I am a libertarian capitalist, and I agree there has been a government-inspired (Fed-inspired, really) transfer of wealth from the poor to the rich.
Let's say you are a smart hacker and I offer you this "deal": you put in $15K, I will lend you $150-300K at very low interest rates, which you can invest as you see fit. The gains (minus the low interest paid) are yours, and in the meantime you can also charge me reasonable expenses. If you fail, you get to walk away, with no personal liability. Will you take this deal?
That was the deal private equity, hedge funds got from the Fed & the banks (aided and abetted by the Fed). In good years, they took great money home. In bad times, many of them go bust, with no personal consequence to themselves.
End result: societal transfer of wealth, from the poor/middle-class to the wealthy. This is not a consequence of a free market. The original sin is the easy credit, supplied to the financially well-connected.
It is funny how now hedge funds and bankers take all the blame, even though millions of 'common people' speculated recklessly in real estate and picked up up enormous debts without any second thought.
The Fed has tried to avoid post-2000 recession and to stimulate general consumption by keeping low interest rates (and not objecting to the tax cuts). This was obviously politically motivated and not very smart as we now see. It did result in a credit bubble. But to claim that it was done to benefit a few 'well-connected' financiers is populism to my opinion. It was done to avoid discontent among people. To appease the masses, so to say...
Interestingly, it is the capitalists who are suffering now, as their equity is eroded by inflation, weak dollar and the bear stock market. The average Joe just defaults on his debts and walks away from his 3 year old house. His creditors take the loss. So it is actually a wealth transfer from the rich to the poor.
Hm... I though 'fake money' had something to do with social network valuations... If so, Marc indeed should know everything about that.
Anyway, I just wanted to say a word in defence of poor hedge fund managers. Some members of this forum will get rich enough to use their services (or become one of them -- like Peter Thiel). Recycling populist cliches about evil bankers and globalisation is soo like... Reddit? ;)
Yeah, the investors (hedge funds, pe) don't have to bear the downside of their investment but they get to keep all the upside. Which gives them an incentive to be really risky with their investments.
The Fed has been hesitant to make them face the downside of their decisions, and that needs to slowly change (without causing a panic/crash)
Comments
I am a libertarian capitalist, and I agree there has been a government-inspired (Fed-inspired, really) transfer of wealth from the poor to the rich.
Let's say you are a smart hacker and I offer you this "deal": you put in $15K, I will lend you $150-300K at very low interest rates, which you can invest as you see fit. The gains (minus the low interest paid) are yours, and in the meantime you can also charge me reasonable expenses. If you fail, you get to walk away, with no personal liability. Will you take this deal?
That was the deal private equity, hedge funds got from the Fed & the banks (aided and abetted by the Fed). In good years, they took great money home. In bad times, many of them go bust, with no personal consequence to themselves.
End result: societal transfer of wealth, from the poor/middle-class to the wealthy. This is not a consequence of a free market. The original sin is the easy credit, supplied to the financially well-connected.
It is funny how now hedge funds and bankers take all the blame, even though millions of 'common people' speculated recklessly in real estate and picked up up enormous debts without any second thought.
The Fed has tried to avoid post-2000 recession and to stimulate general consumption by keeping low interest rates (and not objecting to the tax cuts). This was obviously politically motivated and not very smart as we now see. It did result in a credit bubble. But to claim that it was done to benefit a few 'well-connected' financiers is populism to my opinion. It was done to avoid discontent among people. To appease the masses, so to say...
Interestingly, it is the capitalists who are suffering now, as their equity is eroded by inflation, weak dollar and the bear stock market. The average Joe just defaults on his debts and walks away from his 3 year old house. His creditors take the loss. So it is actually a wealth transfer from the rich to the poor.
>it is the capitalists who are suffering now
lol
http://money.cnn.com/galleries/2008/fortune/0803/gallery.bea...
1gor, you're douching up this thread.
That's fake money. As Marc Andreesen pointed out, U.S. taxpayers paid the Bear Stearns CEO $60M in cash, directly:
http://blog.pmarca.com/2008/03/congratulations.html
PEACE
Hm... I though 'fake money' had something to do with social network valuations... If so, Marc indeed should know everything about that.
Anyway, I just wanted to say a word in defence of poor hedge fund managers. Some members of this forum will get rich enough to use their services (or become one of them -- like Peter Thiel). Recycling populist cliches about evil bankers and globalisation is soo like... Reddit? ;)
Yeah, the investors (hedge funds, pe) don't have to bear the downside of their investment but they get to keep all the upside. Which gives them an incentive to be really risky with their investments.
The Fed has been hesitant to make them face the downside of their decisions, and that needs to slowly change (without causing a panic/crash)