[quote]dhickey wrote:
Tweedle dee and Tweedle dum. You two should add each other to your buddy lists.[/quote]
Hah.
[quote]dhickey wrote:
orion wrote:
If todays governments can only be financed by a ridiculously high income tax, that is what it already costs us now. People would have to face true cost of their actions.
Precisely. The root of the problem is not monitary policy. It is abuse by our elected officials. If you think the gold standard and a 100% reserve system will change this in any way, you are dreaming. We ( i don’t know about austria) need to return to rule by law. We need to limit the power of the federal gov’t. If you can successfully do this, a fiat money supply and fractional reserve banking will not be nearly as ominous.
[/quote]
Then explain to me how a politician could possibly abuse competing commodity currencies and a 100% reserve system?
Maybe they would find a way but the costs would become visible immediately.
[quote]facko wrote:
dhickey wrote:
orion wrote:
If todays governments can only be financed by a ridiculously high income tax, that is what it already costs us now. People would have to face true cost of their actions.
Precisely. The root of the problem is not monitary policy. It is abuse by our elected officials. If you think the gold standard and a 100% reserve system will change this in any way, you are dreaming. We ( i don’t know about austria) need to return to rule by law. We need to limit the power of the federal gov’t. If you can successfully do this, a fiat money supply and fractional reserve banking will not be nearly as ominous.
I don’t like our monetary policy one bit, but I don’t beleive the gold standard, or a 100% reserve system is the panacea many think it is. The biggest (so far) financial catastrophy in US history happend while on the gold standard. It also had very little to do with fractional reserve banking, although that seems to be the popular pictorial.
There are many bright economists who would disagree. If you believe that government should have no involvement in economy, you my friend are the one who is blind. [/quote]
Insofar as even enforcing contracts is an involvement int the economy yes, but that is hardly what most people mean when they are against government´s interference.
[quote]orion wrote:
Then explain to me how a politician could possibly abuse competing commodity currencies and a 100% reserve system?
[/quote]
Ummm…go back to a fractional reserve and one legal currency when they feel like it. After all, how did we get to where we are now?
[quote]
Maybe they would find a way but the costs would become visible immediately.[/quote]
As I have said before in other posts, I am all for competing currencies. I think this is a much better solution that returning to the gold standard with a single currency. I am still on the fense with fractional reserve banking. None of the economists I respect the most seem to care much for it. I just haven’t worked through the logic myself yet.
What people don’t seem ready to acknowledge is that this is not the underlying problem. If we return to a constitutional republic with limited federal powers, most poor economic policy will be taken care of.
If you leave the tumor in washington (or Vienna), it’s just a matter of time before it spreads again.
So we can either keep trimming back branches or we can dig up the roots. I think more specific constitutional ammendments limiting gov’ts overall power and size would be a bit easier than limiting every specific abuse of power individually. The framers knew this, they just weren’t quite specific enough.
ok I confess I don’t know much about economics, and I hate to interrupt this fascinating debate, but I can’t help but wonder: despite all the theories and arguments raised by economists and educated bystanders (like some in this thread), we ultimately do not have a definite answer to past/present/future economic problems, do we?
I mean, if we KNEW what was wrong, why wouldn’t we just fix it immediately or prevent the problems from manifesting in the first place? If we knew better than the highly-criticised auhtorities that occasionally screw up the economy, why have we not replaced them yet?
On the other hand, perhaps all (economic) systems are inherently flawed since they rely on people to implement them, and human frailty is an unavoidable fact of life. Hmm.
Ok I realise this post isn’t very economic, or even very coherent, but it’s just my simple (simplistic?) 2 cents.
[quote]Vanre wrote:
ok I confess I don’t know much about economics, and I hate to interrupt this fascinating debate, but I can’t help but wonder: despite all the theories and arguments raised by economists and educated bystanders (like some in this thread), we ultimately do not have a definite answer to past/present/future economic problems, do we?
I mean, if we KNEW what was wrong, why wouldn’t we just fix it immediately or prevent the problems from manifesting in the first place? If we knew better than the highly-criticised auhtorities that occasionally screw up the economy, why have we not replaced them yet?
On the other hand, perhaps all (economic) systems are inherently flawed since they rely on people to implement them, and human frailty is an unavoidable fact of life. Hmm.
