Piano World Home Page Forums Our Most Popular Forums Digital Pianos - Electronic Pianos - Synths & Keyboards WSJ article on N2

Does that mean I'm entitled to a cut of the ad clicks?

Unions come and unions go, and there are some common reasons:

1. Market factors. Union power rises when labor demand exceeds the supply.

2. Politics. Union power rises when labor leaders pay politicians to enact legislation favoring the union.

Which acting force do you prefer: market factors or politics?

I prefer market factors. These are honest and predictable, while politics is rife with corruption ... yet one more reason to keep government out of our lives.

Unions have declined in America because so much labor has been shifted offshore. A former boss of mine said, back in the 80's: "We're safe in our jobs because there will always be manufacturing." How very wrong!

Labor employment generally moves to the lowest cost source. Manufacturers demand lower costs. And so do we as consumers.

This is nothing new. And it involves no evil intent. It's just basic human nature.

Manufacturers demand lower costs. And so do we as consumers.

And stockholders demand greater returns and that also drives the businesses to cheap labor countries.

I would apply this more to corporations. You can make huge piles of cash being a CEO, complete with severance package that rewards you handsomely if you screw up really badly, forgiven "loans," etc. And when is the last time union misdeeds plunged the world into a global recession? Investment firms seem to do this at least once per decade, on purpose, for-profit, and en masse, which very negatively and very directly impacts a lot of people, and which usually gets "cleaned up" via a big dip into public funds.

Looking on-line I'm amazed at the number of anti-union sites, hawking their scare tactics. They report plenty of union crimes, which seem mostly embezzlement by treasurers. Not saying that's OK to do, but this is a problem wherever money pools and is by no means exclusive to unions. With the general fuss I was expecting more in the way of broken bones and buried bodies. What I can't find is statistics on union corruption, preferably with a comparison to corporate corruption. Lacking that, I wouldn't be surprised if this is another installment of the welfare queen ooga booga, where a few bad apples are conflated into systemic corruption so intractable that it has become necessary to burn the village in order to save it.

Lots of talk here about the evils of big government. The relationship between government and business I believe is this (correct me if I'm wrong): the SEC monitors markets and businesses (markets aren't all that magical as they don't seem to work very well without a lot of external oversight and policing - a function paid for with my tax dollars). There is a danger of any business getting so large that it dominates markets and starts bullying people around, and the SEC can employ antitrust laws to break up such companies. AT&T was broken up for this reason. Smaller government simply can't stand up to misbehaving large corporations, if nothing else they'll be outspent in court (yet another publicly incurred cost). I don't see any alternative to big government when it comes to keeping corporations from becoming "too big to fail". Hate big government all you want, but what other entity has the power to reign in and control the huge misdeeds large corporations commit on a fairly regular basis?

Also, I don't think the use of the term "state's rights" or the equivalent thereof is all that wise. It's a heavily loaded term linked to opposition of federally mandated racial desegregation in the 40's.

Corporations do indeed have poor governance at times--both in terms of the decisions the executives make and the compensation they take. In recent years this has become a bigger problem as the hurdles to takeovers have prevented the market-imposed discipline we saw in the 80's--and executive pay has gone up as a result. The LBO's of the 1980s were widely characterized by the ignorant as nefarious when in practice they were a way of freeing corporations from inept fatcats who had captured the executive suites and board of directory chairs. If the government actually wanted to change the income distribution and improve corporate governance, they would stop impeding takeovers and instead impose constraints on corporate charters so that the board of directors represented the stockholders and the CEO answered to the board of directors--executives are employees of the shareholders and should be paid their marginal productivity just like the other workers. Really if you just outlawed poison pills and dual-class shares you could just about get there. That may happen some day, actually. Politicians are pretty dumb but some of their aides are smart and there's no reason for one side to particularly oppose this type of action.

