Wednesday, October 21, 2009

Hanging Too Good for this Lord.

Try not to choke on your breakfast, lunch, or dinner when you read the enclosed article. Goldman Sachs International's Vice Chairman, Lord Griffiths, has opined that the public must "tolerate the inequality of bonuses as a way to achieve greater prosperity for all." In a world where outrageous and indefensible rubbish is spewed daily by VIPs, this patent, steaming load of horse hockey stands out.

Goldman Sachs, aided and abetted by corrupt and/or cowardly appointed and elected officialdom, stole directly from we taxpayers the same funds that they have since handed out to their employees. Please, tell me, your Lordship, where's the general prosperity in that? All I see is specific prosperity for you and yours to the detriment of me and mine. This makes the putrid nonsense of Ronald Reagan's trickle down economics seem almost reasonable by comparison.

21 comments:

THD Russell said...

I'm going to quote from Bob Dillon here:

"“You didn’t know it, you didn’t think it could be done, in the final end he won the war
After losin’ every battle”

So no, I didn't choke on anything (although "horse hockey" sure raised a laugh), because those idiots bellowing their inane "high-brow" platitudes are going to lose the war. They can only lose the war.

The way I see it, they're already dead.

THD Russell said...

That's Bob Dylan of course. Sorry Mr B. Dillon, I didn't mean to accuse you of plagiary.

Thai said...

While I completely agree with your sentiment, there is one Lego piece I keep having trouble putting together with your anger and all this.

It seems to me that as long as we Americans continues to maintain our living standard through borrowing from others, then the broker of such funds will always be our debt junky masters.

Now this said to give Goldman any kind of free pass, but are we not giving them the power to do this in the first place?

If we don't want to deal with a mold problem, it seems we should not live in the damp tropics.

Americans have made it VERY clear they cannot agree on how they want to spend their money- witness the latest health care or military bills.

Hence we borrow.

We might find a cheaper middle man to broker others' funds, but we should not kid ourselves that as long as we give them this power over us, we are still at their beck and call.

I am still not sure why I seem to be the only one who sees his own fingerprints all over this mess.

Every time I look at this, I plead guilty.

It is just the way I see it.

Thai said...

Typo

"Now this is NOT said to give Goldman..."

Edwardo said...

Thanks for dropping by THD Russell.

Thai wrote:

"It seems to me that as long as we Americans continues to maintain our living standard through borrowing from others, then the broker of such funds will always be our debt junky masters.

Now this said to give Goldman any kind of free pass, but are we not giving them the power to do this in the first place?"

-You have a point, but in my view, the validity of your point stops short where Goldman, or, for that matter, where any of the big insolvent institutions who have absconded with their bonus money via unprecedented taxpayers largesse, are concerned. The reason is simple. None of these institutions are lending.

They are parking their money in government paper, engaging in more rank speculation, and creating mored dodgy security instruments of mass destruction with impunity. Theft is theft, and the twisted, not to say grotesque justifications for the aforesaid theft are an insufferable provocation. So, regardless of how many Americans, U.S. corporations, and government, local and federal, engage in the debt acquisition game to maintain their/our (false) prosperity, we have a duty to duly note the outrages and express our anger.

"I am still not sure why I seem to be the only one who sees his own fingerprints all over this mess."

"Every time I look at this, I plead guilty."

"It is just the way I see it."

-This represents a recurring theme of disagreement between us. And so I will offer, in the spirit of past disputes in this vein, that "We The People" will, with very few exceptions, bear responsibility for whatever predicament we find ourselves in, yet equally, some members of our culture, society, civilization, whatever one wants to call it, will always bear more responsibility than others.

Thai said...

Well said


I really do agree with much of what you say but I remain stumped on a few issues.

1. I am not sure I really think the banks should be making more loans, even if we do bail them out.

2. ... Actually, if you would be willing to help me understand my issue No. 2 better, I would be most appreciative.

Is your position that the banks should never have been propped up?

Or is it similar to Krugman's position whom I understand to be saying should have been bailed out after their owners were wiped out?

