Am I imagining this dichotomy between political ideology and practices?

It’s an interesting thesis, @BarnacleBill, although I suspect that it’s greatest weakness is that it opens you up to the accusation of elitism. The values of environmentalism, local sourcing and eclecticism are those of a more highly educated population. Of course highly educated people tend to be liberals more often than they are conservatives.

People who spend more time in malls and big box stores are probably more conformist that those who haunt mom and pop stores, on average. Of course there are many exceptions.

It’s pretty easy to run against elitism in the heartland. Are the big box stores too plebian for you? You’re so out of touch with the people. You can’t represent them. You don’t understand.

It is a cultural issue. Do you have farmers markets where you live?

It’s also that even if it is hypocrisy, it’s not like people are even aware of it. They are just doing what everyone else is doing. They probably don’t know the positions of the party in anything but the most general terms and hot button issues. That is hardly hypocrisy. To sneer at them probably is elitism. Not that I have any problem with that.

What business is it of you or anyone else where someone shops? Whether they shop at a mom and pop establishment or a big box store or over the Internet, they are contributing to the economy and making private choices that, quite frankly, aren’t any of your business or anyone else’s business. What, big box stores don’t employ people or pay taxes or make purchases for inventory? Where do you think mom and pop shops get their inventory? Give me a break. Are you stalking your co-workers and keeping a tally of their purchases. Sorry to sound so harse, but really think about it for a minute. Businesses in your locality are part of the community whether it is where you decide to shop or not. That’s pretty judgemental in my opinion. That’s the grade I’d give.

@bkcunningham – Private choices can contribute in extremely negative ways with results that can harm many, many third parties that they’re not even thinking of. @BarnacleBill admitted that the observation was something that he felt initially, and based on what he knew wasn’t “all the information,” and put it to the community to expand his understanding, refute it, or confirm it. Although condemning someone for choosing to buy at one place over another without understanding the context is indeed judgmental, stating that we should just stay out of their business and let them and ourselves make any choice they want regardless of the associated harm it may cause is lazy.

@BarnacleBill – I don’t think that it’s limited to any group except the “American Consumer.” Large retailers can afford to take advantage of economies of scale, clearly, and so allow us to afford more. The benefit, of course, is that they often can afford to provide more even pay and benefits ot their employees, but of course on every level we use the personal contact so that we don’t see the peripheral consequences of our purchases.

The problem, though, isn’t big vs. small in my opinion. The problem is that it’s really difficult for consumers to actually invest the time they should in who they’re buying from. Many small businesses act as retailers for larger distributors that contribute to some pretty horrible phenomenon. And larger businesses may indeed be doing business in the most responsible way possible or expected at this point.

So unfortunately, it’s not necessarily a dichotomy, but a product of us being used to getting whatever we want quickly and cheaply – and therefore not thinking about what we actually consume. I’m fairly certain that, whatever your political ideology, the majority of the people sharing that ideology are behaving in a similarly irresponsible way as consumers.

Are you familiar with the essay, I, Pencil?

I am now. Why?

I think it is a very important mini-lesson for people who aren’t familiar with the importance of free markets – much like Adam Smith’s theory of the Invisible Hand – in maintaining our freedom and liberties as individuals.

Either you’re imagining something, or you’re assuming a “pro-business” and “state/local” rhetoric that they espouse which you haven’t introduced as evidence. And buying something from any business at all doesn’t violate anyone’s ‘stated pro-business’ stance, does it? How could it?

In addition, you haven’t mentioned where your politically left-leaning friends shop, or is it that you just haven’t cared enough to examine / investigate that? I think that you really are chumming with troll-bait here, despite your stated intention otherwise.

Okay. But the idea of the invisible hand has been pretty much debunked as much as the idea of utopian socialism.

So I don’t really see the relevance here.

The ‘idea of the invisible hand… pretty much debunked”, @iamthemob? I hardly think so. What leads you to that conclusion?

The invisible hand has nothing to do with socialism.

