tag:blogger.com,1999:blog-4413935813892441553.post9216081597216462103..comments2024-03-20T02:13:42.947-05:00Comments on real economics: Too big to jail?Jonathan Larsonhttp://www.blogger.com/profile/05217670446743983955noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-4413935813892441553.post-75541101074631814782013-02-11T10:23:41.278-06:002013-02-11T10:23:41.278-06:00I was given a copy of Galbraith's then-new &qu...I was given a copy of Galbraith's then-new "New Industrial State" for high school graduation. Because of paragraphs such as you just cited, I became a BIG fan of his. Unfortunately he provided me with a wildly distorted view of the economics profession. Because of him, I expected economists to have a wide-ranging and encyclopedic knowledge of how the world works, a witty and informed view of history and the humans that screwed up a lot of it, and a desire to traffic in the issues that transcend borders and cultures. That doesn't sound like today's economists, huh? I have tried to be a good student of his and have read most of what he wrote. He has NO modern equivalent.<br /><br />This para is especially to the point. Whenever you criticize the Wall Street rackets, you are met with earnest explanations for the improbable circumstance where something like naked short selling is actually useful. The problem is that even when the examples are true, they constitute the tiniest sliver of the overall use of the financial instrument or strategy. 99.9999% of all credit default swaps served no useful purpose whatsoever, and when they went south, they dragged down the real economy so that it still staggers.Jonathan Larsonhttps://www.blogger.com/profile/05217670446743983955noreply@blogger.comtag:blogger.com,1999:blog-4413935813892441553.post-18559553374155894402013-02-11T09:45:39.142-06:002013-02-11T09:45:39.142-06:00I'm reading a collection of John Kenneth Galbr...I'm reading a collection of John Kenneth Galbraith's works and found this gem in "The Great Crash, 1929". Keep in mind it was written back in the mid-1950s:<br /><br />"The machinery by which Wall Street separates the opportunity to speculate from the unwanted returns and burdens of ownership is ingenious, precise, and almost beautiful. Banks supply funds to brokers, brokers to customers, and the collateral goes back to banks in a smooth and all but automatic flow. Margins... are effortlessly calculated and watched. The interest rate moves quickly and easily to keep the supply of funds adjusted to the demand. Wall Street, however, has never been able to express its pride in these arrangements. They are admirable and even wonderful only in relation to the purpose they serve. The purpose is to accommodate the speculator and facilitate speculation. But the purposes cannot be admitted. If Wall Street confessed this purpose, many thousands of moral men and women would have no choice but to condemn it for nurturing an evil thing and call for reform. Margin trading must be defended not on the grounds that it efficiently and ingeniously assists the speculator, but that it encourages the extra trading which changes a thin and anemic market into a thick and healthy one. At best this is a dull by-product and a dubious one. Wall Street, in these matters, is like a lovely and accomplished woman who must wear black cotton stockings, heavy woolen underwear, and parade her knowledge as a cook because, unhappily, her supreme accomplishment is as a harlot."RJMeyershttps://www.blogger.com/profile/10148496665487999948noreply@blogger.com