Black Monday: Global Investors Vote “No” on Paulson Bailout

The wrangling continued on the floor of the House of Representatives all weekend, but when the final tally was taken, Treasury Secretary Paulson’s $700 billion Emergency Economic Stabilization Act of 2008 failed to win enough votes to pass. Republicans swam against the current and voted down the legislation at a margin of two to one. Wall Street was stunned and the stock market went into an immediate 770-point freefall. To their credit, conservative die-hards held their ground and defended the “trickle down” supply side, free market ideology to the bitter end; and the end may be closer than they think. The credit markets have frozen over, the housing market is crashing, and the banking system is on its last legs. If Paulson has got another trick up his sleeve, he’d better pull it out fast. This thing is about to blow.

In the last few weeks, the number of casualties among the financial giants — Bear Stearns, Indymac, AIG, Lehman, Washington Mutual — has continued to grow. Three more struggling European banks were added to the list of financial institutions that needed emergency government assistance just last weekend. It’s no wonder Speaker Pelosi felt like something had to be done to stop the bleeding. The dollar is slipping, consumer spending is down, and foreign creditors are beginning to slow their purchases of US debt. It’s all bad. Even so, no one really knows whether buying up the illiquid mortgage-backed assets from the nation’s banks would have helped to avert a major catastrophe or not. According to professor Nouriel Roubini, chairman of Roubini Global Economics, “You’re not resolving the two fundamental issues: You still have to recapitalize the banking system, and household debt is going to stay high.” A large number of economists believe Roubini is right. The bill will not solve the underlying problems.

Before the stock market opened on Monday, the futures markets had slumped heavily into negative territory, while the TED spread, an indicator of stress in inter-bank lending, had widened to 3.19, a level that suggests another rocky week of trading ahead. Could this be another Black Monday?

Paulson’s bill is designed to avoid a system-wide crash by clearing the banks’ balance sheets so they can resume extending credit to consumers and businesses. The hope is that massive infusion of capital will “turn back the clock” to the happy days of low interest speculation and bubble economics. Paulson is a “one trick pony” who firmly adheres to the belief that wealth creation depends on maximum leverage and an ever-weakening currency. But that worldview is no longer applicable after reaching Peak Credit, where consumers are no longer able to make the interest payments on their loans and businesses and financial institutions are forced to curb their spending and dump their toxic assets at fire sale prices. The system is deleveraging and nothing can stop it. Paulson has yet to accept the new reality.

Besides, there’s no guarantee that the banks will use the money in the way that Paulson imagines. As one Wall Street veteran explained to me, “I don’t see one penny of that $700 billion ending up helping the broader economy. I see it being used to prop up share prices so the insiders can salvage as much as possible when dumping their shares.”

Indeed, the $700 billion is just part of a massive “pump and dump” scheme engineered with the tacit approval of the US Treasury and the Federal Reserve. Once the banksters have offloaded their fraudulent securities and crappy paper on Uncle Sam, they will do whatever they need to do pad the bottom line and drive their stocks up. That means they will shovel capital into hard assets, foreign currencies, gold, interest rate swaps, carry trade swindles, and Swiss bank accounts. The notion that they will recapitalize so they can provide loans to US consumers and businesses in a slumping economy is a pipedream. The US is headed into its worst recession in 60 years. The housing market is crashing, securitization is kaput, and the broader economy is drifting towards the reef. The banks are not going to waste their time trying to revive a moribund US market where consumers and businesses are already tapped out. No way. It’s on to greener pastures. They’ll move their capital wherever they think they can maximize their profits. In fact, a sizable portion of the $700 billion will likely be invested in commodities, which means that we’ll see another round of hyperbolic speculation in food and energy futures pushing food and fuel prices back into the stratosphere. Ironically, the taxpayer’s largess will be used against him/her, making a bad situation even worse.

Then again, if the bill isn’t passed, no one can predict with certainty what will happen. Here’s how Tim Shipman summed it up in “Bailout Failure Will Cause US Crash,” in the UK Telegraph:

Officials close to Paulson are privately painting a far bleaker portrait of the fragility of the global economy than that advanced by President George W Bush in his televised address last week.

