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On April 20 2009 05:17 Diomedes wrote:
Still people in Europe claim banks shouldn't even be allowed to take those risks. And politicians and economists claim what happened would never be possible in Europe because of regulation. And I also have heard people claim that it only was possible because of recent deregulations.
Lack of regulation never causes anything, in the strict sense of the word. The point is it should never be even possible, whatever triggers it. There should be a fundamental failsafe.
And the problem isn't just those mortgages but also how those risks were packaged and traded over and over in ways no one was able to figure out.
And it wasn't the government that made those mortgages either. So how can you blame them for that? Just because they created the scenario where everything could go so wrong but because of the actions of other people. The government did what I did and the banks did what they did.
Yeah, it all wouldn't be possible with the US credit culture. But those people don't manage the banks. People are responsible for their own actions.
First of all, since when is Europe suddenly the land of all the genius economists?
Second of all, there will never be a failsafe. Politicians are too corrupt and other people will simply find another way around the failsafe. If anything, the failsafe will make things worse, as it will reduce the ability of smaller people to compete with the larger organizations.
I already explained in my essay how the risks were packaged and traded. It was through a mxiture of creating mortgage-based securities (which have been traded for quite some time) and lying.
And the government FORCED the banks to make those mortgages. That's like saying that Charles Manson wasn't responsible for murdering all those people because he never actually killed anybody. And saying that the government only created the scenario here is like saying that New Orleans is free of guilt because they created the scenario during Katrina where everything went wrong but they didn't personally cause the hurricane. Not only that, but the government itself provided a market FORCE against the banks to invest in these crappy securities.
I don't disagree that the US credit culture is insane. I also agree that people are responsible for their own actions. But if you think that this wouldn't have happened without regulation, and that as a result we should regulate the financial industry, then we must also regulate (by taking away its powers, namely) the government, to the point that it is no longer able pass stupid ass bills like that.
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To some extent I expected the "read this" counterargument but I wanted to see if you really think this to be the absolute truth (somehow it seems the number of pages written about it makes it "truer" to you) and since you do further discussion is pointless.
To consider anything based on axioms made on human behaviour to be entirely correct in the real world is too esoteric for me and you made clear your stance is final.
Though if I happen to find the time I will read the material and point out fluffy assumptions and fuzzy argumentations as they are bound to be in there.
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On April 20 2009 05:03 Diomedes wrote:
jgad, what you propose would make the primary function of banks impossible and thus basically make banks in the sense we understand them now, illegal. You are doing exactly what was talked about. But your regulations are so extreme that it makes banking totally impossible.
And yet you claimed you want to deregulate? I don't get it.
In the US were basically no regulation for investment banks. This they did did because of market ideology. And your suggestions are so extreme compared with normal regulation proposals, its very odd. Just because the rules are the same for humans and banks that doesn't mean it's no regulation.
And who to blame for the special rights companies have? Exceeding those of normal persons when they aren't even legal persons in the first place. The same people who refuse to regulate.
Nonsense. Just what do you perceive the "primary function" of banks to be, and how do you propose that this will be made illegal?
You go to work and you make some money - what do you do with it? You can :
1) Put it into your mattress until you need it.
2) Lend it to somebody in the meantime and charge interest.
A mattress is somewhat unsafe and so banks originally came into being as institutions which offered the service of safeguarding your money in a more secure way than your mattress. For this you would pay a small fee, but for the peace of mind of knowing that your life savings could not be stolen in a simple act of theft. This is no different than case 1 except that you have purchased use of a more secure mattress. In both cases you have immediate access to your money because it has not left your proper possession. That money is also not in use in the economy as it is not circulating - it is simply waiting until you need it to be used and so it does not generate any income.
In the case where you lend it out, however, you physically give your money to someone else, who then uses it for some purpose, and gives you in return a promise to repay at a later date - plus interest. While the money is loaned out, you do not have immediate access to it because you've given it to somebody else. Only once that money is repaid is it again in your possession.
