Skip to comments.Victor Davis Hanson: Wall Street 101
Posted on 10/09/2008 3:26:20 PM PDT by neverdem
And your point is?
I was brave enought to look at my 401k, it is down 31%.
It will take years to recover, just the value I paid in.
The point is we are in for some rough times. Also, education and common sense do not always go together. I’ll be praying for this country, I suggest all of you do the same.
True that...what I have a problem with is the idea that folks are genuinely shocked that there is greed on Wall Street.
I like the author's observations. I thought the author made quite a few trenchant ones. I thought this was the best:
"If these guys are our best and brightest, then it is about time we rethink what constitutes wisdom, since an Ivy League law degree certainly seemed no proof of either intelligence or ethics."
Nobody ever said they were the brightest. They’re just guys who want to make a buck.
Guess you missed the 'widsomspeak' here. Or, perhaps you just don't like VDH?
Greed on Wall Street; and unfricking amounts of arrogance in Washington. . .and the ‘hallowed halls’ of Congress. Am surprised that Barney has not has HIS nose bloodied yet. . .
"The crisis of the abuses of banking is arrived. The banks have pronounced their own sentence of death. Between two and three hundred millions of dollars of their promissory notes are in the hands of the people, for solid produce and property sold, and they formally declare they will not pay them. This is an act of bankruptcy, of course, and will be so pronounced by any court before which it shall be brought. But cui bono? The laws can only uncover their insolvency, by opening to its suitors their empty vaults. Thus by the dupery of our citizens, and tame acquiescence of our legislators, the nation is plundered of two or three hundred millions of dollars, treble the amount of debt contracted in the Revolutionary war, and which, instead of redeeming our liberty, has been expended on sumptuous houses, carriages, and dinners. A fearful tax! if equalized on all; but overwhelming and convulsive by its partial fall. Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by the deluge of bank paper, as we were formerly by the old Continental paper. It is cruel that such revolutions in private fortunes should be at the mercy of avaricious adventurers, who, instead of employing their capital, if any they have, in manufactures, commerce, and other useful pursuits, make it an instrument to burthen all the interchanges of property with their swindling profits, profits which are the price of no useful industry of theirs. Prudent men must be on their guard in this game of Robin's alive, and take care that the spark does not extinguish in their hands. I am an enemy to all banks discounting bills or notes for anything but coin. But our whole country is so fascinated by this Jack-lantern wealth, that they will not stop short of its total and fatal explosion."
~~Thomas Jefferson to Dr. Thomas Cooper, 1814
Every shill on these boards for the crony bastardized version of the Free Market we have today has pretty much said that:
1) The people who run Wall Street deserve whatever they can get
2) We are too stupid to fully understand the intricacies of all that is done on Wall Street
3) Without leveraging and derivatives certain "investments" would not make sense, but since one of these masterminds thought it up we need to allow leveraging and derivatives in order for it to happen.
Wall Street, Government, the Media, liberal community organizers, etc. all contributed to pounding the average American with the message that we would be stupid if we didn't leverage as much of our wealth as we could by buying large homes, getting HELOCs, putting most of our 401k into stocks, etc.
I realize that ultimately each individual is responsible for his own welfare, but if every major institution is yelling at us 24/7 to borrow, borrow, borrow then it is no surprise that a huge percentage of the American population went out and borrowed.
The people who the community activists wanted to help the most ended up being the ones who are currently in the worst shape: they got invited to be the base of the Ponzi pyramid.
Of course they will be saved by the well-meaning nimnolds in government, but those of us in the middle will end up being squeezed once again.
That our government tries to dump the risk on taxpayers does not bode well for future enterprise.
Greed on Wall Street? Arrogance in Washington? Are you sure? I find it hard to believe.
Just about all of our nation’s problems can be EXPLAINED by the DEATH OF COMMON SENSE and the dearth of individual responsibility!!
If you can’t figure it out... then you are part of the problem.
There’s a problem?
Only for someone who is forced to move because of a job change does the current market value become relevant. They will lose the difference between the remaining amount of the loan and the current market value. However, those situations represent only a small fraction of those who are "under water."