One Republican said that the message from government officials is that “the economy is dropping into the john.” He added: “We could see falls of 3,000 or 4,000 points on the Dow [the New York market that currently trades at around 11,000]. That could happen in just a couple of days.

“What’s being put around behind the scenes is that we’re looking at 1930s stuff. We’re looking at catastrophe, huge, amazing catastrophe. Everybody is extraordinarily scared. It’s going to be really, really nasty.”

The fear on Capital Hill is palpable, especially among the Democrats who have led the effort to pass Paulson’s boondoggle ASAP. Speaker of the House, Madame Botox (Pelosi), and fellow Democratic Party leaders, Chris Dodd, Harry Reid and the blabbering blowhard from Massachusetts, Barney Frank, have done everything in their power to sandbag dissenters, quash resistance, and rush the bill to a vote without the usual deliberation and debate. Rep. Marcy Kaptur (D-Ohio) was one of many angry congressmen who lashed out at Pelosi’s highhandedness. It’s all caught on a one-minute videoon YouTube:

The normal legislative process that should accompany a monumental proposal to bail out Wall Street has been shelved. Yes, shelved! Only a few insiders are doing the dealing. These criminals have so much power they can shut down the normal legislative process of the highest lawmaking body in this land. All the committees that should be scanning every word that is being negotiated have been benched. And that means the American people have been benched. We are constitutionally sworn to protect this country against all enemies foreign and domestic, and yes, my friends, there are enemies . . . The people who are pushing this bill are the very same one’s who are responsible for the implosion on Wall Street. They were fraudulent then; and they are fraudulent now. We should say No to this deal.

Republicans were equally furious at the way the Pelosi Politburo kept the rank and file out of loop as much as possible. Rep. Michael Burgess (R-Texas) summarized the feelings of a great many congressmen who felt they were being railroaded by Pelosi and Co: “We have seen no bill. We have been here debating talking points . . . House Republicans have been cut out of the process and derided by the leaders of the House Democrats as ‘unpatriotic’ for not participating in supporting the bill. Mr. Speaker, I have been thrown out of more meetings in the last 24 hours than I ever thought possible as an elected official of 800,000 citizens of N. Texas. . . . Since we didn’t have hearings, since we didn’t have markup, let’s at least put this legislation up on the Internet for 24 hours and let the American people see what we have done in the dark of night. After all, I have never gotten more mail on a single issue than on this bill that is before us tonight.”

Predictably, Rep Dennis Kucinich (D-Ohio) gave the best speech of the day railing against the financial industry and defending the interests of working class Americans.

The $700 bailout bill is being driven by fear not fact. This is too much money, in too short of time, going to too few people, while too many questions remain unanswered. Why aren’t we having hearings…Why aren’t we considering any other alternatives other than giving $700 billion to Wall Street? Why aren’t we passing new laws to stop the speculation which triggered this? Why aren’t we putting up new regulatory structures to protect the investors? Why aren’t we directly helping homeowners with their debt burdens? Why aren’t we helping American families faced with bankruptcy? Isn’t time for fundamental change to our debt-based monetary system so we can free ourselves from the manipulation of the Federal Reserve and the banks? Is this the US Congress or the Board of Directors of Goldman Sachs?

There is greater opposition to the Paulson bill than any legislation in the last half-century. The groundswell of public outrage is unprecedented, and yet, Congress — completely insulated from the demands of their constituents — continues to blunder ahead following the same pro-industry script as their ideological twins in the White House. There’s not a dime’s worth of difference between the two parties. Not surprisingly, neither Pelosi nor any of the Democratic leadership has even met with any of the more than 200 leading economists who have stated unequivocally that the bailout will not address the central problems that are wreaking havoc on the financial system. Instead, they have caved in to Bush’s demagoguery and the spurious claims of G-Sax bagman Henry Paulson, a man who has misled the public on every issue related to the subprime/financial fiasco so far.