Let' be clear about the financial crisis we are in now, though. It was not caused by, nor did it enrich, investment bankers, brokers, or any other major group on wall street. It was the consequence of a housing bubble caused by government policies to try and push people into homes they can't afford. The guys in NY were given orders from the government (and financial incentive) to facilitate this. The very smart banks stayed out of it for the most part or at least didn't take positions in the resulting securities themselves (Goldman) the less smart banks got way into it, assuming the government would bail them out if need be, which it didn't (Lehman). Later the government did bail out some corporations, some of which are quasi-government agencies anyway. Stupid, stupid corporations. Of course, they had implicit guarantees that they would be bailed out and that always causes firms to take big risks.

Too big to fail is a problem caused by (and only by) implicit government guarantees, which come through arbitrarily some times and not others. It's actually an interesting economic problem because sometimes a bailout actually is worth it in the big scheme of things, but the promise of a bailout makes companies go crazy and take risky positions.

Without the government trying to regulate the market, there is no such thing as too big to fail and corporations/banks don't take insane risks similar to those that caused them to go under when the housing bubble popped*.

The government definitely causes many, many of the economic and social problems we have today. That isn't to say it's intentionally evil, but it is incredibly inept, has a proclivity to aid a small group at the expense of the whole, and is immune to market forces and laws that keep other organizations in check. In principle, voters should keep it in check but that requires more knowledge and motivation than voters have. For the most part voters are dogmatic, not rational, and respond to ads or inherit bias from the media (which leads us back to where we started).

* Ever since it popped, the government has been trying like crazy to get the bubble going again, presumably to enrich those who own houses (who tend to be more wealthy/old and vote a lot) at the expense of those who would like to buy (who tend to be more poor/young and don't vote).

In my opinion, the fact that a correct principle was almost applied to keep something bad alive a couple of generations ago is not a valid reason avoid the principle or the language today.

Hmm. So these guys can wreak all kinds of havoc, leaving Fannie Mae and the public holding the bag, and we can't blame them? I fear that next you'll say Enron was squeaky clean (or at worst amoral).

[video:youtube]bx_LWm6_6tA[/video]

My feeling is that this fiasco can be traced back to deregulation, not over regulation.

I must say, I'm very impressed with your ability to blame literally everything wrong in this world today on government. It's quite a skill.

They would be; if humans were all of the type homo economicus.
But in my opinion the homo economicus is as real as the New Socialist Human, imagined by the leaders of the now defunct GDR.

The homo economicus is a model; but most humans don't just make rational decisions. Which is why the market is not predictable.

Anyway: As long as we can choose our pianos, society is not doomed.

Fannie Mae and the government were the source of the problem. The investment bankers were at most accessories to the crime. If you can call it a crime to do what you are told by the government and not break any laws.

For the model to work, it's not a requirement that all humans make rational decisions, only that those who make irrational decisions suffer their own consequences. If rational agents are acting as well, they should be the marginal investors/sellers/purchasers, absent trading restrictions imposed by--you guessed it--the government.

Also jut a nit pick, predictability in the market is a consequence of a market break-down and irrational behavior. Unpredictability in the market means it's working great and constantly reflecting all available information. Probably you didn't mean it that way, but we might as well be correct in what we say.

I just watched that video and I have to say, if you came away with the idea that investment bankers are the bad guys, you looked at the pictures of fat people in ties too much and listened to the content too little.

As I watch that, I see two groups of people you can blame (though they aren't breaking the law per se):

1. The homeowners buy homes they can't afford or are not worth the money in an attempt to speculate and then walk away. Who's to blame? The speculators (i.e., home owners). Who gave them incentive to take that risk (by loan subsidization through tax breaks and low interest rates)? The government.

2. Investment managers took too great of risks on behalf of their clients. That's not a crime per se, but it wasn't smart. Of course, clients are supposed to understand risks they take with their money. If you lose money in your 401K because you bought something very risky, it's your fault.

