Official — Economic Crash Not Computers' Fault

itwbennett writes "A 2-year government investigation has found what we pretty much all knew to be true: High speed trading systems were not the cause of the 2008 economic crash. 'The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire,' according to a leaked copy of the report's conclusions revealed in the New York Times."

Comments

Economic Collapse due to Class War

[spun]

The rich are waging class war against the rest of us, and transferring wealth from the average person to themselves through fraud and coercion.

Re:Economic Collapse due to Class War

[Hatta]

Indeed. Consider this. The economic losses to banks alone from the Financial crisis are estimated at 4 trillion. Total property crime in 2009 adds up to 15 billion

That's less than half a percent! When you look at it this way, it's not disproportionate to suggest that the entire law enforcement budget of the United States be spent on bringing these criminals to justice. Yet, in most cases the people responsible for crashing the entire economy get million dollar bonuses for it.

Honestly, the only way I can interpret this is that it's intentional. Our system is not intended to provide justice at all. It exists only to protect the wealthy. We have no justice system in the US, we have an exploitation system.

Re:Economic Collapse due to Class War

[dgatwood]

I am sure that the fact that it is still possible for a person to grow up poor and with determination and hard work become rich is something that you either do not believe in or something that you do not believe happens.

It happens occasionally, but it is exceptionally rare. What actually happens, in practice, is that someone born into the middle class becomes upper middle class by moving to an area with a higher cost of living, then working for a while, and finally retiring somewhere with a lower cost of living. Work in California. Retire in Tennessee.

The number of children born below the poverty line (the definition of poor) who work hard and "become rich" is essentially zero, with the exception of lottery winners, and even those folks are rarely rich for very long.

The reason for this is twofold. First, the poor have to spend nearly all of their income just to get by. This leaves no realistic opportunity for the sorts of "I started a company and made it big" stories because there's not enough capital or access to capital to make that happen.

Second, because the poor live hand to mouth, they generally do not understand how to manage finances, so in the rare occasions when they come into a large sum of money (lottery, inheritance, etc.), they tend to blow through it very quickly instead of saving it and living on the interest. They also fail to keep enough money aside to pay their taxes, and end up losing their shirts. This same mindset leads to racking up colossal debt, which only exacerbates the problem.

Those two factors can be overcome, but only through proper education. Unfortunately, our education systems do not teach money management (except perhaps in an MBA program or something), and thus the only opportunity for kids to learn it is from their parents. When the parents don't know how to manage their money, the kids don't learn it. As a result, the vast majority of the working poor (along with the vast majority of their descendants) are basically doomed to a life of barely breaking even.

Even scholarships merely promote them from working poor to working middle class, but the tendency to burn through all their income usually follows them, and although they are in some sense better off, there's not much room for further advancement beyond that point except in subsequent generations through marrying someone with a better grip on money management.

It's like a treadmill. The poor keep walking on it because they started out going just fast enough to keep up. The middle class often start out going faster than the treadmill, walk off the front, and keep walking.

Short of outside interference (e.g. a better education system, marrying someone in a higher social class, etc.), there is no real opportunity to break this cycle. Thus, no matter how hard the poor work, they almost never get ahead, and even when they do, there are limits to how far ahead they are likely to get.

Ultimately, the only way to fix this is for schools to instill financial responsibility in children from a young age. However, this isn't in the best interests of the folks at the top, who require a steady flow of willing consumers in order to maintain their artificial inequality. As such, this isn't likely to every happen unless we get a truly progressive government (which we don't have now and haven't had in my lifetime).

Re:Economic Collapse due to Class War

[Maxo-Texas]

In other 1st world countries, parents income has a 10% effect on their offspring's income.
In the U.S. it is 50%.

In the US it used to be 3 generations from bottom to top to bottom- now it's 5.

Instead of letting people earn money on merit, we have paris hilton's and george bush's leading the nation because their parents were rich. Think about how similar paris and george were.

The children of actors get first shot at all the acting jobs- not because they are good- but because their parents were actors. The CEO's share the same private schools as kinds and refer to playing with other ceo's when they were children.

In the long run- it's bad for the country as a whole to allow rich idiot children to take over the nation because they are friends with each other.

Re:Economic Collapse due to Class War

[JonySuede]

yes they have go read about the Honduras 30 years long civil war started by Dole, Chiquita and the CIA
and read about the killing of syndicalist by coca-cola
and the toxic waste dumped by Shell
and the never-ending Colombian narcowar
and the oppression of millions by the Saudi regime in the middle east

Those things are all a direct result of the continuation of the Monroe doctrine

Re:Economic Collapse due to Class War

[SETIGuy]

I am sure that the fact that it is still possible for a person to grow up poor and with determination and hard work become rich is something that you either do not believe in or something that you do not believe happens.

It's not belief or disbelief. It's evidence. It happens very very rarely that a poor person becomes rich. And when it does happen, it is even more rarely due to determination and hard work. A poor person has no money to spend on education. To a poor person determination and hard work still mean a minimum wage job.

But of course, that's inherent in the capitalistic system. Capitalism is a system where you can become wealthy on the determination and hard work of others. Personal determination and hard work won't make you wealthy, they'll make your boss's boss wealthy.

And once wealth has been achieved, wealth breeds wealth. Once you're in the investor class, you pay other people to make money for you off of the labor of others.

If you a born into a poor family, the ways in which you can become rich are very limited.

