1/31/09
One of the most heated topics floating around Wall Street and Washington of late is the issue of compensation in the financial business.
While Senator Claire McCaskill (D., MO) has been saying some perfectly sensible things about “massive self indulgences” (sic; if I am wrong about my “said in context,” and Senator McCaskill did mean to say indulgences, perhaps she share my Catholic religion and meant to say “indulgences” and was talking about something having nothing to do with Wall Street. However, I get the sense that she meant to say “indulgence,” in the singular. But I digress.) and “a bunch of idiots on Wall Street,” she has hatched a perfectly ludicrous plan that proposes to limit Wall Street compensation to $400,000, the salary of the President of the United States. As ludicrous as this piece of central planning might be, however, Senator McCaskill makes a point when she argues that, once these Wall Street Wonderboys started taking Uncle Sam’s money, they left themselves subject to whatever dictates emanated from the sachems who occupy the den of iniquity on the Potomac. (See one of today’s other posts, “GEORGE BAILEY, CALL YOUR OFFICE.”)
Senator McCaskill’s proposal is, of course, not the only example floating in the ether above Washington of drumbeating for limitations on executive. Most of these proposals, like Senator McCaskill’s, are idiotic but entirely justified because, as the old adage says, once you take the man’s money, you do what the man says. And all these guys have taken the man’s money; though there was some duress involved in “persuading” the then apparently healthy banks to take the money (See my 10/14/08 post.), any of these estimable, highly paid, and supposedly big, tough CEOs could have said no. Instead, they went shuffling off, bowing and scraping to their new federal masters.
As moronic as these pay limit proposals are, some of the defenses of the compensation customs on Wall Street are equally imbecilic. As one might expect, the most gormless of these defenses comes from the Wall Street Journal, which still laughingly insists on fancying itself the voice of the free market.
The Journal points out in one of its 1/31/09 editorials that
“That ‘irresponsible' bonus pool of $18 billion was for every worker in the New York financial industry, from top dogs to secretaries. The average bonus (in 2008) was $112,000; bonuses typically make up most of an employee’s salary (sic) on Wall Street.”
First of all, $112,000 is, for most people, even for most people who read the Wall Street Journal, a lot of money. But even aside from this flight from reality, this whopper was alarmingly disingenuous even for the Journal, the most salient feature of which of late has been its disingenuousness. Reading this, the Journal would have us believe that the typical Wall Street trader, salesperson, or investment banker makes a relatively modest, or at least not outrageous salary (less than $112,000) and then gets a bonus of around $112,000 for a total compensation package of around $200,000. Nice money (way too much for the job most of these bozos has done of late), but not eye-popping. But just how naïve does the Journal think people are? The Journal defeats its own argument when it says that the $112,000 average includes everyone, including secretaries. How big a bonus do you suppose the typical secretary or mail room worker will get this year? Probably pretty close to bupkus. Yes, the average is $112,000, but the big guys, the guys who are in a position to really screw things up (and who did so with a special gusto over these last few years) are getting a LOT more than $112,000. Yes, bonuses “make up most of an employee’s salary (sic) on Wall Street.” But for the professionals, the guys who have crippled, if not destroyed, our financial system, that salary isn’t $112,000 (or anything like it) and, yes, the bonus remains the largest part of their compensation, i.e., a large multiple of a salary of which most Americans, even most college educated Americans, can only dream.
People who read this may protest “Don’t you believe in the free market?” Yes, I do, far more than almost all of Wall Street. That is why this pay for failure so appalls me so. Let’s do some simple arithmetic. From 2002 to 2008, Wall Street securities firms paid about $190 billion in bonuses, which spread over six years averages $31.7 billion per year. Spread over seven years (The 2002 to 2008 time frame could be so interpreted if one includes each of the “end” years.), that would average $27.1 billion. During that time frame, those companies showed (post bonus) profits of $76 billion, or either $12.7 billion or $10.9 billion per year. (Some, especially some shareholders, might argue quite legitimately, that these bonuses were outrageous, but let’s leave that argument for another time.) In 2008, these firms paid out bonuses of $26 billion, not substantially below the average for the “good” years, but the firms collectively lost, post bonus, $25.3 billion. One does not have to be a shareholder to argue that these payouts were ridiculous. In a free market economy, one does not pay for failure, and one assumes that payouts should bear some relationship to the profitability of one’s employer. But, as I have said ad nauseam in the past, we are no longer in a free market economy. We are in a fixed, “not what you know but who you know,” “once you are in the club you are set for life even if you are a witless, irresponsible dolt” economy, an abomination before God and man concocted by the interplay of big government, big business, and Wall Street, an abomination that will be a substantial contributor to the rapid and incipient downfall of our once great nation (just in case you wondered how I really feel).
Others may argue that if Wall Street firms don’t pay (still) gargantuan bonuses, their top talent will flee to more profitable employment. In the first place, it would be a blessing for these firms, or at least for their shareholders, if such “talent” went far, far away. But even I will concede that there remain some bright, talented, hardworking, responsible people on Wall Street, and it would be in their employers’, Wall Street’s, and the nation’s, interest to keep such people toiling away solving the problems their esurient and excerebrose colleagues have created. But the opportunities awaiting those who walk out the door are limited in this environment; Wall Street, and its counterparts overseas, is not lining up to hire people. The opportunities available for those who think they are underpaid simply are not all that abundant. Most sensible people will realize that they are best off remaining where they are, even if doing so entails some financial (hah!) “sacrifice.” If they think otherwise, perhaps they aren’t so smart, or at least not so prudent (I know this from personal experience, but that is a long and distant story best left for another time, or never.), and what we need now, above all, is prudence.
Yes, the proposals coming from Washington to limit pay are ridiculous. But Wall Street brought such potential diktats on itself both by taking federal money and from paying itself according to Alice in Wonderland logic for years.
You made your bed, guys, now enjoy sleeping in it. We can only hope there were some excess nails involved in its construction.
Saturday, January 31, 2009
GEORGE BAILEY, CALL YOUR OFFICE
1/31/09
The Wall Street Journal reports today that many banks, leery of the restrictions about which the big banks who took the government’s money are now whining, have said “No, thank you” to TARP money.
These refusenik banks are, for the most part, not surprisingly, not located in the financial canyons of New York or Chicago. Instead, the include such banks as United Bankshares, Inc., of Charleston, West Virginia, American River Bankshares of Sacramento, California, and Rurban Financial Corp. in Defiance Ohio. Apparently the people who run these banks realize that when one takes the man’s money, one does what the man says and wanted no part of the man, even if the man is Senator Claire McCaskill. (See one of today’s other posts, “SHE ASKS ME WHAT I MAKE…”)
This characteristic bout of good sense and prudence emanating from America’s smaller financial institutions provides further evidence for my long held contention that, if we are ever to emerge from this financial morass, it will be the good sense of the small business person, not the bloviations of the blowhards in New York and Washington, that will lead us to safety.
It would be nice if Mr. Obama or the pooh-bahs on Wall Street would consider hiring some of the people who run such institutions to help solve some of these problems, or at least listening to what they have to say. Such a development, however, is probably impossible. People who run small banks, for the most part, want no part of the hypocrisy, group think, supercilious vanity, and utter insanity that characterizes our nation’s political and economic power centers.
The Wall Street Journal reports today that many banks, leery of the restrictions about which the big banks who took the government’s money are now whining, have said “No, thank you” to TARP money.
These refusenik banks are, for the most part, not surprisingly, not located in the financial canyons of New York or Chicago. Instead, the include such banks as United Bankshares, Inc., of Charleston, West Virginia, American River Bankshares of Sacramento, California, and Rurban Financial Corp. in Defiance Ohio. Apparently the people who run these banks realize that when one takes the man’s money, one does what the man says and wanted no part of the man, even if the man is Senator Claire McCaskill. (See one of today’s other posts, “SHE ASKS ME WHAT I MAKE…”)
This characteristic bout of good sense and prudence emanating from America’s smaller financial institutions provides further evidence for my long held contention that, if we are ever to emerge from this financial morass, it will be the good sense of the small business person, not the bloviations of the blowhards in New York and Washington, that will lead us to safety.
It would be nice if Mr. Obama or the pooh-bahs on Wall Street would consider hiring some of the people who run such institutions to help solve some of these problems, or at least listening to what they have to say. Such a development, however, is probably impossible. People who run small banks, for the most part, want no part of the hypocrisy, group think, supercilious vanity, and utter insanity that characterizes our nation’s political and economic power centers.
“BUT I GOT A DRIVER AND THAT’S A START…”
1/31/09
So former Senator Tom Daschle has joined many of his colleagues, including our esteemed new Treasury Secretary, in having been caught with his hand in the tax cookie jar. It seems that former Senator Daschle, which our hell-bent on bringing change to Washington President has chosen to head the Department of Health and Human Services, paid about $140,000 in back taxes and interest for income that he failed to report when it was earned but was discovered in the process of vetting him for the HHS post. The back taxes were on in-kind income, the luxury car provided him by his new employer, an investment firm that doubtless hired Mr. Daschle for his ability to structure various financial derivatives, not for his ability to have people in Washington return his phone calls, no sir. But I digress.
Mr. Daschle’s tax problems are appalling enough. But what is especially galling, and elucidatory, is Mr. Daschle’s explanation for his “oversight.” He told Senate Finance Committee staff that he had grown used to having a car and a driver as Senate Majority Leader and thus didn’t even think to report the car on his tax return. (Incidentally, we are talking about the period from 2005 to 2007. $140,000 in taxes on a car used for two years? Wow! Must have been a Maybach, a Rolls, or twenty Hyundais. Some of my readers will get that joke, but, in any case, I digress.)
So Mr. Daschle’s experience in Washington had left him so isolated from reality that he didn’t even think he had to report some (approximately) $400,000 in income? He was so used to having his hindquarters smooched on the Hill that he couldn’t relate to the reality of life outside Washington, even a reality that involved being given use of a (n apparently very nice) luxury car as part of his compensation?
Was there ever a better argument for term limits?
So former Senator Tom Daschle has joined many of his colleagues, including our esteemed new Treasury Secretary, in having been caught with his hand in the tax cookie jar. It seems that former Senator Daschle, which our hell-bent on bringing change to Washington President has chosen to head the Department of Health and Human Services, paid about $140,000 in back taxes and interest for income that he failed to report when it was earned but was discovered in the process of vetting him for the HHS post. The back taxes were on in-kind income, the luxury car provided him by his new employer, an investment firm that doubtless hired Mr. Daschle for his ability to structure various financial derivatives, not for his ability to have people in Washington return his phone calls, no sir. But I digress.
Mr. Daschle’s tax problems are appalling enough. But what is especially galling, and elucidatory, is Mr. Daschle’s explanation for his “oversight.” He told Senate Finance Committee staff that he had grown used to having a car and a driver as Senate Majority Leader and thus didn’t even think to report the car on his tax return. (Incidentally, we are talking about the period from 2005 to 2007. $140,000 in taxes on a car used for two years? Wow! Must have been a Maybach, a Rolls, or twenty Hyundais. Some of my readers will get that joke, but, in any case, I digress.)
So Mr. Daschle’s experience in Washington had left him so isolated from reality that he didn’t even think he had to report some (approximately) $400,000 in income? He was so used to having his hindquarters smooched on the Hill that he couldn’t relate to the reality of life outside Washington, even a reality that involved being given use of a (n apparently very nice) luxury car as part of his compensation?
Was there ever a better argument for term limits?
Wednesday, January 28, 2009
“IF YOU’RE INTERESTED IN A CAREER IN POLITICS, AND LOTS OF CASH…”
1/28/09
I sent the following letter to the Chicago Sun-Times in response to a column by Carol Marin, one of our town’s more accomplished political writers:
1/28/09
In her 1/28/09 Commentary piece on the Blagojevich imbroglio, Carol Marin approvingly quotes freshman Democratic Representative Bill Burns of Chicago:
“What drove the impeachment of this governor was the need for campaign cash. Same for George Ryan in the licenses-for-bribes probe, money for his campaign fund.”
Ms. Marin goes on to conclude
“Nothing changes until the (campaign finance) system changes.”
There is a large element of truth in Ms. Marin’s contention, but she omits a substantial point. While it was the quest for campaign money that led to the downfall of Governors Ryan and Blagojevich, that money was not being raised exclusively to fund their campaigns. A truly corrupt politician, or even a mildly corrupt, garden variety Chicago/Illinois politician, has long found ways to funnel “campaign” money into his pocket. Until recently, doing so in Illinois was both simple and legal; all a pol had to do was to report any campaign money converted into personal funds on his or her income tax return. Even after the law was changed and such conversions were made illegal, and doubtless even while that law was in effect, our scrofulous pols channeled money to themselves through jobs or contracts for friends. Money funneled to such friends and supporters easily found its way into the politicians’ pockets through “gifts” or by employing more direct methods, such as channeling such contracts and jobs to the pols’ spouses.