This is how banking should work. Bank runs would be impossible if things worked this way because the bank would always be able to repay demand deposits, which would not be loaned out and which would be available at all times, and loans would be understood to be simply financial instruments removed from immediate cash. To gain access to your money from a loan you would need to either wait until you were repaid by the original borrower or you would need to sell your loan to a buyer willing to give you cash in exchange for the IOU you are holding from the person who you lent your cash to.
In the first case the bank makes money by charging you fees to store your money. In the second they would earn a percentage of the interest for the service of managing the accounts and taking the grunt work out of the hassle of putting lender and borrower together.
This would all be perfectly fine under free-market-laws.
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The point is that it's the US where the problem started. So Europe is going to be more objective.
And how can governments force banks to make deals they don't want to make when at the same time there was almost no regulations. It's just an excuse bankers made if you ask me. What you are is basically saying that others force Manson to kill and thus Manson is not the murderer. Or at least not the prime suspect. Not the other way around.
As for Jgad, that banking will no longer possible is even besides the point that you propose extreme regulations while you propose there are already too many.
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On April 20 2009 05:41 Diomedes wrote:
The point is that it's the US where the problem started. So Europe is going to be more objective.
And how can governments force banks to make deals they don't want to make when at the same time there was almost no regulations. It's just an excuse bankers made if you ask me. What you are is basically saying that others force Manson to kill and thus Manson is not the murderer. Or at least not the prime suspect. Not the other way around.
As for Jgad, that banking will no longer possible is even besides the point that you propose extreme regulations while you propose there are already too many.
a) Europe is not objective. Their governments are very heavily regulated, so of course its in their best interests to promote their ideology.
b) There were regulations back them, what the hell are you talking about? New Deal, Great Society, those were the two juggernaut regulatory authorities. The CRA, as a matter of fact, was one of the many regulations on financial firms. Bankers don't even make this argument lol. What evidence do you have to say that bankers are making this excuse, anyways? And clearly you are misusing metaphors up the ass. I have no idea what you're trying to say here.
You still haven't addressed any of my points other than with vague rhetoric and a disturbing lack of evidence.
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On April 20 2009 05:30 silynxer wrote:
To some extent I expected the "read this" counterargument but I wanted to see if you really think this to be the absolute truth (somehow it seems the number of pages written about it makes it "truer" to you) and since you do further discussion is pointless.
To consider anything based on axioms made on human behaviour to be entirely correct in the real world is too esoteric for me and you made clear your stance is final.
Though if I happen to find the time I will read the material and point out fluffy assumptions and fuzzy argumentations as they are bound to be in there.
You're trying to make arguments against strawmen. What is asserted as "truth" and what you seem to perceive those assertions as being seem to be different things entirely. The number of pages does not make it "more true". Hopefully I've presented arguments logically enough to preclude you making that conclusion about the quality of my reasoning. I merely mean to say that we cannot discuss the matter in any meaningful way - one where we test each others' assertions - unless we both understand each other. Until you familiarise yourself with the contents of the theory we are debating all our relationship can be is one where I teach the contents to you and not one where we debate logically. The converse would be true if your counterarguments came from Keynes or Marx and I had correspondingly not read The General Theory or Das Kapital.
If you're into semantics I recommend the lecture by Hans Hoppe I posted earlier. He gives good examples of the types of statements one can make and the types one cannot make. ie :
"If you increase the legal minimum wage to $1 million per hour (in absence of an expansion of the money supply), unemployment will rise"
Do we really consider a statement like this to be a hypothesis? An empirical statement which must be tested before we can consider it to be true? More fundamentally :
"A ball (euclidian sphere) cannot be red and not red all over (on its surface)"
Is it a hypothesis, or can we state with some certainty that it is true. Do we need an expedition to Jupiter to look and see if we can't find a ball that is red and not red all over, or can we accept that this is a fundamental truth which is self-evident and does not require proof?
Right now you are making assumptions about the statements made by Rothbard and Mises - that they are not these kinds of statements. I can't provide a counterargument to that other than to say that they are and to invite you to try to find flaw in them yourself. To choose any one and debate will invariably require that we largely reproduce the text in unending counterarguments until we finally reach the initial axiom, at which point you would have read the books anyway, and Rothbard is a better writer than I am.
