This is a reply to an article by David Corn about Alan Greenspan testifying before a Congressional Committee about his role in the “financial crisis”.
The basic assumption of the “self-regulating market” ideology is, that bad products will be driven out because
“It is in the self-interest of every businessman to have a reputation for honest dealings and a quality product.”
But this is only valid if the buyer has ACCURATE INFORMATION about the quality, (long term) consequences of buying / using the products and the real intentions of the seller. Only if the participants have access to the same information, will there be any chance of an informed judgement by the “market”. In this context it is no surprise, that the PR-industry is booming…..
In the case of Wall Street this assumption is absolutely laughable: hedge funds and other derivative and commodity traders are gambling with the livelihoods of other people: whether they bet on the prices of food, energy or the risk of default, the very essence of the game is to deceive and to manipulate, to drive prices down or up, whatever is profitable for the moment. The long term consequences for farmers, consumers and society as a whole did not bother them. They played a combination of poker, charade and a pyramid scheme.. always trying to find a new sucker they could cheat on… pity, that in the end, they screwed each other.
So it is hilarious to hear politicians lament “the loss of confidence” in the banking industry which they seek to restore by handing out trillions to professional con-men….. Let´s rescue the swindlers because they are “too big too fail” – and create even bigger financial conglomerates in the process! How stupid can you get? (We need to break up the financial supermarkets and separate commercial from investment banking and insurance companies as Roosevelt did with the Glass-Steagall Act.
Hey, let´s commit the ultimate blasphemy and ask why banking is not a public service? Why do banks have to be private businesses? Why go on being slaves of a system of perpetual debt? Why not curtail interest rates for productive loans and mortgages (for family homes)? Why not stop the debt trap for developing countries by providing alternative loans with very little or no interest at all? (just paying back the principal and a small adminstrative fee – the real return for society would be that more capital for infrastructure, housing, health care and education would be available; instead of giving “aid” we could give them self-determination for a change … Is this just a fantasy?
If a trader can make millions in a few hours, days or weeks – why should he care about his “reputation”? Yes, an important factor for moral behaviour is the acceptance and respect of our fellow citizens but in this environment, “respect” and recognition increases with your ability to create huge profits out of thin air, basically by cheating others. The more opaque and less accountable to the public a business becomes, the smaller is the incentive for the players to behave “morally” or responsibly. In the long run investment bankers, hedge fund managers and the like seem to live in a parallel universe and they have even managed to create their own black hole! (which absorbs all the “market efficiency” Greenspan was talking about..)
In the end “making money” (with no real productive value behind it) becomes an obsession and every new record profit by the other trader is an incentive to strive for more….
This is no support for the attempt to biologize the problem ( “greed” as part of human nature, there we go again…) but proof of Erich Fromm`s assessment that in order to function and expand, the capitalistic economic system must fuel greed and selfishness until finally “economic behaviour” became separated from ethics and human values. The total victory of the economic machine, which was supposed to run according to its own laws was only a matter of time.
E. F. Schumacher wrote in his classic “Small is Beautiful“ that capitalism is doomed to fail because it contains no limiting principle…..The “growth” and profits are never enough… so people and the environment have to be exploited more and more .. until the system collapses.
Greenspan (who was called an idiot in the online forum) is only an idiot in the sense that all classic economists are idiots because they are blinded by ideology and, totally ignoring environmental imperatives, promote an economic system that is incompatible with nature´s laws and human well-being. A system that has to grow incessantly in order to function is self-destructive (like a cancer grows until it kills the host organism).
He pumped all that cheap money into the derivatives system because otherwise the ongoing decline (depression?) of the US economy would have been obvious years ago, so creating speculative bubbles was all that was left to boost “growth” rates and maintain the illusion that the US is still the “engine” of the global economy (only with Wall Street betting and military expenditure). From his (and his cronies) point of view they did the right thing because the top 1% of Americans did extremely well and the top 20% now own 85% of the national wealth…. Perhaps some of them have lost a couple of zillions lately, so what? Paulsen´s rescue money may find its way to their pockets, who knows?
The majority of US-citizens though, must be content with higher debt (substituting higher income) and greater “volatility” (insecurity) as these factors are symptomatic for the current “financial system”.
The ugly truth is exposed here: What the hell is going on?
Final words must go to MILTON FRIEDMAN – the godfather of free markets –
“If I’m going to do good with other peoples’ money, I first have to take it away from them. That means, that the welfare state philosophy of doing good with other peoples’ money (…) is a philosophy of violence and corrosion. It’s against freedom, because I have to use force to get the money. In the second place, very few people spend other peoples’ money as carefully as they spend their own.”
(He meant social welfare of course, corporate and banking welfare is of course OK….)
and a Canadian Prime Minister:
“Until the control for the issue of currency and credit is restored to government
And recognized as its most conspicous and sacred responsibility,
All talk of sovereignity of parliament and democracy is idle and futile.
Once a nation parts with control of its credit, it matters not who makes the nation`s laws,
Usury once in control will wreck any nation.”
William L. M. King, fmr. Prime Minister of Canada (who nationalized the Bank of Canada)
Source: Money as Debt