A conservative vs. a socialist (NDP) government

[jbg]

One of the major reason the 29 collapse happened was the buying of equities on margin...or if you will, speculative buying where the money to purchase is loaned to you. Back then there weren't too many safeguards on how much you could buy on margin, and when the stocks dip below what you paid for them, there is a margin call when you have to pay the difference.

Not sure if it was the gov't who changed the rules or the financial houses who in the end took the biggest hit in the loss..

Basically the speculative bubble of the early 2000's was the same thing; people buying assets with money they didn't have, for more than the assets were worth, hoping to sell them to a "greater fool". My response is "good on them". The harder they come, the harder they fall.... (to paraphrase Jimmy Cliff).

[jbg]

You must lead a charmed existence if Cannibis use is this important to you.

You can thank your lucky stars you don't have something more real and tragic occupying your time.

Oh Cannabis,

Our homegrown native plant,

True patriot's bud, on Stoner's rented land

(forget some lyrics)

Oh Cannabis, the cash crop of BC.

[M.Dancer]

Basically the speculative bubble of the early 2000's was the same thing; people buying assets with money they didn't have, for more than the assets were worth, hoping to sell them to a "greater fool". My response is "good on them". The harder they come, the harder they fall.... (to paraphrase Jimmy Cliff).

The sub prime is at it's core similar. People buying houses they couldn't afford at interest rates that had no bearing on real market values. Although instead of people hoping to sell at a profit, in many cases their motivation was nothing more than having a home they could own. Unfortunately the world is filled with unsophisticated people who don't understand things like interest rates going up or down.

In Canada you can't buy a house with no money down. And if you pay less than (25%?) for a downpayment you have to but mortgage insurance.

[Alta4ever]

The sub prime is at it's core similar. People buying houses they couldn't afford at interest rates that had no bearing on real market values. Although instead of people hoping to sell at a profit, in many cases their motivation was nothing more than having a home they could own. Unfortunately the world is filled with unsophisticated people who don't understand things like interest rates going up or down.

In Canada you can't buy a house with no money down. And if you pay less than (25%?) for a downpayment you have to but mortgage insurance.

IF you bought for long term you really have nothing to worry about, the value will come back up. It was the short term flippers that got burned, they bought high and tried to sell high. Very Stupid in investement terms as the risk is very high hire, as you are investing a lot of money in a very localized market, usually on borrowed money that is very close to or over your borrowing limit.

[jbg]

IF you bought for long term you really have nothing to worry about, the value will come back up. It was the short term flippers that got burned, they bought high and tried to sell high. Very Stupid in investement terms as the risk is very high hire, as you are investing a lot of money in a very localized market, usually on borrowed money that is very close to or over your borrowing limit.

Or worse, you have that crew of 27 year old "financial advisors" (one wonders who in the right mind would take their "advice") who insist in owning $1 million houses, driving BMW's, and finance all this by leveraging home equity loans on top of already choking mortgages. When their bonuses don't meet their inflated expectations they express outrage at not getting what they feel they're entitled to.

[BubberMiley]

What government intervention are you referring to? It is one thing for a central bank to intervene in a financial market and quite another for a government to tax the bejeebers out of honest people and then hand over the cash to a long line of moochers.

I think they are very similar things. One is providing liquidity to prevent a downward spiral of poverty; the other is providing liquidity to prevent a downward market spiral. In both cases you could argue the beneficiaries of these payments should have known better than to find themselves in the situation that they needed them, and in both cases you could argue that the intervention is made not necessarily to help those particular individuals but to maintain the best interests of the overall society.

And I don't see much difference between taxing people's bejeebers and printing money. Both actions make us all poorer.

[Pliny]

Ok, I see the point. If I collect a bunch of stuff together - stuff of no value to anyone else - and I labour to create from that stuff something of value to others then I have created wealth...unless, of course, i refuse to sell it to anyone or no one is interested in buying.

I could labour long and hard creating crap that no one wants to buy or I could labour long and hard creating crap peaple are willing to pay for. If no one wants to give me thier wealth for the product then I have created wealth nontheless?

Glad to see you are starting to get the idea.