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On April 20 2009 05:41 Diomedes wrote:
And how can governments force banks to make deals they don't want to make when at the same time there was almost no regulations.
Because there are regulations - heaps of them. The amount of financial regulation in the world fills tomes. You've been lied to and you believed it. That "there were no regulations" is a total non-truth. The only excuse for believing it is laziness.
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posted by jgad
a 100% reserve requirement for demand deposits
This is really quite an absurd requirement that shows a COMPLETE lack of understanding of WHAT IS A BANK, never mind the whole free banking thing. In any case, this service still exists, its called a renting a safety deposit box if you want something other than stuffing under an mattress.
What a Bank really do is convert long term, illiquid assets into short term liquid assets and does a critical function in the economy. When you put money in a savings account, you are really (indirectly) buying loans from the bank and insured by both the bank (and government) against loss. Deposits are a super high liquidity low risk investment that gets positive returns from interest. This is a financial product that many people likes to use in addition to everything else.
I'm always annoyed how everyone is so ignorant of the financial system. One of the real cause of all the mess today is the collapse of the shadow banking system, or "banks without banks" but with some alternative arrangement that convert the illiquid into the liquid. The bad news is that those that bought into them often didn't either.
Indeed, any actor, when employing means, estimates that he will thus arrive at his desired goal. But he never has certain knowledge of the future. All his actions are of necessity speculations based on his judgment of the course of future events. The omnipresence of uncertainty introduces the ever-present possibility of error in human action. The actor may find, after he has completed his action, that the means have been inappropriate to the attainment of his end.
The people have made their judgment from all the information they have, and their decision is to create a federal government that controls a huge chunk of the economy. This entire block of text is so POINTLESS as to be unworthy of the minute that I spend reading it. It basically says that "humans do whatever they think they should do" with the implication that "one shouldn't challenge their judgment." Well, that is just an irrelevant line of thought since the question being asked is what happens when people disagree, whether it be randians or anyone else, and they do.
All that free markets suppose is that people have desires and will act in a way that they feel will most effectively satisfy those desires.
People ALREADY DO THAT UNDER ANY POSSIBLE SYSTEM. No one could remove that if one defines self action as results of self desire, BY DEFINITION. Just because you live under the most repressive Stalinist nightmare does not prevent it. As long as the brain is connected to the body, it is a invariant truth. As such, it can not be made as an argument for any system.
What the free market does it merely describe a rule that result in a set of behavior to fulfill goals. In a different system, people use different behavior to fulfill often different goals.
And that's fine. I'm happy to allow you to exercise your own affairs. I just don't want you, or anybody else, exercising my affairs, because I also feel competent to do so myself.
Idea behind rand is a strict definition of "affairs of oneself that should not be effected by anyone else" but that is an assertion and not a proof. I can easily say that I should be the god emperor of mankind and that I alone should have sovereign rights to nuke the entire planet. Why is this a bad idea? Well because it would effect everyone else adversely of course.
Well, guess what, pretty much everything a person do effects someone else in some way or not, if by mere existence. There is no my affair or your affair, there is only our affair, some of which is best left to your judgment and some does not. One would take a silly imagination to conceive of a domain of human activity that is so independent as to having no externalities out of the million ways that people are connected in this universe.
This is called "moral hazard" -
A free market would not allow this.
Its called lying. It works since the beginning of time, and with a 70 year lifespan, running a good con once is good enough. Its simple, just make a scheme where you pay out interest from the money of latter investors and you can run it in a free market just fine if you package it just right.
Then again, even libertarians knows that theft and lying is bad. But instead of a person doing it, how about a black box that automatically does this and no one actually have to "lie", they just need to be "correctly ignorant" which they can do easily. Well, that is what the housing bubble and bubbles generally are. It has happened before when money was gold and silver and central banks exists only in the imagination.
