Responding to a recent post, Grandmaster Bud said:
I keep waiting for Brad to post something about the financial market meltdown….
Of course, bud wanted to the subject to come up so he could make some broad statement about the election, which he went ahead and made:
… Apparently the Phil Gramm approach to regulation isn’t so great after all. And to think, if Bush/McCain had their way our Social Security funds would be in grave jeopardy now.
My response was to say that I already tried to give y’all a place to talk about that — you know, the George Bailey thing — but as I’ve made abundantly clear in the past, I generally don’t comment on things having to do with Wall Street, because I don’t understand it. That is, I sort of understand it, and what I do understand makes such little sense that I prefer not to go out on a limb offering opinions on such things.
But here goes anyway: I think markets are all a bunch of smoke and mirrors. Value is totally relative, so to me Phil Gramm and John Maynard Keynes make equal amounts of sense in this context. The value of something like Lehman is to me based on B.S. So the assets were overvalued — big, freaking surprise. Samuel T. tried to explain it to me this morning this way: If your assets are valued at $40 million, but they’re only worth $20 million, you’re overvalued. I get it. And I also think it’s a bunch of hooey. To me, the only value of a place like Lehman, shuffling its ones and zeroes around, is the buildings and office furniture and carpets and such that it owns, plus B.S. If people will pay you $40 million for your stock, it’s "worth" $40 million. If they’ll only pay you $20 million, it’s "worth" $20 million. If they suddenly realize it’s based on nothing — like Wile E. Coyote suddenly looking down and realizing nothing’s holding him up — it’s over.
One can say this about anything — the monetary worth of anything is what people are willing to pay for it. It’s true of comic books. And although I believe (as I have said) that comic books have an absolute value, I realize value is relative.
But when you’ve paid too much for your comic book and you’re off the cliff and you look down, at least you’ve still got your comic book. With Lehman and Merrill and the rest, I’m not sure that you have anything at all.
By the way — you know that Krugman column I wanted to run on the subject, but it got outdated? Well, I’m happy to say that I have a very solid Robert Samuelson piece on the subject for Wednesday’s paper. In it, he explains why "Wall Street as we know it is kaput." My favorite part is when he says that after a crash like this, some good thing may happen in reaction. For instance, "Talented and ambitious people may move from finance, where they were attracted by exorbitant pay, into more productive industries."
That could only be good for the country.