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Paul B. Farrell
June 15, 2010, 12:01 a.m. EDT · Recommend (5) · Post:
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By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) -- Warning: "Capitalism as we knew it is dead." What a grabber! A flashing neon sign on Times Square near Morgan Stanley? No, it's the headline on a promo ad for the new book co-authored by the highly regarded American editor of the world's leading business magazine, the Economist.
Yes, "capitalism as we knew it is dead." Who killed it? The usual suspects. Everybody. And it was easy. First we killed democracy. Yes, democracy as we knew it is also dead.
Magazine covers espousing the death of equities usually spell recoveries, Bob O'Brien suggests.
Next question: What'll take its place? In "The Road from Ruin," Matthew Bishop, the Economist's business editor and co-author Michael Green tell us "capitalism as we knew it" died on "Sept. 15, 2008, the day Lehman Brothers went bust. That much is clear. What we don't know yet is what will replace it and whether that version will be any better than what went before."
Wrong: We do know exactly what will replace it. We also know it won't be better. In fact, far worse, far more self-destructive. The "Doomsday Capitalism" virus is spreading:
Start with "The Road From Ruin." Four "big ideas," a grand vision of what a revival of capitalism must have to succeed: First, "rethink economics." Second: "redesign global governance," including loss of the dollar's reserve currency status to create "a stabler global financial system." Third, "capitalism must rediscover its soul," put "values back into business," and "serve the greater good." Fourth, "promote financial literacy."
Four "Big Ideas." All doomed. Why? America hates them. Everyone: Palin, McConnell, Beck, the GOP's Tea Party of No-No. Yes, even the White House, Congress, Geithner, Bernanke and Dodd. And certainly the Goldman Conspiracy of Wall Street too-greedy-to-fail fat-cat bankers. All guaranteed to hate the four big ideas, hate them more than Cormac McCarthy's bleak post-apocalyptic "The Road."
Hate? Yes, here's why: The GOP does not want to "rethink" economics. No compromise. They want to reinstate their beloved free-market Reaganomics ideology. Period. Also non-negotiable: They'll never surrender the dollar as reserve currency. Un-American. Worse than surrendering America's divine right as the world's sole superpower.
What about "soul?" Wharton economists warn: Washington's financial reforms are not "game-changers," will leave "plenty of risk in the system," thanks to hundreds of millions spent by Wall Street lobbyists. So America will continue sliding deeper into an economic sinkhole with no-soul, no-values, no 'Invisible Hand.'
Fourth: The big idea of "promoting financial literacy" is a perennial hoax, a cleverly disguised Wall Street marketing gimmick. As Richard Thaler, the godfather of behavioral economics puts it: The last thing Wall Street wants is an informed, rational investor wise to their con game.
Sorry, folks, but these four big ideas will only mislead us into letting our guard down, make us more vulnerable to "Doomsday Capitalism," a viral WMD along "The Road."
In "The Big Short: Inside the Doomsday Machine," Michael Lewis details what really happened in the 2008 meltdown of capitalism, leaving us with the eerie doomsday feeling: This will happen again, bigger, soon. Happen because today's weak reforms are no game-changer like the '30s, will leave Wall Street in a business-as-usual mode, with the same old shadowy derivatives game already blowing a new bubble. Prediction: Another meltdown, then finally the Great Depression II dodged in 2000 and 2008.
Inside the "Doomsday Machine" is the story "of a giant bet gone wrong," Lewis tells the Los Angeles Times: "In the simplest terms, a machine got built to enrich people for taking really stupid financial risks. The way it worked was it disguised the risks in a number of ways, but complexity was a chief tool. It made it too complicated for people in the end to understand the risks they were taking. And the machine ended up being fooled by its own deceit."
Too complex? Self-deception? No reform transparency? Oh yes, it will repeat.
Why? As the Timesonline's reviewer put it: "The titans of Wall Street were not simply the corrupt, flash bankers Lewis chronicled in 'Liar's Poker,' but something far, far worse. They were stupid. They had unwittingly created a monster that they did not understand and could not control." Worse, so stupid they're now building a newer, deadlier monster.
Paul Farrell writes the column on behavioral economics. He's the author of nine books on personal finance, economics and psychology, including "The Millionaire Code," "The Winning Portfolio," "The Lazy Person's Guide to Investing." Farrell was an investment banker with Morgan Stanley; executive vice president of the Financial News Network; executive vice president of Mercury Entertainment Corp; and associate editor of the Los Angeles Herald Examiner. He has a Juris Doctor and a Doctorate in Psychology.
Nothing like a complete shrug from markets to contradict a sensationalistic headline on the front page of the New York Times, writes Nick Godt.
3:06 p.m. June 14, 2010 | Comments: 32
- Set | 12:07 a.m. Today12:07 a.m. June 15, 2010
"Doomsday Capitalism virus is spreading http://on.mktw.net/d8AeFm" 12:30 a.m. EDT, June 15, 2010 from MKTWFarrell
"GDP growth fetish is bad for your money http://on.mktw.net/c0aXYt" 11:17 p.m. EDT, June 7, 2010 from MKTWFarrell
"American investors: predictably stupid losers http://on.mktw.net/bFle4F" 11:37 p.m. EDT, May 31, 2010 from MKTWFarrell
"Crash is dead ahead. Sell. Get liquid. Now http://on.mktw.net/949KT9" 11:49 p.m. EDT, May 24, 2010 from MKTWFarrell
"12 ways to cash in on the 'collapse of Eaarth' http://on.mktw.net/9pLdEs" 11:15 p.m. EDT, May 17, 2010 from MKTWFarrell
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