There are parts of Paulson’s Emergency Economic Stabilization Act of 2008 that every US taxpayer should understand, even though the media is attempting to keep the details obscured. In sections 128 and 132, the proposed bill will suspend “mark to market” accounting. This means that the banks will no longer be required to assess the worth of their assets according to what similar assets fetched on the open market. For example, Merrill Lynch just sold $31 billion of mortgage-backed securities for $6 billion, which means that similar bonds should be similarly priced. Simple, right? The banks need to adjust the value of those assets on their balance sheets accordingly. This gives investors and depositors the ability to know whether their bank is in bad shape or not. But Paulson’s bill lifts this requirement and allows the banks to assign their own arbitrary value to these assets, which is the same old Enron-style accounting bullshit.

Paulson’s bill also proposes the “Elimination of FASB 157 and 0% reserves,” This is just as sketchy as it sounds. FASB or Financial Services Regulatory Relief Act reads:

Federal Reserve Banks are authorized to pay banks interest on reserves under Section 201 of the Act. In addition, Section 202 permits the FRB to change the ratio of reserves a bank must maintain relative to its transaction accounts, allowing a zero reserve ratio if appropriate. Due to federal budgetary requirements, Section 203 provides that these legislative changes will not take effect until October 1, 2011.

Blah, blah, blah. It’s all legal mumbo jumbo to conceal the fact that the banks can continue to operate with insufficient capital, which is why the system is currently blowing up. It all gets down to this: The reason the system is exploding is because the various financial institutions have been allowed — via deregulation — to act as banks and create as much credit as they choose without a sufficient capital base. When one reads about massive deleveraging, this relates directly to the fact that under-capitalized businesses were operating with too much debt in relationship to their capital. That’s it in a nutshell. Forget about the CDOs, the MBSs, the CDS and the whole alphabet soup of derivatives garbage. They were all inserted into the system so greedy Wall Street land sharks could expand credit without supervision and balance trillions of dollars of debt on the back of a one dollar bill. This is why Paulson wants to suspend the rules that would bring credibility and trust back to the system. After all, that might impinge on Wall Street’s ability to enrich itself at the public’s expense.

Finally, Nouriel Roubini sites a study by Barry Eichengreen, “And Now the Great Depression,” which points out why Paulson’s $700 billion plan is likely to fail:

Whenever there is a systemic banking crisis there is a need to recapitalize the banking/financial system to avoid an excessive and destructive credit contraction. But purchasing toxic/illiquid assets of the financial system is NOT the most effective and efficient way to recapitalize the banking system

A recent IMF study of 42 systemic banking crises across the world provides evidence of how different crises were resolved.

First of all only in 32 of the 42 cases there was government financial intervention of any sort; in 10 cases systemic banking crises were resolved without any government financial intervention. Of the 32 cases where the government recapitalized the banking system only seven included a program of purchase of bad assets/loans (like the one proposed by the US Treasury). In 25 other cases there was no government purchase of such toxic assets. In 6 cases the government purchased preferred shares; in 4 cases the government purchased common shares; in 11 cases the government purchased subordinated debt; in 12 cases the government injected cash in the banks; in 2 cases credit was extended to the banks; and in 3 cases the government assumed bank liabilities. Even in cases where bad assets were purchased — as in Chile — dividends were suspended and all profits and recoveries had to be used to repurchase the bad assets. Of course in most cases multiple forms of government recapitalization of banks were used. (Nouriel Roubini’s Global EonoMonitor)

In short, it won’t work. Nor is it designed to work. The bill is just Paulson’s way of carving a silver canoe for himself and his brandy-drooling investor buddies so they can paddle away to some offshore haven while the rest of us drown in a bottomless ocean of red ink.

Mike Whitney lives in Washington state. He can be reached at: Read other articles by Mike.

17 comments on this article so far ...