1) You can have or develop a rare talent that is valuable. You can become a famous musician, singer, or athlete. But the problem with rare talents is that they are rare. I could never become a singer or professional wide receiver, regardless of the quality of the person who attempted to train me. I do have natural talents. But if I had been born into a poor family or even a lower middle class family, I would have never become a research physicist, because the resources I needed in order to become one would have been missing. And if I hadn't started on this path at about age nine, it would have been out of reach. You know what to the smart poor kids in an inner city Headstart program? They get ignored, because they don't need attention every second. That pretty much continues into elementary school and beyond. They learn pretty early that it doesn't pay to be smart.

2) You can marry into a wealthy family. This is a lot harder than you might think because the wealthy segregate themselves from the poor. So again, this option is reserved for the rich.

3) Be in the right place at the right time. Also hard if you're poor. But if you're already rich you can buy your way through business school and get an executive position at a start up and make millions for doing very little.

Along with the lack of upward mobility, there's little downward mobility. If you're Donald Trump, you can cancel a billion dollars in debt through bankruptcy, not have a penny to your name, and the next day walk into a bank to ask for a $10 million dollar loan, and they'll give it to you. Because you're a member or the rich club, even though you're poor. If you're poor, the same bank will charge you $50 a month in fees because you aren't maintaining a $15K combined balance. That is, if they let your shabby ass through the door in the first place.

But as I've said, I'm reasonably rich. I come from an upper middle class family. I married into an upper middle class family. I don't personally know any billionaires, but I do know people with 7 to 8 figure net worth, and I've met people with 9 figure net worth. What they all have in common is significant inherited wealth, with the exception of one person who was in the right place at the right time to earn millions on a job that should have paid $50k/yr. Now that he's earned millions and eluded the SEC, he can get jobs that pay in the millions. (Actually he had significant inherited wealth, too). All these people come from upper class or upper middle class backgrounds. I don't know any wealthy people who were once poor. Do you?

There's a reason Thomas Jefferson thought inherited wealth was dangerous to the Republic. There's a reason Adam Smith thought the idea of inherited wealth was absurd other than as a means to care for dependents who could not earn money on their own.

Re:Makes sense.

[dkleinsc]

Actually, only complete morons were betting that the housing market never fell. The smart evil bastards that make up most of Wall Street knew the market would collapse, but were doing their best to ensure that when it did so they'd lose nothing.

For instance, Goldman Sachs would buy credit default swaps from AIG, which meant that they could never lose money on buying up a bad loan (because AIG was going to be left paying the piper if it did). Now, in order to get a good rate from AIG, Goldman also made those investments look much better than they were, so AIG was thinking "those suckers, we're never going to have to pay a claim on this". And of course Too Big To Fail meant that if the shit really hit the fan, they could be assured that Uncle Sam would be the one holding the bag.

And to compound the problem, the individuals at those companies knew that they were never going to be personally liable for any of it. So the manager at AIG was happy to sell credit default swaps and make big bonuses - the worst that could possibly happen is he would get fired after making big bucks.

Re:Makes sense.

[need4mospd]

My question, now that we have this report, where are the prosecutions? Surely it's found that certain individuals or corporations share responsibility in creating the situation that caused economic downturn, right? There are mentions of fraud dozens of times throughout the report. Fraud is a crime last I checked. People should be going to jail en masse, from the greedy loan officer that forged paperwork to the upper management that did nothing while supervising it, all the way up to the previous and current Secretary of Treasury if necessary.

We all get worked up over pictures of oil covered birds in the marshes of Louisiana, yet we just sit here and take it when the leaders of our country rob us at gun point.

Re:Makes sense.

[C10H14N2]

Actually, the major problem was precisely the opposite. The banks and insurance companies -- even Fannie and Freddie -- were all betting that the housing markets WOULD fail. Freddie was churning billions in overnight short sells of their own paper daily, trying to make a profit riding down that failure. It was a race to see who could skim the most off the trades themselves until the paper was worthless. Anyone with the slightest bit of understanding of economics in general and the housing market could see that crash coming back in 2000. They had just created the financial instruments to profit, massively, off the inevitable crash. Even as the last sucker holding that worthless paper, there was still one last bet to call in and come out even money with credit default swaps. It wasn't a cycle people forgot to plan for. It was a market deliberately re-engineered to transfer a LOT of wealth VERY quickly on the highly anticipated downside of that cycle.

It was not an accident, much less willful ignorance. It was simply bare avarice.

Re:Makes sense.

[radtea]

And to compound the problem, the individuals at those companies knew that they were never going to be personally liable for any of it.

Which is what distinguishes the United States from a free market. In a free market, individuals are liable for their actions. Government interference in the free market in the form of legislation that shields individuals from the consequences of their actions in the form of the various Companies Acts that have been passed in the past 150 years, allows such people to hide behind the skirts of the Nanny State.

Given the absence of a free market in the US, there are only two consistent alternatives: to regulate the existing market further so that we get the benefits of the corporate form of social organization without so much of the downside, or to unregulate the market by abolishing the Companies Act and its successors, and return corporate property to its individual owners (the shareholders) while giving each owner and officer personal liability. Since the latter leads to a mess--this is simply a matter of historical fact--I personally favour further regulating the non-free market in which corporations exist.

Anyone who attempts to oppose the regulation of corporations on the basis of claims about "the free market" is guilty of a fundamental logical inconsistency, as no corporations would exist in a genuinely free market.