[lit-ideas] Re: Wall Street and Capitalism
- From: "Veronica Caley" <molleo1@xxxxxxxxxxx>
- To: <lit-ideas@xxxxxxxxxxxxx>
- Date: Thu, 9 Oct 2008 12:36:18 -0400
<...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. >
People were encouraged to do this or take out home equity loans to purchase
other items than their homes.
This was advised by financial advisors because the interest on these loans was
deductible. I don't know which administration did away with making interest
on credit cards deductible, but if memory serves me here,
these two events happened more or less together.
Veronica
----- Original Message -----
From: Simon Ward
To: lit-ideas@xxxxxxxxxxxxx
Sent: Wednesday, October 08, 2008 3:18 PM
Subject: [lit-ideas] Re: Wall Street and Capitalism
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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