Here's an article about the private-equity firm Blackstone's expected bid
for Chrysler:
http://money.cnn.com/2007/04/02/magazines/fortune/benner_blackstone.fortune/index.htm
It provides a candid discussion of exactly what value the PE firms bring to
the table (Hint: It has nothing to do with
David S.:
If I put two bullets in a six chambered gun and asked you to play russian
roulette, would you say that playing was not risky? I don't think your
definition works.
^
CB: Good point.
But to make the analogy fuller, I think the result of shooting the gun on
the empty cylinders
* From: David B. Shemano
Charles Brown writes:
What is the logic supporting the idea that interest should be paid for
money
lent ? I believe many or most mortgages have more interest paid than
principle. In part this is done by payments being allocated to interest
payments before being
historically, compound interest (which is the phenomenon that leads to the
loading of mortgage payments in interest rather than principal) first
appears in the Code of Hammurabi, and is based on the yield on seed corn.
If I lend you some of my seed corn over a period of ten years, I have to
charge
Charles Brown writes:
CB: If your money is secured by the house, why are you taking any risk at
all ?
David S.:
Charles -- read the paper. Sub-prime mortgage lenders are falling like
cards. Home lending is not risk-free. Even in the prime market, there are
defaults.
CB; Yes, by
Louis P. writes:
Marvin wrote:
...We can continue to disagree about
whether the accomodations by the mass parties have been due
to failures of
leadership, as you contend, or to the unexpected historical
resiliency of
. From: David B. Shemano
CB: If your money is secured by the house, why are you taking any risk at
all ?
David: Charles -- read the paper. Sub-prime mortgage lenders are falling
like cards.
^^
CB: As I think about this again, even a sub-prime mortgage is secured by the
house. The lender
Louis P. writes:
Marvin wrote:
...We can continue to disagree about
whether the accomodations by the mass parties have been due to failures of
leadership, as you contend, or to the unexpected historical resiliency of
capitalism and extension of the universal franchise which have combined to
IMHO, the difference that David misses is that between exchange-value
(and surplus-value) and use-value. Markets and capitalism serve the
lust for money revenues (exchange-value) and profits (surplus-value)
and not what's good for people (use-value). If you don't have the cash
up front, the
Louis Proyect wrote:
The real problem is disincentives to invest. What do you do when
there is no incentive to invest, such as was the case during the
1930s?
In these circumstances, the state moves to reflate the economy by
recapitalizing the banks and boosting mass purchasing power. The
Marvin wrote:
Yes, which is a major reason why private investment has now come to be
regarded as a more possible means of generating growth than state
ownership, even by popular movements which came to power avowing the radical
redistribution of power and property. We can continue to disagree
Raghu writes:
Agreed that good is not a black-and-white concept, but it is best
not to avoid such normative questions. In this case surely we can
agree that huge unearned profits is not good for society. At the
very least you have to admit that the Hertz case shows that there is
no free
David, the current buyout craze is setting the stage for a boom in your
business.
On Thu, Mar 29, 2007 at 11:07:43AM -0700, David B. Shemano wrote:
What is an unearned profit? To the extent it is a product of rent-seeking, I
agree that it is a bad thing. The Hertz transaction was not a
Charles Brown writes:
What is the logic supporting the idea that interest should be paid for money
lent ? I believe many or most mortgages have more interest paid than
principle. In part this is done by payments being allocated to interest
payments before being allocated to principle
historically, compound interest (which is the phenomenon that leads to the
loading of mortgage payments in interest rather than principal) first
appears in the Code of Hammurabi, and is based on the yield on seed corn.
If I lend you some of my seed corn over a period of ten years, I have to
charge
Charles Brown writes:
CB: If your money is secured by the house, why are you taking any risk at
all ?
Charles -- read the paper. Sub-prime mortgage lenders are falling like cards.
Home lending is not risk-free. Even in the prime market, there are defaults.
Foreclosure is not inexpensive
If the investor invested in the typewriters, we know in hindsight
that the money would have essentially been thrown down the drain
with a net loss to society compared to the investment in portable
computers. The decision to invest is not made blindly by
investors. They do due diligence and
David B. Shemano wrote:
The logic of interest ultimately goes back to the principle that
human beings would rather consume today then consume tomorrow (i.e.
they value the present more highly than the future). If I offered
you a dollar now, or offered you a dollar next year, would you
On 3/29/07, David B. Shemano [EMAIL PROTECTED] wrote:
What is an unearned profit? To the extent it is a product of rent-seeking, I
agree that it is a bad thing.
I am pleased that we are making a lot of progress in finding
significant points of agreement :)
If it wasn't so risky, there
Louis Project writes:
The real problem is disincentives to invest. What do you do when
there is no incentive to invest, such as was the case during the
1930s? Granted, the post-WWII economy has made such problems appear a
thing of the past--at least for the USA, Western Europe and Japan
(and
I would like to understand your point, but I am not getting it. Why
do you think Africa is different than all of the positive regions
you mentioned? At one point you are saying too little capitalism,
and at the other point too much capitalism.
