Inability to show any resemblance of human decency time and time again.

Got to disagree with you there, ghost. The great depression was brought on, mostly, by deregulating the market. Once regulations were put back into place, things got better. That is, until we started deregulating it again in the past two decades. And things went in the crapper again. The government HAS to regulate the market. We have proven that, the hard way, that at least twice.

Look, Iceray, 1 sentence doesn't constitute an argument, simply a statement. What is "human decency"? Why should corporations be required to show it? Is there another way of looking at that issue (for instance, property right infringement)? You need to go into more depth. Any examples of indecency to back up your claim?

otto, do you support government intervention in the economy?

Copying an earlier post about how Bush's government caused this crisis


Firstly, this was not a republican president in the normal sense. Bush cannot be described as anti-regulation. He introduced the Sarbanes-Oxley Act which increased regulation; even with scandals such as Enron, this represents a deviation from the normal path of Republican thinking, and also penalises those who do business legitimately. He also pushed for new regulation for Freddie Mac and Fanny Mae: http://www.nytimes.com/2003/09/11/business/new-agency-proposed-to-oversee-freddie-mac-and-fannie-mae.html

Bush was not, therefore, your standard Republican- coming after 8 years of Democrat rule, you'd have thought he'd have had rather larger bonfire, wouldn't you. We have, and had, a mix of free markets and regulation. That is undeniable, regardless of the colour worn by the president, and it is vital to ask which part failed.

There are a few aspects of regulatory error that caused everything to be built so high and then fall like a stack of cards:

Firstly, the setting of interest rates is balmy. In communist Russia, the price of bread was set by a group of men sitting around the table. They invariably got it wrong. Normally too low, resulting in shortages, but sometimes too high, causing surpluses to be made. Bread is much simpler than interest rates, so we shouldn't be surprised that they get it wrong.

In 2003 the Fed lowered interest rates to 1%, with inflation at 3 or 4%. In other words, the real interest rate is negative, you are paid to borrow money *even if you don't actually make a profit on the investments you make with it*.

This means that everyone borrows money, often buying homes. This tendency is amplified by the housing policy in the United States. Every President, Republican or Democrat, since FDR has wanted to increase home ownership. Mortgages have been subsidised; banks have been encouraged to lend money to people who clearly couldn't afford it just for political favours. Bush was successful in increasing home ownership from 65% to 70% in the US.

An ever increasing demand for homes results in an ever increasing price. It was so persistent, since through any downturn the governments and central banks pumped money into the economies, that people thought that houses were a sure fire investment. They believed that you could never make a loss on them, and therefore you could never make a loss on a mortgage.

The logic banks then made was sound- houses are guaranteed profit, so there is very little risk, so lets leverage as much as possible to maximise gain. This would have been okay if it wasn't based on a faulty premise. Houses were only guaranteed profit for as long as the interest rate kept on dropping and staying well below inflation, and that was unsustainable because low interest rates cause inflation, which would eventually lead to disaster.

I'll pause briefly in the general narrative to strengthen the point. Things weren't that simple. If the above description was the whole case, only banks lending to American home owners would be in real trouble. The difficulty is that the regulatory restrictions on leverage meant that people tied webs around themselves so that they could take more risk. The logic above, which anyone would come to unless they were avid fans of Austrian economics (and the years of uninterrupted growth made Austrian economics look at a glance to be dead wrong- this monetary policy appeared to work), meant that 'risk' didn't appear to anyone to be risky.

The addition system used to calculate how much capital the bank actually had was like this, under the recourse rule (more regulation): an AA- or AAA-rated asset-backed security had a 20% risk rate, cash had a 0% risk and a personal mortgage had a 50% risk rate.

In a free market, there isn't much reason for buying the AA or AAA mortgage backed bonds. If you are looking for safety, go for the governments' bonds etc. but if you want yield, go for the mortgages and cut out the middle man. But nobody wants to actually have mortgages, because the counting system means that you can't have as many of them. Far better to get mortgages, sell them to somebody else, and then buy different mortgages as an AA or AAA package. Then your own assets count as 20% risk, not 50%, and you can do more business.

So we see that regulation has both (a) directly encouraged reckless personal borrowing, which has (b) encouraged come-what-may investment in houses and mortgages (which are secured by the house, the price of which is rising) and (c) created a very tight web of interactions by making that the way to get maximum leverage.

