Tuesday, September 16, 2008

They feel our pain. In fact, they're doing an LBO on it.

A few readers have inquired as to what would've motivated me to "abandon [my] unique niche" in cyberspace, as one emailer put it, in order to preside over "just another political blog," to quote a second emailer. First of all, long-time readers know that I've always reserved the right to comment on this and that; even back in the days when I was hard-core into the SHAMscape, I found time to dabble in matters of sports, music, pop culture, etc. But I guess my fascinationobsession?with the current political season has to do with the subhead of this blog, especially the part about "scams" and "shames." I don't think there's anything in life that bugs me quite as much as an insult to my intelligence. And when it happens over and over, day after day, I get angry and want to punch walls, which isn't a very good idea, since I work in an unfinished basement and the walls are concrete.

That brings me to something Bill Maher said during one of his opening monologues early last year. He wondered what the Republicans could possibly run on, this time around. "I mean, what are they gonna say?" he mused sarcastically. "'Four more years!'?" As it turned out, of course, Maher gravely misunderestimated the GOP. Watching the usual procession of negative ads during dinner yesterday, I realized that Maher didn't give the Republicans enough credit for imagination (while at the same time he apparently gave the American public way too much credit for insight). More specifically, what Maher did not foresee was that the GOP would try to position itself as the real party of change in 2008. He did not foresee that the McCain camp would actually run ads—not SNL-like parodies, mind you, but serious political adsthat describe Barack Obama, of all people, as "more of the same."

Barack Obama is more of the same.

Is it just me...or isn't that a little bit like, well, if Obama ran ads that characterized McCain as an unpatriotic black draft-dodger who's way too young for the job, and who wants to give your hard-earned money to the Panthers?

All of which is a long way of explaining why, this morning, as the nation weathers a succession of economic upheavals at a scale that probably hasn't been seen since the Great Depression, I wasn't even that shocked to hear John McCain tell GMA's Chris Cuomo that American workers have been "betrayed by a casino on Wall Street of greedy, corrupt excess
corruption and excess that has damaged them and their futures." The man said this exactly as if he weren't the candidate of the "house" party, which is to say, the folks running that casino; the party whose central tenet is the motivating power of unchecked self-interest.

I guess the only thing that did surprise me was that McCain didn't find some way of blaming the whole thing on community organizers.


Oh, by the way: Bush this morning declared himself "confident" that we're going to pull out of this in fine shape. So relax. We have nothing to worry about. George Bush is confident. Just as he's been confident about any number of things, notably including the war in Iraq.

See what I mean about expressions of optimism? How easy it is to throw the words around? And how little they mean, when you come right down to it...?


Finally: LBO = leveraged buyout. The concept has fallen out of a favor a bit since the real heyday of junk bonds and KKR, but LBOs remain a symbol of questionable investment financing for the wheeler-dealer set.


Anonymous said...

It's funny to hear McCain, a Republican who does not even know how many houses he owns (10), blame our problems on the "greedy excesses" (of Republicans).

Cal said...

I believe the new acronyms are CDO, CDS, CMBS, and MBS among others. The new wheeler-dealers are hedge funds and private equity.

I wonder who will play the Mike Milken role this time around. Which one of the heads of Fannie Mae, Freddie Mac, Lehman, or AIG (if they don't get bailed out) will be prosecuted? And it looks the Big 3 Auto companies need a bailout too.

The prosecutors and the public will get worked up to put someone in jail. Then the subject will go away until the next crisis, which is probably around ten years away if history continues to "rhyme" (crash of '87, Asian contagion in '97, Long-Term capital bailout in '98).

But that's capitalism...the tug of war between fear and greed.

Citizen Deux said...

Steve, good article. However, the ease of balming the administration for the success of the economy is a bit like blaming global warming on leaving your car heater running. There is some impact, but no administration has had much effect (since FDR) on the economy as it continues to ratchet away on its own.

Finally, the term LBO is still very much alive and well. The BoA / Merrill deal (for example) is heavily funded with debt, although not Merrill's own assets. Many of the best deals are still done with buyout programs, although much stronger covenants.

Mike Cane said...

Oh, NOW you're catching on to a wee bit of the economic meltdown you disbelieved me telling you about months ago? (No, I don't forget; and yes, I can be a vindictive bleep this way!).