The logical market response is extreme skepticism to all investments, and the result is a medieval economy with much slower flow of capital that is nowhere competitive with others.
So what is the solution to this "automatic ponzi scheme" that people have came up with? Regulation that works well enough to lower systematic risk while allowing enough freedom to maximize flexibility for a fast flowing economy. There is a reason behind something like generally accepted accounting principles and government enforcement, since it prevents fraud or just "unknown black boxes of doom" from building up.
There is a reason why super libertarian-land do not have hyper economy to match (otherwise the ideology wouldn't be left in the imagination of randians as some micro state would quickly prove itself) and that is because regulations help sometimes, in specific areas and things.
None of this would happen in a free market. Interest rates would reflect savings, and when savings went down, interest rates would go up. Demand for credit would increase the price of borrowing ever scarcer savings. This didn't happen because central banks can dictate the interest rate, and even if there are NO savings in the system, as was the case in the US, which was carrying a NEGATIVE savings rate AND had 1% interest rates at the SAME TIME
1) Get rid of central banks and allow the free market to operate properly, including the determination of interest rates.
The powers of the fed is really in the control of the money supply, as the real interest rate is tied with inflation and fed's power in the interest rates is really magically creating some money for overnight loans.
So the question is, who should control the money supply? Lets see the choices:
1. Metals: Supply of metals is not stable, and finding gold maybe the ruin of economy as the 100% inflation per year Spanish experience shows. (or why Britain became powerful while Spain lost position) On the other hand, not having enough metals during economy growth result in deflation, which result in a unnaturally high interest rate, resulting in too much savings, and too little spending as deposits just pile up. It also means more people digging for gold, which is a waste.
2. Companies (Everyone): If the fed does a bad job of printing money, what would happen if everyone is handed the presses to print money. Whats likely to happen is that people would probably have heavy skepticism in private money and would just use foreign government issued money. If some private currency gets widely used by whatever reason, a quick betrayal of trust can make massive money with even less controls than the fed.
3. Neo-barter concept: It is just too clumsy to work fast enough to be competitive. Money is a wonderful thing that makes economics tractable.
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Finally, there is savings in the system, It is just outside the boarders of United States. While Americans are spending like crazy, other countries like China are buying massive amounts of US debt. If the feds are merely blindly injecting money and liquidity into the system, US dollars would be so devalued that no American would be able to afford anything that made at home (which was anything but the case). No, other nations bought into the system and that is how Americans managed to spend. The Asian countries sold the goods and used the cash to buy US debt.
I wonder how useful is the free market concept when billions of people not under the system (of self interest) is gaming currencies and trade as well. In libertarian land, a economic predator can burn cash to do all sorts of damage, like cornering markets or making mess of exchange rates. I wonder what the peoples of the Asian financially crisis felt when a bunch of rumor and some schemers managed to screw exchange rates enough to make their economy ruined while "free market correction" did nothing to save them. (at least they know that a central bank is handy some of the time now)
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There is suggestions that one ties monetary policy strictly to inflation rate and basically do not be proactive, but only supply enough money as price level would show. I'm undecided on the suggestion.
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I fail to see the whole point of the "objectivist free market." It basically claims that it is a good in itself since it have FREEDOOMMMMMMM~~~~ which is just any random arbitrary definition of freedom that rand came out of no real foundation.
If one wants to argue on the side of functionality, than the solution is simple:
Show me a libertarian state and show me that it much works better. If it does not exist than make it exist by finding like minded people.
If it can not exist in its "proper, functional form", than it is just a pointless ideal no better than communism. The fundamental test of an idea is its application to real life as opposed to its elegance.
If every attempt at libertarian state result in the elite/mob taking power and creating a big government, it is time to rethink the failure of the idea as a political idea rather than blame the rest of us. It might be a perfectly beautiful idea within the domain of problems it serves to address, but it may simply fail to address the entire picture of the human condition.
Indeed, one can even argue the reverse, that a secular god of national belonging and its physical manifestation in government is such a strong emotional level desire for so many people that big government must exist for them regardless of economics as it is not a economics problem. Economics do not explain the existence of people worshipping Jesus either nor is a reasonable argument against it as it is strictly outside the domain of problems economics is suppose to analyze.
