State of the Economy - Messy

Unbridled greed has been targeted as one of the main reason’s for the global economic situation we are in. Both Russian Prime Minister Vladimir Putin and Chinese Premier Wen Jiabo at the World Economic Forum in Davos, Switzerland recently blamed the United States pursuit of profit as the main reason for this economic downturn. That in itself is a simplistic response but there is some truth in that accusation. Over the past decade or so proponents and critics of Wall St. have quoted the fictional character Gordon Gecko as saying, “Greed is good” as some sort of mantra that this is the way things are meant to be. But what he actually said was “Greed, for the lack of a better word, is good.” (Italics are mine). An ocean of difference in my opinion. But was greed what drove the economic engine to grind to a halt? It certainly was a factor, the pursuit of money at all costs is an intoxicating beverage. Even if you take the relative penny ante of most investors, the scent of earning more and more money can cloud the better judgment of all involved and that includes investors who wanted a higher and higher rate of return on their investment without considering the corresponding risk.

There is an element of moral responsibility when dealing in the financial industry whether this is balancing the needs of the client to the needs of generating revenue right down to having a sense of “doing the right thing”. An example of moral responsibility gone AWOL could be Richard Arens, a mercantile trader for a one man brokerage company named ABS on the New York Mercantile Exchange. This was the man who everyone ought to hate. On January 2 2008 it was he who was alleged to have been the first to make a trade for a barrel of oil which broke the $100.00 barrier. He bought the minimum 1,000 barrels at a cost of .47 more per barrel than what was currently being traded on the floor. He did end up the day with a loss of 600.00 and made the trade so he would be able to tell his grandchildren that he was the first to pay 100.00 for a barrel of oil. Some kind of legacy. On the basis of accounting for every barrel of oil that was bought, sold, produced or shipped at that time, which numbers about 85, 000,000 barrels a day in the US, that single action increased the value of oil by more than $40,000,000. All this done with an investment of a margin deposit of $6,750. Within 7 months the price of crude rose to a high of 147.27 before settling back down. Was this the case of supply and demand which is the usual cornerstone of pricing or the result of targeted speculation? Considering how a simple $6,750 investment increased the value of oil by $40,000,000 is it too hard to imagine how prices would be affected by people with even deeper pockets?

It is difficult to lay all our problems at the feet of speculators, however enticing it may be. There were other factors all coming together, all interrelated, all commingled on the same messy economic plate. Sub-prime mortgages are a place to start, but they were rather an offspring of some behind the bushes derivative shenanigans. Papers were packaged and repackaged so often and frequently that even their mothers wouldn’t recognize them. Hedge funds? What started out as an investment tool to “hedge” your bets against risk, soon became the depository of high risk/high yield investments. It is rumored that a group of hedge fund managers were the wizards behind the levers which pulled Bear Stearns down, a company that had 8 Billion dollars in cash reserves before rumors of liquidity problems began circulating through the industry. At this point it appeared that the world was not enough to feed the appetite of some traders, they started to eat their own.

This situation is unfortunately not easily solved either domestically or internationally. The markets have become global in nature and with the complex weave of papers flying around the world, it is difficult to unravel what this mess has become. Many companies are now blaming a “broken model of business” as a source of their woes. The auto sector is particularly fond of this expression. It is as though they were following a rule book as to how to operate a business and when the nature of the marketplace changed and went beyond the circumstances described in their business model, all hell broke loose. Forgive me for intimating this but someone who earns a few million dollars a year for their business acumen should be able to do more than follow a recipe.

The list of reasons for this situation are as endless as they are complicating, but the end result is the same, we are in a hell of a mess economically. The solutions are as varied and diametrically opposed as their ideologies. Whether to take a Conservative/Republican point of view that less government involvement the better or the Liberal/Democratic slant that governmental intervention is the be all and end all can be argued up and down until the pundits are blue in the face. But one thing is certain, one of them will win out over the other and history will show if it was the right choice.

Friends

I was thinking about important friends are. Some say that family ties are the most important relationships in your life and it is hard to argue that point. In fact, the phrase, "blood is thicker than water" certainly lends credence to this. Where this phrase came from, I don't know, but according to phrase scholars it apparently alludes to the fact that water evaporates without leaving a trace, whereas blood leaves a stain. So in other words, family is like dirty laundry. Now we are getting to something that even I can understand.

What brought this thought on was not me questioning my family relationship, either immediate or extended. I am happy to say that it has been many months since I wanted to change my last name and move to Honduras to tend sheep. It was more of my thoughts about my friends and how really important they are in my life. There is nothing better for the ego than to have a close friend tell you the real truth, something that most family members sugar-coat and tap dance around until you forget what it was about.

I feel horrible admitting this, but some of the funniest moments I have spent with friends had them being the brunt of some form of discomfort. Not anything bad, mind you, just enough to make a situation unbearably funny. An example was years ago when I was moving my apartment and like all good friends, Paul agreed to help me. There was just the two of us doing all the work and I had recently been given a sofa bed. I must note that we were both quite young and inexperienced in the ways of moving. It was our first experience in moving a piece of furniture such as this and were unaware of the killer instincts that are the nature of a fold out couch. This was a lesson that neither of us has ever forgotten.

I was moving into an old beautiful building, a third floor unit overlooking the park. We were up to the second floor when the couch opened up. I was on the upper part of the stairs and Paul was on the lower portion. I remember feeling the bed flipping open and as I looked up, I saw the frame of the bed portion had caught him just under his chin, pinning him to the wall. He had this look of confusion on his face which was compounded by an inability to utter a single word as the bed pressed against his neck. He had been lifted off his feet like Mr. Atlas did to the bully on the beach. I could hear his feet kicking weakly against the wall as he tried to gain some sort of foothold. You would have thought I would have sprung into action. I knew he needed help and tried as I may, I couldn’t summon the strength to react in a helpful manner. As I struggled with the weight of the furniture, now wildly out of control, every time I looked up, I could see Paul looking at me beseechingly. I couldn’t help myself, I kept breaking out in laughter. Not mere laughter, tears rolling down my face laughter. Laughter that zapped my strength, I was hopeless and helpless with laughter, arms and legs like wet spaghetti. I did manage to scramble over the couch in short order, but as Paul attested to later, I was not nearly as fast as I should have been. In fact, his first words were something to the effect of what was so funny? I couldn’t even attempt to articulate what was so funny then and I still find it almost impossible to articulate now. But it remains as fresh and as funny as the day it happened. I sometimes wonder if Paul still has such fond memories of my moving day as I do.

Friends really are, I guess, a matter of choosing and individual preference. But why is it that sometimes even the most polar of opposites can end up being friends for life? Is there some germ of connectivity that somehow we consciously or unconsciously are able to determine who would be a friend? Why is it that at one stage of your life it is more important who your friends are and not what they are? Maybe this is an age thing, but what your friends stand for, by far outstrips any social status they may have. Why is it that no matter what has happened in your life, negative or positive there is still a friend who will support you without question. I am not implying that family wouldn’t be there, they would. I think in even the most dysfunctional family there is still that familial obligation. But someone from outside the family does have options. To me that stands for a lot and that is why at this time of year I have been thinking of my friends a lot. There are no cute phrases about friends just being strangers we haven’t meet. A friend is not an acquaintance. A friend is beyond that and beyond words. A friend is well, a friend for life.

I hope this little story about Paul doesn’t make you think twice about helping me the next time I need to move. Really, I have matured a lot over the years.