@CyanoticWasp

In the sense that a market without regulation will be guided to the best results solely through its own built-in mechanisms. Debunked in the sense that those market forces are all that we need – true free market capitalism. Particularly when we’re dealing with a global market that produces a ton of externalities.

@bkcunningham

Indeed – it seems to be the exact opposite. Which is why I mentioned it.

@iamthemob

Well, if you’ve ever seen “true free market capitalism” then I’d be interested in seeing that, myself. Every ‘ism’ or system ever devised and implemented by humans produces loads of ‘negative externalities’. I still maintain that laissez faire capitalism produces fewer of them (or ‘would produce’, if we really tried it). People talk about the recent and ongoing economic / government budgetary failures and bailouts as if they were ‘failures of capitalism’, when in reality they were failures of attempted regulation, bad regulation, wrong regulation… and crony capitalism, which isn’t the same thing at all. Glad to see that you didn’t hop on that, at least.

I agree with alot of what you said CyanoticWasp. One of the main detriments of free markets and laissez faire capitalism has been Progressivism.

@CyanoticWasp – How was regulation the failure? Which bad/attempted regulation? Now, I’m a fan of capitalism, but considering the potential for corruption in an enormous global market, it’s clear that we’ve moved beyond any theory that calls for deregulation. As I understand it, the current crisis is due, for the most part, to markets that were not regulated. The crash of ‘29 was fully caused by an unregulated securities market. And the free-market advocates pushing the financial products and maintaining that the rational market could handle disturbances let the problem go on much too long. Again, I’m for minimal regulation that is properly tailored – but ironically, the major issues we’re dealing with germinated in the unregulated, free market sectors of the financial market.

@bkcunningham – I’m not clear what you’re advocating – Progressivism is a pretty broad ideology.

The “Crash of ‘29” was not “The Depression”. Let’s assume that you’re right, that the crash was ‘fully caused by an unregulated securities market’. The Depression lasted 16 years – plus a World War – after that, and the entire 16 years cannot be blamed on “unregulated securities market” of the 1920s – ‘29. My contention is that the Depression was the government’s continual attempt to ‘fix’ the problems in the economy that would have worked themselves out in much shorter order without the ‘fixes’. (I think the same thing about the “stimulus programs” that Bush and Obama have tried since 2007 to ‘fix’ our own economy. The cures are going to end up lasting longer and causing more pain than the disease would have.)

There’s more in that vein. You can’t say that the current problems are the result of an “unregulated securities market”. Banking, insurance and securities are among the most heavily regulated of all industries in the USA today. I think part of our problem is that people actually think the ‘regulations’ work… and so they end up trusting people, institutions and regulations that they should not. We continue to develop institutions that become “too big to fail” and then bail them out. People expect bailouts now. (I recall that when Chrysler got the first government loan money in early 1980 George Will predicted very sensibly that “The problem isn’t that the bailout won’t work; the government is big enough and has deep enough pockets to assure that it will work. The problem is that it will work… and we’ll end up doing it again and again.” He’s a smart guy.)

I think that ‘unregulated capitalism’ will produce more failures. Absolutely. Nothing in our lives prevents failure. But when people go into markets knowing that they assume full risk, then mechanisms such as insurance and hedging strategies will be more prevalent (and workable, even if ‘unregulated’) and people will be more cautious about their investments. It’s not automatic, but markets make it seem so. Congress (and the Executive and cabinet-level appointees) seem to make it take forever and be nearly impossible to work properly.

Take a look at this. I worked on the bankruptcy restructuring of a TARP recipient during the insanity, so it was interesting to see the effect inside and outside the markets. The thing is, you’re talking about the market as being heavily regulated, but it’s not the whole market we’re talking about – the bankers and insurers were working with financial instruments like the bundled subprime mortgages that were broken up, securitized and leveraged, and then resold, as well as insurance risk based financial instruments (e.g., credit default swaps). These were totally under the radar – the companies didn’t have to report or disclose anything, they didn’t need to meet any standards…and so the market participants loved them. The infusion of bailout funds was a reaction to the fact that because of the enormous market failure, no one was taking risks (e.g., extending credit) and therefore people were stopped from doing business, expanding business, etc., and being forced to downside to deal with the frozen credit flow. People stopped taking risks largely because they saw that the huge players were trading on these things they had no idea about…and no one was watching them.

