Keeping your head while losing your shirt

My thoughts are currently focused more on Mammon than on God, so instead of another "spiritual" post, I'm linking to recent articles that address the economic crisis and the problems facing investors. 

A couple of articles warn against panic selling:

The New York Times offers a good explanation of why converting all your stocks to cash is a bad move.

The Los Angeles Times reminds us that bear markets are always followed by bull markets - and we may be poised for one now.

Two other articles address fears of a global collapse:

The Washington Post explains why, media hype to the contrary notwithstanding, we are not entering another Great Depression.

Elizabeth MacDonald of Fox Business News lists the many differences between the real Great Depression and the situation we're currently in.

Finally, the My Money Blog offers sensible advice and a surprisingly mature perspective - surprising because the blogger is a youthful 29!

Comments

[dmduncan]

Back in 1992 I was one of a small group of people listening to Wallace Black Elk at a sweat lodge site in Colorado. He told us of a vision that he had. In the vision he said he saw buildings collapsing and people falling out of the buildings and people were watching this and screaming "Oh my God, oh my God!" But what they really meant, he said the spirits had told him, was "All my gold, all my gold!"

[Matthew C.]

Hi Michael.

You guys probably don't want to hear that I sold all my stocks when the Dow was in the 13000-14000 range, do you. :-)

[Michael Prescott]

You guys probably don't want to hear that I sold all my stocks when the Dow was in the 13000-14000 range, do you.

It wouldn't bother me. I intend to hold my investments for another 20+ years; by the time I start selling, the Dow should be well above 14,000. So, to me, it makes no difference what the price is now.

[Larry Boy]

(Continued from the last blog post, as the issues are the same.)

Michael H wrote:

"This is a global crisis, LB. The core issue has to do with the US Housing market going haywire, but the real problem is about the mortgages that were generated during the housing boom being converted to highly leveraged debt instruments, which were then bought and distributed with more leverage. Vast amounts of cash chasing high returns and low risk went on worldwide, on an almost inconceivable scale."

Okay, I don't know what the origin of this crisis is. But let's look at its effects? Which countries have been able to handle the crisis the best? Is it the U.S.? I don't think so. My impression is that most other Western countries have been able to deal with it better. None of the big banks in Sweden, for instance, have been even close to bankruptcy, and so far have only made relatively minor losses.

"The United States has been a mixed economy forever. It’s remarkable that we are as productive as we are."

What are you trying to say? That any kind of regulation of the market by the government will reduce productivity? I think this is a highly questionable claim. Look at Japan, for God's sake, their government has practically been one with the market, and they have for long periods had the highest production rate of any country! The bubble burst in the nineties, yes, but ups and downs have happened to all economies as far as I know, and now the Japanese economy has been in a positive trend for some time.

"It’s always struck me that those who imagine a global economic system that can provide some sort of heaven on earth constantly ignore the realities of Economics 101: One can’t consume more than one produces."

Do you think it's impossible to meet this standard unless you have a practically free market such as the U.S.? If so, how do you explain the success of the Japanese economy, for instance?

"Not to be a spoilsport, but I think we need more capital. And though I’m belaboring the point, we can either provide the freedom and incentives for more productivity, or we can try to force it."

Oh, so the European countries, Canada and Japan are "forcing" people to provide them with opportunities for economical growth? Is that what you're saying? Gosh, it sounds like you're talking about the old Soviet regime or something.

"As far as “influencing the well being of other countries”, it will be interesting to see what the fallout of the current financial upheaval actually is. With the US providing nearly 25% of global GDP ($14 trillion) a major decline here may provide a profound demonstration of how much the States has provided to the well being of other countries over the past century."

Well, the fact is that per capita, the U.S does not top the list, so this is not remarkable at all. Therefore, a major decline will only show that the U.S. is unable to handle its own economy in a responsible way, draggig down others in the mud.

[MickeyD]

You will vastly enhance the performance of a long term portfolio by going into cash for the down cycles and buying back in for the up turns. Pull up a monthly chart of whatever index you follow and play around with some moving average cross overs and you'll see this is not too hard to accomplish. You won't get the exact highs and lows but you will get the meat in the middle and avoid the big down drafts.

[Pete]

That Washington Post article linked to said:

"In short, Uncle Sam is becoming our new bank. He has also become our new insurance company with his effective purchase of the world's largest insurer -- AIG."

As Clinton's surplus turned into a huge deficit under the Bush administration, what capital is this new Bank of Uncle Sam using? This could give a whole new meaning to the term promissory materialism.

[Michael Prescott]

You will vastly enhance the performance of a long term portfolio by going into cash for the down cycles and buying back in for the up turns.

This is incorrect, for reasons explained in the NY Times article linked in the main post.

[Art]

I'm 55 years old, retired, and my yearly distributions are set up to where I get the same amount regardless of what the market is doing. I got my monthly statement yesterday and my IRA is down about $35,000. Not too bad considering the market we are in. I'm about 60% stock index funds and 40% bond funds in my IRA. I planned my retirement with what I call the 4 legged stool approach. 1/4 is from IRA distributions, 1/4 is from a state pension, 1/4 is from an after tax account, and 1/4 will come from social security when I turn 62. So, even though I'm a little concerned about the stock market, it's something I can't do anything about so I don't worry too much. When I turned 50 I set up what's called 72(t)SEPP distributions which stands for "substantially equal periodic payments"; this allows me to take about 4% of my account each year without paying the 10% penalty that usually apply to any distributions before age 59.5 years of age. http://www.retireearlyhomepage.com/wdraw59.html

[Michael H]

Which countries have been able to handle the crisis the best? Is it the U.S.? I don't think so. My impression is that most other Western countries have been able to deal with it better.

From what I’ve been able to discern, we’re at the very beginning of this, Teabinge, and nowhere near the end. There are already concerns that Iceland will need to declare bankruptcy (that would be the entire country), and several economists are very concerned about Europe’s slow response to the severity of the problem. This is a global problem which will require a global solution. We won’t know which countries have handled it most effectively for a long time, maybe two or three years. Maybe longer, depending on how it’s handled.

What are you trying to say? That any kind of regulation of the market by the government will reduce productivity?

That we should design markets in such a manner as to reduce, if not eliminate, the potential for gross abuses should be as clear as a summer day by now. There does need to be dispassionate governmental oversight that insures that someone offering to insure a contract has the ability to cover losses, for example. We also need much more clarity regarding financial statements and the assurance of a level playing field. I’m not so much of an idealist that I don’t recognize that there are certain people who will abuse anything if they have an opportunity.

My primary concern about this recent upheaval is that governmental reactivity will lead to excessive regulation that stifles economic growth at a time that we will need to encourage as much growth as possible to minimize severe consequences throughout the wider economy.

Do you think it's impossible to meet this standard unless you have a practically free market such as the U.S.?

The point I was making is that there is nowhere near enough current productivity worldwide to elevate the living standards of the global population to the level many now deem necessary. We can have a world where more and more people continue to pull themselves out of poverty, with the associated environmental impacts, or we can return to a simpler time. China and India have already demonstrated their preference for the former. The West needs to decide what they want to do.

Oh, so the European countries, Canada and Japan are "forcing" people to provide them with opportunities for economical growth? Is that what you're saying? Gosh, it sounds like you're talking about the old Soviet regime or something.

What I’m saying is that the high levels of taxation and an emphasis on endless governmental social programs tends to discourage productivity, especially in the West. Japan may an exception to this for cultural reasons, though that culture does create challenges for businesses there. Charlie Rose interviewed the Sony CEO Wednesday, who mentioned that the Japanese business laws that forbid eliminating jobs were particularly difficult to navigate when he found it necessary to reorganize and close some aspects of the operation. On the other hand, wages are considerably lower. The Japanese worker’s mindset appears to regard job security in higher esteem than compensation.

The economic collapse of the old Soviet regime does contain some lessons regarding the efficiency of socialist systems. The tens of millions slaughtered should also tell someone something about the ultimate nature of governmental solutions.

Well, the fact is that per capita, the U.S does not top the list, so this is not remarkable at all. Therefore, a major decline will only show that the U.S. is unable to handle its own economy in a responsible way, dragging down others in the mud.

Again, the core of this current crisis has to do with a frighteningly massive global derivatives market that was allowed to develop with virtually no oversight from any government on earth, while businesses from almost every country on earth were wildly participating. Blaming the US market may make people feel smugly superior for awhile, but that smugness will eventually be replaced with a reality check as the leverage unwinds.

