Capitalism Works
John Mackey, the Whole Foods CEO who wrote the smart op-ed about health care that spawned the boycott and the buy-cott, tells the WSJ's Stephen Moore that government needs a makeover:
He describes what the Federal Reserve has done with massive money creation as "debauchery of the currency." He thinks the bailouts were a travesty."I don't think anybody's too big to fail," he says. "If a business fails, what happens is, there are still assets, and those assets get reorganized. Either new management comes in or it's sold off to another business or it's bid on and the good assets are retained and the bad assets are eliminated. I believe in the dynamic creativity of capitalism, and it's self-correcting, if you just allow it to self-correct."
Beware simple answers, especially per government; See also.
(I'm starting to think this Lewis kid has a future.)
Crid [CridComment @ gmail] at October 3, 2009 12:36 AM
OFFTOPIC— Also, can we all talk about sex a little more this weekend? This artifact cracks my shit up, but a casual search on the internets doesn't certify its authenticity.
When you were in grade school, did you ever get an assignment page like that?
OK, OK, back to finance....
Crid [CridComment @ gmail] at October 3, 2009 12:39 AM
While getting rid of the too big to fail is good in concept, it was too late when the mortgage crisis hit. The FDIC is/was underfunded. They weren't collecting premium payments for TEN years.
It would have bankrupted the country instantly.
Remember the phrase: Backed by the full faith and credit of the United States government.
Jim P. at October 3, 2009 8:02 AM
Again with an uncomfortable question:
What makes you think paper is money?
A huge amount of paper "trades" on the same fixed assets. No less than Bill Gates has said that enumerating his wealth is meaningless; it can't be liquified - which, oddly, means "assigned to solid assets".
Here's an illustration. Suppose there are just three stock certificates printed for Amy's Amazing Redheaded Commentary Company. Amy has two of them and Crid has one. The "value" of AARCC fluctuates with a third party's view of what Crid's share is worth - when Crid says he'll trade.
I am convinced that there are people of little or no publicly-recognized wealth who are set for life. It is news when the Dow changes, and so we know when it does, but this doesn't mean some Kansas recluse won't live in comfort without any of that.
Radwaste at October 3, 2009 8:25 AM
The fact that wealth fluctuates doesn't mean it's not real.
(PS- When you own a full third of AARCC, there are all sorts of benefits, like upgrades on flights and hotels and discounts at participating Red Lobster™ restaurants.)
Crid [CridComment @ gmail] at October 3, 2009 9:18 AM
Seriously, isn't the whole point of the abstraction of wealth to currency that you can readily change your opinion of how much wealth an asset represents?
We need a Econ major in here.
Crid [CridComment @ gmail] at October 3, 2009 9:51 AM
Try reading John Cassidy's article in The New Yorker 10/5.
This shallow wallowing in utopian fantasies is not productive.
i-holier-than-thou at October 3, 2009 11:48 AM
Try reading John Cassidy's article in The New Yorker 10/5.
This shallow wallowing in utopian fantasies is not productive.
i-holier-than-thou at October 3, 2009 11:49 AM
Iholi's concerned about shallow wallowing!
Crid [CridComment @ gmail] at October 3, 2009 11:53 AM
PS- The Cassidy piece is a shallow, pointless cluck. In the New Yorker... Imagine!
Crid [CridComment @ gmail] at October 3, 2009 11:56 AM
I wonder if Mackey is planning to run for office soon? Surely the CEO of big company like Whole Foods has to have a sophisticated enough understanding of last fall's banking crisis to make his claims that nobody is "too big to fail" seem more like a slogan than a meaningful comment on the economy.
Perhaps nobody should be so big as to have their failure risk the entire rest of the economy, but that's not the system we have. The collapse of Citi or any of the financia giants that were teetering on the edge last fall would have brought the economy to a standstill due to a lack of liquidity in commercial paper. While one can question all sorts of decisions made by Paulson and Bernanke during that time, when the "too big to fail" phrase was floated about regarding the banking behemoths, it was correct. The same, however, was not true regarding GM and Chrysler. They should have been permitted to fail. But that decision is on Obama's team and the degree to which they're beholden to unions, not on Bernanke.
Whatever at October 3, 2009 12:07 PM
I tell you, Iholi & Whatever are the same guy.
