-----Original Message----- From: Eric Walker
>> Take the mortgage melt down in 2008 and following, do you think any intelligence was used by the financial industry. Yet these people almost collapsed the financial system of the West, which has led to the present financial situation. Stupid people now have the power to stop civilization in its tracks. Some of the world's smartest minds worked together to produce the financial collapse. They had an implicit faith in the assurances of free-market ideology and laissez-faire, which they had unquestioningly imbibed since childhood, and they based their rent-seeking behavior on those assurances with religious zeal. What they lacked was simple common sense and concrete incentives to avoid actions that are harmful to society. Well not exactly, Eric - the problem is that those same "incentives" are usually going to be in direct conflict under Capitalism with harm to the company (via foregoing a competitive timing advantage). Common sense Capitalism says to avoid actions that are harmful to the company, even if they are harmful to society. Socialism, says: if you do not avoid actions which are harmful to society then you will forfeit gains and pay penalties. Which one makes more sense? It would be more accurate to say that prior to the meltdown - there were a few bright people who were trying to profit via exceedingly high leverage (leverage on top of leverage) ... but oversold an artificial financial "product" which should never have been allowed to be offered - and even the inventors of the product misjudged the risk. Then - a few smarter people (two geeks, to be exact) were able to spot the problem 24 hours in advance, but the greed of one firm in "getting out first" essentially took the entire market down - and very nearly the whole economy. IF they had not acted quickly, however, they would have suffered as much as everyone else, and their stockholders would not have given them incredibly generous bonuses. A great film on this subject, only partly fiction is "Margin Call". Many of the participants of the melt-down praise its accuracy - while never mentioning the main culprit by name. IOW - in Hollywood - the "names have been changed to protect the guilty" ... since they too operate on borrowed capital and do not want to alienate the biggest of the big. http://en.wikipedia.org/wiki/Margin_Call_%28film%29 "Although the film does not depict any real Wall Street firm, or similar corporate action during the 2008 financial crisis, Goldman Sachs similarly moved early to hedge and reduce its position in mortgage-backed securities, at the urging of two employees." Actually - It is not inaccurate, in retrospect - to lay most of the blame and most of the avoidable losses (shifted to others) on Goldman alone. They should have been severely punished. That they were not punished is a disgrace.