As far as the topic of this thread, the recent and continuing events in the global stock markets are a fascinating lesson regarding how reactivity to thoughts can have profound effects on what we call reality. Stock valuations have tanked worldwide, yet underlying economic activity is hardly catastrophic at this point. This is all being driven by the fear that dire economic consequences are eminent. But are they?

Though I've read several particularly grim pronouncements regarding these events, I've also read commentary that suggests that the actions taken by the Fed and Treasury here will have positive effects. That there will be some sort of real economic slowdown is generally agreed upon, it's still possible that the effects will be of a much shorter duration than we can know at the moment.

In any case, the ridiculous stampede for the exits that is now occurring is creating some tremendous opportunities in equities. I think we're getting close to the bottom, but the time to get back in is usually when everyone on earth is convinced that recovery is absolutely impossible, when the consensus is that life as we know it is essentially over.

We're not there yet.

[Teri]

I must say I am terribly dismayed at the financial nous displayed by people on this blog. Even Art. It seems spiritual matters are just a hobby. Mammon rules OK.

[william]

“Charlie Rose interviewed the Sony CEO Wednesday, who mentioned that the Japanese business laws that forbid eliminating jobs were particularly difficult to navigate when he found it necessary to reorganize and close some aspects of the operation.”

There is a powerful upside to these laws and it gives the Japanese worker some security that the gov and company will not treat them as disposable assets. Which tends to lead to much more worker involvement, loyalty, and interesting enough service and product quality.

Again change the system change the country. Until we understand that very simple but difficult concept we will continue to blame such people as CEO’s, politicians, union workers, and people or person in general. Find someone to blame anyone.

Seeking out the root cause of these “disasters” (I suspect learning opportunities) is a very mental painful endeavor. It means looking into a mirror of our most cherished paradigms. That is a big ouch. Politics and religion are two of the best example of this denial to seek out the root cause of the effect.

[Teabinge]

For me it's not a question of market economy or socialism. It's about what kind of market economy. What different kinds are there? What are the advantages and disadvantages of different soultions?

The "speed" and "effect" of the moneymaking machine is one aspect, yes, but what about a (good enough) long-term stability? What about the effects on the environment? What about the effects on human psychology? What about the effects on moral, the nature of human relations and even religion and spirituality?

There is no fault in making some use of Mammon as long as God remains God.

And about anarchy: Yes, I would like that very much. If we were hobbits. As far as I know, there was no goverment or any "system" whatsoever in Hobbiton.

But in real life, in human life, an anarchy would be about warlords and mafias, killings and slavery.

A monolithic, overcontrolled state would do about the same thing, Stalin and Pol Pot were just like warlords.

Power needs to be controlled in various ways; by a democratic system, by media, by courts.

I think I understand the need for autonomy and freedom, the possibility to expand and take real risks and all that, I just don't think that countries like Norway or New Zealand or Canada completely strangles and kills those qualities of life just because they have a general healthcare system or not the most Free of markets.

[Teabinge]

PS...."as long as God remains God" - I mean "God" in the sense of "Godly qualities" , compassion, justice, truth and much more. (Whether there is a person-God or not, I do not know).

If God is God in that sense, you cannot act like Gordon Gekko, you will have a conscience, a rudder and a human soul.

[Michael H]

There is a powerful upside to these laws and it gives the Japanese worker some security that the gov and company will not treat them as disposable assets. Which tends to lead to much more worker involvement, loyalty, and interesting enough service and product quality.

I'm sure this is true, William. Although I guess I don't understand how businesses respond when they're faced with losses or market conditions that place the entire company in peril.

In any case, the differences are cultural in nature. Asian countries such as Japan and China tend to value the collective interest far beyond the individual. David Brooks wrote a very interesting column on this in August, in which he asks some interesting questions:

Researchers argue about why certain cultures have become more individualistic than others. Some say that Western cultures draw their values from ancient Greece, with its emphasis on individual heroism, while other cultures draw on more on tribal philosophies. Recently, some scientists have theorized that it all goes back to microbes. Collectivist societies tend to pop up in parts of the world, especially around the equator, with plenty of disease-causing microbes. In such an environment, you’d want to shun outsiders, who might bring strange diseases, and enforce a certain conformity over eating rituals and social behavior.

Either way, individualistic societies have tended to do better economically. We in the West have a narrative that involves the development of individual reason and conscience during the Renaissance and the Enlightenment, and then the subsequent flourishing of capitalism. According to this narrative, societies get more individualistic as they develop.

But what happens if collectivist societies snap out of their economic stagnation? What happens if collectivist societies, especially those in Asia, rise economically and come to rival the West? A new sort of global conversation develops.

It's interesting to speculate as to whether there is any given system that's ideal for the entire planet, given the vast cultural differences that do exist. Endeavoring to change any culture on the level of shared values seems to me to be a pretty ridiculous undertaking.

[Tony S]

> I must say I am terribly dismayed at the
> financial nous displayed by people on this
> blog. Even Art. It seems spiritual matters
> are just a hobby. Mammon rules OK.

Well, in this material world, we need food & shelter for ourselves and our families. We need to hold jobs and save for rainy days and retirement.

So like it or not, money is pretty central to our lives here, and spiritual matters are a hobby to many of us.

[Michael H]

Well, in this material world, we need food & shelter for ourselves and our families. We need to hold jobs and save for rainy days and retirement.

True, Tony S. I'd only add that I see no inherent contradiction between material concerns and spiritual concerns. The challenge is in maintaining some perspective, either way.

Paranoid Joe Sixpacks are very dangerous people.

Also true. I think the election hinges on whether the Joe's actually turn out to vote, or just sulk at home as they stew in their own ideas of the imminent doom that will accompany an Obama administration.

I don't think I can ever recall a period of time where so many people were flipping themselves out over so many things. Both Obama and McCain supporters are certain that civilization will end if their opponent's elected, and everyone appears convinced that a Depression is inevitable in either case. It's remarkable.

I wonder if anyone will notice when their fears don't materialize.

[Art]

I must say I am terribly dismayed at the financial nous displayed by people on this blog. Even Art. It seems spiritual matters are just a hobby. Mammon rules OK. - teri
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I was the manager of the University of Tennessee College of Vet Medicine Animal Facility Manager for 17 years. My first degree was in Animal Science. When you work for the University of Tennessee you are allowed to take up to 8 semester hours free every semester and I took advantage of that benefit. I have 25 hours towards a Masters Degree in Agricultural Economics and before becoming interested in near death experiences and the holographic universe I studied real hard on how to retire early! I also have 30 hours towards a Masters degree in Education and about 30 hours in Paleoanthropology. I was working on a Masters degree in Holistic teaching and Learning. Learning holistically means that the "lessons" are embedded in whatever we are doing and we learn without even knowing it, like the way that little children learn before they ever start school. Sort of like learning about math while baking a cake or building a bookcase. You don't even realize that you are learning math because it's embedded in the measuring and whatnot. The reason I say this is because I think that's the way that our soul learns while here on Earth. God is so smart that He/She has created a Universe where the soul learns what it's supposed to learn without us having to do anything. This earth life is a school, but it's a school where the soul learns what it's supposed to learn without our even knowing it. The soul's lessons are embedded in our everyday lives and it learns holistically what it's supposed to learn. It's not like grade school where if you didn't pay attention you didn't learn. It doesn't matter if you pay attention or not; everyone experiences time and space, and imprints memories of what it was like to live in a 3 dimensional + 1 time universe and everyone experiences separation in every way shape and form imaginable. You don't have to "know" it. As you just go about your daily life the soul learns what it's supposed to learn without any additional needed input from us. You don't have to be "spiritual" or "religious." Every soul learns what it's supposed to learn.

[dmduncan]

Teri: Yes, when the belly is empty the spirit must wait.

Teabinge: That idea that we must have government to save us from ourselves is not your own. It was passed down to you from a man named Thomas Hobbes in a book called Leviathan. According to Hobbes, life is nasty, brutish, and short, and governments must be instituted because without them there would exist a state of war of all against all.

Because of Hobbes, a lot of people have been convinced, without knowing either where the ideas they have about this come from or how they surreptitiously got into their heads, that human beings are by nature greedy, selfish, and belligerent. By nature. That needs emphasis.

I'm sure a few people who read this feel that way too. Hobbes was the architect of that view. And while there is no denying that human beings are selfish, greedy, and belligerent, whether we are that way by nature or can be different than that is the question, and I think Hobbes got it wrong.

(Oh, and there should be quotation marks in the above stuff somewhere, I'm sure. My memory sucks but I probably quoted him accurately in a couple places.)