Ok I realise this post isn’t very economic, or even very coherent, but it’s just my simple (simplistic?) 2 cents.[/quote]
All economic systems have some flaws. Some of them have more laws than others. The thing is, it isn’t just about knowing which type of economic system will work the best, it is how you implement that system. This gets complicated by politics, corruption, etc. You also have to factor in geographical factors…i.e. is the region landlocked?
what kind of natural resources does it have? what is the growth rate? are there various trade restrictions? how much urban and rural population in comparison to each other and on and on. It becomes clear that there is no cookie cutter approach to economics.
From what I see, not read in text books, or the rhetoric of college professors, I mean from what I perceive, interpret, and evaluate, I have come to certain conclusions. One of those conclusions is that the conservative ideology that government should stay out of economic affairs is flawed on a lot of levels. I do not know how someone could sit back and argue that we are in the situation we are in because of welfare, safety nets and too much government involvement/restriction.
It is clear to anyone who is not too jaded by political ideology (either left or right in terms of modern American politics) that this situation is a result more so of less government involvement and regulation on what is allowable procedure.
As much as anyone wants to downgrade the significance of fractional reserve banking to the extreme of which it has come about, it is a key factor in this situation. This surfaced early on as the housing crisis, which is directly related to fractional reserve loaning procedures in the form of mortgages.
Our economy relies way too much on credit, and that is not a side effect of liberal procedure, it is a side effect of reduced restriction on just how much credit should be issued…period. I blame both parties in the conventional two party system for this.
I’m sure Joe the Plumber, I mean dhickey will debate this post point by point, and in his own right feel he’s right, as will the majority of the neo-con posters on this board. But such is life.
[quote]facko wrote:
All economic systems have some flaws. Some of them have more laws than others. The thing is, it isn’t just about knowing which type of economic system will work the best, it is how you implement that system. This gets complicated by politics, corruption, etc. You also have to factor in geographical factors…i.e. is the region landlocked?
what kind of natural resources does it have? what is the growth rate? are there various trade restrictions? how much urban and rural population in comparison to each other and on and on. It becomes clear that there is no cookie cutter approach to economics.
[/quote]
Please explain how any of this would determine the best economic system for a particular country.
You have done nothing but add to the rhetoric. You haven’t addressed any specific issues with any detail. You can’t “argue that we are in the situation we are in because of welfare, safety nets”, becuase you haven’t made the effort or lack the capacity to use logic an reason to examine these policies.
Read
Observe
Think
Reason
You are forgeting the last two steps.
This is only clear to those don’t have the time or capacity to dig deeper than the serfice of the issue. Or they dismiss logic and reason.
You must not have gotten to causation .vs correlation in course work yet. You seem fixated on fractional reserve banking as our largest handicap. You seen unable to assertain why this is. I mean the input, not the output.
There is nothing inherenly wrong with credit. An agreement between a creditor and creditee is between them. The federal gov’t has no constitutional right to interfere with this agreement. Freedom of Association. It’s when the federal gov’t takes an active role in the structure of credit that things get very interesting.
[quote]
I’m sure Joe the Plumber, I mean dhickey will debate this post point by point, and in his own right feel he’s right, as will the majority of the neo-con posters on this board. But such is life.[/quote]
I am not even sure you know what a neocon is, but I am certainly not one assuming the popular definition. I doubt I share much in common with Joe the plummer. Why don’t you explain why you think we are similar.
I just choose to actually think things through, rather than believing something I read from someone I have not met or nothing about. We were not born with sharp teeth, claws, or other tools of basic survival. Man has only his capacity to solve problems with reason. I suggest you learn how to do this.
Hopefully you’ve learned something here. Not specific facts or theory, but just that you need to think things through a bit before insulting others economic knowledge. You are probably in the middle of the pack on this board as far as economic knowledge. If you attempt to absorb as much as spout out, you may actually learn something.
[quote]orion wrote:
So fiat currencies could work if only democratically elected politicians would use it wisely and for the good of all and if those at the steering wheel are not tempted by the fact that they can move billions and are completely untouchable.
In other words, fiat currencies do not work and never will, for we need a currency system that can be run by mere human beings.
[/quote]
It’s a little like the communism apologism: “Communism would work if every single person in society would suspend their basic human nature for their entire lives!”
Except in this case, it only takes one person or group to resist temptation, and a well-designed system would remove that temptation through enforced laws. It’s a double-edged sword. You get flexibility that can be used to your advantage, but it comes with greater responsibility than commodity currency.
However, as I wrote in the post you quoted:
[quote]tGunslinger wrote:
So in today’s America, I think a commodity currency would be preferable, but that’s a condemnation of our gov’t irresponsibility, not on the idea of fiat currency itself.[/quote]
Our system today is so rotten that, sadly, it IS too much to ask for Congress and the POTUS to show a little fiscal responsibility. A commodity currency would be better for the U.S. today.
