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Originally Posted by The Demon
Regulation has played more than a small role. It has never truly helped.
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.
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.
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.
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.
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I guess ultimately we both agree that what this country needs most is a return to supply side economics. We have outsourced ourselves to death and with every passing year we seem to export less and less and import more and more and it is really catching up to us.
When I talk about companies like AIG creating wealth out of thin I air I mean that they heavily invested themselves into derivatives which allow them to invest 20 times the actual amount that they have in hand. So if they have a million dollars, they can control 20 million in stock then sell it and gain the rewards of a 20 million investment that they didn't make in the first place. If they lose, they cook the books, hide the loss and do it again. That shouldn't be allowed. if you want to invest, great, but you should only be allowed to control as much stock as you can actually pay for.
Yes, I understand the government has fucked a lot of things up and it is bloated and corrupt, but every time I hear about Raw Capitalism I get visions of third world countries where a small group of very wealthy control the masses of poor people and profit heavily off of the exploitation of them. When things like that happen people get scared. Fear breads fanaticism and they start to vote people into office that will head in a more socialist direction and promise them their fair share of the pie. If they had their fair share of the pie all along and weren't worried about losing it, they would be less likely to vote the people into office that will create the hurdles that block good business from being done.
Done correctly, I feel some regulation could work and has a seat at our economic table. Sadly, however, our government has yet to figure out how to do it correctly.