If it is the latter, then we probably agree.

But the issue I am have trouble with is the idea proposed by some (such as Hell) that there would be a $500,000 limit on accounts.

For every company I know has payrolls far far greater than $500,000/month which means every working person I know would not have been paid.

I have been looking for an answer to this problem ever since I realized it that I personally find acceptable and I have not heard/read a single satisfactory solution to this question.

... Indeed I sometimes get the sense there is almost a "reverse gaming" of the system being expressed by many (not all) of those who are the most frustrated with the bank bail outs.

As for the idea that some people have unique responsibilities towards the collective specifically resulting from their unique positions in society, I agree.

But has there ever been any kind of "professinoal" standard set up for the banking profession, etc...
If there is one I am totally unaware of it.

There are many reasons I would strip a physician of their license for instance.

But this idea has its limits as well. No collective can operate where large numbers of its memebers are not playing by mutually agreed rules.

Be well

Edwardo said...

As for the advisability of the banks in question making loans, perhaps they shouldn't. Yet, there are quite a few genuinely credit worthy enterprises who can not get loans presently. This is part of the reason why the economy continues to implode. Prospective businesses have been and are being shut out.

Recall that lending was the primary justification employed by that scoundrel Hank Paulson for the banker bailouts. It was, in retrospect, a bait and switch of epic proportions.

My position is that IF the big banks were to be lent huge sums of money then far more strictures and oversight should have been placed on the loans. It was not. Oversight was minimal, token really. The repayment terms were far from generous.

Instead of debt swapped for equity, cram downs, far more generous terms/repayment schemes for we lenders, we got, at best, benign neglect of we lenders.

However, putting all that aside, we do not need these big banks. That is and was the great lie. They have been, and demonstrably are, a great cancer. What should have happened is that the insolvent institutions were dismantled, parts sold off, parts folded into healthy institutions, etc. etc. But The New York Fed is, for all intents and purposes, The Federal Reserve. They are first among equals as it were, and they and those they represent have "captured" government.

Thai, there was no way around a lot of pain as the nation embarked on stewarding these institutions into oblivion, but it would have put us on the right track for a real recovery, perhaps, if I can permit myself for a nanosecond, even a renaissance of sorts.

But now that we have done quite the opposite to allowing a great rebalancing and cleansing process to occur, there is going to be hell to pay beyond many people's reckoning. Had we taken a different path, I assure you that we would not be well on the way to seeing the nation's socio-economic landscape resembling something of a feudal backwater, employing, for the moment, a "dead man walking" currency.

That is my view, and I hope it answers your questions.

Edwardo said...

FWIW, Robert Reich agrees with me.

http://robertreich.blogspot.com/

Thai said...

Edwardo, thanks for your thoughtful response.

You are one of the brightest bloggers I "know" so you must see this statement (and the Robert Reich post) as being the epistemologically incorrect statements they truly are (not that my views of the world are any more correct, I see that).

... I guess I am more of a nihilist than you.

We already spent the money.

Further, remember "animal spirits", e.g. what we did yesterday is just that, yesterday.

If I spent my money on cigarettes yesterday, it is gone. But I can always change my behavior tomorrow and stop smoking- my choice. Tomorrow is tomorrow and nothing more. There are just always consequences.

... Or as Hell likes to say "the real economy".


Take 2 scenarios (and again, I am not condoning banks nor the treasury):


1. Money is now in bankers hands
2. Money is now someone else's hands

If the money is not in the bankers hands, whose hands will it be in?

How will they spend it differently?

Why will the way the money is spent tomorrow by these bankers who were burned once be any different than the way it would be spent by someone else?


Again, as Hell says- "real economy".

I truly agree with you that there is no way to avoid the pain of this mess- I really do see that.

And so the collective will do what it is going to do, e.g. protect itself and at the same time fracture as it tries to spread the pain around and subgroups resist this spread.

And as it does, some will ask the question: "what does itself actually mean?" and want something else.

