The Blame Game Update
The blame game is well underway for the current financial crisis, and it will only get worse. Who is to blame? Well, that all depends on who you are, and what you have to gain from pushing the burden off to someone else.
A common culprit is ‘greed,’ though I find this implausible. If someone can point me to a time in modern capitalism where greed has not been a factor, then I’ll pay attention.
Yesterday former Fed Chairman Alan Greenspan testified before Congress:
Alan Greenspan, lauded in Congress while the economy boomed, conceded under harsh questioning from lawmakers that he had made mistakes during his long tenure as Federal Reserve chairman that may have worsened the current slump.
It’s hard to overstate how much Chairman Greenspan was universally praised during his tenure. History can be a ruthless judge, and I wonder how much burden of the blame he really deserves. During his last appearance before Congress, on November 3rd, 2005, Rep. Jim Saxton (R., NJ) said:
You have guided monetary policy through stock-market crashes, wars, terrorist attacks and natural disasters … You have made a great contribution to the prosperity of the U.S. and the nation is in your debt.
The irony of the nation being indebted to Greenspan in the wake of our $700 billion bailout is pretty thick.
Regardless, yesterday Greenspan admitted that a key component of his ideology –that regulation is generally unneeded as the market will police itself–has been significantly damaged. That is quite a change.
Also of note is that Greenspan admits he did not think housing prices would collapse: “I did not forecast a significant decline because we had never had a significant decline in prices.” Really? Looks like a bubble to me:
Source: Paper Economy
We’re just starting to unravel all that has happened, and continues to happen, in our economy. Knowing what went wrong is a critical component of a) getting us out of the current mess and b) implementing safeguards so we don’t end up back in the same situation in a few years.
One thing is for sure: we won’t have definitive answers for a while to come.
We in North America live a totally impractical life style far beyond our real requirements for safe and lasting security in a very real world. We buy whatever the advertisers can cook up to entertain us, damn the consequences, and convince ourselves we deserve what ever we desire with a whole list of false truths. We are trapped in a market driven by the most spontaneous, foolish and gullible among us. The market doesn’t even provide really needed items until hard times hit! Suddenly, when there is demand, realistic articles are provided at realistic prices and usually at the quality demanded by the market! We are trapped in an advertiser’s paradise, a marketer’s dream, and we don’t have a clue as to how we must put things together to survive! One extravagant fool can influence the sense of entitlement for whole schools, businesses, neighborhoods or class of people! One “Fad” item can cause cascade buying, even in the toughest of times. The American psyche is sick and it can only be cured by a prolonged and deep depression, followed by extreme paradigm shift and an awakening to a cleansed, and less materialistic mentality!
Uncle B
24 Oct 08 at 12:06 pm
Uncle B,
It’s people who believe what you are espousing that cause poverty over the whole planet.
Our “greed” for cheap goods has raised the standard of living and GDP of 3rd world nations immensely.
Yes, our govt’s debt level is horrible and needs to be brought down via a REAL surplus (stop buying new weapon systems would be a good start — we’re already so far ahead that no one would dare invade. If we didn’t have to defend the Middle East from itself, we could afford 10 years of costing on the equipment on hand).
However, the absolute worst thing that we can do is stop importing goods (including oil).
Then, instead of a couple billion people around the world thinking, “America is great because I get paid so much to make these stupid toys for them,” or “American’s are an evil cancer, but I can’t stop selling them these stupid toys. It would ruin me financially.” They NEED us. They WANT us. And everybody but the true fanatics know it. (Even some of the fanatics are fully aware of what will happen if their succeed. They WANT to destroy all the good that modern technology has brought.)
But no matter what you do, you will NEVER cut consumption. Not even the most repressive police state in all of world history — the Soviet Regime — could stop the black market. It THRIVED until Gorbachev allowed private businesses — then the cops who had been paid to look the other way starting being paid more traditional “protection” money — and THAT is exactly what you are espousing.
