Our Heroes Are Doomsayers: Destruction Is The New Creation

“No doubt that America will soon be home to the most skilled and accomplished destroyers in history.”

Is it not already?

http://michaelfury.wordpress.com/2010/02/22/meanwhile/

It is especially sad to have lived through a time when we put a man on the moon and a high school education was a ticket to decent life to see how far we have sunk today. When we have party that wants to deny healthcare to the less fortunate because it costs too much and would hurt profits and have a large segment of our population that can’t see a deteriorating environment as a threat to our very existence, it makes me feel fortunate that most of my life is already behind me.

“the ones who are betting on destruction, pain and suffering”

Names, Mr. Scherer. We want names:

http://michaelfury.wordpress.com/2008/08/20/the-ghost-in-the-machines-the-mystery-of-the-wtc-hard-drive-recoveries/

click the links.

KInd of a downer Mike. Before you go jumping off the Brooklyn Bridge, back off and take some perspective. You didn’t mention Apple, Microsoft, Google, etc. They don’t fit your dour view. I’m no worhipper of the E-conomy, but its hard to question their impact on our nation’s. Not too much destruction there.

I make magazine stories for a living. I am almost certain I would be more successful if I could figure out a way to destroy them instead.
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Oh don’t sell yourself short, Michael. You destroy every magazine story you touch!
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Keep up the concern trolling and he-said-she-said, champ. Make us proud.

Agreed. That is the bright spot. Though they are, arguably, products of the late 1990s, or in the case of Google, early naughts.
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There is also some green energy stuff going, though it has not exactly taken off yet.

Neat post. But to me, it just reflect what Pres. Obama and others have said repeatedly: that we pushed too far beyond our means and are going to have to reel ourselves back to some kind of sustainable reality. And the contraction is scary & painful, and good people are going to get hurt. And the ones who will do well are those who learn to ride on top of the collapsing heap rather than get pinned under it.

I think we’re just aware that things have to change, that there are forces driving that change that are beyond our control, and that the unknown is often scary as hell.

“We are all living through an age of contraction, in which smart destruction is more prized than creation.”
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This is precisely the problem and why financial reforms should be enacted. Groups like Goldman Sachs, among many others, are making piles of money by placing bets on the failure of bondholders; this is nothing more than gambling. This same pattern persisted throughout the CDS (credit default swap) debacle. One should not be able to place a bet in such an arrangement when one has no financial stake in it. This has been true in the life insurance industry for a long time. I can not purchase a life insurance policy on my sickly, diabetic neighbor because I have no financial interest. This same logic should apply to swaps and derivatives.
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We have already seen what happens when financial titans gamble with other people’s money in unregulated markets and it didn’t end well for us. We shouldn’t let it happen again.

Yes, sacredh.
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Mrs. Tuck and I are about to trundle off to the four part-time jobs (two apiece) that are keeping our heads floating ever so slightly above the wave. Savings? Gone. Retirement? Gone. Health insurance? Not a chance in Hades.
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Not so much bitter as resigned.
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God bless us, every one.

“Click the links” is a hilarious response to someone whose sole role here is drive-by blogwhore whose links no one ever clicks. Nice work.

Aren’t you guys shooting the messengers here?

Greece is in trouble not because Goldman Sachs helped them fudge their books or because Goldman is betting against them. They are in trouble because they massively overspent themselves and intentionally hid wanted to hide their fiscal mess from the rest of the world. You can’t seriously be saying that the Treasury Dept of a decent-sized European country did not know what they were getting into, when they did the deals with Goldman.

As regards Euro’s devaluation, why is it destructive? Remember the hordes of Europeans coming to New York to shop ? Doesn’t that suggest to you that Euro’s been overvalued and could stand to be significantly lower?

Michael Scherer:

the corporate executive who has figured out how to do more with less

Not that it’s executives who usually are the ones to figure out these things, but this isn’t destructive in the ways that the other examples are.
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The ATM that replaces the branch with the line of customers to the teller who processes a paper application for money during bank hours isn’t destructive like a Goldman credit default swap purchase from AIG Financial Products in 2007 guaranteeing more money on default than the MBS would ever be worth.
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That said, this is a beautiful piece.
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This is shockingly good, Michael Scherer. I will link to this everywhere I can.

