Wednesday, December 17, 2008

When the bubble bubbles

Apparently Bernard L Madoff's firm was "a giant Ponzi scheme" and he Madoff with 50 billion dollars of other people's money. After thinking about that for a while, the SEC chief Christopher Cox recently said, "“I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them.”

You can hear the harrumph in Cox's voice from here. Everyone's gravely concerned and will do better next time. Too late for this time, though. The SEC was apparently examining its shoe sole for traces of chewing gum or something and missed the whole thing! How unfortunate!

Like that a couple of months ago when it turned out banks had been loaning people mortgages for ninety gazillion times the net worth of their house and then passing off the debts as "Triple AAA Sure Fire Bet You'll Get Yours John, All Right, YBOS Bonds" to other banks and foreign pension funds. (YBOS stands for "You bunch of suckers.") The watchdogs didn't catch that because they had something in their eye and were standing in front of the mirror blinking and tearing up while it was going on, or something. How unfortunate!

Let this be a lesson to us (again), that when the fox sighs, "Look, all right, if you insist, it's totally going to interfere with my social life so I don't know why I'm offering but, I will. I will guard your hen house. OK?" the correct answer is not, "Awright! Fox is on the job! Let's all go to the bar and get loaded. Nothing can possibly go wrong!"

Capitalism is based on the premise that things expand. If the population's growing, if it's getting richer, if more of everything is happening, it gets along fine. If everything isn't getting bigger, then the only way to keep Capitalism running is to inflate bubbles. Eventually, being full of nothing but hot air, they pop. It's happened before; it's happened again. It'll happen in future, unless the paradigm's changed.

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