Earlier this week I stumbled across a surprisingly on-target quote about what got us into this economic mess from, of all people, Treasury Secretary Timothy Geithner.
The failures that led to this financial crisis were many. Banks and investors took on large risks, risks they did not understand. Washington allowed those risks to build up unchecked. And in communities across the country, Americans borrowed too much in part because they did not understand how to save prudently, how to borrow responsibly, and they did not understand fully that pension values and house prices, equity prices will not always rise.
It’s not a perfect explanation. I wouldn’t make the general statement that banks and investors didn’t understand the risks they were taking. Some didn’t, but many understood quite well. And I think Washington was more than a passive observer of the whole mess.
But the blame laid at the feet of Wall Street and the government is mostly pro forma here. What Geithner is saying is that, as it turns out, a widespread lack of financial acumen amongst ordinary folks was at least as damaging as the foolishness amongst the bankers and bureaucrats. In the immortal words of Pogo "We have met the enemy and he is us."
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The other week WalletPop had a post Want happiness? Forget money – get therapy instead in which was explained that money can’t buy happiness, unless you spend it on psychotherapy.
This was based on a study (discussed a little more completely here but not, as far as I can tell, available on the web) done by two British professors. They found that £800 worth of therapy was the happiness equivalent of a pay rise of £25,000.
Alas, this was not experimental science. As much fun as it would have been, the researchers did not choose people at random and give them piles of cash or toss them onto the couch. All they did was find that people who themselves decided to get therapy experienced the same increase in self-reported happiness as those that got a big raise.
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It’s time for me to bring the series I’ve been doing on a a toy at CNNMoney to a close. Previous installments have covered housing payments, emergency funds, asset allocation, buying your employer’s stock, and life 
insurance. This final installment is on the topic of the last question in the CNNMoney "How Healthy Are Your Finances" quiz, retirement savings.
Like all the other questions, this one has you type in a number or two and gives you a red "Danger" or a blue "Congratulations" for your trouble. The question asks for monthly savings and how much you have already saved. I found that, having previously said I was a 40 year-old making $50K a year, with $10K already saved, if I put in $750 of monthly saving I get the pat on the back but at $700 I fail.
Given the number of variables, I don’t have the patience to back out what rule the toy is using to divide the ants from the grasshoppers. And it doesn’t provide that rule in the explanation of how you did, leaving a user only trial and error to find out what good is. That leaves something to be desired in the way of actionable advice.
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There is a movement amongst earnest policy wonks that might be called Nanny State Light. It’s a compromise position between full-on centrally planned we-know-what’s-best-for-you 
control and you’re-on-your-own-kid libertarianism.
The idea is that instead of making people do the right thing or hoping that they do what’s best on their own, you give them a little nudge and hint in the right direction. This is, I am told, the topic of a clever and popular book, Nudge, which I haven’t yet gotten around to reading. (But I bought a copy a few weeks ago. That’s something, isn’t it?)
The latest scheme along these lines to hit the media is in today’s Wall Street Journal. Apparently, all we need to do to get people to save more money is to send them a text message reminding them to save more money.
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Slate’s The Big Money had an amusing post the other day about some fake Treasury Bonds that were seized earlier this year. The post is mostly about the implausible conspiracy theories that were subsequently hatched, but 
what’s interesting to me is the implausible nature of the fake bonds themselves.
In two separate incidents, Italian authorities confiscated stacks of bonds with a total face value of $250 billion. A collection of US debt that large is itself pretty unlikely, but what really pushed it over the frontier of believability was the fact that these stacks weren’t all that tall. Denominations for single bonds, that is, single certificates, went as high as $1 billion.
To understand just how far beyond the realm of reasonable this is, you need to know that a) the government stopped printing paper certificates in 1986 and b) in the days in which it did print certificates the highest denomination was $100,000. The total amount of authentic paper bonds still in circulation is $105 million. That’s million with an M.
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Government, Media, The Big Picture | Frank Curmudgeon | 
December 18, 2009 2:38 pm | 
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