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First came Jim Cramer's incoherent rant on the hedge fund/Wall Street meltdown, then came Bill Gross's semi-coherent plea to POTUS for a federal bailout of his struggling PIMCO bond funds the overleveraged U.S. homedebtor. Given that these are two of the most vocal and public commentators in the sphere of media finance/capitalism, it seems fair to ask: are these men true capitalists?
Now, I am not one to lecture others on the tenets and/or history of capitalism. I was studying literature and journalism, while many of the regulars on this board were immersed in B-school. Nonetheless, given my limited exposure to macro/micro economics, I vaguely remember a lecture or two about the virtues of creative destruction (i.e., the healthy, natural market process whereby businesses that are poorly run and/or engage in excessive risk tend to go out of business). I also recall a cautionary tale or two about the moral hazards created when government attempt to impede this necessary process. It's been a long time since macro-econ 101, but I distinctly recall Adam Smith saying something about an invisible hand that rewards good financial risk management and penalizes poor risk management, and that this was a *good* thing --not a bad thing, as Mr. Cramer and Mr. Gross both seem to think.
This begs the question: if capitalism is *only* allowed to work freely in ONE DIRECTION (up), is this really capitalism? If the people who habitually make poor financial decisions are always bailed out by those who did not, what sort of behavior does this encourage in the future? Are these Wall Street "Masters of the Universe" who are clamoring for a taxpayer/Fed bailout really capitalists, or something else?
I leave you to ponder this along with one of my personal all-time favorite truisms:
PRIVATIZE PROFIT, SOCIALIZE RISK
Discuss, enjoy...
HARM
P.S., kudos to Jim Grant for his excellent Op-Ed in the Sunday NYT: "capitalism without financial failure is not capitalism at all, but a kind of socialism for the rich".
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HARM's website
The 'news' coming out of DinOR country is a little different, though:
Local broker: Market here ‘alive and well’
Lessons for today: Get rid of the shag carpet and stop thinking the national news about housing markets applies to this side of the country.
First, take a look at national headlines. They’ll scream, “Is the housing market getting worse?” or “Has the housing market bottomed out?”
Maybe it has everywhere else but not in Oregon — and definitely not in Portland or its surrounding communities, including Tigard, Tualatin and Beaverton, according to local agents.
The trouble seems to be that not very many people realize this.
“What’s going on nationally is not necessarily relevant to the local market,” said Brian Bellairs, principle broker at Meadows Group.
Thank God for those valiant professionals at the Tigard Times, tirelessly toiling to clear up common misperceptions, like the national credit crunch affecting the oh-so-special and local OR markets. Especially nice the way they rely on those industry 'professionals' for unchallenged and unsubstantiated opinions. Never mind those Gloom-n-Doomers at the WSJ or NYT, corporate journalism and perma-bullishness is alive and well in Tigard!
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All of this is beyond my comprehension.
The government already guarantees student loans. Should they also explicitly guarantee all GSE mortgages? If so, I'll bet it won't be long before deficiencies on GSE mortgages are nondischargeable in bankruptcy and the government will aggressively pursue homedebtors in foreclosure. Be careful what you wish for, FBs.
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This begs the question: if capitalism is *only* allowed to work freely in ONE DIRECTION (up), is this really capitalism?
In a word, NO.
However, "real" capitalism is also incompatible with democracy.
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"Bill Gross's semi-coherent plea"
Man, ain't THAT the truth! Although not nearly as pyrotechnic as Cramerica's meltdown, it was equally unhinged. It all but assured there will be no cooperation from Washington. You can't just go around using the most derogatory term you can get your hands on, shout it from the roof tops and then expect to gain favor with same said person?
At least... "I've" never had much luck with it.
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We don't call him Helicopter Ben anymore. We call him B52 Ben. That much is going to be dropped to save the banks, funds, GSEs that will go under in coming days...
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HARM's website
Some modestly good news for Randall & Co:
Marin can't shake fallout from mortgage meltdown
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Los Altos, CA
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Randy's Theory of Capitalism and Free Markets (condensed version):
Nearly everyone living in a democratic, free market capitalism hates it. What they enjoy is the spoils of capitalism and the efficiencies of the free market. But when that system demands changes or concessions on their part, they are socialists to the bone.