No. You haven't created any wealth unless you have improved your life or living standards not only according to yourself but according to others who now do a quick calculation and see increased value.

How much wealth I create is entirely dependant upon how much wealth people are willing to transfer to me. If wealth is created - it is only created in the mind of the buyer; No buying - no wealth. Thus advertising.

Everything is still determined by the willingness of folks to transfer thier wealth to someone else.

"Trade" is a better term than "transfer". The government is the only agency that can legally "transfer" wealth. That means take it away from someone and give it to someone else or keep it for themselves. There can be a voluntary transfer as in "charity" or an inheritance. Once again though any transfer of wealth is legislated and the transaction must be recorded to ensure part of the transfer gets transferred to government general revenues - exceptions are few, Like the sale of a principal residence.

[Pliny]

The US Fed intervened, not the US federal government.

The Fed is a curious institution. Like the Supreme Court, it is fortunately now independent of the rest of government yet it's still part of the State. When the the role of a US central bank was in private hands (prior to 1913), the experience was arguably better. The Fed's gross incompetence in response to the Stock Market crash of 1929 led to large government interference in people's private affairs in the 1930s - what you call a "social democracy movement".

IOW, government incompetence led to more government activism. That's a common refrain in history until eventually the State stifles everything.

The Federal Reserve is in private hands today. It is privately owned. No central bank in the US existed prior to 1913.

[DrGreenthumb]

All of those costs are policing costs not war on drugs costs, as those items would still be required by policy forces. Lawyers, judges and prison guards, what percentage of there time is spend on drug offences? MOst of the time users get to serve there time in the comfort of their own homes. I would be will to bet that the government spends less the 1 billion a year directly on drug prevention. Plant based medicines can be just as dangerous as those produce by pharm comanies. Just because it is plant based doesn't mean it isn't dangerous, ie morphine, made from poppy seed, a very dangerous drug.

A just so you know THC is a mild form of LSD and prolonged use can have a detrimental impact on your memory.

I would say a good percentage of those people's time is spent on people whose interaction with the justice system is related to the war on drugs directly or indirectly, because of the black market caused by prohibition and all that comes with that. We would need half as many of all of them to process all the real criminals effectively, were the war on drugs not such a bottomless pit.

Just so EVERYONE knows YOU are LYING, THC is in no way related to LSD. You have no idea what you are talking about so you just make things up? Please show us even one credible source that will back up that outrageous claim.

also the HEROIN boogeyman is old, and HEROIN use was unheard of before prohibition made purified, easier to smuggle forms of drugs popular. The natural plant medicine that comes from poppies is called OPIUM and used in its natural form it is excedingly safe. Heroin is only created by chemical intervention. It is a moot point anyways because we already allow synthetic PATENTED opiates to be sold legally. Tylenol with codiene, is available as an over the counter medicine while morphine, another synthetic opiate, requires a prescription.

Whoever it was that suggested I must lead a charmed life to be able to dedicate so much time to ending cannabis prohibition, well I in fact do feel like I live a charmed life. I have a happy and loving family, enough food, good shelter and lots of nice toys. My life is really pretty great. My obsession however is with freedom, not Cannabis. The war on drugs offends my sense of justice and fairness, and fighting for truth, justice, and freedom is a pretty noble cause in my opinion. That it why I oppose the conservatives who are a dire threat all three.

Edited March 28, 2008 by DrGreenthumb

[jbg]

The Federal Reserve is in private hands today. It is privately owned. No central bank in the US existed prior to 1913.

Except the one that Andrew Jackson abolished.

[August1991]

The Federal Reserve is in private hands today. It is privately owned. No central bank in the US existed prior to 1913.

If the Fed is in private hands, they are curious ones. The US president appoints the Board of Governors (including the Chairman, currently Ben Bernanke) with teh approval of Congress. Any profits of the US Fed are returned to the US Treasury. (The Fed does not aim to maximize profit.)

The Fed, like most Central Banks, is a unique institution. It is part of the State but it is independent of government. By rights, its existence should be formalized in the constitution.

In the US prior to 1913, the role of a central bank was played by several large private banks on Wall Street. (In Canada, prior to 1935 when the Bank of Canada was created, several large private banks on St. James Street in Montreal played that role.)