It is not only the need for campaign funds that drives corrupt politicians. Campaign funds, in addition to legitimately funding campaigns, often serve as conduits for channeling money to politicians without having to pay outright bribes. Even if, as Cindy Canary of the Illinois Campaign for Reform prescribes, caps are put on the amounts of campaign money that pols can raise, or even if more drastic campaign reform measures are adopted, pols will simply find other, and perhaps even cruder ways, to put sell their offices for personal gain. Campaign reform will only affect the methodology employed by nefarious pols to line their pockets.
I sent the following letter to the Chicago Sun-Times in response to a column by Carol Marin, one of our town’s more accomplished political writers:
1/28/09
In her 1/28/09 Commentary piece on the Blagojevich imbroglio, Carol Marin approvingly quotes freshman Democratic Representative Bill Burns of Chicago:
“What drove the impeachment of this governor was the need for campaign cash. Same for George Ryan in the licenses-for-bribes probe, money for his campaign fund.”
Ms. Marin goes on to conclude
“Nothing changes until the (campaign finance) system changes.”
There is a large element of truth in Ms. Marin’s contention, but she omits a substantial point. While it was the quest for campaign money that led to the downfall of Governors Ryan and Blagojevich, that money was not being raised exclusively to fund their campaigns. A truly corrupt politician, or even a mildly corrupt, garden variety Chicago/Illinois politician, has long found ways to funnel “campaign” money into his pocket. Until recently, doing so in Illinois was both simple and legal; all a pol had to do was to report any campaign money converted into personal funds on his or her income tax return. Even after the law was changed and such conversions were made illegal, and doubtless even while that law was in effect, our scrofulous pols channeled money to themselves through jobs or contracts for friends. Money funneled to such friends and supporters easily found its way into the politicians’ pockets through “gifts” or by employing more direct methods, such as channeling such contracts and jobs to the pols’ spouses.
It is not only the need for campaign funds that drives corrupt politicians. Campaign funds, in addition to legitimately funding campaigns, often serve as conduits for channeling money to politicians without having to pay outright bribes. Even if, as Cindy Canary of the Illinois Campaign for Reform prescribes, caps are put on the amounts of campaign money that pols can raise, or even if more drastic campaign reform measures are adopted, pols will simply find other, and perhaps even cruder ways, to put sell their offices for personal gain. Campaign reform will only affect the methodology employed by nefarious pols to line their pockets.
Tuesday, January 27, 2009
“YOU CAN GET ANYTHING THAT YOU WANT AT ALICE’S RESTAURANT”
1/27/09
This morning, the hosts of a WGN-AM 720 talk show chose as a topic an article in today’s Wall Street Journal concerning waiters’ and waitresses’ now being required, at certain restaurants, to bus their own tables as store managers seek to cut costs. The program, generally one of the lightest of WGN’s typically light fare, featured an assortment of waiters and waitresses calling expressing their opinions concerning this latest development and relating some of their experiences. Light and anecdotal, but nonetheless entertaining and informative.
One of the callers was a waitress at what she described as an upscale Oak Brook restaurant (For those of you who don’t know the Chicago area, Oak Brook is a VERY upscale suburb.), and she spent most of her time comparing and contrasting her experience there with her prior experience at the Maggiano’s Little Italy location in Oak Brook. As many of you know, Maggiano’s is a nice place (“good food, everyone minds his business”…okay, maybe not as nice as Bruno’s in the Bronx, but a nice place nonetheless), and isn’t cheap, but only the Quinns would consider it an upscale establishment. The waitress’s main point was not nearly as interesting to me as her response to one of the host’s questions regarding how she was doing, given the economic situation. She responded that she hasn’t felt much of the economic downturn because Oak Brook, being a wealthy community, hadn’t felt much of the recession and because much of her business was corporate.
Two major observations are in order here. This woman’s job puts her in a good position to detect economic trends, a far better position than those of about 99.5% of people on Wall Street. If she is right, and Oak Brook has not slowed down, it means to me that we are in at least as bad an economic situation as I had thought. Why? Let’s use Oak Brook as a surrogate for any, or all, “wealthy” communities throughout the country. If indeed they haven’t been hit, it’s just a matter of time; they merely haven’t been hit YET. Why do I say that? There are two reasons. First, many, if not most, of the people who are considered “rich,” by themselves and by casual and not so casual observers, are not rich at all. Today, when we consider someone wealthy, usually because of appearances or self-delusion, we don’t mean that s/he is wealthy but, rather, that s/he has access to liability creation. That ability to create liabilities is gone or soon will be. Second, even those who are, or were, truly wealthy have been hit hard in their real estate and stock portfolios. Don’t believe the commonly held, yet ludicrous, proposition that the “wealthy” somehow know a great deal about investing money; witness the Madoff fiasco. His “victims” weren’t working stiffs. Not only have those who had some legitimate claim to being wealthy been hit in their portfolios but, in many cases, their jobs are in jeopardy. Don’t believe in the myth that those who are wealthy are necessarily smart, hard working, or immensely talented. Given the structure of our post-free market economy, many are none of those. They are simply well connected, lucky, or were audacious in an economic set of circumstances in which audacity was well rewarded. Their true economic value, under normal economic circumstances, is a tiny fraction of what they managed to accumulate under the Alice-in-Wonderland economy that we had experienced, until recently, for the last twenty years.
If Oak Brook and towns like it do remain largely unscathed, it is only a matter of time before they are, for lack of a better term, scathed. That shoe, then, is yet to drop.
My second major observation: If our waitress friend is wrong about the health of the economy of Oak Brook and it has indeed already slowed down, her mere perceptions say something. As I said above, given her position at the one of the fulcra of the economy, her perceptions are, if they are right (and not just in this case), far more valid than those of the average seven or eight figure Wall Streeter. If her perceptions are wrong, however, they are not nearly as valuable as the equally mistaken perceptions of the typical Wall Street culprit because she is not in as good a position to act upon those incorrect perceptions, largely due to her having to work like a slave for a merely decent (or, in better restaurants, slightly better than decent) livelihood while our Wall Street Wonder Kids make large multiples of what she makes for pretending to be important, telling each other how brilliant they are, and decimating venerable institutions of American finance with their latest bright, or outright criminal, trading and investment schemes. But I digress. However, even if she is wrong, and her perceptions do not have nearly as much value as they would if they were right, they are still valuable because they are not hers alone; they are doubtless reflective of other people’s perceptions and, given that she is at least as perceptive as most of the people on whom she waits, reflective of the opinions of at least some people with a degree of influence.
So if the economies of our “wealthy” enclaves are largely undamaged, it merely means that another shoe, and a big one, is about to drop. If, on the other hand, if such economies are, as I believe, hurting, enough people are laboring under the perception that “the ‘rich’ simply do not suffer in these things” to give the markets and, to a lesser extent, the economy, something of a prop. Neither bodes well for the economy or the equity markets and tells me that, if anything, I am being far too optimistic about the economy and the market. Loyal readers know that if I am being far too optimistic, we are in such a state of economic dyspepsia that even my occasionally skillful verbosity cannot begin to describe its wretched depths.
Perhaps a third observation, but a minor and rather obvious one: Much of one’s business being “corporate” should be, in this economy, grounds for trepidation rather than optimism or complacency.
The experts will scoff at these observations. Why, they are purely anecdotal and are based on the perceptions of a mere waitress. But these are the same experts who told us that the “housing problem” was a mere blip that would have a negligible impact on the economy, after they told us that the worst that could possibly happen in the housing market was that prices would stop going up; a decline in housing prices? Ha! The rantings of a misinformed fear monger! And a misinformed fear monger who values the opinions of mere waitresses and other such riff-raff.
This morning, the hosts of a WGN-AM 720 talk show chose as a topic an article in today’s Wall Street Journal concerning waiters’ and waitresses’ now being required, at certain restaurants, to bus their own tables as store managers seek to cut costs. The program, generally one of the lightest of WGN’s typically light fare, featured an assortment of waiters and waitresses calling expressing their opinions concerning this latest development and relating some of their experiences. Light and anecdotal, but nonetheless entertaining and informative.
One of the callers was a waitress at what she described as an upscale Oak Brook restaurant (For those of you who don’t know the Chicago area, Oak Brook is a VERY upscale suburb.), and she spent most of her time comparing and contrasting her experience there with her prior experience at the Maggiano’s Little Italy location in Oak Brook. As many of you know, Maggiano’s is a nice place (“good food, everyone minds his business”…okay, maybe not as nice as Bruno’s in the Bronx, but a nice place nonetheless), and isn’t cheap, but only the Quinns would consider it an upscale establishment. The waitress’s main point was not nearly as interesting to me as her response to one of the host’s questions regarding how she was doing, given the economic situation. She responded that she hasn’t felt much of the economic downturn because Oak Brook, being a wealthy community, hadn’t felt much of the recession and because much of her business was corporate.
Two major observations are in order here. This woman’s job puts her in a good position to detect economic trends, a far better position than those of about 99.5% of people on Wall Street. If she is right, and Oak Brook has not slowed down, it means to me that we are in at least as bad an economic situation as I had thought. Why? Let’s use Oak Brook as a surrogate for any, or all, “wealthy” communities throughout the country. If indeed they haven’t been hit, it’s just a matter of time; they merely haven’t been hit YET. Why do I say that? There are two reasons. First, many, if not most, of the people who are considered “rich,” by themselves and by casual and not so casual observers, are not rich at all. Today, when we consider someone wealthy, usually because of appearances or self-delusion, we don’t mean that s/he is wealthy but, rather, that s/he has access to liability creation. That ability to create liabilities is gone or soon will be. Second, even those who are, or were, truly wealthy have been hit hard in their real estate and stock portfolios. Don’t believe the commonly held, yet ludicrous, proposition that the “wealthy” somehow know a great deal about investing money; witness the Madoff fiasco. His “victims” weren’t working stiffs. Not only have those who had some legitimate claim to being wealthy been hit in their portfolios but, in many cases, their jobs are in jeopardy. Don’t believe in the myth that those who are wealthy are necessarily smart, hard working, or immensely talented. Given the structure of our post-free market economy, many are none of those. They are simply well connected, lucky, or were audacious in an economic set of circumstances in which audacity was well rewarded. Their true economic value, under normal economic circumstances, is a tiny fraction of what they managed to accumulate under the Alice-in-Wonderland economy that we had experienced, until recently, for the last twenty years.
If Oak Brook and towns like it do remain largely unscathed, it is only a matter of time before they are, for lack of a better term, scathed. That shoe, then, is yet to drop.
My second major observation: If our waitress friend is wrong about the health of the economy of Oak Brook and it has indeed already slowed down, her mere perceptions say something. As I said above, given her position at the one of the fulcra of the economy, her perceptions are, if they are right (and not just in this case), far more valid than those of the average seven or eight figure Wall Streeter. If her perceptions are wrong, however, they are not nearly as valuable as the equally mistaken perceptions of the typical Wall Street culprit because she is not in as good a position to act upon those incorrect perceptions, largely due to her having to work like a slave for a merely decent (or, in better restaurants, slightly better than decent) livelihood while our Wall Street Wonder Kids make large multiples of what she makes for pretending to be important, telling each other how brilliant they are, and decimating venerable institutions of American finance with their latest bright, or outright criminal, trading and investment schemes. But I digress. However, even if she is wrong, and her perceptions do not have nearly as much value as they would if they were right, they are still valuable because they are not hers alone; they are doubtless reflective of other people’s perceptions and, given that she is at least as perceptive as most of the people on whom she waits, reflective of the opinions of at least some people with a degree of influence.
So if the economies of our “wealthy” enclaves are largely undamaged, it merely means that another shoe, and a big one, is about to drop. If, on the other hand, if such economies are, as I believe, hurting, enough people are laboring under the perception that “the ‘rich’ simply do not suffer in these things” to give the markets and, to a lesser extent, the economy, something of a prop. Neither bodes well for the economy or the equity markets and tells me that, if anything, I am being far too optimistic about the economy and the market. Loyal readers know that if I am being far too optimistic, we are in such a state of economic dyspepsia that even my occasionally skillful verbosity cannot begin to describe its wretched depths.
Perhaps a third observation, but a minor and rather obvious one: Much of one’s business being “corporate” should be, in this economy, grounds for trepidation rather than optimism or complacency.
The experts will scoff at these observations. Why, they are purely anecdotal and are based on the perceptions of a mere waitress. But these are the same experts who told us that the “housing problem” was a mere blip that would have a negligible impact on the economy, after they told us that the worst that could possibly happen in the housing market was that prices would stop going up; a decline in housing prices? Ha! The rantings of a misinformed fear monger! And a misinformed fear monger who values the opinions of mere waitresses and other such riff-raff.
Monday, January 26, 2009
OOOHHH, ZSA ZSA!!!
