Jump to content
Objectivism Online Forum

IceFive

Regulars
  • Posts

    18
  • Joined

  • Last visited

1 Follower

Previous Fields

  • Country
    Not Specified
  • State (US/Canadian)
    Not Specified
  • Relationship status
    No Answer
  • Copyright
    Copyrighted

IceFive's Achievements

Novice

Novice (2/7)

0

Reputation

  1. This isn't being forced to lend. A bank makes more money in the long run (even with a lender of last resort helping its failing competitors) if it makes sound lending decisions. The biggest originators of sub prime mortgages were not subject to CRA. Goldman Sach's did more than just play the game. They committed fraud by creating a mortgage investment vehicle for one client who wanted to bet that it would fail, and then lied to other clients about this in order to get them to invest in it. Here there was no government involvement, just pure greed. Wall Street is to blame. Besides, if your quote above is indeed the "game", then a firm who neglected to play would come out ahead in the long run. How can you argue that not investing in subprime during the boom was a bad strategy? Avoiding subprime would have been a great strategy. Here is the same argument as the commentors above. I fail to see why avoiding a speculative bubble is not a winning strategy for a company and its shareholders? Can I see evidence of this please? As far as I know, GLB only restricts banks from merging with insurance companies if their CRA requirements aren't being met. There is no restriction on securitization in existing banks as far as I know.
  2. So you admit it was the banks fault in going along with the conventional wisdom? You concede that they were not forced to do this?
  3. Sorry, what left wing slogans have I been spouting? I look at the data then I judge. Show me contrasting data and I'll change my mind. The data is overwhelmingly one sided in this case. My favorite part of that link above is where the guy links to previous right wing analysis before the crash - http://www.cato.org/pubs/regulation/regv23n3/gunther.pdf - This one advocates the exact opposite position of the one it currently holds. This is proof that the organisation is either wilfully dishonest or unconsciously self deceiving, since they clearly will warp any data to fit their preconceived political views. An honest way would be to warp one's political views to fit the data. I submit that most politicians know that CRA was a minor cause of the crisis, yet they will repeat slogans to the opposite effect in order to gain votes from people who haven't seen the data, or can't understand it. This quote from you I find interesting. You're essentially saying that European banks were forced into buying US subprime because if they didn't they would have lost money anyway? Have I got your argument right here?
  4. For anyone interested in actual facts, rather than right wing slogans: http://rortybomb.wordpress.com/2011/11/01/bloombergs-awful-comment-what-can-we-say-for-certain-regarding-the-gses/ This is the best summary of the whole issue I have seen so far.
  5. I've been thinking more about a gold standard and the deflation that would result as the economy grows. In isolation, deflation is just as arbitrary as inflation. Deflation represents an automatic transfer of wealth from debtors to creditors (the opposite of inflation). There is no basis to prefer deflation than the alternative. In fact it gets worse for deflation. Wages and prices are sticky (just look at the fact that US firms prefer to lay off workers and freeze wages rather than applying a general pay cut to the workforce). So say you are running a business under a gold standard. You would have to give your workers nominal pay cuts just to keep their pay the same as last year.Otherwise everyone would be receiving pay rises regardless of their performance. Try telling someone you are cutting their wages based on their equally good performance as last year; its quite clear that persistent deflation would be impractical because of sticky prices and wages. Most economists prefer a small rate of inflation for this reason. I think the Fed has done a good job of keeping a low moderate rate of inflation over the past few decades. Every prediction of hyperinflation from people on the right (from the WSJ to Objectivist commentators) has consistently been proven wrong.
  6. Deflation would occur. So the money supply would stay fixed but the price level would fall. I completely agree with this. Thank you for clarifying Objectivism's position. I agree that the government need not and should not decide whether people use a gold standard. Imagine with the general deflation that would occur, the smallest denomination of gold would get increasingly minuscule. To the point that you would be paying things in nanograms and atoms of gold. I guess it could be implemented with a suitable electronic system to account for everyone's holdings of gold and its location. You could even account for fractions of atoms of gold (I'm being serious). I'm not going to pass judgement on such a system until I've had a think about it a bit more.
  7. This is what fractional reserve banking is defined as. However why is it fraudulent if all parties agree to it? It clearly isn't, especially under a system of competing currencies that you advocate since people would simply switch currencies if they didn't like it. Here's that chart again: You guys have said you think its weak but I don't see that at all. What I see is that for the US, the UK, and Germany (the worlds 3 biggest economies during the 1930s), when they left the gold standard, a recovery ensued. Being the worlds 3 biggest economies, its also not surprising that a general upturn occurred in other countries even if they were yet to leave the gold standard. Yes, finally! Someone here understand's the gold standard. Now I ask why is passing a law to fix gold at a government defined rate, preferable to the current system of letting the dollar float freely against gold? Here is a good summary of the gold standards effects during the depression (http://www.j-bradfor...ldstandard.html): What surprises me most about this debate is the clear contradictions with Objectivism that the gold standard implies. All I have heard from you guys is "pass a law in order to regulate the amount of reserves banks hold (ie 100% reserves)" or "pass that law to guarantee convertibility to gold at such and such rate". Whatever happened to the non-initiation of force?!
