Inflation: please explain

[mean_liar]

Ditto.

Do not think that "the government needs to make sure the economy doesn't collapse by ensuring that credit is available to the market" means "bankrupt banks should be kept whole and maintained at their current market-fucking size".

[Juton]

Yes, you should go after these greasy Wallstreet fuckers and yes the government should be seizing assets right and left for this shit. But none of that has anything to do with whether or not the government defends the innocent depositors. Who I must remind you: are fundamentally innocent in all this.

Letting banks fail is not only not a moral option, it's not even tangentially relevant to the actual problems. And it doesn't even have anything to do with fiat money, since the FDIC was totally functional back with we had metal-backed currency.

-Username17

America has Federal deposit insurance, which covers the first quarter million in savings, so if a person has just straight savings they should be OK. If they have more than a quarter million they really should have it split into multiple accounts.

If you're talking about investments, well then things get complicated. If the system worked like it was supposed too, than investors who lost money should lose money, there is an element of risk in any investment, people should know that. It's complicated because the regulatory agencies and the ratings industries have been complicit in letting this bullshit get out of hand. Thinking about it, since the government didn't do its job in policing wall street I can totally see the argument for why the government should pony up some money.

I think calling Doom a horrible person is unfair because he specified a 'fair market', this market isn't fair and hasn't been fair in a long while, if ever.

[RadiantPhoenix]

So, what you're saying is, Doom's argument is meaningless because truly fair markets don't really exist?

If this is the case, I would say that Doom should stop posting here, and start another thread, because this thread is about answering questions about things that happen in the real world, not some hypothetical world with a fair market, because it's just getting people who don't immediately notice that bit confused.

[Gnosticism Is A Hoot]

A 'fair' market - which I take to mean a market with no unresolved externalities, no information asymmetry and near-perfect competition - would require a larger and more intrusive government* than has ever existed on this earth.

*Or at least, a regulatory power with limitless authority, manpower and information.

[RobbyPants]

America has Federal deposit insurance, which covers the first quarter million in savings, so if a person has just straight savings they should be OK. If they have more than a quarter million they really should have it split into multiple accounts.

I guess the question is, which is cheaper: the government keeping the bank failing (and hopefully getting their loan back, later) or paying the insurance for every person insured?

I honestly don't know the answer, but it seems like preventing the bank from failing would likely be cheaper, so long as they don't keep letting the bank fail repeatedly.

[Doom]

Yes, FDIC insurance protects depositors (not that saving money is a good idea, of course), so Frank's once again way off base. The depositors, at least the ones that don't have large amounts of money (AND are very stupid--not a common combo), will be fine. Joe Six-Pack won't lose a nickel when the bank fails.

To put it in D&D terms: When the demon lord attacks the city, everyone below 9th level gets a free teleport without failure, to anywhere they want to go. I'm not a bad person, Frank, for thinking that's ok.

But the thing is, Robby, "keeping the bank from failing" costs 1)paying the insurance to the depositors and telling them to stay at the bank + 2) paying all the bonuses and salaries and overhead and everything at the bank + 3) the costs, as you noted, of paying it all again if the bank fails again.

Letting the bank fail only involves the costs of 1)paying the insurance to the depositors and telling them to go elsewhere + 2)paying the unemployment benefits for a while (less than the bonuses and salaries, I'm sure).

When you consider that, either way, the costs are coming from the taxpayer, it's a little annoying that letting the bank fail isn't on the table.

And Gnosticism, the idea that fairness can only exist with massive government intervention is...creepy.

[Juton]

I guess the question is, which is cheaper: the government keeping the bank failing (and hopefully getting their loan back, later) or paying the insurance for every person insured?

I honestly don't know the answer, but it seems like preventing the bank from failing would likely be cheaper, so long as they don't keep letting the bank fail repeatedly.

I don't think any banks in the US have failed more than once, at least officially. I don't know any of the details about how much it costs to prop up a bank, it just really irks me that the CEO of a failed bank still gets a huge bonus and in some cases doesn't get fired for doing such a lousy job. If you don't replace the management of a failed company with managers who are actually good at their job then how can you expect anything else but repeated failure?

[RobbyPants]

That's what I meant about not "letting the bank fail repeatedly". It only makes sense to demand/enforce some sort of (hopefully) positive change if you keep a bank from failing.

[Gnosticism Is A Hoot]

And Gnosticism, the idea that fairness can only exist with massive government intervention is...creepy.

Then it's a good thing that I didn't say that. I said that a fully 'fair' market would require a regulatory body much stronger/larger/more informed than any regulatory body which has ever existed.

