Has U.S. learned less of Enron decade later? [BLAMING THE VICTIMS]
Enron’s bankruptcy on Dec. 2, 2001, revealed fraudulent illusion. Investors swore they would not be profoundly deceived again. But it was only the beginning of a decade when so much in the economy was not as it seemed.
Can’t-lose Wall Street guys turned out to be cheats. Home values did not go up forever. The theme was shredded faith—that and debt, the more the better.
In the simple story of the past decade, a journey from corporate scandals to a housing bubble, then to a collapse and a frustratingly slow recovery, the villain is Wall Street and the victim Main Street. The reality is more complicated.
The Housing Bubble
American consumers had run up debt to record levels by the end of 1003, and more of them than ever were filing for bankruptcy. Yet the stocks of companies extending mortgages to the riskiest borrowers, so-called subprimes, were rising fast.
Subprime was a euphemism for people who had too little income, too much debt, a bad record of paying lenders back—or all three. As home prices rose, worry that they would not meet their mortgage payments was replaced with faith that, even if they couldn’t, they could always see the home for more than they borrowed and return the money.
“People were using their homes like automated teller machines,” said David Rosenberg, chief economist at Gluskin Sheff & Associates and a big critic of lending during the boom. “At some point, people have to own up to their mistakes.”
The biggest, most sophisticated Wall Street firms fooled themselves, too. Banks bought subprime lenders whole. Elegant mathematical formulas from their “risk management” departments told them their gambles were fine. Standard & Poor’s and other credit rating agencies provided reassurance by slapping their highest rating on bundles of risky mortgages.
In 2007, subprime lenders went bust, one after another. Then all the mounting debt, made possible by years of half-truths and self-deceptions, turned the fall of a single industry into a worldwide financial crisis.
By the end of 2008, Bernard Madoff was arrested for lying to investors in a $60 billion Ponzi scheme over two decades.
A sad footnote: After an overhaul of Wall Street rules last year, broker MF Global turned to the same Lehman Brothers-like deals to fuel its bet on indebted European governments. The heavy borrowing helped send the firm run by ex-New Jersey Governor Jon Corzine into bankruptcy, throwing 1,000 people out of work and creating chaos in the markets as brokerage customers scrambled to get their money back. A month after the firm’s collapse, regulators still can’t find $1.2 billion of customer funds.
Corzine Reportedly Ignored Warnings About Bonds
December 6, 2011
The Wall Street Journal reports Tuesday that MF Global's former chairman and CEO Jon S. Corzine ignored several internal warnings about the risks associated with taking on exposure to Europe before the company declared bankruptcy. Lynn Neary talks to Wall Street Journal reporter Julie Steinberg, one of the article's coauthors, for more. http://www.npr.org/2011/12/06/143224370/corzine-reportedly-ignored-warnings-about-euro-bonds
The Reckoning
Now, Europe is paying for years of using government debt to fund early retirements and long vacations that its citizens really couldn’t afford. Streets are chocked with protesters; governments are toppling and interest rates rising, some to crippling highs.
Stocks have barely moved in the decade of lost faith. On the Friday before the Enron bankruptcy, the S&P 500 closed at 1,139. Last Friday, it closed 19 points above that. The incomes of many middle-class Americans haven’t kept up with inflation. Home prices are still falling. Pretending we were wealthier has made us poorer.
Nation, Iowa City Press-Citizen, Friday December 2, 2011 (8A)
BBC WORLD SERVICE
http://www.bbc.co.uk/programmes/p00lf0gr#synopsis
Are we in control?
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Last broadcast on Sun, 13 Nov 2011, 14:05 on BBC World Service (see all broadcasts).
Synopsis
How far can we control the outcomes of our actions?
Economist Robert Frank says that competition is not always benign and that if we want to understand some of its negative results we should look to Charles Darwin for explanation.
Soprano Claron McFadden discusses how far she can control audience reaction when she is performing on stage.
And environmental scientist Peter Liss says we need a lot more data before we can decide whether pumping chemicals into the skies and oceans can really help solve global warming or just creates a new host of environmental problems.
Illustration by Emily Kasriel: the monied hand of the individual controlling the life of the planet, to the sound of music.