1/26/09
Who says the Pontificator is not at the forefront of modern pop culture? I sent the following response to a great friend and former colleague who sent me news of Zsa Zsa Gabor’s being “victimized,” to the tune of $10mm, by Smiling Bernie Madoff:
1/26/09
Ooohhh, Zsa Zsa!!!
Several thoughts come to mind:
First, being famous for being famous, or serially marrying many rich men, must pay well. Can Paris Hilton be far behind on the list of those whose money Bernie made off with? Given her relative youth, and the head start with her chunk of the Hilton fortune (of which I am sure Zsa Zsa also has a piece), such as it is, has afforded her, she is in a good position to surpass even the 1936 Miss Hungary contestant and star of “Queen of Outer Space” in the marvels fame for the sake of fame, and not giving anything away, can do for one’s portfolio. Well, perhaps we have to scratch the latter in Ms. Hilton’s case.
Second, Zsa Zsa’s husband just noticed this last week when he “checked on the couple’s finances.” Either these two are a couple of witless dolts or they have so much money that they never even bothered to check on their mere $10mm investment with Madoff when the story broke. See my first comment again.
Third, if Merv Griffin were still alive, none of this would have happened to Zsa Zsa. He doubtless would have counseled the object of his constant adoration, and the woman whose career he sustained in its later years, to avoid the clutches of the wily and slimy Bernie Madoff. Either that or Merv would have been one of Madoff’s major investors.
Ooohhh, Zsa Zsa!!!
mightydad@wowway.com
Who says the Pontificator is not at the forefront of modern pop culture? I sent the following response to a great friend and former colleague who sent me news of Zsa Zsa Gabor’s being “victimized,” to the tune of $10mm, by Smiling Bernie Madoff:
1/26/09
Ooohhh, Zsa Zsa!!!
Several thoughts come to mind:
First, being famous for being famous, or serially marrying many rich men, must pay well. Can Paris Hilton be far behind on the list of those whose money Bernie made off with? Given her relative youth, and the head start with her chunk of the Hilton fortune (of which I am sure Zsa Zsa also has a piece), such as it is, has afforded her, she is in a good position to surpass even the 1936 Miss Hungary contestant and star of “Queen of Outer Space” in the marvels fame for the sake of fame, and not giving anything away, can do for one’s portfolio. Well, perhaps we have to scratch the latter in Ms. Hilton’s case.
Second, Zsa Zsa’s husband just noticed this last week when he “checked on the couple’s finances.” Either these two are a couple of witless dolts or they have so much money that they never even bothered to check on their mere $10mm investment with Madoff when the story broke. See my first comment again.
Third, if Merv Griffin were still alive, none of this would have happened to Zsa Zsa. He doubtless would have counseled the object of his constant adoration, and the woman whose career he sustained in its later years, to avoid the clutches of the wily and slimy Bernie Madoff. Either that or Merv would have been one of Madoff’s major investors.
Ooohhh, Zsa Zsa!!!
mightydad@wowway.com
Sunday, January 25, 2009
“DON’T MAKE NO WAVES, DON’T BACK NO LOSERS.”
1/25/09
One of the theories that is being bandied about by those who love Chicago politics, most notably by John Kass, is that the grand plan of the people who really matter in the politics of our nation’s greatest city is to get rid of Rod (“I thought of Mandela, Dr. King, and Gandhi”) Blagojevich (Blago has been very cooperative in this aspect of the plan.) and then pass a massive tax increase that will enrage the voters and force out Governor Pat Quinn, putting Lisa Madigan in the governor’s office with a potful of revenue to spend on the people who provide the financial support for the political shenanigans that often pass for government in this state.
As loyal readers know, I had, and in a sense, have, my own theory regarding the regular Democrats’ approach to the Blagojevich imbroglio. I thought that a deal was struck whereby Blagojevich would be put out of office and Governor Quinn would appoint Lisa Madigan to President Obama’s Senate seat. This would give Lisa a nice plum, though perhaps not the plum she really wanted, and assure that things would go smoothly for Governor Quinn in the legislature, controlled by Lisa’s father, House Speaker, 13th Ward Committeeman, and (probably) second most powerful man in Illinois Mike Madigan. Then they would go from there. That plan fell apart when our jello-spined senior senator, Dick Durbin, turned tail and ran at the first cry of racism and acceded to Roland Burris’s ascension to the United States Senate. So my not being entirely onboard with what I’ll call the Kass conjecture might be construed as a case of my talking my own position, but I’ll risk that and spell out my problems with the theory.
On its face, the Kass conjecture makes sense: The pols get rid of a reformer (Quinn) for good, Mike Madigan gets more power, or at least the fatherly pride of seeing his daughter in high office, and the pols get lots of money to spend on their pals and financial supporters. But one cog that seems out of place is Mike Madigan himself. Madigan, despite his Party, does not come across as a reflexive tax increaser. In fact, certainly socially and in many cases financially, he comes across as something of a conservative who would not be a Democrat if he were not from the 13th ward but was raised in, say, Elmhurst. He has spoken in a not entirely hostile manner toward a tax increase, but, as he has said, this is a concession to fiscal reality: If the state is going to continue spending like it does, it simply must raise taxes. The Illinois constitution does not allow deficit spending.
The most important reason that Mr. Madigan is probably not plotting some sort of massive tax increase lies not in ideology, which matters little to him (This very wise eschewal of the bounds of ideology is also the reason that I am sure Mr. Madigan would have been a Republican if he were raised in DuPage County.), but in pure politics. Mr. Madigan is very protective of his majority in the State House of Representatives. He realizes that a big tax increase will not play well, especially in suburban Cook County and the collar counties and could threaten his majority; he could not place ALL the blame for a tax increase on Governor Quinn. Therefore, while a tax increase of some sort is inevitable, don’t look for it to be large or for Mr. Madigan to be one of its chief proponents. His having to be dragged, kicking and screaming, into such a tax increase may be largely smoke and mirrors, as some will inevitably suggest, but I suspect otherwise. Further, even with a tax increase, there won’t be a lot of money to spend on favored constituencies; we will have to use the money to dig ourselves out of the hole Mr. Blagojevich, and his accomplices in the General Assembly, have dug for us.
I also think that the people who matter in Chicago and Illinois politics do not look as far ahead as a “put Pat Quinn in, raise taxes, dump Quinn, put Lisa in” plan would necessitate. This is not because they are not smart; it is because they are, by and large, very smart and know that planning too far ahead in politics is a dangerous, and ossifying, strategy.
One of the theories that is being bandied about by those who love Chicago politics, most notably by John Kass, is that the grand plan of the people who really matter in the politics of our nation’s greatest city is to get rid of Rod (“I thought of Mandela, Dr. King, and Gandhi”) Blagojevich (Blago has been very cooperative in this aspect of the plan.) and then pass a massive tax increase that will enrage the voters and force out Governor Pat Quinn, putting Lisa Madigan in the governor’s office with a potful of revenue to spend on the people who provide the financial support for the political shenanigans that often pass for government in this state.
As loyal readers know, I had, and in a sense, have, my own theory regarding the regular Democrats’ approach to the Blagojevich imbroglio. I thought that a deal was struck whereby Blagojevich would be put out of office and Governor Quinn would appoint Lisa Madigan to President Obama’s Senate seat. This would give Lisa a nice plum, though perhaps not the plum she really wanted, and assure that things would go smoothly for Governor Quinn in the legislature, controlled by Lisa’s father, House Speaker, 13th Ward Committeeman, and (probably) second most powerful man in Illinois Mike Madigan. Then they would go from there. That plan fell apart when our jello-spined senior senator, Dick Durbin, turned tail and ran at the first cry of racism and acceded to Roland Burris’s ascension to the United States Senate. So my not being entirely onboard with what I’ll call the Kass conjecture might be construed as a case of my talking my own position, but I’ll risk that and spell out my problems with the theory.
On its face, the Kass conjecture makes sense: The pols get rid of a reformer (Quinn) for good, Mike Madigan gets more power, or at least the fatherly pride of seeing his daughter in high office, and the pols get lots of money to spend on their pals and financial supporters. But one cog that seems out of place is Mike Madigan himself. Madigan, despite his Party, does not come across as a reflexive tax increaser. In fact, certainly socially and in many cases financially, he comes across as something of a conservative who would not be a Democrat if he were not from the 13th ward but was raised in, say, Elmhurst. He has spoken in a not entirely hostile manner toward a tax increase, but, as he has said, this is a concession to fiscal reality: If the state is going to continue spending like it does, it simply must raise taxes. The Illinois constitution does not allow deficit spending.
The most important reason that Mr. Madigan is probably not plotting some sort of massive tax increase lies not in ideology, which matters little to him (This very wise eschewal of the bounds of ideology is also the reason that I am sure Mr. Madigan would have been a Republican if he were raised in DuPage County.), but in pure politics. Mr. Madigan is very protective of his majority in the State House of Representatives. He realizes that a big tax increase will not play well, especially in suburban Cook County and the collar counties and could threaten his majority; he could not place ALL the blame for a tax increase on Governor Quinn. Therefore, while a tax increase of some sort is inevitable, don’t look for it to be large or for Mr. Madigan to be one of its chief proponents. His having to be dragged, kicking and screaming, into such a tax increase may be largely smoke and mirrors, as some will inevitably suggest, but I suspect otherwise. Further, even with a tax increase, there won’t be a lot of money to spend on favored constituencies; we will have to use the money to dig ourselves out of the hole Mr. Blagojevich, and his accomplices in the General Assembly, have dug for us.
I also think that the people who matter in Chicago and Illinois politics do not look as far ahead as a “put Pat Quinn in, raise taxes, dump Quinn, put Lisa in” plan would necessitate. This is not because they are not smart; it is because they are, by and large, very smart and know that planning too far ahead in politics is a dangerous, and ossifying, strategy.
“GUESS WHAT? IT’S NOT YOUR FAULT!!!”
1/25/09
I don’t watch inaugurations and I don’t generally listen to or pay much attention to Inauguration speeches, and this one, despite its historic overtones, was no different. I have very little tolerance for banality and pabulum and even less patience for the standard campaign speech MO of telling people how absolutely wonderful and blameless they are while laying all their problems at the feet of (other) politicians. As loyal readers know, I have no argument with the castigation of scrofulous politicos, but I find absolving the generally soft and silly American people of all blame for their problems, most relevantly (in the context of a political speech) when it is they who put the scoundrels in power, is either idiotic, supremely and groundlessly adulatory, or both.
Being a prodigious consumer of news, however, I could not avoid reading or hearing about the speech or catching snippets thereof, and I can report that President Obama did not break with the past and did not disappoint in his fulsome provision of pap and pabulum. Especially notable was his decrying the notion “that America’s decline is inevitable, that the next generation must lower its sights.” This particular exemplar of obsequiousness is wrong on its face: There is no doubt “that America’s decline is inevitable, that the next generation must lower its sights.” To say otherwise is to simply tell people what they want to hear.
Why is it so obvious that “America’s decline is inevitable, that the next generation must lower its sights”? On a personal level, this is true simply because our generation has spent its way into a very large financial hole. We have lived way beyond our means, and our children must not only live within their means but also figuratively, and in some cases literally, pay the bills we left them. The only children who will escape this fate are children of those few parents in my generation who have not lived beyond their means, who live modestly, simply, and frugally and have come to know the joy of doing so. Such children have not been imbued with the sordid values of our generation and have not grown used to excessive pampering and luxurious living. Such children will not have to lower their sights. Further, such children will have learned a far more important lesson: that “lowering one’s sights” financially is, emotionally, intellectually, and, most importantly, spiritually, actually raising one’s sights, but I digress.
On a national level, it is certain that we must lower our sights and that our decline is inevitable simply because we have borrowed so much money from overseas “investors.” (Ever notice how in, say, The Wall Street Journal, foreign central banks become foreign investors when they are financing American profligacy and moral decline? But, again, I digress.) This money must be repaid. Even if it can be perpetually rolled over (and the tooth fairy exists), substantial interest will have to be paid on it. As I tell my students, when you owe someone money, the person to whom you owe money is entitled to a share of the fruits of your labor, that person effectively owns a piece of you. The Chinese, Indians, Japanese, Saudis, etc. thus own a very large piece of us. We are not entitled to nearly as big a share of our labors as we were in the past. We owe it to those who have financed our silliness and lack of self-discipline.
The true believers in the wonders of what they mistakenly think is a “free market” will scoff at my pessimism and will find themselves in the strange position of being in agreement with President Obama in his starry-eyed optimism, though not in his economic approach. Why, they will counter, we can grow our way out of this with enough tax cuts.
All we need to do is unleash the industriousness and ingenuity of the American people, and all will be fine.
How exactly are we going to “grow” our way out of this mess? Our manufacturing base, though not completely hollowed out as some observers argue, is a much smaller share of our national output than it was in decades past. This is no concern, the true believers tell us. Why, most manufacturing can be done more cheaply and efficiently abroad, leaving Americans to apply their considerable intellect and drive to more “value added” endeavors like high tech and financial services.