That's why, as a moderate social democrat, I don't advocate trying to make markets 'fair'. I advocate putting certain industries (most importantly, healthcare and education) under the control of elected representatives. I advocate softening the worst vicissitudes of market capitalism through public welfare provision (most importantly, decent unemployment and housing benefits), and I advocate robust, independent and well-funded regulatory agencies.

[Doom]

Ah, so you're saying it's completely unworkable, 'fully fair' is a pipe dream, much as 'independent' and 'fully funded' and 'robust' could ever be...that I can agree with, my apologies.

I think Stossil did a wonderful report on how great regulatory agencies are, maybe it's around on Hulu or something.

[Gnosticism Is A Hoot]

Ah, so you're saying it's completely unworkable, 'fully fair' is a pipe dream, much as 'independent' and 'fully funded' and 'robust' could ever be...that I can agree with, my apologies.

I think Stossil did a wonderful report on how great regulatory agencies are, maybe it's around on Hulu or something.

Yeah, that about sums it up.

[sabs]

We have proven time and time again that Corporations will poison the land, destroy the fish, and irradiate the air, for an extra 40 cents profit. Market self regulation is a joke, corporations do terrible things in the name of "share holder interests". If the cost of settling out of court with 400 families of dead children is 72 million dollars, but the cost of retrofiting the plant to stop leaking poison is 100 million, then they let the 400 children die, and settle out of court, because it's cheaper.

Respectable Chemical Companies build PeeWee League Baseball Diamonds on top of illegal waste dump sights, without bothering to clean them up. They have giant DTD explosions that kill 100's of Indians, and claim "nothing happened."

They gamble with 5 times the GDP of the US and then go "oops, we didn't think that would happen to us."

Market self regulation is a joke, and anyone who claims that a Free Market works is either a conman or an idiot.

[Gnosticism Is A Hoot]

We have proven time and time again that Corporations will poison the land, destroy the fish, and irradiate the air, for an extra 40 cents profit. Market self regulation is a joke, corporations do terrible things in the name of "share holder interests". If the cost of settling out of court with 400 families of dead children is 72 million dollars, but the cost of retrofiting the plant to stop leaking poison is 100 million, then they let the 400 children die, and settle out of court, because it's cheaper.

Respectable Chemical Companies build PeeWee League Baseball Diamonds on top of illegal waste dump sights, without bothering to clean them up. They have giant DTD explosions that kill 100's of Indians, and claim "nothing happened."

They gamble with 5 times the GDP of the US and then go "oops, we didn't think that would happen to us."

Market self regulation is a joke, and anyone who claims that a Free Market works is either a conman or an idiot.

Yep. There's no way around it; libertarians are wrong. They have always been wrong, they will always be wrong. Markets without regulation are engines of destruction, and the only body with the power and legitimacy to regulate markets (or at least, to set up bodies which will then themselves regulate markets) is an elected government.

[Doom]

Indeed, it's tough to argue...utopia is only possible with a perfect government.

[sabs]

Sadly, a Perfect Government is very much out of our grasp. Still, we need to make an attempt to do something. Our form of Government is the worse form in the world, except for all the other ones.

[DSMatticus]

Yeah, libertarian policies would let corporations run the economy because politicians aren't trust-worthy. If that's not the definition of ironic...

Just a comment on FDIC insurance, there's two problems with counting on that.

1) Is it significantly cheaper? There are 300 million some Americans. If the average savings is just 1,000 dollars, we have 300 billion dollars right there. I don't really know the actual numbers, and a ten-second google search failed me, but this is a serious consideration, and the math can be calculated up and we can see how the prices compare.

2) Depositors aren't the only ones with bank accounts. Businesses, small and large, have money with the banks. Letting those banks fail will hurt big businesses and kill lots of little ones.

The costs of one + two are greater than the costs of the bailout. So it is the economically optimum move to bail out the banks. The alternative is saving some money on FDIC insurance, and watching businesses fail nation-wide, perhaps globally, destroying your economy and causing ridiculous unemployment.

[Gnosticism Is A Hoot]

Yeah, libertarian policies would let corporations run the economy because politicians aren't trust-worthy. If that's not the definition of ironic...

In fairness, the more sensible libertarians do recognise the little problem there, and tend to have various more or less silly ideas to deal with it. Mind you, 'the more sensible libertarians' is not a category which includes the US Libertarian Party, or anyone who waves the black-and-yellow flag.

