Wednesday, May 23, 2012

The Devil is in the Details!

Section 1:

     The road to hell is paved with good intentions.  What I am talking about is about the notion of home ownership linked to the American Dream. Modern American dream theory, or perhaps 50’s to early 00’s, is that the American Dream  is the house with the white picket fence, a dog named sparky, and that rascal neighbor child who will eventually date your daughter creating  hilarious sitcom material and run on sentences. Next thing you know, policies start being implemented to put people in homes because everyone should have a home.  Firms start bundling mortgages, I will skip over the complicated process of doing so but the Learning Object and the visual video history found in the resources section provide good information on how the process works,  enabled this to happen.
       Fast-forward and you have the entrenched entitlement philosophy where Wall Street is trying to out due Fannie and Freddie, corruption in government and Wall Street, promoting bad predatory practices so people can get into homes, even if they cannot afford it, in exchange for votes, and thus the perfect storm is born. That is what I find interesting about the section. An idea everyone thinks is good, home ownership.  While the idea of property ownership, and its status in society, was something to be attainable in the founding of the country, there is a reason why the phrase “Life, Liberty, and the pursuit of Property” was changed to “Life, Liberty, and the Pursuit of Happiness.” It’s a more realistic outlook, not everyone at the time, and today in regards of home ownership, can or should have property. Also happiness creates a better, optimistic, view that invokes feelings of freedom than the idea of property.
      What we can do with this in the secondary social studies classroom, is to compare modern views of what is “the founding spirit of America” with what the founders actually said. We can have students compare past politicians and economists expressing home-ownership and the American Dream with the founding ideas expressed by the Founding fathers, even the letters between two founders who did not agree with each other. We can also use this to teach students to think critically, as the idea of the “American Dream” had no origins within the foundation of the country.

Section 2:
     To answer question number 4. No. So long as there is corruption and greed in Washington and Wall Street there will be another crisis. In addition, when those who helped cause the crisis, or who blundered through it, are writing the bills to prevent it, my faith in the bill's ability to do anything positive is no existent. We had regulatory committees full of people who benefited from Fannie and Freddie, who got friends and loved ones in jobs, who lambasted the regulator, people who have gone back and forth between these companies to Washington and back to these quasi-governmental companies.  When the blind lead the blind, we are likely to fall into a hole. 
     In addition, even if these safeguards are placed in, there are chances that the very preventatives we place may end up causing another crisis, or prolong the crisis making a bigger crisis; unintended consequences.   We cannot stop all crisis from happening, what we can do is adapt correctly, and respond correctly, to the ones that we face. 
     The way our economic system is set up, there will be booms and busts as the market fluctuates. There have been times when things have crashed, 1920. The response was to let the market correct itself and we got the roaring 1920s. It crashed in the 1930s, where some say our response to the 1930 crisis, not letting things work out itself,  prolonged the Great Depression. then again that was a different time, each crisis is different. as much as history repeats itself, the details are not always the same. 
      In today's age, we all want control, we do not like chaos, or what we perceive as chaos. That is why the idea of controlling the market to get the booms without the busts, having cake and eating it too, is a temptatious idea. This is a fallacy because  you can have a controlled economy and it will have crisis. The prolonged crisis of those tends to be an inward collapse.
      In conclusion, we cannot control life. Sometimes bad things happen. We as a society have to let go of the idea that we can control everything, that there is no risk in life, that we can have our cake and eat it too. You cannot have the good times without the bad. Therefore there will be another crisis. How we respond to it will be key to how it is remembered. It is easy to remember the crisis gone wrong, rarely do we remember when the crisis went right.


  1. Your answer to the question really goes along with my line of thinking as well. To be quite honest with ourselves, one of the biggest reasons why Wall Street ended up in this huge mess is that they, the firms and people working in them, felt like they understood the risks involved. They felt that they knew what to expect and placed too much emphasis on what, in the end, was just the product of human attempts to dictate the human condition.

    The book goes on and on about how investment firms have models, equations, and all other manners of ways to predict the future. Investment firms dedicate an entire department to figuring out risk, to examining if they should or should not buy this or invest in that, to ask the question of is it worth it or will we probably lose money in the end. Kind of like how baseball gets flack for all of the statistics that they use to evaluate players, there just happened to be enough bankers on Wall Street who were all too will to blindly follow the seemingly infallible science and math which told them that there was almost no way they would lose on subprime mortgages.

    If these complex tools couldn't forsee the future, then who knows how well any human plans can cope with time, human error, and human wants.

  2. Amen to that. It is exciting yet scary to know that as much control we think we have, we do not have that much control on "life." It is a weird freeing feeling because you never know how life might surprise you.

  3. In response to your answer on question number four, I agree that new laws and regulations will not prevent a future economic crisis from occurring. Unfortunately, Wall Street is very adaptive, powerful, and seems to be a step ahead of the regulators. Also, we do not know how the next crisis will occur, obviously.

    However, I disagree with the answer that our government can not attempt to put new regulations in place. While the regulations in response to a crisis may not be well thought out or effective as we would like, the current political atmosphere that exists in Washington today is one sides saying we need regulations and the other saying regulations equals socialism and the death of the free market. To have effective regulations, the government needs to be able to compromise on solutions that will work effectively. If one regulations went too far and did not accomplish what it was supposed to, fix it. However, do not stop all regulations because as we saw with the case of predatory lending, it can get out of control.