Funny video

February 20, 2008

I don’t think it takes an econ major to appreciate the humor here. (Hat tip to CR for this one. )

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So the banks get very creative with their financing schemes, putting themselves at risk of ending up in the home selling business. Then, when they do end up in that business, they say that home selling is not what they do and they shouldn’t be put in that position???Now the guys at the top of the banks when they were doing the creative financing are “fired” and leave with great wealth, no admission that they did anything wrong, no condemnation by their successors, and soon they pop up somewhere else raking in more dough.Meanwhile, those who worked at the bank carrying out the orders of the ones directing the shenanigans, or working in other departments of the bank, see the bank as a company, their employer, at risk for decisions they had no control over.So we have people creating risk then escaping the consequences while others take the hit. The system invites this because of the nature of limited liability. There has to be protection of personal wealth from the results of business activity in order for there to even BE business activity. But here we see how it can play out, shielding those who run the show while leaving everyone else subject to the consequences.Enter Uncle Sam to pick up the pieces, especially if there are lots of people who can be hurt financially. It IS infuriating that we all seem to end up getting the bill for the results of what a relatively small percentage of the population does but isn’t that the nature of the system we’ve created?If you fail and you are at the top there are essentially no meaningful consequences. You were fabulously wealthy before and you remain so. You lose a job, but from your impressive personal network you are soon back in action. This invites dodgey initiatives. It’s what we expect, what we promote because we want creativity to create wealth. We see the down side of it now. Some people are paid to take risk but are put beyond it by the system we have.Joe Average is definitely not put beyond risk, yet he takes it on in keeping with the times. Been through the Depression? Keep money in a mattress, spend the absolute minimum and never take a loan for anything. Common sense, everyone is doing it. Spent your whole life in a credit culture? Don’t think twice about taking on debt and pay little heed to the fine print above the line where you sign your name. Common sense, everyone is doing it.So Joe Average, as a mortgage owner or a rank-and-file bank employee wants limited liability too, just like the big guys, and there’s Uncle Sam to offer it. Democracy and a free market are not compatible. For them to coexist the tensions between the two must be resolved. America has been a study of how this can be done, but there is no guarantee it will work out in a stable or long-term solution

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