O Ye of Little Faith
Brooks, David
THE AMERICAN SPECTATOR 1988 VOL. 21, NO. 1 / JANUARY David Brooks 0 YE OF LITTLE FAITH Behind the pagan response to Black Monday. 44T he economy will never be the same," a New York Times...
...It was open season on those immoral yuppies...
...Now it's the morning after," declared Time magazine...
...In newspaper account after newspaper account, Wall Streeters spoke of their humiliation...
...The only differences I can discern," Raspberry opined, "are that you don't have to have much money or sophistication to bet the numbers...
...I was a superstar for four hours," he said of his maneuverings...
...Images of screaming brokers, sweating traders, and litter-strewn gutters dominate their writing...
...The stock market crash should have awakened us to the need to play catch-up...
...Because their economic impulses are based on the idea that wealth is finite, their programs always involve a lot of self-sacrifice and suffering...
...The New Republic editorialized that the pre-crash days were of "a previous era...
...His impression is that nothing is being created...
...By the end, he concluded, "the honest answer is, I've been humbled...
...Such a tax is an incentive to save, and thereby acts as a spur to capital investment and productivity...
...If added revenues do have to be raised after budget cuts are achieved, then consider a consumption tax—which we espoused for some time...
...Many of the brokers spoke of being awed by a force more powerful than they had imagined...
...If American industry is unable to compete effectively, more than paper losses are at risk...
...One large investment drives a stock price up all by itself, and a number of smaller investments do the same...
...Time magazine agreed: "the tenor of the times will never be the same...
...By taking his money and leaping into the future, the investor contributes to the creation of value and wealth...
...People tend to predict what they prefer, and there was a certain gleeful cheer in the way many people embraced the coming doom...
...As novelist Susan Allen Toth wrote in the New York Times after the crash, she feels "oppressed" by her material well-being...
...Laszlo Birinyi, Jr., chief strategist of Salomon Brothers, wondered...
...William Raspberry wrote a column after the crash entitled "The Lottery" in which he accused D.C...
...Now, the joy ride is over," declared Hobart Rowen...
...A recession is something they can really enjoy...
...Here, then, are some points we feel belong high on the agenda of the planners of America's economic future: • Eschew the siren song of protectionism...
...The money swirls around, changes hands and eventually in the early morning hours of the history of the Republic somebody at the table realizes that when the sun comes up he will actually have to go out and go to work...
...Then I was s...
...One of the crash's lasting effects is that it exposed the shabbiness of the materialist economic vision...
...they are prone to exaggerate its setbacks and its fears...
...And when I get humbled I stay quiet...
...We must reduce consumption, they announced...
...He said, "This is, I think, purely a stock market thing," words which were quoted derisively by the New Republic...
...and pointed to computerized trading, triple witching hours, puts and calls, and other esoterica familiar to only a relatively few ultrasophisticated investors...
...The millions of investors with different desires and ambitions, the different cultures of traders, brokers, messengers, newsletter writers, and fund managers, the ever-shifting hypotheses about the future—all of this is organized into an intricate system that, on the whole, works...
...The editors were apparently unashamed that a full year after they predicted the end, the party was still going on...
...American corporations already are paying more under tax reform—and these costs, for the most part, are passed along to consumers...
...Power-hungry people enjoy cataclysm...
...44T he economy will never be the same," a New York Times article declared...
...His subsequent sell orders merely reify that fact...
...Some have cried "Eureka...
...Economist Lester Thurow declared confidently that the capitalist economy had run out of steam...
...The first group takes it for granted that wealth is, relatively speaking, unlimited, whereas for the poor souls in the second category, wealth is finite and justice is achieved by redistribution...
...When wealth disappears, as it did Black Monday, they assume something irrational must have taken place, and they talk, as Meg Greenfield did, about a terror, or about a mob psychology, as Mortimer Zuckerman did...
...As Warren Brookes, among others, has noted, there is a fundamental split among people who think about economics...
...To materialists, the financial community is an ugly thing...
...U.S...
...The markets are spiritual and resilient...
...American products are priced higher as a result, and that makes it tougher to compete both at home and abroad...
...When somewhere between $400 billion and $1 trillion exists at nine in the morning and then no longer exists by four that afternoon, you knowsomething metaphysical is going on...
...They suspect witchcraft...
...The U.S...
...W hat was out there...
...To a large extent, average opinion constitutes wealth...
...But it wasn't economic news that so awed and humbled the brokers...
...The "serious" response to the crash was a tax hike...
...These latter materialists have a hard time seeing how hypotheses about the future can be organized by the financial markets to create wealth...
...Don't increase the income tax...
