Bet against the bubble - how to head off a subprime crisis
More speculation, not less, is the key
Magic Quadrant for Enterprise Backup/Recovery
We all know what to do about this subprime mess, the credit-crisis final-end-of-capitalism farrago, don't we? Hang the bankers, hang them high, banish greed and stupidity from the human soul, bring in a very real change to our mass, crass, consumerism and usher in a society free from the shackles of late stage fiancierism? OK, not everyone quite approaches this in the manner of Dave Spart, but there's any number insisting that this burp from the maw of capitalism is proof perfect that we must abandon the very concept.
There are also those equally misguided who insist that it's all been just one of those things, that no changes at all are needed. 'Equally misguided', because a system that allows our method of financing a roof over our heads to (nearly) bring the entire financial system to its knees is not something that we want to allow to continue unchecked. Banks and lending are simply too important to wealth generation and risk dispersal for us to want that sort of fragility to continue.
So what should we do then? A little more regulation? A lot more such? That's not necessarily a wonderful solution, considering that over the past few years we've seen the regulators themselves unaware of the disaster unfolding. Robert Shiller's got an argument that will make some peoples' heads explode in his new book The Subprime Solution - we need more speculation in the housing market.
So what market is that?
OK, OK, deep breaths - the man's got a valid point here. Start with the point that the current structure of the market failed us. We thus need to change the structure of that market: that's not really a controversial point at all, from Spartists through to reasonable people. It's also hardly a surprise to anyone that there are market failures: things which markets don't deal well with, things that are left out of or even deliberately excluded from markets. But we do need to distinguish between things which markets will inherently fail with and things which are failed by current markets, but which could be dealt with by better designed ones.
Worth pointing out here that there is no such thing as the 'free market' - nor even 'free markets'. There are distinctions to be made between ones which are more or less free than others, sure. But the really vital point is that all markets are constructed: you cannot have a market in property unless there is prior agreement upon what property is, who owns it and how it is to be transferred. Those agreements can be cultural, legislated, come from regulations or simply common agreement amongst the participants: but all such markets are constructs, not things which exist ab initio.
Take climate change as an example. Stern (of the Review) has called it the greatest market failure ever: a decent enough phrase but one that's not quite correct. It's the result of the absence of a market: that's why we're all running around trying to create a market in cap and trade allowances to solve the problem. That we're creating a market to solve the problem really does seem to indicate that we've identified the problem as the absence of such a market, not a failure of either a market or markets in general, no?
Shiller's analysis of what happened in the housing market over the past few years is similar in logic: there's something missing from our current structure, something which we need to add.
It's the bubble, stupid
He starts from the point that while there was most certainly fraud, stupidity, larceny and greed involved in what happened they were not the cause. No, rather we had one of those madness of crowds moments when the populace was swept up in the grips of a mania. House prices would continue to rise, continue without risk. Very much a repeat of numerous earlier examples, the South Sea Bubble, Dutch tulip mania, internet stocks in the 90s, the Mississippi land boom in France, economic history is littered with examples. The frauds fed off this, but they needed that mania to exist first - they didn't cause it.
COMMENTS
Tech?
What has a USA neo-con economics opinion obscurantist got to do with IT?
Clearing the AIRwaves of Dross and Petrified Thoughts
"This article goes on and on about markets but it's really just about hedging, which is certainly not the same thing as a market." .... By Anonymous Coward Posted Tuesday 2nd September 2008 08:58 GMT
You can say that until you are blue in the face, AC, but the thread is about the dire straits need for wholly different markets, which dispenses with leads from the corrupted financial controls of the less than worthy. And if that should see their little ego empires collapse rather than flourish in their Unbridled Support of Virtualisation of the Great Game, then who would they have to Blame but themselves whenever they are Appraised of the Paradigm Shift in New World Order ProgramMIng. The Offer is there for them to Support IT with Global Wealth. After All, it is not as if it is their Money which is being Spent, is it, although too many are Stupid enough to tell themselves that Tall Tale and thus are Frightened to Spend IT Freely and Wisely for IT to come around to them again for their Philanthropy?
Take a Bow all those Pontificators a la Buffet/Gates/Soros to name but three, who promise a lot but do practically nothing.
DeadHead Rule ..... AI Natural Default
"Mike hit the nail on the head - the corporate form of governance isolates top managers from any downside to risky behaviour (as long as it is not provably illegal!) while compensating them highly for risky behaviour that pays off." ... By Robert Hill Posted Monday 1st September 2008 23:20 GMT
Robert, It is all illegal because the gambling is all done with money created by peoples toil and production since time began and which is salted away/denied them by the Usurers who would even then charge them more to Use what is already theirs, but which has been stolen/spirited away by Suits who think they are Invincible/Invisible/Smarter than the Average Bear. They are no more than Crooks of the Most Vile and Putrid Kind for their Love of Money is the Root of All Evil, it is truly Said.
"Lots of lovely theory, why not start fixing NOW?! " ... By Anonymous Coward Posted Monday 1st September 2008 19:05 GMT ..... is a Valid Starting Point for the Great Fix ........ and who knows, if there is any Intelligence in Wall Street Capitalism, their Bankers will SWIFTly convert to Shariah finance/Islamic Banks or watch their Funding Streams Divert and Disappear as Investors Realise the Deceptions played upon them for the Obscene Pleasure of Unnecessary Greed and Intellectual Arrogance. The Live Evil/Cancerous Growth in their Midsts.
"What is needed is not another market for intangible assets, but more transparency. Even experts at major financial institutions admit that no one really understand how the industry works. Until we do, this sort of thing will continue to happen, as it simply cannot be predicted." .... By Kanhef Posted Tuesday 2nd September 2008 01:15 GMT ..... Spoken like a vulnerable banker/investor, Kanhef. The Industry works like a Scam for it is predicated on Dreams which are tied to the supply of perceived wealth/printed paper/currency. Control the Flow rather than Supply the Flow of Global wealth has you sitting in Control of Dreams and Reality.
That is How IT Works in two Short Simple Sentences.
What would you like to do about IT? Ignore the Facts or Change the Rotten System for Something/Anything Altogether Beta, for of course, IT will be Registering and Monitoring its Live Rebuild with ITs CyberIntelAIgent Reaches into Virtually Instant Global Communications Networks InterNetworking Influence and Affluence to New and More Wwworthy Homes/Stores/Hubs/Safe Havens.
The Old Money System with Powers in Control is Dead .... Long Live the New Money System with IT Control of Powers instead.
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