Look, stop getting overwrought over nothing. By November, things will be SO CLEARLY BAD economically, it will be the overall factor in the election.

Did you know, for instance, that Bear Stearns was holding up to THIRTEEN TRILLION dollars in debt? Or that Lehman fell with over SIX HUNDRED BILLION in debt?

Since early this year, $1-2 *trillion* has been talked about as the meltdown. It's been growing ever since.

Relax. McCain could well drop dead of a cardiac just from increasing news like this. (And oh yes, there's much more coming!)

To get back on point: I'm surprised you haven't mentioned the SNL skit, since it CLEARLY had SHAM elements in it. Maybe you didn't see it? Nikki has it.

Anonymous said...

Don't get me started on the economy. I feel like Cassandra of Troy. The economy has been on my mind and many economists' minds for quite awhile. Everyone kept saying "tomorrow will never come." Tomorrow is here. We are just at the tip of Another Great Depression. I wonder what historians will call this one? Great World Depression or Great Depression 2? This Depression is even worse, because it is global. It will not just affect the U.S., but the world. China is posed to end up on top.

Steve Salerno said...

Mike: I disbelieved you about the prospect of a looming meltdown? Or I disbelieved the fact that European journalists were somehow more "trenchant" in their analyses than our own? I don't recall it quite the way you describe it--i.e., making me out to be some kind of naif--but if you can show me where I went wrong, I'll be happy to admit my error.

My gripe is with the so-called "prognosticators" who've been telling us for a while now that the market (the Dow) is going to bottom out at 5000 or so. Look, there are always people who find oddball reasons for forecasting total disaster, just as there are people who keep telling us the world is ending on August 10...and then when that date passes uneventfully, they recalculate and say, Wait, I actually meant September 25, according to the Hopi calendar... Even Jeane Dixon is right now and then. It's easy for a blind man to throw darts at a wall, then claim to be an expert player when he accidentally hits a few bull's-eyes. ;)

Let's face it, if all of these wonderfully insightful analysts and prognosticators had the courage of their convictions, they would've been selling short or furiously trading in futures in their own accounts; the market itself tells us that very few of them were doing that.

Anonymous said...

Doesn't matter if McCain or Obama reside in the White House, we (Americans) will be paying for the buy outs. When the government takes over these institutions, that means taxpayers (us) will be footing the bill. How can McCain act as if we are so stupid as not to know this? Is the general public so dense as to not know we are footing the bill with either canidate?

I disagree with Citizen Deux on the administration's involvement with the economy. The government is involved when it gets into bail outs as Bear Stearns and whoever else is coming down the pipe.

Mike Cane said...

>>>Or I disbelieved the fact that European journalists were somehow more "trenchant" in their analyses than our own?

Touche. You are de-misremembering properly.

But they *are*!

(As for selling short, who knows? Maybe they have! Although that'd be a real conflict of interest.)

Now off to that infamous McCain thread here to pour some gasoline on it with two links I think you'll like.

Stever Robbins said...

The trends in subprime mortgages were obvious enough that even I noticed it two years ago after reading a newspaper article about Wells Fargo's record quarter. I blogged about how a simple first-year-accounting reading of the article showed that mortgages were headed for trouble.

Warren Buffett and his partner Charlie Munger have been warning for years in Berkshire Hathaway's annual Chairman's Letter that the derivatives and repackaging of risk was headed for a meltdown. Given that Buffett's the richest man in the world and got that way through finance, I tend to hold the various banks and institutions involved extra-responsible. (If someone less credible had been issuing the warnings, maybe they could be excused, but Buffett's as credible as they come.)

In summary: a finance neophyte could tell real-estate was in trouble, and the world's richest man sounded the warnings about the complex derivatives and repackaging thereof for years. Why anyone in the finance community is at all surprised by this is way, way beyond me.

Stever Robbins said...

... by the way, regarding Dems vs. Repubs: "tax and spend" (Dems) is at least more honest than "borrow and spend." (Repubs)

When you tax and spend, you feel the pain immediately. So you can immediately decide if the tradeoff is worth it.

Borrow and spend is much, much worse. It lets you get used to a higher standard of living than you can afford. And on top of that, "borrow and spend" increases next year's budget by the interest on the accumulated debt.

