Monday, September 24, 2007

Don't Toss the Business Section

I love my friends Richard and Hilal who are putting us up in Santa Barbara since we rented our house. But I had to dig the Sunday NYT business section out of the bin, where it had gone straight to recycling. Since the middle-class, my hosts excepted, is super dumb about money - rich folks spending ours - we should really read business news more carefully.

Which I did right after I cancelled my sub to the WSJ, citing Rupert Murdoch's worldwide track record of corrupting the news side to suit his right-wing agenda. In the NYT I found Papa Ben Stein, my 11th favorite Republican, saying some true things about financial policy. In the real world, effect is tied to cause in ways that are inexact and variable. So simple statements of economicdogma are almost always wrong. Like cut taxes, grow the economy. Raise interest rates, fight inflation. Stein writes, "We do know that if the Fed starts printing money, Weimar style, and dropping it from helicopters, Bernanke style, we will probably have big inflation. Or maybe not." This last is far more accurate than most of the crap out there. Stein's main point: "The plain truth, as I paraphrase my sainted father for the millionth time, is that we simply do not know how the various parts of the monetary machine work on the economy."

More fun than Stein's main point is his summary of the Wall Street folk as they responded to the August financial crisis.

Here are some things we do know:

First, Wall Street desperately wanted a rate cut. People on Wall Street had gone into a sort of lenders’ panic as they saw the chickens of excess risk-taking come home to roost. The Wall Streeters loved the excess fees for excess risk. They just didn’t like the inevitable losses of excess risk.

As I have said before, the actual magnitude of mortgage losses was small, but Wall Street is run by young people who panic easily at the first sign of frustration, like overtired infants. They wanted to be reassured that Mommy cared about them and would give them her breast, in this case monetary ease.

When they got that liquidity, so to speak, they calmed down. It is a shame that we have to appease these big rich babies to keep the economy going, but they are very strategically placed big babies and they need care.
The actual article is good on where your money goes, and whom money strokes, and whose well-being it is spent on.

Click on the nursing-home spinning-wheel. There are the encompassing layers of ownership that absorb the money that was meant for care - before it gets to the care. See how Jack makes money. Find Jill's mommy, lost in the maze.

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