Tuesday, October 07, 2008

The Current Financial Crisis

Today's essay is totally different from what's usually on this blog. Feel free to skip it, if you wish, but I think you'll find it worth reading.

Here are a few thoughts on the current financial crisis.

• Our basic source of supply is the Lord. His promises are as good today as they were a month ago or a year ago.

• In the USA, the politicians acted like politicians, not statesmen:
o They didn’t ask the public to do anything in particular to improve the situation. They are hoping to “restore confidence” via the bailout bill, but they don’t say what that means in practical terms. What do they want the average man or woman to do? The politicians are willing to pass a bill that has a price tag of $17,000 per household, but they don’t even consider that several million people might also take action on their own, if the government told them what kind of action it wanted.
o Ms. Pelosi blamed the crisis on the Republicans. Some of the Republicans then refused to vote for the bill. If the bill was as essential to the national well-being as they said, the actions of both sides in that squabble were dangerously selfish and irresponsible.
o The final bill included all sorts of “pork.” Just why should extra funds for wooden arrows for youth, or special treatment of companies doing business in American Somoa, be a part of the bail-out? Any legislator who would vote for a $700 billion bill in order to get some funding for wooden arrows, is somewhere near treasonous. That’s the sort of greedy, me-first behavior that caused the crisis.

• None of the wealthy people have been donating money to the banks, saying that the banks deserve our charity.

• Much of the current crisis, just as much of the Enron crisis (I worked there for a few hours) and much of the Orange County, California, meltdown of the early 1990’s (I helped them track their investments) revolve around hiding risk. Organizations can often make huge profits by taking huge risks. They hide the risks, so that investors will think the huge profits come from superior knowledge. The eventual result is usually huge losses.

And no, I've never worked for a bank nor an investment house.

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