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  1. Donald Hawkins said on September 30th, 2008 at 10:19am #

    So Mike it looks like they will get away with this and of course what we see now and how this game is played I guess to try and slow climate change is probably out of the question except for a little greenwash here and a little there to make people think something is being done. So few doing so much to so many, is that how that goes? Just doesn’t seem fair, right and it looks like there is really not much that can change this, the Darkside is strong. I am going to write my congressman and let’s see what would be a good way to start the letter? I know what James Hansen said once. “Dear congressperson think of this as a war”.

  2. Deadbeat said on September 30th, 2008 at 10:36am #

    What irony. The Republicans primarily stopped this awful bill. And were is the “Left”? Again the lack of organization on the Left is why the Democrats has such an awful stance.

    Also I recently heard that the Cynthia McKinney campaign is running out of money and do not have enough funds to send here to Washington DC to appear on an NPR program. This is clearly representative of the disarray of the Green Party and why there needs to be more scrutiny about the why the Left is in such a sorry state.

  3. Michael Kenny said on September 30th, 2008 at 10:43am #

    This sems to be a perfect storm from the Democrats’ point of view and I just wonder if Pelosi, guessing rightly what was going to happen, didn’t set Paulson up. Because the Democrats supported the bill, the Republicans cannot accuse them of “sabotaging” the economy. But because the bill has been killed, the Democrats can’t be blamed for it by the electorate either. In addition, by cutting out all the committees, few Democrats have actually spoken in favour of the bill. To crown it all, the Republican Party has been split down the middle, between its traditional business side and its redneck, Reagan deomcrat side. It was fear of the latter that caused so many Republicans to vote against the bill bearly a month before an election. So now, the crisis will continue to fester between now and the election and the Republicans have shown themslves unable to deal with it. I would guess that this is the “coup” that the Republicans were planning to spring on Obama in about 6 to 9 months time, but events got out of their control.

    The Black in black Monday seems to be the junior senator from Illinois!

  4. Jonathan said on September 30th, 2008 at 11:25am #

    Michael, though what you say may well be true, what doesn’t seem to fit is that the republicans must have virtually all voted against as well as a few democrats which perhaps shows that at least in action they are not so split.
    Perhaps they (rep.) actually intend to ‘sabotage’ the economy knowing that their candidate is statistically unlikely to win thus leaving Obama with a lot of mess to clean up and responsibility to take. (Just a thought)
    On the other hand they may, seeing that the public is very much against the bill, be trying to distance themselves from George W thus in the public’s eyes scoring double points. (doesn’t explain why McCain supports it dolt!)

  5. Deadbeat said on September 30th, 2008 at 12:34pm #

    I just wonder if Pelosi, guessing rightly what was going to happen, didn’t set Paulson up.

    This aspect was mention briefly today on DemocracyNow! If that was the case it was brilliant politics. But I still have doubt that a bailout is needed. What was mentioned on DemocracyNow is that the bill was rushed and the newer 110 page bill was essentially a longer version of Paulson’s original 3-page bill.

    Clearly the media — who is owned by the very wealthy and wants a bailout bill — did not hide their anger at the Republicans and especially McCain who antics seemed to backfire.

    Clearly what ever plan emerges needs to really infuse money at the bottom of the economy rather than the top. I am totally against raising the FDIC insurance cap to $250,000. That and deregulation is how the S&L crisis happened in the late 1980’s. If the banks know that the government will insure up to $250,000 in deposit it will allow more bank to take unnecessary risk with bank funds. IMO the insurance cap should be lowered back to $40,000 which existed before they raised the cap to $100,000. The average bank balance for most American is about $2500.00

    In fact lowering the insurance would help to spread that money into more banks and even credit unions.

    What we are seeing right now is the creation of mega-banks. What ever happened to enforcing Sherman Anti-Trust? My preference is seeing a restoration of U.S. Post Office accounts that existed prior to Eisenhower and a restoration of the stock transaction tax that existed up until 1966.

  6. Deadbeat said on September 30th, 2008 at 12:42pm #

    (doesn’t explain why McCain supports it dolt!)

