This one is especially for Skipper and others who insist that the CRA caused the crash of '08. The key words in this piece about credit default swaps are "completely unregulated."
Allow me to repeat that: COMPLETELY UNREGULATED.
Although Brenton Smith does not say so, the Lehman CDS deals were so opaque that today, five years after its bankruptcy, some of them are still unsettled.
Nobody knows the total of CDS obligations, because -- wait for it! -- they were COMPLETELY UNREGULATED. But a common estimate was $55 trillion, or several times the cumulative economic activity of humans since the first caveman traded a rabbit skin for a pretty shell.
Should you click through to the Smith piece and then click through to Smith's link about what he calls Bill Ackman's lies, allow me to commend your attention to the date of the story about that: July 2008. (That summer, RtO, a new blog, was constantly repeating financial advice: conserve cash. It was no secret, at least to me, that a crash had been engineered.)
Should you think Ackman's name is familiar, he is known around here for -- until recently -- holding a big stake in A&B, and, more broadly, for being wrong about his bets on business about as often as he is right.
In other words, the people who devised the system that crashed didn't understand it. They were just shooting crap, and if they won, they collected billions. And the way it was set up, even when they guessed wrong, they collected millions. The key word here is GUESSED.
UPDATE MONDAY:
Courtesy of a Facebook friend, this morning I was presented with the following support for the last paragraph of this post.
Funny thing.When rightwingers bitch about income redistribution, they always point to people who are doing their jobs competently, even if the job is no more complicated than restocking shelves at Wal-Mart. I have never, ever heard one of them complain about the massive income redistribution to business management (doubling under Reaganomics) despite the obvious fact that management is, on average, incompetent.
CEO pay has, on average, doubled when compared to worker-bee pay. I doubt anyone will be bold enough to propose that CEO's have doubled their relative productivity.
Arguments that market forces bring us the best achievable distribution of economic assets sound really silly when you think of "management skills" as an asset.
Harry wrote: "But a common estimate was $55 trillion, or several times the cumulative economic activity of humans since the first caveman traded a rabbit skin for a pretty shell."
ReplyDelete2012 World GDP was $71.83 trillion, so you are many orders of magnitude off.
After you fix that, maybe you can explain why it matters that it was COMPLETELY UNREGULATED. Just writing in capital letters doesn't somehow make it related.
Harry wrote: " I have never, ever heard one of them complain about the massive income redistribution to business management..."
Then you haven't been paying attention. Many of us in the Post-Judd Alliance complain ALL THE TIME about corporatism. Since I capitalized "ALL THE TIME" it means it's really, really important :-) Corporatism has many results, one of which tends to be overcompensation of management.
Harry, cause and effect are two different things.
ReplyDeleteIn a 2008 Business Week article, Aaron Pressman let the CRA off the hook.
Unfortunately, the comments thread, laden with facts that Pressman had neglected, and you continue to neglect, put it right back on.
I have never, ever heard one of them complain about the massive income redistribution to business management (doubling under Reaganomics) despite the obvious fact that management is, on average, incompetent.
In addition to what Bret said, it is worth noting that by the tendentious standards of the article, roughly 100% of politicians are incompetent, and if they were subject to the same laws they impose upon the rest of us, the vast majority of them would be in jail.
Also, redistribution doesn't mean what you think it does.
(As a side note, the captcha scheme RTO uses is almost epically annoying.)
I wasn't aware it uses Captcha; it must be a default. Maybe I can disable it.
ReplyDeleteOf course it is redistribution, and of a particularly disgusting kind. I have been tinkering with an extended explanation. Coming soon to RtO, when I get time to finish it.