Tamerlan IED - He didn't build that.

[kimmy]

I suppose that's why Canada and the US have no national debt.

And how is that response relevant to the facts regarding how money is created?

Governments can have debts under fractional reserve banking or the gold standard. Unless you're proposing the elimination of all borrowing, debts will happen.

The US central bank is not injecting 80 billion dollars through quantitative easing at all. It isn't because they can it is because they have to, circumstances dictate it.

Banks do indeed follow the dictates of the central bank. It is the most heavily regulated industry.

Banks follow the law (theoretically) and the profit motive. The central bank doesn't issue "dictates" to commercial banks, and doesn't need to.

All the central bank is doing is stabilizing the economy, right? There is absolutely no abuse of the system at all. No privileges to some corporations over others. It is entirely a fair system with no biases or prejudices. There is no such thing as a bail out. Subsidies are distributed equally. And banks will give you a loan even if you are ugly or their best friend is your biggest competitor.

You're changing the topic by ranting about bailouts, subsidies, and the practices of commercial banks. And none of that has anything to do with fractional reserve banking anyways. Bailouts, subsidies, and discriminatory practices could, would, and did happen under gold standard banking as well.

I know quite well how a fractional reserve banking system works.

The view of many economists is that it is a fine system and that intervention in the market is necessary.

Please do make an attempt to understand me, kimmy.

I'm trying to follow you, but you don't make it easy. You're all over the map.

-k

[Pliny]

I'm trying to follow you, but you don't make it easy. You're all over the map.

-k

What I have Stated are basically ways that the fiat, fractional reserve system can be and is being abused.

Isn't injecting 80 billion dollars/month (quantitative easing) creating money at will? Isn't a seventeen trillion dollar debt created at will?

I am here to learn a few things, kimmy. Nuance is something that can get lost on a board but I certainly did not intend to be condescending when I asked you to make an attempt at understanding my point of view but I can more or less determine the purpose of a discussion by what is said. I know when it gets personal.

I know you may be just googling fractional reserve banking and such and presenting your findings to me. My knowledge of the central banking system is fairly good. I would say better than most on this board. Some are quite knowledgeable.

Are you googling things for my or your benefit? If you know how the central banking system works then you would understand my answers to you and not be claiming I am "all over the map" because I am not. It seems to me you need more information in order perceive how, what I say is relevant.

Personal comments such as being all over the map are unnecessary to the discussion. I am not ignorant and I am not ill-informed on this subject. There are several views held regarding the current economic structure, the social benefits, the personal benefits of those in charge, if there are any, and how sustainable it is. You and I have differing views.

I believe that the current structure is not one of sound money and is easily abused. I think the evidence is clear and that we are at a pivotal point in its sustainability. If I have it right you believe that the system works fine and more regulation would be somewhat of a guarantee against abuse, even in light of the fact that the banking industry is already the most heavily regulated of all industry. I believe it is so because of the centralization and monopolization of power and not because people are generally bad and need to be heavily regulated or they will cheat, steal and act entirely out of selfish greed. Because some do the rest must suffer. I believe that sound money will restore some of the morality that is lost under a fiat currency system.

Now you may not believe that bubbles are created by inflating the currency supply or that a 3% inflation rate is all that bad a thing to tolerate in the name of economic stability. My understanding is that they are destructive in the long run and it is demonstrable if you follow the money flows.

Is it that the poor are poorer because the rich are richer? Or is it because 3% inflation compounded over ten years is a 34% percent loss in purchasing power and the marginally poor and those on fixed incomes are made poorer?

Really, why is it important how rich the rich are. Especially in a fiat currency system where money can be created out of thin air. Of course, you have to understand that they cannot just print it willy-nilly or they will destroy it. Are they in the process of destroying it? We don't know. They tell us their reasoning and we accept it or decide they must know what they are doing and continue our lives.

That's all I have to say right now. Have a glorious day!

[kimmy]

What I have Stated are basically ways that the fiat, fractional reserve system can be and is being abused.

Isn't injecting 80 billion dollars/month (quantitative easing) creating money at will? Isn't a seventeen trillion dollar debt created at will?

No, if the government could create money at will, there wouldn't be a national debt. If the government could create money at will, why bother collecting taxes?

I know you may be just googling fractional reserve banking and such and presenting your findings to me. My knowledge of the central banking system is fairly good. I would say better than most on this board. Some are quite knowledgeable.

Are you googling things for my or your benefit?

I've known how fractional reserve banking works for a long time. Since high school. But yes, I googled it before I posted to ensure that what I wrote was accurate. I'm hoping to start a trend.

If you know how the central banking system works then you would understand my answers to you and not be claiming I am "all over the map" because I am not. It seems to me you need more information in order perceive how, what I say is relevant.

Personal comments such as being all over the map are unnecessary to the discussion.

It wasn't a personal attack, it was an observation about the content of your posts. One minute you're on gold standards or fiat currency, then you're on bailouts and cronyism.

I believe that the current structure is not one of sound money and is easily abused. I think the evidence is clear and that we are at a pivotal point in its sustainability. If I have it right you believe that the system works fine and more regulation would be somewhat of a guarantee against abuse, even in light of the fact that the banking industry is already the most heavily regulated of all industry.

You keep repeating that, but you keep ignoring the fact the derivatives market, which was a key factor in the collapse, was absolutely and totally unregulated. And that other key regulations had been repealed in the decade leading up to the collapse.

