Economic meltdown!

[taks]

If this is, as you seem so sure, entirely a government failure, then surely it's right that the taxpayer should pick up the tab. After all, they, the voters, put these politicians into power and failed to punish them for their mistakes. I hope that helps you feel better about this deal, taks.

what??? i didn't put these idiots into power and i certainly didn't authorize the unconstitutional meddling into my economy. these socialist politicians are raping us, knowing full well what the consequences were before-hand, not caring what it was doing to all of the people in this country.

 

I personally find it marvellous that when the most deregulated laissez-faire right-wing financial system in the world goes belly-up, and the rest of the world doesn't, somehow that's because the United States isn't deregulated, laissez-faire or right-wing enough.

what again? not even close to any of the above. not sure what part of "congress passed laws that forced fannie mae and freddie mac to take on loans with high-risk clients" you don't get, but that's certainly a socialist problem, and those are certainly the "bad loans" that are now being taken over by the tax payers. this is the largest redistribution of wealth EVER.

 

And conspiracies? Socialist takeover? I certainly hope you're not about to blame the liberal European secular elite, because we're too busy faking global warming to take down the banks.

again, what part of "there are those that would argue the cycles of inflation" indicates i agree with the conspiracies? maybe if i had said "including me" you'd have a point, but lets keep the discussion to what i said, not what you think i said.

 

taks

[Meshugger]

I don't know if there are any examples of 'pure' capitalism. Protectionism and other kinds of political intervention are part and parcel of the system. Politicians are responsive to these kinds of demands, they have to be, despite being ever so lasse faire in theory.

 

Taks seems to think an Adam Smith model ideal society is in any way achievable. I disagree.

 

Correct me if i am wrong, but didn't Adam Smith say that a free market comes from having a free society? Meaning that in order to even think about having any form free enterprise and competition, one needs to have a free and just society to make it possible. I do not see that as a completely impossible goal myself. Hell, even Chomsky agrees and openly supports this.

[WILL THE ALMIGHTY]

Yay Canada!

 

Oh wait... elections with ****ty choices. At least we're not in a financial crisis.

 

YOU'RE DOOMED! DOOOOOOMED!

[Humodour]

I personally find it marvellous that when the most deregulated laissez-faire right-wing financial system in the world goes belly-up, and the rest of the world doesn't, somehow that's because the United States isn't deregulated, laissez-faire or right-wing enough. And conspiracies? Socialist takeover? I certainly hope you're not about to blame the liberal European secular elite, because we're too busy faking global warming to take down the banks.

 

It's rather amusing, isn't it?

[Walsingham]

Credit is a difficult thing. I once worked as a loans granting/refusing monkey for one of Britain's big banks. People would go nuts if you didn't lend them money if they couldn't realistically pay it back, then go nuts if you DID lend it to them, and they eventually got threatening letters.

 

My favourite comment ever, which I saw from the BBC public write in was "Banking has never worked and never will". Which actually takes 2nd place in my big list of dumb comments.

[Humodour]

My favourite comment ever, which I saw from the BBC public write in was "Banking has never worked and never will". Which actually takes 2nd place in my big list of dumb comments.

 

OK, I'll bite.

 

What's first?

[random n00b]

I personally find it marvellous that when the most deregulated laissez-faire right-wing financial system in the world goes belly-up, and the rest of the world doesn't, somehow that's because the United States isn't deregulated, laissez-faire or right-wing enough. And conspiracies? Socialist takeover? I certainly hope you're not about to blame the liberal European secular elite, because we're too busy faking global warming to take down the banks.

 

It's rather amusing, isn't it?

No, it's not amusing at all. Because, as things are, if the markets crash as badly as they've been predicting, everyone's gonna feel it - even us EuroCommies. Don't expect it to happen overnight, though.