The people have spoken, and they've chosen big government. (despite assertions that they can not or should not)
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On April 20 2009 05:17 Diomedes wrote:
Still people in Europe claim banks shouldn't even be allowed to take those risks. And politicians and economists claim what happened would never be possible in Europe because of regulation. And I also have heard people claim that it only was possible because of recent deregulations.
I'll concede this - IF you want to have a system of central banking, fiat currency, state-issued deposit insurance, and bailouts for failed banks drawn on the purchasing power of said fiat currency, then YES, you do need to regulate.
This is because, as it stands, when a bank takes a risk they are not the ones who suffer if it goes wrong. BECAUSE the public is FORCED to take the risk from the bank the public must equally FORCE the bank to not make certain kinds of transactions. This is because transactions which the bank would not normally undertake in a free market might be undertaken when that element of risk is displaced from their position. So what you have is, in essesnce, one form of intervention in the market - price controls on interest rates and moral hazard due to risk displacement - creating a situation where more intervention is neccessary to preclude the original intervention from causing a problem.
On the surface this may seem a logical solution - one intervention for a convenience and another to stop the problems associated with the first - but more careful consideration reveals a plethora of associated problems which are not easily solved. In particular, interventions of this sort create a more general problem known as "The Distribution Problem" - a problem which is a non-problem in a free market and to which I've not yet seen an acceptable solution.
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On April 20 2009 06:03 SWPIGWANG wrote:
[
What a Bank really do is convert long term, illiquid assets into short term liquid assets and does a critical function in the economy. When you put money in a savings account, you are really (indirectly) buying loans from the bank and insured by both the bank (and government) against loss. Deposits are a super high liquidity low risk investment that gets positive returns from interest. This is a financial product that many people likes to use in addition to everything else.
Yes, I alluded to this. The point is that it is low-risk and not zero risk. I have nothing against the existence of products like loan-backed deposits, I just don't agree with the way that risk is managed.
Its called lying. It works since the beginning of time, and with a 70 year lifespan, running a good con once is good enough. Its simple, just make a scheme where you pay out interest from the money of latter investors and you can run it in a free market just fine if you package it just right.
Yes, but at least it would be illegal and those people would go to jail. Consider the chaos that Bernie Madoff created and compare it to the chaos that Greenspan created. Lying is bad, yes, and there will always be assholes who break the law, but you can't honestly say that a guy like Madoff represents even the tiniest fraction of the same order of magnitude of a threat to the global economic system as did the handiwork of Greenspan - this because moral hazard was not just bad, but entrenched as the de-jure way of banking.
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posted by jgad
To gain access to your money from a loan you would need to either wait until you were repaid by the original borrower or you would need to sell your loan to a buyer willing to give you cash in exchange for the IOU you are holding from the person who you lent your cash to.
Didn't see this on top. The thing with loans is the following:
1. It is not liquid
2. It is at high(er) risk of default
A savings account is liquid and hedged against default by the bank holding so many different loans at the same time. (hedging reduces risk)
So what happens with an account is that banks packages a lot of loans, insurance and acts as a instant repurchase on demand all abstracted into a simple money account. The interest differential between loans and deposit accounts exists because that money is used to pay for that liquidity.
It is really not more dysfunctional than most financial instruments, many of which may result in huge or even infinite liabilities....as modern derivatives show. Bank run losses are uncommon, but try naked short selling and one may lose everything overnight.
I don't see any reason why they need be singled out, unless random arbitrary restrictions ought to exist in the economy because people are too stupid to figure out what is going on.....
