The Unsinkable brian cork™

Brian Patrick Cork is living the Authentic Life

Question everything and accept nothing

December24

I have decided to regale you with my current thoughts for anyone interested in the short-term causes of this financial crisis. 

The long-term buildup of debt guaranteed problems for America, but a long series of public policy errors produced a severe crisis.  

In a forthcoming article in Vanity Fair slated for January 2009 (yes – I have both the power and will to do this), entitled “Capitalist Fools”,  Joseph E. Stiglitz will write:

“Behind the debate over remaking U.S. financial policy will be a debate over who’s to blame. It’s crucial to get the history right, writes a Nobel-laureate economist, identifying five key mistakes-under Reagan, Clinton, and Bush II-and one national delusion.”

You can learn more about Mr. Stiglitz by reading this summary from Wikipedia:  He has credibility and my attention. Mr.  Stiglitz  is an American economist and a professor at Columbia University. He is a recipient of the John Bates Clark Medal (1979) and the Nobel Memorial Prize in Economic Sciences (2001). He is also the former Senior Vice President and Chief Economist of the World Bank.

In any event…

There will come a moment when the most urgent threats posed by the credit crisis have eased and the larger task before us will be to chart a direction for the economic steps ahead. This will be a dangerous moment. Behind the debates over future policy is a debate over history; at issue – the causes of our current situation. The battle over the past will determine the path for the present. So it’s crucial to get the history straight.

What would Thomas Jefferson and Ayn Rand say?

I believe Mr. Jefferson would advise us to keep asking questions.  And, Ms. Rand would encourage not to accept any answers.

I Blog about both quite a bit.  Go indulge yourself when you have some time. NOTE: See below for some quick links.

What were the critical decisions that led to the crisis? Mistakes were made at every fork in the road.  We had what engineers call a “system failure – when not a single decision, but a cascade of poor judgment calls, produced tragic results. 

The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal./1 Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud:

“I have found a flaw.”

Congressman Henry Waxman pushed him, responding:

“In other words, you found that your view of the world, your ideology, was not right; it was not working.”

Greenspan responds:

“Absolutely, precisely,”

Such a simple rsponse to a tragic and enormous result.

The embrace by America, and much of the, of the world, of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.

The administration talked about confidence building, but what it delivered was actually a confidence trick. If the administration had really wanted to restore confidence in the financial system, it would have begun by addressing the underlying problems-the flawed incentive structures and the inadequate regulatory system.

Was there any single decision which, had it been reversed, would have changed the course of history? Every decision including decisions not to do something, as many of our bad economic decisions have been (eg the SEC and the IRS regarding Bernie Madoff), is a consequence of prior decisions, an interlinked web stretching from the distant past into the future. You’ll hear some on the right point to certain actions by the government itself-such as the Community Reinvestment Act, which requires banks to make mortgage money available in low-income neighborhoods. (Defaults on C.R.A. lending were actually much lower than on other lending.) There has been much finger-pointing at Fannie Mae and Freddie Mac, the two huge mortgage lenders, which were originally government-owned. But in fact they came late to the subprime game, and their problem was similar to that of the private sector: their C.E.O.’s had the same perverse incentive to indulge in gambling.

More later – to include historical foundation, root cause and relevance. And, potential solutions.

Meanwhile… Please go listen to “In The Sun” by Michael Stipe with Coldplay.  The original song was by Joseph Arthur. Both are brilliant. But, I think I like Arthur’s version better. It’s raw – like my feelings so often are.

Peace be to my Brothers and Sisters.

Brian Patrick Cork

______________________

1/ Ayn Rand might agree with this.  But, it neglects the sophism that everything is likely manipulated at some point.

NOTE: I also have a business Blog that apparently fascinates world leaders and decision-makers alike (but, few others). It can be viewed and relished at: The Human Capital Blog.

Blog Posts with references to Thomas Jefferson – and, certainly Ayn Rand:

Shiver

December23

Lets dispense with dramatic posts today and consider:

“Shiver” by Coldplay.

Peace be to my Brothers and Sisters.

Brian Patrick Cork

economic fall-out and the non United States

December1

On Friday November 21, the world came within a hair’s breadth of the most colossal financial collapse in history according to bankers on the inside of events with whom we have contact.

