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Second title in a row with a typo in it... are you purposely trying to get my inner spellchecker's panties into a wad? :P
Thanks for sharing this, btw.
It's an Idiocracy reference. Their fiscal meltdown (triggered by the idea of watering crops with water rather than BRAWNDO) is called "the problem with the e-com-in-y". Sorry to ruffle yr feathers.
Aw shit! And now I feel like a dumbass because I didn't get the reference.
Thanks for sharing this. I found the information and presentation quite nice. The one issue I would bring up is who writes the bank cap regulations? As we've see already, Washington and Wall street are inextricably bound together through capital in the Capital. I'm worried that all the regulating agencies would do is create a document or regulation that was very pretty, but only served to confuse the public and misdirect all the efforts of groups like New Way. Real governmental reform is needed, but I don't believe that it will happen until individual (specifically our generation) stop demonstrating, and start running for office. Just a thought.
It's a very valid concern, and I agree with your overall assessment about taking it past mere demonstration and actually building Real Political Power. In the meantime, I do think there's some potential to get better results out of congress. Marginal improvement is better than stasis.
I generally agree with the takeaway, but the more I study on this topic, the closer I get to the conclusion that the Fed's tinkering caused all this. If failure is allowed to ruin the lives of those that over extend, and money is allowed to flow naturally (instead of being misdirected due to low interest rates and relaxed lending practices), the housing bubble wouldn't have occurred in the first place. I'm currently reading a book entitled "Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse" by Thomas E. Woods, Jr. It's a little wordy, but has some excellent points. Unfortunately, it takes a lot of faith to abandon the idea of extensive control over the economy in favor of allowing a free market (which we don't have now) to adjust/correct its own inefficiencies.
Unfortunately, it takes a lot of faith to abandon the idea of extensive control over the economy in favor of allowing a free market (which we don’t have now) to adjust/correct its own inefficiencies.
It sure would take a lot of faith, and then some. This notion that ultra-efficient self-correcting markets will emerge if only enough regulation is removed is, to me, quite fallacious. It's philosophically flawed, and a dangerous ideology. Two quick reasons:
1) As per Polyani and The Great Transformation, the whole frame of "State vs. Market" is a misconception. Starting with the fact that the only meaningful currencies are those backed by states and proceeding through the necessity of contract enforcement by some external agency, the collective need for security, and a litany of others, the truth is that functioning Markets exist (and have always existed) within boundaries that are defined by States, just as States are influenced and directed in service of (and by) said markets. They are mutually constitutive entities, not oppositional forces.
2) There's a reason most large-scale government programming is redistributive: Markets left to their own devices are mono or oligoplistic, not functionally competitive. Big guys rapidly realize that suppressing competition through market manipulation and other forms of bullying is quite a bit easier than innovation. Markets that are "free" in this way are not drivers of efficiency or innovation, as they are not functionally competitive. States are the only entities which can mitigate and prevent this, both directly by enforcing anti-trust and related legislation, but also more generally by insuring that capital is not so ruthlessly centralized as to completely stifle independent enterprise.
None of that is an argument for command economy, which would almost certainly be worse. It is however an argument for the State to recognize that its regulation of the Market has a purpose: to provide whatever buffer against the capriciousness of market movements our common sense of humanity suggests, and also to set the "rules of the game" such that the positive outcomes of market activity are assured through fair and honest competition, etc. We can do a hell of a lot better on both counts, but it's not a matter of more or less regulation per se, rather of our regulations being better and more effective.
Are you saying that the availability of cheap money (caused by the Fed) and the artificial redirection of said money into housing that wasn't needed (caused by Government intervention in the lending rules) were valid? The markets are ruthlessly efficient and would have prevented both. Agreed, rules must be in place and uniformly enforced to foster a fair playing field. Government still prints the currency and referees the system, but it overstepped its authority with respect to the housing bubble and resultant credit lockup.
I agree with most of your reply, but I would place more responsibility at the feet of the Fed and Federal government than the 'greedy' loan brokers, bankers, and Wall street investment managers. They saw red meat and gorged themselves, knowing that they were perceived as "too big to fail" and that their actions would be overlooked or forgiven.
So, perhaps I am saying that we need less tinkering, not less regulation. What appears to be capriciousness to you may just be the market trying to figure out where the money should go six months from now. Some ventures have merit, while others are detritus that need reclaiming.
As for saying that one of government's roles is to redistribute wealth, I would strongly disagree. I don't follow the uber-tinkering dictum "From each according to his ability, to each according to his need."
Thanks for the thoughful reply. In terms of whether or not Greenspan's monitary policy is "to blame" here, well it's certainly a factor. However, you also have to look at the repeal of Glass/Stegal in the late '90s. I see the origins of the current crisis in the combination of cheap credit, new megabank institutions, and this "too big to fail" mental safety net.
What appears to be capriciousness to you may just be the market trying to figure out where the money should go six months from now.
Strikes me as a kind of magical thinking. The market is not a person, and it doesn't figure things out. Markets are subject to all sorts of bubble phenomena (and other instability) because they are composed of layer upon layer of human decisions -- known for occasional irrationality. At one point in the 1600s, the market "thought" tulips were worth more than gold. Instability and turbulence are features of market systems, not bugs. It's all good. Except when you're talking about core economic infrastructure like health care, roads, utilities and the ability for people to grow old without having to be paupers. We're all better off economically and socially (and morally, I would argue) when those sorts of things can be assumed as solid, "secure" if you will, which is by definition not a condition which markets are well equipped to provide.
As for saying that one of government’s roles is to redistribute wealth, I would strongly disagree. I don’t follow the uber-tinkering dictum “From each according to his ability, to each according to his need.”
Look to a wider historical perspective than the 20th century, and think of "wealth" and not "cashmoney," I think you'll see that this redistributive function has always been a feature of governments. You don't even have to be a socialist (let alone a Marxist or commie pinko) to see that, and appreciate the role.
If you like, go the Hobbsian route, where the core function of the State is collective security. Maintenance of an Army (not to be confused with actually going to war, which generally involves profiteering and other avaricious behaviors) involves redistribution of wealth. The rich pay salaries and equipment for solders, who tend by in large to be non-rich. Everyone benefits whether they pay or serve. That's redistribution.
Closer to home, it was de Tocqueville himself who observed one of the early distinctions between the emerging US and Aristocratic Continental Europe was the imposition of stiff Estate Taxes, which funded basic public services and also prevented the development of dynastic hereditary fortunes. More redistributing of wealth, this time with some of the upside purely in the taking away of actual cash.
And then there's all the stuff I talked about above, things like roads, free education, and guaranteed minimum retirement benefits. Hopefully soon healthcare. For people in the bottom income bracket, these are things that could never in a million years be privately afforded, and in the case of health coverage, largely isn't. These folks don't really pay much in taxes (which is as it should be), but they reap all these benefits.
For the rest of us, the privilege of participating in a richer economic ecosystem (via easy reliable transportation, widespread literacy, etc) is similarly something we'd be hard-pressed to finance on our lonesome. You really do need the extra scratch taken from people who honestly can afford it -- and have gotten where they are in large part because all these underlying systems are functional -- to make the whole thing work.