David Shemano
Well, it is not just Africa. It is
On 3/29/07, Louis Proyect [EMAIL PROTECTED] wrote:
utterly irrelevant to somebody in the Congo. Or in Uganda. Or in
the Philippines. Or Pakistan. Or Indonesia. Etc., etc., etc.
Understanding what Ward Churchill meant when he used the phrase
'little Eichman', and a Goldman Sachs account exec
What is the logic supporting the idea that interest should be paid for money
lent ? I believe many or most mortgages have more interest paid than
principle. In part this is done by payments being allocated to interest
payments before being allocated to principle payments. How is this
rationalized
David S.:
If I put two bullets in a six chambered gun and asked you to play russian
roulette, would you say that playing was not risky? I don't think your
definition works.
^
CB: Good point.
But to make the analogy fuller, I think the result of shooting the gun on
the empty cylinders
On 3/28/07, raghu [EMAIL PROTECTED] wrote:
If resources are limited (e.g. labor and raw materials) some
consumptions should be postponed to accomodate others. Interest is
supposed to be compensation for consumption postponed. (Because
consumption today has greater utility than the promise of
On the concept of being compensated for taking risk, how is risk defined ?
Seems to me risk would mean doing something that has a 50/50 chance or less
of succeeding. So, if all the rich were taking socalled risks in lending
money, then overall the majority of rich people would lose their money
Charles Brown writes:
On the concept of being compensated for taking risk, how is risk defined ?
Seems to me risk would mean doing something that has a 50/50 chance or less of
succeeding. So, if all the rich were taking socalled risks in lending money,
then overall the majority of rich
CB:This is not a new topic, but it seems to me pertinent to
progressive
economics to continue to ask dialectical questions like:
Jim Devine:
[why dialectical? I don't see them as such.]
^^
CB: Lets put it this way. They are not questions just asking for
*
How is wealth created ? What is the source of wealth ? How do the
activities
of financiers contribute to wealth creation ? Or do they ?
From: Jim Devine
if wealth refers to use-values, financiers create it. After all, if
you want to sell some asset, the broker will help
When you say hedge-funders I assume you mean the wealthy individuals who
invest in these vehicles and not the managers themselves? The managers may
be overpaid but they are milking rich fatcats, so why should we care?
(Unless of course said fatcats are pension fund managers gambling with
workers
* From: Daniel Davies
speaking as one ...
what do we do? financiers contribute to wealth creation, a bit. We help
provide liquidity to people who have investments (which are of necessity in
long-term projects) but who want the cash now. We also provide consulting
services to people
Don't financial managers make wealth for the rich for whom they work ?
How do those activities add to the wealth of society ? Why after that
process is over should we consider that the rich person owns more wealth
than they did before the process started ?
Charles
I am sure I am going to butcher this and repeat arguments that you believe
were refuted 100 years ago, but here goes. I disdain the labor theory of
value for the reason stated by Whately: it is not that pearls fetch a high
price because men have dived for them, but on the contrary, men dive for
less than you'd think. For the most part, industrial managers make wealth
in the meaning of the word implied by m-c-m'. The job of financial managers
has more to do with making sure that the m element can actually be spent;
a good industrial manager can help you turn labour and capital into
Charles Brown writes:
I am sure I am going to butcher this and repeat arguments that you believe
were refuted 100 years ago, but here goes. I disdain the labor theory of
value for the reason stated by Whately: it is not that pearls fetch a high
price because men have dived for them, but on
Daniel Davies wrote:
I don't think liquidity shows up all that much as
being a particularly important thing in Marx; in Keynes it's
fundamental.
Marx does have a theory of monetary crisis based like Keynes's on
the psychological idea of auri sacra fames. It's this
psychological element that
David B. Shemano wrote:
But imagine an entrepeneurial diver who thinks I can find a lot more pearls, and
make a lot more money, if I buy a boat, oxygen tanks, etc.
I'll continue that analogy... loosely:
He becomes wealthier due to his financed technological advantage.
Next: The pearls,
Leigh Meyers writes:
He becomes wealthier due to his financed technological advantage.
Next: The pearls, albeit a 'renewable resource' slowly become scarcer
because he
needs to repay the external financing or show increased profitablity,
dividends... etc,
He begins to over-extract the
On Mar 26, 2007, at 5:56 PM, David B. Shemano wrote:
But the pearls are all gone! That is your prediction of the
market process. But to the contrary, eventually our entrepeneur
would start farming his pearls, which is exactly what now occurs,
and there are plenty of pearls (at a price).
Cultured pearls won't be worth the same as the naturally occuring variety.
(Just like a good haircut is worth more than an axe job.)
