More state intervention through laws and regulations: the future of financial intruments as mortgage-meltdown reveals high cost of unfettered markets. The US heads towards recession, shares plungs, oil prices have reached a $120 peak, gold a $1000, OPEC spurns US call for more oil production, activist shareholders call for more transparency and accountability of CEOs, but complex financial instruments used by hedge funds and private equity funds that operate outside of regulation, continue to create more wealth for the wealthy. Wealth disparities intensify as hedge funds and private equity funds skim off the cream of global markets by operating from tax-free offshore locations using everything from emotions, gut feelings, intuition, chaos theory and complex financial algorithms (based on variables, outcomes and values that might be realized in the future and money that is more cyber that really real. These financial institutions with their rhizome-like roots have permeated practically every aspect of our economic lives through our pensions, mortgages and investments. They have create havoc in the economies of nation states and lower quintile households. They gamble big and lose big. When their losses cause the inevitable domino effect, nation states and citizens are forced to cover their losses to prevent the worst. The financial crisis has been triggered by the invisible hand impatient for higher returns, controlled not by a law of nature, human or otherwise, but by an insatiable addiction to a money game. Law makers and regulators from the state and the market are calling a halt.

Bajaj, Vikas. 2008. “Mortgage Defaults Reach a New High.” New York Times. March 6, 2008.

Other related New York Times stories:

  • Bush and Fed Step Toward a Mortgage Rescue (March 5, 2008)
  • Bundled Mortgages and Dubious Fees Complicate Foreclosure Cases (March 4, 2008)
  • Spitzer to Present a Plan to Reduce Foreclosures (March 4, 2008)
  • Other related stories:  

    Acharya, A., H. Almeida, and M. Campello, 2006, “Is cash negative debt? A hedging perspective on corporate financial policies.” Journal of Financial Intermediation.

    Bates, Thomas W.; Kahle, Kathleen M.; Stulz, René M. 2007. “Why do U.S. firms hold so much more cash than they used to?”  (October 2007). Fisher College of Business Working Paper No. 2007-03-006 Available at SSRN: http://ssrn.com/abstract=927962

    Dittmar, A., and J. Mahrt-Smith. 2007. “Corporate governance and the value of cash holdings.” Journal of Financial Economics 83, 599-634.

    Johnston, Megan. 2007. “Whatcha doin’ with all that cash?: Summer money scramble to be one hot topic at AFP confab.” Financial Week. October 22, 2007.

    McDonald, Ian. 2006. “Cash Dilemma: How to Spend It.” Wall Street Journal. May 24, 2006. p. C3. McDonald, Ian. 2006. Capital Pains: Big Cash Hoards.” Wall Street Journal. July 21, 2006. p. C1. Polczer, Shaun. 2008. Scientific investor finds predictability in chaos: Check your emotions before acting.” Calgary Herald. March 04, 2008.

  • Relief for Homeowners Is Given to a Relative Few (March 4, 2008) 
  • Walter Zimmerman, principal partner in New York-based United Energy brokers, applies chaos theory to commodity markets. ” Chaos theory is not based on chaos but on the theory that extremely complex phenomena, like the market, have underlying hidden patterns that can be revealed by delving deeply to glean predictive information about that which was seemingly chaotic. He bases his market predictions on the assumption that markets are reflections of human nature and that both are unchanging, both are more emotional than logical, and that behavioural patterns of human nature/herd instinct/the market will be repeated over time. He advises his clients, the bigger oil producers in Calgary to hedge production against high commodity values (oil at $120 a barrel). If the economy continues to unravel, oil prices will correct lower to about $70 or $80.  He argues that governments cannot fight a recession and inflation at the same time. Cutting interest rates to fight recession leads to inflation and fighting inflation depresses economic activity. Summary of (Polczer 2008-03-04).

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    Merrill Lynch Bull Reflecting on Enron

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    Tse, Tomoeh Murakami. 2008. “Economic Downturn Emboldens Shareholder Activists.” Washington Post. February 19, 2008.

