Here we go again….Alan S. Blinder: When Greed Is Not Good

Posted by Jason | Posted in Economics | Posted on 12-01-2010

1

Alan S. Blinder wrote another half witted op-ed about financial regulation and Wall Street’s return to “greed”. As all half witted intellectuals, he recognizes a symptom, but never questions the source. Here is a paragraph where he talks about Adam Smith.

When economists first heard Gekko’s now-famous dictum, “Greed is good,” they thought it a crude expression of Adam Smith’s “Invisible Hand”—which is one of history’s great ideas. But in Smith’s vision, greed is socially beneficial only when properly harnessed and channeled. The necessary conditions include, among other things: appropriate incentives (for risk taking, etc.), effective competition, safeguards against exploitation of what economists call “asymmetric information” (as when a deceitful seller unloads junk on an unsuspecting buyer), regulators to enforce the rules and keep participants honest, and—when relevant—protection of taxpayers against pilferage or malfeasance by others. When these conditions fail to hold, greed is not good.

via Alan S. Blinder: When Greed Is Not Good – WSJ.com.

Binder says “in Smith’s vision, greed is socially beneficial only when properly harnessed and channeled”, and I’m guessing he thinks the geniuses in Washington should be the ones to do the harnessing and channeling. Is Binder really this ignorant, or is he so trapped in his own reality that he can’t see past his old ideas? By giving Washington the power to “harness and channel” Wall Street, the economy or anything else, you create the source of corruption. Washington has become Wall Street. Look at who occupies the White House staff. This isn’t just Obama. This was Bush as well.

Greed is only harmful to society when the negative results of greed are forced on society instead of the source of the greed. In this case, Wall Street’s greed led to subprime mortgages, but instead of them being harmed by the negative results, they used government force to dish the negative results on the tax payers.

People aren’t typically greedy, despite all the negative comments by the like of Blinder. Something usually entices you into greed. Someone sees the chance of unearned profits, and they get…. well “greedy” for it. In this case, Wall Street got greedy because the Fed was printing “free” money. Who benefits from this money? Well, the banks are the ones who get the money first before it’s devalued. They get to loan it out and make their profit before the damage is done. In their ability to do this, because of the Fed, would they not be making unearned profits? It would be no different than a man giving you $1,000 and saying go ahead lend that out at whatever interest rate you can to make a profit. You pay the man back one percent interest and keep the rest. You really don’t have any risk there. Inflation is typically three to four percent. Hmm, just think how much you can make with no risk if you make even more of these loans. What if you loaned out $1 million? Now you can see where greed comes from.

If we didn’t have the Fed in bed with Wall Street bankers, we wouldn’t have had the easy money that created the last bubble in which Wall Street so enriched themselves. Then when the bubble burst did Wall Street have to take their punishment? Nope. Because of government force and collusion, they were able to force all of America to pay the bill.

What Blinder doesn’t understand is the problem isn’t an unregulated “invisible hand”. The problem is because of government the “invisible hand” now has a gun in it. When there is a gun, this is when “greed is not good”.

VN:F [1.9.21_1169]
Rating: 5.3/10 (3 votes cast)
Here we go again....Alan S. Blinder: When Greed Is Not Good, 5.3 out of 10 based on 3 ratings

Comments (1)

Greed, defined by Marriam-Webster as “a selfish and excessive desire for more money than is needed”, absolutely cannot have caused the financial meltdown. The supposedly selfish banks lost money. They lost lots of money. So if they were greedy, they weren’t really very good at it; otherwise they would have profited, like Wal-Mart, Toyota, or Microsoft, none of which require more oversight or tighter regulation.

If I blow my whole check on lottery tickets in an effort to make money, people won’t call me greedy, they’ll call me stupid. If I was truly greedy, I would instead invest in less risky assets like property or bonds. Same with banks. If we completely ignore the role government played in encouraging risky loans, solely blaming banks, loaning to people whom won’t repay is not greedy, it’s stupid.

Let’s blame stupidity instead.

VA:F [1.9.21_1169]
Rating: 0.0/5 (0 votes cast)

Write a comment