[william]

“Endeavoring to change any culture on the level of shared values seems to me to be a pretty ridiculous undertaking.”

My point has been that if those shared values do not align themselves with these universal laws that govern the universe then problems arise.

We on this blog talk about the oneness of God in one breath and the benefits of an individualistic society in the next breath.

There appears to be a causal correlation between job security (job satisfaction) and quality of service and product. Treating employees as disposable liabilities have a profound impact on quality. Quality is the hallmark of good business practices.

Jesus understood these universal laws the very best when he stated something to the effect what you do to the least of my people you do to me. This statement is the very essence of Christ consciousness.

The world has this mistaken idea that economic structures, systems, and policies do not have to adhere to these universal principles based in love and divine intelligence.

[dmduncan]

David Turner: "If it sells its massive dollar holdings the value of the 'mighty dollar' will plummet and if its debt is not repaid it can claim American assets, yes government assets, just as a bank forecloses on your house if you don't make the payments."

Well, except that here in America the Sheriff can legally force you to get out of the foreclosed house. What can the Chinese do? Invade the country and force Americans to clear out? So it's not the same thing.

[Art]

We on this blog talk about the oneness of God in one breath and the benefits of an individualistic society in the next breath. - william
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I'm constantly posting that the whole purpose of this life is to experience duality and separation which teaches the soul what it means and how it feels to be a separate, unique, individual. It can't be learned in the Spiritual Universe due to those overwhelming feelings of oneness and connectedness that so many near death experiencers talk about. This life is one big lesson in duality and separation, from the moment we are born and we separate from our mothers and the umbilical cord is cut till the day we die our deaths become a lesson in separation to our loved ones we leave behind. Friends moving away, loved ones dying, moving from the place we grew up in, leaving our parents home and establishing our own, life is one endless lesson in separation. We experience duality through religion, politics, race, culture, language, color, weight and height, wealth, I.Q., education, gender and sexual orientation, etc. etc. etc. and duality oftentimes leads to separation. Separation is the theme to almost every book, play, movie, and the lyrics to most songs. The whole theme to the movie "Brokeback Mountain" was about how those two cowboys that loved each other couldn't be together because of Societies opinions about homosexuality. Every time we pick a grape or tomato or cut up a steak our soul experiences separation. Heck, everytime you get up at night to use the restroom the soul experiences separation. I could go on and on. The whole purpose of this life is for the soul to learn what it means and how it feels to become "unassimilated" and the way it does that is by experiencing duality and separation.

[Michael H]

We on this blog talk about the oneness of God in one breath and the benefits of an individualistic society in the next breath.

I do, anyway.

Strange as it may sound to others, I'm certain that individual freedom is integral to discovering one's true nature. And man's true nature is decidedly not, " . . . which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short."

(That's the quote, dmduncan. Your memory served you well!)

[Michael H]

Are the elite those creepy lizard-people David Icke warned us about?

Woo-woo.

[Michael Prescott]

I think it's way past your bed-time, sonny.

Banned.

Not for that comment. Just for being a dick.

[Teri]

"I wonder if anyone will notice when their fears don't materialize." -Michael H

It's not a question of fear. We should be rejoicing. The great paradigm shift has started. We of all people should be recognising that. If we can't, who will?

[Øst!]

I love conspiracy theorists.

David Turner, did or do you happen to support Ron Paul?

[Michael H]

It must be a joyful life you lead, David.

[MarkL]

I've said this before; I believe we're colonists, here in our 3D universe to try to make this life as much like what we call "heaven" as is possible. As such, we abandon our calling if we allow this world to become a hell. Each advance, in human understanding, in technology, in ethics, in government, has allowed humanity to improve life in tiny but measurable steps. To not try to correct a world-wide economic disaster because we will experience "heaven" after death is failure. And we will probably have to take the class over until we pass.

[Zerdini]

If someone is banned how do they manage to continue posting?

[Michael H]

Technical acumen is critical when the world is controlled by the elite, Zerdini.

[dmduncan]

David Turner, unfortunately you are an Alex Jones parrot, so although you do have some things right, you adhere to the Alex Jones nonsense with religious conviction, and of course those who do not share your certainty are "asleep."

I won't argue with you that we are heading toward a one world government. I consider myself a centrist and do not accept the bogus terminology of defining the world into left and right ideologies, and as a consequence I admire aspects of both left and right but each also has aspects that concern me. Regarding liberals, what concerns me is their perceived tendency to muddle things. They seem to regard it as almost sinful or unfair to tell different things apart, to make relevant distinctions between different things, and to treat different things differently. Not only do I think that is a very great evil, but I think that tendency to blur things together is the reason why, if it happens, a one world government will come into being.

But I do not believe, as you and your mentor Alex Jones seem to, that there is some conspiracy of world leaders to do this, or that 9/11 was an inside job to push us in that direction. You are not taken seriously because you mistake your faith based certainty of those conspiracies for provable facts, and most people who do not coexist with you on that level of paranoia are not persuaded that your certainty arises out of accurate fact perception instead of that paranoia.

Finally, my opinion is that you got it all wrong. I like Ron Paul and I admire many of his ideas, and those ideas are why he could never be president. The machine of our government requires all of its replacement parts to be more or less the same or it cannot function, and people like Ron Paul are way out of "spec." But I disagree that the system is broken and needs repair. No, it works exactly the way our Constitution drew the parameters for it to work, so there is no getting back to an earlier time when it worked better, because if it does not seem to work as well today that is because the complexities of this world reveal the flaws of our Constitution in ways that the simpler world of earlier days could not test for, not because it was better back then. Our right to "life, liberty, and the pursuit of happiness" is in the Declaration of Independence, not the Constitution, and the ammendments we do have are only clumsily committed to those rights at best.

[Michael Prescott]

If someone is banned how do they manage to continue posting?

He's using more than one IP address ...

Just ignore him, and he will go away.

[MickeyD]

"You will vastly enhance the performance of a long term portfolio by going into cash for the down cycles and buying back in for the up turns."

"This is incorrect, for reasons explained in the NY Times article linked in the main post."

My UK pension fund (tax efficient equivalent of a US IRA) is up 5% in the last 12 months owing to my switching into cash in response to very simple monthly timing signals that have worked well for the last 100 years. The NYT article is a stockbroker view - they will never advise a customer to go into what for them would be commission free cash for the duration of a downturn. They would churn you into stocks that may simply drop less than the broader indices.

"You will vastly enhance the performance of a long term portfolio by going into cash for the down cycles and buying back in for the up turns."

"This is incorrect, for reasons explained in the NY Times article linked in the main post."

My UK pension fund (tax efficient equivalent of a US IRA) is up 5% in the last 12 months owing to my switching into cash in response to very simple monthly timing signals that have worked well for the last 100 years. The NYT article is a stockbroker view - they will never advise a customer to go into what for them would be commission free cash for the duration of a downturn. They would churn you into stocks that may simply drop less than the broader indices."

This is very short term thinking. It seems that what you have done by moving to cash is to crystalise the losses you have suffered. They are no longer a paper loss but a real loss now - this may be ok is you are close to retirement and think the market won't pick up before you do.

The question now is will you be able to react quickly enough when the market turns if you have to get back into equities? Statistically this is unlikely. You should compare the situation in 5-10 years from now with those who stayed in equities and see how well you did - you may have been right to pull out and crystallise your loss. Personally I doubt it.

[Larry Boy]

Michael H wrote:

"There are already concerns that Iceland will need to declare bankruptcy (that would be the entire country)..."

As far as I can tell, Iceland is close to bankruptcy because the government let their banks grow out of control in the same way as the American banks did. If we look at Sweden, in contrast, we have been able to handle the crisis relatively well, because there are quite strict laws regulating the bank market.

"... and several economists are very concerned about Europe’s slow response to the severity of the problem."

I can't see how Europe is supposed to have reacted slower than the U.S. By the way, there are many economists in Europe that don't think the U.S. measures to save their economy is enough. So there are varying opinions.

"That we should design markets in such a manner as to reduce, if not eliminate, the potential for gross abuses should be as clear as a summer day by now. There does need to be dispassionate governmental oversight that insures that someone offering to insure a contract has the ability to cover losses, for example. We also need much more clarity regarding financial statements and the assurance of a level playing field. I’m not so much of an idealist that I don’t recognize that there are certain people who will abuse anything if they have an opportunity."

