[lit-ideas] Re: Wall Street and Capitalism

  • From: "Simon Ward" <sedward@xxxxxxxxxxxxxx>
  • To: <lit-ideas@xxxxxxxxxxxxx>
  • Date: Wed, 8 Oct 2008 20:18:27 +0100

Mr Gleason (we haven't been introduced): " ... one would have thought that 
Lit-Ideas would offer explanations involving more erudition than finger 
pointing."

Indeed, it's a wonder Lawrence didn't pick it up, he's always one for spreading 
the blame.

If you want to point a finger, make sure it's a large one and is quite blunt. A 
giant's thumb might be good, and it should be pointed at the free market dogma 
that stipulates that markets are an efficient and, for the most part, self 
governing solution to the problem of appying productive assets to a demand and 
supply problem. 

But without sufficient regulation (because the markets are efficient and 
self-governing) people moving the assets around got a bit clever and invented 
products which were not actually real and had no use-value except the creation 
of profit. These products (CDS to take an example), were used to pass on the 
risk associated with marginal mortgage agreements in such a form that the risk 
was soon rated in much better terms than the marginal mortgage agreements 
warranted. In a few years an upside down pyramid was created that pivoted on 
the notion that property prices would keep on rising, buoyed along by an 
articifically low interest rate. This is called a bubble.

Out of the sub-prime sector (because the marginal people just wanted to buy 
their own house), the more astute (but ultimately thick) people, hit on the 
notion of re-mortaging on a regular basis at levels exceeding the current price 
of the property. As the property price rose, the mortage would be secured until 
the time came to re-mortagage again. But when property prices fell ...

And all this was deemed acceptable because the market is self-regulating and 
also because it became a central part of the conservative mythology following 
9/11. True, it was part of that mythology accepted by both sides of the 
political divide (because those on the left too saw need to make an appeal to 
business), but in all respects, it was a central pillar of the conservative 
agenda.

You want proportioned blame? Find out who advocated market de-regulation (and 
stuck by it until only a few weeks ago), who promoted consumption over 
investment, who relied on the rich to feed the poor and who thought that 
national interest trumped global economic and environmental security. 

Or you could blame the leftists who didn't advocate any of it. Not a jot.

Simon

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