7/29/2010

07-29-10 - Bothersome

I think I've been working too much and I'm stressed out and probably shouldn't be taking it out on the internet.

One of the reasons that I never talk to people is that they almost always bring the conversation down to a low level. It's one of my greatest frustrations. Of course it happens in politics all the time, I want to talk about something like how we could actually get better regulation of corporations; obviously just putting Glass-Steagall back in place would be good, but you have to look at the underlying reason why that went away - too much political influence of the big banks, too much importance put on GDP; but besides that you have to ask why the free market is not regulating itself better. Why are private funds investing in hedge funds that charge such high fees and don't actually beat the S&P 500? Maybe it's just ignorance, or maybe they're getting kickbacks. And why aren't shareholders making sure that executives do what's in the best interest of the company? I think this is one of the most important things, there's a big problem with corporate boards and the whole shareholder-election process that isn't being addressed; boards are full of cronies and are failing in their oversight. When's the last time you ever heard of a board shaking up a major company because it was being run badly? Never!

Anyway, I want to talk about something interesting, and instead I get, "but regulation is bad" , uhh , okay, that view is fine, but how about some actual content, if you want to disagree tell me something interesting. No, "mmm I don't like the idea of bigger government". Umm, okay, why not? how about some ideas about how it could be controlled in other ways. No. The conversation is brought down to a boring low level.

Or, even when you're talking to smart people, they will often go into this annoying pedantic correction mode; they don't want to let you be right about anything so they pick some little irrelevant detail to squabble about, like "urm you didn't actually mean GDP, you meant GNP, that's a common mistake". Umm, okay, maybe that's true, if it is true you could make your correction interesting by explaining yourself a bit, or you could just shut the fuck up because it's not germane to the point I'm trying to make and it just drags the conversation down into semantics.

I also really don't like talking to people about a topic that they obviously don't care enough to actually learn. When I find somebody who really knows something about a topic and can teach me, I am ecstatic, I want to pick their brain, first of all I want to get references and do the reading so I can get up on the background material because I don't want to waste their time going over stuff anybody could teach me. I enjoy teaching myself, but find that people who actually want to learn are very rare. Most people just want to rant about some topic they don't actually know anything about. I'll offer "well if you'd like to learn I can point you to.." oh no, I'll just rant without learning thank you. Okay, I'm done with this conversation. Or you get the people who think they're an expert and because of that don't want to listen to anything you have to say. I mean, I know perfectly well that I think I'm an expert on lots of things that I'm probably not, but I still want to learn. If you actually have new insight that I haven't figured out, that's fantastic, please give it to me.


In other stressful news, one of the neighbors just bought their child a drum kit.

Despite my past complaints about the god damn home improvers, it's actually a very quiet neighborhood. For one thing we aren't afflicted by that common Seattle blight of being near "musicians". (Seattle has perhaps the highest per-capita of amateur bands in the US, which sounds good in theory but is actually fucking terrible, because they practice). It's kind of amusing when you just go for walks around the neighborhood; in our neighborhood there's a guy who plays accordian about a block away who's quite good actually, and a guy who jams on electric guitar really loud about two blocks away. (though it doesn't beat where I lived in SF, where down the block from me some older guys would hang out in their garage and play really good jazz).

Giving a child drums should really be illegal. I mean, you could practice on those "Rock Band" style fake drums until you're decent; once you're decent the sound is not so bad, but there's something in particular about an instrument being played badly that is just excruciating and hard to tune out.

6 comments:

Jon Olick said...

The free markets would regulate themselves better if we allowed them to. The banks that made crappy decisions. Let them fall. Don't bail them out so they can continue making more bad decisions. That was a horrible idea. The free markets were not allowed to regulate themselves. The reset button was stopped (temporarily). There was no consequences for bad actions. Funny thing is, all the government did is delay the inevitable and make it worse when it does happen. And it will, cause China won't bail us out next time.

Other things I suppose is that every decision a company makes has to be profit driven by law. That sounds good, but in the end it guarantees greedy behavior. Just like in programming, greedy is a decent method, but there are also non-greedy approaches which do a better job.

Jon Olick said...

As for why do free markets cause such drastic ups and downs? I'm not sure. Perhaps its just the natural evolution of things. If it were prevented, would we still have the same progress that we do today?

RCL said...

@Jon Olick

Well, I believe that just stopping any kind of regulation and letting the markets rule themselves is a bad idea.

There's no guarantee that it will be more stable. Natural things like reproduction of living organisms (see "logistic map" equation) is subject to chaotical behavior, too. There's no inherent stability in free markets either.