I don't see your point. All of this says exactly *what* about the debate regarding the American economy versus the more mixed economies of many other Western countries? As far as I can tell, the "gross abuses" you're talking about seem to be inevitable in a system such as the American, where the field is left open to financial opportunists to do almost exactly what they want. I mean, just how are you supposed to circumvent all this corruption without letting the government regulate the market? (To a reasonable extent, of course, not as in the old Soviet.)

"The point I was making is that there is nowhere near enough current productivity worldwide to elevate the living standards of the global population to the level many now deem necessary. We can have a world where more and more people continue to pull themselves out of poverty, with the associated environmental impacts, or we can return to a simpler time. China and India have already demonstrated their preference for the former. The West needs to decide what they want to do."

What exactly are you saying? That we need American-style capitalism in order to achieve economical growth? If that's what you're saying, I profoundly disagree. Isn't it evidenced by the successes of the mixed economies in the world that you can produce growth and still maintain a reasonable level of public welfare? If you think it's the American army that makes it possible for other countries to have mixed economies, as someone claimed earler, then I would question the necessity of the Iraq war, for instance. Couldn't that money have been spent on soical welfare instead?

"What I’m saying is that the high levels of taxation and an emphasis on endless governmental social programs tends to discourage productivity, especially in the West."

And you base that claim on *what* evidence? How come Denmark, which has one of the highest tax rates in the world, has a GDP per capita which is more than 15% higher than that of the U.S.?

"The economic collapse of the old Soviet regime does contain some lessons regarding the efficiency of socialist systems. The tens of millions slaughtered should also tell someone something about the ultimate nature of governmental solutions."

Are you seriously comparing the old Soviet regime with the mixed economies of Europe?? Are you implying that countries with a mixed economy sooner or later will slaughter its population?? (By the way, what about Americas slaughter of millions of Indians etc.? Should we conflate that with the capitalistic system?) What are you trying to say??
You should really consider what you write, because what you just wrote above is a serious insult to people of countries with a mixed economy. The collapse of Soviet tells us *nothing* about the eficiency of mixed economy systems becuase they're not even remotely similar! Do *not* conflate social democracy with communism!!

"Again, the core of this current crisis has to do with a frighteningly massive global derivatives market that was allowed to develop with virtually no oversight from any government on earth, while businesses from almost every country on earth were wildly participating. Blaming the US market may make people feel smugly superior for awhile, but that smugness will eventually be replaced with a reality check as the leverage unwinds."

I'm not blaming the U.S., I'm blaming the capitalistic system which allowed this to happen, and which evidently has become stronger in Europe recently. You're saying yourself that we need governmental oversight! "...with virtually no oversight from any government on earth" (by the way, that's not true, several countries with a mixed economy, such as Sweden for instance, have handled the crisis fairly well so far).

[Bill I.]

I'm struggling to come up with something to add to this discussion, but even though I earn a living as a technology business analyst and am thus required to pay attention to the financial situation, I'm not sure I can successfully connect my personal metaphysical views to my limited business, economic, and financial understanding.

Even so, I'll give it a whirl.

I would suggest that the deeper picture of this financial mess must include what I call "the changing of the archetypes."

This is psychological (and thus "spiritual," as I see it) in nature, deeper than issues of preferred forms of government, regulation, stocks, bonds, cash, credit, and derivatives, although certainly traits such as greed, dishonesty, and ruthlessness can be connected to this.

The short version is that we are in the midst of a change from the old masculine archetype to something new and different.

This is not a return to an era in which fertility goddesses prevailed; the symbolic qualities associated with the masculine archetype will not, then, vanish, to be replaced with what are considered "feminine" symbolic qualities (think "intuition," for example), although such qualities, long officially repressed, shall be newly ascendant.

We can only guess at the new emerging archetype, then, some kind of blend. It takes time for new societal and religious myths to develop and some of us may be too old to see how this ultimately settles out.

Short-term, however, the collapse of various institutions, the changing of the balance of power, and other such features (accompanied by the unknown effects of the still rapidly changing media, another expression of the underlying change) should surprise no one.

One of the insanities here is the U.S. "defense" budget. It would never have been possible to sustain this, under any circumstances, but it must now shrink faster than anyone predicted owing to the rapidly changing overall situation.

(I speak as neither conservative nor modern liberal, although my sympathies are with the Liberal-Progressives of the late 19th and early 20th Centuries, before the meaning of "liberal" became hopelessly twisted.)

Invading countries posing no immediate threat is an activity appropriate for warmongers or empire builders; killers, really, and throwbacks in this era.

Prudence requires maintaining an effective military capability, but this is quite different from the bloated monster we see today.

Such monsters, whether belonging to Napoleon, Rome, or housed in the Pentagon, require very expensive feeding.

At some point, the monster must starve, and now much sooner than anticipated.

The connection to the above rapidly-becoming-obsolete archetype is clear while in large part the captains of finance have embodied the very same obsolete archetype.

In their case, however, this is a weakened or deteriorating archetype, with the results we see.

(Side note: In a previous comment someone lambasted "conspiracy" theories regarding 9/11. I'm strongly suspicious that 9/11 was an act of collusion, not strictly an "inside job." The idea was to allow the event to happen so as to stir up the populace. Being suspicious is not the same as being sure, however. I'll be very curious to see what declassified documents reveal in the near future. Certainly such an act of collusion would be consistent with the psychology of throwbacks to more brutal eras, attempting to override or forestall the changing of the archetypes.)

Regards

Bill I.

[Bill I.]

Afterthought:

The dishonesty of politicians (examples abounded during the run-up to the invasion of Iraq) mirrors the dishonesty of bankers, mortgage brokers, and some home buyers filling out mortgage applications).

This is yet another symptom, as I see it.

Meanwhile the various crises are magnified as the fears of millions worldwide, now connected via the Internet, are synchronized in a way not possible in previous eras.

[dmduncan]

The problem with most conspiracy theories is that the actual evidence usually points more credibly to the conclusion opposite of the one the conspiracist makes.

There is no evidence that points to collusion instead of incompetence or just a plain old failure to seriously consider and prepare for what would happen. And is that so hard to believe? No, it is consistent with the Bush administration's behavior on lots of things.

Bush neglected Afghanistan to divert most of our resources to a much bigger conflict in Iraq. Shortsighted.

Bush initiated the war in Iraq without a plan for the peace. Shortsighted.

If there is anything we know about George Bush, it's his fondness for shooting from the hip.

Now if there is genuine evidence of collusion, then that evidence must point ONLY to collusion. If it can point equally well to other explanations, then the only thing which makes it seem like evidence of collusion for you is your own feeling about it. And in a climate where so many people hate George Bush, it's no mystery why so many people run to the inside job or collusion theories.

But I don't hate George Bush. I think he's just an average man who unwisely aspired to have an extraordinary job.

It wasn't a good fit.

[Bill I.]

dmduncan: "Now if there is genuine evidence of collusion, then that evidence must point ONLY to collusion. If it can point equally well to other explanations, then the only thing which makes it seem like evidence of collusion for you is your own feeling about it. And in a climate where so many people hate George Bush, it's no mystery why so many people run to the inside job or collusion theories."

My words: "I'm strongly suspicious" and "Being suspicious is not the same as being sure.." are plain enough.

I don't hate George Bush, but I strongly disagree with his policies and actions and the actions of so very many in his administration.

Until we have solid evidence and/or much more detailed explanations of any number of peculiarities associated with the events of that day neither you nor I can truly say what actually happened.

This is a "wait and see" attitude but note how different this is from assuming that official explanations (from known dissemblers) are basically true, complicated by bureaucratic screw-ups and CYAs, or that those explanations are in fact contrived to cover up collusion and, possibly, embellishment of the basic terrorist actions.

I'm suspicious, but my suspicion doesn't extend to President Bush, instead focusing on some within CIA, some within the military, some private security company personnel, and only certain administration officials other than Bush.

I don't believe the Council on Foreign Relations is what some theorize it to be, although I don't rule out the possibility that a few members harbor extremely elitist ideas and, to an extent, include the CFR as part of their networking activities.

We may never know what actually happened, or, possibly, details may not become available for many years.

What is known is that some lied in their testimony to the 9/11 Commission and were never prosecuted for this.

What is also known is that all kinds of documents related to the events were classified and remain so, but these are likely to become declassified at some point.

We also have a high number of peculiarities associated with that day, unexplained to my satisfaction. Examples include the scheduling of military games and exercises for that particular day; the inability of FAA/Pentagon/Norad to get their act together; the recorded flight path of the plane associated with the Pentagon crash and what a great many commercial pilots are on record as saying about that; and even the unproved statements regarding what Nicholas Rockefeller told Aaron Russo.