High tech? Check the enrollments at American engineering schools. How many native born Americans attend such schools? Smart American kids don’t want to be engineers. They want to be lawyers, entertainers, or big time Wall Street guys with $35 thousand commodes. (See my 1/22/09 post “BABY YOU CAN DRIVE MY CAR…”)
The engineers are, by and large, either kids from other countries or kids whose parents were born in other countries. The latter is terrific, the very epitome of the American dream. The former is problematical unless we can persuade, or get our government to allow, these kids to stay here once they get their degrees. As America’s economic dominance ebbs, this will become more difficult and thus our economic decline will feed on itself.
Financial services? Over the last twenty years or so, “financial services” in this country has consisted of figuring out how to get other countries to pay our bills, and that was when it was working. The last few years have shown what a great job we have done with the financial services industry. And, remember, when the big time financial services poohbahs were asking for a bailout, they were telling us that these bright Ivy Leaguers were unable to tell a bad credit from a good credit without generous dollops of taxpayer assistance. This is the business that is supposed to be the genesis of a new American generation founded on optimism and hope.
I sincerely hope that President Obama does a great job (See my post on election night.), but I am not optimistic about his chances, both for policy reasons and because I am a realist. Mr. Obama is a politician, much like John McCain, George Bush, or Rod Blagojevich. As such, he is incapable of solving societal ills and is ever mindful of his own, and his parties’ and contributors’, interests. He is battling the inevitable, and generally doing so by figuratively pouring gasoline on a roaring fire. (See my 1/7/09 post, “But it’s good you’re making it snow, Anthony, it’s real good. And tomorrow—tomorrow’s gonna be a real good day!”)
To tell the American people that everything is going to be okay if we just maintain our optimism is typical political balderdash. It adds to the evidence that Mr. Obama is little more than a very smooth talking, intelligent, attractive, and disarmingly calm and collected version of the same carnival barker who has dominated American politics for decades.
I don’t watch inaugurations and I don’t generally listen to or pay much attention to Inauguration speeches, and this one, despite its historic overtones, was no different. I have very little tolerance for banality and pabulum and even less patience for the standard campaign speech MO of telling people how absolutely wonderful and blameless they are while laying all their problems at the feet of (other) politicians. As loyal readers know, I have no argument with the castigation of scrofulous politicos, but I find absolving the generally soft and silly American people of all blame for their problems, most relevantly (in the context of a political speech) when it is they who put the scoundrels in power, is either idiotic, supremely and groundlessly adulatory, or both.
Being a prodigious consumer of news, however, I could not avoid reading or hearing about the speech or catching snippets thereof, and I can report that President Obama did not break with the past and did not disappoint in his fulsome provision of pap and pabulum. Especially notable was his decrying the notion “that America’s decline is inevitable, that the next generation must lower its sights.” This particular exemplar of obsequiousness is wrong on its face: There is no doubt “that America’s decline is inevitable, that the next generation must lower its sights.” To say otherwise is to simply tell people what they want to hear.
Why is it so obvious that “America’s decline is inevitable, that the next generation must lower its sights”? On a personal level, this is true simply because our generation has spent its way into a very large financial hole. We have lived way beyond our means, and our children must not only live within their means but also figuratively, and in some cases literally, pay the bills we left them. The only children who will escape this fate are children of those few parents in my generation who have not lived beyond their means, who live modestly, simply, and frugally and have come to know the joy of doing so. Such children have not been imbued with the sordid values of our generation and have not grown used to excessive pampering and luxurious living. Such children will not have to lower their sights. Further, such children will have learned a far more important lesson: that “lowering one’s sights” financially is, emotionally, intellectually, and, most importantly, spiritually, actually raising one’s sights, but I digress.
On a national level, it is certain that we must lower our sights and that our decline is inevitable simply because we have borrowed so much money from overseas “investors.” (Ever notice how in, say, The Wall Street Journal, foreign central banks become foreign investors when they are financing American profligacy and moral decline? But, again, I digress.) This money must be repaid. Even if it can be perpetually rolled over (and the tooth fairy exists), substantial interest will have to be paid on it. As I tell my students, when you owe someone money, the person to whom you owe money is entitled to a share of the fruits of your labor, that person effectively owns a piece of you. The Chinese, Indians, Japanese, Saudis, etc. thus own a very large piece of us. We are not entitled to nearly as big a share of our labors as we were in the past. We owe it to those who have financed our silliness and lack of self-discipline.
The true believers in the wonders of what they mistakenly think is a “free market” will scoff at my pessimism and will find themselves in the strange position of being in agreement with President Obama in his starry-eyed optimism, though not in his economic approach. Why, they will counter, we can grow our way out of this with enough tax cuts.
All we need to do is unleash the industriousness and ingenuity of the American people, and all will be fine.
How exactly are we going to “grow” our way out of this mess? Our manufacturing base, though not completely hollowed out as some observers argue, is a much smaller share of our national output than it was in decades past. This is no concern, the true believers tell us. Why, most manufacturing can be done more cheaply and efficiently abroad, leaving Americans to apply their considerable intellect and drive to more “value added” endeavors like high tech and financial services.
High tech? Check the enrollments at American engineering schools. How many native born Americans attend such schools? Smart American kids don’t want to be engineers. They want to be lawyers, entertainers, or big time Wall Street guys with $35 thousand commodes. (See my 1/22/09 post “BABY YOU CAN DRIVE MY CAR…”)
The engineers are, by and large, either kids from other countries or kids whose parents were born in other countries. The latter is terrific, the very epitome of the American dream. The former is problematical unless we can persuade, or get our government to allow, these kids to stay here once they get their degrees. As America’s economic dominance ebbs, this will become more difficult and thus our economic decline will feed on itself.
Financial services? Over the last twenty years or so, “financial services” in this country has consisted of figuring out how to get other countries to pay our bills, and that was when it was working. The last few years have shown what a great job we have done with the financial services industry. And, remember, when the big time financial services poohbahs were asking for a bailout, they were telling us that these bright Ivy Leaguers were unable to tell a bad credit from a good credit without generous dollops of taxpayer assistance. This is the business that is supposed to be the genesis of a new American generation founded on optimism and hope.
I sincerely hope that President Obama does a great job (See my post on election night.), but I am not optimistic about his chances, both for policy reasons and because I am a realist. Mr. Obama is a politician, much like John McCain, George Bush, or Rod Blagojevich. As such, he is incapable of solving societal ills and is ever mindful of his own, and his parties’ and contributors’, interests. He is battling the inevitable, and generally doing so by figuratively pouring gasoline on a roaring fire. (See my 1/7/09 post, “But it’s good you’re making it snow, Anthony, it’s real good. And tomorrow—tomorrow’s gonna be a real good day!”)
To tell the American people that everything is going to be okay if we just maintain our optimism is typical political balderdash. It adds to the evidence that Mr. Obama is little more than a very smooth talking, intelligent, attractive, and disarmingly calm and collected version of the same carnival barker who has dominated American politics for decades.
Thursday, January 22, 2009
“BABY YOU CAN DRIVE MY CAR…”
1/22/09
In a long (about 53 years) overdue move, John Thain, 53 years old, has “resigned” from Bank of America. As most readers know, Mr. Thain ran Merrill Lynch before it was acquired by Bank of America. Before working his magic at Merrill, Mr. Thain ran the NYSE after being the president and COO at Goldman. Mr. Thain, the poster-boy for the “right place at the right time with the right connections, and very little else” formula that leads to big time success in modern day corporate America, and especially on modern day Wall Street, hid the gargantuan magnitude of the financial disaster that was Merrill Lynch from Ken Lewis at Bank of America, who purchased Merrill for a price that now seems, er, high. In Mr. Thain’s defense, Mr. Lewis, another card carrying member of the gormless goon squad that dominates America’s financial industry, was not inclined to look very hard at Merrill’s numbers. Though he may protest that he was “forced” into buying Merrill as part of the on the fly Bushite bailout of the financial industry, Mr. Lewis did not have to be dragged kicking and screaming into the Merrill deal; he thought he was getting a deal. No one, or at least no one sentient who did not have a vested interest in licking Mr. Lewis’s loafers, ever accused Mr. Lewis of being smart. But I digress.
Mr. Thain “resigned” ostensibly because of the obfuscation in which he engaged during and after the Bank of America deal. But other reasons are emerging that Mr. Thain was shown the door. One was that he decided to pay bonuses to employees at Merrill (and what a great job those boys did, eh?) in December, before the really bad news came out, rather than in January, the traditional month for Wall Street payouts. (In his defense (Never have I defended one of these Wall Street Wonderboys twice in one post; I must be getting soft.) Mr. Thain did not take a bonus himself—what a guy!) He also took a Vail ski trip just as the really bad numbers at Merrill, the numbers that jeopardized the B of A deal, were coming out. Then he decided that this week, when figurative defecation was swirling all about him and the deal he concocted with Mr. Lewis and the federal government, would be a good one to attend the annual Davos soiree at which the nabobs of the world economy who had so much to do with getting us into this economic dystopia get together to tell each other how smart they are.
But the really titillating details that have emerged concerning Mr. Thain in the wake of his defenestration at B of A (A multi-million dollar defenestration, I am sure.) have to do with the $1.2mm he spent on his office after becoming Merrill’s CEO in early 2008. Bear in mind that Merrill was teetering even then, before Mr. Thain had a chance to really bollix things up. Apparently, this $1.2 mm expenditure included:
$88 m for an area rug
$26 m for a table
$68 m for a credenza
$88 m for a pair of desk chairs, and…
My favorite:
$35 m for a commode on legs.
A commode on legs? I hope this wasn’t IN his office; I’m hoping it was in an adjoining bathroom. Either that or Mr. Thain, in addition to a paucity of brains, savvy, and judgment, also suffers from a serious LBJ complex. But I digress.
Mr. Thain also, by the way, paid his driver $230,000 for one year’s work. Hmm…Just this morning, I was telling a few friends that if I could find a way to make a living driving something other than a Greyhound Bus, I would leap at the opportunity. Perhaps if I had, like most of Wall Street, spent more time telling Mr. Thain what a genius (and a good looking one, complete with a Blagojevichesque head of hair, at that) he is, I could have achieved this dream. Oh, well…the story of my life. But I digress again.
Most commentators have used Mr. Thain’s extravagance as yet another example of the greed and outright silliness that pervades Wall Street. I, on the other hand, as I usually do, have another angle. At the time of his resignation, Mr. Thain was in charge of the new B of A’s wealth management division.
Let me repeat that…the firm’s WEALTH MANAGEMENT DIVISION!!! O tempora, O mores.
Would you want your wealth managed by a popinjay who spends $1.2 mm on his office, expunges $35 grand for a decorative toilet, and pays his driver $230 grand a year? I don’t know about you, but I would prefer a guy who, when he needs office furniture, goes to OfficeMax or calls his buddy in the office furniture business and asks if there are any old, dented, banged up file cabinets he is looking to unload. Instead of a pococurante who pays his driver more than $200 grand, I would entrust my funds to a guy who insists on driving himself, and only in a car with a real manual transmission. I would rather invest with a guy who clips coupons (and not coupons attached to bonds) than with a mountebank who spends $68 grand on something (a credenza) that I couldn’t even identify. I am far more comfortable investing with a wise man who considers attending to his bodily functions an opportunity to scrutinize the daily paper rather than an occasion to enjoy his $35 grand toilet. I would rather have my wealth managed by a paragon of insight who prefers the north woods of Wisconsin to Vail, CO and who would find a trip to Joseph A. Banks, let alone Davos, Switzerland, a shameless extravagance.
Oh, wait…my wealth is managed by such a person.
In a long (about 53 years) overdue move, John Thain, 53 years old, has “resigned” from Bank of America. As most readers know, Mr. Thain ran Merrill Lynch before it was acquired by Bank of America. Before working his magic at Merrill, Mr. Thain ran the NYSE after being the president and COO at Goldman. Mr. Thain, the poster-boy for the “right place at the right time with the right connections, and very little else” formula that leads to big time success in modern day corporate America, and especially on modern day Wall Street, hid the gargantuan magnitude of the financial disaster that was Merrill Lynch from Ken Lewis at Bank of America, who purchased Merrill for a price that now seems, er, high. In Mr. Thain’s defense, Mr. Lewis, another card carrying member of the gormless goon squad that dominates America’s financial industry, was not inclined to look very hard at Merrill’s numbers. Though he may protest that he was “forced” into buying Merrill as part of the on the fly Bushite bailout of the financial industry, Mr. Lewis did not have to be dragged kicking and screaming into the Merrill deal; he thought he was getting a deal. No one, or at least no one sentient who did not have a vested interest in licking Mr. Lewis’s loafers, ever accused Mr. Lewis of being smart. But I digress.
