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Worries
I haven't had anything to say. I've been sick, sleeping, reading, watching movies, not drawing.
I've been sick for the last several weeks. Went to the doctor (for the third time in 10 years) and found out I have bronchitis. Bronchitis isn't a big deal - just a virus in my lungs. As a present, I now have an inhaler, so I feel like a dorky 10 year old.
But ignore that.
Ignore the election, Palin MILF jokes, the death of David Foster Wallace, whatever else you fucking hear or read.
The real news is that our financial system is teetering on a razor blade.
If it falls one way, it falls into a pit of Alien acid. If it falls the other way, it falls on a hard stone floor, which is better than a pit of Alien acid.
Everything almost fell into a pit of acid earlier this year. But the press, for the most part, didn't cover it because the story took longer then 30 seconds to describe. Even though the fate of the whole fucking country was at stake, and because of that, the state of good chunk of the world.
The subprime crisis. A parable.
Basically, everyone was deluding themselves about the housing market. They thought it could never pop because houses are like here and like you live in them and stuff, so how can they become worth less, you know? It was that stupid. Anyway, now that the housing bubble has popped, there's A LOT of debt that can not be paid. All of that debt was incredibly high risk, but was chopped up and included in packages with safer debt, so everyone convinced themselves that there was NO RISK (sort of).
Imagine you gave your dead-beat stoner cousin a loan. Then you split the debt up with ten of your friends. (They did it because you'd give them a good chunk of the money your cousin is supposed to pay back, and you did it because your cousin is shady, and you wanted less risk.) The thing is, you lied to your friends and didn't tell them that your cousin was a stoner and a dead-beat. They thought he was a safe bet.
Here's the problem. Your friends did the same thing to you.
Now everyone found out that everyone else was lying about who they were giving money to. EVERYONE was giving money to stoner cousins. So now you want your friends to pay up and collect anything they can out of those loans. And your friends want the same from you.
Here's the problem. Your friends did the same thing to you.
Now everyone found out that everyone else was lying about who they were giving money to. EVERYONE was giving money to stoner cousins. So now you want your friends to pay up and collect anything they can out of those loans. And your friends want the same from you.
So that's the set up.
The problem is that you don't have enough money to cover this. You only keep 10% of the money and loan the rest to other family members. Which is fine as long as no more than one of your friends demands their money on the same day.
Your older sister runs a similar game, but her business has failed in the past, and the family lost its house and all of its money. Because of that, your dad guarantees her game, but enforces strict rules.
But youe made a slightly different game than your sister. You didn't want to deal with any of your dad's rules, so you convinced him that you didn't need his guarantee of extra money. Your dad agreed; he believed that your game was different enough from your sister's, was efficient on its own, and didn't need his money guarantee. Even though your game is new, it's really big, and it's never failed. Not once.
Your older sister runs a similar game, but her business has failed in the past, and the family lost its house and all of its money. Because of that, your dad guarantees her game, but enforces strict rules.
But youe made a slightly different game than your sister. You didn't want to deal with any of your dad's rules, so you convinced him that you didn't need his guarantee of extra money. Your dad agreed; he believed that your game was different enough from your sister's, was efficient on its own, and didn't need his money guarantee. Even though your game is new, it's really big, and it's never failed. Not once.
Until now.
Now you and all your friends no longer give any money to each other. So now NO ONE gets money, even if its for a cousin who always pays back their loans. Worse, you don't have the money to pay your friends back, so if they push you, you might go out of business. And if you go out of business, your friend might go out of business, and so on, until all ten of you are broke, the game is over, and no one in your family or your friends' families has any access to any money. Your game has become vastly bigger than your sister's game, so your game is now the only real game.
But now everything is falling apart.
You and your friends are the investment banks. Your sister and her friends are the commercial banks. Your dad is the taxpayers/government/Federal Reserve. The loan to your stoner cousin is subprime housing loans (and the soon to be bad subprime credit loans).
And your situation? It has the possibility of mirroring your sister's great failure. The time her game crashed and cost your family its house and all of its money. Which was the Great Depression.
Things have been bad. The entire game almost collapsed at the beginning of the year. But your dad (the head of the Federal Reserve) gambled and bought a chunk of you and your friends' stoner cousins' loans. And that worked. Knowing that your dad was partially guaranteeing your game stopped your panic, and you and your friends played nice.
Until now. Now it's starting all again. You know you have your dad by the balls. If he doesn't help you, he can lose the house. The problem is that you fucked up, and your dad is sick of bailing you out and letting the rest of the family (and the rest of your friends' families) suffer. So he's not using his money to save your ass, reminding you that you didn't want his rules or his guarantee. He's going to let you fail. It might show your friends to wise up and not expect your dad to take care of everything. Or it might cause your friends to go batshit and stop the game, which would make your family lose the house and everything else.