There are many more.

These can all be attributed to coincidences, imagination, bureaucratic confusion, and so on.

I will remain suspicious until many documents are declassified and, in a changed political climate, serious investigators chase the most obvious of these peculiarities down.

Regards

Bill I.

[Michael H]

Are you seriously comparing the old Soviet regime with the mixed economies of Europe?

No. I’m suggesting that we’ve already seen what socialism accomplishes economically, and if someone envisions “government as caretaker” they may someday find themselves dismayed at what the government decides to take care of.

I'm not blaming the U.S., I'm blaming the capitalistic system which allowed this to happen . . .

If the implication is that the recent events are supportive of social democracies, I have to disagree.

Understanding the factors underlying this problem is highly complex. The statement of "the capitalistic system . . . allowed this to happen", ignores that the underlying cause of the problem, the US housing bubble, was fueled in no small part by legislation and policy decisions that were intended to increase home ownership across the board, especially in lower income demographics. Our advocates of social democracy have their fingerprints all over this. If lenders hadn't been encouraged to relax lending standards (in some cases mandated - read the New York Times piece on Fannie Mae that I linked in an earlier post), the argument could be made that none of this would be happening. The derivatives that are the source of the problem were based on historical models of default rates, but the historical models had much fewer high risk loans. As default rates rose, the value of the derivatives contracts collapsed.

That is not to say that the financial whiz-kids are without culpability. The explosion of mortgage products and the subsequent bundling of those mortgages into hopelessly elaborate derivatives, as well as the ridiculous amounts of leverage used throughout the entire financial system went beyond irresponsible. The regulatory failure in the US mortgage market was bad enough, but the real problem, the derivatives market, was a catastrophic worldwide regulatory failure.

So here we are. There's plenty of blame to go around, but that's not going to free the credit markets, or avert a recession, or drive equity growth. And the entire point that I'm making is that if we want the economy to recover quickly, the best way to do so is to allow free markets to work.

I am not saying that we don’t need reasonable regulation and oversight of markets. There do need to be safeguards in place that prevent companies and individuals from making mistakes – not because they’ll abuse other people without them, but because human beings are vulnerable to thinking their ideas are infallible. This whole thing came about because a huge crowd of people decided that the US housing market was a straight line graph with a steep vertical slope. They forgot that the underlying asset base (US housing) was booming due in part to "socially responsible" governmental policies, and they forgot that sometimes graphs slope down.

Now that the graph is sloping down, the new infallible idea is that all of these mortgage-backed securities suddenly have no value at all, even though 96% of the mortgages here are current. That’s just as irrational as the thinking that caused the bubble, but unfortunately the derivatives are so difficult to unwind that no one has any idea what any given piece of paper is actually worth. And since no one knows how to value what’s on anyone’s books, no one is loaning any money to anyone else at the moment, for fear that the borrower will default. Just as the bubbles were driven by rampant optimism, this crisis is being driven by rampant pessimism. It’s a mess.

. . . mirrors the dishonesty of bankers, mortgage brokers, and some home buyers filling out mortgage applications

I don't think that the people who were involved in either the housing bubble or the credit bubble were acting dishonestly in the vast majority of cases. There were shared assumptions that housing values would continue to rise and that default rates would remain at historically low levels. These turned out to be false assumptions.

Bill I’s suggestions of “greed, dishonesty, and ruthlessness”, as well as Larry Boy’s use of terms such as “financial opportunists” and “corruption”, does speak to core assumptions regarding the nature of human beings. I tend to have a very different view regarding the nature of human beings. That’s the essence of my differences with leftist ideology. I’d like to see government structured to encourage individual initiative and personal responsibility, and I think that if men were entirely free they’d do the right thing much more often than not. It’s just another personal delusion of mine, and one which nearly no one agrees with.

But I don't hate George Bush. I think he's just an average man who unwisely aspired to have an extraordinary job.

It wasn't a good fit.

Well put. W continues to fail the leadership test in a spectacular way. I hope that the voters will opt for the calm, measured candidate in this election. What they will actually opt for remains to be seen.

[dmduncan]

I'm not singling you out Bill, but there are lots of people who do think it was an inside job or who do think there was collusion, and in fact your response to my earlier comment was itself a response to someone who thinks precisely that.

The kind of "knowledge" you are after I think when you say we don't "know" what actually happened is certainty, but we have that about precious little anyway, not just the 9/11 attacks.

I am not after certainty, I want to know if we can be reasonably sure of this or that thing. There are suspicions we never went to the moon too, and lots of questions raised by some people who even have letters after their name. And what you inevitably find is that when their claims are addressed, it turns out they own some very basic misunderstandings of physics.

Now I'm not an expert on metallurgy, and I don't have the time to make myself one either because of some conspiracist's claims about 9/11, and I would not presume to have achieved the level of an expert after a few months of online research. In my daily life I have to trust the advice of experts, and I'm not going to change that general policy because some conspiratorially bent autodidactic metallurgist says there was something suspicious about the collapse of the towers.

So, when I hear a non expert do analysis and also hear his claims refuted by someone who's a professional in the field, I am more likely to accept the verdict of the expert over the non expert.

I operate a website where I come across conspiratorial theories and bizarre claims every day, and what I generally find——not always, but generally——is that there is an absence of intellectual rigor in the lower end of the spectrum of anomalia from where this stuff seems to emerge.

That by itself is no indication that it is wrong, but the hard work of actually demonstrating conclusive connections that show it is right is not there.

So whether one says it was an inside job or another thinks collusion, then I'll think that too when I see evidence that points in that direction instead of somewhere else.

It is startingly easy to find evidence to support a view you apriori suspect is true, and that is why a rigorous challenge to your own ideas by yourself is so important.

If you aren't strenuously trying to disprove your own assumptions, then you haven't tested them under fire, and consequently, you really have no honest idea of how robust they are.

But at the same time, we can't know every thing. We have a limited time and we have to pick our battles. Which is precisely why we also have to trust the advice by people who have picked other battles than we chose, to learn what they have learned, because we could not.

Otherwise I think there is a long slow descent into solipsism for us.

[Klaus S]

Are you seriously comparing the old Soviet regime with the mixed economies of Europe?

No. I’m suggesting that we’ve already seen what socialism accomplishes economically, and if someone envisions “government as caretaker” they may someday find themselves dismayed at what the government decides to take care of.

--- But if the government is an ugly one, we can elect another.

Power is not always "governmental" /political, it can be economical/political as well. I'd rather be governed by representative democracy than by Coca-Cola company or Microsoft.

[william]

“I think that if men were entirely free they’d do the right thing much more often than not. It’s just another personal delusion of mine, and one which nearly no one agrees with.”

Most men felt they were doing the right thing. Even with the big bonuses while the company that they lead goes bankrupt they feel they deserve those bonuses. And they will defend those bonuses even under oath before congress. How’s that for delusional?

Changing the system means changing the existing paradigm and paradigm shifts are rare, very rare. What we are witnessing is the axiom: “with communism man exploits man with capitalism it is the other way around.” Universal law demands that they both fail in time and usually not on our time frame.

When communism failed Americans cheered and I thought to myself don’t cheer too loud as America style capitalism is next. Again until we change the system these major problems will occur. We continue to blame the players in the system for systemic failures.

Our framers of our constitution could not have predicted 200 years out. They did a magnificent job designing a system with the knowledge they had of existing conditions in the world. Ike warned us what would come if we did not change but we did not listen now we pay the price.

[Klaus S]

To be in love in Great Ideas (political or otherwise) is to overvalue the map before the actual terrain.

[Bill I.]

Dear dmduncan:

Regarding 9/11 I remain suspicious and find your statements contrary to the spirit of honest, diligent, and impartial inquiry.

I expressed similar thoughts and beliefs for quite some time after 9/11, dismissing all suggestions that any part of the U.S. government had a hand in things. Such suggestions struck me as being absolutely outrageous. I refused to countenance them.

(How and why this changed is a tale I lack the time to tell at the moment.)

It is exactly such beliefs that prevent a great many otherwise reasonable people from reviewing the situation with detachment, while who would want to associate themselves with the perpetually derided "conspiracy theorists?"

We wish to believe that we are smarter than anyone to which that label has been applied.

Yet I also have strong beliefs -- based on experience and including a number of personally documented instances of pre-cognition and telepathy -- that the generally accepted views of reality itself are false.

Just because a great many people refuse to even consider the possibility that components of the U.S. government colluded with terrorists to murder U.S. citizens doesn't mean that it didn't happen.