Crid [CridComment @ gmail] at October 3, 2009 12:16 PM
Yes, our tone and style are so similar. You're in good with Amy, just ask her to check this out. She can check IPs and OS and browser for our posts and either they'll show we are different people (if you're sane) or the same person going to absolutely incredible lengths to show he's not the same guy just to troll blog comments here (if you're a bit paranoid).
My post was substantive. You can ignore it, argue I'm wrong, show I'm wrong, agree with it (hah!) or some combination of the previous. Your choice.
Whatever at October 3, 2009 1:12 PM
> Yes, our tone and style are so
> similar
Flighty, pathologically narcissistic, whiny-lefty... Yep, same guy. A single (slender) soul shared between you, even if there are twenty fingers.
> My post was substantive.
No! Not substantive! It was anything but substantive! It was a shallow wallow and anything but substantive!
Crid [CridComment @ gmail] at October 3, 2009 3:08 PM
"pathologically narcississtic?" just curious where this comes from.
Regarding the second part of your response, yes, I appear to have forgotten the "substanceless mockery" option. Yep, that's another one.
Whatever at October 3, 2009 3:23 PM
Were we speaking of fiscal responsibility? Here's a fun headline, one sure to be removed from the web as soon as a suitably alert weekend intern gets back to the office after Saturday dinner in Atlanta:
Make CNN Your Home Page
updated 6:24 p.m. EDT, Sat October 3, 2009
47 percent of households will pay no income tax
Roughly 47 percent of households, or 71 million, will not owe any federal income tax for 2009, according to estimates by the nonpartisan Tax Policy Center. That's good news for most of us. But it might be a problem for lawmakers debating how to pay for policy initiatives like health reform, whether to extend the Bush tax cuts and how to reduce the deficit, CNNMoney.com reports. full story
Crid [CridComment @ gmail] at October 3, 2009 4:02 PM
Roughly 47 percent of households, or 71 million, will not owe any federal income tax for 2009,
Wow. Either people aren't earning shit or our tax calculations are more fucked than I though. (or some combination thereof). Taxes are part of the buy-in. Everybody, pretty much, should pay some.
Whatever at October 3, 2009 4:33 PM
"The fact that wealth fluctuates doesn't mean it's not real."
A swing and a miss!
It's not fluctuation. It is abstraction which makes wealth unreal.
You can point at all the effort put into professional football, or racing, or computer repair and run into real questions, which are suppressed just because they illustrate this truth.
We do not have to idolize men who play with a ball, drive around an oval faster than the next guy, or play on our thought that computing should include problems we must pay others to fix.
(Maybe you've seen the little girl "I'm a PC!" ad, which says Windows 7 does - gasp! - what it is supposed to do. I guess that's a new concept.)
But we do. It's a religion: we do it, therefore it must be defended. The best people doing a pointless task must be paid huge sums because it's important!
Radwaste at October 3, 2009 5:08 PM
> It is abstraction which makes
> wealth unreal.
Oh for fuck's sake, Raddy, then YOU'RE DOOMED. If you think economies only work when values are as reliable as the sunrise, you're far to vulnerable in a world as harsh as ours, and the jackals will surely tear the flesh from your bones before the weekend concludes.
Your house, and your work and your motorcycle and the platelets in your blood are worth precisely what someone will pay for them, and not a penny more or less. The whole point is to let prices change as opinions change.
> The best people doing a pointless
> task must be paid huge sums
> because it's important!
Yes, important. Or amusing. Or fulfilling in some mild way. If you don't want to pay people for doing unimportant things, don't. Free country!
Did we cover this earlier? Ask me how much money I've spent on Trisha Yearwood concert tickets in the last three years. Go ahead, ask...
Crid [CridComment @ gmail] at October 3, 2009 5:23 PM
I admit it. Whatever and i-holier-than-thou are one and the same. Crid is one shrewd dude.
i-holier-than-thou at October 3, 2009 9:02 PM
Well, IJS, at least one is redundant...
Crid [CridComment @ gmail] at October 3, 2009 9:14 PM
"and it's self-correcting, if you just allow it to self-correct."