Since 1982, we've accumulated seven trillion dollars in debt by borrowing and spending (virtually all under Reagan, Bush I, and Bush II). Now, 9% of each tax dollar every year goes to pay interest on that debt (source: budget report). So when the Repubs cry "Tax cuts!!" all I can think is: "yeah, right. And even MORE of each dollar next year will be going to pay off last year's foolish expenditures."

The problem is the "and spend" part of both parties. Dems spend on social programs. Repubs spend on the military. Both spend on Medicare and Social Security. Since it's pretty clear spending is going on no matter what, I'd rather see the money spent on programs that help me live a comfy life (e.g. six weeks' maternity leave and/or child care for new mothers) than on war.

(For the record, we live in the safest country in the history of the world. Bordered on both sides by oceans, and by Canada and Mexico elsewhere. We've had only two successful terrorist attacks on our soil in history, one by Timothy McVeigh, our own citizen. Yet a surprising number of Americans believe we must spend a trillion dollars a year on defense to be safe. Sigh.)

Anonymous said...

"In summary: a finance neophyte could tell real-estate was in trouble, and the world's richest man sounded the warnings about the complex derivatives and repackaging thereof for years. Why anyone in the finance community is at all surprised by this is way, way beyond me."

Stever, it wasn't that they didn't know the meltdown was coming, they were hoping it would not happen on their watch. It was musical chairs. Make the money and run mentality. Also, the EURO is posed to take-over the dollar as the world's currency. The EURO was created just for that. Since the gold standard was taken away, there has been no trust in the current currency and less in the dollar. Hasn't everyone been noticing the gold ads on TV? They are popping up for a reason. Yes, America is still the safest country in the world. Mostly due to our geography. America never had a standing military before WWII by the way.

Anonymous said...

Mr. Salerno:

Wall Street brokerage houses are run by democrats, not republicans. What one US senator received the most money from Fannie Mae and Freddie Mac and their executives? That would be the junior Senator from IL - Sen Obama.
The democrats get their money from Wall Street, Hollywood, Labor unions and trial lawyers.
The republicans get their financing from defense contractors, agriculture, non-union industry (companies that outsource), and petrochemical companies.

The republicans can't run on their record - so they have to run against congress. The democrats can't run on their record, so they have to run against Bush.

Anonymous said...

"We've had only two successful terrorist attacks on our soil in history, one by Timothy McVeigh, our own citizen. Yet a surprising number of Americans believe we must spend a trillion dollars a year on defense to be safe. Sigh."

Please read on, and tally up the number of dead people, including Americans. They read like "successful terrorist attacks" to me.
Is it possible to remain that myopic?

Nov. 4, Tehran, Iran: Iranian radical students seized the U.S. embassy, taking 66 hostages. 14 were later released. The remaining 52 were freed after 444 days on the day of President Reagan's inauguration.

Lebanon: Thirty US and other Western hostages kidnapped in Lebanon by Hezbollah. Some were killed, some died in captivity, and some were eventually released. Terry Anderson was held for 2,454 days.

April 18, Beirut, Lebanon: U.S. embassy destroyed in suicide car-bomb attack; 63 dead, including 17 Americans. The Islamic Jihad claimed responsibility.
Oct. 23, Beirut, Lebanon: Shiite suicide bombers exploded truck near U.S. military barracks at Beirut airport, killing 241 marines. Minutes later a second bomb killed 58 French paratroopers in their barracks in West Beirut.
Dec. 12, Kuwait City, Kuwait: Shiite truck bombers attacked the U.S. embassy and other targets, killing 5 and injuring 80.

Sept. 20, east Beirut, Lebanon: truck bomb exploded outside the U.S. embassy annex, killing 24, including 2 U.S. military.
Dec. 3, Beirut, Lebanon: Kuwait Airways Flight 221, from Kuwait to Pakistan, hijacked and diverted to Tehran. 2 Americans killed.
April 12, Madrid, Spain: Bombing at restaurant frequented by U.S. soldiers, killed 18 Spaniards and injured 82.
June 14, Beirut, Lebanon: TWA Flight 847 en route from Athens to Rome hijacked to Beirut by Hezbollah terrorists and held for 17 days. A U.S. Navy diver executed.
Oct. 7, Mediterranean Sea: gunmen attack Italian cruise ship, Achille Lauro. One U.S. tourist killed. Hijacking linked to Libya.
Dec. 18, Rome, Italy, and Vienna, Austria: airports in Rome and Vienna were bombed, killing 20 people, 5 of whom were Americans. Bombing linked to Libya.