Anyone who begins to even look in this direction -- if only as a remote possibility and as dark and ugly such a possibility is, then begins to review available data from that perspective, is likely to be unpleasantly surprised.

Of course this will require digging through mounds of useless speculation unsupported by any evidence; this is a bit like what William James and company went through in their investigations into the paranormal, so long ago. Note that they did find evidence, eventually, no matter that this has tended to be ignored and derided for the last hundred years or so. See Deborah Blum's _Ghost Hunters_ for a short, entertaining, and educational version of their tale.

You speak of experts and lacking the time to do anything more than accept their opinions, yet for every expert you can provide, there is another expert who offers an opposing view.

The world of "black" government covert operations, which includes not just government employees but also former employees working for security companies, is not the same world in which you and I interact.

Here, a lack of transparency (in some ways similar to that of financial companies and some of their arcane products) has been par for the course since at least the end of the Second World War. (See, for example, _Legacy of Ashes: The History of The CIA_, by Tim Weiner.)

There are many things we would rather not look at, things that conflict with our usual and often pleasant beliefs.

My overall view of humanity and its possibilities is very positive, but that doesn't mean I'm not aware of darker strains, or of how derisive and defensive people can be when confronted with the possible existence of that which makes them feel very uncomfortable.

Regards

Bill I.

[dmduncan]

"There are many things we would rather not look at, things that conflict with our usual and often pleasant beliefs."

"My overall view of humanity and its possibilities is very positive, but that doesn't mean I'm not aware of darker strains, or of how derisive and defensive people can be when confronted with the possible existence of that which makes them feel very uncomfortable."

Bill, this is Michael Prescott's blog, not Phil Plaitt's. Who here has not been exposed to this sort of thing and doesn't know it already?

And it doesn't matter what the idea is, Bill. If you become attached to it, then you are uncomfortable by the possible truth of it's opposite. Including the idea that there was a conspiracy or collusion.

The conspiracist isn't especially entitled to make that claim any more than the non conspiracist.

And that's where the facts come in and also why I think it's probably not a good idea to get attached to an idea unless the evidence for it is really strong.

As for "experts," not only are some more qualified than others, but when a large number of them all say the same thing, it seems quite foolish of me to disagree. It doesn't mean they can't be wrong, but certainty is not a promise anyway. So you can put your money on all the ones who say global warming is happening because of human activity, or you can put it on the very few who say it's not.

You are welcome to your beliefs whatever they are, and I have no interest at all in changing your mind. I am not an evangelist for normalism.

[Larry Boy]

"No. I’m suggesting that we’ve already seen what socialism accomplishes economically..."

Denmark, highest tax level in the world: An annual nominal GDP per capita 15-20% higher than the American. In contrast to Norway, Denmark has very few natural resources, but still an unemployment rate of only 1,6%, compared to 6,1 in the U.S. Furthermore, there is virtually zero poverty in Denmark, whereas in the U.S., 12,5% of the population is below the poverty line. Health care and education, virtually free in Denmark.

"...and if someone envisions “government as caretaker” they may someday find themselves dismayed at what the government decides to take care of."

I don't see why European countries are more likely to become corrupt than the U.S. You need to put forth a valid argument for that instead of just lumping together Western Europe with Soviet, which, by the way, doesn't make sense at all since Social Democracy and Communism are separate ideologies and have, in fact, opposed each other historically.

"Understanding the factors underlying this problem is highly complex. The statement of "the capitalistic system . . . allowed this to happen", ignores that the underlying cause of the problem, the US housing bubble, was fueled in no small part by legislation and policy decisions that were intended to increase home ownership across the board, especially in lower income demographics. Our advocates of social democracy have their fingerprints all over this."

Explain why the US government isn't responsible for what happens to *their* banks, which *they* are supposed to keep in check. Sure, the same kind of problem seems to have spread to many other countries as well, but that only goes to show that a free market without regulation doesn't work *anywhere*. You are saying yourself above that the market needs to be regulated. We can both agree on that. So:

Go back to my first comment in this post and answer why you think the economical successes of countries such as Denmark, Sweden, Finland, Germany, Norway, only to mention a few, shows that we have "already seen what socialism accomplishes economically".

[william]

“doesn't make sense at all since Social Democracy and Communism are separate ideologies and have, in fact, opposed each other historically.”

Americans have been taught (brainwashed?) that they are one and the same. We now borrow money from communists, socialists, and kings to make our brand of capitalism work and of all things talk how it is better than any other economic system.

One per cent of Americans have more wealth than the bottom 90%. This is very dangerous affect to remain stable as a country and avoid revolution.

The delicate balance between free for all capitalism and cradle to the hereafter communism may be the right ticket for national stability. Neither approach understands human behavior or potential. The trickle down theory appeared to have trickled up.

[Andrew Paquette]

Two comments:

1) My bank (in Europe) was nationalized last week
2) I worked for a Japanese company in the US. It was clear that the employment laws of Japan affected the Japanese employees in several positive ways, but in some negative ways also. They were definitely more loyal to the company than any of the Americans, no matter how much the US employees might have wished it otherwise, but they also had more stress related to performance. They might have had lifetime employment, but none of them wanted to be perceived as the slacker being carried through life by that luxury.

[Andrew Paquette]

I tried writing a response to the conspiracy theorists here, but gave up. No matter what I tried to say, there was another conspiracy theory waiting to move in to the new territory thus created.

[Michael H]

I don't see why European countries are more likely to become corrupt than the U.S.

I never claimed that they are. The statement applies to anyone, anywhere, who thinks that governmental solutions are a panacea.

. . . why you think the economical successes of countries such as Denmark, Sweden, Finland, Germany, Norway, only to mention a few, shows that we have "already seen what socialism accomplishes economically"

Whatever economic success that has been accomplished worldwide can be attributed to whatever degree individuals are free to innovate and are rewarded for that innovation. I agree with Judy Shelton's observations regarding Nicolas Sarkozy's recent remarks:

These days, it seems difficult to defend the efficacy, let alone the morality, of an economic approach to human interaction that is now blamed for having put the entire global economy at risk. But that is exactly what we need -- most importantly, from America's next leader.

Sometimes it takes an outsider to help us gain perspective . . . France's president held out the possibility that all is not lost, that we can fix what is broken. "The financial crisis is not the crisis of capitalism," according to Mr. Sarkozy. "It is the crisis of a system that has distanced itself from the most fundamental values of capitalism, which betrayed the spirit of capitalism."

Shelton concludes:

With freedom comes choice; with choice comes responsibility. What is true within one's own life and one's own community should be true for the world at large. Integrity matters, competence counts, and earnest effort finds its reward. The Latin root of the word "credit" -- credere -- means "to believe." There is no better starting point for restoring morality to capitalism.

Who would have guessed that it would take a Frenchman to remind us that hope is the limitless source of power that drives the human spirit to create, to improve, to achieve its dreams; it is the greatest civilizing influence in our culture. Yet it was Mr. Sarkozy, speaking before Congress last November, who offered the most profound assessment of our nation's gift to the world. "What made America great was her ability to transform her own dream into hope for all mankind," he said. "America did not tell the millions of men and women who came from every country in the world and who -- with their hands, their intelligence and their heart -- built the greatest nation in the world: 'Come, and everything will be given to you.' She said: 'Come, and the only limits to what you'll be able to achieve will be your own courage and your own talent.'"

It's a lesson that should never be lost or forgotten.

Most on the left will disregard the observations made in this piece on the basis of the publication in which it appears. As Shelton also notes, when we've reached the point where the Republicans are decrying "Wall Street greed" and "predatory lenders", voices such as mine are truly alone in the wilderness.

Like dmduncan on the conspiracy topic, I've no interest in changing any minds - I'm simply calling it like I see it. I think I've been reasonably articulate in explaining why I see things as I do. I think people should be free, and that certainly includes the freedom to disagree with me.

[william]

"And while government regulation, at its best, merely functions as the incorruptible referee -- it will never dream up the breakthrough projects that become capitalism's greatest success stories, nor have the discernment of the venture capitalist who recognizes an entrepreneur with a brilliant idea -- it nevertheless plays a key role" (Shelton)

Key role indeed we are now experiencing the absence of that key role.

Human nature at this time is not ready for the ideology of communism or free for all capitalism. Socialized bailouts for those “greedy ones” who shout capitalism to the top of their lungs then go off and have a 440 thousand junket on taxpayer’s money.

