I'm noticing a lot of replies to the "Pensioners 'kidnap and torture' financial
thread, where people seem to be taking the side of the old men who tortured that guy. While I understand "just deserts," I think
most people are mad over some misconceptions about the marketplace, how this happened, and who is responsible.
Let me first start off by saying, if you lost money in the housing market, it's sort of your own fault:
Bottom line, it was a bad investment. The free market IS a form of sanctioned gambling, and that's how "they" want it, because it creates
Arbitrageurs perform a special function, and exist to ensure consistent pricing across different types of instruments relating to a
particular asset and its relationships (e.g., cash, futures, forwards, options, etc.)
What they don't tell you is that they "ensure consistent pricing" by buying undervalued securities and selling overvalued securities. The housing
bubble would be an example of an overvalued sector, which was arbitraged
to the tune of a few hundred billion dollars.
I don't blame the little guys working at investment firms across the country. I know it sounds like I'm apologizing for them, but I'm not --
because they did nothing wrong -- except make bad investments.
That's just how the markets work. I think it's best to just buy an index fund
, do your
own investing, or go with something low-risk/insured.
The best protection is a working regulatory institution.
While bush was in office, he installed more than 100 top officials who were once lobbyists,
attorneys or spokespeople for the industries they oversee
, which is a bit like assigning the fox to guard the hen house.
To add fuel to the fire, the SEC
was filled with men of such
incompetence, they did not notice Bernard Madoff's Ponzi scheme after receiving detailed reports for nearly 10 years outlining ever detail of illegal
Describing them thusly:
a group of 3,500 chickens tasked to chase down and catch foxes which are faster, stronger and smarter than they
are…As currently staffed, the SEC would have trouble finding first base at Fenway Park if seated in the Red Sox dugout and given an afternoon to
Then, Bush decided to remove the Uptick Rule
, which made it possible for speculators and the
arbitrageurs (remember them?) to literally send a company into bankruptcy using the open market, or at the very least, scare the hell out of everyone
by causing the stock price to drop just a few pennies above zero.
Starting to get the picture of what's going on here?
Wait, there's more:
In 1999, Bill Clinton Signed into law the Gramm-Leach-Bliley Act
, allowing mega
corporations, wielding ungodly sums of money, to merge together and begin speculating in the derivatives and OTC market. It also made the now famous
credit default swaps
legally impossible to regulate.
Adding to the volatility of the market, oil prices were soaring to never before imagined heights, due mostly to the speculative activities of
institutions fomenting higher prices with their 10s of billions of capital and low margin requirements:
world consumption of oil at 87 million bpd was far exceeded by the "paper market" for oil, which equals about 1.36 billion bpd, or more than
15 times the actual market demand.
A study of the oil market by Masters Capital Management was released which claimed that speculation did significantly impact the market. The study
stated that over $60 billion was invested in oil during the first 6 months of 2008, helping drive the price per barrel from $95 to $147 per barrel,
and that by the beginning of September, $39 billion had been withdrawn by speculators, causing prices to fall.
And that's not even the half of it, but the rest, as they say, is history.
Here we are, slumped over, bailing out the very institutions that caused this mess
So who's fault is it that all this happened? Is it really some financial adviser in Germany? He was simply doing what everyone else was doing (which
is a good sign that it's time to not do it anymore) and it worked for a long long time.
I think blame should probably be assigned to the American public, because they allowed these deregulations to take effect in the first place, voted
for the politicians sponsoring these engineered disasters in policy, and said nothing when the lobbyists working for the corporations that profited
the most from this mess wrote
the laws that congress passed.
In other words, blame yourself. Kidnap yourself and torture yourself. It's basically your fault by sitting passively on your ass as the country was
handed up to J.P. Morgan, Citi, Merrill Lynch, Monsanto, Enron, Exxon, Bank of America, etc. in the guise of "free market economics" or
If you want to know what went wrong, here's a good place to start
Kidnapping and torturing a financial adviser won't change or fix anything.
Related Thread on Class Warfare