It also omits a couple of relevant issues:

1. Mortgage securitization is almost 100% done by the government. They were the pioneers and they are the ones that do almost all of it. So if you think securitization itself is evil, the finger points at the government.

2. The video inexplicably indicates that bankers get caught in the middle as a matter of course. The actual problem was that they wanted a piece of the action as well, so they used their own money to buy up some of the securitized loans, and thus felt the pain at the same time as the investors. Bad idea, but they did suffer their own consequences (except the ones that got bailed out by the government. Thanks government.).

The crisis can actually be boiled down to a few things:

* Exuberant public speculating on rising housing prices as a get rich scheme or to have a house they can't afford.

* Government encouraging that speculation through various policies. Government loves nothing better than to increase home ownership among poor people housing, even if they can't afford it.

* Investment bankers playing the role the government, public, and banks require them to.

In the face of these facts, it's incredible that anyone can blame the bankers. I suppose it's walmart's fault if you max out your credit cards on a spending spree? Or maybe it's Visa's fault? Many liberals would say one of those two. Doesn't make it true.

From http://en.wikipedia.org/wiki/Fannie_Mae (standard disclaimer)



From that it seems to me that the antics of private securitizers precipitated the fall. A market failure due to under regulation. Credit default swaps were part of the problem - when is insurance not insurance?

And say what you will about buyer beware, but when we bought our house there was so much going on and not going on at the closing that I pretty much had to trust the lawyer, who I didn't know from Adam. They could have easily pulled a fast one on me. Pushing ARMs, interest only loans, balloon payments, and other confusing instruments on the general public strikes me as pretty crooked. It really kills me that the poor got blamed for making bad decisions when it was the banks that were completely abdicating their role as loan originators, and generally preying upon the public by foisting overly complex loans they must have known had no chance of payback. Rich people took these loans too and walked away when they went underwater, but we don't hear about them much.

Put me down on the side of whoever dislikes lawyers and loan officers.

I'm just saying in the whole chain I don't see the investment bankers particularly bearing the blame. They had customers on one side wanting to put money into subprime loans and customers on the other side offering them. Loan officers and mortgage companies made the bad loans. Stupid money managers (whose job it is to understand risks and protect their clients) bought them. If the bankers hadn't facilitated the transaction, someone else would have. Probably the government.

Regarding regulation, I'm not altogether against it, but I think before deciding whether the government should have prohibited the situation, we should first ask whether the government shouldn't have encouraged it quite as enthusiastically as they did (and continue to do).

I'm not saying this to be merely contrarian, but lawyers are generally OK by me. If it weren't for redress in the court system, private individuals would have quite a bit less power to change anything large corporations do. Which I imagine is why the powerful seem to hate the courts with a passion - it's one of the last semi-level playing fields left.


Making the financing of housing affordable is a laudable goal, but I don't think home ownership is for everyone. It is usually the largest investment one makes, and the fairly non-liquid aspect can tie one to an area too long in the event of job loss, etc. And the market can obviously be heavily manipulated and crashed, impacting hapless owners through no fault of their own. But I do think home ownership can be a stabilizing influence on communities by giving the people living there a long-term and very real stake in an area.

What I don't understand is why banks and the like are still privately held. If anything is a public good it's our currency. Why do we pay middle men for the luxury of using our own monetary system? If value is actually created through interest, why not have that come back to all of us and help fund the system? I mean, who died and put bankers in charge? If I wasn't taught differently in school I might think I'm living in an oligarchy.

Read "The Creature from Jekyll Island", all your
questions are answered... in short it's what's
good for "them".....

Our legal system cuts both ways. Some people and causes lose out because lawyers cost a lot, so it would seem that the rich benefit. At the same time any person or organization with assets will be subject to frivolous lawsuits right and left because the system is exceptionally (unreasonably) generous if you win and there's a lot of randomness in who wins. Certainly we need a legal system, but I don't know that I'd call it a level playing field for either side. Still, you can appreciate that we need a legal system and dislike lawyers as a group.