[Humodour]

I personally find it marvellous that when the most deregulated laissez-faire right-wing financial system in the world goes belly-up, and the rest of the world doesn't, somehow that's because the United States isn't deregulated, laissez-faire or right-wing enough. And conspiracies? Socialist takeover? I certainly hope you're not about to blame the liberal European secular elite, because we're too busy faking global warming to take down the banks.

 

It's rather amusing, isn't it?

No, it's not amusing at all. Because, as things are, if the markets crash as badly as they've been predicting, everyone's gonna feel it - even us EuroCommies. Don't expect it to happen overnight, though.

 

Uh, sorry? We were talking about the 'socialist takeover' conspiracy which taks elucidated.

[random n00b]

I was more referring to the claim that it's somehow possible for the US economy to C&B while for the rest of the world it's smooth sailin'. Hopefully we won't get to see how that goes for real.

[Humodour]

I was more referring to the claim that it's somehow possible for the US economy to C&B while for the rest of the world it's smooth sailin'. Hopefully we won't get to see how that goes for real.

 

Okay, I was just confused because you seemed to be responding to me.

 

On the off chance you meant to quote my first post in this thread instead, I was referring to after-effects of Wall street on banks in Brazil and Australia: both weathered it without much hassle, and having not heard much fuss from the rest of the world, comparatively, I'm assuming they did too - that's why I asked Steve how Britain was handling it.

 

Still, Australia and Brazil - the two economies I've been following lately - do have very diversified trade relations and better regulated banks, so I could be seeing things from a perspective less indicative of the world at large. I'd be interested to hear how Europe's banks are doing. Mostly all I can find on that is vague panic and hype.

 

http://business.smh.com.au/business/us-eco...80924-4mun.html

http://www.ft.com/cms/s/0/5d19bae8-8a9a-11...00779fd18c.html

[Brdavs]

Well taks ,if this is all the result of socialist politicians meddling in, it`s kinda proof that socialism *can* indeed work well... since the (socialist forced) subprime mortages were a substantional driving force for the US wellbeing in the past decade and some heh. Or is it super awsome capitalism when it works and stupind red socialism when it has a hickup?

[Hildegard]

Well let us not panic, the United Socialists of America are going to bail out CEOs with tax payers money, as a stock holder I hope it works, I'm started to be very frustrated.

[Walsingham]

My favourite comment ever, which I saw from the BBC public write in was "Banking has never worked and never will". Which actually takes 2nd place in my big list of dumb comments.

 

OK, I'll bite.

 

What's first?

 

Dumbest statement ever: "All Muslims are terrorists, and should be wiped out." I mean, where do you start? A third of the freaking world is Muslim. Are they, like, really really lazy terrorists?

[Humodour]

Well, it's only one fifth.

 

And yeah, that's stupid, you need only look at Turkey - a 98% Muslim country - to see how strongly they oppose Islamic fundamentalists. They sent their forces into Iraq with us for heck's sake... whatever good Iraq did.

 

I do think that banking tidbit is far stupider due to its sheer vacuousness, though.

[Walsingham]

Yeah, but the Muslim one is stupider by far. I mean, wtf? I can see how you MIGHT think banking was always evil, and somehow have failed to notice how mobile capital investment underpins both innovation and growth. But how could anyone seriously think that being Muslim made you wake up in the morning and - I don't know - get this glazed look in your eye: "Must destroy infidels" and go lurching off in search of explosives. Not to mentin the idea that killing one fifth of the world's population is a good idea. The smell alone would be appalling.

[Rostere]

I'd be interested to hear how Europe's banks are doing. Mostly all I can find on that is vague panic and hype.

 

Well, in Sweden banks seem quite stable, although Swedbank, (very active outside Sweden) is speculated to have problems similar to the American banks in the Baltic sector of their business. It is important to remember in this context that Sweden already had what some might call a crisis in the beginning of the nineties, which led to the creation of institutions well prepared for these occasions.

