financial crisis

Frauds are a cancer destroying capitalism

My previous post described a comment by Sam Antar during his CPE session that the fines arising from of a long list of financial fiascos are essentially a tax on illegal behavior.

He made another comment in that session that I wanted to describe in detail. He said these frauds are a cancer destroying capitalism.

I had opportunity to visit with him a few weeks ago and asked him to expand on this idea. I will summarize what we discussed.

This discussion is cross-posted from my other blog, Attestation Update, since it directly affects freedom, capitalism, and morality.

Cancer destroying capitalism

He indicated the foundation of capitalism is reliability of financial information. If you can trust financial information you read then we can do business with each other.

He says the extent of frauds we have seen are leading people to lose faith in financial information. That leads to loosing faith in their counterparties. Therefore people have less trust. In financial terms that means the risk premiums for transactions go up. The interest rate built into a transaction increases and the return drops.

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By Jim Ulvog, ago

Huge fines are a tax on illegal behavior

Several weeks ago I listened to a continuing education class presented by Sam Antar, current felon and formerly CFO of Crazy Eddie.

In the session, he made two comments that caught my ear. First, the fines we read about as a result of various financial scandals are just a tax on illegal behavior. Second, those fiascos are, he said, a cancer destroying capitalism.

After the session, I had opportunity to interview him by phone and follow-up on both of those ideas.

(This discussion is cross-posted from my other blog, Attestation Update, because this is not capitalism and I don’t think the underlying issue furthers freedom.)

Fines are a tax on illegal behavior

He indicated that essentially no one has been implicated in any of the disasters we’ve read about, which I have discussed extensively on my blog.

He said corporations don’t commit crimes. People commit crimes.

And the people who committed crimes aren’t going to jail.

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By Jim Ulvog, ago

3 of the common myths about capitalism

  • Pro-capitalism = pro-business
  • Capitalism generates unfair distribution of income
  • Capitalism is responsible for the financial crisis and great recession

Not true. Those three (false) myths disposed of in this video:

[youtube=http://www.youtube.com/watch?feature=player_embedded&v=KGPa5Ob-5Ps]

 

That is from Professor Jeff Miron from Harvard.

A few highlights from the video:

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By Jim Ulvog, ago

While pondering the wisdom of those who can prevent the next financial crisis…

…check out the wisdom of politicians and regulators evidenced before the last crisis.

(cross-posted from my other blog, Outrun Change.)

Read The Housing Bubble and the Limits of Human Knowledge , by Alex Pollock.

The fallacy in play today is that the regulators who didn’t see our current financial crisis coming (or helped facilitate it) are now wise & bright enough that they will be able to detect any future crisis far enough in advance to prevent them. It’s quite obvious that is the operating concept driving laws and regulations for several years now.

John Cochrane makes this point in his article Limited clairvoyance: (more…)

By Jim Ulvog, ago

Quantitative Easing and other performance enhancing drugs

(Cross-post from my other blog, Outrun Change.)

There was a big on-air confessional a while back. Something about bicycles.  Here’s another interview that got overshadowed by that big one. Or perhaps it is an educational cartoon. I’m not sure.

Bernanke to Oprah:  ‘I’ve Been Doping for Years’.

This cartoon gives a superb explanation in 12 minutes of a major factor about how we got into our current economic mess.

The format is an imaginary interview with the chairman of the Federal Reserve Bank, Ben Bernanke, as he confesses to long-term doping of the economy.

[youtube=http://www.youtube.com/watch?feature=player_embedded&v=orh64vypKwU]

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By Jim Ulvog, ago

Role of the government in generating the financial crisis

“[…] many of the financial institutions that contributed to the problem were crony capitalist. Business leaders can have confidence in the working of free markets. It is government interference in markets that they should fear.”

John A. Allison

 That’s the opening quote in Pablo Paniagua’s review of Mr. Allison’s book, The Financial Crisis and the Free Market Cure: Why Pure Capitalism is the World Economy’s Only Hope

Mr. Allison was a long-serving CEO of BB&T Bank. He saw the interference of government in the banking industry up close and personal.

Those icky, greedy bankers and icky greedy Wall Street financiers played a role in our current mess, but minor compared to the interference and misdirection and forced distortions arising from various federal agencies.

An overview of the mess we are in: (more…)

By Jim Ulvog, ago