The creation of large institutions is not the result of regulation, but regulation got a kick to it when without government oversight we got monopolies a hundred years ago. And a monopolized industry is grossly inefficient. So we have antitrust laws.

If you look at how these crises occur, the pattern is generally that the market recognizes a sector that is unregulated, there’s a lot of speculation, you get the economic bubble, people say the market will fix everything (like Greenspan was saying prior to the fail), and then it starts to wobble and panic.

The problem is that the market is so complicated that the standard consumer doesn’t know the real risk. And because owners change hand you sometimes buy into something and end up with something else – many people, for instance, had no idea who owned their mortgage. I think it’s counter-intuitive, therefore, to claim that government bailouts and attempted fixes are the problem when it is clearly behavior in the unregulated markets that causes the crises in the first place. I am more likely to blame the initial cause rather than the subsequent attempt to clean up the fallout.

I mean, I think there’s a lot of backwards shit in government regulation – but I think that we really should lay blame where it’s due – and here it was the top brass in the financial markets working free from regulation.

There were so many warnings and pleadings years before the current crisis of the dire consequences that the Community Reinvestment Act would cause a major financial and banking crisis. Not that the CRA is the one and only factor, but it is at the beginning of the road of good intentions that have led us to where we are today.

CRA originated under Pres. Carter, but Bill Clinton pushed and pushed hard for it. Remember, Clinton didn’t want Freddie and Fannie’s monies to go to share holders? No, the monies should go to put the poor in housing. Look who Fannie and Freddie made major political contributions to. The Democratic Party.

Look at whose campaigns have benefited when the sub-prime business was paying off well. John Kerry, Pres. then Senator, Obama, and Hillary Clinton, to name a few. These were the biggest receipients of the campaign dollars from the mortgage lenders.

Fannie Mae CEO Franklin Raines was budget director in the Clinton administration from 1999 to 2004. Raines was also a consultant to the Obama campaign and Freddie and Fannie were in the top five of contributors to Obama.

I could go on with how Bush tried to change the system in 2003, but Congressman Barney Frank stopped that. Alan Greenspan’s concerns were ignored. There’s Chris Dodd, Majority Leader Harry Reid, and a long line of Progressive Democrats who scream how they are helping the poor all the while lining their pockets. Now they scream how corrupt the banking industry is and how there needs to be more changes and more control.

As usual when the government gets into the fray and strong arms corporations how to spend their money, or better yet, how to access the people they are lending to, we see what happens. So qualifications were lowered because the government said there will be a chicken in every pot (you know what I mean). Clinton even used the Comptroller of the Currency’s office to put pressure on banks to lend mor money to the disadvantaged. All with the best intentions. We know where that leads…to the hell we are in today.

By 2006, nearly 30 percent of mortgages went to people who, under normal circumstances would have never qualified. Here is where cause and affect comes into play when the government interfers. Competitoin in the mortgage business reacted when the government strong armed one part of the market.

Millions upon millions were made by lowering standards and processing sub-prime loans for the poor. Everybody and their brother raised concerns about Freddie and Fannie from The Wall Street Journal to Sen. Phil Gramm. They voiced concerns about public pressure from community groups like the now famous ACORN who was extorting money from banks with the help of the CRA.

These groups threatened to organize and burn down the banks if they didn’t get preferential agreements with banks. All in the name of helping the poor. We were hoodwinked.

Sorry to be so longwinded, but I hate to see people being decieved. The government needs to stop directing economic decision making.

