01 December 2007

Too Good to be True ?

Too Good to be True ?
John Maxwell

My late great friend and neighbour, Mavis Virtue was fond of saying that most people's heads existed merely as decorative accents at the ends of their spinal columns, rather like finials on gateposts. We were discussing the reasons most people seemed to lack bullshit detectors and persisted in falling for baubles, bangles, beads and similarly meretricious inducements.
If something seems too good to be true, like Anansi's generosity or a perpetual motion machines, it probably was. We were at the time discussing the South Sea bubble and other manic events when reason went absent without leave (AWOL) and people threw good money after lunatic schemes.
When I first heard about our brand new investment schemes which returned money like a one armed bandit with its innards in an endless loop I told my wife simply that anything that seemed too good to be true almost certainly was too good to be true. The willing suspension of disbelief helps when we're watching Othello or listening to a DJ boast about his 'conquests' but one knows that reality will soon supervene and that the whole thing was imaginary.
The South Sea Bubble was a gigantic stock market speculation that began when the South Sea Company bought the British government's outstanding short-term war debts, not funded by a specific tax, be converted into equity in a new joint-stock company Briefly, the South Sea Company bought the British national debt, expecting two things– a return of 6 percent and a monopoly on trade with the South Seas i.e Latin America. There, the company expected to deliver English wool and other manufactures, to be repaid in gold by the benighted inhabitants for whom Axminster carpets and woollen blankets were obviously worth more than gold.
The company it was said, could not fail

The problem with this expected monopoly was that it did not exist. The King of Spain hadn't been consulted and made it known that there would be no monopoly of trade for anyone and in fact, instead of the fleets of ships carrying gold back to Britain he would allow only three or four British ships a year into his colonies.
That didn't stop the speculation. The South Sea Company's shares rose and kept on rising and their success stimulated other speculators and fraudists who set up thousands of companies for a variety of purposes including such esoteric enterprises as one to distill sunshine from vegetables and the classic " an enterprise whose purpose shall in due time be revealed". It made no sense but people threw their money into the bubbling pot, borrowing money to make fools of themselves.
. Sir Isaac Newton, one of its victims had realised early on that the bubble was just that and took his money out making a profit of £7,000. Unfortunately the bubble continued for so long that against his better judgment, he put in another £20,000 and lost all of it. He was led to muse "“I can calculate the motions of heavenly bodies, but not the madness of people”.
Nobody noticed when Spain and England went to war again and reality clocked in only when the promoters of the South Sea Company realised that their company would never have assets matching their investment and sold out. This of course, precipitated a crash heard round the world. During the mania the government even passed a law (the Bubble Act) making it an offence for a company to do anything that was not in its original charter.
The bursting of the Bubble meant ruin for masses of people and for several generations its reverberations continued to be felt. Britain's blossoming into the financial centre of the know universe was postponed.
I was reminded of all this by a curious text message I received on my cellphone on Wednesday. It read in its entirety

It would seem that Cash Plus needs more people, investors, to generate cash flow. If I manage to bring in five people I will get a reward of the downpaymewnt on a car and 40 people will produce a downpayment on a house. Just what these down-payments are valued is not noted. I have decided after mature consideration that this offer is too good to be true.

None of the Above

Watching this week's televised debate between the US Republican Party's presidential aspirants made me realise to what profound depths the level of American politics has fallen. Apart from Ron Paul, the Great Unknown, it seemed almost impossible to get a straight answer out of anyone. John McCain, as expected, was righteous and right on the question of torture, magisterially rebuking Mitt Romney for his reptilian evasion of the question of whether 'waterboarding' is torture.
Mr Romney, whose father was I believe an honest man, was unable to say what he thought about waterboarding preferring to defer his conscience until he had had a chance to talk to military advisers if he ever became President. As a 'presidential candidate" he thought it impolitic to declare that a practice condemned by all civilised people, prohibited by the Geneva Convention, was torture. I believe that torture is just as much an offence to human dignity as Mr Romney himself.
Mr Mike Huckaby, rapidly gaining strength at the expense of his mealy-mouthed opponents, scared the daylights out of me when he said he would abolish the Internal Revenue Service in favour of a so-called "Fair Tax" – in reality a super sales tax when would impoverish the poor and fatten the wealthy.
Someone needs to remind Americans that they are supposedly disciples of Adam Smith who, fifty years after the South Sea Bubble, gave it as his opinion that the wealthy should pay a sort of ground rent for the opportunities they have in becoming rich. I quoted him two weeks ago in my column "Self-Inflicted Wounds" :
"The subjects of every state ought to contribute toward the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state" - Adam Smith, An Inquiry Into The Nature and Causes of the Wealth of Nations, 1776.
The Republican Presidential candidates were falling over each other to declare how anti-human they were, anti-immigrant (Mexican) anti-welfare (blacks) anti-education (everybody) and apparently anti-anything on the agenda of the civilised world since 1776. In any European country and in a majority of developing countries their opinions would be greeted by disbelief, contempt and probably, rotten eggs and tomatoes.
The brontosaurian Fred Thompson delivered it as his opinion that people should be able to fly the Confederate flag privately but not publicly for fear of giving offence. Everyone paid homage to Ronald Reagan, that intellectual giant of the Republican Party.
I am old enough to remember the Barry Goldwater campaign of 1964 when the world looked on with astonishment at the Neanderthal politics of the Senator from Arizona. This was worse.
The Press, of course, is a prime culprit in these developments. I know that television is basically aimed at people well below the age of consent, but this debate really brought home to me how much American civilisation has been devalued in a relatively short time. It was instructive to hear one republican voter in a Florida focus group assembled by CNN, a middle aged woman who had come expecting to make up her mind on a republican candidate. When she was asked after the debate who she favoured she answered that she was thinking about voting for John Edwards. My sentiments exactly.
The Press or the Media as it is now fashionably called, has dumbed down the politics of the American people by mischief-making, trivialising important matters and distorting the views of anyone left of Winston Churchill. In fact, Winston Churchill's welfare reforms of a hundred years ago would probably not pass muster in the corridors of TIME Inc or the Washington Post. Richard Nixon is rightly reviled for his dishonesty, but I feel that some of the obloquy heaped on him is because he was actually, a relatively civilised human being compared to some of his successors.

Adam Smith redux

While American markets, financial, commodity and other, are braced for weeks and months of turmoil consequent of the meltdown in the sub-prime mortgage market, some people are as happy as pigs in a wallow. It has been announced that the bankers and traders of Goldman Sachs the investment bankers, are to share a bonus pot of US$18 billion this Christmas. They will get bonuses equivalent to nearly twice the national income of Bolivia.
Obviously these guys have worked really hard.
Copyright ©2007 John Maxwell

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