...Others, whom we heartily endorse, have blamed the nation's horrendous budget deficit, and demanded that it be brought under control once and for all...
...After the crash Michael Dukakis stepped up his attacks on a morally corrupt Wall Street world that piles up "paper profits" (which are as easy to spend as the other No trade-offs on trade In the weeks since the stock market fell out of bed, economists and other experts have probed and prodded the patient from every conceivable angle to learn the cause of the malaise...
...Martin Marty, the theologian from the University of Chicago, wrote after the crash that he had "a funny feeling" around office buildings...
...Douglas Ireland, writing in the New York Observer, a weekly for left-wingers who live on the upper-east side of Manhattan, summed it up: "Future generations, if there are any, will hereafter regard Oct...
...The crash was no doubt largely caused by measurable economic factors and possibly by the new market mechanisms that encourage speculation...
...Congressman Walter Fauntroy of being a hypocrite for opposing the city's lottery while not opposing the stock market...
...Congress, especially, should keep history's lesson in mind as it attempts to finalize a largely protectionist trade bill...
...People on the street spoke instead of a sense of suspended animation as the market dropped its 508 points...
...A lot of observers said other people were irrational with fear, but none of them admitted that they themselves were...
...News & World Report raised the specter of a coming "recessionary wasteland, in which auto showrooms become empty of shoppers, home prices collapse, factory production slows and workers join the unemployment line...
...John Maynard Keynes captured the way fluctuations in the wealth of the financial markets are determined by an endlessly reflexive pattern of hypotheses...
...It was humbling and humiliating," said George Kellner of Kellner, Dileo...
...Americans already save far less than the West Germans or the Japanese, to cite just two examples...
...The New Republic went out of its way to boast that it had predicted "morning-after in America" on a cover story in October 1986...
...People bet against each other just as they do in a poker game," E. L. Doctorow wrote shortly after the crash...
...19, 1987 as the date that marked indelibly the beginning of the end of the American Empire...
...there really is only one world out there...
...To materialists, Wall Street is a casino, where money gets passed from the unlucky to the lucky and where some compulsives go insane with greed...
...history, but economic materialists will still pat themselves on the back for predicting it, and they will declare that it proves the bankruptcy of Reaganomics...
...Americans until recent times haven't paid as much attention to world trade and worldwide competition as some of the nations whose products have now become ubiquitous in this country as well as overseas...
...The "serious" response for these people is imposing discipline on themselves and others...
...There was also the usual anti-Reagan bias and rich-envy (never underestimate the power of sadism, expressed by John Kenneth Galbraith: "Financial insanity can be a source of pure enjoyment...
...There were of course economic explanations, which economists are arguing about and which are not the subject of this article...
...Materialists have as hard a time understanding how wealth is created in the financial markets as they do trying to understand how it vanishes...
...if she didn't have so much wealth, the less fortunate would have more, she imagines...
...Trying to hunker down behind a wall of tariffs, import fees, and other trade barriers will only bring on retaliation and trade wars...
...In California, a young woman observed, "there seem to be outside forces that we can't, as individuals, control...
...It has only been two months, but already the hysteria seems quaint...
...But the mood after October 19 had more to it...
...It's Morning Again," was the title of an Anthony Lewis column...
...Marty walks through his campus and sees nothing more than a bunch of students handing papers to a bunch of professors and then the professors handing them back...
...Too bad so many people are willfully blind to their beauty...
...What's more, the mood changed not because people everywhere lost faith in the health of the economy, but because they temporarily lost faith in something more important—each other's faith in the 14 THE AMERICAN SPECTATOR JANUARY 1988 health of the economy...
...He wrote: "The energies and skill of the professional investor and speculator [are devoted] . . . to anticipating what average opinion expects average opinion to be...
...tried that path when it enacted the Smoot-Hawley Tariff Act shortly after the '29 crash, and worsened the Great Depression that soon followed...
...In the financial markets, hypotheses are self-fulfilling...
...If it does, and if we tame the deficit at the same time, then even Black Monday, like a cloud of any hue, will have a silver lining...
...Jesse Jackson expanded the "corporate greed" section of his stump speech after the crash...
...Tim Conway of Martin Simpson sat at his computer, as he told a reporter, "quietly stunned by the intensity...
...The economy seems to be chugging along fine—growing a bit more slowly, perhaps, but growing nonetheless...
...Out of a nation's savings pool comes the money to modernize plants and equipment, and out of better factories with better tools come better, lower-cost products...
...That's surely another key to a solid competitive stance...
...Many liberals saw the coming of a new New Deal in the David Brooks is book editor at the Wall Street Journal...
