Steve Forbes and His Assinine Article

I was just today pointed to Steve Forbes article in his namesake magazine entitled "How Capitalism Will Save Us."  I just finished reading it and I now feel fully justified in saying, "Fuck you Steve Forbes."

If sensible rescue efforts continue--and they will--the immediate crisis will quickly pass. Shell-shocked businesses and consumers won't recover rapidly from the trauma of recent months, especially as we now cope with recession. But the downturn shouldn't be prolonged: The economy here and those overseas should start to pick up no later than next spring.

This, Steve Forbes, is great to hear, please tell me how this will come about...

 

Some liberal political activists are advocating using Washington's new powers to pursue other agendas, such as forcing tighter emissions curbs or mandating costly health insurance coverage. New attempts to restrict corporate pay, at least in some sectors, is a given...  Protectionists are renewing calls for trade restrictions in the name of   consumer safety and promoting "better" labor and environmental standards. Politically resurgent labor unions and other activists will push for rules on who sits on corporate boards to "better represent consumers and investors." They want an implicit veto power over the policies of publicly held companies. They're also ready to remove barriers, such as the secret ballot, in order to coerce workers into joining unions.

Well, Steve Forbes, I see that you do not believe that corporations should be required to have "tighter emissions curbs" or have requirements to provide "costly health insurance coverage".  You think CEO pay restrictions are bad and you don't like unions.  And you have derided consumer safety as well as labor and environmental standards as issues for "protectionists".  Clearly you believe these are things that are in the way of our economic boo boo feeling all better.

You go on to say that new rules and regulations are inevitable but the only acceptable example you give is making credit default swaps (what Warren Buffet calls an economic weapon of mass destruction) part of an official exchange.  Credit default swaps which many people place at the center of this current economic crises.  Credit default swaps that you refer to an "exotic instrument".  Credit default swaps which are completely devoid of any real value.  To you the solution is to legitimize this casino game as part of our recognized economy.

At this point in my review I need to step away and say that, assuredly, I am not an economist and pompous asswipes like yourselves will likely dismiss anyone like me as with out the requisite knowledge to be relevant.  But, that is the part of waht got us here.  We let pompous asswipes like you disguise your big boy parlour games as difficult and exotic so that we would bother ourselves.  We were to just assume that you are smarter than us and let you do your business. However, it is now clear, as I have mentioned twice now, you are just a pompous asswipe interested only in no one touching you sandbox because you are not done playing yet.

Back to regulation.. you claim that Sarbanes-Oxley is punative and costly and the perfect example of what not to do.  So, to unpack this, you want it to be easier to make putting the entire economy at risk by gambling with imaginary value but you against system of real accountability.  That is assinine.

What started in August 2007 was not the failure of free markets but the outcome of bad government actions. Greed and recklessness always run rampant during bubbles, and the mania that engulfed housing and much of the financial sector was no exception. The behavior of mortgage bankers and of Wall Street packagers of subprime mortgages, as well as the excesses and misuses of exotic instruments, will be grist for investigators and writers for decades to come. But all this came about because of government errors--regulatory and monetary

Steve, the theme hear seems to be government as overly-permissive parent.  It is the governments fault that corporations are reckless and greed.  The solution is not to scapegoat the capitalists but instead to do two things, which we will get to.

The next several paragraphs are priceless as you credit bad economic police as the rise of Hitler and Communism of course crediting Reagan with fixing all that.  And then comes that which earns your greatest ire, mark-to-market accounting.  I don't really know what that is but using your definition...

the crisis never would have become so unprecedentedly destructive but for a seemingly arcane accounting principle called mark-to-market, or fair value, accounting. The idea seems harmless: Financial institutions should adjust their balance sheets and their capital accounts when the market value of the financial assets they hold goes up or down. That works when you have very liquid securities, such as Treasurys or the common stock of IBM or GE. But when the credit crisis hit there was no market for subprime securities. Yet regulators and lawsuit-fearful auditors pressed banks and other financial firms to relentlessly knock down the book value of this subprime paper, even in cases where these obligations were being serviced in the payment of principal and interest. Mark-to-market became the weapon of mass destruction.

...mark-to-market is the accounting principle that says you should value your assets at what they are worth.  What is the alternative, especially given that regulation is a dirty word you. This is the exact damn thing that got us here.  Greenspan believed that the capitalists would just do the right thing.  He was wrong.  You are wrong.

And you end you article with the heading "Blame the Victim".  You have the gaul to claim that you and your ilk are the victims.  As I mentioned earlier in this review, fuck you Mr. Forbes.  You, corporate leaders, who lost huge amounts of personal net worth making you billionaires instead of multi-billionaires or, God forbid, multi-millionaires, are the victims. 

So, what should be done?

Radically limit the responsibility of the fed to only two things:

1. Maintaining a strong dollar closely tied to gold
2. Bailing you out if you get in trouble.

In your words:

The big change--the Federal Reserve should have only two missions. They are: keeping the dollar as good as gold and dealing with financial panics. If it does the dollar part right, a panic should be a once-in-a-century occurrence.

On your way out you happen to mention this:

 

Cutting tax rates is also a necessity. Political cultures have a hard time understanding that taxes don't just raise revenue, they are also a price and a burden. The tax you pay on income is the price you pay for working, just as the tax on capital gains is the price you pay for taking risks that work out and the tax on profits is the price you pay for success. If you make it more worthwhile for people to work productively and take risks, they will do so. Rebates are useless--they don't change incentives the way lower tax rates do. Ideally, we should enact a simple flat tax. Twenty-five countries have adopted some form of a flat tax, all successfully.

 

Economic growth will help prevent another financial time bomb--credit default swaps, a form of debt insurance--from exploding. The nominal amount peaked at $62 trillion and is now down to $55 trillion. Renewed prosperity will enable big companies to service their debts, thus nullifying the need to ever collect on the insurance. Most of these swaps will expire within five years.

Cut taxes.  Just keep growing!  Also of note, you never once, not once, never, not at all, not once mentioned the national debt.  And all of this in the context of the banks that have received bailout money using it NOT TO FIX TOXIC LOANS but instead TO BUY OTHER BANKS because, they say, consolidation will help Bob's defaulting mortgage.

Fuck you Mr. Forbes and the horse you rode in on.

For any one that wants a far more rational look, my opinion of course, of where we are.

 

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Comments

[Julie]

I guess that's one of the downsides of having your own magazine...you simply don't get edited. Glad I showed you that article...now I don't need to read it!!!!!

[Bert]

I saw this in the hospital waiting room and just had to read it. After reading it, I did some research on Forbes. Terrible, terrible person.