We are all Melmottes now

Hot/cold on the heels of Iceland’s quasi-default, the Roger Lowenstein in the NY Times urges underwater/negative equity homeowners to “Walk Away From Your Mortgage!”. . Lowenstein’s key point is that businesses (including those owned or controlled by the banks themselves) treat default as a straightforward business decision, to be adopted whenever it is profitable to do so. Lowenstein gives a number of examples where leading banks like (inevitably) Goldman Sachs have engaged in strategic default and urges his readers to do likewise. The piece is in a section headed “The Way We Live Now” and it’s striking that it’s taken more than 100 years for the business ethics of Augustus Melmotte to percolate through to the American middle class

To be fair, it’s only in the last thirty years or so that such ethics have become dominant in the corporate sector, to the point where a board that rejected profitable opportunities to stiff their creditors would now be regarded as having violated its fiduciary obligations to shareholders (particularly if the creditors are workers). And despite all the talk about shareholder value, a CEO who passed up opportunities for personal enrichment at the expense of shareholders would be regarded by his or her fellows as a mug.

Millions have defaulted already – (one in eight mortgages is currently in arrears). Bankruptcy is once again as common as divorce. When defaulting on debt is this common, it is hard to sustain any sort of social stigma or internalised notion that this is anything other than a financial option, like refinancing an existing loan. And, as with divorce, we must soon be reaching the point where most people who take out loans will do so in the knowledge that default is an option.

The question is – can the consumer credit system survive this? Probably it can, but the system will need some radical changes. It’s worked for several decades on the basis of creditworthiness criteria that work on the assumption that (nearly) everyone will repay their debts if they can. Until recently, the checks could also rely on the assumption that people would be more-or-less honest in the information they provided in their applications. The financial system, by promoting ‘liar loans’ colluded in the destruction of the second assumption, and by leading the way in strategic default, helped to destroy the first.

The problem for lenders now is that they will increasingly have to act on the assumption that their borrowers (including those who appear creditworthy on the old standards) are planning, at a minimum, to use default as an insurance option. The only good way to protect against this is to demand lots of secure collateral. That means less liberal credit (and, given higher default rates, higher interest rates) for everyone and no credit at all for lots of us.

119 thoughts on “We are all Melmottes now

  1. My thoughts exactly. This could only lead to more bank failures, and dropping home prices. The victims here will be the prudent savers of the failing banks and even more home owners, who will also become underwater borrowers as a result. I don’t know why smart and otherwise reasonable people are extolling this as a serious option for borrowers. they should be going after the guilty banks and complicit regulators instead.

  2. Surely this is of relevance to Americans, but Australians can not walk away from their debts so easily. I suspect this is part of why our credit markets are more stable.

  3. Maybe if credit is a little tighter we will have a few less banks and banks will be less willing to speculate. Maybe its the clean out we need of an industry that has come to dominate many other sectors?

    I cant see any bubble in history that didnt end up with the banks owning something, other than money, something they didnt necessarily want. I recall reading that the banks ended up owning three quarters of the wool clip in Australia after the 1890s crash, due to defaults on mortgages taken out for pastoral construction expansion. Similarly, the greatest default amount after the 1929 crash was residential mortgage defaults. Residential mortgage defaults in the US must flow into credit agency defaults.

    The question is, who is left holding all those devalued properties after the wash out?. The banks or mortgage insurers. Either way the costs of credit seem likely to grow.

  4. Pr Q said:

    The question is – can the consumer credit system survive this? Probably it can, but the system will need some radical changes. It’s worked for several decades on the basis of creditworthiness criteria that work on the assumption that (nearly) everyone will repay their debts if they can. Until recently, the checks could also rely on the assumption that people would be more-or-less honest in the information they provided in their applications. The financial system, by promoting ‘liar loans’ colluded in the destruction of the second assumption, and by leading the way in strategic default, helped to destroy the first.

    I am not so sure that “the financial system…lead the way in strategic default”. The practice seems to be pretty common amongst the financial populus in Main Street, they did not need much prompting from financial elites of Wall Street.