Related Links
- 1. Download the Podcast (mp3)
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- 3. The Forum Facebook Page (www.facebook.com)
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- 5. Robert Frank (www.robert-h-frank.com)
- 6. Clarron McFadden (www.claronmcfadden.com)
- 7. Peter Liss (http://www.uea.ac.uk/)
Professor of Economics at Cornell University, Robert H Frank, argues that today’s disciples of ‘the father of economics’ Adam Smith don’t pay enough attention to context and that in modern, highly-competitive markets actions that benefit individuals often create highly negative consequences for the society as a whole.
Renowned singer Claron McFadden, who is equally at home in jazz and in classical music, demonstrates how she can elicit the desired emotional response from the audience just by changing the timbre of her voice, regardless of the meaning of the lyrics.
Photo © Claron McFadden; photographer Sacha de Boer
Professor Peter Liss, who has been researching biogeochemical interactions between the ocean and the atmosphere for the past four decades, suggests that we are long way from understanding the complex web of consequences that proposed geo-engineering techniques, such as iron fertilisation of the oceans, would have on our planet.
http://www.bbc.co.uk/programmes/p00j74mh#synopsis
06/08/2011
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Last broadcast on Sun, 7 Aug 2011, 15:05 on BBC World Service (see all broadcasts).
Synopsis
Could the current Eurozone crisis signal the start of terminal decline for the continent?
Or is there something about Europe's rich cultural vibrancy that will help it through the current troubles?
Or perhaps the real reason why civilisations come and go has nothing to do with human activity but the knock on effects of earthquakes, volcanic eruptions and other forces of nature we cannot control.
This week's guests are Greek archaeologist, Yannis Hamilakis, British volcano expert, Clive Oppenheimer, and from Latvia, the country’s first female President and authority on Latvia’s oral folk tradition, Vaira Vike-Freiberga.
Illustration by Bridget Kendall: A poet from ancient Crete sings to a Latvian girl about a volcano.
Latvia’s first female President and authority on her country’s folk poetry, the dainas, Vaira Vike-Freiberga, warns against unthinking adoption of economic models from abroad, however successful they may appear at the time.
She also suggests we shouldn’t overlook a nation’s culture and creativity of ordinary citizens in times of crisis.
You may think of competition for resources and the resulting social unrest as a relatively new phenomenon but Greek archaeologist Yannis Hamilakis says this was precisely the issue that brought down Bronze Age civilisations on Europe’s southern edge.
He also cautions against uncritical acceptance of long-standing interpretations of archaeological discoveries in Crete.
Hamilakis: Labyrinth Revisited: Rethinking `Minoan' Archaeology
Forget the foibles of politicians, the teetering banks and debt laden nations: is the real danger for Europe nothing to do with human kind, but a massive volcanic eruption?
Clive Oppenheimer, distinguished volcanologist from Cambridge University, gives us his view.
Oppenheimer: Eruptions that Shook the World
Volcanologist Clive Oppenheimer says we should send out secret squads to replace glossy magazines in doctors’ and hairdressers’ waiting rooms with a random selection of specialist magazines from around the world: titles for pigeon fanciers, perhaps a trade journal for pest control experts, something for teddy-bear collectors in German... It would get people talking to each other and make them more relaxed.
Braun opts for indie route
[Harry] Braun says he is running in 2012 because he has the solutions to the nation’s problems; he contended that Obama does not.
“He’s not a Democrat,” Braun said. He hasn’t accomplished anything. Neither of the political parties have any ideas on how to solve these problems.”
Melissa Dawkins, The Daily Iowan, Monday, November 28, 2011
3 Don't put your trust in human leaders; no human being can save you. 4 When they die, they return to the dust; on that day all their plans come to an end.
Psalm 146:3-4
ON POINT RADIO
http://onpoint.wbur.org/2011/12/05/the-west-in-decline
MONDAY, DECEMBER 5, 2011
The West In Decline?
The West was great. But what about now? Debt. Fear. The Euro. Is the West out of gas? Is our time up? Big-time historian Niall Ferguson gives us his take.
