Here's one answer

No, you aren’t stupid!

In fact, what you have discovered is the world is a hell of a lot more complex than you once thought it was. Getting an understanding of that world doesn’t require that you have access to LexisNexis. Rather, it involves incorporating into your thinking processes that very few problem that human beings encounter have simple explanations.

Look at all the areas of disagreement that we hear or see in our daily news sources, whatever they may be. Is the Earth really experiencing global warming, and if so, to what degree is it caused by human activity vs. natural phenomena? What should the U.S. do about Iraq, Iran, and the whole of the Middle East? We are experiencing the beginning of a world-wide recession. What caused it, and what can be done to fix it?

You will find as you get older, you will develop your own view of the world which works pretty well in guiding your own personal explanations for complex human problems. I’ll tell you mine, but that doesn’t mean I am recommending it for you. You will have to come to terms with it in your own way, and wear it as comfortably as you wear your own skin.

So here it is – do what you want with it.

1. There is a constant war in the brains of all human being between the rational (thinking and reasoning) and the irrational (behavior driven by emotion).

2. There are really only two basic systems that drive all human behavior – Greed and Fear, and you can classify your observations of everyone you know as reacting to one or the other (and sometime both at the same time) of these stimuli.

3. Everything interaction of a person with others results in Winners and Losers. Example, those who play in the Foreign currency market, have done extremely well the last couple of months buying Euros and Selling U.S. Dollars. The same is true with those selling short on a variety of stocks. Others will lose their lifetime savings as their 401K portfolios dissolve to nothing. While in the end lots of people will lose if this recession runs unchecked for any extended period, there are some who are rubbing their hands together as they watch.

4. Winners tend to be those who are dominated and controlled in their behavior by the rational parts of their brain, with Losers those dominated by emotion. For me, every individual, who has been the victim of fraud, scam artists, and salesmen, has been victimized out of sheer failure to reason.

5. The sub-prime phenomenon is that simple and easy to understand. Those who fell prey to easy purchase of homes with variable rate mortgages simply never bothered (or were incapable of seeing) the consequences. (If something is too good to be true, count on it – it isn’t!) The banks that sold the mortgages were just as irrational, failing to look at what would happen when the housing bubble burst.

6. The same is true for the credit card industry. They gave out tons of credit, to people who will never be able to pay it back, and now that they are not, whether the customer goes bankrupt or not, that money will just not get paid… it’s that simple.

7. Then there is another group all together – the sociopaths who are entirely rational, incapable of feeling empathy, compassion, or guilt. Almost entirely male, they are estimated to make up 1-4% of the population. They know what they want, and they will let nothing stand in the way of their getting it. Where do they end up? They are the top executives of the corporations and guess what else? You got it, the politicians who get elected time and time again. To get a feel for these wonderful folks, read my articles, Congress and the Return of the Body Snatchers, and It’s All in the Brain. You will have a clear understanding of my own views in this regard, and you can come to your own conclusion about whether this is a realistic explanation for much of what we see going on around us.

8. Last but not least is the question of why and how the American Public let’s all this happen. For me, there is an excellent explanation offered by Robert Altemeyer, in his online book, The Authoritarians.

I’ll be interested in your thinking after you have read this material, and thought about the rest of what I said above.

by Sherwin Steffin (14 articles, 24 quicklinks, 1 diaries, 82 comments) on Tuesday, January 22, 2008 at 5:54:48 PM
 

I'll check it out

But I do wonder about your making this seem like this is just the way humanity works. I feel a lot of our behaviors were learned.

It's like what Dennis Kucinich says about how we learned to be violent and if we can learn to be violent, we can learn to be peaceful. It's probably harder to undo violence than it is to undo peace but the point being things aren't just the way they are because. It can be changed through education over a long term period of time.

I know you've thought I think this can all happen in the short term. I don't.

But I do think we need to figure out all the connections economically. We need to find a book by someone who understands this mess. We need to find some way to get this guy to go around and talk to people to help them see how money is being affected, passed around, etc. Tell people what's happening to the dollars they think they have which they don't have.

The sociopaths are making money off people who are desperate. And that desperation in my opinion comes from years of bad policies. So, the government should do something about it because we can. And so everything I want in the future involves a government getting the people to restore trust in it to function.