Mr. Thain “resigned” ostensibly because of the obfuscation in which he engaged during and after the Bank of America deal. But other reasons are emerging that Mr. Thain was shown the door. One was that he decided to pay bonuses to employees at Merrill (and what a great job those boys did, eh?) in December, before the really bad news came out, rather than in January, the traditional month for Wall Street payouts. (In his defense (Never have I defended one of these Wall Street Wonderboys twice in one post; I must be getting soft.) Mr. Thain did not take a bonus himself—what a guy!) He also took a Vail ski trip just as the really bad numbers at Merrill, the numbers that jeopardized the B of A deal, were coming out. Then he decided that this week, when figurative defecation was swirling all about him and the deal he concocted with Mr. Lewis and the federal government, would be a good one to attend the annual Davos soiree at which the nabobs of the world economy who had so much to do with getting us into this economic dystopia get together to tell each other how smart they are.
But the really titillating details that have emerged concerning Mr. Thain in the wake of his defenestration at B of A (A multi-million dollar defenestration, I am sure.) have to do with the $1.2mm he spent on his office after becoming Merrill’s CEO in early 2008. Bear in mind that Merrill was teetering even then, before Mr. Thain had a chance to really bollix things up. Apparently, this $1.2 mm expenditure included:
$88 m for an area rug
$26 m for a table
$68 m for a credenza
$88 m for a pair of desk chairs, and…
My favorite:
$35 m for a commode on legs.
A commode on legs? I hope this wasn’t IN his office; I’m hoping it was in an adjoining bathroom. Either that or Mr. Thain, in addition to a paucity of brains, savvy, and judgment, also suffers from a serious LBJ complex. But I digress.
Mr. Thain also, by the way, paid his driver $230,000 for one year’s work. Hmm…Just this morning, I was telling a few friends that if I could find a way to make a living driving something other than a Greyhound Bus, I would leap at the opportunity. Perhaps if I had, like most of Wall Street, spent more time telling Mr. Thain what a genius (and a good looking one, complete with a Blagojevichesque head of hair, at that) he is, I could have achieved this dream. Oh, well…the story of my life. But I digress again.
Most commentators have used Mr. Thain’s extravagance as yet another example of the greed and outright silliness that pervades Wall Street. I, on the other hand, as I usually do, have another angle. At the time of his resignation, Mr. Thain was in charge of the new B of A’s wealth management division.
Let me repeat that…the firm’s WEALTH MANAGEMENT DIVISION!!! O tempora, O mores.
Would you want your wealth managed by a popinjay who spends $1.2 mm on his office, expunges $35 grand for a decorative toilet, and pays his driver $230 grand a year? I don’t know about you, but I would prefer a guy who, when he needs office furniture, goes to OfficeMax or calls his buddy in the office furniture business and asks if there are any old, dented, banged up file cabinets he is looking to unload. Instead of a pococurante who pays his driver more than $200 grand, I would entrust my funds to a guy who insists on driving himself, and only in a car with a real manual transmission. I would rather invest with a guy who clips coupons (and not coupons attached to bonds) than with a mountebank who spends $68 grand on something (a credenza) that I couldn’t even identify. I am far more comfortable investing with a wise man who considers attending to his bodily functions an opportunity to scrutinize the daily paper rather than an occasion to enjoy his $35 grand toilet. I would rather have my wealth managed by a paragon of insight who prefers the north woods of Wisconsin to Vail, CO and who would find a trip to Joseph A. Banks, let alone Davos, Switzerland, a shameless extravagance.
Oh, wait…my wealth is managed by such a person.
Friday, January 16, 2009
CYNICISM SURVIVES A WATER LANDING
1/16/09
Yesterday, Americans were thrilled to learn that everyone on US Air Flight 1549 out of LaGuardia survived what normally would have been a multi-fatality crash into the Hudson River after a flock of geese rendered one of the A320’s engines inoperable. The passengers were saved from the 40 degree waters of the Hudson through the valiant efforts of local ferry operators, police officers, fire fighters, and ordinary citizens. But most of the credit for their survival, and for the avoidance of even worse carnage, goes to Captain Chesley B. (“Sully”) Sullenberger III. Captain Sullenberger, a former Air Force F-4 pilot has been flying with US Air since 1980 and has 19,000 hours of experience with US Air. He managed to avoid the skyscrapers of Manhattan and execute a perfect water landing in the crowded Hudson, a feat for which pilots are trained but that many experts believe is very difficult, almost impossibly so, to execute in real life. Captain Sullenberger did execute the landing in real life, saving the lives of his passengers and crew and of countless others who would have died had the plane crashed, say, into a skyscraper or onto a busy New York street. He then walked the length of the plane to make sure that no passengers were left behind. He was the last to leave the plane for safety.
All Americans ought to be proud of the efforts of all those involved in the rescue of Flight 1549, and especially of Captain Sullenberger. Captain Sullenberger is a true American hero, the type of person who made our country once great, and an increasingly rare breed.
My cynicism, however, cannot go on break for very long.
After watching, listening to, and reading the story of Captain Sullenberger and Flight 1549, I couldn’t help but wonder how much time will pass before some snot noses in a private equity group buy US Air and decide to fire Captain Sullenberger because, due to his long tenure, he makes too much money, replace him with a kid right out of flight school who will work for ¼ of his salary, and then pay themselves (After all, they are the types whose “managerial talent” is in such short supply in our economy.) bonuses at the rate of ten times Captain Sullenberger’s former salary.
Just wondering.
Yesterday, Americans were thrilled to learn that everyone on US Air Flight 1549 out of LaGuardia survived what normally would have been a multi-fatality crash into the Hudson River after a flock of geese rendered one of the A320’s engines inoperable. The passengers were saved from the 40 degree waters of the Hudson through the valiant efforts of local ferry operators, police officers, fire fighters, and ordinary citizens. But most of the credit for their survival, and for the avoidance of even worse carnage, goes to Captain Chesley B. (“Sully”) Sullenberger III. Captain Sullenberger, a former Air Force F-4 pilot has been flying with US Air since 1980 and has 19,000 hours of experience with US Air. He managed to avoid the skyscrapers of Manhattan and execute a perfect water landing in the crowded Hudson, a feat for which pilots are trained but that many experts believe is very difficult, almost impossibly so, to execute in real life. Captain Sullenberger did execute the landing in real life, saving the lives of his passengers and crew and of countless others who would have died had the plane crashed, say, into a skyscraper or onto a busy New York street. He then walked the length of the plane to make sure that no passengers were left behind. He was the last to leave the plane for safety.
All Americans ought to be proud of the efforts of all those involved in the rescue of Flight 1549, and especially of Captain Sullenberger. Captain Sullenberger is a true American hero, the type of person who made our country once great, and an increasingly rare breed.
My cynicism, however, cannot go on break for very long.
After watching, listening to, and reading the story of Captain Sullenberger and Flight 1549, I couldn’t help but wonder how much time will pass before some snot noses in a private equity group buy US Air and decide to fire Captain Sullenberger because, due to his long tenure, he makes too much money, replace him with a kid right out of flight school who will work for ¼ of his salary, and then pay themselves (After all, they are the types whose “managerial talent” is in such short supply in our economy.) bonuses at the rate of ten times Captain Sullenberger’s former salary.
Just wondering.
SCREW UP, GET A CHECK!!!
1/16/09
As I discussed in my 1/7/09 post, “BUT IT’S GOOD YOU’RE MAKING IT SNOW, ANTHONY, IT’S REAL GOOD. AND TOMORROW—TOMORROW’S GONNA BE A REAL GOOD DAY!”, the Obama stimulus plan will not work primarily because these “take money out of one pocket, pass it through the government, which takes its normal astronomical tribute, and put it in another pocket” schemes rarely provide any but evanescent, if that, relief. That’s the good news. The bad news is that one of the details of the plan will put yet another nail in the coffin of the free enterprise that made this country great.
A substantial chunk ($100 billion? $200 billion? Who knows?) of the money will go toward allowing companies with tax losses to receive tax refunds for profitable years as far back as 2003; normally, losses can be carried back only two years. This abomination before God and man, reportedly included in the package to mollify those rock-ribbed free marketeers in the GOP (or at least that is what the Democrats are telling us, and the Republicans have certainly not made much effort to deflect “credit” for this particular government handout) amounts to handing out money to losers, the very antithesis of capitalism. The more you lose, the more you get. The more you fail, the wetter the federal smooch.
The only tiny jot or tittle of this subsidization of failure that makes even remote sense is the exclusion of the true wards of the state, those companies, including the big banks who are the main instigators and abettors of the utter destruction and socialization (at least on the way down) of our financial system, and the auto companies, now arms of the (Egads!) U.S. Congress, are forbidden from carrying back their losses more than the normal two years. Predictably, these bureaus are now whining about their dismal fate. Mr. Scott Talbot, senior vice-president of Financial Services Roundtable, screeches:
“To exclude TARP recipients (from the tax loss carry back boondoggle) is to ignore a large segment of the economy.” Sniff.
Does Mr. Talbot have a dictionary? “Ignore”? Please, ignore me to the tune of $350 billion, on the way to $700 billion, the next time you are deciding who to permit to escape your notice. But I digress.
This tax loss carry back scam is further repudiation of those starry-eyed dreamers, and those beneficiaries of our currently rigged system who know better, who make the utterly risible argument that we operate in a free market, capitalistic system.
As I discussed in my 1/7/09 post, “BUT IT’S GOOD YOU’RE MAKING IT SNOW, ANTHONY, IT’S REAL GOOD. AND TOMORROW—TOMORROW’S GONNA BE A REAL GOOD DAY!”, the Obama stimulus plan will not work primarily because these “take money out of one pocket, pass it through the government, which takes its normal astronomical tribute, and put it in another pocket” schemes rarely provide any but evanescent, if that, relief. That’s the good news. The bad news is that one of the details of the plan will put yet another nail in the coffin of the free enterprise that made this country great.
A substantial chunk ($100 billion? $200 billion? Who knows?) of the money will go toward allowing companies with tax losses to receive tax refunds for profitable years as far back as 2003; normally, losses can be carried back only two years. This abomination before God and man, reportedly included in the package to mollify those rock-ribbed free marketeers in the GOP (or at least that is what the Democrats are telling us, and the Republicans have certainly not made much effort to deflect “credit” for this particular government handout) amounts to handing out money to losers, the very antithesis of capitalism. The more you lose, the more you get. The more you fail, the wetter the federal smooch.
The only tiny jot or tittle of this subsidization of failure that makes even remote sense is the exclusion of the true wards of the state, those companies, including the big banks who are the main instigators and abettors of the utter destruction and socialization (at least on the way down) of our financial system, and the auto companies, now arms of the (Egads!) U.S. Congress, are forbidden from carrying back their losses more than the normal two years. Predictably, these bureaus are now whining about their dismal fate. Mr. Scott Talbot, senior vice-president of Financial Services Roundtable, screeches:
“To exclude TARP recipients (from the tax loss carry back boondoggle) is to ignore a large segment of the economy.” Sniff.
Does Mr. Talbot have a dictionary? “Ignore”? Please, ignore me to the tune of $350 billion, on the way to $700 billion, the next time you are deciding who to permit to escape your notice. But I digress.
This tax loss carry back scam is further repudiation of those starry-eyed dreamers, and those beneficiaries of our currently rigged system who know better, who make the utterly risible argument that we operate in a free market, capitalistic system.
Tuesday, January 13, 2009
“I WAS WAY OFF!”
1/13/09
In my seminal 12/30/08 post (“ROLAND, ROLAND, ROLAND, KEEP THEM PUNDITS ROLLIN’…”), I stated
“Roland Burris will never sit in the U.S. Senate.”
While things are never as they appear in Casablanca, or Chicago, it looks as if Mr. Burris will be sworn in as our state’s junior senator later this week and will indeed sit in the U.S. Senate.
Why was I so sure that Mr. Burris would not reach the Senate? For the same reason that Rod Blagojevich gave for allegedly holding people up for the seat: a U.S. Senate seat, though relatively inconsequential in the local political landscape, is too valuable a commodity to give away. Though the people that matter in local politics were not seeking cash money for the seat, as was Mr. Blagojevich, they were seeking a different currency: favors, power, and deals that are desirable of themselves and because they can ultimately be a source of cash, perhaps more than Mr. Blagojevich ever conceived. I also thought, accordingly, that a deal was cut with the seat as the prime bargaining chip: Pat Quinn becomes governor, he appoints Lisa Madigan to the Senate seat, and things go smoothly in the legislature for Mr. Quinn. I still think that the deal was in place but that the powers that be underestimated Mr. Blagojevich’s audacity, Mr. Burris’s meretriciousness and vanity, and Dick Durbin’s pusillanimity.