I do not think that fiat currency is a failed idea that should be abandoned by every nation, future or current, forever and ever, amen.
I’m of a similar opinion of fractional reserve banking. It would work fine, if banks recognized that fractional reserve can be unstable, and they need to be cautious with the money they lend. They would learn that lesson quickly if we allowed irresponsible lenders to push up daisies, but we don’t.
In a perfect world, some banks would voluntarily forgo fractional reserve, and advertise their stability and reliability. Other banks would use fractional reserve, and advertise their ability to finance large projects.
But if we’re going to go on some misguided quest to keep every large company in business, then fractional reserve needs to be done away with. We cannot afford to socialize losses with huge fractional reserve lenders.
[quote]dhickey wrote:
facko wrote:
All economic systems have some flaws. Some of them have more laws than others. The thing is, it isn’t just about knowing which type of economic system will work the best, it is how you implement that system. This gets complicated by politics, corruption, etc. You also have to factor in geographical factors…i.e. is the region landlocked?
what kind of natural resources does it have? what is the growth rate? are there various trade restrictions? how much urban and rural population in comparison to each other and on and on. It becomes clear that there is no cookie cutter approach to economics.
Please explain how any of this would determine the best economic system for a particular country.
From what I see, not read in text books, or the rhetoric of college professors, I mean from what I perceive, interpret, and evaluate, I have come to certain conclusions. One of those conclusions is that the conservative ideology that government should stay out of economic affairs is flawed on a lot of levels. I do not know how someone could sit back and argue that we are in the situation we are in because of welfare, safety nets and too much government involvement/restriction.
You have done nothing but add to the rhetoric. You haven’t addressed any specific issues with any detail. You can’t “argue that we are in the situation we are in because of welfare, safety nets”, becuase you haven’t made the effort or lack the capacity to use logic an reason to examine these policies.
Read
Observe
Think
Reason
You are forgeting the last two steps.
It is clear to anyone who is not too jaded by political ideology (either left or right in terms of modern American politics) that this situation is a result more so of less government involvement and regulation on what is allowable procedure.
This is only clear to those don’t have the time or capacity to dig deeper than the serfice of the issue. Or they dismiss logic and reason.
As much as anyone wants to downgrade the significance of fractional reserve banking to the extreme of which it has come about, it is a key factor in this situation. This surfaced early on as the housing crisis, which is directly related to fractional reserve loaning procedures in the form of mortgages.
You must not have gotten to causation .vs correlation in course work yet. You seem fixated on fractional reserve banking as our largest handicap. You seen unable to assertain why this is. I mean the input, not the output.
Our economy relies way too much on credit, and that is not a side effect of liberal procedure, it is a side effect of reduced restriction on just how much credit should be issued…period. I blame both parties in the conventional two party system for this.
There is nothing inherenly wrong with credit. An agreement between a creditor and creditee is between them. The federal gov’t has no constitutional right to interfere with this agreement. Freedom of Association. It’s when the federal gov’t takes an active role in the structure of credit that things get very interesting.
I’m sure Joe the Plumber, I mean dhickey will debate this post point by point, and in his own right feel he’s right, as will the majority of the neo-con posters on this board. But such is life.
I am not even sure you know what a neocon is, but I am certainly not one assuming the popular definition. I doubt I share much in common with Joe the plummer. Why don’t you explain why you think we are similar.
I just choose to actually think things through, rather than believing something I read from someone I have not met or nothing about. We were not born with sharp teeth, claws, or other tools of basic survival. Man has only his capacity to solve problems with reason. I suggest you learn how to do this.
Hopefully you’ve learned something here. Not specific facts or theory, but just that you need to think things through a bit before insulting others economic knowledge. You are probably in the middle of the pack on this board as far as economic knowledge. If you attempt to absorb as much as spout out, you may actually learn something.
[/quote]
Ugh…it is futile to banter with you. If there is anyone who needs to open their eyes, it would be you. It’s funny…your opinions on economics are things you have simply come up with by “thinking things through”, however mine are petty repeats of my professors. Do you have some sort of animosity towards me that I go to college? To the average person reading your posts throughout this thread it would appear as though you mock my education.
On top of that, the only one here who insulted anyone really, was you. You told me I’m stupid in a nice way (“you are not very bright”).
Again, no matter what false propaganda you spew from your mouth, you just can’t back anything up with fact. You tried to dissect each of my arguments with false choices, lies, and attacks on my comprehension and logic skills. In short, you lose.