April 2, Athens, Greece:A bomb exploded aboard TWA flight 840 en route from Rome to Athens, killing 4 Americans and injuring 9.
April 5, West Berlin, Germany: Libyans bombed a disco frequented by U.S. servicemen, killing 2 and injuring hundreds.

Dec. 21, Lockerbie, Scotland: N.Y.-bound Pan-Am Boeing 747 exploded in flight from a terrorist bomb and crashed into Scottish village, killing all 259 aboard and 11 on the ground. Passengers included 35 Syracuse University students and many U.S. military personnel. Libya formally admitted responsibility 15 years later (Aug. 2003) and offered $2.7 billion compensation to victims' families.

Feb. 26, New York City: bomb exploded in basement garage of World Trade Center, killing 6 and injuring at least 1,040 others. In 1995, militant Islamist Sheik Omar Abdel Rahman and 9 others were convicted of conspiracy charges, and in 1998, Ramzi Yousef, believed to have been the mastermind, was convicted of the bombing. Al-Qaeda involvement is suspected.

April 19, Oklahoma City: car bomb exploded outside federal office building, collapsing wall and floors. 168 people were killed, including 19 children and 1 person who died in rescue effort. Over 220 buildings sustained damage. Timothy McVeigh and Terry Nichols later convicted in the antigovernment plot to avenge the Branch Davidian standoff in Waco, Tex., exactly 2 years earlier.
Nov. 13, Riyadh, Saudi Arabia: car bomb exploded at U.S. military headquarters, killing 5 U.S. military servicemen.

June 25, Dhahran, Saudi Arabia: truck bomb exploded outside Khobar Towers military complex, killing 19 American servicemen and injuring hundreds of others. 13 Saudis and a Lebanese, all alleged members of Islamic militant group Hezbollah, were indicted on charges relating to the attack in June 2001.

Aug. 7, Nairobi, Kenya, and Dar es Salaam, Tanzania: truck bombs exploded almost simultaneously near 2 U.S. embassies, killing 224 (213 in Kenya and 11 in Tanzania) and injuring about 4,500. 4 men connected with al-Qaeda 2 of whom had received training at al-Qaeda camps inside Afghanistan, were convicted of the killings in May 2001 and later sentenced to life in prison. A federal grand jury had indicted 22 men in connection with the attacks, including Saudi dissident Osama bin Laden, who remained at large.

Oct. 12, Aden, Yemen: U.S. Navy destroyer USS Cole heavily damaged when a small boat loaded with explosives blew up alongside it. 17 sailors killed. Linked to Osama bin Laden, or members of al-Qaeda terrorist network.

Sept. 11, New York City, Arlington, Va., and Shanksville, Pa.: hijackers crashed 2 commercial jets into twin towers of World Trade Center; 2 more hijacked jets were crashed into the Pentagon and a field in rural Pa. Total dead and missing numbered 2,992: 2,749 in New York City, 184 at the Pentagon, 40 in Pa., and 19 hijackers. Islamic al-Qaeda terrorist group blamed.

June 14, Karachi, Pakistan: bomb explodes outside American consulate in Karachi, Pakistan, killing 12. Linked to al-Qaeda.

May 12, Riyadh, Saudi Arabia: suicide bombers kill 34, including 8 Americans, at housing compounds for Westerners. Al-Qaeda suspected.

May 29–31, Riyadh, Saudi Arabia: terrorists attack the offices of a Saudi oil company in Khobar, Saudi Arabia, take foreign oil workers hostage in a nearby residential compound, leaving 22 people dead including one American.
June 11–19, Riyadh, Saudi Arabia: terrorists kidnap and execute Paul Johnson Jr., an American, in Riyadh, Saudi Arabia. 2 other Americans and BBC cameraman killed by gun attacks.
Dec. 6, Jeddah, Saudi Arabia: terrorists storm the U.S. consulate, killing 5 consulate employees. 4 terrorists were killed by Saudi security.

