Candid Capitalist: John Bogle

John Bogle of Vanguard

We asked the legendary investor, John C. Bogle, patriarch of the trillion-dollar Vanguard family of funds, for wisdom that would get us past the weekend in this financial rockslide. He sees an avalanche and three years of severe pain ahead, but something less than Armageddon, and no reason to realize Sarah Palin’s vision of another “great depression,” except that the Washington cast in the drama so far has been inept. “Embarrassing,” he said. John Bogle is famously a “value investor,” not a speculator. The overgrown financial sector of the economy is doomed, he says. But “America will continue to grow,” even in “fettered capitalism,” or whatever it comes to be called. And healthcare, technology, energy and consumer-product stocks will prove yet again to be good buys.

Click to listen to Chris’s conversation with John Bogle (30 minutes, 14 mb mp3)

Bogle is an insider who thinks, writes and invests like an outsider. At 78, he is a prolific, incisive, often philosophic observer who has written eight (8) books, best-sellers among them, since his heart transplant 11 years ago. He has always spoken as a common-sense sort of common man and often a very tough scold of his own industry.

We were looking for nest-egg advice and the broadest brushstrokes on the crisis. If Warren Buffett can get a guaranteed 10-percent return on his investment in Goldman Sachs, what stake should the taxpayers get for the companies they will bail out? Where, as Ralph Nader asks, is the shareholder uprising? If this is the end of market capitalism as we’ve known it, what is the common-sense name for the alternative system we are backing into?

I’ll tell you something about capitalism — and I somehow remember this, I don’t know how, from the first edition of Paul Samuelson’s textbook ‘Economics: an Introductory Analysis’ — my first taste of economics at Princeton University in 1951 — and what Paul Samuelson said in his introduction was, ‘The problem with capitalism, like the problem with Christianity, is that it’s never been tried.’

John Bogle, in conversation with Christopher Lydon, September 26, 2008.

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  • hurley

    This the clearest guide to the ongoing financial crisis I’ve encountered. Follow the money, as they say. The comment about the absence of grown-ups — a persistent theme of Chris’ — reminded me of the underlying theme of William Gaddis’ Great American Novel, the prophetic and up to the minute JR, whose underlying theme was the sheer childishness of so much of contemporary capitalism. Gaddis saw this coming in 1975, as he did the rise of right-wing religious fundamentalism in Carpenter’s Gothic (1985). A show on JR would be an appropriate companion to this one, and would surely bear out Chris’ contention that it is the novelists who have something special to tell us about the US.

    http://www.amazon.com/Penguin-Twentieth-Century-Classics-William-Gaddis/dp/0140187073

  • nother

    Unfortunately Christopher Lydon was right. He has explored the theme of empire – and it’s demise – for some time now, to the chagrin of many – “why you try’n to rock the boat, man.”

    Turns out he wasn’t trying to rock it, he was just duly reporting on the gaping hole of gushing water he witnessed with his keen eye.

    Our country will now pick a new captain, and the question is, will it be one who pushes on full-steam ahead, with the notion that our ship wields the brightest beacon and fiercest vessel…to the very end bye God? Or will it be the captain that acknowledges our leak, who changes course, even (dare I say) asks for help.

    Listening to Mr. Bogle decry the speculators, I’m reminded again how much Wall Street has come to resemble Vegas minus the etiquette and the hair gel. The fact is any investor in Wall Street is a speculator/gambler and just like in Vegas some of these guys don’t know their limits (especially when they are playing with house money).

    I’m serious here, my contention is that Vegas has come to terms with it’s excess and does not pretend to be something it’s not. I’ve recently been doing some video work at Putnam Investments (I needs the money too, man) and every time I walk into that huge building in the financial district I’m in awe at the monstrosity of bullshit.

    We set up the camera as these fund managers in expensive suits spew high-falutin’ financial lingo at the camera. The more complicated they can make it sound the more likely the naïve investor will fork over their money to the “expert.”

    One of my many jobs was taking bets for an offshore gambling operation in Jamaica. One of the first things I learned was that the more complicated the bet (i.e. teases, parlays, action reverse/bird cage) the better the odds were for the bookie.

    So that’s why Mr. Bogle’s take on the ownership society hit home with me. In the words of that natural investor Thoreau, “Simplify, Simplify, Simplify.”

    (Although his friend Ralph Waldo Emerson replied: “one ‘Simplify’ would have been sufficient.”)

  • Is there a connection between our foray into Iraq and the debacle gripping Wall St.? If so, what is the nature of that relationship? If not, why not?

  • Is there a common denominator underlying the reasoning and rationalizations that produced the quagmire in Iraq, and the mountain of toxic waste (mortgage equities), and the colossal scrap heap of weapons of mass destruction (credit swaps) currently fouling the financial system? Is there a moral dimension that encompasses these rather unfortunate realities?

  • To my mind, the answer to the question framed above, lies in the zone where Bogle & Bacevich intersect.

  • olivercranglesparrot

    It is proposed that we, the tax payer monetary base, bail out an industry that has crushed retirement portfolios, facilitated and enabled the moving of jobs abroad beyond the tax payer monetary base, and has somehow attached us to its hip through a credit gambit to ensure our help upon its plummet lest we suffer its fate and wander aimlessly upon the credit desert. This to me is a scenario that would make Voltaire, Mark Twain, or Joseph Heller salivate.

