At the most fundamental level, what makes capitalism work is trust. When a lender provides capital to a borrower he trusts that the borrower will repay the debt. Now a days, the lender takes out an insurance policy (credit default swap) to guaranty the payment of the debt from a well-capitalized and trustworthy middleman.
On the black day when all the borrowers and the insurance providers are all seen to be untrustworthy, capitalism fails and the flow of capital stops; the economy no longer exists. What saved the day in 2008 was the US government. It became the insurer of last resort and guarantied payment of all debt throughout the world, all 100 trillion dollars’ worth. To make a political point, the tea party wanted to destroy the power of the US government to do this function. They wanted the US to default on its debt. The tea party will do so again if they get the chance. The tea party really wants to destroy the foundation of capitalism which is the perpetuation of global financial trust and the ability of the US government to supply trust in world capitalism. Cheers: Axil On Wed, Jul 25, 2012 at 2:10 PM, Jed Rothwell <jedrothw...@gmail.com> wrote: > Chemical Engineer <cheme...@gmail.com> wrote: > > "They seem like smart, good people who accidentally brought about a >> disaster" >> >> They did it to make more money for themselves and the bank. >> > > Well, not everyone in the story was a banker. Some were government > officials. Paulson was an official who had been an investment banker. I get > the impression he was an honest banker. He quit and sold his shares in > Goldman before he became an official. > > I am not excusing these people. I want to know how this happened. Why it > happened. Greed and stupidity are the cause, but people have always been > greedy and stupid, yet Wall Street seldom collapses catastrophically > because of it. These explanations are not sufficient; there has to be more. > I say the institution itself was dysfunctional. Paulson and the others were > in over their heads. They did not realize how little they knew. They did > not realize things were out of control. > > > >> They were obviously ignorant to risk they created for everyone and we >> are all still paying for it and will be for years to come. For that, they >> should have resigned, been fired or at a minimum demoted. >> > > Many have been fired. Many lost their own money. One of the main > characters in the movie, Fuld of Lehman Brothers, had shares of Lehman > worth about $1 billion. When Lehman declared bankruptcy his shares were > worth $58,000. > > Others made out like bandits, unfortunately. > > I favor punishing the guilty, but we also need to find the root caused > that allowed bad actors and fools to bring about the catastrophe in the > first place. The same goes for every disaster, such as Fukushima and the > wreck of the Titanic. On April 15, 1912 everyone in the world knew who was > directly responsible for the Titanic disaster: Capt. Smith and his > officers. But it went beyond that. The causes were deeper. People needed to > reveal the causes and take steps to prevent this from happening again. That > took a Congressional Investigation and many reforms and new regulations. > Mainly, it took Sen. William Alden Smith, without whom the dead would have > died in vain. There would have been many more preventable shipwrecks > without him. > > We need someone like that to clean up Wall Street. Unfortunately, all > efforts to do so have been blocked by the bankers and the Republican Party. > They seem determined to cause another disaster. That is predictable. In > 1912, the shipping interests made a tremendous effort to stop Smith from > investigating and reforming their industry. They attacked him the > newspapers. To this day, many accounts of the Titanic disaster portray him > as a fool and useless person who accomplished nothing. No good deed goes > unpunished! > > See: > > http://www.lenr-canr.org/acrobat/RothwellJcoldfusion.pdf > > - Jed > >