I guess I can't understand what you are getting at. Only one bank really controls our currency, and it's a wholly owned subsidiary of the government (the fed). The other guys take deposits from people looking to save and lend it to people looking to borrow, giving the interest to the people who lent minus a commission. That's basically what you describe.

Investment banks do the same kind of thing, it's just that the people and organizations that want to save through them have such huge chunks of change that it's often more efficient for the bank to just pass ownership of the securities directly through to them without calling it a deposit.

Banks, whether commercial or investment, really do nothing more special than create an efficient place for people wanting to save to give money to people who want to borrow. They don't have any significant power over the currency or anything else of importance, regardless of how they are drawn in cartoons. That would be like saying the guy who runs the quicky mart down the street has power over the price of gas. He's just a retailer. In fact, if he unilaterally raised or lowered prices by just a few pennies, he'd be out of business. He has no power whatsoever. Bankers are basically in the same boat.

The only significantly sick thing in our banking system is the fact that the government willingly bears any risks they take. This makes the banks themselves want to take risky positions in the assets they handle instead of just doing their job as market makers. Bail outs are one mechanism for this, but FDIC insurance is the bigger one. All the surviving big investment banks have now converted into commercial banks in order to take advantage of this free money from heaven. On the other hand, lack of FDIC insurance caused even bigger problems in the past than we have now, so on this one you can't just chalk the problem up to stupidity on the part of the government. It's a pretty difficult problem--the government has a tiger by the tail.

As a nation, the US is the least bank-oriented of all developed nations: we use markets where many other countries use extremely large and versatile banks for financing. That's why US markets are so much more developed than they are in other nations. Markets are less efficient than banks for many types of transactions, but they put borrowers and lenders directly in contact with essentially no middle man so there's no one to blame. I suppose that's kind of the direction you'd like to see things go, and it's a reasonable one.

Certainly having the government facilitate financial transactions instead of markets and banks is the worst idea ever. I could easily imagine that knocking the world back to the stone age, causing mass poverty and even starvation across the globe. The government has no fear of risk whatsoever, doesn't respond to changes in the economy, doesn't care about the truth in the data, is highly inefficient, and is very easy for the unscrupulous to take advantage of. And believe me, if the government was in charge, you would see unscrupulous people come out of the woodwork to take advantage on a truly unprecedented scale.

If the government took over the work banks and markets do today, those of us who survived the associated apocalypse would never understand how anyone called anything previous a financial crisis.

This may very well play out in the near future sooner than we think as the truth concerning our existence hangs in the balance.

Other factors include:

1) One world government

2) One world currency

3) Slavery to system

Glenda Jackson on Thatcherism

http://www.youtube.com/watch?v=XDtClJYJBj8

Come on, get serious. She was a lone voice in parliament so you cite her as some sort of reference?

Hmm. The book looks interesting, but the first reviewer at Amazon says this:

"The biggest problem in modern banking, according to Griffin, is and has always been the creation of fiat money. Fiat money is money that is "declared" money by the government. It is not backed by anything but promises and deceit. All societies were sound financially when they used gold or silver to back their currency."

I don't have any issues with fiat money, and precious metal backing strikes me as fundamentally flawed - you don't want the value of your currency jumping around with the availability of some scarce resource. And you need the ability to print extra money at times in order to stimulate the economy. Not enough available money can create all kinds of havoc.

I have more trouble with how they distribute that extra printed money. For stimulus purposes it should probably be dropped from helicopters onto the general population, but instead it is given away essentially free to banks. Then we have to have complex government initiatives that attempt to direct it towards the public, with market-based shysters looking for every immoral, quasi-legal, not-yet-regulated-because-we-couldn't-have-anticipated-such-brazen-for-profit-behavior loophole to direct it their way instead.