coromandal


being indecent
May 3, 2015, 12:46 pm
Filed under: brave new world, unseen world | Tags: ,

Beyond basic survival, you’re poor if you can’t maintain the sense of being decent in the eyes of the community you live in:

People are poverty stricken whenever their income, even if adequate for survival, falls markedly behind that of the community. Then they cannot have what the larger community regards as the minimum necessary for decency; and they cannot wholly escape, therefore, the judgment of the larger community that they are indecent.

John Kenneth Galbraith

photo: Dionisio González



markets are a totem

Here’s a description, from Galbraith’s book A Short History of Financial Euphoria, of the aftermath of market crashes, like those of 1987 and 2008. He describes the refusal to talk about the real reason behind crashes, the substitution of other not real reasons, and the propping up of the Market as an unimpeachable institution.

Well, markets aren’t magic, but beyond that and perhaps more importantly, money people are not well equipped for civil leadership. If there is a priesthood increasing superstition and influence around our economic lives – which should be rational and held subject to more important things, like human wellbeing and flourishing – then shouldn’t we do something about it? Discredit the priesthood and maybe the orthodoxy will wither and die.

From the book:

There will be talk of regulation and reform. What will not be discussed is the speculation itself or the aberrant optimism that lay behind it. Nothing is more remarkable than this: in the aftermath of speculation, the reality will be all but ignored.

There are two reasons for this. In the first place, many people and institutions have been involved, and whereas it is acceptable to attribute error, gullibility and excess to a single individual or even to a particular corporation, it is not deemed fitting to attribute them to whole community, and certainly not to the whole financial community. Widespread naivete, even stupidity, is manifest; mention of this, however, runs drastically counter to the earlier noted presumption that intelligence is intimately associated with money. The financial community must be assumed to be intellectually above such extravagance of error.

The second reason that the speculative mood and mania are exempted from blame is theological. In accepted free-enterprise attitudes and doctrine, the market is a neutral and accurate reflection of external influences; it is not supposed to be subject to an inherent and internal dynamic of error. This is the classical faith. So there is a need to find some cause for the crash, however far fetched, that is external to the market itself. Or some abuse of the market that has inhibited its normal performance.

Again, this is no matter of idle theory; there are very practical consequences, and these, as we shall see, are especially evident an important in our own time. That the months and years before the 1987 stock market crash were characterized by intense speculation no one would seriously deny. But in the aftermath of that crash, little on no importance was attributed to this speculation. Instead, the deficit in the federal budget became the decisive factor. The escape from reality continued with studies by the New York Stock Exchange, the Securities and Exchange Commission, and a special presidential commission, all of which passed over or minimized the speculation as a conditioning cause. Markets in our culture are a totem; to them can be ascribed no inherent aberrant tendency or fault.

John Kenneth Galbraith, A Short History of Financial Euphoria, p23



the escape from reality
August 17, 2013, 10:34 am
Filed under: brave new world | Tags: , , ,

no 2 flamingoHere is the economist John K. Galbraith making two more excellent points about the popularity and insanity of speculation.  He describes two reasons why after a bubble bursts — as it did in a spectacular fashion that echoed around the world in 2008 — the real reasons for the crash are completely ignored.

The first reason is that we have very little trouble casting blame on one or two people, but have considerable difficulty blaming an entire community – like the financial community or the economists.  We simply can’t bring ourselves to believe that so many people could be so wrong, and also that people with so much money could be so foolish.

The second reason is that we have come to believe in the invisible hand, laissez faire  of the market as an orthodox Truth. The cause of crashes are never identified as the speculative behavior that precedes them in spite of the evident opportunity to head off very real and painful social and personal damage. Here is Galbraith:

in the aftermath of speculation, the reality will be all but ignored.

There are two reasons for this.  In the first place, many people and institutions have been involved, and whereas it is acceptable to attribute error, gullibility, and excess to a single individual or even to a particular corporation, it is not deemed fitting to attribute them to a whole community, and certainly not to the whole financial community.  Widespread naivete, even stupidity, is manifest; mention of this, however, runs drastically counter to the earlier-noted presumption that intelligence is intimately associated with money.  The financial community must be assumed to be intellectually above such extravagance of error.

The second reason that the speculative mood and mania are exempted from blame is theological.  In accepted free- enterprise attitudes and doctrine, the market is a neutral and accurate reflection of external influences; it is not supposed to be subject to an inherent and internal dynamic of error.  This is the classical faith.  So there is a need to find some cause for the crash, however farfetched, that is external to the market itself.  Or some abuse of the market that has inhibited its normal performance.

Again this is no matter of idle theory, there are very practical consequences, and these, as we shall see, are especially evident and important in our own time.  That the months and years before the 1987 stock-market crash were characterized by intense speculation no on would seriously deny.  But in the aftermath of that crash, little or no importance was attributed to this speculation.  Instead, the deficit in the federal budget became the decisive factor.  The escape from reality continued with studies by the New York Stock Exchange, the Securities and Exchange Commission, and a special presidential commission, all of which passed over or minimized the speculation as a conditioning cause. Markets in our culture are a totem; to them can be ascribed no inherent aberrant tendency or fault.

John Kenneth Galbraith



people are most credulous when most happy
February 19, 2013, 11:32 pm
Filed under: brave new world | Tags: , ,

buy sellThe economist Galbraith describes two classes of investor / speculator:  class no. 1 who believe utterly and finally that markets can and will continue to make them richer and richer indefinitely; and class no. 2 who go all in, but in a slightly more measured way, have made plans to get out.

More entertaining than the descriptions of speculator type no. 1 and speculator type no. 2 is Galbraith’s rumination on the psychology behind it all.  Vanity thy name is … speculation:  players of the market game convince themselves of their own great genius in direct proportion to the lucre brought in.

There is an ultimate step:  from ‘success’ to vanity to credulity.

Here is Galbraith:

The price of the object of speculation goes up. Securities, land, objects d’art, and other property, when bought today are worth more tomorrow. This increase and the prospect attract new buyers; the new buyers assure a further increase. Yet more are attracted; yet buy; the increase continues. The speculation building on itself provides its own momentum.

There are those who are persuaded that some new price-enhancing circumstance is in control, and they expect the market to stay up and go up perhaps indefinitely.   Continue reading