Financial Crisis Introspection: How much of the blame is ours?

Last night, emboldened by a particularly well-written article in the Atlantic and a strong cup of decaf, I posted something here about the derivative-leveraging Wall Street assholes responsible for bankrupting our country. And, somewhere toward the end of that piece, as I often do, I called for their heads to be brought to me on platters. I believe I actually said that, in my opinion, the best way to make sure that we don’t face this kind of problem again, is to “cut the head off the snake.” Anyway, in the wake of that vigorous appeal for violence, our friend Ol’ E Cross, left the following comment, and I thought that it deserved your consideration.

I’ve had this phrase that I’ve tried out, over the years, amongst close friends including those here: “The moral distance of the stock market.”

I try (believe it or not) to stay off the high soap horse box, but I’ll climb on, for tonight. It has, for a long while, puzzled me how friends will write their congressman opposing, say, big oil but turn a blind eye to the percentage of their 4-0h-whatever investments are in big oil. “Moral distance” I say, “chirp” is the reply.

I understand the pressure. I had years of feeling irresponsible because I was not investing. I couldn’t (high horse alert) overcome the moral distance. I figured I’d have less because I didn’t invest but hoped for “enough.”

I’m old-fashioned. A puritan, it’s been said. I work crummy jobs. I bought a house; not as an investment property but as a place to live. I didn’t expect much to change. I still like Jimmy Stewart’s Savings and Loan in a A Wonderful Life. I like, “Billy, your money is in Willy’s home…” I like poor return local credit unions.

In brief, I’m left feeling like all you that played the high-return retirement game get what you get. The extra dollars always come from somebody, somewhere. And yes, I’m trying not to feel a little bitter because collective, okay let’s call it “greed,” may impact my ability to work a crummy job.

Mark says, “Off with the head.” I have to ask, really? Just the head? What about the rest of the snake that blindly followed as long as the tummy was fat?

Who wasn’t complicit? Who wasn’t delighted by returns they didn’t earn? Who didn’t bother to ask questions? The government? The media? Or the millions of (then) contented shareholders?

If I had a rocket launcher, I’d off the whole fucking thing. Nest eggs and all.

So, to what extent do you think that we’re complicit in all of this?

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  1. Posted March 31, 2009 at 8:25 pm | Permalink

    I see what Ol’ East Cross is saying…I haven’t invested a ton because, in theory, I’ll get a teachers’ pension. I got all sorts of OMGWTFBBQ!! from people (usually wealthy people in A2, btw) who thought I should be investing 1/2 of my paycheck. I invested 10% of my gross…I felt that was enough. I don’t like the idea that someone (i.e. the little guy who comes into school every month and feeds us lunch to get us to sign up with him) was making money off of me.

    While I didn’t invest a ton, I did and do live very carefully and frugally. We have a small house, not much debt and not much stuff. Once again, I felt like a lameass (maybe this was my own imagination, this time) for not owning more stuff and not wanting to own more stuff. Meantime, folks were spending on credit, buying houses they couldn’t afford and so on. So yeah, I do feel that folks who earn what I do (i.e. not much) and who were buying $500K houses were acting foolishly and irresponsibly. I’m a schoolteacher; where does it say that I should get a half million dollar home? Come on, now.

    Having said that, I should add that I am lucky. My daddy is frugal and taught me what interest was, how much credit cards actually cost and so on. I have learned that a lot of people don’t learn this at home. If nothing else, I try to teach my students the real cost of stuff and try to get them to understand that a $30,000 (or whatever) per year salary won’t go as far as they think it will. Are other people taught this? If so, do they ignore it when they spend and spend and spend?????

  2. Posted March 31, 2009 at 8:38 pm | Permalink

    Yeah, OEC had a good point. We are all products of our environment. And this is why a lot of all this doom and gloom BS is starting to drive me crazy. You know, you gotta take the good with the bad in life. Nobody complained when the economy was booming the last twenty years and we had it easy. Plenty of opportunity for all. Everyone just found something else to bitch about. But now that this is going on with the economy, we’re all panicking and blaming everyone and anyone.

    What is happening with the economy is just nature’s way. It’s like a forest fire, everything burns so things can start over.

    With starting over, there’s opportunity. I see communities forcing to utilize shared resources better. I see small cities like Ypsi growing stronger and becoming closer because people are forced to stay put. I see us all saving more, living within our means. I see more bartering. More small businesses thriving and growing.