Nov. 9, Amman, Jordan: suicide bombers hit 3 American hotels, Radisson, Grand Hyatt, and Days Inn, in Amman, Jordan, killing 57. Al-Qaeda claimed responsibility.
Sept. 13, Damascus, Syria: an attack by four gunman on the American embassy is foiled.

Jan. 12, Athens, Greece: the U.S. embassy is fired on by an anti-tank missile causing damage but no injuries.
Dec. 11, Algeria: more than 60 people are killed, including 11 United Nations staff members, when Al Qaeda terrorists detonate two car bombs near Algeria's Constitutional Council and the United Nations offices.

May 26, Iraq: a suicide bomber on a motorcycle kills six U.S. soldiers and wounds 18 others in Tarmiya.
June 24, Iraq: a suicide bomber kills at least 20 people, including three U.S. Marines, at a meeting between sheiks and Americans in Karmah, a town west of Baghdad.
June 12, Afghanistan: four American servicemen are killed when a roadside bomb explodes near a U.S. military vehicle in Farah Province.
July 13, Afghanistan: nine U.S.soldiers and at least 15 NATO troops die when Taliban militants boldly attack an American base in Kunar Province, which borders Pakistan. It's the most deadly against U.S. troops in three years.
Aug. 18 and 19, Afghanistan: as many as 15 suicide bombers backed by about 30 militants attack a U.S. military base, Camp Salerno, in Bamiyan. Fighting between U.S. troops and members of the Taliban rages overnight. No U.S. troops are killed.
Sept. 16, Yemen: a car bomb and a rocket strike the U.S. embassy in Yemen as staff arrived to work, killing 16 people, including 4 civilians. A group called the Islamic Jihad in Yemen claim responsibilty for the attack.

Steve Salerno said...

Anon, leaving partisanship out of it, thank you for the time and effort that went into this comment. This sort of factual context is always appreciated.

Steve Salerno said...

And to the previous Anon (11:24): Please know that I for one never bought into the stark and facile distinctions that some people make between Republicans and Democrats. (As just one example that goes to your point, look at Obama's $28K-a-plate dinner last night. And let's face it, the Obamas themselves--while not rich by Bill Gates standards--certainly aren't hurting.) I have set forth my reasons for supporting Obama, but they're not rooted in partisan politics. Not by a long-shot.

Cal said...

Piggybacking on SteverRobbins comment, I do remember Buffett saying that derivatives were "financial weapons of mass destruction." I know I hear on the business channels, and is also taught in B-schools, that they diversify risk. I guess now the emperor has no clothes (to continue the metaphors).

I really wish at this time that there could really be a legitimate third political party. Because blaming one or the other is not going to solve any problems. Fannie Mae and Freddie Mac were the homes (pun intended) for political hacks of both parties.

But I do think America needs to be careful. Most of the world hates our foreign policy. And we go on and on about free market capitalism, but these companies run for government help when things get bad. I just saw Ric Sanchez on CNN telling a guest on CNN that one thing Reagan said was capitalism allowed people to fail, while communism didn't. And we wonder why Vladimir Putin makes comments that the downfall of the Soviet Union was the worst thing to ever happen in that part of the world? I'm not arguing for communism, just trying to point out the hypocrisy.

Anonymous said...

"I really wish at this time that there could really be a legitimate third political party. Because blaming one or the other is not going to solve any problems. Fannie Mae and Freddie Mac were the homes (pun intended) for political hacks of both parties."

Cal you speak the truth. I don't think a third party would help too much though. Parties themselves are just bad news. I think people just like to group together, because it is easier than thinking for themselves.

Elizabeth said...

I just saw Ric Sanchez on CNN telling a guest on CNN that one thing Reagan said was capitalism allowed people to fail, while communism didn't.

Cal, that sounds good, doesn't it -- has that ring of freedom and individuality to it.

Yes, capitalism allows you to fail (what a benevolent phrase!) if you are a regular Joe Shmoe who goes bankrupt because of, for example, unpaid medical bills. You are free to fail, sure. But when you are a CEO of a large enterprise which you ran to the ground through your greed and/or incompetence, "failure" is relative (and, despite appearances, usually optional). It's more like a gentle fall on a well-cushioned mattress. I still savor the image of the Lays -- of the Enron infamy -- bemoaning their horrible fate because they had to sell several of their houses to pay Ken's legal bills. Heartbreaking, I'm sure.

