The cause of the current financial crisis - numbers or culture?

[aneeshm]

Since the current financial slump started in the US markets (and ripples outward), I've continued to come across this pervasive meme of how corporate America, most specifically the upper management of most middle to large sized companies, is concerned more with meeting quarterly projections than with long-term growth. This meme also holds that it is this mentality which is responsible, in large part, for the current slump, because it led to practices which were short-term good but long-term disastrous, such as the relaxation of lending standards to unworthy borrowers.

Now, not being privy to the deliberations going on in the boardrooms these managers inhabit, I have no way of knowing whether or not this is true. Thus this thread - I hope that someone here who actually knows what is going on can tell me to what extent this is true.

Specifically,

a) Does a mentality of "Let's focus on the next quarter, the long-term be damned, we won't be around with this company by then anyway" exist in corporate America? If so, how pervasive is it? How influential? And are there any companies or groups which do not subscribe to it?

b) It it does, what part of the blame for the current financial slump does it bear?

There is also a cultural question which I want to ask.

As far as I have noticed, American pop culture seems to emphasise living for the moment. How much has this affected the general populace? Is this attitude - of live now, pay later - responsible for the current crisis, in the form of borrowers extending themselves beyond their ability to re-pay? If so, to what extent?


More generally, I want this thread to discuss the subjective causes - the "humanities" side - of economic phenomenon. You could show me the numbers - this number is too small, this one too big, so the crisis happened - but I want to know why they're too small or too big in the first place. Because if it turns out that it was, in fact, a combination of unwise institutional and individual choices which led to the current crop of problems, both led by short-term thinking, then it means that at its root, the economic problem is merely a reflection through the market of a deeper, cultural one, which is the one which may need to be fixed. This is what I'm trying to find out in this thread - is this purely an economic problem, or is there some more fundamental cultural cause? Cultural could be of any culture - corporate, popular, whatever.


Disclaimer: I'm not an economist, just an interested layman.

[Jon Miller]

Hmm, is it bad if aneeshm is agreeing with me (that America has a culture where we focus on short term rather than long term).

You could also tie this into problems with pollution/etc.

JM

[notyoueither]

Originally posted by Jon Miller
Hmm, is it bad if aneeshm is agreeing with me (that America has a culture where we focus on short term rather than long term).

You could also tie this into problems with pollution/etc.

JM

No.

Yes.

[notyoueither]

Focus on short term gain is not unproductive, or abhorent, per se.

A young industrialist is not doing anything if the focus is on retirement.

People found a weakness in the system, credit and trading of credit based contracts, and exploited it... to the hilt.

It has been a failure of regulation more than anything else. The rats are doing what they are supposed to do in finding an advantage and maximising it. We need a better maze.

[Kidlicious]

Culture has nothing to do with the financial crisis. If americans saved more money it would just make things worse. If fact, that might be happening as we post on this thread.

[Deity Dude]

In the long term we're all dead.

[Barnabas]

Capitalism self-destructs without state intervention.

[Vanguard]

The financial crisis has been caused by competitive financial manipulation. You have to remember that manipulation of accounting rules is extremely profitable, right up to the failure point, where it suddenly becomes extremely unprofitable----for somebody.

Before that point however, manipulating the accounting rules is so much more profitable than any other business activity that it is impossible to compete with someone who is doing it unless you start doing the same thing yourself.

[Kidlicious]

Originally posted by Vanguard
The financial crisis has been caused by competitive financial manipulation. You have to remember that manipulation of accounting rules is extremely profitable, right up to the failure point, where it suddenly becomes extremely unprofitable----for somebody.

Before that point however, manipulating the accounting rules is so much more profitable than any other business activity that it is impossible to compete with someone who is doing it unless you start doing the same thing yourself.

Yea, but like you said it's very profitable. The economy wouldn't have grown much over the decades without accountants.

[Jon Miller]

Originally posted by Deity Dude
In the long term we're all dead.

Our children aren't.

JM

[rmsharpe]

Originally posted by Barnabas
Capitalism self-destructs without state intervention.

Poor Hong Kong...

[Vanguard]

Originally posted by Kidicious


Yea, but like you said it's very profitable. The economy wouldn't have grown much over the decades without accountants.

Being "profitable" is the not the same thing as "creating wealth."

Manipulation of accounting rules does not create wealth. Instead it (basically) allows companies to print their own money. Which, obviously, is a very profitable business and which companies continue to do until eventually nobody can tell which money is good and which money is bad.

The financial crisis is basically the result of this process. Markets have been destroyed by huge influxes of money created by securitizing false value and borrowing against it. This new money is not backed by interest paid by the government. Nor is it backed by any hard, readily convertible asset. It is instead backed by profits on real estate. Profits which only exist if real estate keeps going up and up in value.

[chequita guevara]

What do Muslims have to do with American capitalism?

[Heraclitus]

Originally posted by Comrade Snuggles
What do Muslims have to do with American capitalism?

Haven't you hear Muslims are the new Jews.

[Barnabas]

Originally posted by Heraclitus


Haven't you hear Muslims are the new Jews.

I don't think so

Jews were/are hated for being a successful minority wherever they move to. Jealousy and resentment are what matters in the case of jews.



Muslims are hated because they are poor people with very different values. They are more similar to gypsies in that way.