    McCain supports the bill for the same reason he supported Charles Keating. As Michael Kenny suggest, McCain is a business republican rather than an ideological republican. This is the split. For example Christopher Shays (R) defied his Connecticut constituency and voted for the measure. If you take a look at the voted based on the congressional districts (the NY Times website has an excellent map of the votes by district) you’ll see that the northeast contingency supported the measure. In other words the monied regions supported the measure. The areas that were against the bill was mainly the Midwest so called “middle America” who’ve taken the brunt of de-industrialization.

    This bill and the vote was all about CLASS and where was the “Left”? It took primarily the ideological Right to stop this awful bill.

  7. Doug Page said on September 30th, 2008 at 1:00pm #

    We have no organized party or group in Congress that represents us. Although I have been a life long Democrat, the Democrats have not done anything for the voters since Medicare in 1965. Manuel Garcia Jr. who writes in Counterpunch and Dissident Voice has it right: We are governed by a Military Industrial Congressional Complex. The function of Congress is to fund Wall Street and its MICC . Wall Street and its MICC return the favor by funding the reelection of incumbent members. The Democrats constantly claim to speak for the “little guy” but without exception, the Democrats betray the little guy. It is time for us to stop wasting time and money on ballot box politics, and start a million man march on Washington with our pitchforks. Today in Counterpunch Manuel Garcia Jr. is suggesting a general strike. We have no other weapons or means to power. Let’s do it!!!!
    Doug Page, Tucson, AZ

  8. Donald Hawkins said on September 30th, 2008 at 2:14pm #

    The Brazilian government faces criminal charges after a report found that the Amazon rainforest is being deforested three times faster than last year as rising food prices encourages more illegal logging.

    A study by Brazil’s National Institute for Space Research found that destruction of the Amazon had increased 228% in August compared with the same month a year ago. Guardian uk

    It’s no big deal who needs rainforests anyway. We need to pass this bailout of 700 billion it’s good for the country and listen to your leaders they are watching out for you and I will vote McCain Palin as they just seem smart and I must say some of you who write for DV how can I say this seem unamerican. Watch Foxnews for a week or so and maybe you will see the light. Hannity is very good and very smart. Watch c-span and the leaders in action and just maybe you will change your evil way’s. Very good music while watching the senate not some of that stuff I’ll bet you people listen to. Did anybody see the President talk this morning he is looking out for all of us and just gives me a feeling of confidence. I hope what I just wrote will help you all in the future.

  9. Daniel Gerber said on September 30th, 2008 at 3:19pm #

    I am a bit surprised at the discussions here. Is it really all only a game, Wall Street and Bankers against everybody else? Are we not forgetting that the easy money from Wall Street and Banks also allowed for a historic expansion of house ownership that benefited all classes. Greed was not only in Wall Street but also on main street where everybody needed the biggest house the newest car, the flat screen TV, the greatest gadget all mostly financed from remortgaging homes. While savings rates became negative.

    I am sorry but coming from Europe, easy access to credit in the US provides for fantastic opportunities, but if one borrows only to blow it on consumption then of course one eventually ends up poorer, but that really is an individual choice. For anyone who can manage his cravings and use the borrowed money in smart investments this place still offers incomparable opportunities.

    Now of course Wall Street greed and creative repackaging into new assets ignoring the fact that housing like any asset could eventually loose value played a big role too. But the fact that while it went on it benefitted many people at various levels of the economy makes a bail out almost a public good issue. What are the options anyway, let everything disintegrate. Disintegration will go well beyond the United States, in a largely globalized world and millions of people, in fact most of them poor will be suffering first and most.

    In the 1930’s it eventually led to WWII, with fascists grabbing power in the countries most affected. Given how unstable the world is, a scenario with WWIII is definitely not beyond my imagination’s grasp, and such a war in the nuclear age would in all likelihood be far worse than what we have seen so far.

  10. Donald Hawkins said on September 30th, 2008 at 5:35pm #

    Most of the luxuries and many of the so-called comforts of life are not only not indispensable, but positive hindrances to the elevation of mankind. –Thoreau

    Get ready as it looks like mankind is about to be elevated like it or not.

