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Putting Today's Scandals Into Perspective

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May 14, 2010 – Comments (11)

I see a lot of posts here on CAPS whining about the corruption that is rampant in our society and how much better things used to be.  Here's a few events from history that will put things into perspective.

Take a look back at things like the Yazoo land scandal back in 1794 where a group of Georgia politicians were given bribes to sell 35 million acres of land to a group of four companies for a penny per acre.  

Or how about the Crédit Mobilier scandal of the mid-1800's where executives from one of America's largest companies, Union Pacific, set up a dummy corporation to pay themselves huge hidden bonuses.

Or how about 1869's Black Friday (aka Fisk/Gould) where a couple of speculators tricked then President Grant into keeping the U.S. Gold Reserves out of circulation so that they could corner the gold market.

Or the Panic of 1863  which occurred when "A large infusion of cash from speculators caused abnormal growth in the [railroad] industry as well as overbuilding of docks, factories and ancillary facilities." Sound familiar?

Or the Teapot Dome scandal of the 1920s where officials in the Harding Administration accepted bribes to lease government -owned oilfields to a company.

My point is that the scandals of today are no different than they were when our nation was founded. People are greedy...they always have been and they always will be.  Sure, we're talking about larger sums of money today partially because of inflation and partially because of "financial innovations" such as derivatives, but despite what Wall Street wants you to think financial regulation will hopefully fix some of the leverage and derivative problems that we currently face.

There's always going to be scandals and thieves out there.  We just hear about it more today than we did back then because we have something called the "Internet" and "Cable Television" and we always remember the past more fondly than it really was.

Does this mean that I think that we should let greedy bastages get away with stealing from people? Absolutely not.  I think that it is very important to be aware of what is going on and even to talk about it (without beating it to death if possible) and that the people who commit crimes should be held accountable.

One should work within the system to better their lives for themselves and their families.  My fear is that the huge amount of leverage in both the public and government sectors will make this mess last a whole lot longer than normal, but contrary to much of the doom and gloom that I read on the Web, life goes on.  We will survive the problems that we are facing today and live to face a whole new set of scandals and problems years from now that everyone will at that time will believe are the worst thing that has ever happened.

Deej

11 Comments – Post Your Own

#1) On May 14, 2010 at 10:50 AM, ocsurf (< 20) wrote:

+1

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#2) On May 14, 2010 at 11:03 AM, vriguy (74.35) wrote:

I appreciate this calming perspective. It is a much needed antidote to all the "sky is falling".  Yes, we're facing headwinds, and life will not be as easy as it was.  On the other hand, the easy life was always just an illusion, made up of cheap credit based bubbles. 

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#3) On May 14, 2010 at 11:07 AM, russiangambit (29.27) wrote:

I think stealing 50-100 mil or whatever  by a group of a con artists damages the country much less than the systematic destruction of the productive culture and replacing in with financial wizardry that has been going on last 10-20 years in the name of saving the economy. The damage is not measured in millions, It is measure in trillions. And it is hard to find equally challenging time in the american history. Perhaps, the Great Depression and the railroad bust. However, I would say that never in the american hisotry there were so many people expecting something for nothing. This is the crux of the problem. And it is called moral hazard.

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#4) On May 14, 2010 at 11:28 AM, TMFDeej (99.41) wrote:

Hi Russian.  You're absolutely right.  The financial industry has grabbed way too much power and hopefully this crisis will lead to the government taking steps to put the sector in check somewhat.  Things always go in cycles.  One could argue that Tech companies had grabbed way too large a share of the market cap of the stock market and the economy not that long ago.

The Great Depression, Civil War, the Panic of 1907 were all arguably worse than the crisis that we find ourselves in today.

To me, the main difference between now and then is not the level of corruption or the excessive exuberance that lead to the problems...the main difference that I see is that population growth helped us to grow our way out of those problems.  We do not have nearly the influx of productive immigrant workers today that we had back then and our population is aging more rapidly today than it was back then (though the U.S. finds itself in much better shape on both fronts than Europe).  

The current debt levels on both the government and private levels are troubling as well.  

Having said this, in the end I have absolutely no doubt that America will somehow manage to get through this and that a conservatively invested, diversified portfolio can do very well over the coming decades if one does it properly.

Deej 

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#5) On May 14, 2010 at 11:32 AM, mtf00l (44.87) wrote:

@russiangambit

Amen

Size and scope matter especially in our electron speed communication world of today. 

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#6) On May 14, 2010 at 11:38 AM, RonChapmanJr (93.89) wrote:

The Panic of 1907 lasted less than a month according to Wiki. 

The U.S. is not going to recover from this.  All civilizations peak and then decline.  The peak has already happened for us, we get to experience the fall from here on out.

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#7) On May 14, 2010 at 11:49 AM, mtf00l (44.87) wrote:

I've posted this on other threads however it is true and simple.

Evil flourishes when good people do nothing. 

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#8) On May 14, 2010 at 12:15 PM, PDTBiotech (94.17) wrote:

RG - no way this is anywhere near the Great Depression, but I do think you're right about the entitlement mindset being a huge problem.

The Great Depression had Hoovervilles, people were malnourished, people dragged their cars around with horses because they couldn't afford gas, people had very little clothes, food, etc.  Today over 2/3 of American adults are overweight or obese.  My friends who are unemployed, many of whom fit into those categories, spend a couple hours sending out resumes and then play X-Box all day.  I lived in Philly recently and still have friends there.  When I go back things feel the same, whether it's center city or W. Philly.  Other than the tumbleweeds blowing down Wall St. NYC feels the same.  Was in L.A. a couple weeks ago and Indy a couple weeks before that, same deal.

Other than a few (idiot) friends having to sell houses they never should've bought, a few people I know who were planning retirement having to postpone it, and some friends getting laid off (many of whom have since found new jobs), I personally haven't seen any real decline in the day-to-day quality of life for most people here.

...And here comes the Alstry-style posting of links to stories of all hell breaking loose.

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#9) On May 14, 2010 at 12:25 PM, russiangambit (29.27) wrote:

> RG - no way this is anywhere near the Great Depression, but I do think you're right about the entitlement mindset being a huge problem.

Yes, I didn't mean quality of life level. The adjustment to the quality of life is needed but is yet to hit and it will be resisted at all costs ( i.e. inflation). What I meant is the structural issues in the economy are very complex and how to fix them is on par with the difficulty encounted in a major crisis like the Great Depression.

I am actually pretty irritated thate veryone is cheering again at the consumer spending when the right thing to do is to decrease living expenses and start saving. We are rushing headlong into inflation, in my opinion.

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#10) On May 14, 2010 at 12:25 PM, russiangambit (29.27) wrote:

> RG - no way this is anywhere near the Great Depression, but I do think you're right about the entitlement mindset being a huge problem.

Yes, I didn't mean quality of life level. The adjustment to the quality of life is needed but is yet to hit and it will be resisted at all costs ( i.e. inflation). What I meant is the structural issues in the economy are very complex and how to fix them is on par with the difficulty encounted in a major crisis like the Great Depression.

I am actually pretty irritated thate veryone is cheering again at the consumer spending when the right thing to do is to decrease living expenses and start saving. We are rushing headlong into inflation, in my opinion.

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#11) On May 14, 2010 at 12:58 PM, PDTBiotech (94.17) wrote:

Aha.  Agreed on all points.  With the exception of the inflation comment at the end, which I probably agree with overall but have no idea what sort of scale we're talking about.

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