One could argue, and very legitimately so, that Messrs. Blagojevich and Burris had the law on their side. After all, the law states that the governor has the duty and obligation to fill a vacant U.S. Senate seat, and Mr. Blagojevich was, at the time of the appointment, and remains the governor of Illinois. But there was sufficient ambiguity in the Senate’s ability to pass on the qualifications of its members, or the validity of the selection process, that the Democratic leadership, if it wanted to delay the appointment until Mr. Blagojevich was out of office, could have done so. And since when did something as trivial as the law stop a determined politician from doing what he wanted? Further, on 12/30, when Mr. Blagojevich appointed Mr. Burris, Senate Majority Leader Harry Reid and Senator Dick Durbin, our senior senator, released a statement that anyone Mr. Blagojevich appointed “cannot be an effective representative of the people of Illinois” and would “not be seated” by the Democratic caucus. I apparently overestimated the resolve of the Senate Democrats and their determination to stick to stated principle. (And it is indeed a sad day in America when I overestimate the resolve of the members of the zoo that once was considered the world’s greatest deliberative body.) As soon as it was hinted that blocking Mr. Burris’s appointment could be construed as even remotely racist, Messrs, Durbin and Reid, as is the wont of most politicians, folded like a cheap card table, or a certain baseball team that plies its trade on Chicago’s north side.
One has to admit that Mr. Blagojevich, though lacking the finesse and vision of the more polished practitioners of Chicago politics, in this instance has beaten the masters at their own game, primarily by exploiting two (or perhaps 57) of their weakest links, a downstate dilettante the Chicago pols mistakenly put into the Senate and his pathetic colleagues in that most august body. The Democrats have retained the seat, though it was hard to imagine their losing it. Roland Burris has his eccentricities, and, while these will probably surface during his tenure in the Senate, the local Dems certainly could have done worse. (Our jackanapes of a senior senator comes immediately to mind.) Doubtless the Republicans are overjoyed; their only hope (and it remains a faint hope) of gaining this Senate seat lies in running against Roland Burris, not because he is Roland Burris (Mr. Burris, despite being a serial primary loser, has never lost to a Republican. Admittedly, this is not much of a statement in our state.), but because he got his seat through the clever duplicity of Rod Blagojevich and the spineless pusillanimity of Dick Durbin. But let’s see how long voters’ memories are; I’m betting not much longer than your typical situation comedy.
In my seminal 12/30/08 post (“ROLAND, ROLAND, ROLAND, KEEP THEM PUNDITS ROLLIN’…”), I stated
“Roland Burris will never sit in the U.S. Senate.”
While things are never as they appear in Casablanca, or Chicago, it looks as if Mr. Burris will be sworn in as our state’s junior senator later this week and will indeed sit in the U.S. Senate.
Why was I so sure that Mr. Burris would not reach the Senate? For the same reason that Rod Blagojevich gave for allegedly holding people up for the seat: a U.S. Senate seat, though relatively inconsequential in the local political landscape, is too valuable a commodity to give away. Though the people that matter in local politics were not seeking cash money for the seat, as was Mr. Blagojevich, they were seeking a different currency: favors, power, and deals that are desirable of themselves and because they can ultimately be a source of cash, perhaps more than Mr. Blagojevich ever conceived. I also thought, accordingly, that a deal was cut with the seat as the prime bargaining chip: Pat Quinn becomes governor, he appoints Lisa Madigan to the Senate seat, and things go smoothly in the legislature for Mr. Quinn. I still think that the deal was in place but that the powers that be underestimated Mr. Blagojevich’s audacity, Mr. Burris’s meretriciousness and vanity, and Dick Durbin’s pusillanimity.
One could argue, and very legitimately so, that Messrs. Blagojevich and Burris had the law on their side. After all, the law states that the governor has the duty and obligation to fill a vacant U.S. Senate seat, and Mr. Blagojevich was, at the time of the appointment, and remains the governor of Illinois. But there was sufficient ambiguity in the Senate’s ability to pass on the qualifications of its members, or the validity of the selection process, that the Democratic leadership, if it wanted to delay the appointment until Mr. Blagojevich was out of office, could have done so. And since when did something as trivial as the law stop a determined politician from doing what he wanted? Further, on 12/30, when Mr. Blagojevich appointed Mr. Burris, Senate Majority Leader Harry Reid and Senator Dick Durbin, our senior senator, released a statement that anyone Mr. Blagojevich appointed “cannot be an effective representative of the people of Illinois” and would “not be seated” by the Democratic caucus. I apparently overestimated the resolve of the Senate Democrats and their determination to stick to stated principle. (And it is indeed a sad day in America when I overestimate the resolve of the members of the zoo that once was considered the world’s greatest deliberative body.) As soon as it was hinted that blocking Mr. Burris’s appointment could be construed as even remotely racist, Messrs, Durbin and Reid, as is the wont of most politicians, folded like a cheap card table, or a certain baseball team that plies its trade on Chicago’s north side.
One has to admit that Mr. Blagojevich, though lacking the finesse and vision of the more polished practitioners of Chicago politics, in this instance has beaten the masters at their own game, primarily by exploiting two (or perhaps 57) of their weakest links, a downstate dilettante the Chicago pols mistakenly put into the Senate and his pathetic colleagues in that most august body. The Democrats have retained the seat, though it was hard to imagine their losing it. Roland Burris has his eccentricities, and, while these will probably surface during his tenure in the Senate, the local Dems certainly could have done worse. (Our jackanapes of a senior senator comes immediately to mind.) Doubtless the Republicans are overjoyed; their only hope (and it remains a faint hope) of gaining this Senate seat lies in running against Roland Burris, not because he is Roland Burris (Mr. Burris, despite being a serial primary loser, has never lost to a Republican. Admittedly, this is not much of a statement in our state.), but because he got his seat through the clever duplicity of Rod Blagojevich and the spineless pusillanimity of Dick Durbin. But let’s see how long voters’ memories are; I’m betting not much longer than your typical situation comedy.
Sunday, January 11, 2009
THESE PEOPLE ARE BATS!
1/11/09
Newsradio 78 in Chicago reported this morning that residents are advised to “avoid contact with bats” in the wake of a rabid bat’s having been found in an attic of a home around Lawrence and Western.
Hmm…
“Avoid contact with bats”? What sort of person needs such a warning?
Newsradio 78 in Chicago reported this morning that residents are advised to “avoid contact with bats” in the wake of a rabid bat’s having been found in an attic of a home around Lawrence and Western.
Hmm…
“Avoid contact with bats”? What sort of person needs such a warning?
YEAH, IT’S THE SYSTEM’S FAULT.
1/11/09
Now that the financial system has “collapsed,” a word that, while perhaps too strong is nonetheless appropriate, it has become distinctly unfashionable to support, as I have done for my entire adult, and most of my adolescent, life, the free market. We are told that the free market has failed, as it did in the ‘20s, and that a new regulatory regime is our only hope if Western civilization is too survive. I say “Balderdash!”
The obvious response to those who have fallen for the siren song of a muscular, busy-body government is that free markets have not failed because free market capitalism has not been attempted, at least not in recent memory. What we are seeing can best, but not entirely accurately, be called corporatism, a system featuring an enormous government dispensing contracts and regulations designed to tilt the playing field toward big business and Wall Street. When the big guys in the corner offices who have purchased the services of our politicians still manage to bollix up not only their own organizations but also the entire economy, the government rides to the rescue. What we are not seeing is the free market, but, rather, a system that is designed to put those who have bought the politicians and their progeny on third base and to pick them up and dust them off when they stumble and fall on their way to the plate. Everything is designed to make things easy and automatic for the bold tough guys who piously proclaim the virtues of the free market, while never having had to subject themselves to its rigors, and run to the apron strings of Big Mama Government when things get the least bit challenging.
This observation that free market capitalism has been absent for a long time (long before our current disaster of an outgoing president) is not a partisan one; neither party has been enthusiastic for the free market because it doesn’t fit well with their misguided messianic mien that it is they, not the grubby practitioners of real capitalism, who should direct society’s resources. Thus, the argument between the parties is not one of free markets vs. government direction of the economy; it is only a matter of which direction to lead those resources. Oddly enough, even that isn’t much of an argument. Since in today’s big government/big business cozy partnership, an economic system that resembles fascism much more closely than it does capitalism, both parties have the same paymasters, both direct government in the same direction: toward big business and Wall Street. But that is another issue.
The other argument against those who favor ditching free markets in favor of tightly controlled rules and regulations is that, even if we were to try free markets again, in this country we are missing two essential elements: fundamental morality and an enlightened, or at least alert, public.
The issue of the confluence of morality and capitalism came up in a conversation I had about fifteen years ago when I was actively involved in the City Club of Chicago, a very interesting organization that allows business and political leaders to interact to discuss, and maybe resolve some of, the burning issues of the day. One of the speakers questioned the prevailing political alliance, under the rubric of the Republican Party, of free marketeers and members of the religious right. He wondered how those who favored morality, or at least their brand of morality, in the public square could embrace a completely amoral free market. The speaker was being disingenuous and was merely using this apparent contradiction to attack what he saw as the hypocrisy of the GOP, as if the Left did not feature alliances between some very strange bedfellows. However, I engaged him.
I pointed out that the market is both completely amoral and extremely powerful. A real free market will deliver whatever the public demands, and will do so very quickly, effectively, and efficiently. If the public demands rosaries, scapulars, bibles, aid to the homeless, and health care for the disadvantaged, the market will deliver. If the public demands pornography, mind altering substances, wholesale child prostitution, and schemes to separate the unsuspecting from their life savings, the market will deliver. That is why an underlying moral framework is much more important, from the standpoint of maintaining order in society, under a free market system than it is in a command and control system. In a command and control system, people don’t have much latitude in what they can demand, and the market is not sufficiently powerful to deliver it to them with the miraculous alacrity of the free market. So a moral foundation is not as essential to the survival of a society in such a system.
Our moral foundation has been deteriorating for a long time, and one does not have to share the moral vision of the religious right to observe the decline of basic morality in our society. Care for one’s fellows, responsibility for one’s actions, personal sexual morality, genuine concern and accountability for one’s children, financial responsibility, etc., have all been deteriorating for decades. The debasement of this fundamental underpinning of our society would make a return to the free market, at least at this stage, precarious.
We also lack an alert public. One of the major themes of the IP is that our society is made up of people who are, to put it nicely, not engaged in what is going on around them and relatively indifferent to the fate of both society and those outside their very narrow scope of interest. Self-government requires, like most do-it-yourself projects, some effort on one’s part, and, rather than make the effort, our somnolent citizenry has turned government over to those who are engaged, and eager to spend money on pols who will do their bidding, who rarely have the interests of the nation in mind.
Being alert requires paying attention, reading the paper beyond the human interest, entertainment, celebrity (more accurately described as the “Who knocked up whom?” section), and sports sections. It involves not only voting (in the primaries and the general) but actually doing the work necessary to cast an intelligent vote. (Watching the news, with its gormless tales of water skiing squirrels, heart rending human interest stories, frustrated comics who call themselves meteorologists, and brainlesss banter between anchor persons who continually mispronounce the names of landmarks in their viewing area, does not make one informed.) It also involves being sufficiently on the ball to realize that you are being misled when you, Mr. Consumer, are being told that you can service a $600,000 mortgage (for the home you deserve and to refinance the credit card bills that sprang from the garbage you really needed) with a $50,000 income.
So free market capitalism, which is being portrayed in many quarters as the source of our financial difficulties, is a museum piece on modern day America, not to mention most of the rest of the world. And if we ever do attempt to reinstall the system that made this country both wealthy and great once upon a time, we will need a moral framework and an alert citizenry, both of which left the building years ago.
And bear in mind that under a truly free system, just because something is necessary does not mean that it should be required. If people want to ruin their own lives, that is their prerogative. It’s that completely crazy personal freedom, coupled with responsibility, idea rearing its inconvenient and challenging head again.
Now that the financial system has “collapsed,” a word that, while perhaps too strong is nonetheless appropriate, it has become distinctly unfashionable to support, as I have done for my entire adult, and most of my adolescent, life, the free market. We are told that the free market has failed, as it did in the ‘20s, and that a new regulatory regime is our only hope if Western civilization is too survive. I say “Balderdash!”
The obvious response to those who have fallen for the siren song of a muscular, busy-body government is that free markets have not failed because free market capitalism has not been attempted, at least not in recent memory. What we are seeing can best, but not entirely accurately, be called corporatism, a system featuring an enormous government dispensing contracts and regulations designed to tilt the playing field toward big business and Wall Street. When the big guys in the corner offices who have purchased the services of our politicians still manage to bollix up not only their own organizations but also the entire economy, the government rides to the rescue. What we are not seeing is the free market, but, rather, a system that is designed to put those who have bought the politicians and their progeny on third base and to pick them up and dust them off when they stumble and fall on their way to the plate. Everything is designed to make things easy and automatic for the bold tough guys who piously proclaim the virtues of the free market, while never having had to subject themselves to its rigors, and run to the apron strings of Big Mama Government when things get the least bit challenging.
