Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Conservative Economics Based Upon Greed

Politics / Economic Theory Jun 09, 2009 - 04:05 PM GMT

By: Pravda

Politics

Best Financial Markets Analysis ArticleCage Innoye writes: In life we have the problem of self management. If we don’t manage ourselves, then disaster occurs. Self control is a key trait of this behavior, taking calculated risks is another, a strategy of balance is another. Most people accept this.


We know things shouldn’t simply go out to extremes because disaster will occur, thus, we manage ourselves. We know that we cannot simply do one thing over and over, that we must do many things for a successful project. We know that we should not take big, foolish risks in our personal lives. Should economics be any different? But in conservative economic theory, economics is very different! A big exception is made, suddenly in the sphere of business and finance we have “magic”. While in life we have self control, in economics we have the mysticism of automatic processes. Thus, life is so much easier in the economic sphere; it’s like a big vacation from reality.

In conservative theory all things magically balance out. If real estate prices get too high, then they correct in a natural cycle. Eventually, all false value is removed; buyers lose equity and investors will lose too. So gains and losses exactly equal. The just invisible hand of Adam Smith creates equilibrium; the invisible hand of this invisible god corrects all. This god is all knowing, all powerful. All works out in a completely spontaneous process. Yes, in life you must worry, but in economics we have a great exception to life because here some unknown god is in control. Whereas in your own life or in education or coaching your child’s soccer team or cooking a holiday dinner there is no god to make things work out automatically. Finally, we have a realm of our lives where all is easy and free of worry! What a relief!

All’s well, but upon a second look, reality doesn’t match our fairy tale. Damage is done just as in other human processes, personal or social -- when we let things go to one-sided extremes, when something is overdone, when we take stupid risks. The magical corrections of conservative theory involve catastrophic events. And the problem in the 2008 crash was not that home buyers or the mortgage makers or the purchasers of mortgage-backed “insecurities” were the only ones hurt. Everyone was slammed by the downturn. Even if you were to argue that those who got houses with poor financials were at fault (which is only partly true), still the vast majority of homeowners were not at fault. Millions of innocent people, the vast majority of the population that did NOT buy houses during the bubble; and the vast majority of businesses did NOT buy mortgage securities, yet they are hurt too. So we must ask, “What kind of invisible hand and magic is this?” A magic that meets out punishment for everyone, to the whole nation for the actions of a minority, this is hardly a just economic god.

In conservative economic theory, a recession or depression must be visited upon all households, there’s nothing you can do, you must accept this, the government should not, can not help, everyone suffers for the foolishness of a few. It seems this theory is a bit sociopathic, mean-spirited and uncompassionate. This view is just plain cruel. Modern capitalism is based on money and profit. It’s an objective system that leads to a particular subjective behavior: greed. Greed didn’t create capitalism but greed is its result and greed maintains the system. Conservatism is a fan of greed -- greed is good, and, perhaps, greed is even divine!

So let’s review this theory -- greed leads to loans given to people not qualified to pay them, then greed sells the mortgages to the whole world, then the whole world goes into a big recession. You may object but conservatism retorts that magic solves the crisis automatically by stopping the global economy and balancing things out. And then, you guessed it, greed returns again, and all is well...(after hiding out in the Bahamas for a couple years).

But if greed is so good, why should we have recessions and depressions in the first place?

We are told the individual must learn to restrain his own greed! How does that work? Be greedy but limit your greed? Consider this: You’re in the financial industry; you see others making profit, manifesting their greed. So as a business person you replicate your colleague’s behavior and, more, you must outdo them in approving loans without financial basis -- no jobs, no tax returns, no proof of income, nothing. The profit demand of the economic system requires this, and how will the rational nature of a lonely individual stand up to this pressure? It cannot. The executive cannot fall behind, when you lag, you’re near a takeover; or as CEO you might get fired at the next shareholders meeting. Any logical executive would get way ahead on the greed curve; you can’t have competitors getting stronger than you. This is Business Administration 101. It’s confusing, at what point does your greed get tempered? Tell us about this enlightened greed!? We cannot have any regulation of the financial industry because conservatives would scream “communism”. So then where is the self control?

Consider this: When it’s absolutely clear that one should stop selling bad mortgages, when the market begins to falter, it’s already too late. The crash has begun. From inside the boardroom of a single company one cannot see the whole process, and one doesn’t want to. So there is a big contradiction in conservative thought. You cannot be greedy and wise at the same time. You cannot serve both moderation and mammon. Either you are for a system of maximum profit and fierce competition or you’re not.

If you’re a good capitalist, competition drives you to greed; you must be greedy to survive in this economic system, one has no choice. In a completely free-market notion with no restraints, the cycle continues until there is disaster. Thus, the supposed magical process does NOT result in an elegant, symmetrical correction; it results in full-scale collapse that paralyzes the entire economy hurting many innocents. Everything stops. Money isn’t available, the economy cannot restart without loans to consumers and business; it languishes. Banks have no cash, and those that do will not lend it out, they hoard it to survive bad times.

What actually happened in the 2008 crash was that the government knew but did nothing because of its ties to the very people who created the problem. Finally, government feigned surprise then scrambled, but the problem was many times greater than they had expected, because they had not required reporting from banks on their activities. Since those who are greedy cannot control themselves, in this economic framework other forces would have to intervene -- in our present system that is solely the government. Fortunately, Bush wasn’t a strict conservative or we’d be in a complete standstill today. Bush pursued conservative policies but when the crisis happened, he switched to liberal policies to save us from oblivion. Conservative economics cannot head off crises, it’s helpless, its principles of greed and deregulation lead there inevitably. It’s trapped by its own logic. So we must conclude that the strict conservative view is “fatalistic”. Fatalism is a cousin to notions of magic and spontaneous greed. In this view, there is nothing you can do.

So let’s sum up the key points of this article: The conservative thesis is based on four things -- Magic, cruelty, fatalism, greed. What we need is a new economic view for a new economic system that opposes these behaviors. In the article, “Diverse Economy is next after Capitalism and Communism” by this author in Pravda, a thesis was put forward on a new system of business and finance. A Diverse Economy would oppose the behaviors of magic, cruelty, fatalism and greed.

Opposed to “magic” would be an economics of rationality. We need to manage ourselves and not let spontaneous behaviors result in disaster. Self management would begin in the firm itself. Here we would catch the problem before it spreads. Industrial leagues would strictly apply ethical and transparent reporting guidelines.

Opposed to cruelty would be an economics of compassion and support, those who are victims should be helped. The blame should be put precisely on those who caused a problem. And we can design fiscal policies that support ordinary people and not favor big banks and corporations.

Opposed to fatalism should be an economics of human intervention -- intervening in the early stages of a problem, not letting things lag. This recession didn’t have to be. There are natural ups and downs in economic processes but they don’t have to result in crisis. With pubic business information we can catch problems before they become catastrophes. Capitalism hides information; ignorance is the general state of capitalism. Further, in capitalism there are no social forces that can act against irresponsible corporations. In a Diverse Economy, there are ‘Leagues’ for consumers, investors, communities, employees and more. Leagues would create a check and balance system making an economy a truly social partnership.

Opposed to greed would be an economics of human values and all key values in a culture. Money wouldn’t be the sole economic driver, profit wouldn’t be the only goal, greed wouldn’t even be considered as a value. In a Diverse Economy, there would be a collection of performance and metric targets that would represent a good list of important social values and good business values too.

Cage Innoye is an American writer. You can contact him at his blog, or at his email address. He is working on his upcoming book, “The Axxiad”.

Pravda.ru

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Pravda Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules