Pete's BLOG-Day 26,231. Why do we have financial crashes?

Today is Wednesday, September 12, 2012. Mt stats today: 10 minutes of yoga, 10 minutes of lifting weights and 50 minutes of walking = 2.7 miles for a September total of 23.7 miles, My weight was 162.8 pounds.

QUOTE from another so-called expert - this one from Emmeline Snively (modeling agent) to Marilyn Monroe, 1944. "You'd better learn secretarial work or else get married."

I LEARNED the main reasons we have financial crashes?  I learned this from a newspaper article in the C.R. Gazette on Sunday, Sept. 9, 2012. The title of the article was BOOK: DEBT SCHEMES KEY TO DOWNTURNS. The article was written by a Reuters reporter. The reporter was explaining what Scott Reynolds Nelson,  a history professor at the College of William and Mary, wrote in his book entitled: "A Nation of Deadbeats: An Uncommon History of America's Financial Disasters".
     As we all know we had the financial meltdown in 2008 from which we're still recovering. Professor Nelson points out we also had financial meltdowns in 1792, 1819, 1837, 1857, 1873, 1893, and 1929. The point of his book was what do all these financial meltdowns have in common.
     Professor Nelson says this : First, every one of them was caused by financial machinations (evil plots, secret or cunning schemes) of Wall Street wizards. And second, the weakness of Americans for get-rich schemes. For example, in the 1850s. investors at home and abroad bought railroad bonds whose underlying value rested on mortgaged land whose value rested on the price of wheat - a predecessor of collaterized debt obligations (remember those from 2008). In each, Nelson writes, "financial intermediaries convinced themselves that the financial instrument they had created was sophisticated enough to protect them from consumer default. And in each case the complex chain of institutions linking borrowers and lenders made it impossible for lenders to distinguish good loans from bad." And in each case the banks were saved but the people got ruined.
     The only president to take the bull by the horns and do something about financial disasters was Franklin D. Roosevelt. In the 1930s Roosevelt got sweeping financial regulations through Congress including the Securities Act and the Glass-Steagall Act. But in the last 30 years those regulations were abandoned by both political parties. We saw more and more deregulation of the financial institutions resulting in the near fatal economic collapse in the U.S in 2007-2009.
     Nelson mentions that "Those who cannot remember the past are condemned to repeat it." And he had this to say also; "We have met the enemy and he is us."
     I remember when Alan Greenspan resigned in 2008 as Chairman of the Federal Reserve. If we look at history I'm afraid we will do it again. (It is pretty sad to hear him say something like that but I'm afraid he may be right.  Americans seem not to know history and are slow learners when it comes to the consequences of excessive greed and money.)

 HUMOR for today: "I understand small business growth. I was one." George W. Bush