Another Take on the Global Financial Crisis

While the current global financial crisis has its immediate roots in the collapse of the American housing bubble, there has been little to no discussion about the deeper causes of the meltdown.  As you’ve probably read many times elsewhere, the internal practices of the financial sector – AIG, Merrill, Lehman, Mac – triggered the floodgates of our economic volatility.  Indeed, it is very easy to assign blame to the equity managers without delving into what drove their actions.  In this time of collective anxiety, everyone needs to stop yelling “Doomsday!” and quietly interpret the events that have just occurred.  What economic analysts have forgotten is that market prices are just qualitative analyses of the commodities and processes we place value in.  The markets are a mirror and what they reflect is us.  We have to learn our lesson and step back from the financial sector to see what choices we have made to cause our distress.

To begin, the culture of greed that exists on Wall Street is undeniable.  Executives over-leveraged their companies on derivatives and extremely risky real estate speculation without regard for their fiduciary responsibilities.  European bankers took part in the game too, as clearly evidenced by the collapse of some of their largest financial institutions and the nationalization of the banks in England.  Iceland made such poor investments that they are now utterly bankrupt.  But I do not think blame should fall as heavily to the equity managers – whether private or public – as it has.  These fund managers are a collective of people who have been trained since their first job out of college to exploit the market through every possible loophole in order to drive profits constantly higher.  Parents saw dollar signs and pushed the golden unicorn of an “investment banking” job.  Meanwhile, all of our finance students were ever taught to do is play with numbers without any consideration of the actual assets they were dealing with.  In truth, the school of finance just got better at its game and the government either didn’t keep up or willingly abetted to profiteer from their exploitations.  Government regulation and oversight, endowed with a lot of foresight, is always necessary to close exploitable loopholes and keep investors rooted to the ground.  For that, the cavalier laissez-faire deregulation that drove the Bush administration can take its share of the blame.  We can also blame the Bush administration for putting us into two costly wars without exit strategies, which destroyed American diplomatic capital and fed helium-inflated deficit spending.  Bush, however, was also not the deeper cause of our financial turmoil.

We, the American people, can point out fingers at the managers of our equity and government until we are blue in the face.  The fact of the matter is that all of them still work for us (except the private equity managers, who were only responsible to those of us who could afford to play).  And, for the most part, all they have ever done is what we have told them to do.  We demanded mansions, they gave them to us.  We never demanded real energy independence, so no one invested in the infrastructure.  We cheered the stock market on, so they invented new ways to continue the ride.  We demanded justice for 9/11 and widely approved the Iraq War in our bloodthirst.  This is not to de-villify the Bush administration, because, more than any in the recent past, it was the most willing to encourage the feeding frenzy.  There is no effective governance from them now, because they were never put there to be effective governors.  The Bush administration was just an enabler of our most base instincts towards racism, xenophobia, fiscal irresponsibility, environmental degredation, and war profiteering.

The 300-foot tall pink elephant in the room is our collective desire for unsustainable consumption.  The American people always demand growth, but without any understanding of where that growth could take us.  Why is it always bigger and not more sustainable?  Whether the effects of our haste take the form of carbon emissions, invisible equity or imperialist intervention, we are playing the game like there is a fourth quarter that will end.  For some reason, probably teleology, people have not yet begun to understand how the game really works.  The game doesn’t end unless we end it.  We like to talk about “the companies doing harm” like they exist apart from reality, but we are the ones that work for them and purchase their products.  We are their lawyers and accountants, shielding them from legal and financial attack.  Neither of the presidential candidates will address it, despite Barack Obama’s promising pledge to create a solar and wind energy infrastructure.

We are not going to fool the environment or the market.  As James Lovelock famously wrote in his book “Gaia”, the Earth is essentially a living superorganism.  Its health is directly impacted by our actions, because we are a living part of it.  Not to mention a dominant part.  There are only so many resources at our disposal and it has become critical that we manage them wisely with our eyes on a permanently iterable lifestyle. I think that Thomas Friedman best described the reality of our situation, when he wrote in his New York Times editorial, “The Post-Binge World”:

“My friend Rob Watson, the head of EcoTech International, has a saying about Mother Nature that goes like this: “Mother Nature is just chemistry, biology and physics. That’s all she is.” And because of that, says Rob, you cannot spin Mother Nature. You cannot bribe Mother Nature. You cannot sweet talk her, and you cannot ignore her. She’s going to do with the climate whatever chemistry, biology and physics dictate. And Mother Nature always bats last, and she always bats a thousand.

