Checks and Balances

Power tends to corrupt, and absolute power corrupts absolutely.

Lord Acton

I was born in Canada and came to the US between my sophomore and junior year in high school. One of my first courses in my newly adopted country was high school civics. I learned with a newcomer’s sense of awe about the three branches of government and their important role in each checking the power of the other. It is highly attributed that this system of checks and balances is the genius of the America.

In the intervening years since those wide-eyed high school years I have been a casual observer of the reality that power and money are self preserving. The more you have of each the more you tighten the circle to protect and increase your lot. The fiasco on wall street is evidence of what happens when the self-reinforcing power/money loop runs exponentially out of control.

If there is any hope of reforming this mess, and I have no expectation that it will be reformed, it would seem that some sort of system of checks and balances will have to be devised. Increased (and effective) regulation might help with some of the “checks” that are needed. But are there “balances” that have yet to be devised? Does the final dissolution of trust by Bernard Madoff mean that investors will demand enough clarity and transparency to balance the unhealthy tendencies of money grubbing?

I have never been a strong advocate of regulation but it it seems to me that a more robust system of checks and balances is needed in our financial systems. The “checks” are somewhat obvious (i.e. regulation). The “balances” are yet to be determined.

Similar Posts

  • Self-Confidence III

    [A]s a few strokes on the nose will make a puppy head shy, so a few rebuffs will make a boy shy all over. But whereas a puppy will cringe away or roll on its back, groveling, a little boy may cover his shyness with nonchalance, with bravado, or with secrecy. And once a boy has suffered rejection, he will find rejection even where it does not exist—or, worse, will draw it forth from people simply by expecting it.

    — John Steinbeck, East of Eden

    Today’s quote is the third in a three-part series on self confidence. Wednesday Martin Luther King, Jr. said, “A man can’t ride your back unless it’s bent.” Thursday Eleanor Roosevelt said, “No man can make you feel inferior without your consent.” These quotes are important to me because they underscore the fact that we are victims less often that we think. If I feel inferior, or intimidated it is because I have chosen to feel that way.

  • Financial Rigor

    One of the things you learn in engineering is to be rigorous. If you build a bridge that falls down on a windy day, there’s going to be hell to pay. Financial markets are not like that; they are very noisy. It’s hard to tell who’s skillful and who’s just lucky. And a lot of analyses are done in extremely haphazard, primitive ways, but the investing public doesn’t know any better.

    Feb 23, 2009 issue of Wired.

    Dan diBartolomeo is the head of Northfield Information Services, a Boston financial analysis firm. He has a long history of analyzing investment strategies and complex securities. His comparison of financial markets to the rigors of engineering is noteworthy.

  • Choose your rut carefully…

    Choose your rut carefully, you’ll be in it for the next 50 miles.

    — Highway sign

    According to folklore, the above sign was spotted on the Alaskan highway. Or perhaps it was posted along the highways in the 20’s and 30’s, before blacktop became prevalent. Regardless of the source, it has served as an apt metaphor many times in my life.

    Each day we are faced with thousands of decisions: what to have for breakfast, what to wear, when to work out, how much time to spend surfing my RSS feeds. Most decisions have very short-term implications and can be corrected if errant.

    Occasionally decisions arise that have much longer-term implications: whether or not to take that new job, move to that new city, attend a certain college or purchase a particular car. In these cases, deliberation pays dividends. When I find myself facing such decisions I classify them with the “Choose your rut carefully” label. It may not be the most glamorous metaphor but it helps me take the time I need to make solid decisions.

  • Gorilla Marketing

    I am an avid fan of podcasts. I listen to many hours a week of interesting and compelling content completely on my own schedule. The TWiT Network produces some of the best, including This Week in Tech, MacBreak Weekly and Roz Rows the Pacific. Leo Laporte is a master behind the microphone.

    Leo continues to chase profitability by adding an ever-increasing array of sponsors for his “netcasting” ventures. Drobo and GoToMeeting are recent additions and he is pushing the boundaries of tolerance with the seemingly endless droning on about Visa’s security protection for online fraud. …

  • Dear United: It Didn’t Have To Be This Way

    Last summer I had a Delta flight out of La Guardia bound for Detroit. It was a Saturday morning and the airport was swarming with passengers, the gate area for my flight was like a mosh pit. As we approached the time to board, a gate agent announced that the flight was oversold by seven passengers. An audible groan rippled through the waiting area as we all clutched our boarding passes and jockeyed further for position in the boarding process. This was not going to be easy.

    The Delta / traveler negotiation process began when the agent offered the usual $400 travel voucher for anyone willing to take a later flight. In a delightful New York accent, a lady standing beside me smirked, “They’ll pay more.” Sure enough, moments later they announced that a $500 voucher was now available to any travelers with flexible travel plans. I smiled as I acknowledged the prophetic power of my fellow traveler. As my plans did not feel flexible, I gratefully made my way onto the plane.

    After the plane was fully loaded, with the last few passengers jamming bags into the overhead bins, a voice rang out over the airplane announcement system that Delta still needed one more passenger to give up their seat. This time, however, they had upped the ante.

  • “The Market” vs “The Economy”

    With all the volatility in the stock market lately it is a good time to remind ourselves that “the market” is not the same as “the economy.” The best that I can tell — at least as of the last few years — “the market” has contracted to a relatively small group of:

    • professional traders
    • automated computer programs
    • institutional investors
    • hedge fund managers

    This tight-knit circle trades amongst itself with very little relevance to what we think of as “the economy.” In contrast to this closed group, the economy is the vast sum of the creation and delivery of the goods and services we want and need.

    It seems to me that the Dow Jones Industrial Average and S&P 500 bears little connection to these things these days.

    Don’t be afraid. Now is the time to be bold. If you don’t like the economy, let’s go out and make one of our own.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.