You have yet to address how the current state of affairs is anything but too LITTLE government involvement, in terms of regulation and restriction.
Are you of the select few, just you and your other jaded forum buddies, whom have true knowledge? You know better than 90% of the analysts, economists, college professors, text book authors, media, most all government officials. Must be…
[quote]Ryan P. McCarter wrote:
Hmm… I must have missed the part in facko’s post where he said “fractional reserve banking alone caused this.” But it did have a lot to do with really making this painful.[/quote]
Have you been reading this thread?
To wit:
facko wrote:
To this, dhickey responded:
To which you responded:
[quote]Ryan P. McCarter wrote:
Classic dhickey! “If what the economics professors who have degrees and get paid to do this don’t agree with me, you might think about changing schools.”[/quote]
It was to your quote that I responded why I thought dhickey was correct (fractional reserve and fiat currency did not cause this), and why.
Then you responded, apparently without reading:
[quote]Ryan P. McCarter wrote:
Hmm… I must have missed the part in facko’s post where he said “fractional reserve banking alone caused this.” But it did have a lot to do with really making this painful.[/quote]
Hello? Where have you been?
Five-Courses: Fiat currency and fractional reserve are root causes!
dhickey: I don’t think so, and I think your teachers are wrong if that’s what they’re saying.
You: Ha!
Me: I agree with dhickey, fiat currency and fractional reserve didn’t cause this.
You: Who brought up fractional reserve and fiat currency?
Good Lord…
[quote]facko wrote:
…
From what I see, not read in text books, or the rhetoric of college professors, I mean from what I perceive, interpret, and evaluate, I have come to certain conclusions. One of those conclusions is that the conservative ideology that government should stay out of economic affairs is flawed on a lot of levels. I do not know how someone could sit back and argue that we are in the situation we are in because of welfare, safety nets and too much government involvement/restriction.
…
[/quote]
I’m not going to respond to you point by point, but here’s my assertion:
-
This current situation was caused because large companies made risky investments in pursuit of huge returns.
-
This came crashing down on them because they disregarded risk.
-
They disregarded risk because our gov’t has been bailing out companies “too big to fail” for going on forty years now.
-
This habit of bailing out companies has “taught” them that risk is overrated, because the gov’t will bail you out if you really get caught in a pickle.
-
And now, rather than letting them fail and serve as examples of what not to do, our gov’t is again bailing them out, teaching everyone, again, that making bad investments is okay.
-
The cycle is repeated, and ten years from now we’ll all shake our heads at how moronic large firms can be, and never once point the finger at the gov’t for bailing out bad firms.
Thus, I assert that this current situation, at its root, was caused because gov’t has continually bailed out bad firms for decades now. That, to me, is gov’t intrusion, and it’s what causing this.
Now you know how someone can sit back and say gov’t intrusion caused this. Feel free to refute it.
Who says that, except for capitalists trying unsuccessfully to parody communists? Communism does work, if it’s not headed by an authoritarian beaureacracy, and instead adheres to libertarian principles of organization.
[quote]tGunslinger wrote:
Ryan P. McCarter wrote:
Hmm… I must have missed the part in facko’s post where he said “fractional reserve banking alone caused this.” But it did have a lot to do with really making this painful.
Have you been reading this thread?
To wit:
facko wrote:
The problem is…I do more than read…I’ve had over 5 separate economic based classes in college so far as that is my major. If you think I have read some article on fractional reserve banking and said oh okay I understand the economy now, you are wrong. However, they[Fractional reserve and fiat currency] are root causes, not symptoms, there my friend you happen to be wrong.
To this, dhickey responded:
To say that fractional reserve banking and fiat currency is root cause of all our economic ills is just plain silly. It no doubt plays a significant role but to focus on this alone is irresponsible. If this is what they are teaching you, I would go to a different school, or take some time to think things through on your own instead of regurgitating what your progressive professors and text books tell you.
To which you responded:
Ryan P. McCarter wrote:
Classic dhickey! “If what the economics professors who have degrees and get paid to do this don’t agree with me, you might think about changing schools.”
It was to your quote that I responded why I thought dhickey was correct (fractional reserve and fiat currency did not cause this), and why.
Then you responded, apparently without reading:
Ryan P. McCarter wrote:
Hmm… I must have missed the part in facko’s post where he said “fractional reserve banking alone caused this.” But it did have a lot to do with really making this painful.
Hello? Where have you been?
Five-Courses: Fiat currency and fractional reserve are root causes!
dhickey: I don’t think so, and I think your teachers are wrong if that’s what they’re saying.