But anyone who thought they were going to be immune from the pain of this are finding out that the collective will not ever let them escape its powers- ever.


And re: Robert Reich's opinion of Greenspan's popularized statement "if they're too big to fail, they're too big."

Again, epistomologically incorrect as well.

Reich's posting is nothing more than "I want the world to look the following way and I don't like the way I see that you see the world".

I completely accept there is probably more overlap between Robert Reich's moral matrix and yours than there is between Robert Reich's moral matrix and mine, but this does not make one opinion more correct.

Statements like "Had Greenspan not supported in 1999 Congress's repeal of the Glass Stagall Act, which separated investment from commercial banking, we wouldn't be in the soup we're in to begin with" might be factually correct on one level, but the implication he wishes us to draw from this statement are most certainly not correct.

What on earth is the difference between an economy that has 240% debt/GDP ratio in 2000 and 280% in 2007?

Splitting up the banks won't do anything and it won't prevent the next crisis either.

These things will happen over and over and over and there is probably nothing we can do about them.

Smoke and mirrors (or as Hell says "real economy").


You read about complexity science. I assume you also read about chaotic systems as well.

You must understand the fundamental boundary conditions which create all these observed phenomena in the first place? You must see the implication of this boundary condition?


“There is a fact, or if you wish, a law, governing natural phenomena that are known to date. There is no known exception to this law; it is exact, so far we know. The law is called conservation of energy; it states that there is a certain quantity, which we call energy, that does not change in manifold changes which nature undergoes. That is a most abstract idea, because it is a mathematical principle; it says that there is a numerical quantity, which does not change when something happens. It is not a description of a mechanism, or anything concrete; it is just a strange fact that we can calculate some number, and when we finish watching nature go through her tricks and calculate the number again, it is the same.”

—Richard Feynman

It is what it is

Be well

Thai said...

But let me add on a personal note I think the financial sector is way too large a % of the economy.

And if and when they make me kind I will fire a lot of them (especially the quants, who I really do think can do much more good in other parts of the economy than they can in Wall Street) ;-)

Thai said...

Typo meant to say "make me king"

Edwardo said...

"We already spent the money."

-Not so. I'll get to why in a bit.

"Further, remember "animal spirits", e.g. what we did yesterday is just that, yesterday."

-In economics, there is indeed a principle that pertains to that idea. The principle argues that in the case of someone who discovers in their last year of law school that they really want to be a race horse jockey, that they should not finish their law degree based on the fact that they have already spent two years of tuition and time on the law.

"....Tomorrow is tomorrow and nothing more. There are just always consequences."

"... Or as Hell likes to say "the real economy".

"The real economy is rather unreal wouldn't you say?"

"Take 2 scenarios (and again, I am not condoning banks nor the treasury):

1. Money is now in bankers hands
2. Money is now someone else's hands

If the money is not in the bankers hands, whose hands will it be in?"

-I think what you are overlooking is, at least in this case, that the money need not have been in anyone's hands. It has been, in essence, borrowed, or perhaps more properly, extorted into existence on the back of a massive lie (and dodgy collateral) and that is a great tragedy.

"How will they spend it differently?"

-Okay, if we are going to overlook the conditions under which this money came into existence, then I will answer your question by saying I don't know. Having said that, I would like to believe that were the money in someone else's hands, we might be experiencing some social benefit we are not likely to experience (to put it mildly) under the present circumstances."

"And re: Robert Reich's opinion of Greenspan's popularized statement "if they're too big to fail, they're too big."

Again, epistomologically incorrect as well."

-How can you be so sure? Admittedly, Reich doesn't make the case so much as jump to the rightness of his conclusion and pound away. Do I need to make the case?

"Splitting up the banks won't do anything and it won't prevent the next crisis either."

"Might that be epistemologically incorrect? I don't know how you can be so sure. Even it doesn't prevent the next crisis, there still may be (I would argue there are) excellent reasons for doing so.

"These things will happen over and over and over and there is probably nothing we can do about them."