What we have here, and see over and over again in the American allegedly "free"-market economy, is privatization of success (and profits) and socialization of failure (and losses). This is hypocritical at best, and clearly not a sustainable economic system (not that I'm an expert, but even I can see that). Some economists call the current crisis the end of the free-market myth (and not a moment too soon).

Let's face it: We hear high-falutin' proclamations on the superiority of the free-market when unchecked greed and a possibility of obscene profits are at stake for those who make the proclamations. But when that very same unchecked greed leads to the inevitable crash and equally obscene losses, then the free-market is no longer such a good option. All of a sudden, the free-marketeers scream Uncle (Sam)!

And then it's, in essence, the minimum-wage making Joe Shmoe who needs to bail out the rich capitalists out of the crises of their own making.

Yeah, it's a great system, when you think about it (and if you are the rich capitalist and not a Joe Shmoe).

Elizabeth said...

P.S. According to Reagan's own definition, Cal, what we have now could be called (a form of) corporate communism.

Cal said...


I'm on your side. The mattress comment- they call those things "golden parachutes". I'm glad the regulator for Freddie and Fannie did not approve the exit packages for their CEOs after the government takeover. These fallen CEOs were called "winners" while they were raking in obscene pay packages, but they won't be called "losers" now that their companies are kaput. Their companies downfall will be blamed on market conditions, speculators, short sellers, etc., and not bad management. And the Sarbanes-Oxley bill passed after the Enron debacle was supposed to cure this?

I just happened to be reading a book on famous economists. Marx kind of indicated that the poor subsidizes the rich. But I'm not arguing for socialism or communism. They don't work.

It kind of gets to Steve's point on another post (and even of SHAM). Everybody talks about always being positive, but no one speaks of the downside of excessive, unbridled optimism.

I also agree with your point about the challenges the little guy faces if they fall behind the 8-ball economically. But that's why I think personal finance and health should be taught at some level in high school. Kids should at least have some idea of what life is about financially and health-wise (both mentally and physically). I know I wish I had gotten it. I learned more through trial and error.

RevRon's Rants said...

While I rarely resort to copying & pasting other people's thoughts, this article in today's Houston Chronicle seemed especially pertinent to this discussion. Of course, McCain's apologists will deny anything painting a less than perfect picture of their hero, regardless of its truth.

Here's the link:

Elizabeth said...

This is a good article, Rev -- thanks for the link.

Cal, good points on teaching money matters in schools -- I too wish so.

And, you know, the choice does not have to be between free market capitalism and communism. (It shows how ingrained by propaganda -- and overblown -- the threat of "communism!" is in this country when one feels compelled to insert the necessary disclaimer "I don't advocate communism, OF COURSE!" every time one says something critical about the US economy -- or, IOW, observes the obvious. I sympathize.)

It is possible to have an essentially capitalist economy with governmental regulations and social benefits for citizens -- see other Western countries. Of course they have their problems, but here, in the US, those are usually brought up as a dire warning against any social benefits by rabid right-wing ideologues. As if we did not have any problems associated with the wonderful free market system, ahem.

Just to point out, in those other Western countries, you do not see these dramatic (and totally preventable) economic upheavals like the one we are witnessing now here. (And, btw, nobody goes bankrupt -- or dies -- because they cannot afford medical care there.)

Dimension Skipper said...

I know it doesn't quite really fit here (or under any other particular post around here), but it's sort of related to economics, energy, election issues, and the concept of eventually having to pay the piper. Plus I just thought it would add some levity. A little levity once in a while never hurts, right?

Remember when...

Originally published June 15, 1986.

Just call him Op-stradam-us.


RevRon's Rants said...

"It is possible to have an essentially capitalist economy with governmental regulations and social benefits for citizens..."

Not only possible, but essential. As I've said before, one need only look to Hong Kong and its abysmal quality of life for the vast majority to realize that an unregulated society is the antithesis of a civilized society. And if a society such as Hong Kong's seems sustainable, have a gander at ancient Rome...

ellen said...