Remember when the hedge funds were the equivalent of “too big to fail” and Mr. Clinton bailed them out? When they bet big and win, we lose. When they bet big and lose, we lose…

IMO, wealth is relatively finite. If the concept of wealth is being able to use monetary resources to buy material resources, then when you work it down to its base, wealth is really only created when resources are produced and destroyed by consumption or waste – and the resources are raw materials (farming, mining, most utilities though some forms of energy production are consuming resources so thus don’t count). Labor isn’t wealth creation because that just goes back to be spent on other resources. Manufacturing doesn’t create wealth because every penny is spent on labor, materials, utilities, etc.
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The absolute greatest farce is the idea that the stock market creates wealth – it’s, at best, a way of transferring wealth. It was meant to be a way of gathering wealth so that companies could develop new products, but the vast majority of stock market trading these days neither puts money into the coffers of companies nor takes dividends out. That means the wealth being “created” on the stock market must come from another location: someone else.
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The sub-prime loan scandal took that to the worst possible extreme: the source of the wealth was the lower class and lower-middle class. They who could not afford homes were sucked dry by banks to “create wealth”. When they ran out of money to suck dry, the false bottom of this wealth appeared and fell out. To add insult to injury, these men and women who would be considered “rich” were bailed out by the government who’s #1 contributor (as a percentage of income) is the middle and upper-middle classes. So pretty much, the entire fiasco has been a slow progression of the transfer of wealth from the lower classes to the rich.
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Well ain’t that bloody stupid.
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If ever there was a case why the redistribution of wealth was necessary, this is the case: the rich already redistributed the wealth into their personal coffers. It’s time to redistribute it back.

I am not sure that you have made the connection that they control that money that determines destruction.

Addendum: this is also why I’m suspicious of the green economy

There are two kinds of efficiencies, Stuart: the kind that actually reduces the labor of employees and the kind that increases the labor of employees. The executive gets credited with either the ATM, or with scaring his employee into making five wigits an hour instead of three.
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Studies make it clear that we are, as a nation, doing both: We are more effiicient because of technology than ever before, but we are also working more than ever before.

FT, I am also resigned to the growing realization that we’ve taken the wrong path. Short term profits at the expense of long term prosperity benefits very few. Sadly, it is the few that are calling the shots. The days of us being the US has given way to us vs them. Thirty five years ago I turned down the chance to make more money to go to work for Uncle Sam because I thought that long term job security was more important than shorter term financial gain.
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I’ve never regretted my decision. Many people are not anywhere near as fortunate. I feel that those that have have a moral obligation to help those that do not. When I hear people say “Why should I have to spend my hard earned money to support….”, I think f**K you, show a little compassion. There may come a day when you need help and you’d better hope that other people have more common decency than you do.

“We have already seen what happens when financial titans gamble with other people’s money in unregulated markets and it didn’t end well for us”

Yes we end up with trillion dollar budget deficits and $12 trillion in National debt. Og you were speaking of the Obama administration were you.I mis-read, I thought you said financial dimbulbs….

Destruction Is The New Creation

Where have you been, Rip Van Winkle? War profiteering has been around for ages, and what I call crisis profiteering isn’t exactly new either.

Some historical perspective from Life, August 17th, 1942.

The other leading contenders are…a study of destruction…

That whole paragraph is a real stretch.

I completely agree with you that the “public risk, private gain” thing makes a mockery of free markets. I actually think bringing something like Glass-Steagall back would be a good idea.

However, I think you’re being somewhat unfair here– in the current crisis, quite a few hedge funds have gone under, but none have required intervention of the kind that the banks did.

Thank you so much for responding to commentary (mine and others’), Michael Scherer.
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You’re right and you’re right.
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What can I say?

We’ll see if the Life link works this way.

http://books.google.com/books?id=v04EAAAAMBAJ&pg=PA76&source=gbs_toc_r&cad=1#v=onepage&q=&f=false

Why is it you’re such a disagreeable, partisan turd? This has nothing to do with Obama or any other President. It’s the system. The fact is that the bankers own DC regardless of who is in power/control and they get what they want nearly every time. Are you so pathetically jaded that you cannot see that?