  • olivercranglesparrot

    … it might have giving William Gaddis a giggle too. (hello hurley)

  • hurley

    OCP, Bravo your catalogue, rhetorically and otherwise. The situation defies parody, except as prophecy, which is what Gaddis managed in 1975. Trickle-up, anyone? Trickle-back? My hope that Chris builds a show around JR and what’s going on, but that’s not a hope to hold him to. Do you know the book, OCP? Curious for your thoughts in any case.

  • pault

    I am intrigued by the juxtaposition of Zizec and Bogle. They are not as diametrically opposed as one may imagine. Its kind of like well what the hell should one do with one’s money if one is hanging left but stuck in the epicenter of capitalism. In the long run though it boils down to understanding the structural problem of adopting capitalism as a faith as opposed to just a theory. We can’t seem to be capable of addressing the limitations of the theory with the current experimental constraints.

  • olivercranglesparrot

    Thanks hurley. I’ve read A Frolic of His Own, which I highly recommend for ruminations about the legal system machinations and thoughts on civil war service, and Agape, Agape. I’ve not read JR, but given your recommendation and thought about this book, I’ve put it in the pipeline and await a recycled copy, at which time it’ll get my thorough attention. I think a show you’re recommending to Chris would be fantastic.

    The connectedness of this crisis has given folks much to think about and frustration to vent upon. Our government leadership has as much as said we’re into MAD scenario regarding the financial services/investment community (which includes speculators, hedgies, VCs, among many others) and the consumer culture. They are highly coupled, since both this sector and consumer habits float balance sheets and consumer goods/services on credit. Credit is not the only area which should be examined, but it should be given some scrutiny as to the fetishes it indulges upon. Credit behavior is merely a symptom of more fundamental flaws inherent in the way the machinery is structured and operates. Who is responsible for the current situation? Depends upon your world view and how it comports with the agenda.

    Best to you hurley, and all.

  • Can anyone explain why a Jewish holiday would interfere with Senate business? making “a vote before Wednesday virtually impossible” [should the bailout-rescue legislation clear the house on a second try]? Seems very curious to me, given the gravity of the situation and the market response. Why does the Senate observe this holiday?

    N.Y. Times:

    …Should the [market rescue] measure somehow clear the House on a second try, the Senate is expected to vote later in the week. The Jewish holidays and potential procedural obstacles made a vote before Wednesday virtually impossible, but Senate vote-counters predicted that there was enough support in the chamber for the measure to pass.

    http://www.nytimes.com/2008/09/30/business/30bailout.html

  • potter

    Flow- I am imagining that the vote would exclude too many members who will be out and unable to vote- it being a most important holy day for Jews.

    Chris- Thank you for this interview/ point of view.

    One comment further here is that Bogle’s advice to those who are at or near retirement-to have 60% of savings in bonds- works if you do not need need your money to be earning so as to have sufficient retirement income. Taking the safe route at this particular point is for people who have a lot of money and do not need to be earning.

    Nobody knows what to do or not do.

    This scary financial meltdown might yet save us from McCain/Palin. Fingers crossed.

  • Thanks potter. I find this intriguing, indeed very revealing. Given that Israel is also the top recipient of U. S. foreign aide, 12 billion dollars annually, I believe. Am I mistaken? I could very well be. Additionally, this may help to explain why congress continues to fund our irrational foreign policy in the middle east despite the overwhelming consensus on the part of Americans (nearly 70%) that we are on the wrong track and doing irreparable damage to our military and economy. It may also shed some light on why the current administration continues its saber rattling towards Iran. And why both major party candidates are compelled to pander to Israeli interests. And finally, why behavior that is characterized by most observers as blatant and unconscionable violations of human rights (Gaza), and naked, illegal aggression and violation of a sovereign state (bombing of Syria) are not only condoned, but endorsed and supported by the United States. Can anyone explain what vital U.S. interests are at stake in Israel?

  • potter

    Flow- I do not think so. Israel is not connected to this. It’s simpler than that: too many would be out and it’s about respect for a very import holy day in the Jewish calendar. I do not think that the world will collapse or not collapse to take a breather either.

    Take up the cause yes- but this explains nothing that is happening on Wall Street. Sounds too much like the old habit of blame it on the jews which I will not accuse you of.

  • Potter, thanks for sparing me the anti-Semite accusation. I want to be absolutely clear; I am in no way suggesting that Israel or people of Jewish faith or decent are to blame for the financial crisis.

    I was commenting only because it was surprising for me to learn that a Jewish holiday can interrupt or suspend business in the Senate amidst a crisis of such magnitude as the present one. The contemplation of this realization led to speculations concerning other aspects of U.S. policy that seem absolutely irrational otherwise, and often result in the U.S. condoning actions diametrically opposed to our professed principles. Given that the U.S. has no vital interests in Israel, one must assign the importance and value placed on this relationship to motives other than national interests.

    If a sufficient number of the members of congress and their staff observe the Jewish holiday, effectively shutting our government down for the duration, this signals a certain disproportionate degree of influence and persuasion, and provides some insight into the reason and motives for the U.S. acting outside — if not against in many instances — its own interest with respect to Israel and the broader middle east.

  • forton-twelve

    Popular logic concerning the “bailout” plan includes the assumption that the bailed-out institutions will immediately make funds donated by taxpayers available to satisfy the need for liquidity in the US. But is there really any control over how these institutions would invest our gift? If their choices in the past were not in the US public interest – why should we assume they will be now? It would add insult to injury if, after donating a precious trillion, taxpayers awoke to realize that their money was gone but with little or no benefit to the US economy. Where would we be then? How much more serious an economic crisis?

