Economics: more or less government intervention?

[Range_This11]

And also a question, because either I missed this or this is one of the holes in my knowledge. Why would the banks need financial backing from the government in the first place. Why not just borrow from the federal reserve?

The federal reserve is apart of the government...

Technically speaking, I think It's its own entity, but the leaders of it are appointed by the U.S. government.

[aspeeder]

Except that the government not stopping them from doing stupid things is pretty much the same thing as not being regulated at all.

In a free market, there is no such thing as a GSE like Fannie Mae or Freddie Mac. There doesn't need to be regulations telling businesses not to do stupid things, because when businesses do stupid things they go bankrupt. When a GSE does stupid things, the government bails them out.

 

More rules and regulations isn't the solution, less government (in this case, GSEs) is.

Much as this is probably counter to my stated ideals, I mostly agree with this. Mostly based on the fact that the Federal Reserve was founded at the turn of the century by some of the richest people on earth (During the famous meeting on Jekyll Island the people who conceived of the reserve owned approximately 1/6 of the entire world's wealth). I can understand government going into certain other areas of business to protect public interests, but when it gets involved in purely the financial system and the risks that they can take are mitigated to the point that they can abuse the system it's chronically unfair.

[Randox]

Suddenly I get the feeling that the Federal Reserve doesn't operate at all like the Bank of Canada. With the first major difference being that the Bank appoints it's own staff, not the government. The Government just tells them what their goal is (such as the switch from promoting full employment to the primary focus being keeping the inflation rate between 1-3 percent). In terms of accountability, not sure.

[Donnie]

It is the same in the US mostly. Except there is no accountability. Zero. More importantly most people dont even know a good job from a bad job. Most people never thought of inflation as a tax, most people subscribe to Keynesian economics so believe institutions like the Fed are necessary and helpful.

[Randox]

I'm not sure how accountable our central bank is either. In it's independence, I think the government would have to pass legislation to actually change the staffing by force (since it is expressly set up to prevent them from doing that). That said, we really might not need ours. It's nice to have the throttle on the economy, but it's not required. It would be interesting to see if we would still be able to regulate as well as we did before the central bank in the present day world, though that is not an experiment I would care to be a part of.

 

And you do want a little bit of inflation to encourage growth. If you can sustain a continuous and low level of inflation, it makes constant expansion possible, but prevents jacking the cost of living up fast enough to impact your earnings too much (it would help if all wages were adjusted annually, but they aren't, and so they are affected).

[Donnie]

This ties into the austrian theory of the business cycle. Which blames those very false signals for artificial growth and the readjusting crash that follows.

 

 

 

Not that this proves anything but Kaynes lost his personal fortune in the great depression and Ludwig Von Mises correctly predicted it was going to happen and saved his personal fortune.

[obfuscator]

I had an interesting talk last night with a guy who works on Bay Street (the Canadian version of wall street) about how the banking regulations we have here prevented a market collapse like the states had. It was really interesting to hear that from someone who actually works directly in the industry..

[Omar]

What kind of regulations?

[obfuscator]

To be honest I don't remember exactly what he said, and a lot of it flew over my head..but he was mentioning how a lot of the shady loans and investments some of the american banks were making are illegal here.

[Ginger_Warrior]

Were they illegal at the time when everything collapsed or have they been made illegal since? Because pretty much every capitalist nation has taken measures since, if only for political reasons because the public demanded it, apart from anything else.

[obfuscator]

No, they've been illegal for quite some time - that's how the crash was avoided.

 

Once again I don't know the details....

[Omar]

Well, thanks for telling us about your enlightening discussion obfuscator. :lol:

[obfuscator]

Haha yeah, I wish I could remember more of what he was talking about lol

[Omar]

This ties into the austrian theory of the business cycle. Which blames those very false signals for artificial growth and the readjusting crash that follows.

 

 

 

Not that this proves anything but Kaynes lost his personal fortune in the great depression and Ludwig Von Mises correctly predicted it was going to happen and saved his personal fortune.