I think they are very similar things. One is providing liquidity to prevent a downward spiral of poverty; the other is providing liquidity to prevent a downward market spiral. In both cases you could argue the beneficiaries of these payments should have known better than to find themselves in the situation that they needed them, and in both cases you could argue that the intervention is made not necessarily to help those particular individuals but to maintain the best interests of the overall society.

And I don't see much difference between taxing people's bejeebers and printing money. Both actions make us all poorer.

In many ways, I tend to agree with you Bubbler - although I arrive at the conclusion by a different route.

It is not wrong for the government to move money around between people. What is wrong is when people change their behaviour to receive the government largesse.

In my pessimistic moments, I'm inclined to believe that governments (politicians and bureaucrats) are just not smart enough to know how to move money between us in a way that makes the world a better place.

One of the major reason the 29 collapse happened was the buying of equities on margin...or if you will, speculative buying where the money to purchase is loaned to you. Back then there weren't too many safeguards on how much you could buy on margin, and when the stocks dip below what you paid for them, there is a margin call when you have to pay the difference.

If speculative bubbles could be so easily explained away...

Financial markets are inherently speculative. Through the price mechanism, traders are "discussing" the value of the future. When the price of one share in Google rises to $400, it may in fact be worth far more than that - or far less. Who knows? If someone could forbid buying on margin, the fundamental uncertainty would not change.

[jbg]

If someone could forbid buying on margin, the fundamental uncertainty would not change.

Except it would force people to gamble with real money, not house money.

[eyeball]

If the Fed is in private hands, they are curious ones. The US president appoints the Board of Governors (including the Chairman, currently Ben Bernanke) with teh approval of Congress. Any profits of the US Fed are returned to the US Treasury. (The Fed does not aim to maximize profit.)

The Fed, like most Central Banks, is a unique institution. It is part of the State but it is independent of government. By rights, its existence should be formalized in the constitution.

The Fed is the Uber-Nanny, it bails out the state when the state cocks things up - with nary a thought to even trying to maximize profit... Socialists... You can't live with or without them it seems. Ideology IS curved like space, take off in any direction you like and you always come back to the same place. What is it again that lefty's and righties are fighting over?

As for "creating" wealth, I'll start entertaining the notion when the GDP is formally replaced by the Genuine Progress Indicator or True Cost Economics.

An economic model that seeks to include the cost of negative externalities into the pricing of goods and services. Supporters of this type of economic system feel products and activities that direct or indirectly cause harmful consequences to living beings and/or the environment should be accordingly taxed to reflect the somewhat hidden costs.

This school of thought is on the rise as a result of the perceived need for ethical consideration in neoclassical economic theory. However, the cost of many goods and services that are currently affordable, and often taken for granted, could see an extreme rise in costs if their "true costs" are accounted for.

For example, if one accounted for air, noise and other types of pollution caused by the manufacturing and the use of a new car, then the price of the new car would, by estimates, raise by over $40,000.

To believe that economics trumps virtue is the same as saying effect trumps cause.

[Renegade]

Ok, I see the point. If I collect a bunch of stuff together - stuff of no value to anyone else - and I labour to create from that stuff something of value to others then I have created wealth...unless, of course, i refuse to sell it to anyone or no one is interested in buying.

Yes, however, it can still be wealth even if you refuse to sell it. What matters is if it is something that someone (including yourself) values.

I could labour long and hard creating crap that no one wants to buy or I could labour long and hard creating crap peaple are willing to pay for. If no one wants to give me thier wealth for the product then I have created wealth nontheless?

If is is not useful to anyone (including yourself) then it is not wealth. It is still useless crap.

How much wealth I create is entirely dependant upon how much wealth people are willing to transfer to me. If wealth is created - it is only created in the mind of the buyer; No buying - no wealth. Thus advertising.

More or less. However you can also be the consumer of your own product. It doesn't need to depend upon an external buyer.

Everything is still determined by the willingness of folks to transfer thier wealth to someone else.

No. A good way to create weath is to create something of value to others, but it is not the only way. The benefit of this method is that the producer can leverage economies of scale. If the farmer specalizes in producing apples, it is likely that 100th apple is less useful to him for personal consumption than the 1st. Similarly the rancher who produces beef will value the 100th lb of beef for personal consumption less than the 1st. They can each realize greater value from their creations by trading with others who value their product more than they do.

