Too bad this would never happen at the Oscars.
Sunday, February 22, 2009
One Benefit of the Financial Crisis
A couple years ago, at the height of the market, some new companies entered into my industry (the fantasy sports industry). They were funded by investment (I think venture capital money), and they spent a whole bunch of it hiring people and marketing themselves. They made a nice splash at the conventions because they'd sponsor events and they'd spend money on advertising with other companies. Sure, they had a business plan of sorts, but not a realistic one given the amount of people they hired and the amount of money they were burning through.
Having seen a number of these outfits come and go, it occurred to me that in a good economy, one where there's plenty of extra money lying around, all it really all it takes is someone who is good at pitching investors to create these pseudo businesses. They raise money, throw it around, act like big shots, spend their way into a modicum of market share, then, if the economy's still good, ask for more money; if it isn't, they fold.
One beneficial side effect of a bad market is the elimination of these kinds of entities. It might seem like an industry is losing jobs or productivity, but it's not. I wonder how much of the loss in GDP in a recession is really just the elimination of this kind of bogus activity.
Having seen a number of these outfits come and go, it occurred to me that in a good economy, one where there's plenty of extra money lying around, all it really all it takes is someone who is good at pitching investors to create these pseudo businesses. They raise money, throw it around, act like big shots, spend their way into a modicum of market share, then, if the economy's still good, ask for more money; if it isn't, they fold.
One beneficial side effect of a bad market is the elimination of these kinds of entities. It might seem like an industry is losing jobs or productivity, but it's not. I wonder how much of the loss in GDP in a recession is really just the elimination of this kind of bogus activity.
Why the Bailout Doesn't Matter
I was getting worked up earlier about the idea that we're bailing out these incompetent scumbag bankers, auto company managers and delinquent home owners, but now I realize that it's much ado about nothing.
No money is coming out of my pocket presently, and the inflation created by the bailouts is not going to be a problem any time soon. So the real issue is that we, the taxpayers, are going to owe all of this on the back end. Just as Wall Street had its pyramid scheme which wound up with homeowners and banks holding the bag while the execs drained out all the money, we're just adding another layer to the pyramid with the taxpayers taking over for the banks. No problem, when we're asked to pay, we'll just do what the banks did - throw up our hands and say we're unable. At that point, there won't be anyone left to borrow from, and so the government and the world order will simply collapse. Which is what would probably happen now if we didn't give our money to the banks.
So we're buying a little extra time, pretending we can actually guarantee all that debt. Might as well enjoy it while it lasts. Because after the collapse - who the hell knows?
No money is coming out of my pocket presently, and the inflation created by the bailouts is not going to be a problem any time soon. So the real issue is that we, the taxpayers, are going to owe all of this on the back end. Just as Wall Street had its pyramid scheme which wound up with homeowners and banks holding the bag while the execs drained out all the money, we're just adding another layer to the pyramid with the taxpayers taking over for the banks. No problem, when we're asked to pay, we'll just do what the banks did - throw up our hands and say we're unable. At that point, there won't be anyone left to borrow from, and so the government and the world order will simply collapse. Which is what would probably happen now if we didn't give our money to the banks.
So we're buying a little extra time, pretending we can actually guarantee all that debt. Might as well enjoy it while it lasts. Because after the collapse - who the hell knows?
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