  8. You are essentially saying that the government should stop issuing dollar bills and that private issuers should make their own bills at a rate of convertibility of their choosing. If I have got your argument right above, then there is nothing to stop a private issuer from not having 100% gold reserves. You say it would be illegal and fraud to have fractional reserve banking, but I don't see any basis for why that would be fraud. If the issuer freely chooses to have 10% reserves and everyone who uses those bills is happy, there is no problem. As long as the reserve level is advertised faithfully then it is not fraud. Which then leads to the following problem with privately issued currencies - the issuer would simply print extra bills to a small % of the total number of bills each year and deposit them in its own bank accountsee note 1 below. They would quickly become the richest corporation ever while causing only a small amount of inflation. You may argue that people would switch to other competing bills, but I don't see that happening. Currency has a strong network effect; everyone will switch to the same bill because that's what everyone else is using. Can you imagine a world in which every item in the supermarket has 20 different prices on it, one for each brand of dollar bill? That in itself is not desirable. ============================= Note 1 - That is essentially what the government does today. With quantitative easing it prints money and buys govt bonds with the money. This is essentially the government printing money for itself to spend. The difference with the government is that it is democratically accountable to the people. If a private issuer ever did this then they can spend the printed cash on whatever they want and are not democratically accountable.
  9. It is pretty much universally accepted amongst respected economists across the political spectrum, from Milton Friedman to Keynes, that leaving the gold standard helped America's recovery. The graph is pretty clear for America and Britain, less clear for other countries granted. I think this shows where you guys are unclear - your first sentence is exactly what a gold standard is defined as. Your second sentence is exactly the system we have TODAY ie no gold standard with the price of gold in dollars freely fluctuates. You have the exact opposite definition of the two regimes. You make the same mistake; that is exactly what a gold standard is.
  10. *** Mod's note: Merged from this topic on "Occupy Wall St." - sN *** Having a gold standard would be an absolute disaster. Take a look at this chart which shows that during the depression you could predict a country's recovery based on when they left the gold standard: http://en.wikipedia....ssion_Graph.svg The reason for this is because currencies need to freely float against eachother (ie devalue & revalue) based on market activity, not be artificially fixed against a commodity which is a recipe for rigidity and stagnation. You can see this in the Euro today which is basically a modern day gold standard in most substantial respects. And a full reserve gold standard?! Well that would mean a drastic cut to the amount of credit in the economy as banks would have to keep more reserves. If private & government players both deleverage at the same time as you advocate, then peoples incomes will fall drastically since one person's spending = another persons income. This would NOT be good policy.
  11. Interesting analysis but I have a few issues. First, the government has to intervene in the market to some extent, for example in setting nominal interest rates. Wouldn't you rather have a system where investors are guessing what rational central bankers are going to do, rather than having a fixed stock of money that always and everywhere produces deflation. Wages are sticky to the upside so persistent deflation would be an utter nightmare for any economy. Second, in your last paragraph you set a continuum of regulation from laissez faire to North Korea. The key for policy makers is to find a balance; to reduce reckless risk taking while still allowing people to risk their capital on ventures. The fact that regulators failed in this and actually exacerbated reckless risk taking doesn't change the goal of successful policy making. It was done successfully in Canada which didn't experience as much of a boom and bust because of minimum loan-to-value regulations. (I realise that Canada's real estate is looking frothy at the moment but lets see if the BoC will raise rates.) This is a liquidationist argument which is basically what turned a recession into the great depression. EDIT: Andrew Mellon, Secretary of the Treasury from March 4, 1921 until February 12, 1932: I wonder how that one worked out lol.
  12. Exactly. Contrary to the title of this thread, it was the bankers own fault.
  13. Let me try and advance this discussion by asking a question: Why did European banks buy up massive quantities of toxic securitized loans originating in the USA?
  14. House price bubbles occurred globally and most nations did not bail out shareholders. For example across Europe banks were nationalized meaning shareholders were wiped out. Bankers aren't stupid, but they are more interested in short term profits than long term shareholder value (its called the agency/principal market failure). Everytime you hear someone blame CRA or any other US specific government intervention, you should ask yourself why that meant the Spanish and British real estate markets also experienced a massive bubble.
×
×
  • Create New...