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On April 20 2009 06:21 SWPIGWANG wrote:Show nested quote +posted by jgad
To gain access to your money from a loan you would need to either wait until you were repaid by the original borrower or you would need to sell your loan to a buyer willing to give you cash in exchange for the IOU you are holding from the person who you lent your cash to. Didn't see this on top. The thing with loans is the following: 1. It is not liquid 2. It is at high(er) risk of default A savings account is liquid and hedged against default by the bank holding so many different loans at the same time. (hedging reduces risk) So what happens with an account is that banks packages a lot of loans, insurance and acts as a instant repurchase on demand all abstracted into a simple money account. The interest differential between loans and deposit accounts exists because that money is used to pay for that liquidity. It is really not more dysfunctional than most financial instruments, many of which may result in huge or even infinite liabilities....as modern derivatives show. Bank run losses are uncommon, but try naked short selling and one may lose everything overnight. I don't see any reason why they need be singled out, unless random arbitrary restrictions ought to exist in the economy because people are too stupid to figure out what is going on.....
Yes, I understand all of this. The point is more one of accountability - in the US it's the FDIC that assumes the ultimate risk on these instruments, but every country does it in a similar way. The point is that the ultimate insurer does not have the assets to cover the potential losses. It's backed by a printing press, which can arbitrarily steal money from the currency base (ie :inflation tax) in event of any need to compensate for such losses. As I've said, I have no qualms with people choosing to have an interest-paying deposit account backed by debt instruments managed by a bank, only that they should be aware of the risk it constitutes and liable for defaults rather than cushioned by the public purse (which is emptier than it may seem).
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I have nothing against the existence of products like loan-backed deposits, I just don't agree with the way that risk is managed.
While one could say that arbitrary government involvement is not necessary (banks can buy insurance from each other.....right) What it really is, is a hack that was added on as experience from past failures.
What happens is that the economy is so interdependent that it can really be consider a single entity rather than disconnected competing interests in certain pathological cases. Just for thought experiment, what would happen if an economy have only one bank in existence and it fails?
Now lets assume that many banks exists, and due to a quirk of profit margins that banks finds lending to each other is very effective, and all loans are crossed with each other so that if one fails, it creates a crisis that spread to everyone else. Well that is what we have in reality.
We have a few choices here:
1. Prevent banks from "merger via economic crossholding", which is probably a few hundred pages of regulations (and much whining from free marketers)
2. Prevent banks from failing if a failure happens and is too big (current solution)
3. Pray that crossholding do not happen, or big banks don't ever fail enough despite the fact people err, or that failures are quickly recovered despite that the economy operate on implicit trust that takes time as opposed to instant operation of fast rational response of well connected agents.
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On April 19 2009 20:13 Ftrunkz wrote:
Reading the title just reminded me of the chicken lover episode of South Park. Never read the book, but if officer Barbrady didn't approve, neither do I.
Hopefully a joke.
Atlas Shrugged is one of the best books of all time. It's not surprising that it is still successful.
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lol never heard of this book. Looks fun.
Tbh there is no way out of the constant cycle of recessions and depressions without eliminating currency, not something a western government is likely to do.
And if you do that you have all the problems of absolute socialism to deal with....
I'll read this thread carefully and make a more informed post tommorow 
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On April 20 2009 06:31 SWPIGWANG wrote:Show nested quote +I have nothing against the existence of products like loan-backed deposits, I just don't agree with the way that risk is managed. While one could say that arbitrary government involvement is not necessary (banks can buy insurance from each other.....right) What it really is, is a hack that was added on as experience from past failures. What happens is that the economy is so interdependent that it can really be consider a single entity rather than disconnected competing interests in certain pathological cases. Just for thought experiment, what would happen if an economy have only one bank in existence and it fails? Now lets assume that many banks exists, and due to a quirk of profit margins that banks finds lending to each other is very effective, and all loans are crossed with each other so that if one fails, it creates a crisis that spread to everyone else. Well that is what we have in reality. We have a few choices here: 1. Prevent banks from "merger via economic crossholding", which is probably a few hundred pages of regulations (and much whining from free marketers) 2. Prevent banks from failing if a failure happens and is too big (current solution) 3. Pray that crossholding do not happen, or big banks don't ever fail enough despite the fact people err, or that failures are quickly recovered despite that the economy operate on implicit trust that takes time as opposed to instant operation of fast rational response of well connected agents.
er.... your definition of the cause of the crisis is faulty, imho. It's not due to a heavily interdependent loaning system, its due to the fact that a combination of bad government incentives and lying, combined with existing (and otherwise stable) investment strategies, resulted in a leverage based collapse.