    tag cloud: corporate governance, senior executive compensation guidelines, New York, investor groups, plunging stock prices, executives, corporate board members, accountability, annual shareholder meetings shareholder, U.S. companies, credit crunch, activist investors, financial services companies, Citigroup, Merrill Lynch, Washington Mutual, shareholder proposals, major banks, transparency, discloser, risk management, mortgage-related risks, Wall Street investment firms, executive succession plans, credit-rating agencies, conflicts of interest, rate securities, security rating, CtW Investment, major financial institutions, subprime mortgage-related losses, shareholder value, economy, recession, investors, withhold votes, network of shareholder groups, multimillion-dollar payouts, financial executives, worst corporate performance, executive compensation, residential homebuilding crisis, credit crisis, corporate affairs, Laborers’ International Union of North America, shareholders, public, housing market decline, losses in securities related to subprime mortgages, five-year housing boom, that peaked in mid-2005, mortgage lenders, risky credit, Wall Street investment banks, complex securities, ultra-safe, AAA ratings, credit-rating agencies, defaulting mortgage payments, risk-averse, management experts, Enron scandal, shareholders challenged corporate boards, larger, more widespread losses, toxic subprime mortgages, investment portfolios, Wall Street banks, large institutional money managers, pension plans, small towns overseas, advocating changes in corporate governance, directors elected by majority of stockholders, shift to majority voting, Weinberg Center for Corporate Governance at University of Delaware, shareholder resolutions, union pension funds, measure of shareholder unrest, high investor support, opportunity for hedge funds, shareholders with larger stakes, mount a takeover campaign for board seats, dissatisfied investors, opportunistism, challenge management, effect change, shareholders, improved disclosure, mortgage-related risks, Ryland Group, home builder, mortgage-lending unit, types of home loans, secondary market, fair disclosure rules, Lehman Brothers, Bear Stearns, Washington Mutual, Beazer Homes, Securities and Exchange Commission, credit agencies, safe mortgage-backed securities, billions of dollars, mortgage-backed securities, safe investments, credit agencies, shareholder scrutiny, Moody’s, parent company, Standard & Poor’s, direct involvement, management potential conflicts of interest, enhancing independence, rotate lead analysts, hire outside firm, conduct regular reviews, rating process, customer feedback, Merrill Lynch, Citigroup, write down securities, $46 billion, mortgage-related securities, restate value on company books, targets of shareholder proposals, AFL-CIO, limit executive employment agreements, exclude evergreen clauses, automatic renewal of employment agreements, shareholder approval, bans on accelerated vesting of stock options, ban on excise tax gross-ups, ban on paying executives’ taxes, response to CEO’s multimillion-dollar pay packages, senior executive compensation guidelines, current practices, expanded disclosure of succession plans, CtW Investment, directors responsible for risk oversight, risk oversight, protect shareholders, mortgage-related losses, epicenter of the meltdown, huge losses, destabilized market, value strategies, pension funds, corporate governance, protect shareholders’ interests, directors independent of management, audit committee,

    As workaholic baby boomers retire it will take three “saner” young employees to do the work of one boomer. This generation of older workers trapped for three decades in the spoiled-employer-centred captive workforce have been under the very real threat of job loss through restructuring and cutbacks, watching helplessly as shell-shocked co-workers were escorted by security to the door with a cardboard box holding personal belongings, years of experience and institutional memory in their hands. The if-you-don’t-like-it-you-can-leave management style is being answered back by a younger generation with a demographic advantage who are unwilling to be bullied into unhealthy habits of long hours and stressful unrealistic expectations, unperturbed by threats of layoffs and more knowledgeable about boundaries concerning their rights and responsibilities as employees. See Hickman (2008 ).

    “If ‘spoiled employers’ don’t wake up to the new reality, they will lose their most valuable assets — employees, a prominent workplace expert warns. Susan Hickman reports. Ontario employers trail western provinces in adapting to a generational shift that is transforming the labour market, warns a leading workplace researcher. And if the private sector “doesn’t get it,” it will find itself replaced by new companies that respect the changing wants and attitudes of young employees, says professor Linda Duxbury of Carleton University’s Sprott School of Business. Young newcomers to the workforce don’t put their priority on money or “getting ahead.” If they’re not happy with their work, they’ll quit and many will conveniently move back in with their parents (Hickman 2008 ).”

    Linda Duxbury, Sprott School of Business, Carleton University, Ottawa, ON

    Hickman, Susan. 2008. “‘Times are a-changing’ for bosses.” The Ottawa Citizen. January 19. http://www.canada.com/ottawacitizen/news/business/story.html?id=77755a94-b399-4762-ba00-69522ab96ce7

    Flynn-Burhoe, Maureen. 2008. Google Docs. http://docs.google.com/Doc?id=ddp3qxmz_503g42r34ch

    read more | digg story

    A United Way report Losing Ground: The Persistent Growth of Family Poverty in Canada’s Largest City claims almost 93,000 Toronto, Canada households are raising children in poverty. That’s 30% compared with 16 per cent in 1990.

