Did Goldman and friends cause the financial crisis or was it reckless government legislation? That’s the $64,000 question. Your link wasn’t really what you’d call to be objective.

And that remark about the eightball just proved where you’re at as far as Rand is concerned. Traders might be reviled, but it’s due to envy.

Jeff

Good post overall, but was that really necessary?

jeff watson: “… We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved. …”

Wow. Conclusive proof that having an eightball to yourself isn’t 100 percent fatal.

But seriously, you’d post something like that in earnest after a financial crisis caused by Goldman Sachs and friends? That’s funny.

I don’t want to start a threadfuck as I seem to be in too many of them around here.

Just so you understand where I come from, I listen to the same BS news that y’all do. We all hear the same guys pontificating, the same op-eds. etc. I don’t respect any of those guys for the simple reason that they have nothing personally invested. I respect someone that has an opinion and is willing to back it up with money, to risk money on their opinion, and that’s what trading is all about…..clarity Everything else in the public domain is just noise.

Ayn Rand summed it up best when she wrote about traders. She said,

“The symbol of all relationships among [rational] men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. A trader does not squander his body as fodder or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtues, in payment for his own selfish pleasure, which he receives from men he can respect. The mystic parasites who have, throughout the ages, reviled the traders and held them in contempt, while honoring the beggars and the looters, have known the secret motive of their sneers: a trader is the entity they dread—a man of justice”

Jeff

As much as I’m not thrilled with ACES myself (too many offsets and allowances given away, for starters), I think you’ve drank the Gore profits kool-aid. Yes, his portfolio benefits, but he’s on record as donating all the profits to green organizations – something that Fox News clipped out of their news reports after Gore appeared before Congress (I can find a link with proof of this if you’re interested). Still, I’ll admit it would be better if Gore just got rid of his problematic investments altogether to eliminate the appearance of a conflict of interest.

If the Feds had taken over the companies (GM, BofA, etc.) and dismantled them piece by piece, I wouldn’t have had any problem with it. My concern is that a simple failure of a company that large strikes me as a recipe for disaster. I read an article that described just how close the world financial system came to complete meltdown on the day Lehman went under, but I can’t seem to find it again – BofA being allowed to simply fail in the same manner would have had an even larger global effect. So a supervised bankruptcy and liquidation with temporary government support would have been my preferred solution.

As for your “traders know best,” I’m finally calling bullshit. Here’s why.

In my industry, electrical engineering, there are essentially two groups of people – designers and technicians. Designers know how to use physical laws and the available components to design a piece of electronics that does something that a customer wants. Technicians know how to assemble those components efficiently, how to test the finished product, how to debug problems, and so on. The two groups are complimentary and largely non-overlapping, although the best engineers have experience as technicians and the best technicians have some theoretical background too.

This overall structure – technicians and designers – applies to every technical industry I’ve looked at to any depth. Healthcare has it with doctors and nurses. Construction has it with architects and contractors. Economics has it with economists and traders.

Krugman and other economists like Shlaes (do you ignore her too, since she probably couldn’t trade her way out of a paper bag any more than Krugman could?) serve to understand the larger economy and provide both insight and guidance to how it works on a macro scale. Traders such as yourself provide the actual liquidity and are good at finding and profiting from the temporary advantage granted by various indicators. Both serve vital, and largely non-overlapping, purposes in the functioning of a successful economy. And I suspect that, as with designers and technicians, the best traders have some theoretical understanding of the economy just as the best theorists have some experience (direct or indirect) with trading.

At this point, though, I’ve probably pulled this far enough afield to qualify as a threadfucker. My apologies to Boney for that.

I, along with you, agree that no company should be too big to fail and that;s why Chrysler, GM, B0fA, and Citi should have gone into liquidation. It would have sent a message to the business community to excise caution. However, the politicians are more interested in votes, and prefer to use band aids instead of an amputation for gangrene.

As for Obama understanding the free market, he understands it perfectly, and his cronies are getting rich off his corrupt administration(the tape doesn’t lie, they do leak numbers before the announcement). This cap and trade is a work of art, worthy of Madoff. Thanks to Cap and Trade, Al Gore will be able to upgrade his Gulfstream V.

As for Krugman, we’ll have to agree to disagree. His partisanship has clouded his judgment, and although he’s an economist, he couldn’t trade his way out of a paper bag. Also, Nobel Prize winners can be crazy, just look at Linus Pauling. Some in the trading sector use Krugman and “The Economist” as fade factors, as they usually are behind the form.

As for listening to economists, why would one do that? If an economist had any prescience or sagacity, he would be trading his own account, not bloviating to the hungry sheep looking for answers.

Jeff

I don’t know enough about the yield curve or the bondholder complaints, although I can hypothesize an advantage to having the government overrule bondholders – if investing in huge companies that are “too big to fail” is made more risky by the fact that the government could step in and negate the bonds, then investors would be less likely to invest in massive companies. Given that IMO no company should ever be allowed to become too big to fail, this is potentially a good thing, although I’d have to study it more to know for sure. Companies were permitted through government inaction to become “too big to fail,” while government action, aka regulations, would have prevented the near collapse of the global financial markets when Lehman Brothers declared bankruptcy and would have eliminated the need for TARP, massive bank bailouts, and increased mil levies on banks by the FDIC that will shore up the “too big to fail” banks with the purchased assets of financially solvent community banks.

I’ve noticed the increase in personal savings, and it’s a necessary short-term economic pain for a massive long-term economic benefit. Personal consumption at the rates of the last 20 years was not and is not economically sustainable. Again, value created out of nothing can turn back into nothing just as fast or faster. Money backed by real value that is saved and turned into more real value via lending will result in slower overall economic growth, but more stable and sustainable growth as well.

