Posted on September 30, 2008 - by deCadmus
A Schism at the Church of Wall Street
I’m not an economist. And, despite all evidence to the contrary – my mailbox stuffed with offers of shiny new credit cards and cutthroat rates for refinancing my home, the glossy ads in the newspaper begging me to buy a shiny HDTV today and wait two years to pay for it – I’m not a financial Luddite, either. I can take it as an article of faith that, just because I see offers for credit every day doesn’t mean that there isn’t a global credit crunch, or that our financial system isn’t near meltdown. After all, who am I supposed to believe… Wall Street, or my lying eyes?
Wall Street has become, by most measures, a religion, so taking high finance as an act of faith seems appropriate, if a bit absurd. At the Church of Wall Street, worshipers embrace the doctrine that any stock – any asset — is worth precisely as much, or as little as the collective belief of the faithful, despite empirical evidence to the contrary. This willing suspension of disbelief has served the faithful well. It’s allowed them to create trillions of dollars of wealth, not out of thin air — not even out of water, or loaves — but out of debt. By golly, that’s a miracle, it is.
Now the high priests of Wall Street – Paulson and Bernanke, Greenspan and Gramm – have failed their faithful. The gods of finance are angry and demand a sacrifice – of $700 billion. No sacrifice? Financial Apocalypse!
I don’t know about you, but I’m not buying what they’re selling.
Of course good banks are holding onto their money and refusing credit to bad borrowers — especially when those borrowers are other banks who didn’t just swallow the poison pill of sub-prime loans — they gobbled them up like there was no tomorrow. And guess what? For them, there isn’t. Let them go bankrupt, and good banks — those with real assets — will buy whatever’s worth having at the fire sale. That’s how markets work, right?
Me, I’m going to go enjoy the autumn leaves. If you see the horsemen, send me an email.
Postscript: True to my word, I *did* go out and see some lovely foliage. Flickr photos have been updated, and you can catch the Autumn 2008 slideshow here.
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Hello.
Bloggle is the online playground of Doug Cadmus, a usability guy, writer, photographer and sometime dramatist who moved to Vermont for the coffee. When not writing, reading or walking his old, blind golden retriever, he roasts coffee in his garage and is the Web Guy for Green Mountain Coffee in Waterbury, VT. Flickr Photos
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October 1, 2008
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Looks like the frigid north has not robbed you of your common sense. Wish more congress-critters were as capable seeing the benefit of letting failed businesses fail. Propping them back up is like wrapping a dirty cloth around a festering wound and hoping it gets better.
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October 1, 2008
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Well now… *that’s* a lovely image to ponder. ;)
And just when you think to yourself, “Self, how can it possibly get any worse that it is?” there’s more stuff rattling down the tubes:
1) There’s growing evidence of actual, for real tightening in the credit markets, at least so far as muni bonds are concerned. Need a new bridge? Sorry… can’t get a bond floated to build it. Maybe if stories like these get out in the marketplace of ideas then there’ll be some traction on the idea that *something* needs to be done, although probably not in the style of the Paulson Plan.
2) The Repubs have floated some ideas that would make the bailout plan more palatable to them, like a two year waiver on capital gains taxes and more tax credits for businesses that they weren’t able to get crammed through the House earlier in the year.
I could insert snark here about the GOP today standing for the Grand Obstructionist Party or some such, but I simply can’t top the devastating irony and bleak humor they heap upon themselves.
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October 1, 2008
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Wish I could sit and discuss this whole topic over a pot of coffee - you should could visit south when the snow starts.
There is one critical flaw in the story most repeated. Avoiding a recession is not a good idea. We have been putting off a recession through the tech bubble, housing bubble and short-lived commodities bubble. It is going to happen but the longer we put it off the worse it will be. Hopefully the Congress will get bogged down and do nothing so the system can clean itself out.
It is true that credit markets are tighter than they were a few weeks back. That is because less idle money is sloshing around looking for any place to land. People and businesses with the ability to pay back their loans will always be able to get credit as long as they are willing to pay the market rate. Municipalities might have to try the radical idea of spending less for a few years but worse things could happen.