Is Too Big to Fail Also Too Big to Save? 9 comments
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There is an interesting article in the Telegraph UK about how thousands of hedge funds are on the brink of failure as the global crisis unfolds. Emmanuel Roman, chief executive of GLG Partners, and Nouriel Roubini, New York University Professor and long-time predictor of financial doom, have made the recent forecast for the industry.
Of interest in the article, beyond the prediction of massive hedge fund failures, is the following quote:
"It's like we're walking blind in a minefield," said Prof Roubini. " Every situation has become risky and no one can trust each other. The banks are too big to be allowed to fail, but they're also too big to be saved.
Unfortunately, the "too big to fail, but too big to save" perspective may be more true than we want to believe or admit. The trust issue is certainly being played out from all directions.
Of additional interest is the belief that recent events and a protracted recession will end the financial dominance of the US. While I believe the end of this story is yet to be written, you have to wonder, 'What if this is true?'. Who will step into the leadership role of the US? Economies that are still developing and emerging? Economies that rely on crude oil revenues? The European Union?
Furthermore, are any of these economies really decoupled? Rocked back on its heels? Definitely. Loss of leadership? Not so sure.
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This article has 9 comments:
Socialism does not work. And as the author points out, the banks and institutions that have made bad decisions have to be allowed to fail...it is the only possible outcome -- anything else will have worse consequences by prolonging the pain, as well as by shifting the pain to the undeserving -- and then the outcome is pain of not just an economic variety -- that sort of injustice invariably begets social unrest. That does not seem to bother U.S. Democrats, nor the Bush administration which is inexplicably acting in accordance with those socialists in these maneuvres!!
Obama the solution? Not on your life!! He is more of the socialist-Democrat same, but worse!! Be prepared for all-out Marxist assault on capitalism and private property rights. This will beget my corollary to this author's theme: that the real truth to be gleaned from all these recent events is this: we have a government which has failed its purpose and is now too big to save. Ponder that in relation to what you see happening, and in light of the recent proposals being considered by Democrats for grabbing our private 401K retirement savings and nationalizing them -- read between the lines and you see a funding grab for a failing Social Security program. We are seeing the utter failure of socialism, yet the power that it gives to politicians is forcing them to continue grasping with everything they have left. It's time for us to slough it off!!!
As far as world leadership goes, we have the same respect that any schoolyard bully gets, and as long as we are trying to control third world resources with promises of aid, education, and medicine, the respect level is irrelevant to our leaders.
We pay the Dalai Lama $15,000 a month to irritate China,( and have for 40+ years), the CIA supports Reporters Without Borders ( sans verite) and Human Rights Watch just to be able to quote their paid-for evaluations, and provide the AP's favorite quotes.
Where is the market for bullshit? Oh, it is here.
We still have military dominance.
We have powerful English speaking cousins and allies in Britain, Canada, Australia and New Zealand (well, at least it's a beautiful place to spend a vacation ;) who are virtually part of the American empire already.
English is the second language of most of the middle classes around the world and we English speaking peoples are unified by a language that is remarkably free of dialects.
(Switzerland, to take only one example from many around the world, is divided by three language communities and often threatens to separate into three countries. Even German Switzerland suffers from 12 mutually incomprehensible dialects of German.)
Germany is a great cultural and economic power in Europe but remains small and contained and without ambitions of empire.
France is still the cultural center of Europe but is without any imperial designs or power.
Europe itself has shown, with two world wars (civil wars) and by recent events, that the EU is, at best, unreliable.
Russia and China/Korea/Japan are the only threats to Anglo-Saxon power both economic and political.
Russia could easily become an ally and in my belief should become an ally.
And Asia has built a prosperous economy along the Anglo-Saxon model, with important and valuable cultural variations, and should remain allies and friends.
However, as Arnold Toynbee said, "Civilizations die from suicide, not by murder." If we insist on killing ourselves the rest of the world will have to pick up the pieces the same way we Americans picked up the pieces after the European suicide we call World War II.
It's our choice.
I can't remember who made this observation, but he said democracies are doomed to fail because eventually politicians realize they can buy votes by promising to "give" and voters can extract unearned benefits by electing these politicians.
As soon as you de-link productive effort from consumption you have overturned the natural order of physical reality. It is not "the economy" or "government" that creates goods. It is human effort. "The economy" coordinates individual's production/income and consumption/expenditur...
Free enterprise with property rights honors the natural order. Animals live in a free enterprise world. You don't hunt, you don't eat. You share work and its rewards with your family and tribe. This is "natural" socialism.
Mass socialism--involuntary sharing--is a human creation motivated by the politics of envy.
"Mature" democracy is corrupted democracy: politicians delivering pork and citizens accepting it. They don't care that their hardworking neighbor produced the pork and the politician stole it in order to "give" it to them. This is mass socialism, keeping the free enterprise beast alive to produce the pork and calling it "democracy".
Welfare is charity, not a "right". It may be impossible to build a mass society with fabulous wealth like we have now, without socializing charity. Maybe mass society and free enterprise are simply incompatible. Maybe it's either give up mass society with the incredible wealth it produces, or give up on pure free enterprise with its clear moral order. I would rather give up wealth than go Commie.
For example, for the average worker, UPS is not essentially different from the US Postal service except for the fact that there is no group at the top at the US Postal service who make enormous salaries.
America is already a socialist country in the sense that most of our consumption is consumption of products produced by large monopoly oligopoly corporations.
American remains a free enterprise country to the extent that our inventions and creative discoveries are made by small groups of individuals who form start up companies. But once these companies reach the size of Microsoft or Intel, they become monopolies or at best oligopolies which function as quasi governments complete with security forces and rigid rules of behavior. The Bill of Rights stays at the front door of these corporate behemoths.
People who work for large corporations have already accepted loss of most of the freedoms of the Bill of Rights, including the loss of free speech and have accepted corporate think as the price of economic security.
Social Darwinism? Try tracing the career of George W. Bush and many, many others like him to demonstrate the truth of that theory for much of the American economy.
Thank God for Andy Grove, Bill Gates and Steve Jobs but watch out for their children.
I would argue that large corporations are functioning like large "tribes", taking care of their own and demanding allegiance and reciprocity. You are right that most of the things we consume are made by these oligopolies, but I think the point is that they actually do make things that we want to buy. Unlike state socialism, which sings you lullabies of caring while robbing you and cajoling you to abandon your heretical anti-socialist thoughts. "Velvet tyranny". They only show you the jackboot if you try to defy them rather than go along.
There are still lots of free enterprise small and medium size businesses, too. Residential construction is pretty much completely done by small contractors. There are small scale free enterprise contractors working in practically every industry. Trades of all kinds are operated as small businesses. Non-franchise restaurants are free enterprises, and even franchise outlets are owner operated. A lot of retail is still small business.
Once you get outside the big cities you see free enterprise everywhere. I wouldn't give up on free enterprise yet. Small businesses don't make the news but millions of people make their living from them, and enjoy the freedom that comes with earning everything you get.
I like to be humorous and provocative so I often exaggerate, caricature or highlight things that people tend to ignore or misunderstand.
However, whether you characterize large corporations flatteringly as tribes or pejoratively as organization men, they don't represent free enterprise.
And, at least in part, large corporations give us what they persuade us to want through advertising, not what we "really" want.
I have no desire to see socialism, even of the Scandinavian type, in America but I would argue that most of the people who work in large corporations would be perfectly happy under socialism which might not look much different from their corporations.
Take a trip to Sweden and look around if you don't believe me. The Swedes are a very happy people: The fact that they have one of the highest suicide rates in the world proves it :)