Derivatives

English: Wall Street sign on Wall Street

English: Wall Street sign on Wall Street (Photo credit: Wikipedia)

The abuse of unregulated derivatives by Wall Street caused the Great Recession. That is the conclusion reached in Republic, Lost, How Money Corrupts Congress–and a Plan to Stop It by Lawrence Lessig. The following quotation is the simple analogy he uses to explain what happened. The regulation of derivatives is compared to laws regulating automobile highway speeds.

“A speed limit that applies to black cars only will not only incentivize the sale of colorful vehicles, it will also be a boon to the paint departments of auto body shops everywhere. That’s the story of Wall Street in the 2000s. While some portion of the market for derivatives was no doubt driven by a genuine meed for the particular flexibility of a derivative, a huge proportion was simply black cars being painted red. The winners in this new market were the drivers of those freshly painted cars, and the firms that had done the paint jobs (aka Wall Street). The losers were–surprise, surprise–the rest of us.”

The derivatives in question were backed by US mortgages and rated AAA by Standard and Poor and others. Derivatives were exempt from regulation by act of Congress as urged by Alan Greenspan and others. Financial instruments still regulated by law were recast as derivatives to escape regulation. And without the discipline of regulation, Wall Street took on excessive risk. And it came tumbling down in 2007-8 birthing the Great Recession.

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Life expectancies

English: Life expectancy vs. GDP (PPP) per cap...

English: Life expectancy vs. GDP (PPP) per capita, accordig to World Bank, 2009 (sample: 162 coutries) Sources: :GDP per capita (PPP), (World Bank, 2009) :Life expancy (CIA factbook, 2009) (Photo credit: Wikipedia)

I searched on-line for US life expectancies based on whether or not one has healthcare insurance, and I couldn’t find any statistics. According to an article on Forbes, those numbers don’t exist. Why not? Perhaps because someone wants to keep us in the dark. Logically, one would expect those with more access to healthcare to live longer than people with limited access. In his book The People of the Abyss, Jack London in 1902 found that the poor of London, England lived an average of only 30 years while the better-off Londoners lived an average of 55 years.

Of course, it is possible to manipulate statistics to produce any results you want. In the second related article below, the author removes deaths from car accidents and violent crimes to boost the US longevity results. Going further, if you were to remove all deaths before age 60 or 65 or 70, of course the resulting longevity average would be higher.

Please see People of the Abyss

Hummer-Dinger

A real Hummer Dinger

A real Hummer Dinger (Photo credit: Steve Koukoulas)

Before it went out of business, the Hummer Division of GM was considering merging with the German manufacturer of the Dinger line of trucks. The merged company to be called Hummer-Dinger, or Humdinger for short.

PS There is a restaurant chain in Tennessee named Humdingers. http://www.humdingersrestaurant.com

Brainwashed

The Brainwashed logo.

The Brainwashed logo. (Photo credit: Wikipedia)

Why do Americans sit idly by when our freedoms and our economic livelihoods are threatened? Citizens of other countries would take to the streets to protest while we, in contrast, do nothing. I believe that we Americans have been brainwashed into accepting what our political leaders tell us as they carry out the mandates of the 1%. We live in limbo since corporate-owned media entertain us, rather than inform us.

What must we do to change this? First of all, we must demand to be informed by the media, not entertained. To that end, I recommend two non-profit websites free from corporate influence: www.readersupportednews.org and www.truthout.org Both are worth supporting if you can. If you cannot give to maintain them, then I suggest you send articles you find important or extra informative to your friends and relatives, your kith and kin. If we don’t know what is going on, we can’t demand changes.

Secondly, I would suggest that you consider becoming active in the political process at any level and work to get out the vote during elections. The fewer people who vote, the easier it becomes to steal elections or maintain incumbents in office. Change is required and the only way to get change is to change the players.

During the medieval period, kings and the nobility, the 1% of that day,  maintained their hold on power with the support of the clergy, the media of that day. The 99% accepted their lot in life with the promise of a better life in the next life. Today’s 1% use the media to spin a fantasy world in which anyone might become fabulously wealthy through hard work or good luck. The truth is that the US has become more class stratified than Europe and the chances of hitting it big in a lottery are much less than being struck by lightning.

To restore the middle class

English: Economist James K Galbraith

English: Economist James K Galbraith (Photo credit: Wikipedia)

Again from The Predator State by James K. Galbraith:

“The true secret  lies in the aggressive regulation of wages. If you are a business in Sweden or Norway, you are free to import, export, and outsource as you like. There is, however, one thing you are not free to do: you are not free to cut your wages. You are not free to compete by going after cut-rate workers, either native or immigrant. You are not free to undercut the union rate. You have to pay your workers at the established scale, and if you cannot do that and earn a profit, too bad for your business.

“The effect of this on business discipline is quite wonderful. To succeed, business must find ways to compete that do not involve running down the wage standards of their workforces. They do it by keeping productivity high and investing in the search for technological improvement. this means that advanced industries thrive in Scandinavia, while backward ones die out. (Progressive businessmen prosper, while reactionaries fade away.) As a result, the economies as a whole stay competitive: the Scandinavian countries started the twentieth century poor and ended it at the top of the world’s distribution of income and wealth. The tax and welfare systems then make sure that everyone has enough to live on.

The United States is not Sweden or Norway. It is much larger, in particular, and for this reason it cannot move ahead as far or as fast as smaller countries. But the economic principles do not change when they cross the North Atlantic. And we have, in fact, applied them in the past. As Dorgan and Brown correctly state in their essay, this is how the American middle class got built in the first place. It was done not by ‘free markets’ but through unions, laws, regulations, and yes, standards. But the standards were not imposed on other people. They were imposed at home–where they can be enforced–and the rest of the world adjusted to what we did here. The problem, in short, is not foreigners and trade. The big problem is that unions, laws, regulations, and standards have been undercut by conservative policies right here at home. And the foundation stone of those policies is the idea that wages and prices should be set by the market, and not interfered with by the political process.”