    At what point do we stop complaining and start rising from the ashes? Are we all just waiting to completely burn down, for CNN to tell us we’ve officially hit bottom? I say let’s focus on the positive, work hard, help each other out, and start spreading the good word. And honestly, when we decide to do it is when it’s going to happen. Let’s declare this the bottom and start rebuilding now. I don’t care who’s to blame, I care who’s going to contribute to change.

  3. Brackinald Achery
    Posted March 31, 2009 at 9:05 pm | Permalink

    Right on, Cuz.

    But I do think we each have a moral and pragmatic responsibility to keep our reps accountable to their oaths of office. If something’s not explicity authorized in the Constitution, they can’t do it. It’s a legal contract between us the people and our Federal public servants. No one will hold them accountable for their violations but us, which is fair because we’re the ones who end up suffering for and paying for their userpations in the long run, with our rights, and the fruits of our labor.

    Delegating the printing of fiat currency to a central bank is not authorized, bailing out companies at taxpayer expense is not authorized, firing CEO’s is not authorized, etc, etc, etc (Federal narcotics laws, waging war without a declaration of war…). For God’s sake, they can ammend the Constitution if they need to, but this ignoring stuff is plain illegal. They know that we won’t hold them accountable, however, because they view us as an ignorant mob, and manipulate us with scare tactics and free handouts (as if we won’t pay for them someday, which we will).

    So yes, it’s our fault. Our founding fathers (cue moving fife and drum music) warned us to be vigilant for our liberties, because they knew the system of government they created needed constant pruning due to the inevitable gradual userpations of power that governments inevitably accumulate. They knew from the East India Tea Company how big business can buy government that ignores its bounds. If we aren’t vigilant, we deserve what we get…. except that that minority of us who are vigilant also get what you nonvigilant douchebags deserve (record scratch on the music).

  4. Chelsea
    Posted April 1, 2009 at 5:23 am | Permalink

    Excellent, well written observations.
    And, Mark, thank you for posting that.

  5. Posted April 1, 2009 at 6:58 am | Permalink

    Our complicity is not limited to the stock market (I say, as someone who owns shares of Exxon and WalMart, via my IRA’s market index fund, but was never quite bothered enough by this to find an alternative).

    Anyone who has ever thought of their house as “an investment” instead of “a place to live” is complicit. Anyone who stretched for a mortgage, who decided to “buy as much house as you can” assuming they’d be able to manage it in a few years, and would be a sucker not to buy now, because “your house will always gain value.” Anybody who bought when they should have rented, because, “you’ll earn equity even without paying down the principal.” Anyone who took out a home equity loan or cash-out refinance on the belief that their home’s value was rising fast enough to erase the extra debt. (And right about now, I’m glad I still have a crappy kitchen and bathroom, rather than having over-extended in that direction.)

    Pretty much anybody who participated in the homeownership market in the last decade without raising an eyebrow at the assumptions involved is complicit.

    Both in the housing market and the stock market, we decided to ignore that TANSTAAFL, because we were afraid of being left behind and missing out. And, in some Pascalian way, this was the sensible thing to do. If it was all imaginary money, then we were all in deep trouble regardless of whether we participated. But if it was for real, then we were only in trouble if we didn’t participate. Rationally, we had to make sure that we were getting a piece of any wealth that might actually be out there.

    So, yes, I agree with OEC and see us pretty much all as complicit. Oops. Our bad. Maybe we’ll learn something out of it, and stop looking for free money and easy solutions.

  6. Posted April 1, 2009 at 8:01 am | Permalink

    As Murph says, I hope we will learn something out of this. I do like to hear people actually talking about living more frugally and being more conservative–NOT politically! I mean, conserving more resources.

    But I have to be honest and cynical…I think that once the tides turn (if they do) and once we get back to “good times” (which I somehow missed in late 99 and 2000), people will go back to their old spending and borrowing ways.

    Why must I be so cynical?????

  7. Posted April 1, 2009 at 8:31 am | Permalink

    Spending and borrowing is not necessarily a completely bad thing as long as people do it within their means. Stockpiling money is awful for an economy.

  8. Brackinald Achery
    Posted April 1, 2009 at 9:01 am | Permalink

    I guess I won’t be opening a new stockpiling account for a rainy day then. If nobody saves, then credit is toxic because it’s based on so much fart gas. Of course increased inflationary pressures make savings harder, because our savings will be devalued, forcing us to spend and destroy the foundation of future prosperity. Without a foundation of saved capital and resources, you can’t make an honest loan to start new projects — the resources are just not there. That’s why everything the government is doing is ass over heads wrong. Stockpiling money is exactly what we should do, without any inflationary measures to punish it. Then consumer confidence returns, because prices fall to more realistic levels and people aren’t afraid of getting wiped out due to their frugal nest eggs.

