Saturday, September 4, 2010

Breaking Down the Great American Recession (from Michael Hirsh book, "Capital Offense") "The worst economic downturn since the Great Depression hadn’t occurred just because of a simple crash. An entire era had overreached—the markets-are-always-good, government-is-always-bad zeitgeist that defined the post–Cold War period. The very idea of government regulation and oversight had become heresy during this epoch. Washington policymakers came to ignore the key differences between financial and other markets, differences that economists had known about for hundreds of years. Financial markets were always more imperfect than markets for goods and other services, more prone to manias and panics and susceptible to the pitfalls of imperfect information unequally shared by investors. Yet that critical distinction was lost in the whirlwind of deregulatory passion that followed the collapse of the Soviet Union and other command economies. Finance, completely unleashed, had come to dominate the real economy rather than serve its traditional role as a supplier of capital to goods and services. Venture capital transmogrified into speculative fever. Innovative ways of financing new business ideas evolved into vastly complex derivatives deals, like subprime-mortgage-backed securities, that were often little more than scams."

10 comments:

  1. you know my hubby rest his soul said this for 20yrs. befor the end finally came --

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  2. So true Doug...take for example a common telephone bill some of the charges are so distorted that I'm not sure anyone in the company could give a satisfactory explanation as to what they are. It hasn't been that many years ago that such charges would have been considered criminal fraud.There are people still alive today who served time in prison for charging the kind of interest rates that most of our banks now consider perfectly legitimate.This kind of criminal behaviour has become an acceptable way of doing business and it permeates our entire economical system.

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  3. You're right Mike. Credit card and banks would have had managers burned at the stake in the old days for the interest they charge.

    And how come when people talk about "red tape", they always talk about the government strictly and never refer to the financial markets and the mortgage companies and all their hidden snares?

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  4. Respected Bankers and Businessmen is what we call them in this country ......this is what they are called in other countries

    http://sgforums.com/forums/3317/topics/364267?page=4

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  5. At least the loan sharks over here don't have multi-million dollar television ad campaigns....thanks for that reminder how we should catagorize thesee people, Mike.

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  6. Thanks Steve. I'd like to get the book soon.

    This little excerpt I think is a nice summing up of a lot of our current economic problems.

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  7. Personally I have always found capitalism rather offensive myself Doug..... the mythology of the free market obscures 'respectable' gangsterism which actually places John D Rockefeller and Al Capone in exactly that same line of business, one quite successful..... the other a bit of a loser....but both no more than murderous scumbags on the make.

    Sounds like a book worth reading Doug, thanks for the heads up

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  8. Yes,AA, that's one of the problems with trusting any large set of institutions, including capitalist entities: the patina of faith in "free markets".

    It sounds great to so many because of the boom times. But its a false idea that men and women in business suits can't possibly be anything but angels, or God's Chosen, when some of them are little more than robbers bent on ruining lives by the gross and behavior that can border on sociopaths. The disease is giving anyone the idea that "Private vices make for public virtues". And selfishness at the public expense is no virtue.



    They only lack the tommy guns that Mr Capone and his ilk wielded. And the speculative part of capitalism (hedge fund types, financial engineers, corporate raiders, et al) can be a magnet for the absolute dregs of human morality.

    I hope to get my hands on Hirsh's book. From the excerpt, he seems to be on to something.

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