He's adversley affected his potential profits unles he sells more more
more into a market that is skeptical about the value of his cultured
pearls because the
On 3/26/07, David B. Shemano [EMAIL PROTECTED] wrote:
But the pearls are all gone! That is your prediction of the market
process. But to the contrary, eventually our entrepeneur would start
farming his pearls, which is exactly what now occurs, and there are plenty
of pearls (at a price).
basically because the whole nature of the game is that a lot depends on your
contacts, so it's bound to concentrate in the spots where financiers meet,
eat, drink and sleep with each other.
best
dd
-Original Message-
From: PEN-L list [mailto:[EMAIL PROTECTED] Behalf Of Yoshie
Furuhashi
David is surely right on this - the good that they did was that they put up
the cash when Ford needed it; we can all sit around saying that it's easy to
load a company up with debt and flip it for a quick turn, but these were the
people who were prepared to actually place the cash on the
Daniel Davies wrote:
IIRC they also said that they would rather shovel shit if it paid
the same.
I have actually shovelled animal excrement, as a young man, and I
personally
believe that equities analysis is more fun. I never know quite
what to make
of Portnoy, but my own experience of the
Daniel Davies wrote:
IIRC they also said that they would rather shovel shit if it paid the same.
The fellow used as exemplar said 'railroad clerk' which is a somewhat
analogous skillset to stock trader, except for the
hypercompetitivness, greed, and pay scale..
lcm
Ford Motor company has a miserable history, but at the time they were pretty
desperate. I wonder why there wasn't more of a bidding war that would have set
the
price near to what the company was worth.
On Sat, Mar 24, 2007 at 10:05:41AM -, Daniel Davies wrote:
David is surely right on
On 3/23/07, David B. Shemano [EMAIL PROTECTED] wrote:
What good did they do? Good is kind of a loaded word, but let's anwer
it this way. The Hertz transaction happened because Ford, which owned
Hertz, wanted to quickly liquidate its investment in Hertz for cash. Ford
hired very expensive
On 3/24/07, Daniel Davies [EMAIL PROTECTED] wrote:
basically because the whole nature of the game is that a lot depends on your
contacts, so it's bound to concentrate in the spots where financiers meet,
eat, drink and sleep with each other.
It's a profitable activity that helps the ruling
This is not a new topic, but it seems to me pertinent to progressive
economics to continue to ask dialectical questions like:
How is wealth created ? What is the source of wealth ? How do the activities
of financiers contribute to wealth creation ? Or do they ?
We have to challenge the
On 3/23/07, Charles Brown [EMAIL PROTECTED] wrote:
This is not a new topic, but it seems to me pertinent to progressive
economics to continue to ask dialectical questions like:
[why dialectical? I don't see them as such.]
How is wealth created ? What is the source of wealth ? How do the
I wrote:
if wealth refers to exchange-value, financiers do not create it
(according to Marxian political economy). All they do is transfer
property rights from one person to another, rather than creating new
exchange-value -- or surplus-value. The financiers are able to slice
off a piece of the
On 3/23/07, Jim Devine [EMAIL PROTECTED] wrote:
...we will need investment planning to serve the
democratically-decided public interest rather than the individual
greed-driven capitalist interest as we see it now.
For David Shemano:
This is why I concern myself with things like banks and
speaking as one ...
what do we do? financiers contribute to wealth creation, a bit. We help
provide liquidity to people who have investments (which are of necessity in
long-term projects) but who want the cash now. We also provide consulting
services to people wanting to carry out corporate
Charles Brown writes:
This is not a new topic, but it seems to me pertinent to progressive
economics to continue to ask dialectical questions like:
How is wealth created ? What is the source of wealth ? How do the activities
of financiers contribute to wealth creation ? Or do they ?
We
On Mar 23, 2007, at 1:25 PM, Daniel Davies wrote:
I would probably still do it though because it is fun.
In Frank Partnoy's FIASCO, he recounts asking his colleagues in the
derivatives-selling business if they'd do the work if it weren't so
well-paid. Unanimously they said no. One said he'd
Daniel, you are so old fashion. I read on the front page of the New York Times
business section how the sub prime market had automated software to determine
the
riskiness of loans. They could do it in a matter of seconds. Can you work that
fast?
--
Michael Perelman
Economics Department
On 3/23/07, Charles Brown [EMAIL PROTECTED] wrote:
We have to challenge the legitimacy , the generally accepted notion , that
it is appropriate to compensate hedge funders, for example, on the scale
that they are compensated for their activities.
When you say hedge-funders I assume you mean
On 3/23/07, David B. Shemano [EMAIL PROTECTED] wrote:
Precisely because all economic activity is inherently speculative and
risky, the decision to allocate capital to an economic activity (as opposed
to any other activity) is a critical component of the economic process. The
financier, by
David B. Shemano wrote:
I am sure I am going to butcher this and repeat arguments that you believe were refuted 100
years ago, but here goes. I disdain the labor theory of value for the reason stated by
Whately: it is not that pearls fetch a high price because men have dived for them, but
on
Without debating whether Archbishop Whately was correct or not,
economics is very selective about its use of subjectivity. Where is
the subjectivity of the pearl divers or any other labor? When Jevons
began experimenting with the physiological nature of fatigue, the
Austrian economists denounced
Raghu writes:
David,
The biggest difficulty answering this argument (as with most free-market econ
arguments) is that there is a grain of truth in it. The financier does
sometimes perform this role of taking risks and supporting entrepreneurial
activities that have promise. Perhaps the venture
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