I think we need to quit focusing on those who are "under water" and focus on fixing Fannie and Freddie (and maybe Sallie).
Is it, that you have 'other issues'?
Good one! And ‘thank-you’ Mr. Jefferson. . .
He is the only person I have heard to point out the west's war against radical Islam is a battle between The Enlightenment and The Middle Ages.
I just find it frustrating that folks suddenly realize there is greed on wall street or arrogance in politics.
Do not think anyone here is 'discovering' either one. . .and sense a bit of that same 'arrogance' perhaps; in your imagining such. This can be a 'choir. . .preaching' - so to speak...a 'misery-loves-company'; and/or just a venting here. It is as well a huge sharing of information, meant to inform. . .and meant to be shared with the 'less informed'. Wherever they are.
. . .think the 'above' explanation is just a venting; because I am sure you 'know this'.
I’ve hidden our financial accounts from my husband.....and I’m contemplating looking at them.....
Thanks for Jefferson’s quote.
Look at the above story. The writer is shocked there is greed on wall street. He’s shocked the rules were bent. He’s shocked folks acted in an unethical manner to secure fortunes that will carry forward along and support their families for several generations.
If I look at the current market value of my stock, it’s way down.
But the way I figure it, I still own the same percentage of some pretty good companies that I used to own before the market tanked. The companies aren’t going out of business. They are still going to be the highest quality companies around when things come back.
I could alternatively give my stock to someone else who would get to pick it up at a really low price, and I would be unlikely to get it back again at that price (because there’s no way I would buy it back at the bottom, I would hold out until I was sure the market was going up again, of course.)
I do share your frustration inasmuch as there ARE too many people out there who are either 'shocked' or simply 'not shocked' at all, by the truths unfolding per this crisis; nor shocked by what they must consider as no more than 'inconvenient facts' - and so, are blindly, STILL committed to voting for Obama.
The red flags are everywhere; the warnings. . .and yet; I see the homes where 'boy scouts/girl scouts' live; where the parents are hard-working; America-loving - and Educated. but they have an Obama sign in their yard; or decal/bumper sticker on their car. . .
THAT shocks ME - and makes me crazy!
have to say the economic crisis is working in favor of obama.
Yes, it is; understandable; and it is not surprising that Obama would capitalize here; moreso; given neck-deep involvement of his own Party/Demrat 'Leadership' and his own 'Fannie/Freddie' associations - add to that the level of abuse here and the consequences; it is almost 'amazing to behold' just how brazen; just how cunningly dishonest these practiced liars are.
Worse, their gaining/taking the high-ground here was so predictible! Obama constructed his story; with himself as the hero; and the Repubs as the 'evil-doers' while McCain immersed himself immediately in the problem. Obama attacked and has not stopped. As have the practiced liars, Pelosi/Reid/Frank. . .and the 'rest of them'.
When this started I was about 60% cash and 40% stock. I have since gone to 80% cash and 20% stock (from losses and conversions on the way down). The market has dropped over 10% since my last sale so I figure I won’t get whip sawed too badly now (always a danger when you get out like this).
Looking back at historical daily percentage changes (both highs and lows) you see many bounce backs right after a big loss (especially 1987 for example). We have not seen very many bounces in this drop.
The most frustrating thing is that I could have paid off my house with the money that I have lost this year, and I know that I am in better shape than a lot of other people.
see the kissinger interview with fallaci in the early 70s, to paraphrase, “americans want the hero to ride in on a white horse...”
I just count myself lucky that I am 32, and still have a few years to make up my losses (keeping in mind inflation).
And the prices for rents in the area matter too. I could get a whole lot less space for the same amount of money in my area.
Let me know if you want in or out.
Links: FR Index of his articles: http://www.freerepublic.com/focus/keyword?k=victordavishanson
His website: http://victorhanson.com/
NRO archive: http://www.nationalreview.com/hanson/hanson-archive.asp
Wonderful post, neverdem.
Incentives from hell - derivative traders skimming off more money than exists off silly subprime loans - donations to banking committee members knowing changes would cause long term disasters in spite of short term gains. Just stupidity and arrogance.