    My knowledge of US commercial practice is a bit hazy. But I understand that they have a system of no-recourse loans. This led to the practice of “jingle mail” as property owners with negative equity returned the keys to the lender, leaving the lender (or securitizer) to bear most of the losses (given low or no deposit).

    Australia, by contrast, appears to have much more stringent credit practices. This is surprising in a way, because one assumes that the US would be more vigilant in the enforcement of contract performance.

    Australian lenders who default are forced to carry their unpaid mortgage like an albatross hanging around their necks until they or the mortgage is finally amortised. And this practice seems to have worked much better in making lenders more wary about giving free and easy credit and forcing borrowers to live up to their obligations. Which generally acted to curb walk-away fire sales of distressed mortgagees.

    But all this shows is that stricter regulation, whether moral or legal, is required to make the capitalist contractual system work properly. Such regulation must be in some way altruistic – requiring the all parties to sacrifice their immediate interest for the long term welfare of the group.

    This is the moral paradox of capitalism identified by Weber and Durkheim. The altruist ethic that is needed to ensure contracts are undertaken in good faith and honoured is obviously at odds with the “greed is good” ethic predominant on both Wall Street and Main Street. But unlimited greed winds up consuming the social capital that actually underlies the capitalist system.

    It is striking that just at the moment when some Christian forebearance and self-restraint is most required we see a massive upsurge in atheistic liberalism. How ironic is it that such medieval virtues with their archaic quasi-religious flavour are essential for the most sophisticated systems to avoid panic and chaos.Or perhaps not ironic at all, but rather predictable.

    *

  5. Jack Strocchi :

    This is the moral paradox of capitalism identified by Weber and Durkheim. The altruist ethic that is needed to ensure contracts are undertaken in good faith and honoured is obviously at odds with the “greed is good” ethic predominant on both Wall Street and Main Street. But unlimited greed winds up consuming the social capital that actually underlies the capitalist system.

    Interesting thoughts. But I’m not sure that the basis for ensuring contracts is altruistic. If I lend money, then its in my personal financial interest that the borrower pays me back and that I can trust him/her to do so. Similarly, it is not for altruistic reasons that I might borrow money from a lender. Instead, I do so because I want to further my personal material objectives. That is, both parties act in good faith and honour the deal in order to further their (mutual) self interest (greed?), not for altruistic reasons.

  6. I’m not sure widespread ‘Melmottism’ – will lead to ‘radical’ changes in the credit markets but I agree with your sketched anticipation of what will happen. Most people have assets to lose so life will go on pretty much as is in Australia.

    But just thinking about it, I can think of two possible consequences.

    1) those who need capital will find it harder to get it. Where they might want to increase their leverage from say an 80% loan to valuation ratio to 90 or 100% it will be more difficult. Not sure that’s a bad thing however . . . . It’s how things used to be under post Bretton Woods financial regulation which seemed to banish financial crises in developed countries for a time.

    2) one of the important functions of the capital market is to get money to people who have none so they can invest it and return it with interest. Thus young families (sorry WORKING families) and those who come from the wrong side of the traps but who have an idea and a passion to do something entrepreneurial. Coping with widespread Melmottism will starve these people of capital that. This will reduce efficiency and more importantly social equity, though in the latter of these cases, the financial sector never coughed up much for entrepreneurs with a few ideas and no collateral anyway.

  7. Hi John,

    Not knowing who the hell Melmotte was, I followed your link. I wonder if Oscar Wilde’s assumed name in France – Sebastian Melmoth – was intended as any kind of reference?

  8. boconnor@#6

    But I’m not sure that the basis for ensuring contracts is altruistic. If I lend money, then its in my personal financial interest that the borrower pays me back and that I can trust him/her to do so. Similarly, it is not for altruistic reasons that I might borrow money from a lender. Instead, I do so because I want to further my personal material objectives. That is, both parties act in good faith and honour the deal in order to further their (mutual) self interest (greed?), not for altruistic reasons.

    The basis of any given contract is no doubt egotistic. But the basis of faith in the contractual system must be altruistic.

    The idea that preserving a man’s reputation is in his self-interest has taken a beating in the era of Paris Hilton, Harry M. Miller et al.