We have just hired the very ones that sunk their organizations to fix the problem. Whoops guess no one read management 101. Wait until you see what kind of bonuses they give themselves for that. We humans are an interesting species.

Humans will always figure out a way to take advantage of a system any system so remove the oversight of any economic system and the take advantage greed party begins.

Now we are going to put our eggs in the basket of a right wing agenda Frenchman.

[Michael H]

Well, William . . . I guess it's clear where you stand on the human nature question.

To paraphrase an earlier comment of yours: Some contributors to this blog speak about the unity of the sacred, while disparaging the individual manifestations thereof.

[william]

very few humans are able to experience or feel this "unity of the sacred" at this time. but I believe there is a law of progress in action that will allow everyone to gain that ability.

we are a works in progress. :-)

we appear to be very early in our species development and I suspect our soul development.

look around there are people taking advantage of people all the time due to many factors one being misapplied desires.

[Larry Boy]

Michael H wrote:

"I never claimed that they are. The statement applies to anyone, anywhere, who thinks that governmental solutions are a panacea."

I think that we should be very aware of the possibility of large-scale corruption in *whatever* country we live. But surely we need *some* governmental solutions to manage the crisis we're in at the moment? You're saying yourself that the market should be regulated to some degree. And I don't see that social welfare programs have led to corruption in Canada or Western Europe or any other country which is based on democratic values. As far as I'm aware it has only been the case in communistic countries such as Soviet and China.

"Who would have guessed that it would take a Frenchman to remind us that hope is the limitless source of power that drives the human spirit to create, to improve, to achieve its dreams; it is the greatest civilizing influence in our culture. Yet it was Mr. Sarkozy, speaking before Congress last November, who offered the most profound assessment of our nation's gift to the world. "What made America great was her ability to transform her own dream into hope for all mankind," he said. "America did not tell the millions of men and women who came from every country in the world and who -- with their hands, their intelligence and their heart -- built the greatest nation in the world: 'Come, and everything will be given to you.' She said: 'Come, and the only limits to what you'll be able to achieve will be your own courage and your own talent.'"

It's a lesson that should never be lost or forgotten." (Shelton)

Bla bla bla. This is just laughable. America, the "great country of freedom", has killed millions of its own native inhabitants, been involved in slave trade on a massive and appaling scale, and continued to deny black people human rights long into the 20th century. It is just laughable to say that America is a "country of dreams". Now I'm not saying that any other country is any better, but those who still think that America is "the greatest nation in the world" need to wake up to reality.

[william]

“has killed millions of its own native inhabitants,”

It appears that disease and despair killed more Indians than warfare. Human greed is part of the human psychic at this time and may be for some time to come. The soul is a work in progress and some more progressed than others.

Again it appears that at this time what is needed is not government controlled or owned economic systems or a free for all let capitalism do its thing. That delicate balance that benefits the most people and allows human potential to flourish for the most people is indeed a great challenge and offers many lessons in life for its citizens.

Ideologies including economic are very prone to paradigm paralysis; one only has to view this political season to see this phenomenon in action.

[Michael H]

Bla bla bla. This is just laughable. America, the "great country of freedom", has killed millions of its own native inhabitants, been involved in slave trade on a massive and appaling scale, and continued to deny black people human rights long into the 20th century. It is just laughable to say that America is a "country of dreams". Now I'm not saying that any other country is any better, but those who still think that America is "the greatest nation in the world" need to wake up to reality.

It's all about what one chooses to focus on, LB. Most everyone alive today can look to history and find endless examples of atrocities.

Yet, nearly no one recognizes that those involved didn't see their acts as atrocious at the time. They saw what they were doing as largely, if not entirely, correct. I see it as hopeful that the consensus today is that slavery is abominable and that it's regarded as wrong to displace tribal societies. At the same time, I see it as troubling that so few recognize that the core issue remains collective consensus, that so many still advocate "solutions" based on collective consensus, and most of all, that so few who advocate collective solutions recognize and acknowledge that accomplishing those solutions requires resorting to force.

Where we do agree is that more need to wake up to reality. I think where we differ is in the interpretation of what “waking up to reality” means. I think true reality is what exists behind all thoughts about reality, while most who demand that others "wake up to reality" really mean that they need others to see the same reality they do. If there’s a solution that exists, it has to do with recognizing that everyone is experiencing a separate reality.

And that is the entire problem. When the collective largely agrees on a given interpretation of reality, individual human beings are trampled, and often slaughtered. (The Inquisition, The Spanish Conquest, The Bolshevik Revolution, The Thousand Year Reich, and yes, the tremendous expansion of the United States are all examples). This is why I advocate small government that focuses on protecting individual rights. The founding fathers of the United States recognized this, which is why they arrived at a constitutional republic rather than an unfettered democracy. They understood that unfettered democracy amounted to an elegant euphemism for mob rule.

The mob has whittled away at the original vision for over two centuries now. My hope is that there are enough individuals remaining to slow the momentum. I have serious doubts as to whether there are.

[Larry Boy]

Michael H, I can sympathize with most of what you wrote in your last post. And I totally agree that reality is "what exists behind all thoughts about reality". I think one of the greatest problems, which has also been one of our greatest advantages throughout history as it has permitted development, is that we tend to look at the world through a filter of "concepts". I think we need to revise some of these concepts from time to time. As an example, take the idea that we can "own" nature and its resources - it has absolutely no objective basis whatsoever, and creates a lot of problems. "Ownership" only exists in our minds, and I suggest that in the future we may need to change it to another concept which is more in alignment with a sustainable ecology - such as "temporary responsibility for (a certain thing)".

I suggest we agree to disagree on the other issues, and end this discussion here.

[william]

“The mob has whittled away at the original vision for over two centuries now. My hope is that there are enough individuals remaining to slow the momentum. I have serious doubts as to whether there are.”

I found it interesting that you had these doubts. Also your comment about the expansion of the united states as most Americans have been convinced that this expansion is only for defensive purposes.

“This is why I advocate small government that focuses on protecting individual rights.”

This is a delicate balance because without some gov oversight a nation could end up with one per cent of the population having more wealth than the bottom ninety per cent and we have seen in third world countries how this can have dire affects on that country in hostilely and violence.

And what is interesting to me about the human mind is almost to a person that one per cent believes they have every right to that wealth in spite of the consequences it may place on the many and the future of that country.

[dmduncan]

I too oppose large government and my thoughts on this come from having lived among the Lakota who up until a hundred years ago were roaming the land without any form of government for as long as any of them can remember. The effects you see on reservations today are directly traceable to the loss of tradition that sustained them for hundreds or thousands of years. The effects are horrific so I do not support any philosophy that tries to homogenize the world into one thing and one thing only. And the attitudes which lead to the current conditions are still very much apparent in South Dakota today. There is quite a bit of racism and unfair treatment of the Lakota in their own lands; if two people commit the same crime, and one is Indian, the white person will receive softer punishment. Indians wait longer in restaurants to get served than white people do. The bags of Indians are checked while leaving Walmart while white people pass unbothered. But you don't hear of these things because the Indians are still a very stoic people with a sense of humor that allows them to tolerate a great many things that would drive others, like me, nuts.

And my idea of ownership too comes from them, and it is neither socialist nor capitalist.

If we have a right to life, liberty, and the pursuit of happiness, then there can be no such right without that which makes life possible, first among such things which is land. So that when some people have more than they can possibly use they are infringing on the rights of others to live and do in fact set up a feudal system where now you owe some other person to live on some parcel of land that he himself cannot occupy.

Nature gives freely, but humans have figured out a way to supplant nature and charge others for what should be theirs by right so that they can survive from other people's labor while doing nothing themselves.

A man should have the right to live on a patch of land for as long as he lives, and for his child to live their too. But when they die or otherwise choose not to live on it, then it should not belong to them anymore.

The right to such things is a traveling right which should not exist where you do not exist.

The idea and policy that some people can buy more land than they can use for their natural needs and then sell it to other people is wrong, because it contradicts the principle that we all have a right to life, liberty, and the pursuit of happiness.

That does not mean the government has to give all this to you, but it should mean at least that the government does not interfere with your right to get it for yourself, and to protect people and moderate in disputes.

[Roger Knights]

MP: Your preference for holding on is based on an assumption that the major trend is up. But what if it's down? I think it is--and I think there are profound psychological forces making it hard for nearly everyone to envisage a sharp decline. (I recently won an enormous amount of "play money" on a current-events predictions market (www.hubdub.com) by betting heavily at 17-to-1 odds, on average, over a period of two months (early August thru early Oct.) that the Dow would touch below 9000 before Oct. 31.)