  11. john andrews said on September 30th, 2008 at 11:57pm #

    There seems to be general agreement that the main cause of this crisis is that banks lent too much money. However, there has been little comment about the other side of the equation – the ability of people to pay.

    Three years ago I was doing warehouse work that paid £7.20/hr – and that was not exceptional. Today that same work pays between £5.80 and £6.20/hr – and that is not exceptional.

    Meanwhile house prices were rising at something like 25%/yr.

    How did the financial geniuses who run our economies think that people would be able to pay increasing housing costs with decreasing wages?

  12. AaronG said on October 1st, 2008 at 12:03am #

    “…..greedy Wall Street land sharks could expand credit without supervision and balance trillions of dollars of debt on the back of a one dollar bill”

    So, to help me understand the banking system a bitg better, it’s kinda like feeding fish to 5,000 people using only 1 fish. That has only been done once before in history. They said The Beatles were bigger than Jesus, but do the bankers think they are too?!

    By the way, Mike, I love your last paragraph with the canoe and brandy analagy. But do you seriously think the bankers will do the sweaty work of paddling? Chuck an outboard on the canoe and guzzle some more fossil fuels whilst sipping the brandy. There. I’m thinkin like a banker already……….

  13. Poilu said on October 1st, 2008 at 3:02am #

    Following is AP’s blurb on this from Monday.

    While I find the Democratic opposition to this government-sponsored highway robbery somwhat less than inspiring, the actual vote tally HARDLY justifies any claim that the bill’s demise was “overwhelmingly” a Republican affair. Moreover, the *95* Democratic Reps [vis-a-vis 133 Republicans] who voted against that corporate giveaway can scarcely be considered a mere “handful”!

    Shall we get our facts straight here?? This was clearly a BI-partisan — albeit frighteningly MARGINAL — rejection of that hasty “Chicken Little” plan. And despite Madame Pelosi’s typically quisling support for the Bush Reich, the House Democrats contributed significantly to that defeat:

    “House Rejects $700 Billion Rescue Plan”
    [AP; 29/09/08]

    ‘ The U.S. House of Representatives on Monday defeated a $700 billion emergency rescue package, ignoring urgent pleas from President Bush and bipartisan congressional leaders to quickly bail out the staggering financial industry.

    ‘ The measure failed on a vote of 205 to 228. Voting against the measure were 95 Democrats and 133 Republicans. …’

  14. David A. Smith said on October 1st, 2008 at 7:06am #

    What are the options anyway, let everything disintegrate. Disintegration will go well beyond the United States, in a largely globalized world and millions of people, in fact most of them poor will be suffering first and most.

    Daniel – you have nailed it with regard to options, but missed the lesson. Yes, disintegration is the alternative (and may occur even with the bailout), but that isn’t necessarily a BAD thing. Yes, people will suffer. But, hey, the poor are already the poor. The real hurt comes to the new poor. And most of us are deadly afraid that we’ll be among them.

    But here’s the real issue – why do we consider the loss of our material comfort to be such a horrendous hurt? Are we really that shallow? Or are there other things that make life worth living? Just maybe, the collapse of this wealth worshiping economy will be the best thing that ever happened to us, bringing focus back to aspects of life that truly are important.

  15. Donald Hawkins said on October 1st, 2008 at 7:16am #

    I am pulling for you. I will do my part as an American. Going to get a first and second on my house at the highest rate I can find. We will get a new flat screen TV and all those calls we get to buy stuff sign us up. Turn all the lights on in the house even in the day time and just drive around for the fun of it. All those commercials on TV that say to call now well if the phone isn’t busy from the other calls again sign us up. Going to start eating maybe 6 meals a day. Any money left buy stocks. I am pulling for you.

