Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Conservative Economics Based Upon Greed

Politics / Economic Theory Jun 09, 2009 - 04:05 PM GMT

By: Pravda

Politics

Best Financial Markets Analysis ArticleCage Innoye writes: In life we have the problem of self management. If we don’t manage ourselves, then disaster occurs. Self control is a key trait of this behavior, taking calculated risks is another, a strategy of balance is another. Most people accept this.


We know things shouldn’t simply go out to extremes because disaster will occur, thus, we manage ourselves. We know that we cannot simply do one thing over and over, that we must do many things for a successful project. We know that we should not take big, foolish risks in our personal lives. Should economics be any different? But in conservative economic theory, economics is very different! A big exception is made, suddenly in the sphere of business and finance we have “magic”. While in life we have self control, in economics we have the mysticism of automatic processes. Thus, life is so much easier in the economic sphere; it’s like a big vacation from reality.

In conservative theory all things magically balance out. If real estate prices get too high, then they correct in a natural cycle. Eventually, all false value is removed; buyers lose equity and investors will lose too. So gains and losses exactly equal. The just invisible hand of Adam Smith creates equilibrium; the invisible hand of this invisible god corrects all. This god is all knowing, all powerful. All works out in a completely spontaneous process. Yes, in life you must worry, but in economics we have a great exception to life because here some unknown god is in control. Whereas in your own life or in education or coaching your child’s soccer team or cooking a holiday dinner there is no god to make things work out automatically. Finally, we have a realm of our lives where all is easy and free of worry! What a relief!

All’s well, but upon a second look, reality doesn’t match our fairy tale. Damage is done just as in other human processes, personal or social -- when we let things go to one-sided extremes, when something is overdone, when we take stupid risks. The magical corrections of conservative theory involve catastrophic events. And the problem in the 2008 crash was not that home buyers or the mortgage makers or the purchasers of mortgage-backed “insecurities” were the only ones hurt. Everyone was slammed by the downturn. Even if you were to argue that those who got houses with poor financials were at fault (which is only partly true), still the vast majority of homeowners were not at fault. Millions of innocent people, the vast majority of the population that did NOT buy houses during the bubble; and the vast majority of businesses did NOT buy mortgage securities, yet they are hurt too. So we must ask, “What kind of invisible hand and magic is this?” A magic that meets out punishment for everyone, to the whole nation for the actions of a minority, this is hardly a just economic god.

In conservative economic theory, a recession or depression must be visited upon all households, there’s nothing you can do, you must accept this, the government should not, can not help, everyone suffers for the foolishness of a few. It seems this theory is a bit sociopathic, mean-spirited and uncompassionate. This view is just plain cruel. Modern capitalism is based on money and profit. It’s an objective system that leads to a particular subjective behavior: greed. Greed didn’t create capitalism but greed is its result and greed maintains the system. Conservatism is a fan of greed -- greed is good, and, perhaps, greed is even divine!

So let’s review this theory -- greed leads to loans given to people not qualified to pay them, then greed sells the mortgages to the whole world, then the whole world goes into a big recession. You may object but conservatism retorts that magic solves the crisis automatically by stopping the global economy and balancing things out. And then, you guessed it, greed returns again, and all is well...(after hiding out in the Bahamas for a couple years).

But if greed is so good, why should we have recessions and depressions in the first place?

We are told the individual must learn to restrain his own greed! How does that work? Be greedy but limit your greed? Consider this: You’re in the financial industry; you see others making profit, manifesting their greed. So as a business person you replicate your colleague’s behavior and, more, you must outdo them in approving loans without financial basis -- no jobs, no tax returns, no proof of income, nothing. The profit demand of the economic system requires this, and how will the rational nature of a lonely individual stand up to this pressure? It cannot. The executive cannot fall behind, when you lag, you’re near a takeover; or as CEO you might get fired at the next shareholders meeting. Any logical executive would get way ahead on the greed curve; you can’t have competitors getting stronger than you. This is Business Administration 101. It’s confusing, at what point does your greed get tempered? Tell us about this enlightened greed!? We cannot have any regulation of the financial industry because conservatives would scream “communism”. So then where is the self control?

Consider this: When it’s absolutely clear that one should stop selling bad mortgages, when the market begins to falter, it’s already too late. The crash has begun. From inside the boardroom of a single company one cannot see the whole process, and one doesn’t want to. So there is a big contradiction in conservative thought. You cannot be greedy and wise at the same time. You cannot serve both moderation and mammon. Either you are for a system of maximum profit and fierce competition or you’re not.

If you’re a good capitalist, competition drives you to greed; you must be greedy to survive in this economic system, one has no choice. In a completely free-market notion with no restraints, the cycle continues until there is disaster. Thus, the supposed magical process does NOT result in an elegant, symmetrical correction; it results in full-scale collapse that paralyzes the entire economy hurting many innocents. Everything stops. Money isn’t available, the economy cannot restart without loans to consumers and business; it languishes. Banks have no cash, and those that do will not lend it out, they hoard it to survive bad times.

What actually happened in the 2008 crash was that the government knew but did nothing because of its ties to the very people who created the problem. Finally, government feigned surprise then scrambled, but the problem was many times greater than they had expected, because they had not required reporting from banks on their activities. Since those who are greedy cannot control themselves, in this economic framework other forces would have to intervene -- in our present system that is solely the government. Fortunately, Bush wasn’t a strict conservative or we’d be in a complete standstill today. Bush pursued conservative policies but when the crisis happened, he switched to liberal policies to save us from oblivion. Conservative economics cannot head off crises, it’s helpless, its principles of greed and deregulation lead there inevitably. It’s trapped by its own logic. So we must conclude that the strict conservative view is “fatalistic”. Fatalism is a cousin to notions of magic and spontaneous greed. In this view, there is nothing you can do.

So let’s sum up the key points of this article: The conservative thesis is based on four things -- Magic, cruelty, fatalism, greed. What we need is a new economic view for a new economic system that opposes these behaviors. In the article, “Diverse Economy is next after Capitalism and Communism” by this author in Pravda, a thesis was put forward on a new system of business and finance. A Diverse Economy would oppose the behaviors of magic, cruelty, fatalism and greed.

Opposed to “magic” would be an economics of rationality. We need to manage ourselves and not let spontaneous behaviors result in disaster. Self management would begin in the firm itself. Here we would catch the problem before it spreads. Industrial leagues would strictly apply ethical and transparent reporting guidelines.

Opposed to cruelty would be an economics of compassion and support, those who are victims should be helped. The blame should be put precisely on those who caused a problem. And we can design fiscal policies that support ordinary people and not favor big banks and corporations.

Opposed to fatalism should be an economics of human intervention -- intervening in the early stages of a problem, not letting things lag. This recession didn’t have to be. There are natural ups and downs in economic processes but they don’t have to result in crisis. With pubic business information we can catch problems before they become catastrophes. Capitalism hides information; ignorance is the general state of capitalism. Further, in capitalism there are no social forces that can act against irresponsible corporations. In a Diverse Economy, there are ‘Leagues’ for consumers, investors, communities, employees and more. Leagues would create a check and balance system making an economy a truly social partnership.

Opposed to greed would be an economics of human values and all key values in a culture. Money wouldn’t be the sole economic driver, profit wouldn’t be the only goal, greed wouldn’t even be considered as a value. In a Diverse Economy, there would be a collection of performance and metric targets that would represent a good list of important social values and good business values too.

Cage Innoye is an American writer. You can contact him at his blog, or at his email address. He is working on his upcoming book, “The Axxiad”.

Pravda.ru

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Pravda Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in