    Its always possible for a rational egotist to get a better deal by cheating on any given contract. As proven by the “Prisoners Dilemma”. See the better part of lower Manhattan, Canary Wharf and Pr Q’s literary allusion for contemporary example. Although the rawest example of how the destruction of altruistic trust can wreck capitalism is post-Soviet Russia.

    Liberal social (and biological) scientists has no solution to the Prisoners Dilemma so have to resort to various fictions (like the Leviathan and Social Contract) to account for the fact that people do indeed do nice things for un-selfish reason. This shows the weakness of the individualist “volutionary”, as opposed to group evolutionary, method of analysis.

    But in fact the natural history of families, faith and fatherland shows how the evolution of common feeling for ones fellows can lead to the establishment of a consenting capitalist contractual society. The circle of trust spreads outwards through trade (catallaxy) so long as people feel that they are not going to be screwed on the deal.

    But we post-modern liberals have spent the past generation trashing and dissipating the social capital handed down to us by our ancestors. Its great sport to make fun of clergymen and shoolmasters but they come a heck of a lot cheaper than lawyers and auditors.

    Liberals will have to rebuild institutions that foster self-sacrifice and trust. But now they have put obstacle in their own way by making their first order of business the destruction of the Christian religion which was one of the pillars of the trust building business.

    The alternative will be the PRC’s illiberal (“corporal”) Leviathan method of direct state command and control. Good luck with that for those wanting liberation from constraint.

  9. But in fact the natural history of families, faith and fatherland shows how the evolution of common feeling for ones fellows can lead to the establishment of a consenting capitalist contractual society.

    That’s a nice bit of alliteration Jack, and an interesting take on history, in which a “common feeling for ones fellows” lay dormant in the human race until fortuitously appearing in north-western Europe in the eighteenth century, no doubt owing to the marked strengthening of clerical influence around that time. Perhaps if aboriginal society hadn’t been so individualistic they might have prospered in a similar way.

  10. Although the collapse of Iceland might not have demonstrated that capitalism is inherently flawed, its collapse and the defaults that have been brought upon US homeowners show that the neoliberal brand of capitalism, what could probably best be called F U economics, is fatally flawed and this will hopefully mean we never see that variant again. Although I think, probably, it will not. People forget, and after a while snake oil is simply rebottled and drunk with the refrain, “This time its different”.

    Those who have been drawing the largest salaries for the last 30 years have been practicing F U economics in its hardest and purest form. Each of them thinking they are “the motor of the world”; the Atlas that might choose to shrug. They have been plundering the corporate sector for fun and profit, and setting things up so they walk away unscathed from any downside they create. The beauty of linking bonuses to options, that were never deserved and that were on top of a salary that more than compensated their efforts, is, of course, that there is no downside – something missed by the PC’s recent report. Given that behaviour, it is a bit rich for any of their number to bemoan that the middle class is now adopting their ways. Of course, the middle class in choosing to take the bankruptcy option in preference to paying all their debts have not been clever enough to escape unscathed.
    If they had been that clever and unscrupulous, those poor sods would have already risen further than the middle class.

  11. “The only good way to protect against this is to demand lots of secure collateral. That means less liberal credit (and, given higher default rates, higher interest rates) for everyone and no credit at all for lots of us”.

    Surely the market solution is to give people the choice of different sorts of liability options. I don’t know if this is legally possible in the US but you should have the chance of offering to honor the debt and pay a lower interest rate.

    There seems nothing inherently wrong in forcing the lender to bear some share of the risk involved in borrowing against uncertain asset values. Isn’t that the idea of ‘interest free’ Islamic finance.

  12. Ok- Im placing my bets on Augustus Melmotte, a character from an 1870s satirical novel called “the Way We Live Now” by Anthony Trollope (considered his finest work)!! It was inspired by the financial scandals of the 1870s. It lashes out against the pervading commercial, political, moral and intellectual dihonesty of the age..

    Now this IS starting to ring a loud bell…a big ben actually

    Augustus Melmotte is a foreign born financier with a mysterious past….

    and the rest of you find out what he does!

