I don’t know anything about economics, but I know this is bad.

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I know almost nothing about economics. I have to admit I don’t even know what a stock is, despite many explanations by many people. Some people have told me it just doesn’t fit with my kind of brain. Other people have told me I didn’t grow up with rich enough parents to be immersed in this kind of talk the way some other kids were (when we covered this in school, I was the only kid in my class whose dad didn’t invest — not that I retained a lot of learning from school anyway). Still other people have told me that the reason I can’t comprehend it is because it’s inherently self-contradictory on many levels and everyone sort of pretends it makes sense, and I’m not good at doing that, or something. Regardless, it’s just not a subject I have ever been good at, it might as well be gibberish as far as I’m concerned. (And I don’t even know stuff that I was immersed in, like credit, well enough to be confident in using them. This is the biggest reason why I have never had a credit card — I don’t dare mess with money in ways I don’t understand, and I understand it less than the average person does.)

Whatever is going on, and whatever my lack of understanding, I know that this can’t be good.

The New York Times seems to have several stories on the topic. That is one of them. It’s also the top story on Google News, with 2223 related articles the last I was able to search it, and every time I look there’s a different headline at the top.

I’m told that economists have been predicting this sort of thing for awhile, but everyone’s been distracted.

I’m also told that we have a chance of patching this up for a little while, but it’s only a patch-up, and things are likely to be really screwed up for awhile.

I hope that people are able to see that this sort of thing matters more than whether people agree on a lot of other things. Just like a lot of crises matter more than individual differences of opinion (the way the environment is going is another one that seems hopelessly mired in the worst kind of politics (the kind most people think of when they hear “politics”, not the kind of politics I usually try to involve myself with)). This is one of those things where people have to get past their own ego and look at the bigger picture no matter who they are. I’m just afraid that the most powerful people, won’t do that, they’ll be too busy point-scoring against each other to even notice what to do. I hope to be proved wrong.

Larry Arnold has repeatedly warned against choosing political candidates entirely on the basis of their stance on autism-related issues — things like climate change, for instance, are a heck of a lot more pressing. And as he frequently notes, in the autism and autistic communities people often lose sight of the fact that we are only one form (or at any rate, a small number of forms) of neurological variance, and neurological variance is only one set of the variances that comprise disability, and disabled people are only one part of the human race. It is true, that some of us (me included) are thinking of the larger picture while only able to write about pieces of it (because of a combination of our own limitations around language, and the limitations of language itself), and that many of us have a lot more thoughts on a lot of things than we can express at any one time. But it is also true that at some point that people who can address these things explicitly at any given point, need to do so.

I’m not saying conflict is bad. Conflict over the right things is absolutely essential. But before you jump into conflict-mode, make sure it’s over the right things. And whatever you do, don’t be like a bunch of North-Going Zaxes and South-Going Zaxes clinging to their mental widgets for dear life while things they could actually do something about are falling apart around them in the real world that those widgets are directing them away from (like a weaving a charmed web alway, and all that — does combining Dr. Seuss and Tennyson in the same breath mean I’m up too late?). There’s a time and a place — make sure it’s that time and that place.

And I hope that people will actually work together to solve these various more universal problems, rather than getting lost in the endless discussion of who is opposed to which thing that has nothing to do with this, or only tangentially is related. I have nothing to contribute in terms of knowledge of economics, and none of the powerful people will likely read this. But I am often capable of recognizing a situation where it’s important to put aside other differences while working on a problem. And this is certainly one of those situations. I don’t expect the people with the most power to be reading this or anything, but I hope that this will at least remind people who do read it to think twice when they recognize themselves losing focus on what is important. “People who do read it” includes me, and I’m writing this as much to remind myself as any other given person.

About Mel Baggs

Hufflepuff. Came from the redwoods. Crochet or otherwise create constantly and compulsively. Write poetry and paint when I can. Physically and cognitively disabled. Anything you hear in the media or gossip is likely to be oversimplified at best and wildly inaccurate at worst, the only way to get to know me is to actually know me. I'm not really part of any online faction or another, even ones that claim me as a member. The thing in the world most important to me is having love and compassion for other people, although I don't always measure up to my own standards there by a longshot. And individual specific actions and situations and contexts matter a lot more to me than broadly-spoken abstract words and ideas about a topic. My father died a couple years ago and that has changed my life a lot in ways that are still evolving, but I wear a lot of his clothes and hats every day since he died and have shown no sign of stopping soon.

11 responses »

  1. I guess you understand a lot more about economics than I do, because that link makes no sense to me at all.
    I agree with you in principle, however. I prefer the Reblican platform on disability (assuming they keep their promises, not an accurate assumptions with most politicians) but if I were an American I’d still vote Democrat because that’s about *all* I like about the Republicans.

  2. I had it explained to me in detail step by step by an economics major. I’m still not sure I get it all. And the link was provided to me by someone who was doing a running translation of the main points.

    But I’m not sure I could explain it even with the fact that I’ve spent hours talking it over with someone with a degree in that field. I’ll try though.

    Basically it has to do with money that’s totally imaginary.