Nonetheless, it is possible to create wealth which only your consume. If through my labour I create all nourishment, and shelter that I need, am I not wealthier than before I had any of those things?

[Pliny]

Except the one that Andrew Jackson abolished.

Yes...of course..there were actually two, the First National Bank (1791-1816) and the Second National Bank abolished by Jackson. They were both privately owned and did the banking of the government basically.

Here is a concise history.

http://odur.let.rug.nl/~usa/E/usbank/bankxx.htm

[M.Dancer]

The Federal Reserve is in private hands today. It is privately owned. No central bank in the US existed prior to 1913.

ahem....

Who owns the Federal Reserve?

The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.

http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm#5

[Pliny]

If the Fed is in private hands, they are curious ones. The US president appoints the Board of Governors (including the Chairman, currently Ben Bernanke) with teh approval of Congress. Any profits of the US Fed are returned to the US Treasury. (The Fed does not aim to maximize profit.)

The Fed, like most Central Banks, is a unique institution. It is part of the State but it is independent of government. By rights, its existence should be formalized in the constitution.

In the US prior to 1913, the role of a central bank was played by several large private banks on Wall Street. (In

The US President nominates the Board of Governors and it is approved by the Senate. The Chairman is selected by the President from the Board of Governors and it is approved by the Senate.

Since the Fed is privately owned I don't believe profits are returned to the US treasury. Do you have a link on this point?

[M.Dancer]

IF you bought for long term you really have nothing to worry about, the value will come back up. It was the short term flippers that got burned, they bought high and tried to sell high. Very Stupid in investement terms as the risk is very high hire, as you are investing a lot of money in a very localized market, usually on borrowed money that is very close to or over your borrowing limit.

Yes and no. Some bought thinking that their mortage payments would always be $1000 a month and when their interest rates went up to market rates their payments went up accordingly.

And then they were forced to sell and having no equity in theri home (no downpayment) they were only left with debt.

[M.Dancer]

The US President nominates the Board of Governors and it is approved by the Senate. The Chairman is selected by the President from the Board of Governors and it is approved by the Senate.

Since the Fed is privately owned I don't believe profits are returned to the US treasury. Do you have a link on this point?

See my post above. The federal reserve is not privately owned.

[Pliny]

ahem....

http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm#5

The official websites always say no one owns them. They are a part of government but they are not a part of government. They are not private for profit but they pay shareholders 6% on dividends. Is there any wonder central banking is confusing? As they themselves say, "There is confusion about 'ownership'.." but that can all be explained. If you care to find who the shareholders are, you can. They do say it is member banks.

[Pliny]

Double Post

Edited March 28, 2008 by Pliny

[Renegade]

Unfortunately the world is filled with unsophisticated people who don't understand things like interest rates going up or down.

Then those "unsophisticated people" should stick to financial instruments they do understand, like rent, instead of mortgages. If I did not understand how derivatives work and I speculated on derivatives and lost everything on financial instruments I did not understand, should I expect sympathy and perhaps a bail-out? Caveat Emptor. (BTW, that goes both for the home-owner, the lender, and the buyers of ABCP)

Yes and no. Some bought thinking that their mortage payments would always be $1000 a month and when their interest rates went up to market rates their payments went up accordingly.

And then they were forced to sell and having no equity in theri home (no downpayment) they were only left with debt.

So what? Some people think the only payment they need to make on their credit cards until they lose their jobs then they too end up left only with debt. The only difference is the scale.

Ignorance is not an excuse and by accepting it as one, you are simply encouraging them to repeat the behaviour by absolving them of their true responsibility.

[Pliny]

Ignorance is not an excuse and by accepting it as one, you are simply encouraging them to repeat the behaviour by absolving them of their true responsibility.

Hear! Hear!

Insurance and protection from ignorance are conducive to remaining ignorant.

[Pliny]

Except it would force people to gamble with real money, not house money.

Good point!

[Pliny]

To believe that economics trumps virtue is the same as saying effect trumps cause.

It happens!