Yes but then how would a bunch of thieving bureaucrats get their grubby fingers on a big ol' piece of irresistible pie? As Rahm Emanual said, 'never let a crisis go to waste'. Just scare the public into thinking the sky is falling and you have carte blanche to "rescue" the situation, where that rescue conveniently keeps you and your buddies gainfully employed. Bureaucrats have to feed their kids too you know. /s
Lobster at October 4, 2009 5:04 AM
"While getting rid of the too big to fail is good in concept, it was too late when the mortgage crisis hit. The FDIC is/was underfunded. They weren't collecting premium payments for TEN years."
Did you just indirectly use a failed *government* agency as an example of why capitalism needs protecting by the government?
"What makes you think paper is money?"
Paper (in the loose sense, i.e. including bank deposits and other money that is 'virtual' these days) *is* money; I think what you are trying to get at is the difference between 'money' and 'wealth' - people often incorrectly conflate the two. The best way to think of wealth is as 'actual stuff' (like a yacht), and of 'your wealth' as the sum of 'actual stuff you currently own plus actual stuff or labor you can buy (with your money/paper)'. Anything else virtual/paper-based (e.g. stocks) are in effect just currency too. They are calculated as part of your 'wealth' based on (say) an approximate valuation of how many yachts you could buy *if* you sold your AARCC stock. The value of AARCC stock is based on the 3rd party's guesstimate of how much wealth he/she thinks Amy would be able to generate by means of doing actual business - it's not arbitrary at all - certainly valuating businesses is not an exact science, but it certainly isn't arbitrary, it's based on real things such as ability of Amy to produce product, demand for that product, income gained for that product, market competition for the product, and so on.
As I recall, most of Bill Gates wealth was tied up in MS stock and other investments - so what he meant by that was probably trying to explain to the public that if the news article said he was worth X dollars, it didn't mean he could just go out and buy X dollars worth of yachts. But in theory he could've sold out his ownership of said stocks. One problem with MS is that, because he was so 'big' and such a critical figure, he could not feasibly have done that without the value of MS stock declining in a big way due to people losing confidence. Rest assured though he would've remained an extremely rich man.
Now rich peoples money doesn't just sit around in a big vault like Scrooge McDuck or whatever ... it sits in financial institutions, who try earn interest on that ... this is done primarily by investing either directly or indirectly in other businesses. This means that, yes, even the general public benefits from Bill Gates big ol' piles of money, because it means that when Joe Public wants to start a business, and goes to the bank for a loan, there is more money available for the banks to lend out to promising-looking ventures that will earn interest for Gates.
"Wealth" would fluctuate regardless of whether or not it was currency-based; currency is just a proxy for goods anyway. For example, if I owned a certain model motorbike - broken but missing just one part - and for which it was easy to get parts in 2001, but for which (say the company went bankrupt) it became extremely difficult to get parts in 2009, the value of my motorbike *just sitting in the garage* would likely plummet (and by "value of" we mean "how many such motorbikes it would take to trade for one yacht - i.e. you don't have to think in terms of currency).
Wealth, as in the value of all your stuff etc., also fluctuates simply by virtue of the fact that the world around you is in flux ... e.g. the economy and population grows around you, which might mean more people who want some arbitrary obscure good you own (or more competitors who produce fungible substitutes).
That said though currency is more prone to effects and to manipulation, and one of the main arguments against fiat currency is just that, i.e. let's say you have $200,000 in the bank, and today you can buy one small yacht with that ... now a badly run government can just print lots more dollars, and what this *in effect* does is literally steal the value of your dollars out from under you and put it in the coffers of the bureaucrats ... i.e. it's like a tax, by printing money the government has *taken money from you* by reducing the amount of "stuff" you can buy with $200K and by printing their own (say) $500K increasing the amount of "stuff" they can buy.
Lobster at October 4, 2009 5:31 AM
Only a short-term standstill. Those parties in need of commercial paper would have found new avenues to get it. That's what a free market economy is all about.
There would have been some suffering during the adjustment. But don't mistake that suffering for evidence that the system is broken.
100 years ago, only rich people and institutions invested in the stock market. What will the investor pool look like in another 100 years?
Nothing is too big to fail. And the government should not prop up any poorly run organization - nor hinder a well-run one.
Conan the Grammarian at October 4, 2009 10:53 AM
"The collapse of Citi or any of the financia giants that were teetering on the edge last fall would have brought the economy to a standstill"
Yeah yeah the sky would've fallen if the wonderful government hadn't rescued you from the Big Scary Capitalism blah blah ... boy do they have you convinced.
Lobster at October 4, 2009 3:33 PM
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