“I’m so bored. I hate my life.” - Britney Spears

Das Langweilige ist interessant geworden, weil das Interessante angefangen hat langweilig zu werden. – Thomas Mann

"Never for money/always for love" - The Talking Heads

Wednesday, January 23, 2008

brother, can you spare a trillion?

They used to tell me I was building a dream ...

LI had to swallow a little sob of pride, yesterday, as the Bush administration, in the form of the Fed, did what it does best – made sure that our billionaire class is all tucked in and shit. Are they being fed well? Have their diapers been changed? Since last August’s cuts (which, we’ve been assured over and over by financial journalists, were ‘brilliant’), the Fed has shown that it takes its mission (“drinks on the house!”) seriously.

Many might be thinking, gee, if trillions of dollars can be lost in the blink of an eye, perhaps the state should have captured that money and used it for something useful. Such thinking is vicious, criminal, and should be outlawed. As libertarians would point out, such thinking would hamper all our freedom – freedom – freedom. Soon we’d be demanding free health care and who knows what other kinds of shit. It would be the Soviet Union all over again.

But carpers are always a problem. Econospeak has a nice post referencing an article in the dear old New York Times of last July. Remember last July? It was the gilded age, last July. We were all so happy. Things were turnin’ around in Iraq. The towers of Babel were being built in the heart of many a gentrified area – such as in Austin – and everybody was getting rich, mining the potential in their up and up houses by tapping the mortgage money, here and there, for the new kitchen, the boat, and how about a six pack of 25 dollar wines? It was then that we heard the words of one of the captains of our industry and fate as though it were a blast from the Whore of Babylon herself, speaking at the ‘Anti-Christ welcome home’ party:

"Kenneth C. Griffin, who received more than $1 billion last year as chairman of a hedge fund, the Citadel Investment Group, declared: "The money is a byproduct of a passionate endeavor." Mr. Griffin, 38, argued that those who focus on the money -- and there is always a get-rich crowd -- "soon discover that wealth is not a particularly satisfying outcome." His own team at Citadel, he said, "loves the problems they work on and the challenges inherent to their business." Mr. Griffin maintained that he has created wealth not just for himself but for many others. "We have helped to create real social value in the U.S. economy," he said. "We have invested money in countless companies over the years and they have helped countless people"."

"The income distribution has to stand," Mr. Griffin said, adding that by trying to alter it with a more progressive income tax, "you end up in problematic circumstances. In the current world, there will be people who will move from one tax area to another. I am proud to be an American. But if the tax became too high, as a matter of principle I would not be working this hard."

Can you imagine how we would all suffer if Mr. Griffin did not work so hard? I imagine that he would get out of his seat slower. Or, when some suited scumbag came in with another computer simulation showing how to fleece suckers ever more creatively, he’d airily wave them away. He’d be on strike, our maestro. Imagine that creativity taken away from the common good to which he so richly contributes! He’d lie down on his office sofa more. It would be so sad. Similar sentiments were uttered by Russian serfholders in 1850 – take away the ability to own a serf and you simply destroy the incentive structure that had made Russia great!


roger said...

ps - perhaps I should say, beyond the snark, what I thought was wrong with last August's Fed action. If the economy had been like the one in 2001, the Fed would have been perfectly justified in injecting liquidity into the market. Why? Because 2001 was a traditional retraction. There had been overinvestment in real products and services, and there was underdemand for them.
But in 2007, this wasn't the case. Rather, it was the very structure of the investments that were out of whack. Profit was being generated by speculation that, ultimately, was not based on real goods and services, but on that narrow service that consists of creating a spread sheet. There was - and there still is - an enormous disproportion between spread sheet wealth and real investment. The supposed credit crunch was the result of the structural corruption at the heart of spreadsheet wealth. It didn't address that corruption at all, but used the ordinary purpose of the market as a screen motivation behind which to keep the machinery of spreadsheet wealth going. Well, that was not going to last long. Just as Greenspan's enabling of the overconstruction and overpricing of homes lead to the crash of the mortgage market - more than just the subprimes are going to be going down - so, too, Bernake's briefer equity bubble simply impeded the fallout as spreadsheet wealth evaporated when the reality principle came in - that ultimate Ultra. Counterparty wealth, it turned out, was a bet on a promissory note on another bet. These made great spreadsheet numbers, but they weren't hooked into the world. So it goes...

roger said...

oops, another ps - go to this Stiglitz op ed for a fairly good list of what should be done now. Which, of course, won't be.

Brian said...

A freind of a coworker just lost his job. He owes %500K on his house (in California). The house failed to sell at auction, and the house across the street sold for the low 300s. A lot of paper wealth lost. The bank suggested he just give up and send them the keys.

As for your's truly-$25 wines?-when you have the pathological collecting bug, that's cheap!
Oh well...some of us know better but still keep making the same mistakes over and over.

roger said...

Brian, I'm no Savoranola of the oeniphile set! I have felt, however, that there is something spurious about the wealth being thrown about in this country.

Brian said...

If you're ever in the Bay Area, let me know-I'll open one of my more stupid expenditures in your honor. :)

roger said...

And if you are in Austin - well, I'll treat you to Three Philosophers, the king of beers!