[Enoch]

man, that's a very, very simplistic view that just isn't correct on most levels (except that there are cycles). first, the "entirety of U.S. economic history before 1932" was not entirely unregulated by any stretch of the imagination. next, the US wasn't even close to a typical economy during the industrial revolution. we were swamped with immigrants which made the labor pool huge compared to demand for labor. capitalism was doing fine, but like any system that has feedbacks, it takes a while to adjust. large inputs/changes to a feedback system will cause erratic behavior. the US was, as a whole, growing much faster than any system could manage. not so today.

OK, that's a reasonably fair point from an economic history point of view. For example, among other things, many of those financial panics were illustrations of the problems associated with specie-backed currency. (E.g., Big gold rush? Inflation! A decade of growth without a major gold find? Deflation!) But still, 19th-Century America was the most laissez-faire major economy the world has seen, and it does illustrate some of the advantages (growth fueled by innovation and entrepreneurship) as well as the disadvantages (labor problems, monopoly, and some very crippling depressions) of such an approach.

 

Interestingly, your above post rightly acknowledges that economies are very complicated creatures, and that no one cause can be said to be responsible for any one effect. But the same doesn't seem to apply in your thinking when the big bad government is that cause:

yes and no, i think. no, i agree that this wasn't a result of "capitalism." there were actually laws requiring freddie and fannie to accept loans from high risk clients. it was deemed "discrimination against the poor" to deny them a loan based on their risk. NO KIDDING! they're the ones that can't pay their loans back. they didn't need a house, they needed a freaking apartment! anyway, the "greed" was from politicians. they benefited from this over the years, big time. freddie and fannie lobbied against bush when he wanted to pull in the reigns. they knew they'd get bailed out if it came down bad, and they probably knew it would come down bad, too.

First off, Fannie & Freddie don't make any loans themselves. They buy loans from private loan originators (banks and such), package them together in various forms to make mortgage-backed securities, and sell these securities on financial markets. They've gotten in trouble because they put a guarantee on certain aspects of most of the securities they sell.

 

Second, it's naive to suggest that government's regulations on lending to poorer customers is anywhere close to the only reason for the problems in the mortgage industry. Regulation was a factor in this crisis, and if you're looking for a way to blame government for everything and absolve the decision-makers in the private marketplace, it makes for a convenient scapegoat. But a more thorough inquiry finds plenty of blame to go around for all parties involved. Yes, Fannie and Freddie were forced to buy and securitize these loans, but it was still up to the individual banks to make them. They did so because higher risk borrowers pay higher interest rates, and because they were disastrously wrong about two big assumptions: 1) that real estate prices would keep going up, and 2) that by swapping their loans for mortgage-backed securities, they diversified all their risk away. We agree on this at least: I don't think it's a result of "capitalism"-- I think it's a result of human nature.

 

Lastly, and once again, the current financial problems are much broader than just real estate. It happened to be the sector that was hit first, but in time anyone who saves or borrows money for whatever purpose is going to feel the effects. The bigwigs on Wall Street were too captivated by their own brilliance to notice that overly leveraged transactions, even with hedges, were a bomb waiting to go off. Plus, the huge growth in derivatives greatly obfuscated the balance sheets of lots of big firms, making them even more vulnerable. (Derivatives can be very difficult to value accurately, so when a company's balance sheet has a whole lot of them on the "assets" side, nobody really knows what that company is actually worth.) Throughout all this, the Fed, the Treasury, and the Congress were basically dancing to Wall Street's tune (as is usually the case when the markets are riding high), repealing restrictions on investment banks and keeping the cheap credit flowing to fuel the leveraged investment boom.

Edited September 29, 2008 by Enoch

[Humodour]

I'll just point out once more that unregulated free market capitalism has had its time. America should now move over for capitalism with a conscience.

 

Maybe that's the Third Way. Who knows? It works for Australia and Canada. But whatever it is, as Sarkozy points out, the era of the completely unregulated free market, Reagan's notion that the market always knows best, is over.

