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> We were on the edge of something that could have taken civilization as we know it to the edge of ruin. Banks alone can't take civilization down because they
by mojuba 16y ago
> We were on the edge of something that could have taken civilization as we know it to the edge of ruin.
Banks alone can't take civilization down because they don't produce wealth. As long as there are factories, services, knowledgeable, skilled people doing useful things, the civilization will stand OK with or without the rotten banking system.
Failing banks, on the other hand, might have taken down Berkshire Hathaway, I suppose, but that's not the entire civilization.
> Very high IQ people can be completely useless
... in the eyes of very low IQ people.
> I see no reason to think Goldman misbehaved in some horrible fashion. Everyone was doing it, and it's only natural to increase your moneymaking activities when you can do so legally.
Should I really comment on this nonsense? Goldman was doing what everyone was doing without much thinking about the consequences, and they didn't misbehave? Actually he responds to himself a bit later:
> You have to be able to keep your head on when everyone else is losing theirs.
- jrockway 16y ago> Very high IQ people can be completely useless ... in the eyes of very low IQ people. I agree with you here. The problem was not the mathematical models that were developed, the problem was that people don't know what risk means. Traders have the "it won't happen to me" attitude, so they go for the big gains. When everyone in the industry goes for the big gains, all paid for with credit from big gains that "will eventually" materialize, the industry has a problem. (An example is credit default swaps. If the bank that wrote you the swap fails, you have taken on more risk than you were expecting. When a bunch of banks fail at once, then all the banks take on additional risk, and also fail.) Anyway, this was all predicted, but the shareholders of financial institutions wanted the gains that necessitated heavy risk-taking. And they reaped what they sowed. You can't blame the quants for this one...
- gvb 16y ago> Banks alone can't take civilization down because they don't produce wealth. As long as there are factories, services, knowledgeable, skilled people doing useful things, the civilization will stand OK with or without the rotten banking system. While it is true, banks don't produce wealth, they are the lubrication that keeps the machinery working smoothly. Manufacturing has to buy raw materials, add value, and then sell their product. The time that lies between "buy" and "sell" is tough without banks.
- mojuba 16y agoWhat makes a bank a bank nowadays is money lending rather than deposits and transfers. Some say money lending itself creates value, but I don't agree. Oversimplified, it can be said that because money is nothing, then money lending is even more so. But in any case I was talking about the "rotten" banking system with corrupt lending practices rather than about banking in general.