Tuesday, July 1, 2008
I think I feel some moralizing coming on.
Not many people know that photography is a second career for me. A dream come true you might say.
My first career was as an investment banker. It was back in the 80’s and early 90’s. I was a vice president back in the days when a female vice-president was about as common as snowbirds in Montana in January. I worked for a British company running their San Francisco office. Those were heady times indeed for this country girl.
Anyway, I like to think that my experience affords me some knowledge of finance and economics. Thanks to the Internet I have been able stay in the loop, so to speak, and do for myself what I used to do for others.
I am well and truly worried. It appears my fellow Americans have gone on a spending spree the likes of which has never been seen in human history. Wall Street and the government have colluded to convince the average citizen everyone gets to be a millionaire or at least live like one. We as a nation have sold our very souls for trinkets from China. And, we make fun of the Manhattan Indians!?
Wall Street, Madison Avenue and our very own Federal Reserve have conspired to lead Americans, and the world, down the primrose path. First Wall Street got the average American investing in a market he knew nothing about. Every Tom, Dick and Harry could be heard boasting about the killing he had made in the market. Then Tom, Dick and Harry got killed when the whole thing blew up. All the while Wall Street was conspiring to weave an unregulated and tangled web of derivatives that no one could or can conceive. I know I was one of the original architects. At the behest of it’s masters the Fed showed up in the nick of time to lower rates to zero so that everyone could forget about the stock market and get rich buying a house for no money down and no income qualification. A house he really couldn’t afford.
Why were people encouraged to engage in reckless behavior? Greed, pure and simple. The people peddling the stocks, the real estate, and running the companies that sold the junk were making money hand over fist. And there was no downside for them. If a CEO bankrupted a company he/she was rewarded with a $60,000,000 golden parachute. Meanwhile shareholders and responsible people who know it is always prudent to set aside some acorns in good times got screwed. They were pariah, party poopers, not team players. I know I was one of them.
I believe we are on the brink of an economic collapse, and, no sniggering from my foreign friends. It’s going to be global. This insatiable appetite for consumption in America has led to the same in countries all around the globe. Can you blame them? They see how we live. They want a piece of the dream. And, they’ve been working very hard to provide us with all the junk we want but do not need.
So, now the real estate bubble has burst and all the want to be millionaires are weeping. They’ve treated their homes like piggy banks, run their credit cards to the moon buying $6.00 cups of coffee and crying about $4.00 per gallon gasoline. Our banks are now in trouble because there were no lending standards. The mantra in the real estate lending area was “If you can fog a mirror you can get a loan” and so they did. And all the while that nasty derivatives tangle looms. But now, there are no more bubbles to blow and the piper is about to get paid.
What’s all this have to do with nature? A lot. Everything in nature runs in cycles. When cycles are left to run their course, in their own good time, the highs are not quite so high and the lows are not quite so low. But, when greedy people endeavor to control those cycles by blowing bubbles in order to keep the party going much longer than was natural you are asking for disaster. When greedy people entice the masses to indulge in conspicuous consumption way beyond their means something bad is going to happen.
In finance there is a term “reversion to the mean”. What that means is, things will ultimately get back into their normal range. So, when you manipulate cycles and make them run far longer than they were meant to the reversion is going to be nasty.
Don't let the money mongers fool you old bromides like "A penny saved is a penny earned" and "Save for a rainy day" are not outdated. Just the other day someone sought to insult me by calling me "old fashioned" to which I replied "Yes, thank goodness".
Greed is one of the seven deadly sins. I believe we are about to find out just how deadly.
Fasten your seatbelts folks! I think we are in for the ride of our lives.
PS. The photo is entitled “Maniac”.