You: Ha!
Me: I agree with dhickey, fiat currency and fractional reserve didn’t cause this.
You: Who brought up fractional reserve and fiat currency?
Good Lord…[/quote]
raaaar!
While it wasn’t the root cause, fractional reserve banking did have a heavy hand in this. I’m not even saying we should do away with it, but to deny that it made a bad problem much worse is dishonest.
And no, he didn’t say it was alone to blame for our situation. We have a few problems right now, and fractional reserve gets a lot of the blame for some of it. The fact is that the collapse of the housing bubble wouldn’t have been as disastrous without all the wheeling and dealing that went on.
I honestly think you’re just looking to disagree with facko.
[quote]tGunslinger wrote:
facko wrote:
…
From what I see, not read in text books, or the rhetoric of college professors, I mean from what I perceive, interpret, and evaluate, I have come to certain conclusions. One of those conclusions is that the conservative ideology that government should stay out of economic affairs is flawed on a lot of levels. I do not know how someone could sit back and argue that we are in the situation we are in because of welfare, safety nets and too much government involvement/restriction.
…
I’m not going to respond to you point by point, but here’s my assertion:
-
This current situation was caused because large companies made risky investments in pursuit of huge returns.
-
This came crashing down on them because they disregarded risk.
-
They disregarded risk because our gov’t has been bailing out companies “too big to fail” for going on forty years now.
-
This habit of bailing out companies has “taught” them that risk is overrated, because the gov’t will bail you out if you really get caught in a pickle.
-
And now, rather than letting them fail and serve as examples of what not to do, our gov’t is again bailing them out, teaching everyone, again, that making bad investments is okay.
-
The cycle is repeated, and ten years from now we’ll all shake our heads at how moronic large firms can be, and never once point the finger at the gov’t for bailing out bad firms.
Thus, I assert that this current situation, at its root, was caused because gov’t has continually bailed out bad firms for decades now. That, to me, is gov’t intrusion, and it’s what causing this.
Now you know how someone can sit back and say gov’t intrusion caused this. Feel free to refute it.[/quote]
It’s like what came first…the chicken or the egg. Government wouldn’t be bailing these companies out in the first place (in an effort to save millions of peoples jobs, lives and families in the process) if there was more restriction on what kind of ridiculous risky procedures should be allowed. I don’t 100% believe in bailouts, however, if your idea of fixing the problem is to let every one of these corporations collapse, causing the EXTREME job loss, which will lead to further spiraling to shit, then I’m sorry, I’ll have to go with the former.
And again, for the final time, I’ve had five formal courses, and none of my professors ever touched much on fractional reserve banking, nor fiat currency, in anything more than an explanation of what they are. If my education can somehow be used against me as a negative in an argument, then I feel sorry for the mindset of this board.
[quote]facko wrote:
Ugh…it is futile to banter with you. If there is anyone who needs to open their eyes, it would be you. It’s funny…your opinions on economics are things you have simply come up with by “thinking things through”,
[/quote]
Wrong. I read quite a bit on economics. I simply choose to fully understand what I read before parroting it.
Not at all. I went to college. You started out on this board coming right out and saying that most on this board don’t understand economics. It then became very clear that you do not truly understand economics. You may study econoimcs but you are missing the part where you actually understand what you are studying.
We have seen others like you on this board. You make broad statements with no actual logic to back it up.
I know nothing about your education. I don’t what books you have read on economics. I only know what you have typed in this thread. I encourage everyone to expose themselves to economics and you are taking 100% more initiative than most.
You set the tone with your first post. You simply cannot back up the bravado you displayed.
Again, not specific. I don’t know how I can prove a negative but I will give it a shot. What specific problem to you think can only be solved by doing away with fractional reserve banking and/or fiat currency?
Again, this has been rehashed on several threads on this board. I can not help that you chose not to read and commment on them.
Regulation and restriction of the economy is simply treating the symtoms rather than the source. We have more regulation now than we have ever had in this country. Are we stronger, economically speaking, than we ever have been in the past? Name a specific issue you would like to discuss and we talk about how it not because of lack of regulation.
Maybe, I don’t know what specifically you are talking about. Do I think that anyone following Keynesian economics is wrong? Yes I do. Do I think I know more than those that study and understands classic economics or the Austrian school of economics? No.
Again, point me to a specific topic or article that you think a analyst disagrees with me and we can discuss it.
Saying we are all fools becuase nobody mentioned monetary policy in the specific thread you chose to read, is not having a meaningful discussion.