    I forgot I am going to tell my kids to do the same thing as me. They already have a first on there house and they need to get a second. I will tell them to always buy new never used. This Christmas max out there cards and then get another job that’s two jobs. Take my Grandson out of school heck he is six to watch the animals as they work. I am pulling for you. Now here is the big one to make friends with some rich people to get on the list. What list? From what I understand the entire State of Colorado will be ringed in barb wire and only people on the list can get in. That list. Like James Hansen said think of this as kind of a war. I am pulling for Wall Street and Banks maybe the people on the hill will come to there senses and pass this bill. I am pulling for them and will do my part think of this as a kind of war.

    A good book called the list. A little on the lines of Atlas Shrugged anybody like to help me write it. Think of it as a kind of war.

  16. Deadbeat said on October 1st, 2008 at 9:36am #

    Are we not forgetting that the easy money from Wall Street and Banks also allowed for a historic expansion of house ownership that benefited all classes.

    The house “ownership” didn’t benefit all classes because a mortgage is NOT home ownership. It is housing INDEBTEDNESS and the bank still owns the home. And please lets not talk about the risk of divorce for a home debtor. This is not a benefit to all classes especially when this debt is acquire with falling real wages.

    Housing indebtedness is extremely expensive but it is all about the “American Dream”. The desire to having a home is very strong and what needs to occur is a rethinking of housing. Perhaps cooperative housing or co-housing or low-cost public housing. Also why is rent not tax deductible? Clearly rents is needed to provide shelter and yet there is no deductions or subsidies for paying rent.

    There need to be a whole rethinking of housing.

  17. Daniel Gerber said on October 2nd, 2008 at 10:38am #

    I completely agree that our current materialistic world and the capitalistic way to define quality of life might be squewed and quite possibly even unsustainable. But whether we like it or not, it reflects the wishes of the great majority of the world’s informed population. All you have to do is travel China, India, and other developing coutnries and you can see all the young striving for a better life largely defined in terms of material goods and modern western luxuries (once past the basics of water, food and shelter), cars, televisions, cell phones, watches, you name it. It seems as humans we all like “nice things”. So yes, I really think that the great majority of us really are that shallow.

    I work with cooperatives, and associations, my experience with them unfortnately is that they often sound a lot better on paper than they function in reality. It is hard workt to work together, especially when you have a multicultural setting with very different views as to what can be considered as acceptable rules. As a Swiss I have a very strong “need” for order, clear and equitable rules, timeliness, efficiency, (these are enourmously helpful characteristics in a capitalistic society) however many cultures have very different views on these topics. I have travelled and worked a bit around the world, and I have become convinced that no one has the right to impose their values on another, at the same time though, not all values are equally contributing to the betterment of society, or the individual for that matter. How do you reconcile this?

    In a diverse society, as unfair as it may appear, capitalism (defining quality of life in terms of the things we own) that allows each individual to make their own choices and live with their consequences, seems the most suitable. It does not promote equality and it favors individuals and groups who already have a headstart in life, intelligent, wealthy, healthy, physically talented, etc.. and they almost always will keep remaining at the top echelons. They can afford to make mistakes, the headstart if they manage to tap into it, will always make them rise back up to the top. Given this fact, there is no doubt that in order to keep society functionning, some redistributive systems need to be in place to keep a certain homegenity and maintain peace. But at the same time these redistributive systems cannot go on taking from one group to give to the other, there have to be incentives, as well as measures to provide equal access to make sure that everybody is properly motivated to make it on their own. Otherwise surely dissent will form. The proper application of this redistributive system though is very complicated, and hugely expensive. Where systems seem most effective in keeping the balance between those that really need assistance and those that simply take advantage, the administration of the system typically becomes more expensive than the actual amount of resources transferred. And that too is a problem.

    Truly I have no solution, all I can say is that ultimatley the greatest contributor to our own happiness (which might be quite different in definition for each of us) seems to be ourseleves, especially in the developed world. Our ability to make our own choices and willingness to live with the consequences of these choices then might be the definition of happiness. It would seem that life inherently is unfair from the begining, all we have really is ourselves to make it as good as gets for ourselves.