-Ah, your aforementioned nihilism, or is it simply defeatism, is showing through now.

"Smoke and mirrors (or as Hell says "real economy").

You read about complexity science. I assume you also read about chaotic systems as well.

You must understand the fundamental boundary conditions which create all these observed phenomena in the first place? You must see the implication of this boundary condition?"

-Am I to understand that you believe you have identified the boundary conditions as they pertain to the world of us mortals, and that we have reached them?

"There is a fact, or if you wish, a law, governing natural phenomena that are known to date. There is no known exception to this law; it is exact, so far we know. The law is called conservation of energy..."

-One must be very careful when endeavoring to apply abstract "scientific" principles to our earthly and human realm.

"It is what it is"

-Indeed, if we can only agree on what "it" is."

-You're damn skippy the financial sector, or the F in the FIRE economy, is too big a portion of the economy. And that begins to get to the subject of how we got into this mess in the first place. But that is a discussion for another time.

-Best wishes.

Thai said...

I did misspeak, you are quite right to point out this out. It did encourage people to spend money they otherwise might not have spent.

But when did this begin? What a rabbit hole.



"Might that be epistemologically incorrect? I don't know how you can be so sure.


- I am "pretty sure".

Lets say I am surer than I am of many other things people tend to feel pretty sure about (like the sun we rise from the east tomorrow, etc...)

-One must be very careful when endeavoring to apply abstract "scientific" principles to our earthly and human realm.

Amen only this is not so abstract- honest.

An old professor of mine used to say to me:
"What the mind does not know, the eye does not see."

I simply cannot see a way around the manifold boundary conditions created by the conservation of energy, and believe me, I have been looking for a very long time.



"Even it doesn't prevent the next crisis, there still may be (I would argue there are) excellent reasons for doing so."

Fair enough but you are back to the issue of point of view and this is nihilism in a nutshell.


"These things will happen over and over and over and there is probably nothing we can do about them."

-Ah, your aforementioned nihilism, or is it simply defeatism, is showing through now.

Yes, it is showing through and I guess at some level it is a form of defeatism, though I tend not to look at it from that point of view.

But I can't really dismiss this point of view either.


You are a good guy. Of that I am certain.


Regards

DED said...

Edwardo wrote: we do not need these big banks. That is and was the great lie. They have been, and demonstrably are, a great cancer. What should have happened is that the insolvent institutions were dismantled, parts sold off, parts folded into healthy institutions, etc.

I agree.

Thai wrote: These things will happen over and over and over and there is probably nothing we can do about them.

That assumes the system has infinite elasticity. It does not. At some point, it will break.

Thai wrote: I am still not sure why I seem to be the only one who sees his own fingerprints all over this mess.

Every time I look at this, I plead guilty.

It is just the way I see it.


Only if you're directly contributing to the problem; enabling it. If you disagree with the way things are done and are powerless to stop them, how is it your fault?

Entrenched differences of opinion in democracy is its undoing. We dither while Rome burns. We don't think to grab a bucket to put out the fire until the embers burn our flesh. By then it is either too late or close to it.

All for the sake of politics.

I realize you gentlemen are both more learned on this subject (financial institutions) than I, though I find my opinions on this subject more closely aligned to Edwardo.

Thai, I find your shouldering the sins of the bankers a misplaced approach to the subject. While as a society we may have collective guilt, there are many individuals who followed the rules, whether they be established law or common fiscal sense. And these same individuals are powerless to stop those that don't. I can tell my neighbor that he's a fool for his slavishly materialistic lifestyle, but the law prevents me from stopping him.

Edwardo said...

Ded wrote:

"That assumes the system has infinite elasticity. It does not. At some point, it will break."

That is an excellent point I wish I had made. Thanks for doing it for me.

Thai said...

Nice response

"That assumes the system has infinite elasticity. It does not. At some point, it will break."

I should have been clearer re: over and over as I think we are saying the same thing.

It is just I do think the system will break over and over and over and that we just have to pick up the pieces... At least that has always been my interpretation of meaning of observations like war, earthquakes, etc... are fractal.