Historian and author Niall Ferguson talks about his new book, "Empire," during an intetrview in Cambridge, Mass., April 11, 2003. "Empire," a follow-up to a television series that drew 2.5 million viewers in Great Britain, is a spirited defense of Britain's record as an imperial power. (AP)
For five hundred years, the ascendancy of the West has driven world events. Sometimes brutally. Sometimes beautifully. But it’s been the West on top. Now, as Europe shakes, the U.S. struggles, and China and India rise, historian Niall Ferguson is asking whether the long era of Western ascendancy is over.
Whether we’re living through a long decline – or could see a sudden collapse. Maybe soon. Avoiding that means a cultural and institutional “reboot” says Ferguson, to revive the sources of Western strength. Our “killer apps.”
This hour, On Point: Niall Ferguson on the fate of the West.
-Tom Ashbrook
Guests
Niall Ferguson, Laurence A. Tisch Professor of History at Harvard University and author of Civilization: The West and the Rest.
More
Niall Ferguson in the studio with On Point's Tom Ashbrook. (Alex Kingsbury/WBUR)
From Tom’s Reading List
The Guardian “It has been an intellectual spat of some savagery, so far largely confined to the refined pages of one of Britain’s most respected literary magazines.”
TED “Over the past few centuries, Western cultures have been very good at creating general prosperity for themselves. Historian Niall Ferguson asks: Why the West, and less so the rest? He suggests half a dozen big ideas from Western culture — calls them the 6 killer apps — that promote wealth, stability and innovation. And in this new century, he says, these apps are all shareable.”
Newsweek “There’s another problem. Just like the populists of a century ago, the Teapopulists are drawn compulsively to disastrous presidential wannabes. I never asked you what you thought of Mitt Romney, Ted.”
In this book I want to show that what distinguished the West from the Rest – the mainsprings of global power – were six identifiably novel complexes of institutions and associated ideas and behaviors. For the sake of simplicity, I summarize them under six headings:
1. Competition
2. Science
3. Property rights
4. Medicine
5. The consumer society
6. The work ethic
Now, before you indignantly write to me objecting that I have missed out some crucial aspect of Western ascendancy, such as capitalism or freedom or democracy (or for that matter guns, germs and steel), please read the following brief definitions:
improvement in health and life expectancy, beginning in Western societies, but also in their colonies
6. The work ethic – a moral framework and mode of activity derivable from (among other sources) Protestant Christianity, which provides the glue for the dynamic and potentially unstable society created by apps 1 to 5
From CIVILIZATION: The West and the Rest by Niall Ferguson. Reprinted by arrangement of Penguin Press, a member of Penguin Group (USA), Inc. Copyright (c) 2011 by Niall Ferguson.
NOT THE END OF THE WEST BUT—THE END OF WHITE SUPREMACY
Jean Gimpel in The End of the Future: The Waning of the High-Tech World (1995) as part of the Praeger Studies on the 21st Century wrote a future prediction for the future of China in “The End of White Supremacy.” He posited that we should take heed of the fact tht deindustrialisation will mainly happen in the West and in the former Soviet Union, and that this dramatic trend will mark the end of 500 years of European domination of the world. In Pierre Lellouche’s Le Nouveau Monde (1992), he wrote that when the USA and the Soviet Union were confronting each other, mankind was witnessing the encounter of two ideologies, the democratic and the Marxist, created by our white reigning civiliztion. When capitalism and democracy collapses in the West, as I predict it will following the bankruptcy of our financial system after the disintegration of Marxism in the Soviet Union, we will very possibly be witnessing the twilight of the white race—provionally we hope.
Gimpel declared that as is now generally recognised, the center of the world trade has moved from the Atlantic to the Pacific. In 1982, the volume of trade across the Pacific overtook that across the Atlantic. The developing countries in the Far East grew in 1993 by 7.4 per cent compared with the world’s 0.6 per cent. Nevertheless, when Wall Street crashes, triggered off perhaps by a sharp fall of shares in Tokyo, Hong Kong or Singapore, the Pacific Basin will suffer an economic deceleration. But in the long run the Far East will recover progressively, achieving world economic supremacy while the former countries of our once glorious civilisation will become, in their turn, developing countries.
