An intersting piece in Asia Times argues that much of America’s economic strength is due to our Sarah Palins.
via Lead and Gold.
Economics & Finance
Stresses of Globalization
Unfortunately in the year XXXX the whole world was one large international workshop. A strike in the Argentine was apt to cause suffering in Berlin. A raise in the price of certain raw materials in London might spell disaster to tens of thousands of long-suffering Chinese coolies who had never even heard of the existence of the big city on the Thames. The invention of some obscure Privat-Dozent in a third-rate German university would often force dozens of Chilean banks to close their doors, while bad management on the part of an old commercial house in Gothenburg might deprive hundreds of little boys and girls in Australia of a chance to go to college.
“Keeping the Machinery of Civilization Going”
Good point about how people aren’t routinely taught how things work. This is as true for important principles of business and finance as it is for plumbing. If more people had basic knowledge about this stuff it would be difficult for politicians and media to scapegoat markets, or valuable market tools such as derivatives, for problems caused by institutional management failures and corruption.
Wise Words on Troubled Times
Like many, the current events in the financial markets have me a bit dazzled. I understand a lot more than I did a few weeks ago from reading blog posts, newspaper articles and a small book or two. I also have been watching CNBC and Fox Business which have had a lot of interesting information on them as well. But I have a reservation. Whenever I see a report on CNBC or soak in a few pixels of information on a website I get a certain empty feeling. I feel as though I am being played. These information outlets feed on advertising for their lives, after all. Blood always leads, even on the financial pages.
The very best thing I have read on the current situation was in the WSJ weekend edition a week ago. It wasn’t “world ending” stuff, and it was easy to understand and concise. Several articles in the same edition were excellent.
That said, here is an excellent quote from Blogging Stocks:
In these tough times, the media does it best to convey the impression that it’s really looking out for the best interest of the humble investor.
In its September 28, 1998 issue, Fortune’s cover screamed: “The Crash of ’98. Can the U.S. Economy Hold up?” The Managing Editor explained that Fortune was “dedicated” to making sense of the “scary” financial situation.
How helpful!
I am not trivializing the current financial crisis. I have no idea what the direction of the markets will take in the future. What I do know is the financial media have a vested interest in hyping extreme conditions because it is in their economic interest to do so.
Investors can learn from the terrible track record of the media in predicting the future of the markets. They are not a reliable source of information.
What are your alternatives?
Consider the 80-year history of the markets, which have experienced ten bear markets. Look at long-term risk and reward data. Read books that have peer review, academically tested data supporting intelligent investing principles. There has been a trend by authors of these books to write them in way that is easily understood by everyone…
…Ignore the financial media, unless you find it entertaining.
The big wooden horse the Greeks gave the Trojans was not a gift. Neither is the information provided with such confidence by most of the financial media.
The article is appropriately named Kissing Cousins: The Wall Street Collapse and Media Hype.
The Bailout and Human Nature
Eyes and ears are poor witnesses when the soul is barbarous. Heraclitus
Posted mid-Sunday, as bail-out talks continue.
Pinker complains in The Blank Slate of the increasing emphasis in the 20th century on nurture. This may well have increased our sympathies for others, but has led us to undervalue human nature and therefore not consider moral hazards that tempt it. Our experiences are so variable and their impact so ambiguous, we may be quick to assert effect where none existed – or emphasize it when convenient. Indirectly, we came to devalue that third and most personally consequential component – human agency. We say, “Officer Krupke, I’m down on my knees” and grin, but we aren’t always ironic. Our experience and history, however, should make us more optimistic and also wary: men can be good (and remarkably so) and men are fallible. (Sinners some might say, while the Deists find us prone to errata.) A culture’s use is in restraining us from being our worst and encouraging our best; the more those restraints and rewards are internalized the smoother, more productive, and happier our lives. Our goal is not too many laws but good ones, not many restraints but necessary ones.
The general consensus is that increased subprime lending encouraged by Congress led CEOs to make bad loans. We are selfish, our vision narrowed to our time and our profit: the home buyers may have been naïve but also wanted a free lunch; the CEOs wanted to please Congress the source of their jobs, power & money; Congress wanted to buy votes, increase campaign contributions, and purchase their own houses cheaply. Those least likely to feel the consequences of their follies are in Congress.
Which is a long way around to the point: What the hell were Dodd and Frank doing writing a version of the bailout? Why do they think they should? Why does anyone else listen to them? Isn’t having a dog in that fight exactly the reason for recusals? Is there no moment when we say your history has undermined your authority?