Go, Economy!

[Advocate]

UNITED NATIONS — Michael Douglas had to field questions Wednesday about the financial turmoil shaking world markets from reporters recalling his role in the 1987 film "Wall Street."

The actor sought to focus on the subject of Wednesday's news conference — urging the United States and eight other holdout nations to ratify a nuclear test ban treaty.

Douglas won an Academy Award for portraying the rapacious banker Gordon Gekko, who popularized the phrase "greed is good" in the movie.
After world leaders here condemned the "boundless greed" of world markets, Douglas was asked to compare nuclear Armageddon with the "financial Armageddon on Wall Street."

But the likening to Gekko did not end there, with a reporter asking: "Are you saying Gordon that greed is not good?"

"I'm not saying that," Douglas replied. "And my name is not Gordon. He's a character I played 20 years ago."

Douglas, who married actress Catherine Zeta-Jones in 2000, has won two Oscars — as a producer for 1975's "One Flew Over the Cuckoo's Nest" and as best actor for his role in "Wall Street."

[YellerDog]

Wut.

[Cowutopia]

So McCain isn't going to the presidential debate because of the financial crisis? LOL

[Bojack]

Legalizing marijuana will not generate revenue. You can't charge me for something that I can grow in my gutter.
As far as saving money by not having to prosecute dealers/users, do you know how much money the gov'ment makes from seizing these dealers assests? Me neither, but I bet it far outweighs the little bit of money it takes to run a court room for half an hour.

This is patently untrue. Large scale pot farms would pop up VERY quickly, people good at plants and farming would create excellent strains of pot just like they do with most crops. They would also be able to create an endless supply for people who live in cities etc. You must be trying to pull our legs here.

[Drewbacca]

Economy will collapse by October 1st. Martial law will be declared. Mobile jails will be all the rage!

[Vasteel]

Large scale pot farms would pop up VERY quickly, people good at plants and farming would create excellent strains of pot just like they do with most crops. They would also be able to create an endless supply for people who live in cities etc.

Probably, and people would and do buy the shit out of it, but there is a factor you aren't considering: farmland. You run into the same problem you do with biofuels as a gasoline replacement. This is that there is only so much viable land on which to grow things, all (or near enough) of it is already being used, and in fact is diminishing as tacky suburb after tract suburb is built. So any crop you introduce is at the expense of another: you have to give up say, wheat production for corn in the case of biofuels. If weed proves more lucrative and less labor intensive than spinach, than that is what farmers will produce. In either of these cases, you might have a lucrative cash crop, but the tradeoff is increased food costs for everyone due to diminished supply.

Also, lol at anyone who thinks the whole 'War on Drugs' isn't profitable. It just isn't profitable for most taxpayers. Prison is a fucking industry, and a noteworthy factor in the American economy.

[icarusfall]

SMOKE WEED EVERYDAY!

[Vasteel]

SMOKE WEED EVERYDAY!

Oh, don't get me wrong- I'm all for it. I love me some chiba.

[Cheebs]

Legalizing marijuana will not generate revenue. You can't charge me for something that I can grow in my gutter.

An entire shelf of bottled water in every supermarket and convenience store says "hi".




And yes, legalize that shit already.

[Gooch]

Here's an interesting article debating the issue of capitalism and the perspective that many (like MarsKitten) share, i.e. the nuke them all and let capitalism sort them out:

Does the TARP mark the death of capitalism? To some commentators, apparently it does. To be sure, this kind of massive government intervention is the last thing any real capitalist wants to see. But is what we have now any better? Let's think about why we like capitalism as a concept, then consider whether this market even remotely resembles capitalism.

Free markets are supposed to efficiently allocate resources. If there are too many pizza places in your town, but not enough auto mechanics, the free market is supposed to drive one of the pizza places under and encourage entry by an auto mechanic. While we may feel for the proprietor of the pizza joint, we know that in the long run, we're all better off when the market is allowed to move resources away from the pizza business.

But we don't want to see the pizza guy forced to close shop because of some external dictate. We want to see a vote held to decide whether we have too many pizza shops in town. We want all the pizza places to compete for business, with the better competitors enjoying strong profits. In fact, we don't even want to see the weaker competitors driven under. Ideally, the weaker competitors will improve their operations and become stronger competitors. But if not, then indeed one or more of the pizza restaurants will undoubtedly go under.

So what kind of world are we living in now?

Let's take a hypothetical investment bank. We'll call it Merrill Brothers (MB). MB became involved in underwriting a series of commercial real estate loans during 2006 and 2007. MB retained some subordinate interests in these loans, as management believed these projects were attractive investments.

Some of these were for condo deals, which is obviously not the best place to be now. Perhaps given the benefit of hindsight, MB wouldn't have entered into the condo deals at all. But it is what it is. MB's management needs to decide what to do about the loans now.

I think in a real capitalist economy, MB would be given the chance to live or die based on the actual performance of these loans. Why? When any bank makes a loan, their credit analysis is based on the perceived odds of the loan remaining current. The capitalist system should reward the banks that make good underwriting decisions based on this criteria.

But in today's market, MB would not be given that chance at all. In terms of mark to market, all credit-oriented securities have declined in value from 2007 to today. Obviously a loan for a condo project would have declined significantly in market value. Forget, for a moment, why these loans have declined in market price and/or whether that decline is reasonable. Let's just stick with the fact that the market price is lower than the original price.

Let's assume that MB's management absolutely loves their loan portfolio, but the market believes their loans are only worth $0.60/dollar. And many will question whether $60 is a good price. But if MB plans to simply hold the loan, what does the market price matter anyway? It really shouldn't. MB should have the chance to live and die by the economic reality of their lending decisions. Not the market's perceptions of those decisions.

Now perception becomes reality as the continuous negative headlines cause trading partners and lenders to back away from MB. In the end, MB either fails or runs to some better capitalized partner. But ultimately it isn't a capitalist ending at all.

Think of it like a poker hand. There are two queens and a 10 on the board, and you have a 10 in your hand. Your opponent is betting the hell out of it. Sure seems like he's got a third queen, and maybe the best play is to fold. But should the other players at the table step in and force you to fold? In a free market, you can bet, raise, or fold, no matter what other people say.

So now we're faced with to non-capitalist paths. On one hand, the current situation. On the other hand, a government bailout.

The bailout will create some semblance of confidence in financial institutions and their balance sheets. There will be some increase in lending capacity. There will be some end in sight for declining home prices.

If there is no bailout, then what? When do things improve? Does the commercial paper market shut down? Is it possible to leverage trading books? Can anything be securitized?

So as much as we all hate the idea of a government bailout, we really need to consider what kind of capitalism we think we're defending. I'd love to hear more about long-term solutions to our problems. But in the short-term, we have to stem the relentless waves of fear. Before its too late.