The First Disaster Of The Internet Age

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The Internet, of course, is just a technology, to be used for good or ill. Is there a technological fix that would help prevent a similar mess? One of the ways of averting the next crisis is to make the Internet better at consolidating information. Right now when you go to financial sites you are deluged with information about stocks and major market indices, plus some news headlines, and on and on. What if, instead, you saw something akin to the dashboard of a car—with dials and knobs corresponding to what's going on in credit markets, derivatives, commodities and stocks. Instead of giving endless tables—the sort of thing that used to clutter newspapers—imagine heat charts (red is bad, green is good) and simple graphs. The financial dashboard would interpret information: here is what is currently working properly in financial markets, here is what isn't, and here is what you should be terrified about. If you want to know more you can click and find out. A well-designed dashboard will at least make sure you know enough not to be surprised.

Instead of giving everyone a Bloomberg workstation, we can ask that our personal-finance providers build us a better dashboard over the Web. We need something that lets us know more than the balance of our 401(k)s, something that connects us to the ebb and flow of live financial markets around the world. It wouldn't be hard. No new technology is required—people just need to demand it (loudly). All that is required is our active interest in making sure that the world doesn't come down around our ears. We are part of this system, and we need a window into it.

One window must look in on what goes on between traders—including instant messages. By all means let the 20-something traders set up derivative trades via IM—just make sure all the trades take place in full view. Compliance regulations from the SEC and the exchanges already force messages to be archived, but firms need to do a better job of making trades, however they happen, go straight from private electronic channels onto public exchanges. We simply can't have opaque financial instruments traded via IM turn into trillion-dollar markets that no one understands or can see. No more "whoops!" should be allowed. Instead, the solution is to use the Web to force the outcomes of traders' actions into the open, even if their private conversations themselves remain private.

Instead of helping cause a financial crisis, next time around the Internet needs to be part of the solution. And it's up to us—engaged citizens, at least as much as government and flawed regulators—to make sure change happens long before the next inevitable financial crisis breaks. We can use technology to make financial markets safer. And that includes making them safer from the collateral damage of Alan Greenspan's irrational exuberance for risky financial technologies.

Kedrosky is Senior Fellow at the Kauffman Foundation and an adviser to institutional money-management firms. He edits the blog Infectious Greed (paulkedrosky.com).

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Posted By: koppany varga @ 12/06/2008 12:30:42 PM

http://koppanyvarga.wordpress.com/2008/12/02/financial-system-fix-it-with-empowering/

How to fix the financial system by introducing radical openness?

Poor Alan Greenspan - he seems to be the dumbest person on the planet. To trust that the Internet would make the financial markets safer and more transparent? What a naïve idea!

Yet, he is right. The Internet is capable to make the world safer. It can bring more transparency, but can't chase away the shadow of secrets alone. And that is exactly why he is wrong trusting the Internet to do the job alone.

However, strengthening the regulatory structure, introducing tons of new legislation, setting up new monitoring agencies is the wrong answer to our problems. It does nothing more than slowing the economy even more down.

Is there a way out?
Yes, and Paul Kedrosky is very close in this article. He suggests, we should have some more light on the scene. We need a financial dashboard, and access to the IMs between the traders. That is right. But we need much more.

Radical openness

What we really need is wiping out alltogether the secrets in the financial system. You can not build a healthy industry on secrets. It only helps to hide incompetency, hybris and greed.

So what next?

Obligate the financial service providers to make ALL relevant information generally available, real-time. Things like the IMs (even better: send them on twitter); all data they give to rating firms, auditors and state agencies; minutes of board meetings (even broadcast them online); all background studies and calculations.

While legislation takes some time, this policy can be introduced instantly at companies bailed out.

This would lower the barriers of entry into the industry of analyzing and rating financial products. Empowering startups to proliferate in this field will - in turn - change the behaviour also the incumbent players. And this would reinstate trust and sincerity in the financial system. Funny words? Yes, and this one shows again, how ill our system really is in its present form.
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Posted By: Nowforthetruth @ 10/27/2008 9:16:24 AM

http://www.youtube.com/watch?v=iivL4c_3pck

Hear Obama in 2001 Chicago Public Citizen Radio Interview criticizing the Warren Court as not radical enough for not pursuing redistribution of wealth.

Obama Says that community organizing is for the purpose of assembling the political power to force redistribution of wealth.
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Posted By: Nowforthetruth @ 10/26/2008 9:39:35 PM

The Kennedy tax cut.

http://www.heritage.org/Research/Taxes/bg1765.cfm

About half way through the article.

"President Kennedy proposed massive tax-rate reductions, which were passed by Congress and became law after he was assassinated. The 1964 tax cut reduced the top marginal personal income tax rate from 91 percent to 70 percent by 1965. The cut reduced lower-bracket rates as well. In the four years prior to the 1965 tax-rate cuts, federal government income tax revenue--adjusted for inflation--increased at an average annual rate of 2.1 percent, while total government income tax revenue (federal plus state and local) increased by 2.6 percent per year . In the four years following the tax cut, federal government income tax revenue increased by 8.6 percent annually and total government income tax revenue increased by 9.0 percent annually. Government income tax revenue not only increased in the years following the tax cut, it increased at a much faster rate.
The Kennedy tax cut set the example that President Ronald Reagan would follow some 17 years later. By increasing incentives to work, produce, and invest, real GDP growth increased in the years following the tax cuts: More people worked, and the tax base expanded. Additionally, the expenditure side of the budget benefited as well because the unemployment rate was significantly reduced.
Using the Congressional Budget Office's revenue forecasts (made with the full knowledge of the future tax cuts), revenues came in much higher than had been anticipated, even after the "cost""of the tax cut had been taken into account. Additionally, in 1965--one year following the tax cut--personal income tax revenue data exceeded expectations by the greatest amounts in the highest income classes.
Testifying before Congress in 1977, Walter Heller, President Kenned''s Chairman of the Council of Economic Advisers, summarized:
What happened to the tax cut in 1965 is difficult to pin down, but insofar as we are able to isolate it, it did seem to have a tremendously stimulative effect, a multiplied effect on the economy. It was the major factor that led to our running a $3 billion surplus by the middle of 1965 before escalation in Vietnam struck us. It was a $12 billion tax cut, which would be about $33 or $34 billion in today's terms, and within one year the revenues into the Federal Treasury were already above what they had been before the tax cut.
Did the tax cut pay for itself in increased revenues? I think the evidence is very strong that it did."