Which camp do you belong to? Republicans or Democrats, Socialist or Capitalist... many in the Western world often know what they are or what they stand for ... e.g. "he is a left leaning republican ... blah-blah..." People in Asia do not usually ponder these matters, the most important political consideration is whether you are a Communist, and as long as you are against Communism, you are ok. Now here is a case which caught fire over the weekend. If you are honest and admit whose side you are on - it basically tells a lot about how you view the world and people around you.
On CNBC, Rick Santelli complained and ranted that the president’s housing plan rewarded “bad behavior” and suggested creating an Internet Web site to allow Americans to vote on whether they wanted to subsidize “losers’ mortgages.” The rant captured many's attention, some for and some against. Over the weekend, the notable and fiery Robert Gibbs, Obama's press secretary, launched a strong rebuttal against Santelli.
Mr. Gibbs decried Mr. Santelli for what he called a rant and made these observations:
“I’m not entirely sure where Mr. Santelli lives or in what house he lives but the American people are struggling every day to meet their mortgage, stay in their job, pay their bills, send their kids to school. You can’t stay in this program unless you continue to make mortgage payments. That’s important for Mr. Santelli and millions of Americans to understand. Mr. Santelli has argued, I think quite wrongly, that this plan won’t work for everyone. Now every day when I come out here I spend a little time, reading studying the issues, asking people who are smarter than I am questions about those issues. I would encourage him to read the presidents plan and understand that it will help millions of people many of whom he knows. I would be more than happy to have him come here and read it. I’d be happy to buy him a cup of coffee — decaf.”
Before you read on, which camp do you think you are in. Decide now, it should strike a chord in you immediately. Are the things Santelli said always at the back of your mind?
All things being equal, Santelli's diatribe is quite Republican, let the markets correct itself. You made a bad decision, you should have to pay for it yourself. Surprisingly, or rather, unsurprisingly, Santelli did not make the same rant when funds were doled out to banks via TARP!!! That is so Republican, the corporations and businesses are supreme, not the masses.
The key phrase in Santelli's rant was "losers' mortgages". That implies that if you were not smart enough, you deserve to rot in hell. Anyone who ends up on the losing side will be called "losers", not when the bet is still on. That camp always believe investments and funds should go to the deserving, not the needy, hence they are generally against "crutches" and "safety nets"... try pushing through a bill to give single mothers' benefits, and you would have big problem persuading the Santelli's camp.
What is a government but a collection of people under one nation, entrusted to take care of the economy, social infrastructure and prosperity of those people. Its not a business. You cannot lay off your own citizens when the going gets tough.
The assumption that an individual is entirely responsible for their own decisions and actions is false and flawed. You can be a hard working individual with normal commitments, who ends getting caught up in the credit implosion tidal wave that is greater than you can fight off or predict. If you have a mortgage, a car loan, and is supporting two kids in college, and find that your property is now in negative equity, and your job no longer exists - is that entirely your fault? I am not making excuses for those who have lost their jobs and/or in negative equity property loans - some may have taken on more risk than they can or should shoulder. Some have taken on mortgages greater than their ability to pay, but its hard to decipher one from the other.
Most individuals are not "specialised or informed enough" to read prospectuses, to understand the actual make up of CDOs, or what credit default swaps are, many are not aware the regulators are not doing their job well, many have been relying on those fucked up credit rating agencies that put a AAA stamp on those CDOs, many more are deluded that they can afford a$500,000 loan when their monthly salary is only $5,000 by mortgage finance companies, ...
People have government to put in place specialised regulators, laws and enforcement officials to "protect individuals" from excessive mania or maniac behaviour. When you keep offering huge loans to people with little capital and affordability, it is very difficult for the individuals not to be caught up in the spiral. Governments and responsible officers in industry are there to "not allow" these things to get out of hand - they did not do their jobs.
Individuals also have to share their burden of their follies, its not all one sided, but to trash Obama's mortgage renegotiation plan as taxpayers funding those "losers' mortgages" is plain irresponsible and cruel.
CNBC has taken the place of Fox (Republican) network. CNBC is so biased towards the ancient Republican policies that it is ridiculous. Michelle Caruso-Cabrera is the female Rush Limbaugh as some would say. Gasparino is not far behind. Somehow those people in the Santelli camp tends to be owning more than a couple of paid off houses - coincidence? To be fair, there are rich people who are Democrats too, so you need to differentiate. Just that Democrats, even when they are rich, still feel a bigger need to have a fairer society; while a Republican thinks that you need to be pro-business so that the rich can employ the poor.
The housing bill, stimulus bill and TARP are not perfect, but they are a starting point to pull together. Santelli stated something like “you can’t spend your way to prosperity” to which his audience of traders applauded and whistled approvingly. Well, Santelli and his band of traders had no problem leveraging themselves to prosperity over the past 5 years.