    Id say Augustus lacks a ethics and morals and is a polished foreigner with a handlebar moustache and a reasonable amount of charm with the ladies and a good story or two… but its just a guess…

  13. Oh no, Alice, I beg you to have compassion – or have you not come to the end of the story. Consider, if Augustus only had had the benefit of Gen Fama’s teaching, inbetween a bit of windsurfing, he might still be alive!

  14. @Ernestine Gross
    And a six pack …(which I gather is the new expression for an arrangement of well worked pectoral and abdominal muscles…)

    but alas Ernestine…poor Melmotte is not still alive and he wasnt by the end of the story!

  15. Alice – I’m not sure what in my comment you took as advocacy for regulation. However I am curious to know.

  16. @Jack Strocchi

    You might be interested to know that Christian forbearance and blah blah blah in the United States is associated with laxer regulation of the old midieval concept of usury, resulting in pervasive predation by payday loans in the South. Fundy politicians lots of campaign money from the loan sharks. Presumably by atheistic liberalism you mean ethics, which, as any devout Christian here will tell you, are pointless because Jesus loves you or something. Thanks, though, for injecting ignorant bigotry into a straighforward commercial issue.

  17. @Nicholas Gruen

    “Thus young families (sorry WORKING families) and those who come from the wrong side of the traps but who have an idea and a passion to do something entrepreneurial. Coping with widespread Melmottism will starve these people of capital that.”

    No it won’t. Interest rates charged will be higher. This ensures a high return on investment. No one will borrow for marginal projects. This is a good thing. Buffet charges Berkshire Hathaway subsidiaries a high rate for just this reason.

  18. In the US mortgages are typically non-recourse, can’t be modified in bankruptcy proceedings, and the bankers are almost incapable of renegotiating them on their own.

    This leaves default and foreclosure as almost the only rational alternative for an individual if they are severely underwater.

    If the banks don’t want this, then they need to show much more willingness to renegotiate terms of mortgages where it would be rational for the mortgage holder to walk. The reason that businesses view bankruptcy as a viable option is because it can give them clout over their creditors so that negotiations become a two-way street. Why should individuals not be able to structure the same level of clout as companies?

  19. rd, If the USA would be a closed economy (no borrowing from outside) then individuals and companies in the USA could go into bankruptcy as often as they consider ‘rational’. But, the USA is not a closed economy.

  20. Jack Strocchi :Pr Q said:

    This is the moral paradox of capitalism identified by Weber and Durkheim. The altruist ethic that is needed to ensure contracts are undertaken in good faith and honoured is obviously at odds with the “greed is good” ethic predominant on both Wall Street and Main Street. But unlimited greed winds up consuming the social capital that actually underlies the capitalist system.
    *

    There has been a revolution in the fields of neurobiology and psychology in the last decade or so.

    Just as it was a new instrument—the telescope—that led to the undoing of much of Christian mythology, it appears it will be new instruments—for instance those that allow us to measure fMRI in real time—that will lead to the undoing of much of the mythology of the Age or Reason.

    The infamous Cardinal Bellarmine, who prosecuted Galileo in his heresy trial of 1615, has found his modern-day twin in New Atheists like Richard Dawkins. When invited by Galileo to look through his telescope to see for himself, Bellarmine is reputed to have refused, saying that he had a far better source of evidence about the make-up of the heavens, namely, the Holy Scripture itself. Likewise, we find the New Atheists in a similar state of denial when they run headlong into some of the new findings of neuroscientists.

    The conception of human nature now taking form is more nuanced than the old one. As Herbert Gintis et al write in “Moral Sentiments and Material Interests”:

    “While the writings of the great political philosophers of the past are usually both penetrating and nuanced on the subject of human behavior, they have come to be interpreted simply as having either assumed that human beings are essentially self-regarding (e.ge., Thomas Hobbes and John Locke) or, at least under the right social order, entirely altruistic (e.g., Jean Jacques Rousseau, Karl Marx). In fact, people are often neither self-regarding nor altruistic. Strong reciprocators are conditional cooperators (who behave altruistically as long as others are doing so as well) and altruistic punishers (who apply sanctions to those who behave unfairly according to the prevalent norms of cooperation).”