    Donating money to failed institutions is not the only way to inject cash into the economy. Instead, two trillion could be made available to State and Local Governments for infrastructure needs such as mass transit, hospitals, sustainable power and highways. By retaining control over the allocations, Congress could ensure that investment is directed to activities which genuinely support and develop US economic interests – true investments to support US economic growth for years to come. Congress has a responsibility to carefully consider public investment and to direct public funds to activities which promote US interests. Congress cannot and should not delegate this responsibility to private sector money managers.

    The failure of these financial institutions demonstrates that their leaders are not qualified to deal with the current economic crisis. It would be wise to let the “magic of the market” work its wonder; insolvent firms should be allowed to proceed to their natural end. This will allow the well-managed institutions to provide the leadership needed for growth.

  • potter

    Flow- again, as far as I can see Israel does not belong in this argument, regardless of how you feel about our support of Israel. You can try to connect this to “other aspects of our policy” that are irrational but that does not lead to a rational conclusion other than that there are those who are running this country who are not thinking in terms of what( you or I think is) is best for the country and this is one of those nasty chickens that have come home to roost. Israeli policies may be another issue. I don’t want to see the demise of Israel and I happen to believe that Israel has been doing quite well to endanger her future with or without our enabling. ( See Olmert’s interview as reported in yesterday’s NYTimes) I think that we have to support Israel but not necessarily Israeli policies. We are allies. This is not to say that vocal and influential right wing Jews do not exist in this country ( a minority among US Jews). But this has nothing whatsoever to do with taking off for a Jewish holy day as far as I can see, not with the subject at hand- the financial crisis and measures to be taken if possible to stop the avalanche. As with the schools on this day- I believe that there would be so many out (not only top tier- but so many employees that are needed to function) that it really is not practical to have a session. Think Christmas.

    Shutting down for this holy day( as scheduled) does not signify a “disproportionate degree of influence and persuasion” nor give any insight about the U.S. “acting outside or against it’s own interest with respect to Israel and the broader middle east”.

    Our dependence on oil does. The retribution of House Republicans brought down an imperfect bill. Tax cuts, deregulation of the system or inadequate regulation of it brought us to this point…. all irrational when you consider our interests. To insist on focussing on the Jewish holy day Flow is so off as to causes me to reconsider giving you the benefit of my doubts about the old nasty habit of blaming the Jews.

  • potter

    I was really surprised that Flow is not the only one agitated about Congress taking this scheduled day off ( voicing their concerns on the internet). Some feel that in this situation our lawmakers should be working on a “solution” no matter what. ( As if this can be fixed by some magic bullet). Others are giving a substantial list of all those in Congress and the executive branch who are Jewish. This by the way says nothing about their views on Israel which vary. And it’s strange to me to bring Israel into this. Few of those agitated ( actually only one other) in my little survey complain about Israel.

    This holiday is one of two of the most important holy days in the Jewish Calendar, the other occuring next week :Yom Kippur.

    It’s not the happy celebratory day as celebrated in the Christian calendar – which is by now mostly secular. Rosh Hashonna is not optional if you believe in Judaism. You take the day regardless of worldly matters, for spiritual reasons. it’s not just a holiday, it’s a “high holiday” as Yom Kippur ( next week).

    Taking a day off for a breather and to think/meditate connect with a spiritual self instead of acting with haste and vengeance is good. As well you have members that just need to go home and connect with their constituencies and who are in fact up for re-election.

    Our government is secular but taking off for religious holidays like Christmas and the Jewish New Year ( when there are so many who practice Judaism) is respectful of religion.

    Okay- I am done.

  • dr-seuss

    I am not sure what is meant by “if you believe in Judaism”. I believe that Jews exist. Judaism on the other hand is an artificial theological construct of an abstract deity with a huge mouth and no spine, reminiscent of the Ferengi race from Deep Space Nine. As long as Jews know they don’t really run the show; that if it were not for America Israel would not exist, then what is the big deal if Jews maintain a grossly exaggerated sense of self importance? No one can prevent Jews from thinking themselves superior, just as no one can prevent Christians from worshiping a conquerors religion with the rotting corpse of a dead Jew on a stick as their front man. That aside, I think the economy is much more important than anyone’s “religion”.

    Nancy Pelosi should never have made those negative comments about the Bush administration before the vote. If the matter wasn’t so serious I may have thought it was her idea of a joke, it’s just that her timing couldn’t be worse. I think it was an abuse and misunderstanding of the magnitude and influence of the podium. She knew that the whole country would be watching and she probably never practiced how to hold back certain impulses at what has turned out to be a most inopportune time.

    Republican minority leader John Boehner cited her speech as the reason why they decided to vote against the bailout. Obviously Pelosi should not have spoken in such a way, but using her misuse of the podium as the reason to vote against the bill is even more irresponsible. Your feelings were hurt? Big deal! What about people’s retirement money and 401k? What about the 1.2 trillion dollars that disappeared from the stock market the day after? True, there is wisdom in allowing the economy to correct itself, but to a point. A stimulus package will restore confidence in all sectors, and, most likely, stave off a depression. It may still get worse before it gets better, but I would rather not run full speed into a wall.