Sorry Eliz,
Here in the UK we are having the same economic traumas as you, a Swiss bank has gone to the wall, turmoil on the German Bourse--this is a global meltdown that's a long way from running it's course. The only solid looking financial institutions left are the old fashioned risk-averse kind, you know where they only lend out money that has previously come in from depositors.
Our beloved National Health Service is teetering too, everyone wants to live forever, demands hugely expensive treatment for a few more months of life and the managers outnumber and outrank the medics.
We try to stay out of hospitals unless we are desperate because the cleaning has been outsourced (privatised to save money) costs three times as much as before and people are dying from infections (MRSA, clostridium difficile etc) caught in dirty hospitals. This has been going on for about 8 years, no-one has the political will to organise a mop and bucket brigade but we can still muster war parties and swan about on the international stage looking suitably statesmanlike.
If Obama doesn't get the job there maybe we could have him. Lord, we need a saviour, any saviour.

Steve Salerno said...

I should add, at this point, that in no way did I intend this post to be construed as an actual argument for communism/socialism. Primarily I was noting the irony.

It would be nice to see a free-market system that functioned like a well-oiled machine, serving the needs of management, labor and consumer alike. Trouble is--and how many times have I made this reference now?--it goes back to what our friend DeTocq said about democracy itself: that it's utterly dependent on being run by people of good will. Otherwise it will fail. And I worry that some of the very people who rise to the top of management are, in fact, exactly the opposite of the types of folks DeT had in mind. (e.g. Enron, etc.) I also ask myself how someone could run a company like AIG and accept the kinds of golden parachutes/handshakes and other bennies we hear being discussed, even as the company is forced to suffer the ignominy of an $85 billion bailout. Where do they get the nerve? It's a wholly different context, but I'm reminded of the way Yankees outfielder Hideki Matsui issued a formal apology to the fans last year after he got injured. Now, I don't know if Matsui actually gave back any of his considerable salary--I expect not (his agent would kill him, as would the players' union). But at least the attitude is a step in the right direction. We need a lot more of that.

ellen said...

Rev Ron,
The real eye-opener is Singapore, a virtual police state but run for the benefit of the citizens. I went to school there in the last days of the Empire and was there when they gained independence. Lee Kuan Yew became PM--a communist who rapidly converted to capitalism, his son is PM now. I was there last year--you can't chew gum in the street but business is booming, they have the highest standard of living in the SE Asia and no-one wants to dissent.
Size is crucial though, I think it can only work in a small city-state, and Lee Kuan Yew was a remarkably benevolent and principled dictator--still a dictator though.

Elizabeth said...

I should add, at this point, that in no way did I intend this post to be construed as an actual argument for communism/socialism.



(No, seriously.)

Cal said...

I don't want to get too technical since this isn't a finance blog, but the Treasury and SEC are crafting legislation to further undermine the free-market. They are now targeting "short-sellers", or those who bet the prices of a stock to go down. This was done in the 1930's and all studies showed that short-sellers helped determine the true value of a stock.

I'm not a fan of financial institutions failing, but Obama (through his surrogates or other Democratic senators) should be screaming bloody murder. If a Democratic administration were to pull this less than 1 and 1/2 months before an election, the Republicans would call them all kinds of socialist names.

Since it seems the main issue is now turning to the economy, if the stock market is up 25% (just a guess) in the next few weeks, McCain and the Republicans are going to say they solved the problem by their emergency actions. And the public may believe them.

I don't mean to be cynical, but the Treasury Secretary and most of his deputies are from the investment bank Goldman Sachs. That stock had tanked this week, until today. It seems to me they want Goldman to remain independent and the stock to recover and not become a Lehman or a Bear Stearns. I don't even know if the blind trusts these people have to put their investments in before coming to work for the government have to be sold. If not, I'm sure a lot of their net worth is tied up in Goldman stock.

Steve Salerno said...

Cal, those are interesting comments--and you beat me to the punch! Just last night I was toying with the idea of writing a post in which I said that McCain, who now seems to revise his campaign rhetoric on a daily basis, would find some way of claiming credit for the market's 400-point "rebound" yesterday. I think the only thing that stopped him was his fear that there might be big reversals yet to come.

Steve Salerno said...