    Nietzsche struggled with human nature at about the same time Trollope gave us Melmotte, a character who was “inspired by the financial scandals of the early 1870s, and lashes at the pervading dishonesty of the age, commercial, political, moral, and intellectual.” Nietzsche, without the advantage of modern instrumentation, figured out that the simplistic, reductionist concept of human nature embraced by orthodox psychology, biology and economics is science in the service of ideology. He evidently took his inspiration from the same sort of environment Trollope did, explained here by Jacques Barzun:
    “Nietzsche’s assault on the character of both the mass man and the intellectual conformist was launched in the 1870s and 1880s, a time when the booming of industry, the ruthlessness of capitalistic enterprise, and the ravages of renewed imperialism were at their height.”

    Nietzsche saw it as a descent into nihilism, and two world wars with the Great Depression in between seem to have vindicated his foreboding. There certainly do seem to be some kinks in the Age of Reason and Enlightenment projects—their underlying assumptions and philosophies–because we now find ourselves back in a situation not at all unlike that of Nietzsche and Trollope’s era.

    According to the new scentific theories I think we could postulate that we now ourselves in an epic struggle. We can either upright our moral ship or descend again into nihilism. Peter Turchin sums up the dynamic as follows:

    “Unconditional cooperators (altruists) are vulnerable to exploitation by self-regarding free riders. Moralistic punishers (or moralists, for short), unlike altruists, attempt to ensure that others also contribute by punishing free riders. If, despite their efforts, the majority fails to contribute to the common pot, moralists stop contributing themselves (thus, they are conditional cooperators). A moralist, thus, is a second-order cooperator because it creates public good (ensuring that all cooperate) while bearing some fitness costs (because punishment is costly). Mathematical models and experiments with real people show that when public good games are played by mixtures of altruistic, selfish, and moralistic strategies the outcome tends to one of two extremes. Either the moralists succeed in forcing free riders to contribute to the common pot, or moralists fail to do so, and then nobody contributes (except for unconditional altruists, if any are present). In other words, either the group achieves a cooperative equilibrium, or succumbs to the ‘tragedy of the commons.’ “

    This is of course a much more highly nuanced scenario than the simplistic “greed is good” and “red in tooth and claw” ideologies promoted by the New Atheists like Ayn Rand and Richard Dawkins.

  21. With the dollar collapsing the USA is pretty mush walking away from it’s debt. The corporate world has long waked away from debt, you lend to it in full knowledge of that fact. So the USA middle class is walking away as well. I doubt it will be the end of the world as we know it. It does make the financing of Australia mortgages look like a pretty good investment.

  22. @TerjeP (say Tay-a)
    Terje – it was your comment at 2#

    You said “but Australians can not walk away from their debts so easily. I suspect this is part of why our credit markets are more stable.”

    I took your comment as an advocacy for regulation Terje because Australians cannot walk away from their debts so easily precisely because of regulation.

  23. @TerjeP (say Tay-a)
    You see Terje – even a dedicated libertarian such as yourself slips up occasionally in reccognising the need for sensible regulation. However, this is one I dont particularly agree with strangely enough.

  24. I guess my feeling is that if lenders had been constrained by this perceived option on behalf of the borrower, we would not be in the situation we are in now.

  25. gadubu :I guess my feeling is that if lenders had been constrained by this perceived option on behalf of the borrower, we would not be in the situation we are in now.

    And this gets us back to the role of the rating agencies, a recurring topic on this blogsite.

  26. @Ernestine Gross
    I agree Ernestine…it does get us back to the hype and spin of ratings agencies…because clearly something came between expected financial institution caution and prudence and the ultimate borrower in the U.S. Ordinarily you would expect that if a risky borrower had the ability to “walk away” as they do in the US, this might actually make financial institution retail lenders somewhat more cautious? Yet, it didnt happen that way in the US did it?
    Perhaps the rapidly growing house prices there lulled all the good sense away…

    I can hear the real estate agents’ patter ….”Dont worry if things are a bit tough this year…in a year or two you will have much more “equity” in the property…but if you wait you will miss the train”.