    I can’t understand why the average American doesn’t see the connection between Wall Street, and Main Street. Is being against the bailout not counterintuitive? Would it not otherwise be harder for individuals and businesses to get loans while destroying consumer confidence with a possible rise in unemployment? Everyone needs an accountant. Everyone needs a place to keep their money. We all need to borrow money from time to time. Why are people so willing to cut off their nose to spite their face? Wall Street is not exempt from mistakes and corruption. Let’s correct the problem and move on. When Wall Street is in trouble all of us should feel obligated to come to its aid, in the same way we expect FEMA or the Red Cross or the Coast Guard or the Police to come to our aid in times of trouble. There is a particular element of spite and ignorance coming from certain pockets of the country. I don’t want to point fingers, but I will say this. After the past week or two I can more deeply relate to why we once had a Civil War. Power should be shared, not horded or abused. Let’s hope we don’t have to burn down the house.

  • jazzman

    Dr-Seuss says: I can’t understand why the average American doesn’t see the connection between Wall Street, and Main Street. Is being against the bailout not counterintuitive?… Why are people so willing to cut off their nose to spite their face?

    The reason average people are against this bailout is that emotionally, people are angry due to the perception that congress will borrow a huge sum from some entity or entities and give it to the very people who they view as responsible for the economic collapse and they, along with their progeny as taxpayers, will be paying for it indefinitely.

    What they don’t understand is that as you said they are behaving irrationally (see Dan Ariely) and cutting off their nose to spite their face. I believe that the majority of people operate on the model of reward and punishment and they believe that the perpetrators (those identified by the media – faceless corporate entities and their principals) need to be punished for their behavior.

    They presumably broke no laws and therefore cannot be legally held responsible and punished (fined or jailed) so they need to suffer by losing their companies and possessions. The citizens want some sort of vengeance and would require it despite the cost to themselves and their fellow citizens. Average Americans are not introspective, philosophical or capable of following the complexities of economic interconnectedness. They are not wont expend the energy to understand that if the batteries that power the economy are drained that even if they are forced to tighten their belts, there are many who cannot.

    If small businesses can’t get the capital to bridge the cyclical gaps when income is down then workers are laid off. If companies are forced to tighten their belts they won’t hire and may turn to offshoring as a means to save money. Unemployment starts an upward spiral. Without jobs homeowners will be unable to pay their mortgages and because home prices are spiraling down they can’t sell due to the negative equity which causes defaults and exacerbates the spiral. The cities and towns can’t fund services because tax collection is off due to the housing defaults and more jobs are cut. Modern western society is so interdependent that trouble in one sector has the potential of toppling the rest of the system like a house of cards.

    Our system depends on faith in the fiat monetary system of credits and debits and if confidence is shaken, many will find that there’s no there there.

    There are many factors which contributed to our current situation. There are the unscrupulous lenders who tempt people to borrow beyond their means and then lend them enough rope to hang themselves and the people who succumb to the temptation.

    Those who churned the mortgage backed securities for maximum commissions even though they knew that if housing prices fell the buyers of those instruments would be screwed. The companies who insured those uncollateralized securities to the tune of 60 trillion dollars with less than .001% of the monies to back it up and the legislators who believed in unfettered free markets or the lobbyists who flogged the idea.

    All the administrations from Reagan to GWB (Bill Clinton signed the bill that allowed the unregulated Credit Default Swaps) that weakened oversight and regulation of the banking and insurance industries until there was a virtual “anything goes” philosophy. The relaxation of controls was compounded by overreaction to Tyco, Enron and Worldcom’s excesses etc. with the Sarbanes Oxley laws. Those who voted for these anti-government and over-governance were well meaning but these were costly experiments of which we are now gauging the results empirically.

    There maybe better solutions than this bill but the problem is too complex to be dissected and solved in a timely manner if at all which is the crux of the bailout. It may not work and we’ll pay the price if it doesn’t but if nothing is done and the economy collapses the country may pay a greater price. When such things occur social unrest and violence find fertile ground in which to take root and wars (as after the great depression) are sold as a means to unite common cause.

    Vote for the person who has the mental acuity, persuasion and temperament to tackle these big challenges and opportunities, rather than a warrior.

    Peace to ALL,

    Jazzman

  • dr-seuss

    Jazzman,

    First your comment and then my response.

    “…Congress will borrow a huge sum from some entity or entities and give it to the very people who they view as responsible for the economic collapse”.

    Let’s say half of the world’s population is on a huge boat in the middle of the ocean. Now we learn that a powerful storm is approaching. The people on land whose lives are not directly at risk have to make a decision if they will risk their own lives in an attempt to save the others. Sure, they could let them drown, but that means that the rescuers’ lives will now be much harder, or in some cases impossible, because the people that they chose to sacrifice were also contributors to the economy. One cannot expect to lobotomize what is arguably the most sensitive component (Wall Street) of the economy with the expectation that the rest of the body will remain healthy. This is a kind of unfeigned simplicity that in my opinion is very dangerous.

    “…They believe that the perpetrators (those identified by the media – faceless corporate entities and their principals) need to be punished for their behavior”.

    Yes, punished. So I guess it is a question of degree. Do we punish innocent people? We try not to. Can we retro-punish the CEO’s who got away with multimillion dollar retirement packages? Probably not. I for one would love to punish them, but that’s not how our system works. So we are left with one solution: to institute new and more transparent rules and regulations that make it much harder for greed and corruption to go unchecked. Wall Street is not immune from corruption. In fact, Wall Street is more prone to it than Main Street. That is why when the average American here’s of greed and corruption on Wall Street, it makes it that much more unacceptable because people say to themselves ‘these guys are already rich, and now they want even more – no way, I won’t have it, off with their heads’! That kind of reaction is dangerous. To me the question of the day is as follows. ‘How much’ of Wall Street do we sacrifice (mostly in the private sector); how do we regulate anew while implementing a stimulus package to avoid total economic collapse? Get the bailout in their first so we can then take our time trimming the pork without sacrificing the whole pig. No pig, no country.