China will progressively dominate the Pacific Basin and beyond and, for the second time in her long history, she will have entered an era of growth in which her psychological drive and her technolocal evolution will rise in parallel curves. China is at the beginning of a cycle that could last a millenium, whicle Western Civiliation stands at the end of a cycle that is already 1,000 years old. (108)
A WESTERN REBUTAL
THE AMERICAN CRISIS & FIGHTING BACK
Most of Americans see the crisis as a collection of problems, not necessarily related to each other, and, although profoundly troubling, nevertheless within the reach of reason and reform. But if we list these problems, not according to topic, but as elements of larger issues concerning the structure of our society itself, we can see that the present crisis is an organic one, that is arising out of the basic premises by which we live and that no mere reform can touch it. (15)
- Disorder, corruption, hypocrisy, war. The front pages of newspapers tell of disintegration of the social fabric, and the resulting atmosphere of anxiety and terror in which we all live. Lawlessness is most often associated with crime and riots, but there is lawlessness and corruption in all the major instituions of our society—matched by the indifference to responsibility and consequences, and a pervasive hypocrisy that refuses to acknowdge the facts that are everywhere visible. Both lawlessness an evasion found in the [two wars], with unprincipled destruction of everything human, and random, indifferent, technological cruelty.
- Poverty, distored priortieis, and law-making by private power. America presents a picture of drastic poverty amid affluence, an extremity of contrast unknown in other industrial nations. Likewise there is a superabundance of some goods, services, and activities such as defense manufacture, while other needs such as education and medical care, are at a starvation level for many. These closely related kinds of inequality are not the accidents of a free economy, they are intentionally and rigidly built into the laws of our society by those with powerful influence; an example is the tax structure which subsidizes private wealth and production of luxuries and weapons at the direct expense of impoverished people and impoverished services. The nation has a planned economy and the planning is done by the exercise of private power [of the AEI and other corporate lobbies] without concern for the general good, [such as the 1% paying their fair share].
- Uncontrolled technology and the destruction of envioronment. Technology and production can be great benefactors of man, but they are mindless instruments [drone warfare, pressure to drill in pristine sites or fracking for natural gas while poisoning the water supply]; if undirected they careen along with a momentum of their own. In our country they pulverized everything in their path: the landscape, the natural environment, history and tradition, the amenities and civilities, the privacy and spaciousness of life, beauty, and the fragile, slow-growing social structures which bind us together. Organizations and bureaucracy, which are applications of technology to social institutions, increasingly dictate how we shall live our lives, with the logic of [Right-wing religionists and anti-tax allegiances] organization taking precedence over any other values.
- Decline of democracy and liberty; powerlessness. The Constitution and Bill of Rights have been weakened, imperceptibly but steadily. The nation has gradually become a rigid managerial hierarchy, with a small elite and great mass of disenfranchised. Democracy has rapidly lost ground as power is increasingly captured by giant managerial institutions and corporations, and decisions are made by experts, specialists, and professionals safely insulated from the feelings of the people.
Adbusters Co-Founder Discusses OWS
December 6, 2011
Robert Siegel talks to Kalle Lasn, a co-founder of Adbusters Magazine. Lasn helped originate the idea for the Occupy Wall Street movement.
In this segment of the program, the Occupy Wall Street movement; some observations on its roots and its future. In a moment, we'll hear from reporter Carrie Kahn on the language of the movement and where it comes from. But first, we're going to hear from one of the people who inspired the movement and effectively branded it.
Kalle Lasn, the editor of the bi-monthly Adbusters. Mr. Lasn joins us from just outside Vancouver, British Columbia. Welcome to the program. http://www.npr.org/2011/12/06/143224364/adbusters-co-founder-discusses-ows
5. The artificiality of work and culture. [Prior to 2008], Work and living became more and more pointless and empty. [Now] there is no lack of meaningful projects [like repairing and/or rebuilding our crumbling public infrastructure] that cry out to be done, but our working days [if we can find work] for most Americans, it is mindless, exhausting, boring, servile, and hateful, something to be endured while “life” is confined to “time off.” At the same time our culture has been reduced to the grossly commercial; all cultural values are for sale, and those that fail to make a profit are not preserved. Our life activities [wars and rumors of more war] have become plastic, vicarious, and false to our genuine needs [such as affordable health care], activities fabricated by others [claiming to be our ally] and forced upon us.