This observation that free market capitalism has been absent for a long time (long before our current disaster of an outgoing president) is not a partisan one; neither party has been enthusiastic for the free market because it doesn’t fit well with their misguided messianic mien that it is they, not the grubby practitioners of real capitalism, who should direct society’s resources. Thus, the argument between the parties is not one of free markets vs. government direction of the economy; it is only a matter of which direction to lead those resources. Oddly enough, even that isn’t much of an argument. Since in today’s big government/big business cozy partnership, an economic system that resembles fascism much more closely than it does capitalism, both parties have the same paymasters, both direct government in the same direction: toward big business and Wall Street. But that is another issue.
The other argument against those who favor ditching free markets in favor of tightly controlled rules and regulations is that, even if we were to try free markets again, in this country we are missing two essential elements: fundamental morality and an enlightened, or at least alert, public.
The issue of the confluence of morality and capitalism came up in a conversation I had about fifteen years ago when I was actively involved in the City Club of Chicago, a very interesting organization that allows business and political leaders to interact to discuss, and maybe resolve some of, the burning issues of the day. One of the speakers questioned the prevailing political alliance, under the rubric of the Republican Party, of free marketeers and members of the religious right. He wondered how those who favored morality, or at least their brand of morality, in the public square could embrace a completely amoral free market. The speaker was being disingenuous and was merely using this apparent contradiction to attack what he saw as the hypocrisy of the GOP, as if the Left did not feature alliances between some very strange bedfellows. However, I engaged him.
I pointed out that the market is both completely amoral and extremely powerful. A real free market will deliver whatever the public demands, and will do so very quickly, effectively, and efficiently. If the public demands rosaries, scapulars, bibles, aid to the homeless, and health care for the disadvantaged, the market will deliver. If the public demands pornography, mind altering substances, wholesale child prostitution, and schemes to separate the unsuspecting from their life savings, the market will deliver. That is why an underlying moral framework is much more important, from the standpoint of maintaining order in society, under a free market system than it is in a command and control system. In a command and control system, people don’t have much latitude in what they can demand, and the market is not sufficiently powerful to deliver it to them with the miraculous alacrity of the free market. So a moral foundation is not as essential to the survival of a society in such a system.
Our moral foundation has been deteriorating for a long time, and one does not have to share the moral vision of the religious right to observe the decline of basic morality in our society. Care for one’s fellows, responsibility for one’s actions, personal sexual morality, genuine concern and accountability for one’s children, financial responsibility, etc., have all been deteriorating for decades. The debasement of this fundamental underpinning of our society would make a return to the free market, at least at this stage, precarious.
We also lack an alert public. One of the major themes of the IP is that our society is made up of people who are, to put it nicely, not engaged in what is going on around them and relatively indifferent to the fate of both society and those outside their very narrow scope of interest. Self-government requires, like most do-it-yourself projects, some effort on one’s part, and, rather than make the effort, our somnolent citizenry has turned government over to those who are engaged, and eager to spend money on pols who will do their bidding, who rarely have the interests of the nation in mind.
Being alert requires paying attention, reading the paper beyond the human interest, entertainment, celebrity (more accurately described as the “Who knocked up whom?” section), and sports sections. It involves not only voting (in the primaries and the general) but actually doing the work necessary to cast an intelligent vote. (Watching the news, with its gormless tales of water skiing squirrels, heart rending human interest stories, frustrated comics who call themselves meteorologists, and brainlesss banter between anchor persons who continually mispronounce the names of landmarks in their viewing area, does not make one informed.) It also involves being sufficiently on the ball to realize that you are being misled when you, Mr. Consumer, are being told that you can service a $600,000 mortgage (for the home you deserve and to refinance the credit card bills that sprang from the garbage you really needed) with a $50,000 income.
So free market capitalism, which is being portrayed in many quarters as the source of our financial difficulties, is a museum piece on modern day America, not to mention most of the rest of the world. And if we ever do attempt to reinstall the system that made this country both wealthy and great once upon a time, we will need a moral framework and an alert citizenry, both of which left the building years ago.
And bear in mind that under a truly free system, just because something is necessary does not mean that it should be required. If people want to ruin their own lives, that is their prerogative. It’s that completely crazy personal freedom, coupled with responsibility, idea rearing its inconvenient and challenging head again.
Thursday, January 8, 2009
“BUT THAT’LL SCREW UP ALL MY PLANS…”
1/8/09
If the major concern of the political powers-that-be in the state of Illinois (the city of Chicago, really) were to clear up the Burris mess, there would be a very easy way to accomplish this goal: Lieutenant (and soon to be) Governor Quinn could simply say that if (when, really) he becomes governor, he would appoint Roland Burris to President-elect Obama’s old Senate seat. That would provide the political cover for Secretary of State Jesse White and the profiles in courage that constitute the Democratic leadership of the U.S. Senate to seat Mr. Burris and be done with it. The Democrats keep their seat, Obama loses one distraction, and the Democrats in Chicago put one of their own in the (Ha!) world’s greatest deliberative body.
So why doesn’t Pat Quinn give Burris the nod? I still think this is because a deal has been cut (See my 12/30/08 post) that would have Quinn appoint Lisa Madigan to the seat when Mr. Quinn assumes the governorship (Again, I only know what I read in the papers. No one has told me anything about this, and I don’t even know anyone who would be able to tell me anything about this.), and a putting Mr. Burris in the Senate would bollix up the whole deal.
Perhaps I am wrong and there is no such deal in the hopper. There may be other reasons that Mr. Quinn will not simply affirm Mr. Burris’s appointment. Quinn, being a longtime reformer, may find Mr. Burris, a garden variety Chicago pol, and not an especially outstanding one at that (Again, see my seminal 12/30/08 post.), unacceptable and may want to appoint someone who is, like Mr. Quinn, reform minded. If this is the case, it is hard to see how Lisa Madigan, except for her last name (Admittedly, last names count for a lot, in many, many ways, in Chicago politics.), does not qualify as a reformer. Perhaps Mr. Quinn, either because he is cowed by the race-baiting tactics of Mr. Burris, Bobby Rush, et. al. or because he sincerely believes that Mr. Obama’s is a “Black” seat (so much for the color-blindedness of your typical politician, but especially your typical Democratic politician), would like to appoint a reform minded Black politician, which would exclude Mr. Burris for one reason and Ms. Madigan for at least one other.
The whole Burris morass could be resolved today with a word from Pat Quinn. That Mr. Quinn is not uttering the necessary word tells me that a deal for this Senate seat has been struck, and the only thing that stands in its way is Mr. Blagojevich’s hanging around like the ghost of Jacob Marley.
If the major concern of the political powers-that-be in the state of Illinois (the city of Chicago, really) were to clear up the Burris mess, there would be a very easy way to accomplish this goal: Lieutenant (and soon to be) Governor Quinn could simply say that if (when, really) he becomes governor, he would appoint Roland Burris to President-elect Obama’s old Senate seat. That would provide the political cover for Secretary of State Jesse White and the profiles in courage that constitute the Democratic leadership of the U.S. Senate to seat Mr. Burris and be done with it. The Democrats keep their seat, Obama loses one distraction, and the Democrats in Chicago put one of their own in the (Ha!) world’s greatest deliberative body.
So why doesn’t Pat Quinn give Burris the nod? I still think this is because a deal has been cut (See my 12/30/08 post) that would have Quinn appoint Lisa Madigan to the seat when Mr. Quinn assumes the governorship (Again, I only know what I read in the papers. No one has told me anything about this, and I don’t even know anyone who would be able to tell me anything about this.), and a putting Mr. Burris in the Senate would bollix up the whole deal.
Perhaps I am wrong and there is no such deal in the hopper. There may be other reasons that Mr. Quinn will not simply affirm Mr. Burris’s appointment. Quinn, being a longtime reformer, may find Mr. Burris, a garden variety Chicago pol, and not an especially outstanding one at that (Again, see my seminal 12/30/08 post.), unacceptable and may want to appoint someone who is, like Mr. Quinn, reform minded. If this is the case, it is hard to see how Lisa Madigan, except for her last name (Admittedly, last names count for a lot, in many, many ways, in Chicago politics.), does not qualify as a reformer. Perhaps Mr. Quinn, either because he is cowed by the race-baiting tactics of Mr. Burris, Bobby Rush, et. al. or because he sincerely believes that Mr. Obama’s is a “Black” seat (so much for the color-blindedness of your typical politician, but especially your typical Democratic politician), would like to appoint a reform minded Black politician, which would exclude Mr. Burris for one reason and Ms. Madigan for at least one other.
The whole Burris morass could be resolved today with a word from Pat Quinn. That Mr. Quinn is not uttering the necessary word tells me that a deal for this Senate seat has been struck, and the only thing that stands in its way is Mr. Blagojevich’s hanging around like the ghost of Jacob Marley.
Wednesday, January 7, 2009
“BUT IT’S GOOD YOU’RE MAKING IT SNOW, ANTHONY, IT’S REAL GOOD. AND TOMORROW—TOMORROW’S GONNA BE A REAL GOOD DAY!”
1/7/09
Much of Wall Street waxes enthusiastic about the markets for a number of reasons, perhaps the most groundless of which is the upcoming Obama stimulus plan. Even reasoned, experienced voices, like Art Cashin, one of the few people on the Street who have my respect, while not blindly enthusiastic about the plan like their younger ingenuous and myopic colleagues, cite the stimulus plan as a possible reason to be somewhat enthusiastic about the markets.
Mr. Obama pledges to give the economy a massive shot of fiscal adrenaline. In the process, he will run deficits that, if such a thing is indeed possible, exceed those bestowed on us by the ever vigilant fiscal conservatives in the Bush administration and their henchmen in the (until 2006) GOP senate. This plan is doomed. The Obama plan will not work for the reason that these “Take money out of one pocket, put it in another, and let the Keynesian multiplier (which, mysteriously, only seems to work when the money passes through government hands) work its magic” plans only work when they are used as a prod to get the Fed to loosen up on the money supply, and then only ephemerally. But there is something else working against the Obama plan.
In the 1930s and 1940s (The end of the former and the first half of the latter featured a fiscal stimulus plan that finally did work: World War II. Think about that in the current geopolitical context.), the government engaged in a fiscal stimulus plan that is cited as a model for, or at least a logical comparison to, the proposed Obama plan. The debt used to finance the resultant deficits was held to a relatively small extent by the Fed but mostly by American investors who felt wealthier and more confident as a result and thus more willing to spend and invest in America. But things have changed. We don’t save in this country any more. In fact, in the new America, saving has come to be regarded as a pusillanimous manifestation of a lack of optimism, and we all know that the most grievous secular sin in modern America is a lack of optimism. But I digress. The point is that we don’t save and thus must import, or create out of whole cloth, our capital. Thus, the even more gargantuan mountains of debt with which Mr. Obama and the Democratic congress will endow us will be held largely by the Fed but also by Chinese, Middle Eastern, and other foreign investors. The experts tell us that the former is no problem because inflation is impossible in an economic slump. (Bear in mind that most of the experts were either not yet born or still in exclusive boarding schools in the late ‘70s and early ‘80s ,where they learned the techniques of living, thinking, and investing in an echo chamber. But the inflationary ramifications of a rapidly expanding Fed balance sheet will be addressed in a later post.) Experts who are full throated internationalists will argue that the latter is no problem because foreign investors will be similarly optimistic and willing to invest in America. We are the world; we are the children, after all. There doubtless is something to the one world economy argument, but at the very least foreign investors have far more wide ranging investment alternatives and propensities than did holders of T-bonds in the ‘30s. At worse, our national interests might not occupy a high priority in their range of thought when selecting investments (which doesn’t make them all that different from most people on Wall Street, come to think of it, but it’s still something to consider). At worst, if the world economy continues on its present course, these investors may not have the willingness or the wherewithal to continue to finance our shameless profligacy. Think of the throttling back of, say, Dubai’s and Abu Dhabi’s ambitions. Of course, foreign investors may not have any choice…for now. (Think Cleavon Little in “Blazing Saddles” holding a gun to his head in order to get the townsfolk to back off on their threats to get rid of the new sheriff, who happens to be Cleavon Little.) But these are not foolish people who fritter away their time reading (oh, sorry, listening…reading is too strenuous for the modern American) about the latest exploits of Brittany Spears or someone named Jay Lowe or watching ESPN 24 hours a day. Eventually, they will develop a large and sufficiently prosperous middle class and will no longer need us to borrow their money to buy their products. But, again, I am digressing.
The major point is that, since we no longer save, we have to import capital. Thus, a major stimulus package will have to be financed with debt that will largely be held by foreigners. Unless we can keep the international Madoff scheme that characterizes the modern global economy going for an indeterminate length of time, we may not be able to import capital. And, even if we can, at the expense of offending the unabashed internationalists who dominate economic and political thinking in New York (and, yes, even Chicago) and Washington, perhaps being beholden to the Chinese and Middle Easterners might not be such a favorable economic and financial development.