    Greed is good for the country as a whole, but not when individuals keep it or hoard it from the rest of us.

  • shaman

    Thanks for this interview.

    Wide ranging, deep conversation such as this is its own reward.

    Unfortunately George Bush’s “war on terror” is morphing into John McCain’s “war on greed”. I wonder if the USA can afford these simplistic wars on human emotions.

    What’s next, a “War on worrying”?

    We have new terms that some of us need to understand:

    “De-Leveraging”

    “Default Swaps”

    “Investment banking vs. FDIC insured banking”

    “Repeal of Glass-Steagall”

    The new danger is in the “Libor”

    (this is the bank lending rate – which, if it goes too high – will announce the end of the world economy)

    This is no time for a “war on greed”.

    We just need

    reasonable financial regulation and business transparency

    to return immediately

    AND

    To get rid of this Damnable, lack-a-day Bush “Era of Deliverance” run by a bunch of Hickass Cornpones!

    Other than that I have no opinion.

  • jazzman

    Dr-Seuss I’m not sure what your boat analogy is meant to convey. I was explaining why the average American doesn’t see the connection between Wall St. and Main St. and why they are against the bailout and willing to hurt themselves and their neighbors to punish the few they deem responsible for this event. I don’t wish to see the metonymic Wall St. receive a metaphorical lobotomy and the simple solution to their problems is to be the middlemen in good faith (no churning and taking advantage of a client’s ignorance) between investors and entities in which they invest.

    I am for a bailout of some sort. I have reservations about what I have gleaned from the sound bites the talking heads have provided but doing nothing is courting disaster (and disaster is a cheap date.) It’s definitely an improvement from Paulsen’s “Give me 700 gigabucks to do with as I see fit with no legislative or judicial oversight. Just trust me!!!” 3.5 page 1st pass power grab. The current bailout approved and signed by GWB today (I have little knowledge of its contents) is imperfect to be sure but it has the potential to act as a gap to halt the dominoes falling.

    Those who have read my opinions here at ROS know that I don’t believe in punishment for vengeance and I do not condone punishing those who take advantage of a flawed system or those who construct the systemic flaws wittingly or unwittingly. I don’t believe there are innocent victims who find themselves involved in dramatic events as I believe ALL persons are responsible for whatever dramas to which they are party.

    The solution you propose, transparency and regulation has become a necessity due to the less than ideal behavior demonstrated by a number of individuals who gamed the system because they could, abetted by as I mentioned above, a philosophy of “unfettered free market capitalism” and anti-governance legislation. This in turn spawned the over reaction of Sarbanes Oxley regulations which exacerbated the current collapse. So a realistic balance of regulation and room to operate needs to be struck.

    As you note punishment for vengeance’s sake is dangerous (fear and jealousy are a not so subtle subtext in your example) and one more reason to be unfavorable to punishment. Rewards and restraint are far more effective at encouraging ideal behavior. Gordon Gecko’s philosophy may be capitalism’s driving mantra but I believe it is a less than ideal (albeit a powerful) motivator as it is a 2nd order derivative of the FEAR emotion, one of the strongest human motivators. Love and altruism are IMO more ideal motivators to cultivate.

    Peace to ALL,

    Jazzman

  • dr-seuss

    Jazzman,

    First your comment and then my response.

    “I’m not sure what your boat analogy is meant to convey”.

    It is meant to convey that people stand more to gain through cooperation than by isolation; as you have noted: they should be more “altruistic”. The implication of the analogy is obvious. If people expect Wall Street to be available when they need loans, stocks, accounting and banking, then why does the average American not feel some sense of obligation, not to the fat cat’s in particular, but to the financial system as a whole? To put it plainly – what right does the average American have to suggest that Wall Street has no right to ask for help?

    “I believe that the majority of people operate on the model of reward and punishment and they believe that the perpetrators (those identified by the media – faceless corporate entities and their principals) need to be punished for their behavior”.

    You did not specifically state that you yourself agreed with the notion that these people should be punished. So I cannot hold you to it if and until you clarify your position for the record.

    “I do not condone punishing those who take advantage of a flawed system”.

    People are not perfect and neither is our system. You ‘seem’ to be suggesting that getting away with a crime (let’s stick to the example of Wall Street corruption, although I admit I am curious about what other types of crimes you feel are permissible) is OK because “the system is flawed”. Is that what you are saying?

    “The current bailout approved and signed by GWB today (I have little knowledge of its contents) is imperfect to be sure but it has the potential to act as a gap to halt the dominoes falling”.

    How would you know that it is “imperfect” or if it has “the potential to act as a gap” if, by your own admission, you have little knowledge of its contents?

    “I don’t believe in punishment for vengeance”.

    I am not sure what you mean by “vengeance”. What about punishment to compensate the innocent victims who lost retirement funds and their 401k? You are not suggesting that the innocent and the guilty switch places are you?

    “I don’t believe there are innocent victims who find themselves involved in dramatic events as I believe ALL persons are responsible for whatever dramas to which they are party”.

    People who are kidnapped, women who are rapped, others who have their money stolen from them, people who are the victims of hit and run auto accidents, people who are murdered, and last but not least children stricken with cancer – every last one of them, according to you, is “responsible” for being in the way of tragic events or the criminal who decides to rob them or take their life?