6. Absence of community. America is one vast, terrifying anti community. The great organizations to which most people give their working day, and the apartments and suburbs to which they return at night, are equally places of loneliness and alienation. Modern living has obliterated places, locality, and neighborhood, and given us the anonymous separateness of our existence. The family, the most basic social system, has been ruthlessly stripped to its functional essentials [or been made homeless or redundant]. Friendship has been coated over with a layer of impenetrable artificiality as men and women strive to live roles designed for them [by the myth of Exceptionalism]. Protocol, competition, hostility, and fear have replaced the warmth of the circle of affection which might sustain men and women [and the family]against a hostile universe.
7. Loss of self. Of all of the forms of impoverishment that can be seen or felt in America, loss of self, or death in life, is surely the most devastating. The source of discontent and rage in the new generation begins with school, if not before, and individual is systematically stripped of his/her imagination, his/her creativity, his/her heritage, his/her dreams, and his/her personal uniqueness, in order to style him/her into a productive unit for a mass, technological society. Instinct, feeling, and spontaneity are repressed by overwhelming forces. As the individual is drawn into the meritocracy, his working life is split from his home life, and both suffer from a lack of wholeness. Eventually, people virtually become their professions, roles, or occupations, and are thenceforth strangers to themselves. Blacks long ago felt their deprivation of identity and potential for life. But white “soul” and blues are just beginning. Only a segment of youth is articulately aware that they too suffer an enforced loss of self—they too are losing the lives that could be theirs.
Reich again asks a rhetorical question: “What has caused the American system to go wrong in such an organic way?” And he answers that the first crucial fact is the existence of a universal sense of powerlessness. We seem to be living in a society that no one created and that no one wants [to own]. The feeling of powerlessness extends even to the inhabitants of executive offices. Yet, paradoxically, it is also a fact that we have available to us the means to begin coping with virtually all the problems that beset us [as a nation].
Most people would initially deny that we are beginning to cope, but reflection shows how true it is. We know what causes crime and social disorder, [as well as unemployment in the world’s richest economy] and what can be done to eliminate those causes. We know the steps that can be taken to create greater economic equality.
Battle Cry: Occupy's Messaging Tactics Catch On
by Carrie Kahn
December 6, 2011
Many people who've joined the Occupy Wall Street movement say the months-long communal living has been the experience of a lifetime. One of the movement's hallmarks — the "people's mic" — has come to represent the movement's collective spirit.
In New York's Zuccotti Park, protesters couldn't use amplified sound, so the large crowds took to repeating what a speaker said out of necessity. But the technique moved quickly across the country, even to cities like Oakland, Calif., where protesters had some powerful microphones.
Lucas Brinson, 21, takes on the role of a human microphone, relaying information throughout New York City's Zuccotti Park Occupy Wall Street encampment days before protests were cleared out by police in mid-November.
We are in possession of techniques to fashion and preserve more livable cities and environments. Our problems are vast, but so is our store of techniques; it is simply not being put to use.
'Occupy': Geoff Nunberg's 2011 Word Of The Year
December 7, 2011
Geoff Nunberg, the linguist contributor on NPR's Fresh Air with Terry Gross, is the author of the book The Years of Talking Dangerously. http://www.npr.org/2011/12/07/143265669/occupy-geoff-nunbergs-2011-word-of-the-year
Battle Cry: Occupy's Messaging Tactics Catch On
by Carrie Kahn
'Occupy': Geoff Nunberg's 2011 Word Of The Year
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Comments
No civilization in history has ever lasted very long with such huge inequalities in income. The current differences, call discussing them 'class warfare' like the Right, will result in some very ugly scenarios.
Look what happened to the French back when they had their revolution..
I think we are watching to collapse brought on by fiat money and the worthless value it has backed up by nothing...
The outcome will be sad and tragic..and everyone knows it and wants that so-called elusive recovery that ain't coming no matter what comes out of the current meetings in Europe...