No Free Lunch
As I was leaving the house today I noticed the Dow had tumbled 200 points on word that the democrats were going to make sure the bailout was not a blank cheque. Really? What financial professional EXPECTED it to be without any conditions? Why should this come to a surprise to anybody and frankly, why would the market see this as a bad thing? Wanting something for nothing is what got us into this mess – a more responsible and engaged government oversight can only help stabilize things at this point.
And I don’t mean McCain responding to the financial crisis by trying to fire the head of the SEC which even the President doesn’t have the power to do, or on the next day wanting to fire the head of the FEC – the Federal Election Commission.
The other day I heard someone on CNN say that it was a cultural issue, at first I thought she was crazy but as she made her argument it started to make more and more sense. She said traditionally bankers were seen as very cautious but over the last little while, she didn’t give a time frame but I’d suggest 7 to 8 years or so, this caution has been replaced with a culture of wanting something for nothing. The instant gratification culture she called it, although you could just as easily call it the debt culture.
Spendthrifts want what they want and they want it now and if it means going into debt they don’t care – this is what we would call an irresponsible spender. Now society is made up of all sorts of people and I’m not out to say these people are wrong, some manage to juggle their various credit card and other debts and somehow make it work but I think we can all agree that we wouldn’t want our financial institutions behaving this way. Thankfully Canadian banks are much more pragmatic, due partly no doubt to a strong central bank and logical enforced regulation. But south of the border with republicans like Bush and McCain deregulating everything paved the way for this cultural shift in the American banking community.
Plus the example set by CEOs who only look at the next quarter, and if they fail getting a huge severance package, trickled down to the lower levels so that it ended up being that in many cases only the customer would be seriously considering the next 30 years not just the next 3 months. But that wasn’t the standard many of us grew up with, the trustworthy, stable, cautious banks didn’t seem to take unnecessary risks and so many people were unaware of the change – they just saw low interest rates not knowing that they weren’t stable or as affordable as they seemed because the banks hadn’t lied to them or misled them before to such a degree. But removing the laws that kept the banks responsible allowed these firms to behave like criminals of the previous decade but without the direct consequences. And so now, thanks to republican deregulation, it’s the taxpayers that have to face the consequences and this new irresponsible market is surprised that someone in government actually wants to hold people accountable not just for the mess but for the funds that should with a little luck get us out of it?
If the American taxpayer were just to had over money without conditions it would just further feed into the culture of irresponsibility in the financial sector that brought us to the brink in the first place. So rather than panic and sell your stocks because the generous government might just be forced into behaving responsibly why not ride it out and take this development as a good sign that we’re not just addressing the current shortfalls but the fundamental problems and the culture that brought us here? Am I the only person who sees the democrats growing a backbone on this thing as good? Responsibility isn’t just a word to grown at; it’s the path to financial success, independence, and stability so let’s try embracing it because just feeding your desires without a thought of tomorrow doesn’t seem to be working.
It’s economics that gave us the phrase “there’s no free lunch”, it would be nice if the economists and investment bankers would remember it.
