The Speculating Fever

In a word, the great speculating fever which breaks out every now and then in the country, had raged to an alarming degree, and every body was dreaming of making sudden fortunes from nothing. As usual the fever had subsided; the dream had gone off, and the imaginary fortunes with it; the patients were left in doleful plight, and the whole country resounded with the consequent cry of "hard times."

The Devil and Tom Walker (Washington Irving) 1824

Did Washington Irving foreshadow our present financial ills and plight? Or was he simply an astute observer of human frailty? There is no doubt that "the fever has subsided." We are swimming in debt, we are at the mercy of heartless lenders, we are manifesting our anger in the crowded streets, we are losing our homes, our dignity, our hope, our jobs, and our faith in our rulers.  Tom Walker is probably the best representative of all the corrupt brokers, greedy bankers, and incompetent politicians. Did they, as he did, sign a pact with the Devil in exchange for untold riches, at whatever the cost and at whatever the suffering they might cause?

"The great speculating fever which breaks out every now and then" says Irving. We want something for nothing; we believe the promises of an El Dorado by investing in shady instruments; we give in to the demon of greed present in every human soul and heart... and we pay the price. So yes, we are in part guilty of listening to the false prophets, of wanting wealth without working hard at it. What did the financial crisis of the last 3 years say about us? Will we learn from the bitter experience? Or, as Irving emphasizes, will the speculation fever reappear? Soon?

Wall Street has often been compared to a giant casino, except that in Vegas you already know that you are there to lose and have fun, while investing in hedge funds and the like is much more of a gamble; we, the small fish in the financial pond, are an appetizing dish for those who speculate and thus manipulate the ups and downs of the market. Financial gurus come and go, and the end result is always the same: "This financial advice is given with the understanding that you may suffer a loss."

Strange isn't it that the loss is usually for the small investor and not for the one giving the advice. Do you remember the case of a giant brokerage house betting AGAINST its own clients? Talk about the right hand not knowing what the left is doing! Did any of these big shots end up in jail? No, of course not. They take the easy way out: paying a fine. Again, notice the disclaimer: ..without admitting any guilt in the operation. Now, how can you, the accused company, pay the amount set by the government and pretend that you didn't do anything wrong? You destroyed families, wiped out pensions, caused massive lay offs, and even suicides; and all you do is pay a fine??

Bloomberg Businessweek (Oct 24-30 edition) says that Citi agreed "to pay $285 million to settle SEC claims that it marketed to investors a mortgage security that it also bet AGAINST."  Then came the classic statement "It neither admitted nor denied wrongdoing." They must think that we are stupid! You pay a fine and then state that you don't admit committing a crime? Because that's what it is, a crime against American families who trusted you to offer a decent investment. I can just imagine one of my students caught cheating during a test saying:"I don't admit or deny I did wrong." What kind of message do we send to the next generation? That's it's OK to cheat and lie?



The OWS (Occupy Wall Street) movement is the result of so much anger and frustration at bankers and brokers getting away, literally, with murder. It's not a bunch of hippies, Mr. Gingrich, smoking pot and preaching free love. It's a multitude of families clamoring for justice! Of course, none of the republican candidates will admit that financial crimes were committed, simply because Wall Street is paying for their campaigns or hiring them as highly paid consultants; right again, Mr. Gingrich?


The author of  the very successful book The Black Swan, Nassim Taleb, offers a strange analysis of the financial crisis; he says that our economic system is not capitalism or socialism, but rather "bankerism". The banks, instead of serving us, are demanding that WE serve them. This statement comes from a man who has been a hedge fund manager, a financial mathematician, and a professor of economics. Banks do us a favor by allowing us to be their customers and once our accounts are in their claws, they happily pile up fees upon fees, some of which most of us aren't aware of. Will some courageous politician from the right of the left rise and advocate putting banks back where they belong? Taking care of our hard-earned dollars and giving us a fair interest?

I know I should stop dreaming and fantasizing; as long as Congress is allowed to consort with financiers and corporations, the fate of the 99% is in the hands of the 1%. What we can we do?

American Spring?

Allow me to compare the "Arab Spring" to the "American Spring". Thousands of protesters, most of them peaceful, take to the streets to demand a better life that would allow them to pursue their dream. Cairo, Tripoli, Damascus, Athens? No, it's New York and dozens of important cities in the U.S. It's corporate greed versus Joe the Plumber, Main Street versus Wall Street.

Come on! Ever since the last economic downturn revealed the dirty laundry of financial wizards, the shenanigans of major banks, and the sloppy oversight by the government, a growing anger has been simmering inside ordinary people who call themselves the 99%. Millionaires and billionaires pay less in taxes than 99% of us, because they can take advantage of numerous loopholes through their high-powered lawyers. Republicans refuse flatly to close these unfair advantages for rich people and for corporations, calling it a disguised tax increase. But don't believe that Democrats in Congress are any better; they may fume and rant against their opponents for saying no, but they are just as much "bought" by special interests. Just as the Greek philosopher Diogenes hunted in vain for an honest man with his lantern, we the people hunt in vain for a congressman who is not in the clutches of powerful lobbies.