Keynes wrote The General Theory in 1936, i.e. long after the crash. Not to mention Hawtrey and Cassel predicted the GD a decade before it hit.

http://uneasymoney.com/2011/12/12/keynes-v-hayek-enough-already/

[Donnie]

To be honest I don't remember exactly what he said, and a lot of it flew over my head..but he was mentioning how a lot of the shady loans and investments some of the american banks were making are illegal here.

 

Most of the shady stuff that caused the recession was government lead not bank lead. So legality would not have mattered here since they would've ignored those laws to fullfil the same political goal.

 

I agree with laws and regulations, however appealing to the same government that engaged in the shady activity that caused the recession isn't likely to work.

 

 

Thats why I am so supportive of non governmental regulation agencies and more then 1 of them.

 

 

 

[This loan was approved by the Loan Regulation Board]

[Omar]

What do you think of these two points?

http://uneasymoney.com/2012/10/03/two-problems-with-austrian-business-cycle-theory/

[Randox]

Not that it matters at the end of the day too much, but the government can't ignore laws (not strictly true, but mostly true in the public eye). They would first have to change them to allow them to do what they want to do. If nothing else, it makes finger pointing a bit easier.

[Omar]

Is planned obsolescence an example of market failure? Markets are supposed to incentivize competition, but if everyone just decides to sell products that are quickly useless, consumers are [bleep]ed if they're sort of forced to use them anyway.

[sees_all1]

Planned as in your products have a useful life, or that you'll quickly have new and better products?

 

 

Related to the Laffer Curve:

http://www.telegraph.co.uk/news/politics/9707029/Two-thirds-of-millionaires-left-Britain-to-avoid-50p-tax-rate.html

[Omar]

I was talking about the US. The same thing is happening in France. Tax percentage of GDP according to data.worldbank.org is roughly twice as high in the UK. For what it's worth, the US still has room to impose according to lenders. People don't lend to governments that won't be able to pay back. Governments get their money mostly from taxes. Therefore people assume the US still hasn't hit the peak of the Laffer curve.

By planned, I mean that the products are engineered in such a way that they become useless more quickly. Backwards incompatibility with previous software versions is an example. The product could have been better designed, but that's not in the interest of the producer. I'm not talking about cases where backwards compatibility is impossible, obviously.

[sees_all1]

By planned, I mean that the products are engineered in such a way that they become useless more quickly. Backwards incompatibility with previous software versions is an example. The product could have been better designed, but that's not in the interest of the producer. I'm not talking about cases where backwards compatibility is impossible, obviously.

In a free market, if there's money to be made making quality products / backwards compatible products / longer life products, those will be produced.

 

If there isn't money to be made, in an "economic" sense, that is not a failure of the free market.

[Donnie]

Yeah I agree with that sees_all1

 

The truth is I dont know if planned obselecense is a good or bad thing. My money is that it is fullfilling the demands of society. People would rather buy a new toaster for $20 then get one that will last forever for $100. So people buying the cheap toasters signifies that it is their demand. Could be market manipulation but I doubt it.

 

This is especially true with the computer industry.

[Omar]

So, Donnie, in an ideal world, what would the government be in charge of? Would you rather it give up its monopoly on violence as well?

 

And, more on why the Laffer Curve is just rationalization for tax cuts...

http://crooksandliars.com/jon-perr/economists-fail-republicans-laffer-curve

[Donnie]

Property was enforced by social norms.

Law was enforced by social norms. English common law is a good example of that since peasents didn't have access to neither kings law nor church law so they appealed to arbiters who were known to be fair, out of case rulings a case law emerged from it. None of this was government enforced.

 

 

The only thing I cant find a market solution for is a military protection of a stateless region against other states. Private guerrilla war works but it has obvious flaws as does donations for nukes. So my reason for not a total anarchist is because of the defense against other states dilemma.