Here We Go Again

I must be getting older. Or I read too much history. It just doesn’t ever seem like people that should know better -- really smart people -- ever learn.

”For it is becoming increasingly clear that the real-estate bubble of recent years, like the stock bubble of the late 1990s, both caused and was fed by widespread malfeasance.

That is from Paul Krugman, as quoted from this post on the Economist's View. I’ve tried to steer you towards both in previous posts.

When it comes to money, I’m like Forrest Gump -- “I’m not a smart man...” Seriously, I don’t spend a lot of time studying money and the investments I make tend to make financial planners wince because the are so conservative.

But there’s one theme I keep seeing over and over again. Financial scandal -- lack of regulation. Financial scandal -- lack of regulation. Financial scandal -- lack of regulation. It’s like having a Shania Twain song stuck in my head -- playing over and over. It’s maddening.

I mean really, how many times do we have to hear it before we’re sick of it ? This time it’s the sub-prime mortgages. Last time it was the deregulation of electricity (Enron) and telecommunications (World Com.) Before that it was the deregulation of the Savings and Loans (Charles Keating and Neil Bush.) (Yes, of the Bush family, for you younger folks.) I’m sure there are others that I missed in my youth but we could keep going to back to the Great One in 1929 (lack of regulation in the stock market) and even beyond.

People are greedy. This isn’t recent news. Greed is one of the Seven Deadlies. It’s as old as...well, sin. Smart people aren’t immune. Even rich people aren’t immune. It’s how a lot of them got that way. Has TV finally succeeded in poisoning our collective minds ? Do we believe a $1,000 dollar suit and a Masters degree in Business Administration somehow equates to honesty ? To good character ? Not to put too find a point on it but you don’t go to business school to learn it’s wrong to cheat, steal and lie. You go there to learn business law, how to generate income and how to advertise.

We need to wake up and smell the coffee before the rest of the world does. When I was putting this post together and went to the Economist’s View to get the links I needed, I ran into this:

”The ongoing sub-prime mortgage crisis, a result of irresponsible lending policies designed to generate commissions for unscrupulous brokers, presages far deeper problems in a U.S. economy that is beginning to resemble a giant smoke-and-mirrors Ponzi scheme. And this has not been lost on the rest of the world.

We’re getting better advice from an Iranian economist (Hamid Varzi) than from our own government. You really ought to read the whole thing.

”A solution to the U.S. debt problem requires radical measures, including: the elimination of corporate tax loopholes, a reversal of tax breaks for the ultra-rich, a bipartisan campaign to eliminate budget "pork," imposition of stringent limits on corporate debt and speculative lending, a vast reduction in military expenditure and, finally, an additional 50 cent per gallon gasoline tax that would slash the federal deficit, curtail energy waste and spur technological breakthroughs.”

If we can’t put our own house in order -- if we can’t stop the “malfeasance”, the “pork” , the “irresponsible lending”, the “unscrupulous brokers”, the unregulated greed in our country, the world -- that global economy you hear so much about -- isn’t going to do business with us. We may not call it stealing but that doesn’t mean the rest of the world won’t.

Don Brown
August 18, 2007