“Remember when the hedge funds”

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Hedge fundS. What funds? Long-term Capital Mgt was bailed out when their holdings die bombed. Oh yeah, Gov Corzine who was the head of Goldman Sachs used information he received in trying to solve LTCM’s problems, gave to GS traders which sold short LTCM holdings forcing the prices down and GS to profit handsomely. (from When Genius Failed) .
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Interestingly enough LTCM was filled with academics who new a great deal about math and nothing about markets… A lot like Obama’s administration

It’s called privatized profits and socialized losses.
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rs239 — Are you kidding? A number of hedge funds have been bailed out over the years when they have recklessly endangered the capital markets. There is a serious lack of regulation in this area (derivatives) and we have consistently failed to learn the lessons of each failure only to have the next one blow up on a larger scale.

Greece is in trouble not because Goldman Sachs helped them fudge their books or because Goldman is betting against them.
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Nothing like kicking someone when they are down to make a profit, ‘tho.

Can you give me an example HISTORICALLY where redistribution of wealth has worked successfully? I’m just curious. I can’t think of one. It’s a noble ideal – but all I see is dead inner cities in this country–not from lack of opportunity, but of deadened spirits that have been fed just enough to disable their creative and motivational forces (except for rap, but that tends toward self- and other- destruction rather than ennoblement) that can move them toward prosperity.

Sorry, I believe in people — every single last one of them. And we need to be free to choose to succeed or fail. Ask Tony Robbins about your theories. He’d laugh, and he’s helped millions to do things that wouldn’t have thought they could do on their own. Try believing in the individual spirit of each person. ANd then, roll up your sleeves, find some hours, mentor a child in an inner city, and let him fix his OWN problems. They’ll erect a statue to you for that.

I’m just saying.

Creative minds always find a way around regulation, but, wouldn’t it be absolutely wonderful if corporate executives were incentivized to take the long view? Wall Street’s insatiable demand for instant results to enhance their profits through trading has been a major contributor to the often ridiculous business decisions made by managers of publicly-traded companies. You seldom see family-owned businesses operate for short-term results. I maintain that one of the chief reasons Ford has come out of the automobile industry crisis pretty well (so far) is because it is essentially still a family-run company and has the luxury of major stockholders who take the long view, because it is in their best interest. You see many other examples of this in other auto companies, and in other industries as well.

diecash1: do you’ve any names of hedge funds that were bailed out in the last 2 years?

You want a positive example of the benefits of redistribution of wealth? How about every public work that has ever been created in America? Taxes (redistribution of wealth) have allowed us to build our infrastructure, schools & universities, hospitals, oversight and regulatory agencies, etc. Without it, we could be another great power similar to Somalia just as Grover Norquist and the Repubs want.

“Nothing like kicking someone when they are down to make a profit, ‘tho.”
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Do you think Greek financial leaders would have cared if their bet had paid off? Accept reality, life’s not always fair. It’s not the role of government to make it so…only to ensure equal opportunity, not equal results. Someone has to lose, sometime.

You mean other than Goldman Sachs et al.?
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There was something called TALF that was part of the financial bailout that was provided to hedge funds among others:
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http://www.dailyfinance.com/story/talf-tarp-lets-call-the-whole-thing-off/1477414/
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Much of the financial bailout benefited hedge funds, either directly or indirectly as they were dealing in the swaps and derivatives that would have gone under w/o the bailout. They were made whole in this process.
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http://www.calculatedriskblog.com/2007/08/dean-baker-on-hedge-fund-bailouts.html
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http://motherjones.com/politics/2009/04/geithners-hedge-fund-bailout-illegal

Actually the credit for Ford’s health is because of Alan Mulally, not the Ford family.
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The changes at Ford initiated by CEO Mulally, a former aerospace guy, have meant the difference between death for the automaker and merely being sick

http://www.businessweek.com/magazine/content/09_11/b4123038630999.htm
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When Mulally was hired, there was a lot of fluffing and clucking because he wasn’t from the auto industry. Seems that was a good idea.