...Ever-consistent I. E Stone wrote in the Nation that we needed to administer some "bitter medicine" to ourselves...
...No matter what their shares are selling for, American companies have to compete at home and overseas against companies from the rest of the world...
...One wonders if Mr...
...When the market leaps as one community, when all its members buy together, the bull charges...
...socialists glimpsed the revolution—finally...
...Meg Greenfield spoke of an "animal terror" which stalked the nation during Black Monday, "the sort that makes your forehead clammy and causes grown men to quake in their boots . ." Mortimer Zuckerman described a deranged mob psychology, market observers moralized about a speculative frenzy, and psychologists quoted in the newsmagazines intoned about fickle herds of brokers...
...that with the lottery unlike the market you know precisely how much you stand to win or lose . ." Well, that's right, Mr...
...Looking back on the news coverage of that tumultuous week, Ronald Reagan comes out sounding the best...
...Raspberry, because in the market, unlike in the numbers, the profits haven't been created yet...
...They see nothing but the petty desires (which do indeed exist) and the greed...
...George Soros, one of the most intelligent fund managers, notes, "Financial markets operate on a principle that is somehow akin to scientific method...
...You go past 15 or 20 miles of aluminum and steel and glass and you find people doing things in those buildings with paper...
...After fifty-nine months of denyingthe existence of a boom, these people suddenly were telling us the party had existed after all, but that it was now over...
...Much to Miss Saikowski's disappointment, I guess, another crash has not been forthcoming...
...U nfortunately, those who are allegedly this nation's spiritual leaders are among those most blind to thespirituality of wealth...
...But even as the Congress and the Administration negotiate what we hope will be more than a budgetary Band-Aid, we'd like to offer them a reminder...
...Please, guys, keep your eye on the long-term implications for international trade, and the role of American industry in what's indisputably a worldwide marketplace...
...No human being could have ever designed so intricate and beautiful a system...
...At some point during the morning of October 19, some important people looked at their screens and went "uh, oh...
...Wake Up America" was Business Week's command, a full month after the crash...
...The inability to compete could mean the loss of American jobs, and a lower standard of living for Americans...
...declining Dow...
...When somebody with massive holdings goes "uh, oh," a million dollars or so no longer exists...
...What does the market know that we don't...
...But Soros also recognizes that investors are crucially different from scientists...
...Wall Street, the materialists chorused, has been conjuring up phantoms of riches, and now it has dragged the rest of our decadent society over the brink...
...And suddenly people began anticipating the next movie by Oliver Stone (Platoon) entitled Wall Street, dealing with, you guessed it, venal brokers...
...It was no accident that foreign stock exchanges followed America's on the downhill ride...
...Having collected data on a certain company and its stock performance, investors hypothesize about the future of its stock price...
...Charlotte Saikowski of the Christian Science Monitor wrote that we might need another crash, because we hadn't suffered enough, or learned enough from the first one...
...Even on its darkest day, the market was wonderful and humbling...
...While scientists go to great lengths not to influence the outcome of their experiments, investors inject themselves into the experiment by putting their money down, thereby affecting or creating the outcome...
...Mobil® ©1987 Mobil Corporation THE AMERICAN SPECTATOR JANUARY 1988 15 kind) "without producing a thing or creating a new job...
...Consider the relationship between savings, investment, and productivity...
...The old system had gone insane, the voices continued...
...It goes on today, prompting reasonable people to realize that the party metaphor is misleading...
...There was also a spiritual side to the crash and the way people reacted to it...
...Hysterics around the country were feeding on hype...
...It was the collective and massively destructive force of investors all over the world going "uh, oh...
...The next recession will follow the longest peacetime recovery in U.S...
...Morning in America" was the title of a Herblock cartoon...
...Some day, of course, the doomsayers will be right, as those who predict the inevitable tend to be eventually...
...Even in these days of index futures, options on stocks, and options on futures, investment is an act of hypothesis testing...
...He does not appreciate that knowledge is being created, ideas are being swapped, and as Black Monday demonstrated, ideas can be financially awesome...
...Now we will have to end our mad revelry, they continued...
...Their view of the financial community is stingy, squalid, and ignoble...
...An editorial in that paper noted that we had crossed "a seam in history, a dividing line to a new era...
...The Washington Postdid an outstanding piece on how the crash treated Mark Mehl, director of stock trading at Drexel Burnham...
...There are those in the tradition of Adam Smith and Jean-Baptiste Say, who believe wealth is metaphysical, the result of ideas, imagination, good habits, and hypotheses about the future, and there are those in the tradition of Thomas Malthus and Karl Marx, for whom wealth is primarily physical...
Vol. 21 • January 1988 • No. 1