Mike Barrett
24 Oct 08 at 12:44 pm
Uncle B, re “The American psyche is sick and it can only be cured by a prolonged and deep depression”, I hope not! We do need a change in mindset in how we view our financial landscape, but I’m optimistic even basic financial education can do the trick.
Mike, re “But no matter what you do, you will NEVER cut consumption” - indeed, nor should you want to. There’s nothing wrong with consumption, just like there is nothing inherently wrong with debt. It’s all in how you use it.
William
24 Oct 08 at 1:33 pm
Uncle B,
In the interest of avoiding an all out flame war, let me first list the points on which I agree with you:
1) Yes, imbeciles (mostly celebretries) can cause avalanches of purchasing with the latest fad. (The purse specifically designed to carry a tiny dog was the one that made me sick. Let the poor thing walk on a leash!) Nothing to disagree on with this. Your statements are quite accurate. Though I’m pretty sure we disagree on how the after effects (ie, profits) should be dispersed.
2) Yes, we are trapped in a “Marketer’s paradise.” (Addendum and partial rebuttal below.)
3) A long and profound depression is indeed the only thing that can change the way Americans look at economic factors — largely because most Americans are ignorant of both finance (my own blind spot) and economics. (Rebuttal below.)
Now, a few rebuttles:
2A) However, a Marketer’s Paradis is far superior to every “People’s paradise” the world has ever known. EVERY attempt at equal sharing for all has ended in disaster. This includes Utopian communes here in the United States, but REALLY shows itself in the history of the Soviet Union that was revealed during the time that the old Soviet archives were open to Western scholars. Go look up a book called, “Stalin: Court of the Red Tzar” (Might be “Tsar” or “Czar.”) It shows the TRUE brutality of a “paradise” enforced from above.
3A) You call yourself “Uncle B,” so I assume you are not young. I am 36, which makes me old enough to have observed my grandparents and the HUGE mental scars that the Great Depression left on them. Those scars were NOT good. They left people knowing that they “ought” to do good, but they often didn’t because they needed the results of what they “could” do to survive. My grandfather, whom I admired immensely, broke federal laws every cold weekend — he built an incinerator in the basement, complete with blowers (he was an engineer), which did an amazing job of heating the house, but was having visibly negative affects on the neighborhood (smoke).
Further, remember that the most rapatious corporations in the world (American, by and large) were created or led during their period of most depraved behavior by the survivors of the Great Depression.
A free society that allows people to have whatever they want will produce fewer weapons and fewer wars, because idle hands will become busy building toys.** Why hasn’t this happened in the US? Because our economy is not truly free. In the 1950’s the amount of grain produced in the US was classified “because it would tell the Soviets how much reserve food we had on hand in case of war.” But there was an exception — the floor traders at the Chicago Mercantile Exchange WERE privy to this info. Today, we are closer to a true free economy, and move closer ever year, but we still have a way to go. I still consider the US the best place in the world to live, with Switzerland running a freezing, but close, 2nd. (I’m from TX. Can’t handle cold.)
** Remember Eisenhower’s comments on leaving office about the “military industrial complex” (MIC). He was dead right, and a lot of idle brains were put to work building better bombs. (MUCH better bombs.) If instead, we had a program to seek out the smartest or most creative (I include arts here) and pay them to be creative or to solve problems without limits on what they can produce, then the MIC will implode for lack of brains.
Yes, the National Foundation for the Arts is supposed to do that, but Congress never gives it real money. The National Science Foundation gets more money, but they divide that money into smaller grants. Why? Surely an artist wouldn’t need a grant the size of a project for a military laser? Nope. Instead, the NSF grants are tied to “matching funds” from the DoD or DOE. Again, give those idle hands something better to do. Let them use the grants to develop new consumer goods and keep the patent, so they profit. Result: Fewer weapon development projects.)
Mike Barrett
26 Oct 08 at 10:20 am
William,
You’ve stated very well exactly what I meant. Thank you for the clarification.
Sometimes I get caught up in verbiage and have too much fun writing instead of discussing. :/
Mike
Mike Barrett
26 Oct 08 at 10:24 am