Saturday, October 25, 2008

No, Really?

I've said, like, a thousand times that we need to quit treating capitalism like a religion. It's an economic system, no more... and no less. The whole idea that greed is meant to result in some kind of moral good is patently absurd.
"I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms."

Greenspan, 82, who relinquished leadership of the Fed just two years ago, said the collapse of the sub-prime mortgage industry -- and the vast, mostly hidden trade in derivative financial instruments it spawned -- exposed a "flaw" in his categorical reliance on free markets.

Over the last two decades, fortunes have been made and lost parsing Greenspan's Delphic declarations, but there's a breathtaking example of ideological blindness embedded in that first sentence. Does Greenspan really believe that banks, brokerages, rating agencies and insurance companies act of their own accord? Even he has to understand that the people who run them decide how they respond, even to market forces.

There are no autonomic reflexes in finance. Did Greenspan really believe that the people in power, presented with a chance to make a killing, would put the interests of their institutions and stockholders ahead of their own?
In the end, greed is just greed, and capitalism is just as good (or bad) as we allow it to be.

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