke.

RE: now, that was pathetic
By theendofallsongs on 9/22/2008 12:00:03 PM , Rating: 1
Both parties are to blame
Not according to the facts.

Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally...

It is easy to identify the historical turning point that marked the beginning of the end. Back in 2005...for the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.

If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee...

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.

Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

There's a lot more. Very, VERY interesting reading.

RE: now, that was pathetic
By porkpie on 9/22/2008 3:57:16 PM , Rating: 2
Great link. That's a fantastic article. A lot I didn't know about the scandal. As usual, the media tries to hide all the really relevant details from us.

RE: now, that was pathetic
By FITCamaro on 9/22/2008 4:05:29 PM , Rating: 2
Indeed. But you'll never hear it even discussed on CNN, ABC, NBC, etc.

RE: now, that was pathetic
By Entropy42 on 9/23/2008 4:18:35 PM , Rating: 2
Not that this makes it false, but that article is written by McCain's financial advisor. Its not terribly surprising that he blames Democrats, Obama, and Clinton, and also finishes by claiming that McCain would have saved us if only they had listened.

RE: now, that was pathetic
By FITCamaro on 9/24/2008 9:20:29 AM , Rating: 2
Those things are on the record in history. Not believing it because the guy telling you is a McCain advisor doesn't make it untrue.

RE: now, that was pathetic
By masher2 on 9/24/2008 10:54:59 AM , Rating: 1
FYI, Jim Johnson, who headed Obama's VP search committee, is ex-CEO of Fannie Mae. Johnson joined the team at a point he was under fire for preferential loans to and by Fannie Mae.

It's also indisputable that McCain cosponsored the Federal Housing Enterprise Regulatory Reform Act of 2005, a bill that was ultimately blocked by Democratic vote.

RE: now, that was pathetic
By sigilscience on 9/24/2008 11:28:25 AM , Rating: 1
Top Recipients of Fannie Mae and Freddie Mac
Campaign Contributions, 1989-2008

1. Dodd, Christopher D-CT $133,900
2. Kerry, John D-MA $111,000
3. Obama, Barack S D-IL $105,849
4. Clinton, Hillary S D-NY $75,550
5. Kanjorski, Paul E D-PA $65,500
All five democrats, and four of them sit on committees which oversee Fannie Mae and Freddie Mac in some way (or should have overseen them I should say).

RE: now, that was pathetic
By FITCamaro on 9/24/2008 5:12:56 PM , Rating: 1
Funny how this isn't on the news huh? If McCain sat in Obama's place on that list, it'd be on every news channel 24/7. But the media doesn't want people to know.

Gotta maintain that "I'm just like you." image Obama tries to portray.

RE: now, that was pathetic
By FITCamaro on 9/24/2008 5:21:10 PM , Rating: 2
Yeah I know. Didn't know the exact name of the bill McCain cosponsored.

It's amazing how little people want to learn. It's easier to stick your fingers in your ears and shake your head back and forth going "LALALALALAALA IM NOT LISTENING LLALALAALALALA!"

I'll admit that I'm not perfect. That sometimes I have the wrong info. But I read all I can to try and educate myself. Not watch the news and listen to whatever crap is on. Take for instance the situation in Georgia. Georgia started it. I'll admit it. Russia wasn't entirely the bad guy there. I do think they overstepped their bounds on the response though considering South Ossetia (sp?) isn't even really their territory which Georgia moved troops into. And that Russia is quickly reverting back to the Soviet era.

RE: now, that was pathetic
By rvd2008 on 9/22/08, Rating: 0
RE: now, that was pathetic
By pmonti80 on 9/22/2008 10:39:17 AM , Rating: 4
Capitalism will probably regulate itself as the laws of free market dictates. The problem is we don't want to deal with that fact. Because that means that there will big ups but also big downs and the regulation of those downs may take a lot of time and be very hard. That is not acceptable by our current standards, so we use regulation and government intervention so that ups go up and downs don't go down.

RE: now, that was pathetic
By FITCamaro on 9/22/2008 1:02:44 PM , Rating: 3
Exactly. If capitalism were allowed to play out, people would lose their homes. As they should. But its bad for votes so they'll spend our money to save those people from their own mistakes.

RE: now, that was pathetic
By jgvandemeer on 9/22/2008 11:15:16 AM , Rating: 2
If capitalism is left unregulated, it will kill this country and then will parasite on its dead flesh
Ever notice that the more capitalism a country has, the better it seems to do?

The actual villain to blame in my opinion is ... capitalism. Greediness of corporations
So why didn't this happen years ago? Do you think corporations just suddenly got greedier?

Your rantings don't have much to do with the real world.

RE: now, that was pathetic
By pmonti80 on 9/22/2008 11:28:48 AM , Rating: 2
That is just an opinion. Some people think capitalism is a means to an end, just until we find something better. And to other people the free market an end in itself.

RE: now, that was pathetic
By jgvandemeer on 9/22/2008 11:41:43 AM , Rating: 2
His was just an opinion also.

But as a wise man once said: "the difference is MY opinion is right".

RE: now, that was pathetic
By rvd2008 on 9/22/08, Rating: 0
RE: now, that was pathetic
By Ringold on 9/22/2008 9:57:28 PM , Rating: 2
Not close?

.951 HDI, which heavily weights all your pet peeves, versus the highest score of .968, Iceland, a tiny island in the Atlantic largely untouched by the world. As the UN takes care to point out for you, we come darn close and have 1/3 more purchasing power than France. Figure 2 notes that, contrary to your post, we rank higher than the OECD average, and supporting the person's post you were responding to, the further down on Figure 2 you go the less capitalism you find.

Not that I expect you guys to work with data, but there it is.

Unregulated capitalism is like driving a car without any rules. No good.

Adam Smith would agree. The key is balance.

RE: now, that was pathetic
By Ringold on 9/22/2008 10:00:31 PM , Rating: 2
. BTW, the Great Depression was interrupted only by entering the planned economy when the war began.

Again, your lack of data is no surprise, but if you look at unemployment data from the era, you'll notice the "Great Depression" was in recovery before the war, but really only turned in to the Great Depression after exactly what you claim saved it started to be implemented; government control over the economy. I'm not aware of any economist or historian of any integrity that still believes otherwise, as history is pretty clear.

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