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Category Archive: Brave new world of finance

Feb 29 2008

The brave new world of finance-14: The next bubble?

(For previous posts in this series, see here.) In this final post in this series, I want to look at what might be the next bubble looming on the horizon. In his article The next bubble: Priming the markets for tomorrow’s big crash (Harper’s Magazine, February 2008) Eric Janszen says that the total value of …

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Feb 27 2008

The brave new world of finance-13: The new bubble cycle

(For previous posts in this series, see here.) Karl Marx famously argued that capitalism, while being remarkably resilient in overcoming problems and capable of releasing enormous productive capabilities, also carries within itself the seeds of its own eventual destruction because of its incapacity to accept an equilibrium state. Capitalism requires that companies have to push …

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Feb 26 2008

The brave new world of finance-12: The consequences of the primacy of shareholders

(For previous posts in this series, see here.) As I discussed in the previous post, the instability caused by shareholder demands for steadily increasing rates of return infects every area of business for the worse. Furthermore, the law requires of management that businesses be run purely for the benefit of its stockholders. While this is …

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Feb 25 2008

The brave new world of finance-11: The changing emphasis of business

(For previous posts in this series, see here.) The problem with the modern business world, as I see it, is that it is no longer enough that a company be successful in the traditional sense of steadily producing revenues in excess of expenditures. That model of a successful business is considered hopeless naïve these days. …

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Feb 19 2008

The brave new world of finance-10: Who’s to blame?

(For previous posts in this series, see here.) As is typical with bubbles, people involved at all levels of the subprime mortgage debacle seemed to deliberately shut their eyes to any negative information, as if they thought that wishing things were just peachy would make it so. As long as nobody looked too closely at …

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Feb 18 2008

The brave new world of finance-9: Two case studies of destroyed communties

(For previous posts in this series, see here.) Up to now, I have been looking somewhat generally at the problems created by the collapse of the subprime mortgage market: how the problem was created and the scale of the problem. But to really appreciate how it worked and its impact on actual people, one can …

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Feb 15 2008

The brave new world of finance-8: The end of the housing dream

(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 …

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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 …

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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 …

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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 …

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