  27. ” The way we live now” was gloriously adapted by the poms a few years back for teev, with David Suchet doing the lead (Melmotte). What struck me at the time was that Trollope was earlier said to be one of John Howard’s favourite writers, because it struck me how much of Melmotte’s story and Howard’s, and the whole noughties adventure, paralleled each other.

  28. @downsouth

    When all your tossing around of science-y words is finished, there is still the question to be answered: ‘so where is this God person?’

    I’ll look down your microscope when you actually have some direct evidence to show me.

    And Ayn Rand a New Athiest? Somehow you seem to have forgotten to add Stalin and Mao (and that other dictator whose name can’t be written because then I lose the thread). Anybody else unpleasant you’d like to add to the list? I hear PJ Keating is one of them too!

  29. It is of course popular to blame the financial institutions for the excesses but might the consumer take a little blame for taking on an excessive amount of debt? OK, I know many of the mortgage loans had terms that were suspect or hard to understand but not signing a piece of paper you can’t understand should be one of life’s early lessons, no?

    For the record ‘walking away’ does not absolve you from liability in most US states. A few states may have non recourse laws which means the bank has to decide whether to take the house or pursue you but on the other hand some states also have homesteading laws which means you can file for bankruptcy but not lose your principal residence.

  30. @Alice

    Alice, the US based rating agencies played a role in selling their highly rated junk in the famous ‘global economy’. It seems to me to be appropriate that the US takes responsibility for the financial consequences of its legal system. How the US government is going to deal with the internal consequences of the conversion of privately generated debt obligations into public debt is its business. This is a simplified picture. Not all highly rated junk benefited US citizens and not all governments can be said to be unaware of the difference in legal systems. To this extend similar issues exist in many countries. Those who preached the native ‘free market’ economics, including ‘capital market efficiency’, might wish to show leadership in voluntarism – volunteer to pay higher taxes. The rest of the global economy is apparently in no mood to join the Melmottes.

  31. Alice – no you are wrong. Australians can not walk away from their debts because of contract. Americans can due to regulations designed to protect them.

    Hail Satan – you must be joking. In the USA they are obsessed with the regulation of usury which is half their trouble. When inflation hit double digits in the 70’s the credit markets closed down in several US states because their were caps on the rate of interest you can charge and high inflation necessitated high nominal rates of interest to stop real rates going negative. But they stuck to their regulation of usury and suffered the economic collapse it ensured. You clearly speak from a position of ignorance. Our credit markets in Australia have always been less hampered that those in the US. Sure we have the four pillars policy but that is nothing compared to US reserve requirement laws, interest rate caps, branch restrictions and a muddled central bank comitted to multiple goals beyond low inflation.

  32. @TerjeP (say Tay-a)
    Terje says “Alice – no you are wrong. Australians can not walk away from their debts because of contract.”

    I know that Terje. I nver said Australians could walk away. Read my post again.

  33. @Ernestine Gross
    Ernestine – could not agree more with your comments “the rest of the global economy is in no mood to join the Melmottes”. The trouble is Ernestine, the Melmottes behind these CDOs and the Melmottes in the ratings agencies could be said to be hidden behind a fast moving wholesale mass production line with no lines of accountability to the ultimate borrowers or lenders….and unfortunately these Melmottes are alive and well and likely living every bit as well as before the GFC, thanks to the unsustainably indebted US taxpayers. The high priests of ‘free market’ efficiency are already damaged.

  34. Alice – perhaps you can clarify things regarding your position. Which of the following do you agree with.

    1. Americans can walk away from their debts due to lending regulations. Australians can’t due to the absence of such regulations in Australia.

    2. Advocating that a regulation should be absent is not a pro regulation position.

    3. Australias credit markets are more sound in part because Australian borrowers can not so easily abandon their obligations.

  35. Terje, I’m afraid Alice has you. The most “laissez faire”, unregulated arrangements would allow people whose house falls below the value of their outstanding debt to walk away.

    “Here’s your collateral Mr Lender, hasta la vista.”

    Banks in Australia are not allowed to enter into such arrangements. That’s called regulation.