Until now. Now it's starting all again. You know you have your dad by the balls. If he doesn't help you, he can lose the house. The problem is that you fucked up, and your dad is sick of bailing you out and letting the rest of the family (and the rest of your friends' families) suffer. So he's not using his money to save your ass, reminding you that you didn't want his rules or his guarantee. He's going to let you fail. It might show your friends to wise up and not expect your dad to take care of everything. Or it might cause your friends to go batshit and stop the game, which would make your family lose the house and everything else.
If the game stops, no new money for anyone. No new money, no new business. And there's been plenty of people yelling that the whole game is too dangerous, but no one listened. No one thought dad should get involved because the game was pretty damn good, damnit, and fuck dad anyway, we can do it on our own.
But you can't. Hopefully your loss doesn't extend to everyone's extended family.
This isn't just Bush's fault, btw. This is the fault of 30 years of bad policy. For 30 years, people have been screaming that the market can take care of itself. And that's kind of true, it can. In the past, when the market was unregulated, the market would crash every 10 or 15 years and would wipe out EVERYONE. The whole economy would crash, everyone would lose their jobs, a few ultra-rich people would stay afloat, and there would be general misery, sickness and death for everyone else. Read any fucking novel written before 1920 to get a picture of what went down (or any history book). But we won't learn our fucking lesson. There are serious gaps to market economies. It's a 'duh' thought except to the most pig-headed Milton Friedman worshiper, but there's too much money going to power-people for anyone to fix these systemic problems (and that definitely includes Obama (and McCain - he's even worse)).
A Massive Financial Collapse might be the result.
September 15 2008, 06:37:50 UTC 3 years ago
September 15 2008, 06:40:29 UTC 3 years ago Edited: September 15 2008, 06:44:28 UTC
I worked for one of the biggest investment banks as a risk analyzer, which doesn't mean much (it was a bullshit title more than anything else) but it made me VERY cynical.
September 15 2008, 07:38:09 UTC 3 years ago
I heard some of this on the BBC driving home but I still don't understand everything
I think I understand, but help me out here: when you say the investment banks have the federal reserve by the balls, what's really going on? Are they playing chicken with each other? Because it seems like even the investment bankers would want to avert total disaster. It seems like everybody would want to, except maybe people who are pro-apocalypse.September 15 2008, 07:38:52 UTC 3 years ago
also
If America's economy self-detonates, do we take the whole world with us? Or do we go down (mostly) on our own?3 years ago
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September 15 2008, 09:13:55 UTC 3 years ago
so
do you see one presidential candidate making more of an impact economically?(also crossing my fingers that
September 15 2008, 12:49:58 UTC 3 years ago
reporting for duty, sir
Because everything Troy says about economics is 100% true facts!There's someone my f-list who's been crooning about the coming crisis for even longer than Troy has (a long, long time), and he's a whacko libertarian.
I do think it's funny that Troy says that Bernanke is handling this well, since Bernanke is a pig-headed Milton Friedman worshiper who believes the Fed caused the Great Depression.
I would say more, but I am late for class.
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September 15 2008, 10:04:49 UTC 3 years ago
thanks for th update friend now i will click on that delong blogue
i've just changed my mind about unregulated marketsJaysus
--mza.
September 15 2008, 14:43:48 UTC 3 years ago
For some examples of periods of unregulated markets:
Look at Russia after the wall crashed. Or Poland. Or South America after the IMF enforced unregulated markets in the 80s. Or Chile's crash after installing a text book Milton Freidman deregulated market after assassinating Allende. Or S.E. Asia during their great crash. South Africa after apartheid ended. On and on.Or just as well, look at the U.S. during 1830-1920. It was a hell hole for anyone who wasn't rich and it was totally unregulated except for some tariffs. The UK after industrialization is cooking, like Dicken's time period, is also a good example of the "miracles" of deregulation.
And for the people who hate markets, you really need to see how quality of life and length of life goes wildly up under societies that adopted industrialization and free markets.
I don't know if it's sustainable, but it's definitely done good, despite everything. And unregulated markets have done a lot of harm, just as totally regulated markets never really work (USSR pre-1989). I'm just arguing against the extreme economic libertarians whose ideas were in charge for all the examples above AND for this recent debacle.
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September 15 2008, 13:43:04 UTC 3 years ago
September 15 2008, 14:45:43 UTC 3 years ago
Unfortunately, there's no real safe place to invest. Getting a nest egg that's spread about a bit is probably a good idea. I haven't done it at all, which is stupid, but I want to make comics, not to be safe. Stupid, but whatever.
