Bad Times: What’s Happening!!

Since arriving in Beijing, I’ve found myself in a lot of discussions about the international financial crisis. For China, the timing couldn’t be worse - this mess lands at their feet just as they were beginning their victory lap following the triumphant Beijing Olympics. People are being laid off , there are reports of riots, and faith in the already shaky as hell Chinese stock market is disappearing. There’s a Murphy’s Law sort of sensibility that says it’s just the PRC’s luck that just as it prepared to up its speed, the system that’s its spent the past thirty years figuring out is breaking down. I, as an American, am usually asked to provide some sort of insider knowledge on the US’s role in triggering this avalanche, but even after having spent most of the last two months in the US obsessively monitoring the news (mostly for the election, but some financial stuff sneaked in there as well), I still can’t provide anything resembling a coherent or useful response.

It’s my fault, obviously, but I also think the difficulty stems from the poor quality of coverage. Generally, in the US at least, you get two forms - hyper-technical jargon from trade sources like CNBC or sappy human interest stories from CNN and most of the major new publications. To try to get a handle on things I spent a few hours today looking for different sorts of coverage. I found some interesting, helpful things formatted in ways that I find it easier to rock with. So here’s a little inventory (accounting by Arthur Anderson LLP):

1. A Visual Guide to the Financial Crisis
I’ve spent enough time around Dutch architects to know that their is no single element of the human tragedy that can not be represented a multi-colored diagram. For me, this little gem crafted by the online money management company Mint is the first case I’ve found of a player in the financial industry communicating itself to the public without talking up themselves or talking down to us. [click to enlarge]

I can imagine that some would accuse this sort of diagram of putting a friendly face on behavior that was reckless, destructive, and above all STOOPID. So I also think it’s useful to take a look at exactly how full of shit the designers of the financial and real estates bubbles were (probably still are). Here’s a couple tragic-comic pieces of evidence for the prosecution.

2. The End by Michael Lewis

Michael Lewis is a former bonds trader turned author who’s spent a lot of the past 20 years chronicling the excesses of America’s bubble-based economy in books like Liar’s Poker and The New New Thing. In this piece for portfolio.com he writes that the crotch-grabbing Wall Street culture that he hoped to expose in the 80s is finally dead, just 20 years later than he expected.

Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.

Very long, but very good.

If you’re looking to put a human face to the greedy jocks he describes in the piece check out these clips of Peter Schiff, the president of Europ Pacific Capital, speaking what we now know are undeniable truths about the US economy and being openly mocked by a bunch of bridge&tunnel meat heads who, one would hope, are currently in fear for their lives due to the enormous debts they owe to their coke dealers.

3. The Giant Pool of Money

If you don’t have the time/interest to read a long article, check out this very on point radio program created by my favorite radio show This American Life. It covers many of the essential features of the crisis with the intelligent, gentle firmness that defines that program. Here’s a little breakdown.

A special program about the housing crisis produced in a special collaboration with NPR News. We explain it all to you. What does the housing crisis have to do with the turmoil on Wall Street? Why did banks make half-million dollar loans to people without jobs or income? And why is everyone talking so much about the 1930s? It all comes back to the Giant Pool of Money.

DL the transcript here.

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