  36. @TerjeP (say Tay-a)
    Look Terje – Im getting a tad irritated

    My post above (at 25) was in response to your post (at 18) which was in response to my post (at 4) which was in response to your post (at No.2) .Your comment (at 2) is in inverted commas below (yes I once did the subject auditing).

    You (Terje!!!) said

    “but Australians can not walk away from their debts so easily. I suspect this is part of why our credit markets are more stable.”

    Ill let you ponder your comment again instead of continuing to completely misconstrue and misrepresent what I actually wrote. You said you were curious as to how I interpreted you as being pro regulation (at your comment 18) ? For starters I do not intepret you that way normally – you are the most dedicated deregulation devotee I know – I just caught you slipping up. Red handed. Big time. And you have slipped up in this thread with your comment above made at 2#!

    Dont try to weasel out of it by pretending you dont understand my comments Terje. I just caught you out! Not the other way round. Our Australian credit markets are more stable because of what? ….what?…..what is it that makes them more stable?? People cant walk away from their debts.

    Why not Terje? The big huge R word (that you dont normally like….). I know you dont want to say it Terje…but you sure as hell implied it.

  37. Alice – I’m not trying to weazle. I just don’t understand what you are on about.

  38. @paul walter
    Hey Paul – where have you been brother? You obviously like your literature – lets have a bit more on Augustus Melmotte – apart from his handlebar moustache, elegant attire and charm with the ladies…David Suchet, describes Melmotte thus
    His assets included “a house in London’s Grosvenor Square, a dangerous manipulative charm, an heiress daughter, Marie, and enough nerve to host a state banquet for the Emperor of China.”
    “”He’s vile to his family, including his downtrodden wife, he beats his daughter Marie, he’s a crook, a charlatan, a pig and he’s violent… yet he has a vision of free trade and free movement of money which in his mind could lead to a new and better world.”

    He even has a handlebar moustache in one or two images ….in Suchet’s depiction thick sideburns, thick eyebrows and much gesticulating with havana cigars.

    David Suchet also claims he had much in common with the 20th-century’s Sir Robert Maxwell.

  39. What ever happened to debtors’ prison for those who are not keen to pay contractual debts? However since the Productivity Commission seems to even think that there should be little regulatory limit on the rewards for those at the top whatever debts or losses they make I suppose prison as an option is out.

  40. Andrew c :@downsouth
    When all your tossing around of science-y words is finished, there is still the question to be answered: ’so where is this God person?’

    I have no idea. I don’t believe in God, at least not God as the Unmoved Mover who lives at the farthest boundary, along with angels and other spirits in the service of God the Creator–the bearded guy, you know.

    So I’ll just fire the question back at you: ‘so where is this homo economicus person?’, and his neo-classical psychologial sibling, the ones described here by Amitai Etzioni in “The Moral Dimension”:

    “The Age of Reason advanced the image of a rational person, who chooses means on the basis of evidence and logic, free of the bondage of the superstition, prejudices, and biases that dominated early ages. Homo-economicus, rationalistic, isolated, and preoccupied with self-interest, is but one offspring of the Man of Reason; the offspring has a neo-classical psychological sibling. The sibling, too, is largely reactive, driven by inputs, is without personality, hedonistic and egotistic, a-social, devoid of affect (or emotions). Moreover, the sibling’s value judgments are locked away into a forgotten compartment.”

  41. Good evening, ladies (and gentlemen).
    Alice, have been laid low by a “lergy”- hot in Adelaide but have had to sweat on lest I go back to shivering.
    Quick scan notes you have adressed Terje’s comments re, “walking away from debt”, if its of a comfort, it gobsmacked me too and before you had replied, given his anti regulation stance.
    Or am I (still) reading it “wrong” somehow?
    Please, some one, heeeelp!!

  42. As for the rest of a great thread, am better for the discussions and comments.
    However, If I do not reply again, a wreath will do fine.

  43. @paul walter
    No Paul – you are reading it right. Terje did contradict his own views. I suspect a lot of libertarians dont really absorb the full ramifications of the “any regulation is bad regulation” view. Hence they will tend to slip up. Thus the ALS “no regulation, no government” view is mostly an artifice.

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