 

The Third Way, or Radical center, is a centrist political philosophy of governance that embraces a mix of market and interventionist philosophies. The Third Way rejects both socialism and laissez-faire approaches to economic governance, but chiefly stresses technological development, education, and competitive mechanisms to pursue economic progress and governmental objectives. Third way philosophies have been described as a synthesis of capitalism and socialism by its proponents. One of its central aims is to protect the modern welfare state through reforms that maintain its economic integrity.

 

No, don't stop me! Let me guess - it's a 'socialist conspiracy'. Call me when Cato Institute crumbles.

[taks]

disadvantages (labor problems, monopoly, and some very crippling depressions) of such an approach.

again, these aren't disadvantages of capitalism, but complications due to the state of our country at the time...

 

labor: you cannot make any valid comparisons given the state of the nation during the 1800s (and early 1900s). we were growing by leaps and bounds, far greater than simple internal growth would have allowed. apples and oranges.

 

monopoly: when? where? not without government intervention can monopoly exist.

 

depressions: given the other problems, hard to make any valid claims blaming capitalism.

 

Interestingly, your above post rightly acknowledges that economies are very complicated creatures, and that no one cause can be said to be responsible for any one effect. But the same doesn't seem to apply in your thinking when the big bad government is that cause:

first of all, just because i acknowledge economies are complicated creatures does not mean in any way that there can't be one root cause to some bubble or panic. flawed logic on your part.

 

second of all, while the current problem is probably the result of a lot of things, the issues with freddie and fannie are easily tied to the regulations requiring them to take on bad loans (which i understood, but stated incorrectly). this is why it is called the "subprime" problem. subprime refers to the fact that these loans were going out to people that had bad credit. they were backed by freddie and fannie in a government attempt to get home ownership levels up (which was a very bad idea, IMO). without that backing, the loans wouldn't have been available in the first place.

 

First off, Fannie & Freddie don't make any loans themselves. They buy loans from private loan originators (banks and such), package them together in various forms to make mortgage-backed securities, and sell these securities on financial markets. They've gotten in trouble because they put a guarantee on certain aspects of most of the securities they sell.

agreed on the first, and nothing on the rest is contrary to what i've stated.

 

Second, it's naive to suggest that government's regulations on lending to poorer customers is anywhere close to the only reason for the problems in the mortgage industry.

uh, it is called a subprime lending crisis for a reason.

 

Regulation was a factor in this crisis, and if you're looking for a way to blame government for everything and absolve the decision-makers in the private marketplace, it makes for a convenient scapegoat. But a more thorough inquiry finds plenty of blame to go around for all parties involved. Yes, Fannie and Freddie were forced to buy and securitize these loans, but it was still up to the individual banks to make them. They did so because higher risk borrowers pay higher interest rates, and because they were disastrously wrong about two big assumptions: 1) that real estate prices would keep going up, and 2) that by swapping their loans for mortgage-backed securities, they diversified all their risk away. We agree on this at least: I don't think it's a result of "capitalism"-- I think it's a result of human nature.

sure, all these things were factors, but the regulation had a major, if not majority, impact on the process. i've never said, either, that the government was the sole problem. yes, the bankers and other decision makers made bad decisions. but the bankers knew the loans had the backing of freddie and fannie, and they damn well knew they'd get bailed out if they defaulted. take away the backing and they don't do the lending. they were also making money hand over fist. take government control out of the process, and this can't happen. the banks will make loans based on ability to repay, because the statistics say subprime borrowers are more likely to default.

 

here you have yet another case of somebody blaming the capitalist system after the government went in and tinkered with it. once the government put these regulations in place, it was no longer capitalist. it was nothing more than a money generating scheme that line the pockets of the bankers and politicians alike. it burst, and yet again the taxpayers get to pick up the tab.