September 15 2008, 14:01:55 UTC 3 years ago
Now that they've bailed one out, everyone thinks they'll do it again. The article in the NYT today put it like this:
"Mr. Geithner [President of the New York Federal Reserve Bank] made an impassioned appeal to the group: We need an industry solution. We need an industry solution, no matter what, he said. His message was clear; it is not about any individual bank, it is about the industry. If you don’t create an industry solution, you will be next.
Most of the bankers quietly listened. But some questioned the need for them to play a role in a bailout. Lehman Brothers had overreached and brought its troubles upon itself, they argued. Why should they put up their own money in a rescue? "
http://www.nytimes.com/2008/09/16/busin
So, they don't think *they* should put the money up. But they want the government to do that instead (putting our money up, as it were). The reason BofA didn't do the deal with Lehman was because they wanted the Government to give them the same kind of sweet deal that JP Morgan got. Basically wanting the government to subsidize their business deal (with a great deal of assets in addition to the bad debt). Moral hazard is no longer just an idea, it's a reality. The government had to stop with the handouts now, or nothing would get done by the industry.
As much as all of this sucks, there's no easy solution. There's a ton of bad debt out there, and as more and more people clue in to the fact that it's not getting any better, they'll start pulling their money out. The general public is dumber than dirt, but it's already starting to bubble up. The more there is coverage of this, the more average people with their money in a 401k are going to get spooked and as bad as all this is, if the sheep get in on it, it's going to look like 1929 all over again. It sucks - people are going to vote on who they think they'd like to go to a church retreat with, and you could end up with a couple of clueless idiots in the White House when this all goes down. If you finally make people understand the gravity of the situation, everyone will panic and take their money out of their 401ks and banks and hide it under their beds. When that California S&L was taken over, most people's deposits were fully insured and they knew that but they *still* were standing in line waiting to get their damned money out.
Maybe we need a big crash, because you know the banks aren't going to agree to more regulations unless their heads are chopped off.
This situation and the election make me want to move to Canada or something. *sigh*
September 15 2008, 14:57:11 UTC 3 years ago
The problem with a crash is that everyone gets hurt, but all the little people get squashed. The ultra rich get hit a little bit, but largely sail through unscathed even though they caused the problem. The upper middle class, middle class and poor are simply crushed. Everyone's going to get hurt a little if things just deflate for awhile. Everyone will hurt a lot if things crash. As long as we learn something from all of this, and prevent it from happening again, then we can avoid the same thing happening in the future, and a slow deflation will be worth it.
That said, the S&L crisis, the junk bond crisis, LTCM, Enron, Andersson, the mortgage/rent disparity, our bond situation, etc., have all been very loud warning signs that no one listened to (esp. the maestro of destruction, Greenspan).
The Great Crash did nothing to teach markets how to clean up their act until later. Over the course of decades the market learned that no regulation and monopolies were bad for the economy, but it took a long time and a lot of death and suffering to figure it out.
Part of the reason people are so damn stupid is because economics shit isn't explained to them by the press.
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September 15 2008, 14:52:32 UTC 3 years ago
right now i just get a sort of uncanny impression being dictated by the final sentence.
September 15 2008, 15:01:05 UTC 3 years ago
Basically, the deregulation of banks under Reagan, Bush, Clinton and Dubya, allowed the banks to make shady loans and business transactions. Now it's all falling apart, and everyone realizes that the system is broken. If things crash, we're all fucked. Things are going to grind down to a slow crawl until money-people figure out how to trust each other again.
September 15 2008, 15:03:37 UTC 3 years ago
September 15 2008, 15:44:31 UTC 3 years ago
Now come sit down next to the fire.
Would you like a cup of hot cocoa?
September 15 2008, 15:48:22 UTC 3 years ago
Fucking Carpet Pissers
"I mean, his wife goes out and owes money and they pee on my rug.""That's right, Dude; they pee on your fucking rug."
September 15 2008, 15:52:39 UTC 3 years ago
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September 15 2008, 18:13:31 UTC 3 years ago
But turns out the Canuck populace is just as stupid. I'm watching the "man on the street" interviews and everyone seems to think that this won't hurt us up here... one even said he had complete faith in the U.S. banking system. *imagines your blood pressure rising*
September 15 2008, 19:08:04 UTC 3 years ago
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Haven't been writing much lately; my blog lately is mainly comics and photos.
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September 15 2008, 19:44:07 UTC 3 years ago
Are all my stocks going to evaporate? Should I SELL SELL SELL?
Love,
Me
September 15 2008, 19:54:16 UTC 3 years ago
However, I am not Troy, so pretend my answer was BLARGH DE BLARGH BLARGH BOOBY BLARGH.
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September 15 2008, 20:38:31 UTC 3 years ago
Dude....
