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Originally Posted by kane
Sure, there are a lot of reasons that things have gone south as of late. Regulation has played a small roll in that, as has greed, mismanagement, ignorance, overspending, and a million other factors.
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Regulation has played more than a small role. It has never truly helped.
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Let me just ask you this: Which would be better for the country? 1. We let companies like AIG do as they please. They play risky games and create wealth out of thin air then when it catches up to them they collapse and burn, take with them 20%+ of the nations banks and cause massive unemployment, stock market collapse and all kinds of chaos. Once the dust has settled another company steps in and takes up the slack they have left behind and starts doing the exact same thing which will be great for about 10 years then it too will crash and burn.
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Yes, and when those companies fail, we let them fail. AIG doesn't create wealth out of thin air kane. That would be the FED and the banks. Reserve ratio for banks, printing press for the FED. The FED has largely been responsible for every single recession since its creation in 1913. And the dollar has lost 96% of its value since that time.
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or 2. We put in a regulation that either oversees how some of the derivatives are handled, or maybe we completely disallow them and say to the market :" If you want to make money, you need to sell a good or a service to someone. You can't just come up with complex formulas that just create wealth out of nothing?" And AIG is left making several hundred million dollars instead of a billion dollars. They still are huge, they still have an enormous amount of wealth, but they are a little more stable.
Which do you think is best for the country as a whole?
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A. Eventually go back on the gold standard. Right now, abolish unions, increase manufacturing, destroy the printing press, get rid of government regulation in the financial markets. I'll repeat, it's the FED and the banks who create money out of thin air.
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I agree with you that if something fails, it should stay failed. To me this isn't about the bailouts, this is about preventing situations that put us in a position where people even consider bailouts. The beauty of the free market rabid wolf is that it will never go hungry or get tired. It will eat its young as it burns the forest around it, then it will crawl into its den and sleep. When the forest has regrown and the animals have returned, it returns to hunt. For a while it is fine, but then it gets greedy again and kills too much and it is back to where it started.
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I think your blame is misplaced. The whole crisis started in the 70s which I've already outlined. We stopped saving and started spending, we started outsourcing and not producing anything, banks ceased giving businesses loans and thereby, destroying capital investments. Banks also increased loans to individuals, who started living beyond their means. Then Clinton got rid of the cap placed on bank loans, people started buying houses, housing prices skyrocketed, people realized they couldn't pay, and then we had mass defaults. AIG and those few companies were just the tip of the iceberg.
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We have to learn from history. If history shows us that certain business practices are bad for the economy, then I see no problem in overseeing them just disallowing them. I could make a bunch of money selling meth, but the government has decided that this is bad and they don't let me do it. At least if I sell meth the person that buys it knows they are fucking up their lives. With a lot of the shady shit that goes down on wall street there are plenty of people who one morning wake up and find their 401K is worth half what it was the week before and it is all due to a few people who decided to take extreme risks so they could get a bigger bonus.
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No system is perfect, capitalism is the best though. If we would just change the mainstream economics back to Austrian, which focuses more on the supply side and marginal utility, we'd get this country back on track.