Paula Hay's List: Economy

• We need to learn the lessons of the past eight years or so, even if the press doesn’t want to go along, and re-examine, from top to bottom, all the firewalls that were supposedly designed to protect us from precisely the financial catastrophe that has just occurred. These firewalls start with risk managers, officers, directors, etc., within the financial institutions, then extend outward to accounting firms, rating agencies, regulators, and yes, journalists.

• But if a lender or creditor believes it can profit more from a complete failure—i.e., if it has an insurance policy that pays off only in the event of utter devastation—that creditor might be more inclined to push a company toward bankruptcy. And thanks to the financial innovations of recent years—the rampant use of hedging and credit-default swaps, the ability of investors to purchase insurance on debt—that's exactly what seems to be happening. Creditors are acting to protect their economic self-interest by encouraging companies to destroy themselves.

  • This is an excellent description of the architecture of the wealth transfer to Goldman Sachs, et al.
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• What does that do to an economy? It bankrupts it. Think of it this way: A business borrows 1000 dollars from the bank to get started. In ten years, say, it is supposed to pay back 2000 to the bank. Where does the other 1000 come from? Some other business that has borrowed 1000 from the bank. For one business to pay back what it owes, another must go bankrupt. That, or borrow yet another 1000, and so on.
• We do not live in an economy, we live in a Ponzi scheme.
• As painful as it might be to watch, and as irritating as it might be to those with shrinking retirement savings, the collapse of the centralized corporate economy is ultimately a good thing. It makes room for a real economy to rise up in its place.

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• Except in a few rare cases, corporate charters and centralized currency were never intended to promote commerce. They were intended to prevent locals and non-chartered entities from creating and exchanging value. They are not extensions of the free market, but efforts at extracting value from the free market.