  9. Posted April 1, 2009 at 9:11 am | Permalink

    I didn’t say that saving was bad. I was intending to say that excessive saving (stockpiling) is bad. I agree with you, however.

  10. Ol' E Cross
    Posted April 1, 2009 at 9:34 am | Permalink

    I should say if I knew Mark was gonna take this comment out of the dark corners of the thread and thrust it into front page light I might have been more polite. My callousness towards retirees nesteggs was, I think, a bit much.

    So, beyond the obvious solutions of moderation and saving, here’s what I’d like to see with the stock market. One of my early employers offered a 401k (or something similar) option of investing in a “social equity fund.” Basically, it promised that your money wouldn’t be invested in any truly nasty enterprises. Later employers didn’t offer anything like that; they only offered risk/reward choices with no moral strings.

    These things probably exist, but I’d some bright money folks to start a brokerage in the SPARK Ypsi building that offers a wide array of values-based investment portfolios. For example, you could choose to have all your investments in “green energy” companies or companies that were unionized or didn’t outsource or gave same sex benefits or whatever issues you care about. This would allow shareholders (who we’re always told are the ones execs are answering to when they make spurious decisions) to actually influence behavior. It wouldn’t simply reward profits but would reward how those profits are earned by infusing more capital into the type businesses we say we’d like to see.

    And then I’d like to see employers offering their employees choices of where to invest rather than just a few “take it or leave it” options that are essentially putting money in the same places.

  11. Brackinald Achery
    Posted April 1, 2009 at 10:45 am | Permalink

    The Market Force is with you, OEC.

  12. Paw
    Posted April 1, 2009 at 11:14 am | Permalink

    But it’s not nearly as much fun rallying a crowd and urging them to cut their own heads off.

  13. EOS
    Posted April 1, 2009 at 2:19 pm | Permalink

    Everyone’s fault? No way.

    Just because someone put their money in an FDIC insured bank rather than stuffing it under their mattress doesn’t mean they’re to blame that the bank loaned out their money for high risk mortgages. The bank executives got rich while the depositor’s money earned less than the rate of inflation.

    Just because someone’s retirement is invested in a diversified mutual fund doesn’t make them profiteers in the past twenty years. Numbers on a monthly statement have no impact on daily living. I don’t have the option of choosing individual corporations to invest in with my retirement funds. The only “social choice” fund offered considers it morally acceptable to profit from abortions and porn.

    I didn’t elect Barney Frank and Chris Dodd. I didn’t line their pockets with cash so that they would pass laws favorable to my business. I didn’t buy more house than I could afford. I didn’t take out a risky mortgage. I’m not buried under credit card debt.

    No – it’s the fault of dishonest persons and politicians who are hell bent on socialistic world government. And its the fault of easily led voters who were manipulated with catchy slogans. Hope is not a platform-change is not a policy.

  14. Posted April 1, 2009 at 3:13 pm | Permalink

    I don’t think subprime lenders would like a socialist world government.

  15. Brackinald Achery
    Posted April 1, 2009 at 3:24 pm | Permalink

    Plenty of Republicans and Democrats are guilty in on this shit, EOS. It’s not a one-sided thing.

  16. E. G. Penet
    Posted April 1, 2009 at 7:07 pm | Permalink

    Great discussion. Contrary to common belief, you buy and hold bonds and trade stocks. Treasury bonds and some corporate bonds have produced more wealth than stocks through thick and thin since the Depression of the 1930s.

    Murph is also right, if you can rent cheaper than you can buy, then rent. It is that simple. It’s like driving when you could walk. Driving a fuel efficient vehicle versus anything less efficient. Etc. It’s a mindset that can be applied to everything.

    However, we are all guilty in some respect for participating in this culture or even tolerating it without making more of a fuss. I am guilty. I have created in my mind a quality-of-life cap-and-trade system, where I guzzle and waste and then spout off. In my mind, it sort of evens itself out. (Not.)

    My sense is that we have NOT hit the bottom, if there are any “investors” out there. If you haven’t sold yet, sell into the “relative strength” of this current “bear trap” and have your broker put the money into Treasury TIPS or just buy bonds at the bank. Take a little bit out to make yourself feeel good, though, and spend it locally right here in Ypsilanti. Today.

  17. Posted April 1, 2009 at 7:29 pm | Permalink

    Cousin Geoff’s comments nicely crystallized something I’ve been thinking about the past week, which popped up again in my head this morning listening to all the dreary news on the way in to work.

