We broke it, now we have to fix it.
Quick payday loans are useful for short-term money needs, but common sense is better for breaking and remaking the currently flawed economic system America operates under.
“Common sense is not so common.” – Voltaire
Ken Kurson of Esquire sees this clearly when it comes to America’s financial situation. Like too few financial pundits and doomsayers out there, Kurson puts his finger on the pulse of a very simple equation…
In order to achieve reward, there must be risk
Here’s a little warm up primer on risk and reward…
That’s why Kurson is happy that the stock market has crashed hard. And he wants it to stay crashed. We may all need quick payday loans for a while.
It isn’t that he’s happy that people lose their jobs when this happens. But it’s perhaps the only way that fundamental problems in the U.S. economy will be fixed.
He feels that Alan Greenspan’s efforts to flood the market with cheap dollars was extremely misguided, and that the market’s willingness to accommodate this panic influx of greenbacks was delusional.
It was not a sustainable course of action, as much as living on quick payday loans alone would be. The ensuing crash is something Kurson feels strongly about:
And now I’m happy. Not that people are hurting or that retirement accounts have been massacred or that many will lose livelihoods. No, I’m happy about the return of a little bit of goddamn common sense.
We must resist the notion that our economy’s problems can be solved by heavier regulation; the market must remain fluid. Kurson believes that any sense that we can make great gains without facing risk is “childish.”
Seriously, where did all of this country’s previous rewards come from?
Kurson thinks the massive bank bailouts are a terrible idea, too. Where’s the accountability? Banks lend
irresponsibly, get into trouble, then Big Brother Government bails them out. No risk, no reward. In Kurson’s words for the next Treasury Secretary:
He should immediately erase the bailout safety net: You lever your bank past the point of danger, you don’t get bailed out, you get taken over. And prosecuted.
While the columns of Babylon are falling for the American stock market, banks and other once mighty financial institutions we once felt were the bedrock of the country’s position as a world superpower, perhaps we’ll be ready to take on these three myths that Kurson presents:
1. Investment banks are an indispensable source of “innovation” and liquidity
Investment banks are going down in flames. We should question whether they’re truly necessary. According to Kurson:
Like lawyers, these parasites basically create nothing, add no value. And now they don’t exist. The global financial system will survive not giving tranches of 10,000 combined mortgages from the farthest-flung sections of America.
2. Home ownership is an unalloyed good
Sure, owning a home is expensive and not a liquid asset. But Kurson asks if owning a home is even appropriate for many Americans anymore. A modern, global workforce must be mobile… why have a place you’re tied to (via a mortgage, from the Old French “pay until death”) when you’re going to spend most of your time away from home?
3. “Deregulation” caused this mess
Per Kurson, this is simply not true. The failing institutions are heavily regulated:
Investment banks are regulated by the SEC, the Federal Trade Commission, state attorneys general, and state banking commissions. But too many regulators are as bad as no regulators – none of them feels responsible since a failure can be blamed on all the others.
Who will accept responsibility for the problems, break up the failed model and build a new one that accepts risk once more as a necessary path to reward? It is my sincere hope that Barack Obama will be the man to start this process, to take the risks others are afraid to take.
On a related note, why do you think small lenders offer unsecured quick payday loans? There’s certainly risk involved on their part, but there is reward for the customer – surmounting a small, temporary financial obstacle – and for the lender who profits under a reasonable system of exchange. Risk leads to reward.
He’s right. Deregulation didn’t cause this, and over regulating won’t fix the problem either. The problem was lending out too much money with the assumption that it was all going to be paid back. Also, people should be budgeting their money in such a way that they should only get the home that they can afford. If you make $30,000 a year, a $200,000 home is out of your price range. And flooding the market with currency is also unhealthy for the economy because all that does is devalues the dollar.