[quote]dhickey wrote:
facko wrote:
Ugh…it is futile to banter with you. If there is anyone who needs to open their eyes, it would be you. It’s funny…your opinions on economics are things you have simply come up with by “thinking things through”,
Wrong. I read quite a bit on economics. I simply choose to fully understand what I read before parroting it.
however mine are petty repeats of my professors. Do you have some sort of animosity towards me that I go to college?
Not at all. I went to college. You started out on this board coming right out and saying that most on this board don’t understand economics. It then became very clear that you do not truly understand economics. You may study econoimcs but you are missing the part where you actually understand what you are studying.
We have seen others like you on this board. You make broad statements with no actual logic to back it up.
To the average person reading your posts throughout this thread it would appear as though you mock my education.
I know nothing about your education. I don’t what books you have read on economics. I only know what you have typed in this thread. I encourage everyone to expose themselves to economics and you are taking 100% more initiative than most.
On top of that, the only one here who insulted anyone really, was you. You told me I’m stupid in a nice way (“you are not very bright”).
You set the tone with your first post. You simply cannot back up the bravado you displayed.
Again, no matter what false propaganda you spew from your mouth, you just can’t back anything up with fact. You tried to dissect each of my arguments with false choices, lies, and attacks on my comprehension and logic skills. In short, you lose.
Again, not specific. I don’t know how I can prove a negative but I will give it a shot. What specific problem to you think can only be solved by doing away with fractional reserve banking and/or fiat currency?
You have yet to address how the current state of affairs is anything but too LITTLE government involvement, in terms of regulation and restriction.
Again, this has been rehashed on several threads on this board. I can not help that you chose not to read and commment on them.
Regulation and restriction of the economy is simply treating the symtoms rather than the source. We have more regulation now than we have ever had in this country. Are we stronger, economically speaking, than we ever have been in the past? Name a specific issue you would like to discuss and we talk about how it not because of lack of regulation.
Are you of the select few, just you and your other jaded forum buddies, whom have true knowledge? You know better than 90% of the analysts, economists, college professors, text book authors, media, most all government officials. Must be…
Maybe, I don’t know what specifically you are talking about. Do I think that anyone following Keynesian economics is wrong? Yes I do. Do I think I know more than those that study and understands classic economics or the Austrian school of economics? No.
Again, point me to a specific topic or article that you think a analyst disagrees with me and we can discuss it.
Saying we are all fools becuase nobody mentioned monetary policy in the specific thread you chose to read, is not having a meaningful discussion.
[/quote]
The thing is, I’ve come to realize that no matter what I write, unless it coincides with your economic beliefs (which again, are skewed by your political beliefs) you are going to continue to dissect each point, one by one. And you will believe you are right as well, no matter what. What is the point?
It’s enlightening to me that you have mentioned the Austrian school in such a positive light. It explains a lot in regards to your method of action. I have yet to read any Austrian theories that are based on any type of real math. And just as you do, Austrian school is quick to point out all the flaws yet give no real alternatives. The bail-outs for instance. You point out how they are terrible, yet your alternative is, let it all collapse, even though in doing so, millions of jobs will be lost, lives will be ruined, which will lead to further spiraling of the economy. That is your solution? I give up.
[quote]tGunslinger wrote:
I’m not going to respond to you point by point, but here’s my assertion:
-
This current situation was caused because large companies made risky investments in pursuit of huge returns.
-
This came crashing down on them because they disregarded risk.
-
They disregarded risk because our gov’t has been bailing out companies “too big to fail” for going on forty years now.
-
This habit of bailing out companies has “taught” them that risk is overrated, because the gov’t will bail you out if you really get caught in a pickle.
-
And now, rather than letting them fail and serve as examples of what not to do, our gov’t is again bailing them out, teaching everyone, again, that making bad investments is okay.
-
The cycle is repeated, and ten years from now we’ll all shake our heads at how moronic large firms can be, and never once point the finger at the gov’t for bailing out bad firms.
Thus, I assert that this current situation, at its root, was caused because gov’t has continually bailed out bad firms for decades now. That, to me, is gov’t intrusion, and it’s what causing this.
Now you know how someone can sit back and say gov’t intrusion caused this. Feel free to refute it.[/quote]
Moral hazard is incredibly dangerous.
I would also add that most seem completely uninterested in why these investments were so attractive in the first place. The simply start the analysis with “Greedy investors put together mortgage backed securities”. This is the middle of the story at best.
Why were these investments attractive? Well because real estate values where going through the roof. This provided assets that would increase in value at a rate much greater than other investments at the time. This is market speculation. This is what investors do.