The Democrat socialists/communists engineered this financial downfall. Then they nominated a communist for POTUS. About half the people in the US are fearful of a communist take-over; the other half welcome it as they never experienced the cold war and have never been taught or experienced the evils of communism. As the communist candidate gets closer to winning, people are panicing and selling which accelerates the downward spiral. As asset values collapses, people are going to demand socialism/communism in the US to offer some level of protection and safety net. Obama gets elected by a fearful electorate seeking stability of socialism. America may be lost by this cooked-up crisis.
I agree with that — stupidity and its first cousin, a short time horizon. Perhaps there was just too much money to be made to take the long view.
It’s different this time. They hadn’t invented derivatives them.
Yeah it’s different: worse.
“. . .have to say the economic crisis is working in favor of obama.
Yes, it is; understandable; and it is not surprising that Obama would capitalize here”
Is anybody ready yet to consider that this economic crisis may have been manufactured, and may have been in the works for years?
Or aren’t we there yet?
Oh yes...actually, have been saying for a long time; per 'what we all know' and that is this 'Democrat-now-radical-Left' Party will do whatEVER it takes, to assure their assumption of power in this next Election; including bringing our Country to it's knees - if that is what it takes. And according to any good Leftist bible - including Alynsky's/Rules for Radicals; that IS what it takes.
You can choose the 'guns'. . .or the 'power from within the system' MO (version of cooked frog - which counts on heavy use of politcal correctness) - but MO works on same principle. First DESTROY; big bang; or, 'silent', if practicalities matter. Destroy. . .then 'recreate'; recast a future.
Obama's friend - and neighbor - Weatherman, 'Bill Ayers' offered - long past Obama's eighth birthday - that his only regret is that he did NOT do more damage; more destruction. (contrast Ayers regrets, against McCain's apology/regret - albeit 'not guilty' - in Keating Five, media now uses for moral comparison). Now, as an aging terrorist; Bill allows that power from 'within' the best MO.).
Surely we can recognize the 'change we can believe' unfolding as we speak here. Whether by extreme calculations; 'happenstance'; or Alynsky 'wisdom'; or bumbling combinations; the Dems are now busy 'rewriting' a new creation myth.
Meantime, if there are still doubts. . .there is always COPUSA/communist part,usa/ website to check out and see how the 'Dem's' are doing.
Here is what their recommendations were for 'rescue' and for
securing 'their securing' - America's future'.
A familiar 'hue and cry'. . .
SAVE MAIN STREET -NOTWALLSTREET / http://www.cpusa.org/article/articleview/985/1/123">copusamainst.link (read more here)
and the plan itself:
Any plan before Congress must:
1) Protect homeowners faced with foreclosure by restructuring mortgage rates to be in line with family income.
2) Create economic stimulus for working people and small business
3) Provide $100 billion in emergency relief to state and local governments wracked with budget cuts and diminished tax revenue
Bar CEO severance packages and cap the pay of executives receiving a bailout
5) Regulate banking and finance with transparent public oversight
6) Maintain public control over monopolies like Fannie Mae and Freddie Mac that have a decisive role in the economy
7) Control speculation and increase revenues by taxing large financial transactions
8) Ban predatory lending and cap interest rates on all types of debts
9) End the war in Iraq, which is draining $700 million a day from public coffers
Developments are moving quickly and their full impact has yet to be felt, but let's make sure that American workersthose who made this country richdo not further suffer at the expense of the financial elites, those who have created this crisis.
Call Congress today! Tell them no blank check for Wall Street!
National Board Communist Party USA
What the media and others are saying about the Communist Party. Save Main Street Not Wall Street! by CPUSA, 09/22/2008 17:32 Statement of the Communist Party USA
1994 seems to be when the first seeds for the financial weapons of mass destruction were planted. There is no regulation to date of these “newer” financial instruments that were designed to get around sensible banking regulations of having capital reserves to back up your institution.
