He starts off with a pithy remark, "Is it possible to have capitalism without capital?" Oh, Rich, you're too...rich. And I imagine he is. Mr. Lowry is the editor of National Review (of which I am a huge fan) and travels in that circle of people to whom Big Money is customary. He's always on opinion shows, and newspaper columns. In fact, for a member of the conservative movement, he seems to be fairly well liked by liberal media outlets. He's as likely to be on The News Hour, as Hannity and Colmes. The point, readers, is that Mr. Lowry, in all likelihood, has an awful lot of money in play on the stockmarket. As we're about to find out, he not only believes in it, but credits it with the rise of the West in general. With that in mind, let's go back to the comment. Capitalism, for those of you unfamiliar with Adam Smith, is based on trade, not money. So, if Wall Street were to suddenly collapse (which it won't), capitalism would go on. That's not to say that there wouldn't be effects, or repercussions, but the idea that capitalism as a whole would cease to exist is very silly.
This next quote is long, but fully covers the division between us:
"[P]resumably [the honest laboring man] wants to buy a house (which requires a mortgage), not pay for everything with cash (which requires credit cards), have a job (which requires a business that is very likely dependent on loans) and buy big-ticket consumer items he can't pay for upfront (which requires car loans, etc.)."
The house he bought was too big, acquiring debt is a bad idea for the honest laboring man (after all, if he were a finacial wiz, he wouldn't be laboring, and a good chance he's not honest. Oh come off it: selling short is inherently dishonest.), and he definitely shouldn't be buying big-ticket consumer items on credit. It's a virulent, nasty rumor that says we should, and it preys on our basest instinct: Have it now! You can't live without it! Life would be different with this!
"The financial crisis is so disturbing exactly because finance is so centrally important. Our sophisticated financial system -- inherited from the British -- has been one of the glories of Anglo-American capitalism...Without this system, Britain and America wouldn't have risen to global pre-eminence, and consumer capitalism as we know it -- dependent on credit -- wouldn't exist."
There is one bit of advice given to us by the ancient heathen Greeks, and by the Jews in the Old Testament, and by the great Christian teachers of the Middle Ages, which the modern economic system has completely disobeyed. All these people told us not to lend money at interest: and lending money at interest—what we call investment—is the basis of our whole system. Now it may not absolutely follow that we are wrong. Some people say that when Moses and Aristotle and the Christians agreed in forbidding interest (or "usury" as they called it), they could not foresee the joint stock company, and were only dunking of the private moneylender, and that, therefore, we need not bother about what they said.
That is a question I cannot decide on. I am not an economist and I simply do not know whether the investment system is responsible for the state we are in or not This is where we want the Christian economist. But I should not have been honest if I had not told you that three great civilisations had agreed (or so it seems at first sight) in condemning the very thing on which we have based our whole life. ~ C.S. Lewis, Mere Christianity
There's a lot of speculation (some of which I've engaged in here) about who would profit and who would lose in a bailout, and it's all been split along the lines of wealth.
"The rich have their profits privatized, and their risk socialized", and, "It's really the poor who need their 401Ks and their retirements protected." This goes on without end in blog comments and various places of democracy. Who can say who wins the most in a bailout, or who profits the most? Economists don't agree, and to a significant extent I don't think we'll ever know.
I propose a new metric for division: the wise and the foolish. Those who were foolish enough to live in debt--as has been warned against down through the ages--ought to bear the burden. Those who are without debt ought to be left alone.
That seems fair to me.
5 comments:
I fully agree that society relies too much on credit to get what it wants - not what it needs - and to get it NOW. My boyfriend recently bought a ridiculously gizmodic new television; a colleague of his remarked on the loan he must have had to get, and was surprised to learn that actually, he'd saved up for the last eight months or so to buy it outright. It was as if the concept of waiting and budgeting for a desired item had simply bypassed the guy.
I don't have a problem with short-selling; I see it as a way for the market to right itself. Shares can't rise all the time, and short-selling prevents that from happening. The very act of short-selling causes share prices to drop, just as going long often causes them to rise, so what's the difference?
All that is happening in the current 'crisis' is that a previously over-inflated market is righting itself, and unfortunately, the surfers who have been enjoying the tidal waves for so long don't like it when they're suddenly back in still waters. Perhaps it's easy for me to say, as someone who doesn't have enough money to be really affected by economic fluctuations. Hell, as a student, I'm up to whatever body part you'd care to name in debt (but that's GOOD debt - unavoidable as part of my investment for the future, not materialistic impulsiveness).
I wouldn't outlaw short-selling, but it's not nearly safe enough to be done as frequently as it is. All I propose is that we let them take the full risk and reward.
The market is trying to right itself; it remains to be seen whether it shall be allowed.
Oh--wait--they passed the Bailout, but only after an additional $150 Billion was tacked on. Good for them, for sticking to their guns...
Whilst we have a system in which politicians are dependent on the votes of the people who've been successfully sold the lie that they "need to buy crap" both for their own status and to keep the ecnonomy going, we'll never have a situation other than one in which failing institutions, and people, are "bailed out". Whether that bail-out turns out to be another lie is yet to be seen; I'm no economist either. But the IDEA of a bail-out is inevitable; the prospects of any politician effectively saying "tough cheese, you dozy fools" to hundreds of thousands of people are zero to minus-infinity.
That's not to say that, in principle, I don't agree with much of what you're saying.
The majority of people I've talked to are against the bailout though. I'm perplexed what encourages these politicians to think they will get to keep their jobs.
I agree that the idea of a bailout is inescapable, but that doesn't mean any idea of a bailout will do. I've read several proposals for a bailout that seem decent. The one they picked was a series of blank checks to enable those most (ir)responsible to wreak more havoc--to their profit.
For example, a Google search for, "Dave Ramsey common sense bailout" will reveal a $50B plan that protects the weakest among us, and leaves the rest to find their way. I defy anyone to find out what "The Plan" is for this $850B one I'm stuck with. Which brings us another question: Why was $700B unacceptable to politicians, but $850B is quite nice?
I'd imagine that most people in theory are against the idea of banks being bailed out with taxpayer money, but when it comes to a stark alternative between a bailout allowing a neighbour or relative to stay in their house or them being turfed out onto the street, they might change their tune.
I don't know the ins and outs of your package at all; I know that the UK's considerably smaller £50bn package is (according to the party spin at least) tied to commercial rates of interest on the loans payable by the banks and strict controls on employee bonuses - but then I'm sure that your government is spinning your package in much the same way.
Ultimately, most of the public never get beyond thinking about the rights and wrongs of "a bailout" - the specifics are invariably going to be fairly complex, and the results hard to judge without a lot of hindsight. But both of our governments are incredibly tightly bound to the money markets, so neither can afford to be seen to be doing nothing.
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