This is so well put. Seriously. This should be tacked up as fliers one every single doorstep.-MQB
September 15 2008, 23:22:32 UTC 3 years ago
September 15 2008, 22:33:05 UTC 3 years ago
hi, i'm billy
like naomi, i found you via anita.my question is, if you could freeze time and erase the current financial structures and rebuild them, what would you do?
you say that the destruction of the poor and middle class in a crash concerns you, and that people being left to rot while industry advances bothers you. i am in agreement, fully, but i lack the economic understanding to propose how to fix this. i have a hard on for the promises socialism gives, but not enough knowhow to seriously analyze it to see if i myself think it would work.
is there a fair economic system?
September 15 2008, 23:07:15 UTC 3 years ago
Hi, I'm Troy
That's a rough question. I think about it a lot, but I can't think of a realistic economic system outside capitalism. Theoretically, I don't like state ownership of production and distribution, and think it's a proven awful system for moving goods; which rules out communism and most severe socialisms. That said, I sorta like European socialism, which is really just an expanded Welfare State, but that really doesn't deal with the problems of Capitalism, it just white washes everything.I like the idea of companies where workers can buy into ownership, like the law firm partner model, or the worker-owned factory, but I've heard many complaints about it as a model. Still, I'd like to see it expanded. It has worked in a few places at a few periods of history.
I'm not sure if I like the idea of anarchism, but I definitely consider it too optimistic/idealistic, and think it totally untenable. I like the goals of communism, but think it's an ideal that doesn't even work in the abstract. I tried reading about "participatory economics," or "parecon," but don't really get it, and need to read more.
I just don't know what I would do.
Some simple things: I would make corporations more accountable, and make it easier for them to lose their charter. I would revoke their status as "juridical persons" and would tweak their relationship to ownership. I would make them lose their charter if convicted of a felony that would put a regular "juridical person" in prison. I would engrave workers' rights, environmental concerns and other "externalities" into our system of markets, and install a better system of checks and balances that account for power. I'd immediately rescind the law that spending money is a form of free speech, and loosen the control of lobbyists. I'd demand as much transparency as possible at all level of economic systems (and in the political world as well).
I guess I'm skeptical of a free market but recognize its power for good (and bad). Same with private ownership and corporations. I'd rather have a lab somewhere where a million or so people could practice new economies and new ideals of working and trading. And after a few generations of working experiments pick one that is the best.
I dunno. Just too big an idea.
September 16 2008, 03:17:29 UTC 3 years ago
September 16 2008, 06:19:36 UTC 3 years ago
September 16 2008, 05:58:40 UTC 3 years ago
Why 30 years? Is this a reference to the dollar being taken off the gold standard? What's the 30-year figure in reference to exactly?
I stumbled across a 9-year-old act that seems to be a significant player in what is happening with the market now:
"Phil Gramm introduced into the Senate the 1999 Gramm-Leach-Bliley Act, which Bill Clinton later signed into law. The act repealed the Glass-Steagall Act which had established a firewall between commercial and investment banking in the wake of the Great Depression. The repeal created a "shadow banking system that operates outside any government oversight." This deregulation is precisely what has led to practices like the over-escalation of subprime mortgage lending resulting in the current crisis."
So, am I right in presuming all that? Would you consider the Gramm-Leach-Bliley Act to be one of a few governmental decisions over the past 30 years that we should view as casually linked to what happening now?
September 16 2008, 06:18:51 UTC 3 years ago Edited: September 16 2008, 06:20:57 UTC
There's all kinds of crappy legislation that the three of them didn't bother to veto that helped the banks but didn't help anyone else. Gramm-Leach and the Bankruptcy Reform Act are just two of the most egregious. All believed (or voted for legislation that supported) an extreme laissez faire designed to deregulate any governmental oversight or hampering of big business, and that distinctly included Wall Street.
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September 19 2008, 00:18:05 UTC 3 years ago
So I can understand the appeal of not being subject to his rules. They're really for his benefit more than yours. And of course, Daddy let you play unsupervised for a while because he knew that eventually you'd come running to him for help, and his price for helping is to grab 80 percent of everything you've got. Not a bad deal for Daddy.
September 19 2008, 00:31:58 UTC 3 years ago
I'm guessing by your ridiculous rant that you're a libertarian, specifically the type who jerks off to Rand and Friedman. Libertarians have an amazing capacity for ideology-based self-deception.
At least the bankers and brokers who dealt with subprime only had an allegiance to short-sighted greed.
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September 23 2008, 18:03:13 UTC 3 years ago
I'm glad someone said it.
September 16 2010, 13:19:20 UTC 1 year ago
How To Build Credit
for the people who hate markets, you really need to see how quality of life and length of life goes wildly up under societies that adopted industrialization and free markets.like this article its very interesting..