It's not often that I overhear a statement from an Average Joe outside the Metro, only to immediately realize its immense wisdom.
After all, it's easy to place the blame for this economic crisis on others. There are a multitude of convenient targets out there--some (much) guiltier than others. Yet we cannot deny that we did, in fact, "eat the sh** up".
It's perfectly fine to chastise the salesmen of sh**--so long as we remember that they made their livings, and still make their livings, off the consumers of sh**.
I have a recommendation for us all, as we try to pinpoint who is responsible for starting this sh** in the first place. We should distinguish between four key, but sometimes fluid, categories of people: The Greedy, the Incompetent, the Criminally Liable, and The Indifferent.
And to elevate the discourse a bit, I ought to define what I mean by sh**.
I'm talking about the entire spectrum of shenangans that, altogether, produced our crisis. I'm talking about the plethora of parts that propelled this flawed machine we call "The Economy". The habits, attitudes, and devices that created, aided, and abetted a culture of grave irresponsibility.
Let's not kid ourselves: much of the public knew full well what they were getting into: incurring massive debts and getting loans that they couldn't possibly afford--the delusional 'something for nothing' mentality. Risk-taking wasn't restricted to the upper classes and the banks: in the past decade, a significant portion of the public adopted an anything-goes mentality when it came to money.
In assigning blame, of course, the magnitude and impact of risks taken on by your average bank or hedge fund far outweighed the consequences of those taken by the average American. Yet we cannot ignore that the aggregation of consumer recklessness and individual greed throughout this country played a significant hand in causing this crisis. Banks were overleveraging on the securities backing the false mortgages that we (at least, enough of us) created the market for.
But here's the major problem, both morally and legally, for far too many who dealt in sh** (whether it be derivatives, Madoff investments, market speculation and manipulation, or the advice dispensed by Jim Cramer on Mad Money): they thought it was gold. A prevailing assumption among both high-rollers and the general public was that asset prices were destined to rise.
The following quote, taken from a 1997 New York Times article, typifies the reckless attitude of the Greedy and Incompetent--an attitude that endured long after the Dot-Com bubble burst:
We have a huge vested interest in keeping stock prices up,'' said Albert Wojnilower, senior economic adviser to the Clipper Group, a Wall Street firm. ''Millions of people who have put their money into stocks want to be optimistic and corporations have invested on the basis of their optimism. It won't change unless we get slapped in the face with evidence of rising inflation.
Blind faith and optimism inevitably led to a dearth of caution, and in turn, an exorbitance of risk-taking and spending binges funded by illusionary wealth.
In many cases, it's awfully hard to separate the Greedy from the Incompetent. After all, who can ignore the overlap? For example, some of those who directly invested with scam artist Bernard Madoff were promised a 46% return on their investment, greedily adhering to the illusion that they would get something big for nothing. While other investors were promised a lower-than-average return and may not have been so greedy, all were also fundamentally incompetent--accepting an impossibility, consistent returns, as an inevitability.
In another example, I understand why Jim Cramer has become posterboy for financial recklessness with a cable platform, but lets be clear: If you lost money buying or selling stocks based on Jim Cramer's advice, you have primarily yourself to blame.
Determining who falls into the Criminally Liable category regarding this crisis gets murky--Jim Cramer is a case in point. While he appears to have admitted to (what should be considered) market manipulation and illegal trading activity, his behavior may have been a symptom of a larger problem: a lack of a clear delineation of rules. This goes beyond a failure of the Securities and Exchange Commission to enforce the rules: the government never clarified exactly what the rules were.
Even now, proceeding forward, in an era of corporate bailouts and bonuses irreflective of performance, we all need clear answers to a simple question.
What. Are. The. Rules? Without adequate rules, there has been and can be no adequate system of financial enforcement--making the 'Criminally Liable' difficult to identify and apprehend.
We can no longer afford indifference.
The Indifferent may have benefitted peripherally from the financial community's reckless driving, as assets steadily rose in so-called value. In any case, the vast majority of public was indifferent to all too many of the shenanigans pulled during the last eight years. The vast majority of the media, CNBC notwithstanding, was indifferent to the culture of irresponsibility. Worse, to varying extents, their parent companies were giddy participants in this culture--and the media's (in)actions may have risen to levels beyond mere indifference--to greed and incompetence. In the case of CNBC, Absolutely.
So, going forward, I suggest we all remember the maxim from Average Joe outside the Metro: To varying degrees, while 'they' were selling sh**, we were eating the sh** up.
From now on, companies should be selling reputable products and services--engaging in real wealth production, not profiting from paper and predictions. The media should never again allow their access to CEOs and financial cheerleading to trump their obligation to the public's right to know. Last but not least, consumers should know exactly what we are buying, in whose hands we place our money, and how to manage their money.
It's time for a new diet for many of us.