[mean_liar]

1) Is it significantly cheaper? There are 300 million some Americans. If the average savings is just 1,000 dollars, we have 300 billion dollars right there. I don't really know the actual numbers, and a ten-second google search failed me, but this is a serious consideration, and the math can be calculated up and we can see how the prices compare.

2) Depositors aren't the only ones with bank accounts. Businesses, small and large, have money with the banks. Letting those banks fail will hurt big businesses and kill lots of little ones.

The costs of one + two are greater than the costs of the bailout. So it is the economically optimum move to bail out the banks. The alternative is saving some money on FDIC insurance, and watching businesses fail nation-wide, perhaps globally, destroying your economy and causing ridiculous unemployment.

No.

http://en.wikipedia.org/wiki/Bailout#Sw ... ing_rescue

Bullet point #4 is the important one: "Sweden formed a new agency to supervise institutions that needed recapitalization, and another that sold off the assets, mainly real estate, that the banks held as collateral." Banks that were over-leveraged were dismembered.

You can bailout and prevent economic disaster while also bankrupting fuckup institutions.

[tzor]

Yeah, libertarian policies would let corporations run the economy because politicians aren't trust-worthy. If that's not the definition of ironic...

In fairness, the more sensible libertarians do recognise the little problem there, and tend to have various more or less silly ideas to deal with it.

Note that by definition libertarian focuses on the individual. A corporation isn't trust-worthy because it isn't accountable. It really doesn't exist, save as a legal construct. You can't line GE up against a fireing line and shoot it. (And if you could, it wouldn't care.) Allowing people to "hide" behind the legal virtual persona of a corporation doesn't sound very libertarian to me. A true libertarian would consider corporation limited liability just another abuse of the progressive government.

That may sound "revolutionary" but most libertarians love founding father talk.

I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

I hope we shall crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.

There is an evil which ought to be guarded against in the indefinite accumulation of property from the capacity of holding it in perpetuity by…corporations. The power of all corporations ought to be limited in this respect. The growing wealth acquired by them never fails to be a source of abuses.

The end of democracy and the defeat of the American revolution will occur when government falls into the hands of the lending institutions and moneyed incorporations.

[DSMatticus]

Well, tzor, that doesn't actually fix the problem - you can interchange corporation with a single really rich asshole, and any problems corporations cause can be caused by that single really rich asshole.

And you can only line up that guy and shoot him if he's violated some law/regulation, but libertarians by definition don't like laws/regulations that restrict the right to property. And that really rich a-hole really does have an advantage at every financial dealing he comes into, because he has more wealth to throw around.

E.g., inflated healthcare costs exist because healthcare providers stand to gain more by charging more (higher cost per procedure, but reduced customer base, and they're fine with that because it's a net profit, while society generally... isn't). That's a free market at work. You can make more money by charging rich people more and turning away poor people. This is a clear case where self-interest does not align with social-interest, and nobody is violating the idea, "do what you will with what you own," so libertarians really can't complain. And if they do, their complaints won't be... very libertarian. They'll be, "we have to stop you from doing that specific thing with that thing you own." And that's regulation, by definition.

[DSMatticus]

Mean-liar, that's a seperate issue, and it's one I totally agree with you.

We said: "In trouble? Have money, no strings attached."
They said: "In trouble? We're going to take your banks, spend the bailout money ourself, carefully disassemble bad banks (as opposed to letting them catastrophically and suddenly implode), blah blah blah, and at the end, once we've fixed those banks, we'll sell them back on the open market for a profit." And that is totally what they did - they did a bailout that cost them almost nothing in the long run.

If you're telling me the Swiss did their bail-out smarter than us, oh god yes. We fucked up so bad. But both were bail-outs, and a bail-out of SOME form was necessary. And that's all I said. You can't let those banks collapse on their own terms - I suppose the phrase "controlled demolition" applies here.

[Doom]

the US Libertarian Party, or anyone who waves the black-and-yellow flag.

Who/what has the black-and-yellow flag?

[Gnosticism Is A Hoot]

the US Libertarian Party, or anyone who waves the black-and-yellow flag.

Who/what has the black-and-yellow flag?

Anarcho-capitalists.

[Username17]

Perhaps not coincidentally: quarantine is also a black and yellow flag.

-Username17

[Koumei]

Dangerous things in general tend to have black-and-yellow (the warning signs for radioactive hazards or bio-hazards, the stripes for police lines and so on, many Imperial chainswords). So basically, if it has those colours, you should probably keep away for your own safety.

This certainly applies to anarcho-capitalists.