Snipped from http://www.newsweek.com/id/161199
Holed up for most of the weekend in a conference room at the pink, Spanish-style resort, the JPMorgan bankers were trying to get their heads around a question as old as banking itself: how do you mitigate your risk when you loan money to someone? By the mid-90s, JPMorgans books were loaded with tens of billions of dollars in loans to corporations and foreign governments, and by federal law it had to keep huge amounts of capital in reserve in case any of them went bad. But what if JPMorgan could create a device that would protect it if those loans defaulted, and free up that capital?
What the bankers hit on was a sort of insurance policy: a third party would assume the risk of the debt going sour, and in exchange would receive regular payments from the bank, similar to insurance premiums. JPMorgan would then get to remove the risk from its books and free up the reserves. The scheme was called a credit default swap, and it was a twist on something bankers had been doing for a while to hedge against fluctuations in interest rates and commodity prices. While the concept had been floating around the markets for a couple of years, JPMorgan was the first bank to make a big bet on credit default swaps. It built up a swaps desk in the mid-90s and hired young math and science grads from schools like MIT and Cambridge to create a market for the complex instruments. Within a few years, the credit default swap (CDS) became the hot financial instrument, the safest way to parse out risk while maintaining a steady return. Ive known people who worked on the Manhattan Project, says Mark Brickell, who at the time was a 40-year-old managing director at JPMorgan. And for those of us on that trip, there was the same kind of feeling of being present at the creation of something incredibly important.
Like Robert Oppenheimer and his team of nuclear physicists in the 1940s, Brickell and his JPMorgan colleagues didnt realize they were creating a monster. Today, the economy is teetering and Wall Street is in ruins, thanks in no small part to the beast they unleashed 14 years ago. The countrys biggest insurance company, AIG, had to be bailed out by American taxpayers after it defaulted on $14 billion worth of credit default swaps it had made to investment banks, insurance companies and scores of other entities. So much of whats gone wrong with the financial system in the past year can be traced back to credit default swaps, which ballooned into a $62 trillion market before ratcheting down to $55 trillion last weeknearly four times the value of all stocks traded on the New York Stock Exchange. Theres a reason Warren Buffett called these instruments financial weapons of mass destruction. Since credit default swaps are privately negotiated contracts between two parties and arent regulated by the government, theres no central reporting mechanism to determine their value. That has clouded up the markets with billions of dollars worth of opaque dark matter, as some economists like to say. Like rogue nukes, theyve proliferated around the world and now lie hiding, waiting to blow up the balance sheets of countless other financial institutions.
It's worth remembering that in 1801, when Jefferson became president, the US national debt was around $100 million, about 10 times annual federal revenues. This was literally "the cost of freedom," and would correspond today to a national debt around $30 trillion.
Since our actual national debt is $13+ trillion, the government is in better financial shape today than it was in Jefferson's time.
And at the time, Jefferson's number one priority was paying down the national debt. So, how did he do it? How does ANY wise government ever increase its revenues? Yes, that's right!
JEFFERSON REDUCED GOVERNMENT SPENDING AND CUT TAXES.
Soon the national coffers were overflowing with revenues, paying down the debt, and the economy was booming.
And what was Jefferson's number two priority? Well, there was a small matter of Islamic terrorists in North Africa. Jefferson started a "war of choice" against them, to eliminate the annual tributes America was paying -- the First Barbary war.
But even with paying for the war, the US economy & federal revenues grew so fast, Jefferson had no problem coming up with (the unconstitutional) $15 million needed for the Louisiana purchase, and still paid down 30% of the national debt by the time he left office in 1809.
Do you suppose there's a lesson to be learned here?
More than one lesson, actually. . .
BroJoeK: It's worth remembering that in 1801, when Jefferson became president, the US national debt was around $100 million, about 10 times annual federal revenues. This was literally "the cost of freedom," and would correspond today to a national debt around $30 trillion. Since our actual national debt is $13+ trillion, the government is in better financial shape today than it was in Jefferson's time.Excellent!
You mean someone or a lot of someones created a global crisis that vaporized trillions of dollars on purpose?
You mean someone or a lot of someones created a global crisis that vaporized trillions of dollars on purpose?
“You mean someone or a lot of someones created a global crisis that vaporized trillions of dollars on purpose?”
Do you think leftists wouldn’t do that?