There is a parallel with markets. At their core, markets are propelled by fear and greed. They’re just the balance at any given moment of those two impulses. Over the long run, you cannot spin the market. You cannot sweet talk it into going up or beg it not to go down. It’s going to do whatever it’s going to do — whichever way greed and fear tug it. And the market always bats last and it always bats a thousand.”

Whether we ignore these economic, political and social facts is up to us.  When people “put their faith in the markets” to guide society, it’s like praying for divine guidance.  It’s not going to happen and you’re avoiding the inevitable problems.  We have to collectively change our overconsumptive habits before the sense we’re getting of Newton’s Third Law  – “Every action has an equal and opposite reaction” – gets any more intense.  The collapse of the financial markets needs to be evaluated as part of this larger picture.  If we look in its mirror, it is showing a world that no longer can run on credit.  We must pay down our debts – to each other and to the environment.  This election will play an important part in whether we alter our values for the better.  Choose without unsustainable desire.

3 thoughts on “Another Take on the Global Financial Crisis”

  1. The political crisis in the US began with the fraudulent election of GWB, a nefarious attack to democratic principles, as endorsed by the US Supreme Court, so no wonder there is both a political and a financial crisis now.

    If the US government (at least the incoming administration soon after taking office) doesn’t incarcerate a significant number of white collar criminals in the US and impounds their assets (both from the private and the public sectors; entrepreneurs and politicians alike, at the highest levels, whether members of the Illuminati clan or not) who are to blame for unfair business practices, political corruption, insider trading, favoritism on juicy war and other public contracts, self demolition of buildings and institutions, abusive secrecy about relevant information and technology that should be made public for the advancement of mankind (i.e. the Disclosure Project), including all sorts of tax / financial simulation and manipulation schemes, which combined blatant crimes have led the US to this collapse, and whose conduct is legally sanctionable by law and in equity, so as to demonstrate that there are rooted solid principles in the US legal system, sufficiently strong and valuable to shelter those main street citizens who abide by decent standards of living, and to punish wrongdoers until they repair the damage, with punitive and decisive action, the conclusion is simple: NO MONETARY BAILOUT WILL EVER BE ENOUGH FOR THE US TO REGAIN CREDIBILITY, because it is conducted at the expense of innocents and for the shared benefit of criminals. That is abuse of power … pure and intolerable injustice. If the Judicial system remains a silent puppet, just as the two other branches of government have clearly become noisy ones, the free fall of this crisis will not end, because what is being done is simply immoral, no matter how it is labeled or justified.

    THE WORLD URGENTLY NEEDS A MORAL BAILOUT, and both the US Executive branch and the Legislature (composed of politicians mostly interested in their selfish careers, and not in the common good as public servants) don’t seem to have a clue of what that means or how to implement it, except with more of the same which wont solve the roots of the problem.

    It is the Judiciary (not composed of biased politicians but by persons of allegedly good moral character with standards of ethical behavior), through the Supreme Court, the branch of government that is constitutionally in charge of administering Justice, so IT IS ABOUT TIME FOR THE JUSTICES TO DO THEIR JOB and save us all from what is coming.

    Regardless of the merits, the US achieved international respect when President Nixon was impeached, which led to his removal from office after Watergate. During the last few administrations all kinds of lies and deceit by Presidents in the US have not been sanctioned and have not only been tolerated but continue to be even applauded, with a much worse component of dishonesty than the Nixon era, including shameless ridicule, so the outcome is exactly what we have and where we stand right now: economic, political and moral decay.

    If a country has the government it deserves … there’s no more time to waste and the US as a country should regain worldwide credibility, because further delays in taking effective action with a principled bailout will unfortunately turn over governmental leadership to others abroad, just to save those few liable criminals in-house (politicians and bankers), and that will be at the expense of freedom and international peace, let alone the continued bankruptcy trends of the US economy and its political system, fundamentally due to more than obvious moral insolvency from the top down.

    Eric Coufal, Esq.
    Attorney and Counsellor at Law
    admitted to practice in Mexico,
    and in the United States by the
    New York and New Jersey Bars

  2. It’s so refreshing to read a post that talks about the accountability of one’s own choices and actions, rather than blaming ‘the government’ or ‘the bankers’ or whoever else gets in the firing line.

    We are all part of this giant, living, superorganism and there is no escape.

    We are all one.

    May peace and peace and peace be everywhere…

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