The CRA-Subprime connection is not all that clear – but it seems clear that it wasn’t the main catalyst for unsafe lending procedures. These paragraphs below indicate at least part of the controversy:

2008 Nobel Prize in Economics winner Paul Krugman noted in November 2009 that 55% of commercial real estate loans were currently underwater, despite being completely unaffected by the CRA. According to Federal Reserve Governor Randall Kroszner, the claim that “the law pushed banking institutions to undertake high-risk mortgage lending” was contrary to their experience, and that no empirical evidence had been presented to support the claim. In a Bank for International Settlements (BIS) working paper, economist Luci Ellis concluded that there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust, relying partly on evidence that the housing bust has been a largely exurban event. Others have also concluded that the CRA did not contribute to the financial crisis, for example, FDIC Chairman Sheila Bair, Comptroller of the Currency John C. Dugan, Tim Westrich of the Center for American Progress, Robert Gordon of the American Prospect, Ellen Seidman of the New America Foundation, Daniel Gross of Slate, and Aaron Pressman from BusinessWeek.

Some legal and financial experts note that CRA regulated loans tend to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA. Approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA, and another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. Michael S. Barr noted that institutions fully regulated by CRA made “perhaps one in four” sub-prime loans, and that the worst and most widespread abuses occurred in the institutions with the least federal oversight. According to Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, independent mortgage companies made risky “high-priced loans” at more than twice the rate of the banks and thrifts; most CRA loans were responsibly made, and were not the higher-priced loans that have contributed to the current crisis. A 2008 study by Traiger & Hinckley LLP, a law firm that counsels financial institutions on CRA compliance, found that CRA regulated institutions were less likely to make subprime loans, and when they did the interest rates were lower. CRA banks were also half as likely to resell the loans. Emre Ergungor of the Federal Reserve Bank of Cleveland found that there was no statistical difference in foreclosure rates between regulated and less-regulated banks, although a local bank presence resulted in fewer foreclosures.

So…it seems like you’re pointing fingers at the poor and the government for what was mainly a blind reaction to a booming housing market with little concern about a decline. Since the majority of the lenders of the subprime were private and those loans appear to have been more risky, one could deem it a result of the unregulated market acting in a predatory manner. I wouldn’t outright – but I also think that blame should go where it belongs – the actions of greedy corporations.

I’m pointing fingers at programs for the poor. Not the poor. Let’s make that clear.

My left-leaning friends mostly shop regional, amazon and thrift stores. And Craigslist.

@bkcunningham, I don’t care where people shop. I don’t notice what people wear, or what they drive, unless it’s large and they try to run me over or hit my car. It came up this week as a post-Black Friday discussion, and after an inquiry about a shopping night this weekend that small business merchants put on each year. I was taken to task by several people because I wasn’t shopping, coupled with a comment that I was walking over at lunch to look at washing machines at a mom-and-pop place near work.

Deal Magazine actually posted a pretty good breakdown of All the Devils Are Here, showing how the various streams (and, surely, fed policies were a part of it, but not causal) contributed to the meltdown – most of it being simply about private institutions repackaging debt on a bubble they thought would never burst – and were told by the “rational market” analysts never would.

Paul Krugman isn’t one of my, or many others, favorites in the field of economics. His Nobel Prize was…never mind about Nobel’s in light of recent history. Here’s one of my favorite Krugman’s quotes: Although America has higher per capita income than other advanced countries, it turns out that that’s mainly because our rich are much
richer. And here’s a radical thought: if the rich get more, that leaves
less for everyone else. That statement — which is simply a matter of arithmetic — is guaranteed to bring accusations of ”class warfare.”

Makes sense – his recent critique of the trust the market mentality in the economics profession wasn’t favorable, but the response was mostly “well…most theories have some problems so ours did too…” Not necessarily claiming that he’s wrong…

The For Richer article seems like a pretty good reflection of what many in the U.S. see as a crisis of the middle class.

But it still seems as if the main cause comes from the unregulated and “hidden” sectors of the financial industry.