    Just imagine … a world with no law, no morals, no ethics, just a bunch of hominids acting like animals – some aggressive, some defensive, some live, some die – anything goes. Not “all” hominids would act like animals mind you. Some of us would sit around the campfire writing songs and respecting each other. I have no problem with that. But as you know there is always a snake in the garden somewhere. So what does Jazzman propose the peaceful hominids do when uncle Vinnie shows up and takes your money and your wife? What should the other hominids do if Vinnie goes into a rage and starts killing people? And how many people should Vinnie be allowed to kill before he is stopped? Yet you have suggested that “Love and altruism are IMO more ideal motivators to cultivate”.

    Curious, this “Jazzman”.

  • Is there a connection between the war in Iraq and the bailout of Wall St.? Did the Fed intentionally engineer a bubble? If so, why? The short answer is the housing bubble was engineered to cover the terrible toll of the war on the economy.

    Now that the political discussion concerning the response to the credit crisis is settled, there is room for consideration of the factors that contributed the emergence of the crisis. Paramount among them is subscription on the part of policy markers, stemming back to the Reagan administration, to the principles and theories of free-market economics as advanced by Milton Friedman. Essentially: the market regulated least works best.

    However, placing the blame for the current crisis exclusively within the domain of failed policies — rooted in a flawed social-economic theory — and poor governances excludes an examination of intentional factors that may have contributed to the crisis.

    I found this comment by Columbia University professor Joseph Stiglitz, winner of the 2001 Nobel Prize in Economics, former chief economist at the World Bank and co-author of The Three Trillion Dollar War: The True Cost of the Iraq Conflict, to be significant.

    Excerpt from Democracy Now 10/2/2008:

    AMY GOODMAN: […] does the bailout connect to war?

    JOSEPH STIGLITZ: Very much. Let me first explain a little bit how the current crisis connects with the war. One of the reasons that we have this crisis is that the Fed flooded the economy with liquidity and had lax regulations. Part of that was this ideology of regulations were bad, but part of the reason was that the economy was weak. And one of the reasons the economy was weak was oil prices were soaring, and part of the reason oil prices were soaring is the Iraq war. When we went to war in 2003, before we went, prices were $23 a barrel. Futures markets thought they would remain at that level. They anticipated the increase in demand, but they thought there would be a concomitant increase in supply from the low-cost providers, mainly in the Middle East. The war changed that equation, and we know what happened to the oil prices.

    Well, why is that important? Americans were spending hundreds of millions—billions of dollars—to buy imported oil. Normally, that would have had a very negative effect on our economy; we would have had a slowdown. Some people have said, you know, it’s a mystery why we aren’t having that slowdown; we’ve repealed the laws of economics. Whenever anybody says that, you ought to be suspect.

    It was actually very simple. The Fed engineered a bubble, a housing bubble to replace the tech bubble that it had engineered in the ’90s. The housing bubble facilitated people taking money out of their mortgages; in one year—out of their houses; in one year, there were more than $900 billion of mortgage equity withdrawals. And so, we had a consumption boom that was so strong that even though we were spending so much money abroad, we could keep the economy going. But it was so shortsighted. And it was so clear that we were living on borrowed money and borrowed time. And it was just a matter of time before, you know, the whole thing would start to unravel.

  • jazzman

    Dr-Seuss: I understood your boat analogy as it applies to a pragmatic approach to bailing out system in crisis. Again I wasn’t sure why you were directing it to my observation as to why average Americans were against it even to the point of lobbying against their own interest.

    I agree completely that cooperation is superior to competition (your words isolation which is an antagonistic form of competition in this case.) I question that Wall St. was in fact asking for help from the taxpayers, as their proxies in Washington were the ones asking for the bailout (the investment banks seemed to think that they were in good shape until the dominoes started to fall but perhaps it was just a brave face to inspire confidence (as in trickster.) Anyone has the right to ask for help but whether it is forthcoming is a function of the importunee’s worldview and whether they believe in lying in made beds, forgiveness or protection of ones self interest.

    You did not specifically state that you yourself agreed with the notion that these people should be punished. So I cannot hold you to it if and until you clarify your position for the record.

    I did specifically state that I do not believe in punishing those responsible, the crisis would have been a result of irresponsible practices even if the law were followed to the letter, and I know of no laws that were broken in the construction of this debacle.

    You ‘seem’ to be suggesting that getting away with a crime (let’s stick to the example of Wall Street corruption, although I admit I am curious about what other types of crimes you feel are permissible) is OK because “the system is flawed”. Is that what you are saying?

    No I’m saying exploiting a flawed system is not a crime as long as no laws were broken – however I believe it is ethically challenged. I don’t define crime as transgression of the “LAW” I break no laws with which I agree and I obey no laws with which I don’t agree – unless a metaphorical gun is pointed at me. If I find myself in a drama in which I am arrested for “breaking the law” then I have to pay whatever price is exacted. I believe the only just laws all flow from 2 precepts. One may not physically harm another and one may not deprive others of their possessions.

    How would you know that it is “imperfect” or if it has “the potential to act as a gap” if, by your own admission, you have little knowledge of its contents?

    Perfection doesn’t exist – but what I’ve gleaned from the talking heads is that by buying toxic assets (liabilities) instead of demanding a share of the business that is liquidating them to the government is basically buying a pig in a poke with little downside to the institutions holding the bad debt and potential for losses to the taxpayer. If $700B hasn’t the potential to act as a gap then why would anyone sign up for this plan. Everything is potential until actualized. Whether the gap is bridged remains to be seen.