The above is true irrespective of political ideology. It makes no difference whether one is a so called liberal or conservative. Even self proclaimed libertarians most often turn out to be socialists at heart.
And the more one relies upon free markets as either a god or a devil, the more likely they are to be socialists, usually without even knowing it. And certainly without ever admitting it.
Listen carefully to those who shout most loudly on either extreme. The practical ramifications of their rhetoric is almost exclusively socialistic in nature.
It's easy to pick on Ayn, but this is one area in which she had the contemporary body politic nailed.
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HARM,
Too funny! One of the comments from "Leo" ( just above your's ) was spot on as well. He noted that this "feel good" piece had all the ear markings of other market's sentiment 6-12 months ago! He's right, we're just late to the "party".
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Los Altos, CA
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Marin can’t shake fallout from mortgage meltdown
Funny funny funny. A realtor(tm) from a house I looked at months ago just called Sunday and told me that XXX had been reduced on final time -- yes for a big whopping 0.875% -- and that this is your last chance to buy it before they take it off the market for good!
So now it's "buy now or be locked out forever because the seller won't sell to you, mister mean, cheap, greedy buyer".
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Did you ever wonder why the NYSE has "curbs" when it goes down but not when it goes up? And isn't That the same Jim Cramer who was just recently on you-tube going on about how easy it is to manipulate the market?
Mr. Newsfreak
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Hampton, VA
But when that system demands changes or concessions on their part, they are socialists to the bone."
Capitalist with my money, Socialist with yours
Build mass transit for others to use, freeing up he roads for me
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Curbs go both directions, up and down. They limit program trading volatility.
Program Trading "Collars"
A collar on program trading firms instituted by the NYSE is most commonly referred to on CNBC as "curbs in". The NYSE applies program trading curbs whenever the NYSE Composite Index (NYA) moves 190 points higher, or 190 points lower than the previous day's closing price.
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Are these Wall Street “Masters of the Universe” who are clamoring for a taxpayer/Fed bailout really capitalists, or something else?
Ponziconomists (tm)
SP
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Randy H Says:
Curbs go both directions, up and down. They limit program trading volatility.
And IIRC, the upside trading curbs did go into force for a while on the day of the cut in discount rate.
SP
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HARM,
Great thread topic. I think Randy H has it pinned down - when push comes to shove, we all look to Uncle Sam for a bailout. It's human nature. When you can't handle the pressure, you ask mommy or daddy for help.
IMO, the only real way to create a true capitalistic society, or for starters, one that at least has some semblance of free market principles, is to seal off the deciders from the masses. That means the HF managers, IB CEOs and what not have no direct line to Bendover Ben and pals. Of course this is impractical, but on the other hand, it doesn't help when Hank Paulson is the ex-CEO of Goldman Sachs. I'm sure HE's not influenced by his Wall Street pals...
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Curbs go both directions, up and down. They limit program trading volatility.
I thought delta-hedging is no longer fashionable...
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A true capitalist society is as rare as a true communist society. None of these ideologies are truly compatible with human nature.
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GammaRaze's website
To me, the difference has always been about one thing and one thing only: Force (or coercion).
A truly free person (capitalist, if you will) will detest force. Everything is voluntary. You have a service to offer or goods to sell; the buyer either wants that or not.
A socialist, on the other hand, uses force and feels that is the solution to problems. Take someone;s money away by force and use it to "solve problems".
Imagine if the federal government didn't have the authority to do all that coercion.
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Scene: ['World' News show on local telly]
Bryan, The Personal Finance Reporter: "And so, at this point, the direction of the stock market depends on whether the expectation of a rate cut in September will turn out to be real."
Katherine, the talking mannequin: "Well, thank you Bryan - let's certainly hope for the best, come September."
WTF? Has the notion of stocks going up all the time become such an article of faith that news-anchors are now openly rooting for it as "the best" outcome no matter what?
SP
[Not their real names, I didn't care to figure out what they were.]
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Katherine and Bryan have side businesses as Realtors. :)