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    Dramatic images from NASA and the National Snow and Ice Data Center at the University of Colorado in Boulder reveal disturbing changes to the homelands of circumpolar Inuit. Rotten sea ice prevents access to resources. The amount of ice loss this year absolutely stunned CU-Boulder senior cryospheric scientist Mark Serreze of NSIDC.

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    Sea ice extent continues to decline, and is now at 4.24 million square kilometers (1.63 million square miles), falling yet further below the previous record absolute minimum of 5.32 million square kilometers (2.05 million square miles) that occurred on Se

    Key words, tags, folksonomies: environment, science, weather, Nunavut, circumpolar Inuit, Inuit social histories, climate change,

    National Snow and Ice Data Center. 2007.

    Armchair science: Montreal philosophy prof Laberge (2007) calls Al Gore, the high priest of the missionary ecological movement and claims Gore has turned the issue of climate change into a moral imperative. He uses 18th c. Scottish Enlightenment philosopher Hume’s is-ought problem to prove that the statement “global warming is bad” is erroneous.

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    See also Speechless:

    In the socio-historical context in which Hume was writing he was concerned with distinguishing vulgar reasoning from true philosophy. He argued that there were four sciences: logic, morals, criticism, and politics. He claimed that morals do not result from logical reason and judgment but from tastes, sentiments, feelings and passions.

    Hume distinguishes also between a vulgar [thinker who uses only common language] who proposes a system of morality and a true philosopher, between the thinking of a peasant and a true artisan. Vulgar reasoning shifts from ‘is’ to ‘ought’ imperceptibly without giving a proper explanation or producing evidence.

    Is Laberge suggesting that Gore is a vulgar thinker who has not provided enough evidence for his case? In the case of climate change the science is overwhelmingly clear.

    And humans do have the moral sensitivities which are the basis for making ethical decisions. We also have reason and scientific tools that provide us with experience-based evidence that informs our moral choices. Even Hume describes a political will, a social covenant in which citizens consult and agree upon a common ‘moral’ action.  We are not conscious of most of our mundane, everyday moral choices. Failing to protect forests or watersheds is a moral choice. A couple of decades ago most of us were insensitive to the moral nature of our actions that were destructive to ecosystems. In complex ecological issues where so many political, economics, geography, social and cultural interests converge, we consider ethical dimensions. Science can provide tools for measuring forest regeneration and efficient technologies for implementation. But science itself is not invested with moral sensitivity. It is only through human moral sensitivities that value judgments can be made in regards to unintended risks or side effects. Once science has provided evidence of shared, heightened risks we move from mere truth claims to moral justification for action or inaction.

    Notes:

    Keywords: Hume, philosophy, epistemology, ecology, is-ought, meta-ethics,
    Webliography

    Markie, Peter. 2004. “Rationalism vs. Empiricism.” Stanford Encyclopedia of Philosophy.

    Hume, David. 1739-40. “Footnote 13.”Treatise of Human Nature.

    Laberge, Jean. 2007. “Le devoir de philo: le scepticisme de Hume contre les écolos.” Le Devoir. 19 mai.

    Indifference to faith has left Europe’s churches mostly empty. But debate over religion is more intense than its been in many decades. Religion is re-emerging as an issue because of Europe’s growing and restive Muslim populations and a fear that faith is reasserting itself in politics. That is adding up to momentum for a combative brand of atheism.

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    Webliography

    Colbert, Stephen. 2007. Unquisition. May 3.

    Delacroix, Eugène. Jacob Fighting the Devil. Lutte de Jacob avec l’Ange. Eglise Saint Sulpice Detail. 2005.1

    Hitchens, Christopher. 2007. God is Not Great: How Religion Poisons Everything. Twelve/Warner Books.

    “Jacob Fighting the Devil.” chapter 32 of Genesis

    Kinsley, Michael. 2007. “In God, Distrust.” Sunday Book Review. New York Times. May 13.

    Lacroix, Alexandre, Truong, Nicolas. 2007. “Nicolas Sarkozy et Michel Onfray: Confidences entre Ennemis.” Philosophie Mag. No. 8. >> Philomag.com

    Onfray, Michel. Atheist Manifesto: The Case Against Christianity, Judaism, and Islam.

    Higgins, Andrew. 2007. As religious strife grows, atheists seize pulpit.” Northwest Herald. >> nwherald.com. April 13.

    Etzioni, Amitai. 2007a.”The West Needs a Spiritual Surge” >> Amitai Etzioni Notes. March 6, 2007.

    Etzioni, Amitai. 2007b. L’Occident aussi a besoin d’un renouveau spirituel.” Le Monde. 7 avril.

    Flynn-Burhoe, Maureen. 2007. “Unquisition: Selling Nothingness.” >> Speechless. may 13.