No prizes for guessing which camp I belong to.
p/s photos: Aum Patacharapa Chaichua
8 comments:
Hi,
It is society that enables extraordinary wealth accumulation by the top one or a few percent of the population. If they are against redistributive justice, legislation should take care of that. The caveat is that the redistribution should impact the most number of people in distress while discouraging future imprudence. Is that possible?
Anyway the current measures, while necessary, are merely band aids that would not fix the structural flaws in the way markets and regulation function and that brought things to such an ugly head. I view that unless the flawed ideology of unfettered and predatory capitalism is addressed, history will repeat itself. In particular these points should be considered:
One: A few thousand Soroses should not have the impunity or the encouragement to wreck the real productive economy and disrupt or destroy the lives of billions. While specualtion cannot be outlawed, excessive specualtion should be and can be curtailed. Of course, speculators will say they are bringing discipline to markets as if high ideals are their concern.
Many years ago Greenspan said that derivative transactions need not be regulated as these take place between professionals. I say, bullshit.
Two: Western economic and finance theory are based on non-realistic assumptions such as efficient markets and rational human behaviour. Even I know that I'm not that smart or rational, lol. And so prescriptons based on such flawed theories should be taken with a big pinch of salt.
There is no free lunch: If you overspend today to stimulate the economy someone will have to foot the bill in the future. Basically you rob the future to pay for past excesses and old Greenspan knows a lot about past excesses.
Three: Economic ups and downs are a given with or without speculative excesses although they exacerbate them. So pursuing the holy grail of everlasting and increasing prosperity is both foolish and naive. Present excessive consumption will have negative reverberations for future generations and learning to say enough is wise.
Four: Sorry for making you yawn.
Rask
Dali,
Till now I see no blame go to rating agencies... wtf AAA rating for CDO n CDS. these agencies still got guts to come out and rate all the financial institutions.. should rate their own agencies first LOL
rask,
u did not make me yawn, u wrote exceptionally well and succinctly..
makes me happy to see such well thought out commentary in my blog
Turning rabid & controversial is good for CNBC's rating and viewership.
People like Marc Faber supports "creative destruction" or let the market work out the past excesses but I guess he doesn't have to experience the social costs
I used to hate economy in university, coz any answer is a right answer when you can BS rationally.
The entire financial markets are driven by fear and greed. At the root of every mortgage, asset "ownership",
~cashflows supplied by financing not collections,
~fiat money system (the money you cannot see),
~money creation by banks (we have trusted the banks so much as "safe and secured place" to stash our savings that most ppl actually were shocked that I suggest keeping some gold and silver in their own premises)
~stock market based on "confidence units"...that's why I say U-need-trust to buy unit trust
~properties as safe investments (most only make money upon sale, not upon purchase)
I wonder if the entire Babylonian financial system were to crumble to ashes, will gold and commodities stand the test of time?
I guess my question is What shall be the last one left standing, after the dust settles?
BUYER BEWARE! THERE IS NO SUCH THING
AS FREE LUNCH !!!!!!!!!!!!!!!
When I was in Uni, they taught me that that Adam Smith's theory of THE RATIONALE MAN is the basis of economics. Now we all know that is false - people will think for themselves first. In some cases these selfish actions may lead to a better good e.g. creation of jobs by greedy MNCs & businessmen.
However the modern Wall Street have taken speculation too far with ABS, MBS, CDOs, CDS etc. They are trading papers with little or no underlying assets ! In that respect I would like to see the growth of Islamic Finance because every transaction must be asset backed ! No more funny transactions and papers.
Why can't the governments just outlaw derivatives?? They are supposed to be used for hedging - instead they have almost destroyed the modern economies as we know it ! It has not worked. look at Citic who lost billions from their purchase of AUD !!Crazy right... hedging does not reduce your losses. There is no real headging - you are just passing on some risk to others and taking on some other unknown risks onto your books !
So the government, regulators are at fault for allowing excessive speculation that have negative value add to the real economy. And these traders make millions p.a. ya the financial industry need to shrink to be support for the real companies, instead of a giant.
Thus a long term solution for the western world - shrink by regulation. Bankers should not earn so much for taking risks using other people's money.
Now they talk about N - nationalisation. Well I think it will continue to spook the market no matter what they say. People like GIC have lost more than 90% of their investment in Citi, and more than 80% in UBS. Who on earth will now invest in any Western banks? They must be crazy. So what options are left? Even if they don't nationalise, which fund manager will risk his performance by owning Citi or BOA's shares? When in doubt - stay away. If they survive they may make a lot of money. But we just don't know.
So I would focus more on the stronger banks in Europe like HSBC, Deustche, UBS, CSFb etc. They were not so badly hit and gaining market share.
It is a big world out there...;)
Your heart is certainly in the right place.
Many baby-boomers probably will face a bleak future through no fault of their own. Through the years they have socked money regularly into equity pension funds only to find on the cusp of their retirement that their portfolios are more than decimated because of this current economic turmoil.
For many of them, spending their twilight years bagging groceries, flipping burgers, or working as a night watchman, could be a very real possibility.
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