Actually, we all base our lives on artificial regulations: we artificially reduce our aggression levels and we don't compete in every way possible (e.g. by killing competition), etc. Law itself is an artificial regulation.

That said, I come from country (Russia) that once tried to centralize & regulate people's business activities so tightly that we ended up being employed for life by a bunch of ineffective corporations which were (mis)managed much more badly than any US corporation. And we all know how it all ended.

cbloom said...

"Don't bail them out so they can continue making more bad decisions. That was a horrible idea. The free markets were not allowed to regulate themselves. The reset button was stopped (temporarily). There was no consequences for bad actions. Funny thing is, all the government did is delay the inevitable and make it worse when it does happen."

I think there are a number of mistakes in your reasoning.

1. The reset button is not going to happen (*). The government will instead guide us into a long period of no-growth ala Japan. (* not until the currency collapses completely if you believe that will happen)

2. The free market clearly will not regulate itself if there was less government interferences. It's not clear at all that the implicit insurance of a bailout had anything to do with banker's bad behavior. The problem is that their personal profit is not tied to the company's or the market's as a whole.

3. A lot of people toss around the idea that we should have just "let things fail". In a literal sense I think that's clearly nonsense, it would have been a huge crash. The US can't afford to do that because it would lose its place as the world's treasury. Furthermore I think the idea that depressions are good for economies is questionable. Yes the results afterward are often good, but that fails to count the pain that occurs during the depressionary cycle. (it's overtly bizarre if you think of it as arguing that it would be a good thing if we took the 30% poorest and made them all homeless and hungry).

I think it's rather more subtle to say what the right move at the time of the crisis was and what the best thing going forward would be.

Unfortunately it doesn't appear that our government will do anything substantial.

Just letting banks fail is only okay if they are small enough to not do serious damage (putting limits on bank size seems like a good idea to me), but you also have to be aware of systematic risk across the system. eg. in the old S&L crisis, it was mainly small banks that were failing, but it was a big problem because so many of them were exposed to the same risk.

Jon Olick said...

"The reset button is not going to happen"

I hope your wrong. Its like the band aid problem. Do you tear the bandaid off slowly and cause more pain overall, but over a longer period of time. Or do you tear the bandaid off quickly and have less pain total, but more pain now. No president wants to be the president who was here when a recession or a depression happens. If they get there way, it will come off slowly. If they can control it.

Life is full of unexpected events. Only time will tell if they can achieve that.

"The free market clearly will not regulate itself if there was less government interferences."

Completely Free market == Anarchy. I think it takes a balance between the two. You can't take all the control away from the companies, or suffer Russia syndrome. But you can't necessarily give them all the power either, or you get more of whats currently going on, but worse.

"The US can't afford to do that because it would lose its place as the world's treasury. "

We are trying to hold onto a time which is going to pass. A time where we were absolute and top dog. China is going to take the trophy from us, whether we like it or not. Its simply a matter of time. Their economy is growing at many times our economy. By some projections, they could overtake us by the end of this or next decade.

So, the big question for me is whats changed? Why won't history repeat itself? They are still doing sub-prime mortgages. They are still doing interest-only and adjustable rate mortgages. I can't see that anything has changed other than we feel like its behind us. That feeling is pre-mature. Nothing material has changed to prevent a repeat. The only question is, who will bail us out next time?

cbloom said...

"I hope your wrong...."

Well they can control it, as long as they have the ability to raise money through the Fed. That would only stop if the currency collapsed. Which would hurt the whole world so much that it's very unlikely to happen any time soon. In the short term they will do everything they can to soften the blow. Long term no-growth seems to be the dominating likelihood by far.

"China is going to take the trophy from us, whether we like it or not. Its simply a matter of time. Their economy is growing at many times our economy."

Of course they're growing faster, they're an emerging market. It's not at all clear to me that China is a threat to the US in any significant way. The death of US manufacturing has been happening for a long time anyway. Even if/when China's total economy is bigger than ours, that's not as significant as people think - they have a lot more people than us. What is crucial is the world's faith in the dollar and the treasury.

The US has been screwing our own competitiveness. Maybe I'll write a dedicated rant about this.

"They are still doing sub-prime mortgages. They are still doing interest-only and adjustable rate mortgages."

That's not really true, not like they were. Fannie is no longer underwriting big pools of non-researched mortgages. Unfortunately there is a lot of pressure to keep the housing market alive. There's a lot of manipulation still (for example Toll Brothers are now running a fund which effective just pumps up the value of their own product, which might be illegal in a more moral world).

old rants