    And I guess normally everything is juggled in a weird way so that everyone can ignore the fact that a lot of the money is totally imaginary.

    But occasionally (and, as I’ve now been assured by two people, inevitably) the imaginary money is really obviously imaginary, and really obviously just not there.

    And when that happens, banks start failing.

    And when banks start failing, a lot of really bad things happen — people lose jobs, people lose money, people lose a lot of things.

    And there are ways to correct that but they either take a lot of time or a lot of effort or both.

    But it really strains my brain to even figure out how to say that much, and I am sure that my attempt at description might horrify someone who is very into the subject. In my head I am connecting these to as many concrete events as I can, but I can’t get the words around both the concrete events and the whole bizarre imaginary money thing.

    So I hope I was not too vague — the main thing that I have been led to understand is that this is the beginning of either a recession or a depression. Those concepts I can grasp more readily than all the imaginary money stuff. I have been trying to just not let my brain try to think too hard about imaginary money because it will just lead to a complete stalling of any other abilities. (Sort of like Star Trek computers being fed paradoxes.)

    Personally, I’m not a Democrat or a Republican (and in my state you don’t register with a party, you either participate in a political party or you don’t — but even where I used to live I wasn’t a Democrat or a Republican). And when it comes to disability I think they’re both likely to screw us over in ways that will lead to people dying. So if I based my vote purely on disability policy I wouldn’t vote at all.

    Both Democrats and Republicans are very upset about what is happening to the economy, though.

    There is a lot of quoting of Greenspan, who is a Republican.

    For instance, here is a long set of quotes from him, including:

    “First of all, let’s recognize that this is a once-in-a-half-century, probably once-in-a-century type of event,” Greenspan said on ABC’s “This Week.”

    Asked whether the crisis, which has seen the US government step in to bail out mortgage giants Freddie Mac and Fannie Mae, was the worst of his career, Greenspan replied “Oh, by far.”

    “There’s no question that this is in the process of outstripping anything I’ve seen, and it still is not resolved and it still has a way to go,” Greenspan said.

    And this is one where it says, “[Greenspan] described the current banking crisis as possibly the worst in a century – including the 1929 Wall Street Crash.”

    So I know nothing about the mechanics of it, but I have been assured by people with more understanding of that, that this is Bad with a capital B. Exactly how bad depends a lot on what certain people do — regardless of their political affiliations.

    But I completely don’t blame you for understanding less than I do, I would not have understood as much as I do now without a lot of repeated explanation that started when I was older than you are now. But the little I understand is practically nothing compared to what people usually understand.

  3. Thanks for reminding us of the bigger picture. This is having an impact world wide. UK banks are also in trouble. The danger is that the financial crisis will tip the wider economy into recession and that will mean cut backs in services for the most vulnerable like the elderly and the disabled.

  4. Temple Grandin talked a bit about the dot com bust in Animals in Translation – and how it seemed to her that when the fake money started doing things to real money, there were problems (talking about what happened during the boom).

    There’s a lot of greed in society – and that’s destroying the economy. What is good for *ME* may not be good for *SOCIETY*, but if I have the choice between doing something that helps others only a little bit but hurts me, or helps me *A LOT* but hurts others only a little bit, most people’s reaction (and mine, sadly, most of the time) is to worry about myself.

    So in the dot com boom, people bought stock in companies that had no sales. But they thought they could keep selling the stocks for more money to the next guy. Eventually they ran out of next guys (like any pyramid scheme).

    The housing market is the same. The big difference is scale – huge companies bought house mortgages the same way individuals bought stocks during the dot com era – “It doesn’t matter that the house is overvalued and they owner can’t pay off the loan, we’ll find another idiot to sell it to who will pay more than the last one.”

    The strange thing is that no single person was doing anything wrong necessarily, but they were all acting in their own interests, not society’s.

  5. Thank you for this post. I also do not understand much about money or economics (and I share your credit-card phobia! No nonexistent-money-spending for me!), though I’ve found myself having to think about economic issues a lot this year.

    There are a number of things that I blame for the current shakiness of the global economy: one, the dependence on overly hyped “bubbles” of investment (the tech bubble in the ’90s, and more recently the housing, finance and security bubbles) that are inherently transient and unstable; two, the massive interconnectedness of financial indicators (that one is explained really well in this article, which unfortunately requires a subscription); three, the conflict between an economy that requires constant growth to be healthy and a finite world (seriously, even when companies fail to grow as fast as they were predicted to, they lose money somehow); and four, the tendency for the rich to get richer and the poor to get poorer.

    The point is, this is huge. Everything I read makes me think it’s systemic, and direly in need of radical intervention if we want to avert a second Great Depression.

  6. Yeah I know what you mean Joel. It’s way too easy to forget whose life your actions are affecting, especially when the effects aren’t concretely and immediately obvious, but rather accumulative and far away from you. Selfishness in general is one of those things that takes work, and often a good deal of outside input, to avoid (since one of its most common attributes is not even noticing the effects of your own actions on others). And I’m not even convinced it’s possible to fully avoid it — it’s so entangled in our natures as human beings.