Becoming rich is not a sin; look at all these TV preachers who live in luxury, sitting on gold-stitched Louis XIV chairs while asking for more money from their "captured" audience. OK, that was pure sarcasm! Let's instead look at "honest" and compassionate wealthy Americans such as Warren Buffet or Bill Gates. They share their treasure with the less fortunate through their very important charitable foundations. They have more than they could spend in five generations, because money attracts money.
 Warren Buffet, a compassionate wealthy icon

The Wall Street protesters often have no idea what they want; they just know that something is not working. The media is unfair when they ask a young man what economic system should replace the present-day capitalism. They try to portray the chanting crowds as ignorant rabble rousers, forgetting that not everybody can graduate from Princeton. And yet, the great minds of this country have failed to rally in support of the nascent movement that some commentators baptized the "tea party" of the left. If that's the case, good for them; we need a balanced political system in which all of us are represented. While the very rich can buy influence and votes, the rest, the 99%, can only take to the streets and voice their discontent with politicians who are in bed with corporations.

Interestingly enough, President Obama recently mentions the 99% manifestations as having a serious impact in 2012 elections; did he mean in his favor? And why does everything have to relate to elections? Would any congressman (woman) gladly sacrifice reelection if such act guaranteed a return to prosperity for most Americans? 99% of them would say yes (assuming they are capable of giving a straight answer), while thinking just the opposite. I hereby suggest that every politician should be hooked to a lie detector machine when giving interviews; the upshot would be a suddenly very busy senator unable to grant CNN his/her views on the most pressing matters.

Yes, capitalism has many positive facets because it appeals to a very human trait: greed; through greed people invent new gadgets, take more risks and create more jobs. Do you know of any CEO who can retain his job if the bottom line says "We have not increased our profits"? But capitalism, through greed again, is also tremendously destructive as people will sell their grandmother to make a buck.

 

What is the alternative? I turn my attention to Germany, where unions sit on the board of major companies with the bosses to decide on a course of action that will benefit shareholders and workers alike. Their welfare safety net protects the weak, the handicapped, and the sick. If you work hard, you gain hard. If you are lazy, a quality abhorred by most Germans, you'll "suffer" until you perform. The result? An economic and industrial powerhouse that has become the engine of the European Union.


Why be afraid of copying what works in other countries? Why sully the political environment with stupid accusations of being a socialist? Do they even know what the word means?

We could also change our political system into a Parliamentary Republic, just like the Germans!

RIOTS IN THE QUEEN'S REALM

Burning buildings,  flying rocks, chanting youth, store looting, police taunting, and innocent victims crying, this must be the eastern city of Deir al-Zour in Syria, where the hated regime of  President Bashar al-Assad is mass murdering its own population. Oh surprise! We are actually in the middle of London, the epicenter of riots and violence initiated mostly by young disaffected people. Troubles quickly spread to four other English cities and authorities are baffled as to the causes of this popular uprising.

We cannot blame the weather as the temperature in London hovers around a balmy 70 degrees F. We cannot blame the full moon as it isn't due for another week. There have been 10 riots since 1985 in England, mostly due to police brutality, although a few had to do with increases in taxes and university fees. Indeed, college students have been at the core of the fray a few times, but the finger points mainly to disaffected young people who cannot find a decent job. Street protests usually start peacefully but quickly degenerate in violence caused by those who see an opportunity to loot stores for the rich, Armani's in London was sacked, and by those who enjoy violence (as crazy as this may sound).

The main reason for these riots lies at the heart of the (unjust) capitalist system which creates an abyss between the "have" and "have not". Racism and discrimination against immigrants also play a role. Let's remember the terrible violence that occurred in France in October 2005, where unemployed youths, mostly Arab immigrants, caused hundreds of millions of euros in property damage and thousands of wounded among police and rioters. England is also fertile ground for racial discrimination, as are several other European countries.

Let's remember the Watts riot in Los Angeles in August, 1965, caused by a seemingly innocuous and common event: the arrest of a black man for driving under the influence. The summer heat and years of intense discrimination against African-Americans reach the boiling point and the resulting violence was instrumental in setting up profound changes in the police force and in the perception of minorities.

Many modern Republicans, including presidential candidates for 2012, favor a smaller government and a "laissez-faire" attitude toward the financial forces that move the market. They firmly believe that the federal government should not bail out large companies in danger of failing. "Let the economic and financial factors take care of themselves," they argue, and eliminate all government controls and interference. Maybe we should ask GM's and Chrysler"s employees and workers their opinion. These now very successful enterprises are paying back their official bail-out loans and will soon recover their independence. Thousands of people could have lost their jobs had it not been for the government's intervention.

Are we exempt from more riots in the U.S.? Of course not; what is happening in Britain could very well spill into the U.S., especially since the stock market suffered a huge decline, a potential harbinger of a new recession.

The Republican kind of savage capitalism favors the smart, the strong, and the rich (Bush's tax cuts for example), and leaves the others to charities (tax deductible of course) and to the vagaries of the market. Unless we change the system, we may be the victims of urban violence more and more frequently with the corresponding dire consequences.