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On April 20 2009 06:03 SWPIGWANG wrote:
Finally, there is savings in the system, It is just outside the boarders of United States. While Americans are spending like crazy, other countries like China are buying massive amounts of US debt. If the feds are merely blindly injecting money and liquidity into the system, US dollars would be so devalued that no American would be able to afford anything that made at home (which was anything but the case). No, other nations bought into the system and that is how Americans managed to spend. The Asian countries sold the goods and used the cash to buy US debt.
I wonder how useful is the free market concept when billions of people not under the system (of self interest) is gaming currencies and trade as well. In libertarian land, a economic predator can burn cash to do all sorts of damage, like cornering markets or making mess of exchange rates. I wonder what the peoples of the Asian financially crisis felt when a bunch of rumor and some schemers managed to screw exchange rates enough to make their economy ruined while "free market correction" did nothing to save them. (at least they know that a central bank is handy some of the time now)
This is true, and in some sense it was the glut of foreign savings which allowed the Fed to do so much borrowing. It still doesn't address the problem of moral hazard and a centrally set interest rate. Still, all China has to trade are Yuan and the question remains as to whether or not the same situation would have arisen should US interest rates have been allowed to float on the market rather than being dictated by central policy. In this case there was a maelstrom of bad policy that all contributed - the glut of Chinese and Saudi savings, the low interest rates following the Nasdaq collapse, the birth of Fannie and Freddie and the laws pushing bad mortgages - one can't point to a single element that caused disaster.
And nobody is promising that a libertarian world would be utopia or a paradise - that's the sort of thing that's restricted to fantasy ideologies like communism. In a free market there will always be banks that fail, companies that fail, people that go bankrupt - lots of people make bad decisions all the time. No system of government can stop that. At least, I think, we can agree that the current system promotes a certain detachment that frustrates learning from past mistakes - because those who make the mistakes are not the ones who suffer for them.
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On April 20 2009 06:03 SWPIGWANG wrote:
The people have spoken, and they've chosen big government. (despite assertions that they can not or should not)
Then why bother having a debate? Just submit to the tyrranty of the majority, I suppose. By this logic there is nothing wrong with genocide or apartheid or CCTV cameras placed in every living room by the state - as long as the majority choose it, then it is as it should be. The Palestinians really are criminals and the Tibetan monks are getting what they deserve from China. The people have spoken, and thus it should be. This is silliness.
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Just because there was bad government incentive doesn't mean the banks don't bear responsibility.
You bring up Manson and murder which is so strange. It's the banks that went bankrupth and this is only because of their own actions. The government didn't force them to do anything. Just because there were incentives for this behavior doesn't mean it was forced upon them. Banks were all to eager because they all thought they were going to make a lot of money.
Then the banks failed and the government had to bail them out with tax money.
Only reason banks even work is because people trust them because of the role of the government. The government has a regulating task. And clearly regulation failed.
I have never seen anyone say it was all caused by this CRE. Never. It was the banks taking too much risk on loans they shouldn't even have handed out in the first place to americans who were loaning too much for a second house and all kinds of crazy stuff. And then they sold and resold all kinds of complex financial products to each other based on these loans. All this happened while Greenspan was deregulating to make stuff easier for the banks to do their thing. The banks were all too glad with what the government did. When Greenspan adjusts interests it's often almost at the request of Wall Street.
The whole Manson analogy, it's like saying his parents are murderers because the murder was an effect of his bad childhood. This is an exact perfect analogy since you hold the government accountable for something the banks did. But at the same time you are against regulations and you don't believe the governemnt should have stepped in and stopped them while it happened.
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On April 20 2009 06:35 fanatacist wrote:
Atlas Shrugged is one of the best books of all time.
Hopefully a joke.
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EPT