Sound investment and speculation requires very sound market signals. If investors are receiving inaccurate market signals, we need to figure out why. In this specific case it is real estate values increasing at an unsustainable rate.
Why are real estate values increasing at an unsustainable rate? All we need, economically speaking, to understand this is a basic knowledge of supply and demand.
First demand for real estate. Real estate values started rising at a faster rate than inflation starting in the 60s. The only possible explanation for this is either shrinking supply or increased demand. I think we can all agree that it was more likely to be the later.
CRA attempted to force lenders to relax lending criteria. They wanted more people to own homes regardless of whether or not they could pay for them. CRA put a relatively small but noticeable increase in demand into the housing market. Even a statistically small increase in demand can start the snowball rolling downhill.
CRA was not as effective in putting lower income people into homes and some would have hoped. Respectable lending institutions were still resisting the lending of money to those that may not have been able to pay it back. As housing prices continue to rise, this risk gets a bit more acceptable. Enter Fannie and Freddie.
At the behest of our friends in DC, Freddie and Fannie are slowly creating a demand for risky mortgages by letting the market know that they will buy them up. Banks don’t want to hold on to them, so Washington needs to find someone that will buy them up.
So we have now compounded increase demand for real estate with increased demand for risky loans. Artificial market signals are:
Relax lending standards, as there is no risk once you sell the mortgage.
There is a market for risky mortgages
Housing prices are going up, invest in real estate.
Now you have fly-by-night mortgage companies popping up everywhere to get a piece of the action. Create as many mortgages as you can and sell them to those acting on the market signals above. No risk after the mortgage is sold.
Now housing prices really start to rise. There are a whole slew of potential home buyers that are in the market for houses they cannot afford. Not to worry, they can sit on it for awhile and sell it for a profit if they can’t make the payments. Again, base of artificial market signals
We all know what happens next. Someone else posted a great tutorial about how and why these mortgages got packaged the way they did, so I won’t get into that.
What I find spectacular is that Washington is again trying to artificially increase demand for real estate and risky mortgages. Absolutly astonishing.
[quote]facko wrote:
It’s like what came first…the chicken or the egg. Government wouldn’t be bailing these companies out in the first place (in an effort to save millions of peoples jobs, lives and families in the process) if there was more restriction on what kind of ridiculous risky procedures should be allowed. I don’t 100% believe in bailouts, however, if your idea of fixing the problem is to let every one of these corporations collapse, causing the EXTREME job loss, which will lead to further spiraling to shit, then I’m sorry, I’ll have to go with the former. [/quote]
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Who gets to define what is “too” risky?
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Every once in a while, a risky investment turns golden. To flatly ban all “risky” investments would rob us of a great deal of innovation. A good portion of the modern tech industry was born from nerds in basements that no one in their right mind would’ve considered good investments.
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Why shouldn’t a company be able to engage in risky investment, so long as they are forthright with their shareholders and they alone take the loss if they fail?
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If risky investments were banned, we’d all be stuck with 2% annualized returns. Fortunes come after taking risks. To ban the latter is to ban the former.
Think on it, in that vein. Trying to legislate away excessive risk is a fool’s errand that cannot be done.
To your second point:
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Yes, large corporations failing would be painful. But their employees would find new jobs, their assets would sold to healthy firms, and the sun would rise in the East the next morning.
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The U.S. is not a banana republic, no matter how hard we try to be: the failure of some large firms will not irreversibly wreck our economy. Demand in this country is too overwhelming, diverse, and able to pay for our economy to be destroyed by a few large firms dying.
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There wouldn’t be an annual bloodletting of huge firms if the gov’t stopped bailing them out, because large firms would learn what NOT to do. Unlike now, where they are rewarded for acting foolishly.
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Large companies failing is like a tree falling in the rain forest: it opens up a huge gap in the market that many businesses would try to fill. To prop up a stagnant giant beyond their natural expiration date robs us all of the innovation and competition that would occur after their deaths.
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I think I’ve said it once or twice, but bailing out firms simply teaches them to continue making bad investments, bad investments that we all pay for when they fail. That is, unless they succeed: then we all can go fuck ourselves, and only the shareholders get the profit.
You’re the one who came in here guns blazing, claiming none of us had any idea what was going on. You made the claim, and then backed it up with a measly “I’ve had five courses!”
