"... On Feb 5, 4:04 pm, archytas <[email protected]> wrote: ..."
> I wish we could look deeper into the structures that have brought > about this mess. I like the idea of small and local-global for most > things as I don't cotton to the idea that whizz-kids know much other > than how to use and hide insider information. Obama was sliming up to > the ghastly Blair yesterday and this makes me wonder whether he just > has a sharp eye to what sounds good rather than policies. Capitalism > readjusts itself as a rule and I think this will be the problem - the > same old stuff will emerge again when we really need deeper change > towards more justice in law and reward. I think we can and have looked deeper into the current economic crisis and I think it scares the hell out of us but that's no reason for any of us to go into mental and spiritual rigor mortis over it. >From the bottom up, fear and greed are the altogether underlying causes of the current situation. It helps to remember that greed is but one of the bastard children of fear. It started with the housing market, as it generally seems to -- we have more bubble/bust cycles in real estate than in all the rest of business and industry combined. Perhaps that is because land is the primary and underlying foundation of what we consider to be wealth, leading us to value and over-value it more than is meet and proper. Of course it doesn't help that real estate salespeople are held in little more esteem than used car salespeople which fosters the attitude that since they have the name they might as well play the game. In any case, real estate blossomed into another bubble that led to the greatest over-valuation of property that this nation has ever seen. This mess was made worse by an out of touch administration that set loose the dogs of greed and the dogs of war by reducing or eliminating virtually all controls over the market. Then the banks and mortgage houses got in on the bubble by giving overvalued mortgages under obscene terms to people who could not be expected to pay them off. The people who are now in foreclosure or close too it are screaming but most of them knew or should have known they were in over their heads and should have stopped. But a large number of them figured, what the hell, I'll flip this property in two years at a handsome profit given the current rate of appreciation, so I don't care if the mortgage balloons to an outragous rate. The problem began to come to the surface about two years ago when the appreciation rate began to fall, then the bottom fell out of it last September. A lot of people got into the market early on in the boom and wound up taking their profits early and walking while the walking was good. It's sort of like the initial investors in a ponzi scheme -- they are the only ones who will realize any profit or return on their investment and that profit will be paid for by those who are the losers on the end run. The ones who got into the market in the last two years have virtually lost everything. The bigger problem is that as the real estate market went bust it fell so low that it took a lot of very solid homeowners with it -- people who did not really deserve to lose. But also early on the banks and mortgage companies, seeing this huge influx of money and growth, packaged these overvalued mortgages into more and more complex investment packages which were then sold repackaged and resold over and over to other banks and investment houses on thinner and thinner margins until those investments were so complex and so leveraged that no one could figure out who owned what and how much any of it was really worth. These comprise what are currently referred to as toxic assets And these toxic assets are the problem the banks have to deal with today. There are so many of these overvalued assets on their books that they have no idea whether they are insolvent (bankrupt) or not and are holding on to every dime they get from any source including the bailout funds. This is also why everyone is talking about needing to fund the banks with additional trillions more dollars. Without banks the country has no liquidity and that more than anything else can bring about ruin. No one likes bankers -- probably not even other bankers -- but they are necessary to a functioning economy whether we like it or not. Capitalism is the process whereby capital is invested to create profits. Every one who owns a share of anything in this country is a capitalist. It is also true that a capitalist free market does get out of balance from time to time -- either via over-valuing or under- valuing assets by different means but mostly by debt exceeding the necessary growth to pay the interest and reduce the principle on that debt. Debt is a fine tool to be used with a steady hand to make the economy grow, but again, where it gets out of balance with an economy's ability to grow fast enough to service the debt and principle the waters get troubled. And unfortunately when the waters get troubled people's fears are magnified and greed becomes even more prevalent. This is where we are right now. But there is a bigger problem to deal with, though not an insurmountable one. Basically no one ever envisioned a global economy such as we have today. Many call it Pandora's box but maybe Pandora's not such a nasty bitch after all. Time will tell but what we have is not only a new ballgame, but a whole new game entirely and we are unsure of the degree and sort of rules necessary to ensure against greed and corruption without choking the economy to death. We know people become afraid and react greedily but how do we protect ourselves, our society, and our economy from that greed and corruption without creating a stringently and tightly controlled environment that does not permit any growth at all. It is true, as Geithner said the other day -- the same day Wall Street and other markets took a nosedive on the news -- that we are in uncharted waters and need to proceed with both care and daring -- a difficult trick at best. But the numbers can help give the confidence needed. Global wealth -- assets if you will -- is estimated to be around $140 trillion with the U.S. owning the largest share at approximately $48 trillion. Notwithstanding the current situation, the global annual GDP (the value of all goods and services) is around $48 trillion, which accounts for a certain amount of growth in global assets each year. The U.S. adds approximately $12 trillion a year to that. In both assets and GDP we still lead the world by a wide margin. Check out http://bigpicture.typepad.com/comments/2007/01/worlds_assets_h.html for a more detailed graphic on these numbers. But the essence of this situation is that it is entirely of human creation. Nature did not force an economy on us. Were we satisfied to live as the rest of the animal kingdom lives, we'd never have to face anything worse than a natural disaster. But we have created this world in which we function. It is all our own doing. We write the rules and arbitrate the outcomes. Basically we got ourselves into this mess and given our history, I've little doubt we'll get ourselves out of it and be the better for it. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""Minds Eye"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/Minds-Eye?hl=en -~----------~----~----~----~------~----~------~--~---