Then, from about 2005 to 2006, interest rates were increased by the Fed from 1% to 5.25% in what I think is the quickest rise in interest rates in US history. Suddenly the following happens:

People who had flexible rate mortgages can't pay them.
Banks start making losses on people who have fixed rate mortgages.
People stop buying houses.

Therefore, house prices go down, meaning that banks repossessing homes from those entering bankruptcy still don't recoup their losses. Banks are now loosing money on all the mortgages that they were led to believe were safe by the way regulation was set up and the effects of the way it was set up. Many to all banks have these mortgages, but nobody knows how many or whether they come from institutions that are unsafe or not because of the web that had been created by the pass the parcel game that had resulted from the twin factors of believing you couldn't make a loss on a mortgage and the way that regulation encouraged it as a way of increasing the leverage you could have. This lack of knowledge about which banks actually had a problem meant that investors assumed that all banks had a problem and the plug was pulled, people went on the defensive as bank shares proceeded to plummet, reducing spending and loosing confidence. Banks realising how much risk they had stopped lending more money, so credit froze and so did business. Consumption had fallen, the means of production, credit, had dried up, and a recession resulted.

It is easy to blame greedy bankers, because we don't intuitively understand that the lending of money is the fuel, not the load in the motor of our economy. It is easy to point to the fact that there was a big financial industry making loads of money which collapsed, and say that it was their fault, but that doesn't answer the question: Why was things so obviously *not beneficial to anyone* as people buying houses they couldn't afford, investing in projects that were in real terms breaking even or loosing to inflation, lending money to the people who were doing these things, why was that profitable in a free market? There was no reason why they would be in a free market, it was because there was regulation, because the market was not free, that a game was made in which they were profitable.

The fact is ultimately this: regulation changes the rules of the economic game (which I must emphasise isn't zero-sum, but that's another misconception), and nobody can predict what effect that has on the game. We introduce many rule changes at once to a massive playing board, with no idea how everything will interact. It is like playing chess on a single, enormous board with nearly 7 billion players, each with several sets of chessmen , and then restricting the number of moves people can make, with the specific aim to increase the number of pawn promotions happening. The fact is, nobody can hope to predict what is going to happen, let alone control the outcome by setting the rules, so lets go with the principle of free trade- so the vast majority of the time everyone in a trade benefits, as being the guarantor that most of the time when a house is built, or a jumper knitted or a loan lent, it is not stacking up a pile of cards that will fall down, bringing our world with them.

Let's put our faith in the fact that most people are responsible most of the time, so will not default on payments, will not fail to deliver a product, as the basis of our economy; and let's not put our faith in groups of suit-wearing men around tables to make universal decisions as to how to improve the rules, because when they inevitably get it wrong, everyone, not just the few who are irresponsible, suffers greatly as we have seen.
 

You just asked me what was wrong with corporations I told you what I feel is wrong with them. They make decisions based off what's for the good of the company over the good of everyone. Think of all the companies that put lead, which is poisonous, in toys because it was cheaper. Moving their companies out of the country to avoid taxes so they can be more profitable. Where does all this money go that they get from cheapening everything? Back into the company, you never hear about a company suddenly increasing the wages of all of its workers, the people who make the company gain those profits.

This is all a joke. You're doing exactly what the financial powers want you to do. Argue about idealogical issues. I ask you all this, Has anything truly changed since Obama replaced Bush? The answer is no. Why? Because the agenda is already set. Follow the money. Follow the organizations. You'll see that the same people have sponsored both candidates and that the administrations are members of the same affiliations. Stop fighting over pennies and watch the dollars. We're all being manipulated through the press and TV which are all owned by the major financial institutions which are ran by a small few who happen to also support our politicians. Wake up people! The NWO is taking over and we're arguing over ideologies while the banking powers consolidate the world's resources and steal our liberties in the name of security.

The biggest scam in history.

The banking institutions created a world wide recession by buying up all the oil, thereby driving p the price. Then the US government gave our money to the poor banking system to save us all without any promises. The banks then bought out smaller, independent banks and we got nothing in return. Then arrives the Savior, Obama, and he borrows the same money we gave the banks at interest to save us all once again with a stimulus package. This must be the greatest scam in the history of the world since organized religion. We all might as well bow down to our new masters as we are all about to become or already are financial slaves. The NWO is here people. What are you going to do about it? Argue idealogical points of view, or fight back? The choice is now. The choice is ours. We owe it to our children. Fuck them and fuck them hard because the shit's about to hit the fan.