After trust is restored, than we can go from there.  

by Kevin Gosztola (194 articles, 103 quicklinks, 63 diaries, 776 comments) on Tuesday, January 22, 2008 at 6:41:39 PM
 

A couple rebutals

I would take issue with a couple points you make here, Iceman.

#3. I believe capitalism offers power for creative investment capable of benefiting all. Let's take an example involving common stocks to demonstrate this (truth is there are other viable sources of investment capital beyond common stocks, but for now this will do). Capital made available for investment in a business can help finance the implementation of improved processes that lead to an increase in the productivity of labor. This reduces the cost of production. This, then, offers to even reduce the cost of the product paid by the end consumer.

So far, then, we have the business, and the consumer of its wares, benefiting. Improvements in productivity lower the cost of production, and so, increase the business' profit margin. Check business benefit. Some of this increased profit margin can be passed on to the product's end consumer, thus lowering the cost they pay. Check consumer benefit.

But what of investors and labor? Well, first, when profit margins are increased as a result of the improvement in productivity, then both investors and labor can financially benefit. Investors by way of how the improved earnings power of the business increases the value of their share in the business; labor by way of how wider profit margins make pay raises feasible.

And labor can potentially benefit all the more, too, were more time made available for other pursuits as a result of the improvement in productivity.

So, not every interaction among people always results in winners and losers. Some interactions are, in fact, win-win.

#5. One thing you neglect to mention in the fallout from the subprime mortgage crisis (regarding those who might be incapable of seeing the consequences of a variable rate reset) relates to the consequences of our society having perfected the art of turning a blind eye. I think it is safe to say most borrowers entering into a financial transaction as significant as a mortgage assume the lender would not act contrary to the lender's best interest. Can the borrower not rightly assume the lender has no vested interest in building a portfolio of non-performing loans? Indeed, the borrower also has every reason to believe regulators are on top of the situation, and would protect against a run-away, rogue lender who might threaten the very integrity of the mortgage market (let alone compromise the very underpinnings of the financial system, itself).

Yet, by perfecting the art of turning a blind eye, our government's regulatory agencies might rightly be looking down the barrel of criminal charges, as well as congressional representatives for lack of oversight, such as one might reasonably claim is leading to a "Breach of the Peace" (see U.S. Constitution Article I, Section 6).

by GoldenT (6 articles, 1 quicklinks, 1 diaries, 51 comments) on Saturday, January 26, 2008 at 7:45:33 PM
 

Good question re: Hedge funds.

Time I educated myself on this as well, and so I have. Good explanation here http://en.wikipedia.org/wiki/Hedge_fund

by Steven Leser (193 articles, 37 quicklinks, 32 diaries, 1298 comments) on Tuesday, January 22, 2008 at 9:07:01 PM
 

Here's a good place to start.

"To K. and T. -- and to all young people like them who are eager to learn the truth, whatever it may be, about the world they must live in, so that they may not make it worse than it is in trying to make it better."

Dedication, by author Harry Scherman within his book, published in 1938,
THE PROMISES MEN LIVE BY [Book review, March 28, 1938 issue of TIME Magazine:"Easy Economics."]

But first, seriously, make sure you really want to take the "red pill." 

by Edward Ulysses Cate (0 articles, 0 quicklinks, 0 diaries, 217 comments) on Wednesday, January 23, 2008 at 1:53:28 PM
 

The Simple Answer

"One of the great American industrialists of our day—a man who has rendered yeoman service to his country in this crisis-recently emphasized the grave dangers of "rightist reaction" in this Nation. All clear-thinking businessmen share his concern. Indeed, if such reaction should develop—if history were to repeat itself and we were to return to the so-called "normalcy" of the 1920’s—then it is certain that even though we shall have conquered our enemies on the battlefields abroad, we shall have yielded to the spirit of Fascism here at home."

-- President Franklin Delano Roosevelt 1944 State of the Union Address

The simple answer is returning the power of the purse to the People.

See Dennis Kucinich's H.R. 3400 - Rebuilding America's Infrastructure.

And discover:

How Roosevelt’s RFC Revived Economic Growth, 1933-45 

by GoldenT (6 articles, 1 quicklinks, 1 diaries, 51 comments) on Saturday, January 26, 2008 at 6:07:18 PM