“Taxes (redistribution of wealth)…”
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You see, that’s the problem. I view taxes as necessary fees for service, not a tool for social engineering. Building infrastructure isn’t (and shouldn’t be) redistribution of wealth. That should be the main function of government and use for taxes collected, after providing basic protections (police, fire, etc.).

True RK but taxes are a redistribution of wealth from private hands to public works.
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BTW, our tax code is full of all kinds of financial engineering, be it to benefit individuals or corporations.

…life’s not always fair.
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Life is what you make of it.
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…only to ensure equal opportunity, not equal results.
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What does making a profit from keeping others in misery have to do with that?
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Someone has to lose, sometime.
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I hope that you are this sanguine when it’s your turn.

I didn’t expect to be the contrarian with mostly progressive bloggers posting, but, there has been and always will be ways to make money off of a losing situation going back to bankers selling short in the stock market crash of 1929. Unless there is something I do not know about, Goldman Sachs did nothing to cause Greece or the EEC to get into this mess but are, momentarily, making a profit from it. I see nothing bad about that myself. As for the totally unrelated issue of wealth distribution brought up by forgottenlord, government and unions (who’s members become more and more efficient by staying with the same job for twenty five years rather than four months often doing no net harm to companies) have done outstanding job of redistributing wealth. Giving one million Walmart employees an extra $2 per day would open thousands of coffee shops create many jobs while giving the Walton family that same two million to the Walton family would be unlikely to create more than, maybe, one or two jobs.

Not all taxes are direct attempts to redistribute the wealth. Income taxes, I would argue, aren’t really redistribution of the wealth insofar as they are saying that “Person poor needs to use a greater percentage of his salary to provide for his needs than Person rich and therefore Person poor should be taxed less”. However, some taxes are built with the express purpose of redistributing the wealth – I look at the “Death Tax” which was actually meant to help ensure that financial wealth didn’t wind up in perpetuality within a single family once it had been amassed or the “Banker Tax” in various European countries that are doing exactly what I’m talking about – trying to redistribute the wealth from the bankers who are making money off of this misery back into the general populace via the government.
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Redistribution of the wealth probably shouldn’t be the standard mode an economy sits in – after all, the argument of “penalizing success” is reasonable (I do not begrudge Bill Gates’ billions compared to the current and recent CEOs of the big banks and I don’t feel that Bill Gates’ money should be shoved back into the general populace just because he has it). However, things like the “Banker Tax” works as a fine to penalize those who create false wealth and then use that false wealth to transfer wealth to themselves. Yes, it’s a redistribution of the wealth, but it is also an attempt to rebalance the system after it was so badly misused. In effect, it becomes a bit of a disincentive. Keep in mind: when I say that redistribution of the wealth shouldn’t be the norm, the bracketed income tax system I do not considered redistribution of the wealth and thus am not including that.

“Actually the credit for Ford’s health is because of Alan Mulally, not the Ford family.”
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Bill Ford hired Mulally. No CEO is ever hired without the approval of the Ford family.

I’ll agree with you that there is quite a difference between “betting on something bad happening” and making profit while being culpable like, say, making millions of dollars in bonuses after you got bailed out by the government to prevent a total collapse of the economy because of your previous mismanagement.
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As for Unions, I disagree. Unions, where they’ve been implemented, have generally been effective (with a few exceptions, but there’s always bad unions out there). Occasionally, they’ve been too effective and sometimes they’ve created problems beyond redistribution of wealth (I’m looking at you, every Teacher Union out there). But that isn’t my actual problem with your statement.
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Look at the banking industry. The Unions aren’t really needed there because most of them making 6 figure bonuses… in a recession…..after being bailed out by the government. In this case, the entire industry is soaking up financial wealth after having created false material wealth. Even worse, the two main purposes of the financial industry (enabling of the creation of actual material wealth and protection of everyone’s personal financial wealth) are being violated in the process (FDIC aside which is ensuring the latter). The only two things that can rebalance this problem are redistribution and regulation – redistribution deals with the immediate issue of them having already gathered too much of the total financial wealth while regulation prevents them from collecting financial wealth using false material wealth.