    “With starting over, there’s opportunity.” and “At what point do we stop complaining and start rising from the ashes?” I think those are the key points. Especially now and over the next year or whatnot, when the foundation for what the next decade will look like is being poured.

    My deepest concern about all these shenanigans is that sometimes it seems like all those at the till are thinking about is “okay, how do we get the engine of the economy back to the rpms it used to be spinning at, or at least as close to that as possible?” with no thought of “how the hell did we get in the mess to begin with? And how are we going to resist it happening in the future?”

    Most importantly, though, I want something figured out so that in thirty years when the whole damn cycle repeats itself again and I’m an even more bitter old man, I can mumble about how back in aught-nine[1] we whupped this thing in the ass and I can go back to yelling at the damn kids to get off my lawn.

    [1]: I consider the single greatest thing about being my age at this time in history is that as an old man I’ll be able to refer back to aught-nine.

  18. EOS
    Posted April 1, 2009 at 9:03 pm | Permalink

    B. A. –

    When are you going to realize that it’s not Republicans vs. Democrats? Both are on the same dark side. Bush started the bailout rolling with his “crisis” in October. He ran for office on conservative ideals and then led the nation into huge spending increases and massive debt. He ran for office on a platform that promised he wasn’t into “nation building” and then decided to overthrow Saddam and rebuild both Iraq and Afghanistan with our tax dollars. Does anyone remember his claim that the rebuilding of Iraq would be paid for by Iraqis using their own oil profits?

    What’s the likelihood of an honest middle-class person getting elected to the Senate when millions of dollars are necessary for a campaign? How would Jimmy Stewart’s “Mr. Smith” cope with a Senate that won’t let him read the bills he has to vote on? How would Mr. Smith react if his party asked him to approve funding for health care changes before the proposed changes were even discussed?

    It’s really nice that so many of the posts here are optimistic, but eventually you all are going to have to come to grips with reality. We are not going to cycle through this economic crisis in our lifetimes. You can’t pay off trillions of dollars in debt without industries and manufacturing and full employment. Your retirement investments won’t recover in time for your retirement and the Federal Government won’t be able to keep Social Security obligations to the Baby Boomers. The group of twenty is meeting right now to discuss the IMF takeover of the FED.

    And while our future is being destroyed, we discuss ways to spend even more tax dollars on unnecessary projects or kiosks and community gardens.

  19. Ol' E Cross
    Posted April 1, 2009 at 10:45 pm | Permalink


    Just because someone’s retirement is invested in a diversified mutual fund doesn’t make them profiteers in the past twenty years. Numbers on a monthly statement have no impact on daily living. I don’t have the option of choosing individual corporations to invest in with my retirement funds. The only “social choice” fund offered considers it morally acceptable to profit from abortions and porn.

    That’s expresses very well what I define as “moral distance.” I’m assuming you’re opposed to abortion and porn. Would you directly invest in a porn flick or fund abortions, whatever the return? I wager no. But if your retirement is funding both, and you are profiting from it, you throw up you hands and shrug? You’ve got no other choice if you want to turn a modest profit, right?

    Currently, 76 percent of the stock market is owned by “moral distance” institutions (pensions, mutual funds, etc.) that have, arguably, no concern other than what brings the highest return.

    All I’m advocating for is choice, on both sides of the political fences, rather than being forced to turn a blind eye and wash our hands from what our money is funding (and what, in good times, we profit from).

    Would it really not bother you if your retirement fund was growing because you were funding abortions or does morality stop at the dollar sign? Honest and truly, I would have expected you to support the concept of values based investments more than anyone.

  20. Brackinald Achery
    Posted April 1, 2009 at 11:23 pm | Permalink

    When are you going to realize that it’s not Republicans vs. Democrats?

    About a year ago or so. I really didn’t catch on for sure until the first Republican Primary debate. I’m slow sometimes.

    In regard to E.G.’s tip about bonds, my counter-tip is that the Treasury Bond bubble will be the last bubble to burst (thanks to our fiat dollar/central bank inflationary monetary policy), and it’s going to get really ugly when people realize their supposed firm foundation of financial safety can go up in smoke too. If the American Government guarantees it, don’t bet on it. Ask the Injuns.

  21. Patrick
    Posted April 3, 2009 at 1:38 am | Permalink

    Did I miss something? Is there a financial crisis? I was so busy pondering the greatness of Hillary Swank’s ass, I didn’t realize I was complicit in some kind of worldwide conspiracy.
    Wow. What would we do if Kim Kardashian came to town? Would even the “Coon Man” survive?

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