dr. carl freedman, marxist, shared with us recently a story about george will, the famous conservative columnist, who has for years been warning this nation about a crucial problem in how its particular version of capitalism functions. not a free market system in any sense of the word, american capitalism – mr. will contends – has lost sight of the fact that, as an economic system, capitalism is not just a profit system, but rather a profit and loss system. laissez faire economics of the kind marginalized republican presidential candidate ron paul preached, relies on the failures of certain businesses as a way for the economic system to naturally shed dead weight and keep the overall system strong. this is the classic darwinian approach to a market economy, and its logic can be understood as being reasonable enough.
what has always perplexed me is this contradiction: why have the so called free market capitalists traditionally railed against social programs like unemployment insurance, health insurance, public education, and the like as being antithetical to the free markets, yet whenever the free markets come into contact with real economic crisis, the fed swoops in and saves their asses by injecting public funds into the system? mr. will calls this practice privatization of profit and socialization of loss. it’s not free markets by any stretch. i invite anyone who can add and subtract to take a pen and total up how much money has been ‘liquidated’ into the markets in the last 16 months and compare that total to the amount of money theoretically required to provide national healthcare and to see for yourselves which total is higher.
if the ponzi scheme is collapsing, i for one couldn’t be happier.
for anyone who finds this crisis truly fascinating, the best article i have uncovered that explains what is actually going on can be found at the wall street journal. pay particular attention to the section entitled “swaps game.” try to imagine for a second what kind of absurd nonsense is propping up this system of credit and excess after you read this section. if your money was in a firm that was participating in the swaps game, tell me you wouldn’t rather them take your bankroll to the 500 club and play liar’s poker with sudsy and cat all night with it. people on wall street go to work everyday and play the swaps game. there is actually a very important component of 21st century capitalism called the swaps game. wait till you read what it is. you’ll shit. it sounds like it was invented by the guys who brought you beer pong.
i’m glad i’m broke.
but i’ll be richer than you tomorrow.
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6 responses so far ↓
and now the US is in the insurance business (AIG). Not nationalized health care
yeah, they’ve got no excuse now! they already own an insurance company! just reconfigure it into a public service instead of a money sucking pit. the stock market is like owning a boat … a big hole in the water you throw money down.
My $.02 on the whole financial crisis thing….
IMHO there are three main causes here. The first is fraud. Essentially business and the stock market are all about risk management. Businesses hedge against risk by raising the rates at which they loan money and with instruments like the one discussed in the WSJ article. The fraud comes from the fact that mortgages were sold to other banks and the risk associated with default on the loans was understated. This is the main reason why this is so widespread and not contained to traditional sub-prime lenders.
The second is greed. Both on the part of the banks and on the part of consumers. In places like california, people were so anxious to get in on the money train that they were willing to buy property they couldn’t afford in the hopes that the 15-20% rise in property value would somehow allow them to afford it at some point in the future. A little common sense here would have gone a long way. The population wasn’t growing by that much. Income wasn’t rising that quickly. What could possibly make living in California 15-20% more desirable each year? The answer is nothing. People let greed cloud their judgement and the net result was that a person making $50k a year would spend $600k for a 1500 sq. foot house in transitional neighborhood in Oakland and use the property’s future appreciation to help pay for the property. If you need to make 20% profit to be able to “afford” your investment you’ve had a serious lapse in judgement…
The final cause which is frankly the most disturbing, is a lack of accountability. This a systemic problem in America today and its only getting worse. We have created a culture of entitlement where kids grow up getting a ribbon just for playing the game. The result of this is people have no problem walking away from their obligations. They are entitled to the good life regardless of what they make or how much money they’ve saved. Remember, despite everything this “crisis” is because people are not paying their bills. The media has been complicit in all this by chalking it all up to “predatory lending practices.” That’s a bunch of BS. If you are taking out a $500k loan and you don’t read the fine print or understand what the term “ARM” means that is not the bank’s fault.
The sad thing about all this is who is being affected. Its easy to look at this and think its just a bunch of rich people who have invested in the stock market. The fact is roughly 50% or all americans hold stock either directly or via mutual funds. There will probably be millions of Americans who now have to work well into their seventies to make up the money they lost in their 401k’s as a result of the fraud, greed and lack of accountability of others…
kd, get on the ballot, speak the truth, run. you have always had a keen sense of the contemporary zeitgeist and have been able to, most importantly, articulate it. your analysis is spot on. there is plenty of blame to go around. the entitlement point is particularly important. americans circa 2008 believe, with all sincerity, that it is their god given right to possess x, y, and z just for showing up. i see it in my own thought process, and i’m pretty unmotivated in a commodity acquisition sense, relative to the norm. i’m ultimately out of patience with the right wing propaganda that somehow fails to acknowledge that, no matter what the ramifications are for the “common man” with regards to the negative effects of a market collapse, that somehow whenever policy attempts to use public funds for social needs that might somehow benefit the working class, it’s communism and antithetical to the market system. curiously, socialist programs like the fdic created in the 30s are what are keeping this sea of mistakes from materializing itself into something catastrophic. the only cure for greed is scarcity, and damned if we’re not teetering on the brink of some serious fucking scarcity. the abundance was fake, people. get back to work.
while agreeing with some of what has been said, (long time no speak kd) may i opine?
it is true that around 50% of americans have a vested interest in the market-that leaves half of the country too worried about paying monthly bills to give two shits about the impending recession (take a drive around rural so ill, or louisiana for that matter.)
i’ll grant that many of these ‘lower class’ citizens are responsible for signing “ARM’s” that they couldn’t afford, and that the bankers who offered the loans couldn’t, and arguably shouldn’t, care any more than hoover where they end up living.
this, however, is the reason for government regulation-so normal fucking idiot americans don’t bring down the economy bc they aren’t economists.
reagan began the dereg almost thirty years ago, systematically dismantling the social programs that brought the country out of the depression into the only era of the true american dream, where you go to work until retirement and then obsess about your grandkids or your lawn. roads worked. schools worked. the press worked (don’t get me started). people worked.
blaming ordinary americans for this is like is like blaming a mom on foodstamps, and not halliburton, for the deficit.
it is now out of control-if the original borrowers are responsible, then what about the bankers who bundled, obscured, bet on, and against, and on, and against what would happen to those loans?
how can the total value of these derivatives be sextillion dollars (1,000 trillion) when the gdp of the whole mother flippin’ planet is $65 trillion.
these fuckers are economists, and not bad ones as you would suspect. they know exactly what they are doing. the only problem is that the shit hit the fan 6 weeks earlier than planned, and john mccain, thankfully, is not an economist.
hooch, i didn’t know you had it in ya’ … well said, my friend. you should get your own public radio show or something …