    I just hope enough people can overcome enough of it in time to do something about this and a whole lot of other problems in the world before it’s too late.

  7. All I know is that I paid roughly 10 years worth of interest to the banks at double rent for a couple of homes. Some of that was mortgage insurance. In the end, I got zero equity, zero house (I’m renting now), and on top of it, the feds took my tax money and gave for the bank’s welfare which still has my home and full equity and insurance on it that I paid for. Someone made out with daylight highway robbery on this and its not citizens. The banks loan to anyone, accelerate and foreclose on anyone. …. “Two pence a bag” anyone? (someone name that reference if you like)

  8. Think of the stock market this way–
    Stocks represent partial ownership of a company. The price at which they are bought/sold reflects the opinion of the buyers and sellers about the value of that company and its future prospects. The seller will pay the price that s/he believes reflects the proper value of the company, and the possibility of receiving a share of the profits from it in the future.

    Unfortunately, on the stock market, this can change from focusing on the value of the company to the value of the share itself, and buying/selling decisions made that focus on what the buyers and sellers think about the future value of the stock itself, totally separate from the underlying company. In other words, someone will buy the stock not because s/he thinks the company has good prospects and that s/he will receive a portion of the profits in the future, but that other people will be willing to buy those shares for a higher price than s/he is now paying–and the company’s actual performance may have nothing to do with that. When that happens, it’s speculation, and speculation has ruled the stock market for most of our adult lives.

    So if you don’t quite understand the stock market, that’s understandable, because for a long time it has not really done what it is supposed to do. The dot com bubble and the housing mania are simply more extreme episodes.

  9. Okay, here’s my attempt at explaining the credit crisis.

    When you loan someone money, there’s always a risk that they won’t be able to pay you back. People can go bankrupt, or die without enough assets for their estate to pay off their debts. Companies can go bankrupt too. You can estimate the risk that someone will be unable to pay, by looking at whether they have a job and whether they have paid off loans before. That’s what a credit rating is for.

    So if you’re a bank, you try to take that into account. You refuse to make loans to people who are bad credit risks. Also, you make a lot of loans, and you charge a high enough interest rate that even if some people can’t pay you back, you still end out ahead.

    But if a lot of people become unable to pay you back all at once, you’re in trouble.

    (Not being able to pay back a loan is called “defaulting”, for some reason.)

    You can also buy and sell loans, sort of. For instance, if I borrowed $100 from you at 5% simple yearly interest, that would mean that I owe you $105 at the end of the year. But if you needed money *now*, you could sell a bond backed by that loan to someone else. Basically, you’d be getting a loan where the lender expects you’ll pay it back with the money I pay you. That’s a “mortgage-backed bond”.

    But then, still, if I defaulted, you could be in trouble; you’d have a bond to pay off that you didn’t have the money to pay it with. But you could set up the bond such that if I defaulted, you don’t have to pay it back either. So when someone buys a mortgage-backed bond, they need to take into account the chance that the borrower … whom they’ve never met! … will default on the loan.

    So there’s still risk, and that means the value of that bond changes over time. And there are other things that affect it too. In a real-world mortgage, the borrower has the option to pay it off early, in which case they don’t pay as much interest. That would reduce the value of the bond, so the bond is a risky investment. And there are also adjustable-rate mortgages, where the interest rate on the loan changes over time.

    Mortgage repackaging companies like Fannie Mae are in the business of buying bank bonds backed by mortgage loans and selling bonds that split the “risky part” of the deal away from the “less risky part”. Then they can sell the risky part to speculators, and the less-risky part to more careful investors. Adding investment money to the market makes it easier for banks to make loans, since they don’t have to take on so much of the risk that the loan won’t be repaid.

    But this changes the way that the bank people think about making loans. They know they’ll sell the loan instead of holding onto it. So they don’t care so much if the loan is risky, because the risk affects someone else! They make “subprime” loans, which are so risky they can only be sold when they’re bundled up with others to spread the risk around. And they make it really easy for people to get those loans … even people who are unlikely to be able to pay them back.

    And so, when things start to go bad, a lot of people can’t pay back their loans. Which means their houses get foreclosed on. And the bank sells the houses. Which drives the prices of houses down. Which means that people who took out a million-dollar loan to build a house now have a house worth only half that much.

    Meanwhile, companies that invested in those bonds find out that they are holding a lot of bonds they thought were valuable, but turned out to be worth a lot less.

    Fannie Mae seemed like a good idea because it made it easier for people to buy houses and cars and stuff. The problem was that once enough people defaulted on loans, the whole system stopped working.

  10. The other part of the loan problem was that the collateral – the house itself – lost value, when everyone thought it would keep going up (including banks).

    So banks made risky loans thinking, “Aw, shucks, I know they can’t pay, but their house will be worth more then they owe, I can sell that when they don’t.”

    The problem is that housing prices stopped going up.

  11. A reminder: If your comment doesn’t get posted, and isn’t violating any of my posting guidelines, then your first thought should be “it’s in the spam filter,” not “why don’t you want to post my replies?”.

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