So naturally, I enjoyed my right to bust your balls for it. Because you know, nobody else in here managed to advance beyond the 10th grade…
[quote]facko wrote:
dhickey wrote:
facko wrote:
Ugh…it is futile to banter with you. If there is anyone who needs to open their eyes, it would be you. It’s funny…your opinions on economics are things you have simply come up with by “thinking things through”,
Wrong. I read quite a bit on economics. I simply choose to fully understand what I read before parroting it.
however mine are petty repeats of my professors. Do you have some sort of animosity towards me that I go to college?
Not at all. I went to college. You started out on this board coming right out and saying that most on this board don’t understand economics. It then became very clear that you do not truly understand economics. You may study econoimcs but you are missing the part where you actually understand what you are studying.
We have seen others like you on this board. You make broad statements with no actual logic to back it up.
To the average person reading your posts throughout this thread it would appear as though you mock my education.
I know nothing about your education. I don’t what books you have read on economics. I only know what you have typed in this thread. I encourage everyone to expose themselves to economics and you are taking 100% more initiative than most.
On top of that, the only one here who insulted anyone really, was you. You told me I’m stupid in a nice way (“you are not very bright”).
You set the tone with your first post. You simply cannot back up the bravado you displayed.
Again, no matter what false propaganda you spew from your mouth, you just can’t back anything up with fact. You tried to dissect each of my arguments with false choices, lies, and attacks on my comprehension and logic skills. In short, you lose.
Again, not specific. I don’t know how I can prove a negative but I will give it a shot. What specific problem to you think can only be solved by doing away with fractional reserve banking and/or fiat currency?
You have yet to address how the current state of affairs is anything but too LITTLE government involvement, in terms of regulation and restriction.
Again, this has been rehashed on several threads on this board. I can not help that you chose not to read and commment on them.
Regulation and restriction of the economy is simply treating the symtoms rather than the source. We have more regulation now than we have ever had in this country. Are we stronger, economically speaking, than we ever have been in the past? Name a specific issue you would like to discuss and we talk about how it not because of lack of regulation.
Are you of the select few, just you and your other jaded forum buddies, whom have true knowledge? You know better than 90% of the analysts, economists, college professors, text book authors, media, most all government officials. Must be…
Maybe, I don’t know what specifically you are talking about. Do I think that anyone following Keynesian economics is wrong? Yes I do. Do I think I know more than those that study and understands classic economics or the Austrian school of economics? No.
Again, point me to a specific topic or article that you think a analyst disagrees with me and we can discuss it.
Saying we are all fools becuase nobody mentioned monetary policy in the specific thread you chose to read, is not having a meaningful discussion.
The thing is, I’ve come to realize that no matter what I write, unless it coincides with your economic beliefs (which again, are skewed by your political beliefs) you are going to continue to dissect each point, one by one. And you will believe you are right as well, no matter what. What is the point?
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interesting copout
You obviously haven’t read the Austrians and have no idea how economic theories are created. You don’t create economic theory with math or specific cases. You can use these as tools to test your theory, but not create it. Economics 101.
[quote]
The bail-outs for instance. You point out how they are terrible, yet your alternative is, let it all collapse, even though in doing so, millions of jobs will be lost, lives will be ruined, which will lead to further spiraling of the economy. That is your solution? I give up. [/quote]
First show me the “real math” behind the bailouts. I have yet to see anyone walk through preciseley what they think would have happened without them and how this is worse than trillions of dollars in debt and double digit inflation.
This is economics. Economics doesn’t provide policy or call for specific action. It simply weighs the cost .vs the benefit of particular actions and policies. Problem is most only look at the benefit and ignore the cost part of the equation.
I am trying to figure this out. So you are against fractional reserve banking because of the explosion of credit, but are for the bailouts? Seems like an incredible contradiction.
[quote]Ryan P. McCarter wrote:
tGunslinger wrote:It’s a little like the communism apologism: “Communism would work if every single person in society would suspend their basic human nature for their entire lives!”
Who says that, except for capitalists trying unsuccessfully to parody communists? Communism does work, if it’s not headed by an authoritarian beaureacracy, and instead adheres to libertarian principles of organization.
[/quote]
The prosperity of large families living together is proof that the communist philosophy is not entirely without merit. And you are right on the point that communism fails the instant it is no longer voluntary. Free to enter, free to leave.
But that is why it cannot ever succeed when enforced by a government. Whenever “I don’t want to join the collective!” is met with “Tough shit.”, the system will fail.
But since I made that statement in a discussion about fiat currency, you may safely assume that I meant government enforced communism.
And apologists for government enforced communism make foolish defenses that are thinly veiled substitutes for “Communism would work if every single person in society would suspend their basic human nature for their entire lives!”