Give me a day and I will come up with a response.

re: personal culpability

Apart from the fact that I took a home loan out when I purchase my first (and only) home 14 years ago and that I save for both my/my wife's retirement and the kid's college, I don't think it is greater than anyone else's.

I just can't say it is less than most people's either (I agree a few bankers- really insurers- are probably a "little more guilty".)


And

"While as a society we may have collective guilt, there are many individuals who followed the rules, whether they be established law or common fiscal sense. And these same individuals are powerless to stop those that don't. I can tell my neighbor that he's a fool for his slavishly materialistic lifestyle, but the law prevents me from stopping him. "

Amen,

Indeed, this is the crux of the problem.

For the truth is, we never really have agreed on the rules, and I am not sure we ever can.

If it helps to explain why I can be a bit of a nihilist on this issue, I posted the following for Dink and Deb on our blog if you want.

By the way, did you see the success Penn had the other day with Gene therapy?

Giving kids their sight back- pretty cool.

DED said...

Apart from the fact that I took a home loan out when I purchase my first (and only) home 14 years ago and that I save for both my/my wife's retirement and the kid's college, I don't think it is greater than anyone else's.

Certainly doesn't sound like fiscally irresponsible behavior to me. Of course if you come back and say that you're overleveraged (i.e. you bought a $400,000 home on a $40,000 salary), that'll change things. :)

I just can't say it is less than most people's either (I agree a few bankers- really insurers- are probably a "little more guilty".)

If "most" people are fiscally responsible with their long term debt (i.e. buying an affordable home) than "most" people don't shoulder any of the blame (and that would include you, me, Edwardo and many others) for this mess. I don't know what the stats for fiscal foolishness were before the collapse of the mortgage market but I'd wager that the majority of people weren't involved in exotic loans. If the majority were foolish, then not only would Wall St banks have failed but an overwhelming number of Main St banks would have failed last year as well. Yes, 100+ have failed this year but they've primarily been in those growth markets where everyone (banks, would be homeowners, mortgage companies, and so on) got fiscally reckless coupled with the collateral damage that comes with a significant recession.

There was a map in my local paper recently and I noticed that none of the failed Main Street banks were in the Northeast and northern Atlantic states. That makes sense as the housing boom/bubble never got as carried away as it did in Florida, Nevada, Georgia, etc. And these are the states where the market crashed and burned.

DED said...

Thai,
Do you explain how risk and energy are related in Part 2? Because at no point in the first link do you establish a connection between the two. If I have to read further, I shall.

Thai said...

I think so yes- at least I tried to explain it to them (mostly to understand a few of the books Hell has chosen to put on his own blog in his selected reading list).

If they do not explain it to you satisfactorily or you still have a few questions let me know. The cognitive leap from conservation of energy to conservation does seem to stump people for a little while; I am sure it will be obvious when you see it.

... If you think about it, risk is really nothing more than a form of information and information and if you keep thinking about it, information is most definitely a form of energy (you can look this up if you want).

So the conservation of energy for a closed system implies the conservation of information for a closed system implies the conservation of risk for a closed system.

Anyway this is the basic math behind complex/chaotic systems.

Thai said...

Sorry, typo

Should have typed

"The cognitive leap from conservation of energy to conservation of risk does seem to stump people"

Thai said...

And DED, no, my home price to income ratio was about 2:1



Edwardo, can you expound on this statement a little more.

"-I think what you are overlooking is, at least in this case, that the money need not have been in anyone's hands."

I think I misunderstood you.

The credit cycle encourage consumption we should not have foolishly done, but once we consumed things, they are gone.

Borrowing to support borrowing is only encouraging a different kind of consumption.

So "yes" the bankers may have been a kind of criminal to you- say pushing the drug "credit" to naive children- but so too are we still demanding our leaders figure out how to keep the consumption monster feed- so they are not any different.

And we keep electing them...

Indeed the people who consistently say "no" to more consumption and the people least electable.