I asked you to justify your claim.

Well. it doesn't make sense to talk about the company making profits. There are the workers, the customers or the owners, and the interaction between these people is what creates the company.

Now, supposing the company did not say that it put lead in the toy. Then it is doing something wrong, under trade descriptions etc. but that is a specific company acting deceitfully. As for wages, if people didn't want to work for those wages, they wouldn't. It is a free choice. You hate the company, presumably you cannot think that by providing jobs it is doing them good.

Finally, I'd like you to justify the doctrine that it is immoral to try to be profitable. Don't distinguish between monetary profit and other forms of benefit, because there is none. Money is the means of exchange of goods, and equivalent to goods. Your argument must work equally well for rice as for gold.

TGM: how can you write so much, ahhhhhhhhhhhhhhh

Ghost, I can't verify that what you pasted above is correct. I am not that smart. But, I know many teachers of economics who have detailed to me how deregulation caused these problems. When you just sit back and say "no one would be so greedy to upset this system. It will just work." It doesn't. We had $500,000 houses being sold to migrant farmers with a yearly income of under $10,000. The banks were making money off of lending because there were no rules and they were greedy. I believe that some sort of regulation is needed to prevent what has happened.

I agree with C-K and I know I'm not the only one thinking revolution is at hand.

In response to Iceray, btw.

C-K, please read the longest post of mine above.

Capitalism plays off mans greatest weakness, greed. Do you propose something Better ghosty?

jimgov, people didn't do that because they thought it would make a loss, they did it because they thought that it would be ok, because they'd get the house if it all went wrong, so they couldn't make a loss. It was the government that set up the system where that was (or seemed) sensible. People really did make millions.

However, don't blame greed. Every business is set up because of greed. The person wants something, so they set up a business to get it, be it a nice product sold or monetary gain itself or whatever else. Who thinks that Steve Jobs invented the iPhone to make people happy? Of course not, he did it because *he* wanted to make it, because *he* thought it was cool, because *he* could make a profit. There is nothing wrong with greed, only recklessness, and a government with a 4 year term is guaranteed to be the most reckless part of an economy.

Also, most economists are wrong most of the time, so a teacher of economics being able to explain something to you doesn't mean its right. You should look into the Austrian school, not only very incisive and interesting, but also, a number of leading Austrian economists predicted the current crisis with remarkable accuracy.

http://mises.org/MediaPlayer.aspx?Id=4004

Wow C-K. That was a real angry post. But, I agree that banks have to be reigned in. And that is done by...drumroll please...instituting regulations that make sure that they are operating in the publics interest.

There is plenty wrong with greed Ghosty, plenty wrong with it.

I didn't mean good old plain run of the mill greed. I mean greed on a scale that us mere mortals cannot even imagine.

jimgov, these same "teachers of economics" were also saying that the economy was just fine two years ago, and that American prosperity was going to go on forever. People like Ron Paul and Peter Schiff who said otherwise were laughed at by these same geniuses. (The geniuses also apparently never heard of Sarbanes-Oxley, the most onerous regulatory legislation in the history of American business.)

C-K is right. The big banks own the Federal Reserve, Congress, and the more than dozen agencies which regulate them. Just look at the revolving door between Goldman Sachs and the Treasury Department. The idea that government bureaucrats from any of the dozen or so federal agencies that regulate banks are ever going to 'reign in' the same banks they work(ed) for is ridiculous. So is the idea that just one more law or regulation would've prevented the current depression.

Tolstoy, I am not talking about the big whigs in the government. I am talking about college economics teachers. They saw what was happening. They knew the past. They were able to put the pieces together. Of course, they are just teachers who know how economics work. Why would anyone listen to them.

Iceray, I propose Capitalism. I propose that greed, when tempered with cool-headed rationality, is not a weakness but an asset. I am an unrepentant egoist because I believe that the property right is sacred.

