As the world becomes increasingly jittery about the seeming financial tsunami sweeping the globe - and talk of recession a la 1929 - some pieces for sober reflection:
- Editor at Large at Fortune [on CCN Money]:
"The standards that rule most businesses - avoiding excessive leverage, reining in rampant pay and the massive dilution that goes with it - didn't apply to Wall Street. So what if investors didn't understand all those arcane instruments and sophisticated hedging strategies? Wall Street was the black box on the Hudson that worked its own brand of magic.
Today, the magic is fading fast. It's time to step back and analyze how financial firms actually operate.
The truth is that they've been relying on a highly-flawed business model for years. Put simply, Wall Street firms used towering leverage to make tons of money in a long-running bull market that blatantly underpriced risk. At the same time, they handed a huge chunk of the gains to employees in the form of excessive pay."
- "And Now for the Really Bad News. . ." in Harper's Magazine:
"Last week while the media were engaged in spinning various silly tales relating to presidential candidates, not to mention the enticingly lurid story of the fall of Eliot Spitzer, the nation’s financial markets were in a barely observed meltdown. Here are just a few snippets that suggest what we’re in for."
- From AlterNet:
"Recognizing these costs of the Iraq War is even more crucial now that the economy is facing recession. While a recession is probably unavoidable, its length and severity will depend on the effectiveness of the government's stimulus initiatives. By a wide margin, the most effective stimulus is to expand public investment projects, especially at the state and local levels. The least effective fiscal stimulus is the one crafted by the Bush Administration and Congress--mostly to just send out rebate checks to all taxpayers. This is because a high proportion of the new spending encouraged by the rebates will purchase imports rather than financing new jobs in the United States, whereas public investment would concentrate job expansion within the country. Combining this Bush stimulus initiative with the ongoing spending on Iraq will only deepen the severity of the recession."
- Editor at Large at Fortune [on CCN Money]:
"The standards that rule most businesses - avoiding excessive leverage, reining in rampant pay and the massive dilution that goes with it - didn't apply to Wall Street. So what if investors didn't understand all those arcane instruments and sophisticated hedging strategies? Wall Street was the black box on the Hudson that worked its own brand of magic.
Today, the magic is fading fast. It's time to step back and analyze how financial firms actually operate.
The truth is that they've been relying on a highly-flawed business model for years. Put simply, Wall Street firms used towering leverage to make tons of money in a long-running bull market that blatantly underpriced risk. At the same time, they handed a huge chunk of the gains to employees in the form of excessive pay."
- "And Now for the Really Bad News. . ." in Harper's Magazine:
"Last week while the media were engaged in spinning various silly tales relating to presidential candidates, not to mention the enticingly lurid story of the fall of Eliot Spitzer, the nation’s financial markets were in a barely observed meltdown. Here are just a few snippets that suggest what we’re in for."
- From AlterNet:
"Recognizing these costs of the Iraq War is even more crucial now that the economy is facing recession. While a recession is probably unavoidable, its length and severity will depend on the effectiveness of the government's stimulus initiatives. By a wide margin, the most effective stimulus is to expand public investment projects, especially at the state and local levels. The least effective fiscal stimulus is the one crafted by the Bush Administration and Congress--mostly to just send out rebate checks to all taxpayers. This is because a high proportion of the new spending encouraged by the rebates will purchase imports rather than financing new jobs in the United States, whereas public investment would concentrate job expansion within the country. Combining this Bush stimulus initiative with the ongoing spending on Iraq will only deepen the severity of the recession."
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