@Elvis: LOL!

forgottenlord, thank you for 10.6. It expressed many of my thoughts but I think I’m much more in favor of wealth redistribution than you are. I have been sick and tired of seeing the wealthy take take take and then tell us how lucky we are that they are doing so well because our success depends on their increasing success. The “Death Tax” nonsense was nothing more than a highly effective propaganda campaign that somehow managed to convince the average Joe that the 10 year chevy and modest home would be taxed and taken away from them if mom and dad died.

What has happened to the people of this nation? How is that some half of us would rather walk over the bodies of our fellow man than help them and then call that heartlessness virtue?

Our national priorities are twisted, our quality of life is declining, and too many still don’t know why or who is to blame for this miserable state of things. But we are seeing the mis-directed anger being manipulated for political purposes.

To you and the good Friar, Amen. Do we despair or do something? And What?

grape_crush- I don’t know what you mean about my “turn”. I’ve suffered many losses in my life…I just don’t quit, and I don’t blame the other guy for my own misfortune or bad judgment. You should try it some time.

Is “Cick the links” the new “I’ll call you when I get a chance”?

Who exactly is going to make the judgment as to what comprises too much wealth? Is Bill Gates more worthy of keeping his fortune beacuse his company makes stuff, while Warren Buffet, as an investor, is not because he doesn’t “create wealth” (as someone here defined it)? I get it, we’ll have a “Wealth Czar” working along side the “Corporate Compensation Czar”. During the last Presidential campaign, one candidate’s definition of what constituted “wealthy” went from $250,000 annual income down to $150,000 in the space of a few weeks. What should we expect from the all-knowing bureaucrat who would determine “sufficient wealth”?

I just find the idea of the ability to make money off of another’s misfortune to be morally bankrupt, even if you technically had no direct involvment in that misfortune. The idea that you can use credit-default swaps on stuff you have no stake in is ridiculous. It is this type of Wall Street gambling that got us into this mess to begin with.

It bugs me alot that people still don’t realize that you can’t use financial instruments alone to create wealth.
Financial instruments should be for pooling resources only. That wealth you just aqcuired has to come from somewhere. Either you have taken the wealth from somewhere else (some one has to pay for the credit-default swap contracts) or you are inflating the wealth beyond its true value, which eventually leads back to another market correction.

I am of the opinion that fast gains based on no products actually being produces only exacerbates our problems in the global economy.

Randomkirk: Please re-read my post. Also, if you check the definition used earlier, Bill Gates does not create wealth. No software company creates wealth. At best, they enable the creation of wealth. I explicitly differentiate between “creating wealth” (making resources that can be consumed) and “converting wealth” (turning resources such as labor, electricity, and raw materials into new resources that can be consumed). Creating false wealth is where you effectively make it look like wealth exists (material or financial) when it does not. In general, the creation of false wealth results in the transfer of wealth from the deceived to the deceiver with little or no material or financial wealth going back to the deceived.

“As you tuck your children in tonight, let them know. If they dream big, they too can one day dismantle something wonderful.”
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“Greed is good”, little Johnny. Sleep tight.
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Obviously, the “destroyers” are the ones who are in it just for the money; themselves. Our much-vaunted and over-valued Galts (they also show the great wisdom to use their vast ill-taken gains to build themselves island fortresses to safely watch the final result of their selfish greed).
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The fact is, we’ve been cultivating this ethic of selfishness for over a generation. I blame movement “conservatives” and their apologists in the public media.

I just don’t quit, and I don’t blame the other guy for my own misfortune or bad judgment.
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Please. If a drunk in an SUV wipes out your entire family, you’re blaming him. Likewise, if your stockbroker embezzles your retirement, you’re gonna blame him.
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You should try it some time.
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Don’t pretend that you know me, random.
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Oh, and what does some unrealistic take on self-sufficiency have to do with making a profit from others’ misery? That you don’t find such profiteering an issue morally?

grape-Don’t pretend to know ME. And, what does someone getting killed by a drunk driver have to do with a profitting from the mistakes of a nation and an economy, making bad decisions? You’d like to see banks in this country pay for their bad decisions, don’t you? Your sympathy for the poor, unfortunate Greeks being bamboozled by the apparently much more wily, greedy American investment bankers is condescending. Could it be that they were just as greedy?