Much of Wall Street waxes enthusiastic about the markets for a number of reasons, perhaps the most groundless of which is the upcoming Obama stimulus plan. Even reasoned, experienced voices, like Art Cashin, one of the few people on the Street who have my respect, while not blindly enthusiastic about the plan like their younger ingenuous and myopic colleagues, cite the stimulus plan as a possible reason to be somewhat enthusiastic about the markets.
Mr. Obama pledges to give the economy a massive shot of fiscal adrenaline. In the process, he will run deficits that, if such a thing is indeed possible, exceed those bestowed on us by the ever vigilant fiscal conservatives in the Bush administration and their henchmen in the (until 2006) GOP senate. This plan is doomed. The Obama plan will not work for the reason that these “Take money out of one pocket, put it in another, and let the Keynesian multiplier (which, mysteriously, only seems to work when the money passes through government hands) work its magic” plans only work when they are used as a prod to get the Fed to loosen up on the money supply, and then only ephemerally. But there is something else working against the Obama plan.
In the 1930s and 1940s (The end of the former and the first half of the latter featured a fiscal stimulus plan that finally did work: World War II. Think about that in the current geopolitical context.), the government engaged in a fiscal stimulus plan that is cited as a model for, or at least a logical comparison to, the proposed Obama plan. The debt used to finance the resultant deficits was held to a relatively small extent by the Fed but mostly by American investors who felt wealthier and more confident as a result and thus more willing to spend and invest in America. But things have changed. We don’t save in this country any more. In fact, in the new America, saving has come to be regarded as a pusillanimous manifestation of a lack of optimism, and we all know that the most grievous secular sin in modern America is a lack of optimism. But I digress. The point is that we don’t save and thus must import, or create out of whole cloth, our capital. Thus, the even more gargantuan mountains of debt with which Mr. Obama and the Democratic congress will endow us will be held largely by the Fed but also by Chinese, Middle Eastern, and other foreign investors. The experts tell us that the former is no problem because inflation is impossible in an economic slump. (Bear in mind that most of the experts were either not yet born or still in exclusive boarding schools in the late ‘70s and early ‘80s ,where they learned the techniques of living, thinking, and investing in an echo chamber. But the inflationary ramifications of a rapidly expanding Fed balance sheet will be addressed in a later post.) Experts who are full throated internationalists will argue that the latter is no problem because foreign investors will be similarly optimistic and willing to invest in America. We are the world; we are the children, after all. There doubtless is something to the one world economy argument, but at the very least foreign investors have far more wide ranging investment alternatives and propensities than did holders of T-bonds in the ‘30s. At worse, our national interests might not occupy a high priority in their range of thought when selecting investments (which doesn’t make them all that different from most people on Wall Street, come to think of it, but it’s still something to consider). At worst, if the world economy continues on its present course, these investors may not have the willingness or the wherewithal to continue to finance our shameless profligacy. Think of the throttling back of, say, Dubai’s and Abu Dhabi’s ambitions. Of course, foreign investors may not have any choice…for now. (Think Cleavon Little in “Blazing Saddles” holding a gun to his head in order to get the townsfolk to back off on their threats to get rid of the new sheriff, who happens to be Cleavon Little.) But these are not foolish people who fritter away their time reading (oh, sorry, listening…reading is too strenuous for the modern American) about the latest exploits of Brittany Spears or someone named Jay Lowe or watching ESPN 24 hours a day. Eventually, they will develop a large and sufficiently prosperous middle class and will no longer need us to borrow their money to buy their products. But, again, I am digressing.
The major point is that, since we no longer save, we have to import capital. Thus, a major stimulus package will have to be financed with debt that will largely be held by foreigners. Unless we can keep the international Madoff scheme that characterizes the modern global economy going for an indeterminate length of time, we may not be able to import capital. And, even if we can, at the expense of offending the unabashed internationalists who dominate economic and political thinking in New York (and, yes, even Chicago) and Washington, perhaps being beholden to the Chinese and Middle Easterners might not be such a favorable economic and financial development.
Tuesday, January 6, 2009
ON THIS HAPPY NOTE…
1/6/09
The Wall Street Journal, on today’s (i.e., Tuesday, 1/6/09’s) front page proclaimed that, quoting the headline, “Hard-Hit Families Finally Start Saving, Aggravating Nation’s Economic Woes.” The article went on to report that in the third quarter of 2008, U.S. household debt fell for the first time since the series began being tracked, which was in 1952. During the same quarter, U.S. consumer spending growth declined for the first time in seventeen years.
As loyal readers know (See, inter alia, my 11/26/08 and 12/7/08 posts.), I find the resurgence of saving, even if brought on by economic difficulty, a favorable development, perhaps the only favorable economic statistic I see on the horizon. However, conventional thinkers are sullen and down in the mouth about this development. These brilliant strategists, who dominate New York and Washington (Both of these places, bear in mind, are highly complicit in our current economic malaise.), insist that what the economy needs now is a big shot of spending. As usual, the people directing policy, both public and “private,” are dead wrong here, wallowing in the encrusted and putrid remains of a thoroughly discredited economic philosophy. This economy needs more spending just like a drunk needs a strong shot of JTS Brown (“no glass, no ice”) to cure his hangover.
Yes, the type of spending in which Washington is trying to get us to engage would provide temporary relief, and enough of it might provide momentary exhilaration. But the consequences will be the type of pain that will be relieved only by gargantuan quantities of the financial equivalent of Alka-Seltzer followed by the economic equivalent of an eight hour steam. If we don’t learn to save money again, it’s curtains for the U.S. economy and, more broadly, for our once great nation. This is our chance; this is our moment, as politicians are fond to say as if they had invented that trite piffle of a piety. We should just let these economic problems run their course and let people make the adjustments that must me made. Ours is not so much a problem of public finance as it is of personal finance. We have spent far more than we should for far too long a time. What we are witnessing now is the chickens' of 20+ years of profligacy, borne out of a misguided sense of entitlement, coming home to roost. This has led to our decay not only economically, but morally as well. It might be too much (in most people’s, but not yours truly’s, estimation) to say that our wanton, gormless spending is a soul-sickness, but at the very least it is a reflection of a silly people desperately trying to validate itself by the geegaws it manages to accumulate. For the sake of our economy and of our society, we are going to have to radically change the approach to saving and spending that dawned, at least this time around, with my generation. The adjustment is going to be painful, but it is necessary. Any policy designed to ameliorate the pain will merely postpone, and exacerbate, it.
Conventional thinkers will, of course, heap abuse on such thinking. Ignore what old-fashioned, out of touch moralists like the Pontificator are saying, they will argue, and just get out there and spend. It is their hope that the American people will heed their admonitions and dance to their scratchy tunes, but, again, they are, in some cases, thoroughly depressed at the notion that the populace will not cooperate. “The idea that the American family will quickly spend us out of recession is a fantasy. It won’t happen,” the Journal article quotes Harvard law professor and TARF overseer Elizabeth Warren as saying.
I wish I could share Professor Warren’s optimism. Sure, people are saving now, but only because they have to. This is not the generation that survived the Depression and won World War II. The modern American is a shallow and soft person who tallies his worth by counting the gimcracks with which he surrounds himself. Much like the not yet convinced alcoholic who doesn’t drink when cut off from booze in the rehab center, the American spender will be right back on the hooch when times get “good” again.
It is all quite hopeless.
The only chance I see that our long ago great nation emerges from these troubles is if (Being the parent of adolescents and a pre-adolescent, it is very difficult to say this.) we do go into an economic depression and the next generation is hardened, much like their great grandparents, thereby. That is the only way that I think our society can be expunged of its self-destructive adoration of all things material and aversion to all things by which real character is developed. My generation, and perhaps the subsequent generation, has lost itself to the mental, emotional, and spiritual novocain of spending, debt (the “gotta have it” mentality, as my ever insightful wife would call it), network television, celebrity-centricism, and groundless entitlement.
Needless to say, the faint glimmers of bullishness (on the markets, not the economy) that I have been experiencing over the last few weeks (See my 11/21/08 post.) have rapidly dissipated. Not only are the economic signs bleak, but the cures being proposed by the people in charge on both Wall Street and Washington will serve only to intensify our difficulties. Further, the “experts,” the same people who castigated the Pontificator as a brainless bear when he proposed a few years ago that real estate might actually fall in price and that there would be dire consequences for the stock markets, are starting to get bullish. All this says to me that, despite the market’s being down some 40% from its highs, there is plenty of room on the downside, to paraphrase a man who, at least on film, epitomized the last great American generation, maybe not today, maybe not tomorrow, but soon enough.
Happy new year.
The Wall Street Journal, on today’s (i.e., Tuesday, 1/6/09’s) front page proclaimed that, quoting the headline, “Hard-Hit Families Finally Start Saving, Aggravating Nation’s Economic Woes.” The article went on to report that in the third quarter of 2008, U.S. household debt fell for the first time since the series began being tracked, which was in 1952. During the same quarter, U.S. consumer spending growth declined for the first time in seventeen years.
As loyal readers know (See, inter alia, my 11/26/08 and 12/7/08 posts.), I find the resurgence of saving, even if brought on by economic difficulty, a favorable development, perhaps the only favorable economic statistic I see on the horizon. However, conventional thinkers are sullen and down in the mouth about this development. These brilliant strategists, who dominate New York and Washington (Both of these places, bear in mind, are highly complicit in our current economic malaise.), insist that what the economy needs now is a big shot of spending. As usual, the people directing policy, both public and “private,” are dead wrong here, wallowing in the encrusted and putrid remains of a thoroughly discredited economic philosophy. This economy needs more spending just like a drunk needs a strong shot of JTS Brown (“no glass, no ice”) to cure his hangover.
Yes, the type of spending in which Washington is trying to get us to engage would provide temporary relief, and enough of it might provide momentary exhilaration. But the consequences will be the type of pain that will be relieved only by gargantuan quantities of the financial equivalent of Alka-Seltzer followed by the economic equivalent of an eight hour steam. If we don’t learn to save money again, it’s curtains for the U.S. economy and, more broadly, for our once great nation. This is our chance; this is our moment, as politicians are fond to say as if they had invented that trite piffle of a piety. We should just let these economic problems run their course and let people make the adjustments that must me made. Ours is not so much a problem of public finance as it is of personal finance. We have spent far more than we should for far too long a time. What we are witnessing now is the chickens' of 20+ years of profligacy, borne out of a misguided sense of entitlement, coming home to roost. This has led to our decay not only economically, but morally as well. It might be too much (in most people’s, but not yours truly’s, estimation) to say that our wanton, gormless spending is a soul-sickness, but at the very least it is a reflection of a silly people desperately trying to validate itself by the geegaws it manages to accumulate. For the sake of our economy and of our society, we are going to have to radically change the approach to saving and spending that dawned, at least this time around, with my generation. The adjustment is going to be painful, but it is necessary. Any policy designed to ameliorate the pain will merely postpone, and exacerbate, it.
Conventional thinkers will, of course, heap abuse on such thinking. Ignore what old-fashioned, out of touch moralists like the Pontificator are saying, they will argue, and just get out there and spend. It is their hope that the American people will heed their admonitions and dance to their scratchy tunes, but, again, they are, in some cases, thoroughly depressed at the notion that the populace will not cooperate. “The idea that the American family will quickly spend us out of recession is a fantasy. It won’t happen,” the Journal article quotes Harvard law professor and TARF overseer Elizabeth Warren as saying.
I wish I could share Professor Warren’s optimism. Sure, people are saving now, but only because they have to. This is not the generation that survived the Depression and won World War II. The modern American is a shallow and soft person who tallies his worth by counting the gimcracks with which he surrounds himself. Much like the not yet convinced alcoholic who doesn’t drink when cut off from booze in the rehab center, the American spender will be right back on the hooch when times get “good” again.
It is all quite hopeless.
The only chance I see that our long ago great nation emerges from these troubles is if (Being the parent of adolescents and a pre-adolescent, it is very difficult to say this.) we do go into an economic depression and the next generation is hardened, much like their great grandparents, thereby. That is the only way that I think our society can be expunged of its self-destructive adoration of all things material and aversion to all things by which real character is developed. My generation, and perhaps the subsequent generation, has lost itself to the mental, emotional, and spiritual novocain of spending, debt (the “gotta have it” mentality, as my ever insightful wife would call it), network television, celebrity-centricism, and groundless entitlement.
Needless to say, the faint glimmers of bullishness (on the markets, not the economy) that I have been experiencing over the last few weeks (See my 11/21/08 post.) have rapidly dissipated. Not only are the economic signs bleak, but the cures being proposed by the people in charge on both Wall Street and Washington will serve only to intensify our difficulties. Further, the “experts,” the same people who castigated the Pontificator as a brainless bear when he proposed a few years ago that real estate might actually fall in price and that there would be dire consequences for the stock markets, are starting to get bullish. All this says to me that, despite the market’s being down some 40% from its highs, there is plenty of room on the downside, to paraphrase a man who, at least on film, epitomized the last great American generation, maybe not today, maybe not tomorrow, but soon enough.
Happy new year.
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