As far as small business goes, more government spending tends to support small businesses due to the number of construction companies who qualify as small businesses. New housing starts and building permits are up, suggesting that lenders are clearing out the backlog of crappy mortgages (and thus that TARP is working at least a little), and sales of existing homes have been rising since bottoming out in March. Since the majority of homebuilders are small businesses, this is all good for small business and thus for the economy. We can probably debate for months whether this is a result of TARP clearing out the junk, but TARP money was intended to induce more lending, and you’re not going to have increases in housing starts and sales of existing homes without lending.

I’ve also heard reports of a surge in small business formations from people who’ve been laid off and are trying their hands at being entrepreneurs, but I haven’t been able to track down data for or against the reports I’ve heard.

On the topic of Amity Shlaes, Krugman has played “whack-a-mole” with her arguments here and here, so you’ll excuse me if I don’t buy her arguments, or yours that are based on hers. And I realize it’s all the vogue these days to blame Roosevelt for lengthening the Depression (another Shlaes’ invention), but that’s been strongly disputed by many, many economists. I’ll fall back on Krugman since he’s the economist I read the most, but he’s not alone by any means. Check out these links for what I mean: New Deal economics, Even more on nominal wages, Wages and employment, again.

Obama understands that free market reality isn’t as neat as libertarian economic theory would have us believe. And frankly, until you can provide me proof that he’s wrong (and that I’m wrong, since I agree with him on this point, as I’ve made abundantly clear over the years we’ve argued about this), you’re not going to convince me.

Jeff

I guess that’s one interpretation. Another is that they sparked the greatest sustained period of prosperity in the history of the nation.

Please read what I wrote. I said “The government action regarding the economy not working.”

Show me where any government action has improved the economy. Has the stimulus or TARP helped? Has the creation of Fiat money helped? Has the government diktat regarding the yield curve helped? Has the plunge protection team worked? Has the subordination of bondholders helped? Has the increased government debt helped the economy? Has the cronyism of the new administration helped…..they tend to leak numbers before the announcements(the ticker tape doesn’t lie), something the Republicans couldn’t get away with.

Any improvement in the economy is due to the revaluation of assets which creates trade solely due to free market forces. The free market is the reason the economy is improving, not the government. The economy is improving despite the government, which only exists as a result of profits from the private sector, and what they can take from the citizens.

Have you noted the uptick in the private savings rate?

The bond vigilantes certainly don’t think the government is doing anything to help the economy, and any fool can look at the bond market performance and see that.

This administration is reducing the number of incentives that would make a person want to start a business or be in business, vs. working in a job with little risk.

Amity Shlaes from the CFR has some interesting stuff regarding government intervention.
http://www.cfr.org/bios/7536/amity_shlaes.html

Which brings me to the question…Does government spending really improve the economy or is it just window dressing?

Finally, In the great depression, Roosevelt’s programs made what would have been a 3 year depression into one that lasted three times as long.

Jeff

There are four basic possible outcomes here: economy improving/government intervention is the cause, economy improving/government intervention not the cause, economy degrading/government intervention is the cause, or economy degrading/government intervention is not the cause.

Given that government spending has partially filled the private spending gap (30-50%, IIRC), I have a hard time believing that we’re in the “degrading/government spending is the cause” quadrant, although we could still be in the “degrading/government spending is not the cause” quadrant. In that case, however, it’s easy to argue that the spending gap has been partially plugged by government deficit spending and so government spending is slowing the pace of economic degradation, but is being overwhelmed by other factors.

The problem is that the hole we’re in requires much more bold action than Obama and his party are willing to undertake. Half-measures and beginning to move in the right direction are simply not enough, especially when most of them are predicated on political viability rather than doing what’s right/needs to be done.

The largest investment in renewable energy in US history is, in fact, a tiny sum when compared to other government expenditures. I’m neither a pacifist nor an isolationist, but it should be obvious that our military spending is the root cause of our financial woes. That’s an issue that Obama will not address. Someone will have to eventually, that is, if we’d like to draw down the empire and survive its fall.

Clearly the Dems still have horrid nightmares about speaking honestly to the American people; they may never forgive Carter for doing it. But i remember Obama promising to do just that. He’s not, nor does it appear that he has any real intention of doing it. That he’s willing to ignore issues that are important to people who voted for him is troublesome: real health care reform, gay rights, reexamining the war on drugs. (on at least two of these issues, polling suggests that a good many conservatives are open to what could be called “liberal” solutions) It appears that he is unwilling to take on any entrenched interest.

I believe that people took his rhetoric to mean that he’d put things above politics; there’s no sign of that. And what achievements he’s made look pale and sickly in that light. He needs to use the rhetoric and incessant media presence to move the American people, not triangulate his position…unless he wants to be just another politician and not a leader.

Reactionary criticisms? Really? He hasn’t done a damned thing that he promised to do that was important, and in most cases has done exactly the opposite, but these are reactionary criticisms? What the hell would be a valid criticism of him, then? Pretty much all he’s done is made sure the gravy train didn’t wobble for the upper 5%.

I love the “Don’t point fingers!” attitude. Pointing fingers is EXACTLY what’s needed. When people are worthless, they need to be told they’re worthless. More importantly, they need to not be reelected. Next time I’m voting green or staying home.

Y’all really need to read Nock’s “Our Enemy the State,” the complete book linked below.
http://www.lewrockwell.com/orig3/nock1.html

Although written long ago, it is very current. Nock anticipated all of this.

Taking power from the elites, short of a 1917 style revolution, isn’t going to happen. Y’all need to figure out another way to advance your agenda.

Jeff