Why do I believe that? Because it is self contradictory to deny the right to property. Suppose that there is no such thing as a property right. Now I come and claim ownership of something. Nobody owned it, because there is no property. I haven't infringed on anyone's rights, have I. Now suppose I claim everything. Again, nobody else owned it, did they? So what wrong have I done? You see, *now* you claim your property right, don't you? You could disguise it behind, say, a right to food, but its still, ultimately, property.

So what kind of person can have a property right? Well, first of all, you have to be a moral agent: sentient, able to understand basic concepts: cause and effect, the future and so on. You also need to be non-violator of property rights yourself- if you violate the rights, you loose the rights. You cannot be owned yourself, either, because your owner could then order that you give him your property, making it de facto his anyway. This implies that we must, since we can own property, own ourselves.

Now, no other moral law can demand that we give up ourselves or our property. They were our moral rights, so we cannot be morally wrong in asserting them, therefore altruism cannot be a moral requirement. At the same time, we have implicit in the property right, egoism, but rational egoism. We should aim to acheive certain things that we value- happiness, friendship, a house and so on, otherwise we are not egoists, and the only way to do this is by reasoning, by rationality, because otherwise we are blind and hostages to chance alone.

And that last sentence is just plain wrong. We have been dismantling our regulations for over a decade. This isn't just one little law. It was an entire apparatus of regulation. And it was taken apart. And THAT could have prevented what is happening now.

And I agree with you on most points ghost. Capitalism is not the problem. So far, it is the best system that we have come up with.

NO Jimgov it isn't. It's done by first putting the Federal Reserve under the Treasury. Do you know that he Federal Reserve isn't federal at all but a private institution? All of the wealth of the U.S is controlled by private institutions that are not regulated at all. Search the Internet and you will find a video of Alan Greenspan commenting on the fact that the F.R. isn't obliged to anyone, including the President. The Americans fought a war of independence to escape the Bank of England. Many great American presidents fought this same concept being created in America by the richest Americans. After WW 2, Truman I believe, agreed to legislation that created the Federal Reserve. He's later on film (again search the Internet for confirmation), as saying that it was a big mistake. Since the creation of this institution there has been a slowly, contrived effort to take over the world. Recent events are just a part of this effort. Just wait and see what is coming under Obama. If you want I'll make predictions and give video evidence to support them. I'd rather you did it for yourselves but I will if you are unable to educate yourselves.

Wonderful comments by Friedman on greed:

http://www.youtube.com/watch?v=RWsx1X8PV_A

Or TGM what prevents you from claiming property is your conscious. Or a group of naked men willing to strap you down and rape you with baseball bats.

No, you are wrong. The Federal Reserve is not a private institution. It is an independent entity within the government. It was created by the Federal Reserve Act in 1913. And saying "Since the creation of this institution there has been a slowly, contrived effort to take over the world" kind of makes you sound a little off kilter. There aren't conspiracies in every corner.

C-K's previous comments are quite insightful.

jimgov, I doubt you are pro-capitalist as I insist on the term being used. Capitalism is the free market, laissez-faire. What you seem to be proposing is a mixed economy. Sure, there are elements, large elements, of capitalism in the Western world today, but do not be fooled into thinking that there is only a little statism, only a little corporatism (ironically a government doctrine, not a corporate one), only a little collectivism, only a little socialism, indeed, only a little altruism, for that is anti-capitalist in a sense too. Capitalism is about the individual, what he wants and what he values, and that is his matter and his matter only. Normally, and I suggest rightly, what he wants is himself

Who runs the Federal Reserve then? Who regulates it? Who does it answer to?

Answer these questions and I'll start to take you seriously.

Iceray, you have missed the crux of my argument. There is nothing moral there to stop me, only physical force, violence. My conscience doesn't stop me from claiming property rights, it commends it. But my argument is that you cannot complain about my seizing all property without, at some level, claiming a property right.

First off, I don't care if you take me seriously. Lets get that straight. I have better things to do. Secondly, from the Federal Reserve..."The Board of Governors of the Federal Reserve System is a federal government agency. The Board is composed of seven members, who are appointed by the President of the United States and confirmed by the U.S. Senate. The full term of a Board member is fourteen years, and the appointments are staggered so that one term expires on January 31 of each even-numbered year. After serving a full term, a Board member may not be reappointed. If a member leaves the Board before his or her term ex- pires, however, the person appointed and confirmed to serve the remain- der of the term may later be reappointed to a full term."