    I am not sure what you mean by “vengeance”. What about punishment to compensate the innocent victims who lost retirement funds and their 401k? You are not suggesting that the innocent and the guilty switch places are you?

    Vengeance is punishment for revenge. Whom would you punish for what crime? I lost retirement funds (1/3 of its value after 2001 and got back to my pre-2001 level in 2005 after contributing steadily to my mutual funds along with their appreciation, and I’ve lost almost as much again in the last couple of months.) I picked the funds in which to invest, I pay the price and seek no retribution.

    As I don’t believe in guilt or innocence per se their places are equivalent.

    People who are kidnapped, women who are rapped, others who have their money stolen from them, people who are the victims of hit and run auto accidents, people who are murdered, and last but not least children stricken with cancer – every last one of them, according to you, is “responsible” for being in the way of tragic events or the criminal who decides to rob them or take their life?

    Yes. In the most basic sense, everyone in the examples you cite made choices consciously or unconsciously that caused them to arrive at the space-time coordinates when these (on the surface, heinous,) events were actualized into a participatory drama. They had ample opportunities to avoid the drama. I don’t expect you to understand or subscribe to the Meta level which renders these things neutral if not edificatory as your belief system likely precludes that view. I could be incorrect, if so, please disabuse me.

    Just imagine … a world with no law, no morals, no ethics, just a bunch of hominids acting like animals.

    I can imagine that but I choose not to as laws, morality (except Absolute Morality) and ethics are idea constructs, a product of human thought. Expect humans to act as animals and they will live up to one’s expectations. Expect them to be empathetic humans and they will be so.

    So what does Jazzman propose the peaceful hominids do when uncle Vinnie shows up and takes your money and your wife? What should the other hominids do if Vinnie goes into a rage and starts killing people? And how many people should Vinnie be allowed to kill before he is stopped? Yet you have suggested that “Love and altruism are IMO more ideal motivators to cultivate”.

    I believe that peaceful people will not have to contend with an “Uncle Vinnie” (do I detect a stereotypical implication?) If I lose my money and wife to another, then I co-created the drama and was unsuccessful in convincing him/her/it to seek booty elsewhere. If a person becomes violent and acts out, then those participating in the drama will determine the outcome. In my belief system as there are no victims, only those who allow themselves to be killed will be.

    I stand by my opinion that love and altruism are more ideal motivators than fear and violence.

    Peace to ALL,

    Jazzman

  • dr-seuss

    Jazzman,

    “I believe that peaceful people will not have to contend with an Uncle Vinnie… ‘If I lose my money and wife to another, then I co-created the drama and was unsuccessful in convincing him/her/it to seek booty elsewhere”.

    In other words it’s “their fault”, they must have “done something to deserve it” because, according to your view, the universe corrects itself. Well, maybe you’re right. However, that does not necessitate anarchy or an anything goes attitude. We won’t let uncle Vinnie run the show because he doesn’t play like the others. Innocence is a commodity we hold sacred and choose to defend at all costs. We don’t believe in oppression and we certainly don’t believe in living in fear. The proverbial snake in the garden will show up like clockwork. Why? Because the snake can’t create peace for himself and others around him; he can only copy, cheat, steal, murder, and fornicate. He does not believe in law, education, or even history. His knowledge is vast, but he has no understanding. He will imitate us because he wants what we have created for ourselves. He will dress like us, eat like us – sometimes he may even live with us (that’s interesting), but his inherent lack of morality and inability to create keeps him in a perpetual state of covetous and wrong doing. He is quick to anger and as a result is always one step away from killing or being killed or going to prison. But enough about Vinnie the Snake. Let’s get back to our conversation.

    Once in a while in the media you hear of a child in the projects who got shot for being too close to a window. And now you are going to tell me/us that the child “co-created the drama”? I don’t believe that you believe this. I believe it is entertainment for ROS – either that, or the worst attempt to “be different” I have ever seen. Life unfolds before our eyes. Innocent people get caught up in things to no fault of their own and quite often guilty people go unpunished. That is not “my personal view”, it is a statistic. In your world there would be no such thing as no-fault insurance because everyone involved in an accident “co-created it”. What you are putting forth here is completely ridiculous. I would expect people who live in the Amazon to interpret the world this way. By the way I have several friends who were born and raised Guyana so I know what I’m talking about. It is not a slur against them. It is only a reflection of a lack of formal education, having nothing to do with morality or temperament. Someone with you’re writing ability who puts forth such starkly undeveloped views must be held under scrutiny – not because “I say so”, but because ideas must be tested within the sphere of human interaction, and over long periods of time. You have backed yourself into a corner with dissonant and untestable views. One cannot expect people to be “altruistic” or “loving” simply by wishing it – that’s naïve, and scandalous. The question of the day for you Jazzman is: how do you make it happen?

    I would be interested in a summary of the historical, legal, and philosophical background of the precepts of your ideology. I would also like to hear about the traditions or religious rituals and reading material people can use to help apply those precepts in their daily lives.

