Here’s a cute little web site that practices the art of reducing life’s complexities down to mathematical formulas. A few examples:
PONZI SCHEME = ROI – R – I
CRAZY = TALKING TO ONESELF – (CELL PHONE + EAR PIECE)
BRUNCH = BREAKFAST + LUNCH + CANTALOUPE
DOGGIE DAYCARE = KENNEL – GUILT
You get the idea.
Here’s a blog piece by Paul Krugman that analyzes the financial policy of the Obama Administration, captive as it is of Wall Street. He claims that Obama is basically trying to put Humpty Dumpty together again – that is, securitization failed to spread risk, but instead intensified it. Now they want ot go back, pick up the pieces, and try securitization of risk, one more time.
Underlying the glamorous new world of finance was the process of securitization. Loans no longer stayed with the lender. Instead, they were sold on to others, who sliced, diced and puréed individual debts to synthesize new assets. Subprime mortgages, credit card debts, car loans — all went into the financial system’s juicer. Out the other end, supposedly, came sweet-tasting AAA investments. And financial wizards were lavishly rewarded for overseeing the process.
But the wizards were frauds, whether they knew it or not, and their magic turned out to be no more than a collection of cheap stage tricks. Above all, the key promise of securitization — that it would make the financial system more robust by spreading risk more widely — turned out to be a lie. Banks used securitization to increase their risk, not reduce it, and in the process they made the economy more, not less, vulnerable to financial disruption.
But if Wall Street has spent $5 billion over the last ten years to influence policy, Wall Street is pretty well going to get its way, and forget for a moment whether a “D” (45% of contributions) or an “R” (55%) is in power, because that person is not really in power anyway.
To be fair, officials are calling for more regulation. Indeed, on Thursday Tim Geithner, the Treasury secretary, laid out plans for enhanced regulation that would have been considered radical not long ago.
But the underlying vision remains that of a financial system more or less the same as it was two years ago, albeit somewhat tamed by new rules.
As you can guess, I don’t share that vision. I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.
But try they will. Wall Street, I mean. Obama is merely a conduit, as McCain would have been. Two parties is nonsense. It’s one party – the capitalist party, with two right wings, one of which flaps harder than the other, meaning we go in circles.
But who knows the future? Well, one person does – here’s the tail end of a blog comment by Dave Budge at Electric City Web Log, 3/26/09 11:49am:
In other words, we’re screwed. The only thing that can save us is to reduce spending as a percentage of GDP. But for at least the next two years that ain’t gunna happen.
I think what he is saying there is that change is in store, two years down the road. Mid-terms. Restoration of financial sanity. ‘R’s (55% of $5 billion) take over from ‘D’s (45%), and we’ll have a change of course. Of course.
He’s also saying that the government should not be spending money like it is – in fact, many R’s are saying this – that we should be cutting spending, reducing tax rates for the wealthy once more – you know – all of these people who did not see this coming now know how to get us out of it. It’s pure insanity.
Here’s some more formulas:
TRICK OR TREAT = EXTORTION + “OH – ISN’T THAT CUTE!”
MIME = JUGGLER – BALLS
BUSH + GEITHNER – PAULSON = OBAMA
Piece of Mindful 