This goes deeper than a market meltdown. I don’t think we’re going to be hearing the Free Market at any cost mantra for awhile. I’ve always believed that economics has a lot in common with religion. As long as faith is strong, it seems to work. And work a lot longer than you think possible. But once that faith is shaken, look out below.
A good example is personal retirement planning. We’ve been told it’s our responsibility to make sure our retirement is secure. To invest our money wisely. To increase our savings. We’re also encouraged to buy every new widget that comes on the market. That the two goals can be mutually exclusive is like having an elephant in the living room. You can ignore it all you want. It doesn’t go away and the shit just gets deeper.
I have a 401k account. I picked a mix of funds and bonds that hopefully will not totally tank in the near future. I have not dabbled directly in the stock market; I’m mindful of my economics instructors’ advice of “if you can’t afford to lose it, don’t risk it.” And, like a lot of people, I don’t make enough to risk anymore than my 401K contribution. We have some savings and we’re probably better off than a lot of people right now. Probably comes from being a logging family. We never had three good years in a row, but we managed. And we did pretty well most of the time.
The execs from companies like Lehman Brothers justified their hefty bonuses and extremely generous compensation packages because of the risks they were taking. What risks were you taking Kemo Sabe? It was your investor’s money you were risking and few questions were asked as long as the numbers on the ticker continued to climb and compliant boards of directors didn’t ask inquire too closely. But, what goes up can come down. And right now, well the piper is in town it’s time to pay up.
I learned a fancy term when I took my business classes some years ago. Fiduciary responsibility. Geez, twelve syllables in two words. It has to worth at least five bucks.
Basically it means you manage the money entrusted to your care for your client’s benefit not yours. Now we find that the top execs at Lehman Brothers lied to their investors a week before the company entered bankruptcy. Investors were told that everything was OK. Then boom, the company is history, the employees are out the door, and the grilling before Congress begins.
Questions are good. Asking questions a couple of years ago probably would have been better but apparently no one wanted to be accused of economic heresy and the cows are not only out of the barn they’re on their way to the packing plant. How many other execs have lied? How can I make good decisions when the people who are responsible for managing my investments lie?
Maybe it’s no accident that our MBA president has treated the American people the same way these business execs have treated their stock holders.