The trigger was Citigroup – the bank, which only two years ago, was America’s largest (and, a shining example (and barometer) of our financial prowess).

How many of you noticed – and then understood – the vital sense of urgency around the Fed’s response to Citigroup, and the frenzied efforts to stabilize that organization?

It can now be argued that the United States government (the people?) are the largest shareholder in Citigroup.

“The size (nay – the magnitude) of the United States Government’s de facto nationalization of the $2 trillion banking institution is an indication of shocks yet to come in other major United States and perhaps European banks thought to be ‘too big to fail.”

– Raymond St. James, British Financier

The way in which US Treasury Secretary Henry Paulson has handled the unfolding crisis has been worse than clumsy.  It is incompetence laced with deceit. Paulson is not a banker; but a Wall Street ‘investment banker’, whose experience has been in the quite different world of buying and selling stocks or bonds (or underwriting and selling same). His croneyism and sleight-of-hand tactics has made a grave situation into a globally alarming one. Mostly (likely) in terms of shaking (or confirming) the global financials markets confidence.

The most alarming aspect of the crisis is the fact that we are in an inter-regnum period when the next President (that would be Barack Obama) has been elected, but cannot act on the situation until after January 20, 2009 when he is sworn in.

Interestingly, there is already talk around Capital Hill in terms of Presidential “preemptive” pardons.

Just think about that in terms of who is perceived as holding the bag, and accountability.  The timing is exquisite for a crisis and all responsible parties can avoid liability.

In any event…  Professor Igor Panarin, a leading Russian political analyst has said the economic turmoil in the United States has confirmed his long-held view that the country is heading for collapse, and will divide into separate parts.

I don’t think  this is likely.  But, the notion is provocative or evocative – depending on where you stand.

Nonetheless…

Professor Panarin said in an interview Monday the 24th with the respected (most of the time) daily Izvestia:

“The dollar is not secured by anything. /1 The country’s foreign debt has grown like an avalanche, even though in the early 1980s there was no debt. By 1998, when I first made my prediction, it had exceeded $2 trillion. Now it is more than 11 trillion. This is a pyramid that can only collapse.”

The paper said (and, I am paraphrasing – so, you have to trust me on this):

Panarin’s dire predictions for the U.S. economy, initially made at an international conference in Australia 10 years ago, at a time when the economy appeared strong, have now been given more credence by this year’s sequential events.

When asked when the United States economy would collapse, Panarin said:

“It is already collapsing. Due to the financial crisis, three of the largest and oldest five banks on Wall Street have already ceased to exist, and two are barely surviving. Their losses are the biggest in history. Now what we will see is a change in the regulatory system on a global financial scale: America will no longer be the world’s financial regulator.”

NOTE: China and Great Britain are already making this assumption (my perception based on actions [deeds] and words).

He predicted that the U.S. will break up into six parts – the Pacific coast, with its growing Chinese population; the South, with its Hispanics; Texas, where independence movements are on the rise; the Atlantic coast, with its distinct and separate mentality; five of the poorer central states with their large Native American populations; and, the northern states, where the influence from Canada is strong.

Fascinating and gripping stuff.  I wonder which “province”, given socio-economic opportunities would be the egalitarian?

In closing, Panarin even suggested that:

“We could claim Alaska – it was only granted on lease, after all.” /2

Meanwhile…  Today, I am listening to “Fix You” by Coldplay.

Peace be to my Brothers and Sisters.

Brian Patrick Cork

______________________________

1/ There isn’t enough gold on the planet.

2/ I have a call and email into Panarin to sort out who, precisely, “we” are.

What’s All This About?

"What am I looking at?", you might wonder.

Lots of stuff.

Meanwhile, here, I discuss events, people and things in our world - and, my (hardly simplistic, albeit inarticulate) views around them.

You'll also learn things about, well, things, like people you need to know about, and information about companies you can't find anywhere else.

So, while I harangue the public in my not so gentle way, you will discover that I am fascinated by all things arcane, curious about those whom appear religious, love music, dabble in politics, loathe the media, value education, still think I am an athlete, and might offer a recipe.

All the while, striving mightily, and daily, to remain a prudent and optimistic gentleman - and, authentic.

brian cork by John Campbell





photos by John Campbell

 

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