 

Lastly, and once again, the current financial problems are much broader than just real estate. It happened to be the sector that was hit first, but in time anyone who saves or borrows money for whatever purpose is going to feel the effects. The bigwigs on Wall Street were too captivated by their own brilliance to notice that overly leveraged transactions, even with hedges, were a bomb waiting to go off. Plus, the huge growth in derivatives greatly obfuscated the balance sheets of lots of big firms, making them even more vulnerable. (Derivatives can be very difficult to value accurately, so when a company's balance sheet has a whole lot of them on the "assets" side, nobody really knows what that company is actually worth.) Throughout all this, the Fed, the Treasury, and the Congress were basically dancing to Wall Street's tune (as is usually the case when the markets are riding high), repealing restrictions on investment banks and keeping the cheap credit flowing to fuel the leveraged investment boom.

of course they are, and i never said the problems weren't deeper. but it is a rigged game. whether you like it or not, we've (our government) have tried so hard to put the reigns on capitalism that they've broken all of the self-adjustment mechanisms that otherwise exist. you can't tinker in one area and expect that there won't be repercussions in another (not that they haven't tinkered in the others, too).

 

taks

[taks]

exactly how do sarkozy's comments support your point that the market does not know best? none of these abuses or scandals could exist if it were not for the government intervening.

 

yet again, blaming the system for something that isn't even part of the system. it's a strawman argument.

 

taks

[random n00b]

Well, taks. For all the shots you take at the problems that arise from governmental interventionism, you still have to provide convincing arguments that a fully unregulated market is a perfectly self-balancing system and is preferable to the alternatives.

 

Just sayin'.

[taks]

Well, taks. For all the shots you take at the problems that arise from governmental interventionism, you still have to provide convincing arguments that a fully unregulated market is a perfectly self-balancing system and is preferable to the alternatives.

 

Just sayin'.

ah, there's the bait and switch argument that is so often made - it is akin to asking that i prove a negative. the regulated system has problems (i'd go so far as to say it is broken), and these problems always get blamed on capitalism, but the fact that any regulation exists renders that blame falsely directed. the solution is NOT more regulation, since that only creates a bigger problem, and we do have evidence that this is true. nay, we have proof that this is true.

 

taks

[random n00b]

I think you misinterpret. I'm not saying government intervention IS the way to go. But what you posted does not, in effect, prove that no intervention entails no problems. You don't like interventionism, but there's nothing to suggest that the complete opposite is more desirable.

[Humodour]

exactly how do sarkozy's comments support your point that the market does not know best? none of these abuses or scandals could exist if it were not for the government intervening.

 

yet again, blaming the system for something that isn't even part of the system. it's a strawman argument.

 

taks

 

I think it's best if I just quote Sarkozy directly since it's clear you didn't read the article:

 

"The idea of the all-powerful market which must not be constrained by any rules, by any political intervention, was mad. The idea that markets were always right was mad." ~ Sarkozy

 

Also:

 

"Self-regulation as a way of solving all problems is finished. Laissez-faire is finished. The all-powerful market that always knows best is finished." ~ Sarkozy

 

He's not calling for the end of capitalism by any means. He has quite good clarity about what needs to replace the current system:

 

"The financial crisis is not the crisis of capitalism. It is the crisis of a system that has distanced itself from the most fundamental values of capitalism, which betrayed the spirit of capitalism ... The present crisis must incite us to refound capitalism on the basis of ethics and work."

 

"The market economy is a regulated market ... in the service of all. It is not the law of the jungle; it is not exorbitant profits for a few and sacrifices for all the others. The market economy is competition that lowers prices ... that benefits all consumers."

Edited September 29, 2008 by Krezack

[Meshugger]

I think you misinterpret. I'm not saying government intervention IS the way to go. But what you posted does not, in effect, prove that no intervention entails no problems. You don't like interventionism, but there's nothing to suggest that the complete opposite is more desirable.

 

Let's make it even more easier:

 

taks:

 

government meddle in the market == bad

 

random_noob:

 

if (government meddle in the market) == bad

then

?

 

Carry on.