Here's a quote from an Oct. 19 article on www.SeekingAlpha.com by Peter, Schiff, "Not Your Grandfather's Great Depression":

the structure of the U.S economy today is far weaker than it was in the fall of 1929. Years of reckless consumer borrowing and spending, and enormous trade and budget deficits have resulted in a hollowed out industrial base and an unmanageable mountain of debt owed to foreign creditors. Instead of the support of a strong currency backed by gold, the public now must deal with a modern Fed free to print as much money as politicians want. So rather than getting the benefits of falling consumer prices (as happened during the Depression), consumers today will contend with much higher consumer prices, even as the economy contracts.

With Barack Obama now waiting in the wings to conjure a newer New Deal, far larger than even FDR could have imagined, and at a time when we cannot even afford the old one, this will not be your grandfather's Depression. It may be much worse.

[Roger Knights]

Oops: Make that http://seekingalpha.com

[Roger Knights]

Even if we don't have another monster depression, we could have a big recession followed by a decades-long no-growth period, like Japan. E.g., the Dow could lose 50% more (Dow..n to 4000 or so) and stay there. An investor would do better in something other than stocks.

[Michael Prescott]

Even if we don't have another monster depression, we could have a big recession followed by a decades-long no-growth period, like Japan.

We could.

Then again, we might not.

Since no one knows, my approach is to maintain a diversified portfolio and wait for things to shake out.

Your mileage may vary.

[Roger Knights]

The comments above (Oct. 19) were made when the Dow was at about 9000. It's 8375 now. I predict it'll be below 4500 by this time next year. (If we're lucky.)

The paradigm is that stocks always come back--and then some. But that hasn't happened in Japan. The Nikkei index was 39,000-plus in 1989, and it's down to about 7,600 or so now. That happened because Japan had to work through massive debt overhang following a real estate bubble--which is the same prospect that faces us.

There's a wonderful book with hundreds of quotable passages that was a best-seller last year, and which I recommend to all: The Black Swan: The Impact of the Highly Improbable, by Nassim Taleb, a derivatives trader for a hedge fund. He managed to dodge the 1987 crash. His advice to traders and investors is to avoid exposure to negative black swans, and maximize exposure to positive black swans (long-shots). There is a 10%, say, chance that we're facing another Great Depression--so, despite uncertainty, that's all you need to know to get out--and live to fight another day!

(What'll happen when countries start defaulting? Lots of falling dominoes and forced selling, leading to a chain reaction of more dominoes and a crash. Just because opinion leaders aren't openly talking about this possibility doesn't mean it's not in the cards.)

[Roger Knights]

PS: And here's a word of caution about trusting Warren Buffet's "Buy" recommendation:
http://seekingalpha.com/article/101409-a-bailout-for-berkshire

[Roger Knights]

PPS: Here's a link to an article similar to the NYT article MP cited, titled "To sell or not to sell: unloading stocks in bear market rallies will only lock in your losses." It is followed by 147 comments, 75% of them highly critical--along the lines of my remarks above:
http://www.marketwatch.com/news/story/dont-sell-bear-market-rallies-itll/story.aspx?guid=D3918C68-0D03-465B-8333-5D2EB07E7213&dist=SecMostRead

[Roger Knights]

PPPS: Here's yet another don't-sell-now article, titled "How bad is it? It's actually pretty darn good
Commentary: 'Buy when there's blood in the streets'" Here's the link:
http://www.marketwatch.com/news/story/how-bad-its-actually-pretty/story.aspx?guid=%7B1B147F0F%2D2256%2D4CB4%2DA1BA%2D9136F4112570%7D

The amusing thing about it is that it's date is Sept 17, when the market was down only 25%, as opposed to its nearly 45% or so drop as of now (and more coming tomorrow). It drew over 400 comments, most of them critical. The best one so far stated, "What kind of advice is this? The sky IS falling."

That's my basic point: we get socially conditioned to "deny" that possibility (especially after perma-bears and gold-bugs have been crying wolf for decades). But we should be prepared to think outside the box.

[Michael Prescott]

The comments above (Oct. 19) were made when the Dow was at about 9000. It's 8375 now. I predict it'll be below 4500 by this time next year.

Time will tell. I don't try to predict the stock market. I've never been able to do it, and I haven't found anyone who can do it consistently. The Dow may be at 4500 in a year. Or it may be at 11,000. Who knows?

The parallel with Japan is interesting, but I suspect there are differences as well as similarities. History seldom repeats itself exactly.

It drew over 400 comments, most of them critical. The best one so far stated, "What kind of advice is this? The sky IS falling."

Sounds like capitulation to me.

[Pete]

"I don't try to predict the stock market. I've never been able to do it, and I haven't found anyone who can do it consistently."

You obviously haven't heard of Bradley Cowan's Stock Market geometry.

[Roger Knights]

Here's a link to a six-page article on Seeking Alpha by Richard Shaw, titled "Surviving the short-term to participate in the long-term.
http://seekingalpha.com/article/102432-surviving-the-short-term-to-participate-in-the-long-term

Here are the first few paragraphs:

"Market timing is not a good idea, but standing aside when a global train wreck is happening in proportions that rival the worst periods in modern history is not market timing — it is self-preservation.

"Being out of the market makes deciding how to re-enter problematic, and some opportunity could be missed, but far greater opportunity is missed if capital is destroyed.

"We [his fund] are in cash from 80% to 100% in various accounts since mid-summer.

"We believe that discretion is the better part of valor in this situation. Nobody really knows what comes next. We are in a Black Swan. The unknown unknowns dominate."

PS: The Dow just closed above 9000 today--a great time to get out (although a few stocks, under 10%, are way oversold).

[Roger Knights]

Here's an amusing rebuttal to the idea that nobody knows has the key to predicting the stock market. The key is known as the Halloween indicator, or "Sell in May and go away". I'm quoting from commenter Jojo99 on a thread by MarketWatch blogger Mark Hulbert. (There is also a similar article by "Babak" at http://seekingalpha.com/article/103912-sell-in-may-and-go-away )

===========
This was something quoted by John Mauldin in his newsletter dated around 5/20/2008. I don't have a link to it though.
*******
"Numerous studies show that since World War II, as much as 99% of stock market returns have been generated between November 1 and May 1. Good friend and fishing buddy David Kotok of Cumberland Advisors sums it up nicely:

"According to the Ned Davis (NDR) database, starting in 1950, $10,000 invested in the S&P 500 Index every May 1st and then liquidated every October 31st would only be worth $10,026 today. That's right: had you stayed out of the stock market from November through April and only been in the market from May through October, you would have had no change during the last 57 years. 21 of those years would have been negative; 36 were positive. This happened during the same period that stock prices were rising about 75% of the time and markets made extended upward moves.

"Consider the results of the reverse strategy. Buy the S&P 500 Index on November 1st and sell all your stocks on May 1st. The outcome is dramatically different. Your original $10,000 would now be worth $372,890 as of April 30th closing prices in 2008. Out of the 58 periods you would have had positive results in 45 of them and negative results in only 13 years."

[Roger Knights]

Here's another amusing note, from Mark Hulbert on MarketWatch:

The Hulbert Financial Digest's investment-letter monitoring through Oct. 31 is now available. It's a disquieting spectacle. Only 12 letters of the 180-plus followed by the HFD have made money in 2008, And the top performer -- Crawford Perspectives, up 33.6% -- uses astrology.

[Roger Knights]

Here's another amusing quote, by superstar psychic Laura Day, in the Telegraph (UK) for Nov. 9:

"I ask her if she had anticipated that the current financial crisis would be as big as this. 'I thought it would be bigger, actually, and I think it's not over yet. These symptoms were cooking for years. I could feel this six years ago.' She thinks it will be decades before the market truly recovers."

Here's the link:
http://www.telegraph.co.uk/news/worldnews/northamerica/3400109/Meet-Laura-Day-The-financial-psychic-of-Wall-Street-who-predicted-global-meltdown.html

[Roger Knights]

PS: Here's another amusing quote (the last sentence)from the article on Laura Day:

"She comes from three generations of doctors, and her father, David Globus, has little truck with his daughter's line of work. Does she ever discuss her abilities with him? 'Are you kidding? My father just got convinced vitamins are useful.' Nevertheless, he has been known to ring her for help. 'He'll call me up at seven in the morning and say, "Where are my damned keys?" I'll say, "They're in the maid's bathroom in your grey jacket." We don't talk about how I know it; it would disturb him too much."