  • jazzman

    Dr-Seuss: In other words it’s “their fault”, they must have “done something to deserve it”

    Fault is a pejorative connotation of responsibility – responsibility need not imply fault, it’s neutral and it is subjective projection (value judgment) that decides its positivity, neutrality, or negativity; in other words we are the deciders. The concept of desserts is as neutral as responsibility; it’s subjectivity that gives it a value. I say one is responsible for participating in all dramas from vignettes to full blown productions. If one doesn’t not take responsibility for the subjectively negative experience, then one cannot take credit for positive occurrences (again subjective) and must chalk it up to random happenstance (luck.) I don’t believe that luck exists. I have delineated the 3 possible prime movers for existence here at ROS several times. They are:

    1) God controls everything, i.e., there is no free will

    2) No one is in control, i.e., free will exists and random luck is the prime mover

    3) Each one of us controls our reality, i.e., free will and total responsibility for all subjective experience

    4) Some hybrid of the above (I’d say most believe it’s a combo of 1 & 2 primarily with a skosh of 3 in some cases.)

    I believe completely in #3 and the universe doesn’t correct itself, there is no need for correction, it is sui generis. If one doesn’t like an experience, a change in subjective outlook (attitude) will render it positive or neutral.

    However, that does not necessitate anarchy or an anything goes attitude.

    I’m for the pentarchy of Absolute Morality “not anything goes” by a long shot.

    Innocence is a commodity we hold sacred and choose to defend at all costs. We don’t believe in oppression and we certainly don’t believe in living in fear. The proverbial snake in the garden will show up like clockwork.

    Again I would say the concept of innocence is subjective, and even when believed to be objective (an impossibility) it is rarely held sacred and mostly defended haphazardly on a quid pro quo basis. Here in the USA it is fashionable to oppose the subjective notion of some types of oppression but certainly anyone who subjectively warrants oppression (like enemy combatants denied habeas corpus) will be oppressed generally without a second thought.

    I’ve written numerous times at ROS that FEAR is the strongest emotion and that fear is responsible for most less than ideal behavior in humans. It has been exploited for political ends since the beginning and because people are afraid they seek to mitigate it by supporting anyone whom they believe will subdue the bogeyman (snake, Vinnie or Osama.) What they don’t realize is they are responding to secondary information which is abstract and only made real in the mind and the body who responds to that mental state. The snake symbolizes fear of humans behaving in a less than ideal fashion. Those represented by that symbol are acting out of FEAR themselves and pose a threat only to those who cooperate in their dramas.

    Once in a while in the media you hear of a child in the projects who got shot for being too close to a window. And now you are going to tell me/us that the child “co-created the drama”? I don’t believe that you believe this. I believe it is entertainment for ROS – either that, or the worst attempt to “be different” I have ever seen.

    Yes because I don’t believe in random happenstance – the child cooperated in the drama for personal reasons. These reasons are on a meta-level as are the reasons for all participants. The parents had a reason to engage in the drama that resulted in an injured or lost child. The shooter had reasons to perpetrate this “accidental” shooting, as well as did the larger community etc.

    Anyone familiar with my almost 3+ years of posting at ROS will tell you I have been consistent regarding this belief and any entertainment is ancillary. I realize that my beliefs are not mainstream and I think differently from many (but not all) others but again I don’t expect you to think as I because your belief system precludes such a worldview as evinced by your writing.

    Innocent people get caught up in things to no fault of their own and quite often guilty people go unpunished. That is not “my personal view”, it is a statistic.

    It is your personal view. You actively decide guilt and innocence personally or passively by consensus and the statistics agree with your belief.

    In your world there would be no such thing as no-fault insurance because everyone involved in an accident “co-created it”. What you are putting forth here is completely ridiculous.

    I don’t believe in the concept of “insurance” where one has to lose to win. I maintain auto insurance because I am forced to by the state. I have homeowner’s insurance because I am forced by my mortgage agreement. I have medical insurance because my work requires it. I have never filed a homeowners or auto insurance claim. Medical insurance is the only one I have used and that was mostly for my children. Just the mere fact of a having a “hedge” against “bad luck” increases the likelihood of creating circumstances where having insurance mitigates the downside.

    It is only a reflection of a lack of formal education, having nothing to do with morality or temperament.

    I’ve had plenty of formal education and found it unsatisfying and extremely provincial and lacking in critical assessment. Morality and temperament are a function of one’s belief system.

    Someone with you’re writing ability who puts forth such starkly undeveloped views must be held under scrutiny – not because “I say so”, but because ideas must be tested within the sphere of human interaction, and over long periods of time.

    If my views appear undeveloped, it is due to the confines of this venue, I assure you they are quite robust and I welcome all scrutiny. I have tested these ideas for 35 years in the real world by living according to them and have yet to find any alternative belief system that is as consistent though incomplete (for Kurt Gödel) and is totally equitable for all.

    You have backed yourself into a corner with dissonant and untestable views. One cannot expect people to be “altruistic” or “loving” simply by wishing it – that’s naïve, and scandalous

    I test my views with my life and as a Jazzman am very comfortable with dissonance. I believe that the natural state of humanity is loving and altruistic, the naïveté and scandal are your characterizations. I would venture that you subscribe to naïve realism (look it up.)

    The question of the day for you Jazzman is: how do you make it happen?

    It happens consciously or unconsciously, all of us create individually reality as matter-of-factly as breathing. There is a physics explanation that works similarly to quantum electro dynamics but the margin is to small to contain it.

    I would be interested in a summary of the historical, legal, and philosophical background of the precepts of your ideology.

    Legality is an artificial construct an out of place in this discussion for historical references see Plato or many of the ancient Greek thinkers. See the philosophy of solipsism for further study.

    I would also like to hear about the traditions or religious rituals and reading material people can use to help apply those precepts in their daily lives.

    See Rhonda Byrne’s The Secret and What the Bleep Do We Know for starters.

    Peace,

    Jazzman