Oh, and one other quick thing that comes to mind: Back when I was doing a lot of writing for Worth--I hasten to add, this was when Worth was a serious-minded magazine that investigated wealth and finance, rather than just gushing about it, a la the current version of that magazine--I wrote a piece that required me to conduct an extensive interview with Dick Grasso, who then ran the NYSE. At one point I asked Grasso whether the more stringent trading halts ("circuit breakers") that had been put in place after the Crash of '87 were really fair to everyone--notably the short-sellers. Grasso chuckled for a moment and said, "Who gives a shit about the short-sellers?" The NYSE's publicist later called me back and asked me not to use the remark.

ellen said...

Read a very good piece in Harpers
by Eric Jantzen on why the global economy is dependent on bubbles. Basically, the western economy in its present form is shot, has been for a while and requires these constant bubbles to struggle on for a few years.
The housing bubble is burst, according to Eric the smart guys are already working on the next bubble which will be in alternative energy and all things green.
Historically, western countries have always gone to war when the economy needed a boot up the backside so are these bubbles a sign of progress or are we finally devouring ourselves?

Steve Salerno said...

Thanks, Ellen. I think someone else referenced this piece a while back as well, and I forgot to give credit.

Cal said...

Great anecdote about Grasso, Steve. I used to read Worth in the '90s. You are right, it is a different magazine now.

Anonymous said...

One of my closest friends lives in Singapore and she adores it! I never would have expected such an "American girl" to love a police state so much, but she does. She is doing very well there does not plan on coming back to the U.S.

I lived in Hong Kong in 1993 and everyone was afraid of the trade-off to China. They were leaving Hong Kong in droves like rats escaping the Titanic. The ones who stayed tell me China pretty much leaves them alone. My friends in Taiwan are not as pleased with the Motherland.

ellen said...

I had the great good fortune to see the before and after aspects of the Singapore experiment. 45 years ago it was teeming, filthy, uneducated, opium dens everywhere, a hand-to-mouth existence for most, four distinct ethnic groups at each others throats. The day they had independence, Indonesia moved in to take over.
It is now nominally democratic in that I think the structure is there--just no-body is interested in using it as Lee Kuan Yew has done such a great job. I was quite nostalgic for the filth and squalor last year but the Singaporeans aren't. With good subsidised, owner housing for all, top health care, superb education and the ethnic groups getting along with each other, they are a very pragmatic people.
Of course hungry eyes covet this good life at all times, the main highways are built to serve as military runways, they've just put tubs of flowers down the middle to disguise this. Lee Kuan Yew was a
canny chinese who understood history, I only hope his son is half the man he was.
If that's a police state you can sign me up.

Henriette said...

"If that's a police state you can sign me up."

That is just it: When everything is working economically and socially like a well oiled machine, does the governement matter? I know my friend in Singapore cannot see certain episodes of programs like "The Simpsons," which we send her, but she does not mind the censorship. She thinks free speech is overated, but that is easy to do when she has nothing to moan about. Leaving me with the question: Do we only need free speech when we are unhappy?

ellen said...

Leaving me with the question: Do we only need free speech when we are unhappy?

I think everything in life is a trade-off. The Singaporeans are happy to trade unlimited access to western culture for the benefits they enjoy. Lee was awarded an IG Nobel prize (a satirical gong)some time ago for punishing his people for 30 years for chewing gum, spitting and feeding pigeons--we laugh at that but I remember the spitting ban, it eradicated TB (a massive killer) almost overnight.
Singapore is a free port, even my brother got involved, as a schoolboy, in smuggling drugs, things were so easy. There are draconian punishments now for such antics but the point is that they work, Singapore is vitually crime- free.
I think that not only speech, free or not, but thought itself, the precursor of everything, only arises when the person is dissatisfied in some way with how the world is. All movements political, social, cultural, arise from dissatisfaction. Human evolution is the history of dissatisfaction with the way things are.
Lee Kuan Yew took the best from everything he came in contact with and then rebuilt Singapore using thought and meticulous planning. He was focused on the job not on his personal status or party politics. From the beginning he was planning for who would succeed him and putting in place structures that would ensure the continuation of justice, fairness and no tolerance for corruption.
I'll still sign up for that.

ellen said...

Found a link to a short bio on Lee made after he stepped down.


Compare this man's attitude and outlook to any of our western leaders, do you notice what's missing in all our guys? Integrity.
Lee was a long way from perfect but he had integrity in spades.