(For previous posts in this series, see here.) The real estate boom fueled by the easy availability of subprime mortgages was a classic pyramid phenomenon, entirely dependent like all such phenomena on an endless stream of new buyers coming along willing to pay the inflated prices. When the crash came, as it inevitably does with …
Monthly Archive: February 2008
Feb 14 2008
The brave new world of finance-7: The subprime mortgage debacle
(For previous posts in this series, see here.) The current so-called subprime mortgage crisis is a result of a real estate boom fueled by a combination by ignorance, greed, lax standards and oversight, and outright criminality. Unlike art or precious stones, in the case of a house, the value can be determined within a fairly …
Feb 13 2008
Everybody should be converting: The sequel
There was a fascinating discussion in the comments section on the post Everybody should be converting that I encourage everyone to read. I was going to reply in the comments but it got too long (my usual failing) and I thought it merited a new post that pre-empted (once again) the series on the new …
Feb 12 2008
The brave new world of finance-6: Greed and bubbles
(For previous posts in this series, see here.) One can never underestimate how the power of greed, the thought of making a lot of money quickly, can cause otherwise rational people to lose their senses. A friend of mine works for the white collar crime division of the Cleveland police and he can tell story …
Feb 11 2008
The brave new world of finance-5: Crystal ball economics and the rise of bubbles
(For previous posts in this series, see here.) My first real awareness that my understanding of what constituted sound economics and business practices was orthogonal to how Wall Street viewed it came in the 1990s when company after company sought to increase its stock price by slashing its work force, thus increasing its profits (at …
Feb 08 2008
Everybody should be converting
(I am taking a short break from the series of posts on economic issues. They will continue next week.) Earlier this week, Pope Benedict XVI issued a replacement for the traditional Good Friday prayer and it has riled up some Jewish groups. Part of the new prayer says: “Let us pray also for the Jews …
Feb 07 2008
The brave new world of finance-4: From social being to consumer
(For previous posts in this series, see here.) In the last post, I suggested that sending out checks for $600 to each taxpayer, especially those who don’t need it, and then encouraging them to waste it, hardly seemed like a coherent economic plan. Such a policy can only be understood as a subsidy to the …
Feb 06 2008
The brave new world of finance-3: The ‘free money’ stimulus package
(For previous posts in this series, see here.) Clearly I am not the only one that thinks that current fiscal and monetary policies are not only unsustainable but also immoral and that their priorities are completely out of whack. French President Sarkozy, following the discovery of the speculative trading and fraud that resulted in losses …
Feb 05 2008
The brave new world of finance-2: Further indicators of insanity
(For previous posts in this series, see here.) The current weird situation in which the stock market rises on what you or I might think is bad news can also be seen with labor figures. When reports are released that unemployment is low (which ordinary people would think is a good thing), the stock market …
Feb 04 2008
The brave new world of finance-1
One topic that I have tended to avoid in my blog posts is the subject of economics. This is because the ‘dismal science’ is one of those subjects where I feel a little out of my depth. Whereas I can make sense of events in many other areas of everyday life, even to the extent …
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