Hey MS, why are you equating money with success?
“the smart people, the winners, the ones who are actually making money, the ones who have figured out this newfangled economic age of ours”
Did you not watch Pretty Woman? — not that I am suggesting America needs an encounter with a charming lady.

Actually, I think that is part of the problem: society seems to define success by money. There’s a theory that that idea is on its way out the door with the coming of the millenials, but that’ll be something worth watching for. (There’s also a theory that millenials are having to sell their soul earlier to pay off their college loans……so your mileage may vary)

And, what does someone getting killed by a drunk driver have to do with…
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…you not blaming the other guy for your own misfortune? Seems pretty obvious, random.
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…and profitting from the mistakes of a nation and an economy, making bad decisions?
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Okay, a simple example for you: A gambler gets in over his head and owes a lot of money. He gets a loan from a loan shark at a sky-high interest rate to keep from getting his legs broken. Now, to pay back the loan shark (and save his arms), he has to liquidate all of his retirement savings, kids’ college funds, and sell the house. Now he and his children are broke and homeless.
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Please tell me how it’s the kids’ fault that they are in the situation they are in. I know you’re smart enough to understand the analogy.
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You’d like to see banks in this country pay for their bad decisions, don’t you?
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According to your stated philosophy, it’s every man for himself, and there’s no limits to what you can get away with, right? An earthquake hits in Haiti, and it’s time to engage in human trafficking; someone steals your life savings and, well, it’s your fault for trusting him in the first place.
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Your sympathy for the poor, unfortunate Greeks…
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Oh, it’s not the government of Greece that I have sympathy for; it’s the civilian population that’s affected by poor decisionmaking resulting in a crisis first and the morally dubious profiteering off of that crisis second.

Michael, you have your detractors here on swampland, who seem to disagree with whatever you say. I do too, for the most part.
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But this post is just brilliant and the subject deserves to be on the Time magazine cover. I think you have said what most economists have left unsaid for far too long and . The so-called financial wizards have turned the global financial markets into one giant casino. I wouldn’t grudge them that, except they are using tax payers money as an unlimited leverage and pushing an entire nation into bankruptcy.

And, what does someone getting killed by a drunk driver have to do with…
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“…you not blaming the other guy for your own misfortune? Seems pretty obvious, random.”
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Sorry, but your “analogy” appears more like a non sequitur to me. I fail to see how you can compare bankers making bad decisions with drunk drivers killing innocents.-RK
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“…and profitting from the mistakes of a nation and an economy, making bad decisions?
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Okay, a simple example for you: A gambler gets in over his head and owes a lot of money. He gets a loan from a loan shark at a sky-high interest rate to keep from getting his legs broken. Now, to pay back the loan shark (and save his arms), he has to liquidate all of his retirement savings, kids’ college funds, and sell the house. Now he and his children are broke and homeless.
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Please tell me how it’s the kids’ fault that they are in the situation they are in. I know you’re smart enough to understand the analogy.”

Please tell me how it is the responsibility of anyone other than the people of Greece to solve the problems they and their government created.-RK
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You’d like to see banks in this country pay for their bad decisions, don’t you?
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“According to your stated philosophy, it’s every man for himself, and there’s no limits to what you can get away with, right? An earthquake hits in Haiti, and it’s time to engage in human trafficking; someone steals your life savings and, well, it’s your fault for trusting him in the first place.”
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I didn’t say every man for himself. Don’t read into what I did say, which is that people need to take responsibility for their mistakes. This has nothing to do with Haiti. I know you’d like to think that we Republicans all cold-hearted SOBs, but you are very mistaken. I and plenty of my like-minded friends have done quite a bit to help people less fortunate than ourselves.-RK
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Your sympathy for the poor, unfortunate Greeks…
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“Oh, it’s not the government of Greece that I have sympathy for; it’s the civilian population that’s affected by poor decisionmaking resulting in a crisis first and the morally dubious profiteering off of that crisis second.”
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So, what was your point? Trading in debt the way Goldman Sachs has done has been around for centuries. In fact, it helped fund the American Revolution, including “morally dubious profiteering off another’s misfortune” (if only accidentally).-RK

While not creating anything of actual value.