I believe it is so because of the centralization and monopolization of power and not because people are generally bad and need to be heavily regulated or they will cheat, steal and act entirely out of selfish greed. Because some do the rest must suffer.

There's plenty of evidence to show that the bankers and investment houses just care about profits and will flout rules and ethics to make as much money as they can. The banking industry has a list of scandals as long as your arm. And again, just read the details of the eToys vs Goldman Sachs lawsuit if you need a reminder of how Wall Street views everybody else.

You've been trying to make excuses for the bankers since day 1, and this is just another attempt.

I believe that sound money will restore some of the morality that is lost under a fiat currency system.

Now you may not believe that bubbles are created by inflating the currency supply or that a 3% inflation rate is all that bad a thing to tolerate in the name of economic stability. My understanding is that they are destructive in the long run and it is demonstrable if you follow the money flows.

Is it that the poor are poorer because the rich are richer? Or is it because 3% inflation compounded over ten years is a 34% percent loss in purchasing power and the marginally poor and those on fixed incomes are made poorer?

Calculations that take inflation into account are readily available and demonstrate that there's far more to the issue than inflation. Inflation-adjusted figures demonstrate that the rich are, indeed richer, and everybody else is just treading water.

Really, why is it important how rich the rich are.

Why is it important how rich the rich are? You're the guy who dredged up the "you didn't build that" meme to try and make your badly-conceived point, so perhaps you should reflect on what the whole thing was about: it was an attempt by rich-guys to explain why they should get lower taxes.

-k

[Pliny]

No, if the government could create money at will, there wouldn't be a national debt. If the government could create money at will, why bother collecting taxes?

Well, the agreement is the Central bank creates the money and the government borrows it by selling the bank a bond or IOU that they make up on our behalf. We taxpayers agree to pay the bond to the central bank with interest. The Minister of the Treasury holds the single share of the Canadian central bank in trust. Apparently, we are to believe the government owns the central bank. It's kind of a shell game but they certainly don't want the currency to be made worthless by over-printing it and flooding the economy. WE aren't Zimbabwe.

Now what do you think "at will" means? Anytime they want they can print up a few trillion? They do create it at will but they don't just create it for no reason and they do have to maintain its value and the public confidence. That's basically the parameters. And if they can convince the public of the necessity they can remain within the parameters. One of their favoured corporations gets in trouble they can print a few billion to bail him out or they can choose to abandon him. That's what is meant by "at will". At will, the US government decided to bailout Goldman-Sachs and AIG while letting Bear-Sterns and Lehman Bros. founder. They created over $800 billion out of thin air to do so.

As for the rest of your post I'm not going to go over the same ground time and time again. You just go ahead, there are plenty of people that agree with you on your views re the banking system and greedy Wall Street and lack of regulation was the key point.

You can look at the commodity backed currency point of view or not. So far you have chosen not to. But if you ever decide to look you will have to understand how it will work in an economy in the short and the long term and what occurs to a fiat currency of which I think you will find, in terms of government sustainability and thus economic stability, there is no long term.

Edited June 11, 2013 by Pliny

[kimmy]

I have a problem with phrasing like "at will" and "out of thin air" because it suggests that it's done on a whim and without consequence, neither of which are true. They can expand or contract the money supply using the tools provided by the rules of the fractional reserve system. The government can borrow money, but not in a way that changes the money supply.

As for what ground you've covered, it's actually not much. You've ranted about the evils of fiat currency, but doesn't address the real issues. You've claimed it addressed cronyism and corruption, but it doesn't. You've wrote longingly of a golden age of "real capitalism" that never actually existed. Cronyism and graft and corruption have been in the mix since day one. You were unable to address the short-term gain mentality that has given executives the opportunity to make outrageous bonuses in the short term by engaging in practices that put their companies' long-term future in grave danger. You've offered the claim that fiat money is behind all of these evils, but were unable to justify that claim.

-k

[dre]

No, if the government could create money at will, there wouldn't be a national debt. If the government could create money at will, why bother collecting taxes?

Quickly read through your posts here Kimmy and they are pretty good, but wanted to touch on this one point. The government certainly CAN create money at will. They can simply print notes and mint coins, or relax the reserve rates, or instruct the central bank to purchase securities. Theoretically the drawback here is that would get more inflation than you would have if the government sells bonds and treasury bills on the open market but they can certainly whip up as much "currency" as they want to.

Theres no real need for a national government controlling its own currency to go into "debt". They can create interest free money based on legal tender laws alone, like both Lincoln and Kennedy did. This is currency back directly by the national economy instead of the sale of treasury instruments. This currency has value simply because the government forces vendors to accept it as trade for goods and services. Just print up some bills, back them with legal tender laws, and hope they retain purchasing power.

Some examples of this where the "greenback" that Lincold printed to pay soldiers during the civil war, and the "colonial scrip" issued by the commonwealth of Pensylvania.

[Pliny]

I have a problem with phrasing like "at will" and "out of thin air" because it suggests that it's done on a whim and without consequence, neither of which are true. They can expand or contract the money supply using the tools provided by the rules of the fractional reserve system. The government can borrow money, but not in a way that changes the money supply.

All right. You do have to agree it is "created out of thin air". They have that power. "At will" is just a semantic difference you wish to argue.

As to "at will", of course there are limitations or else they will destroy the currency by destroying confidence in it. Expansion or contraction is not the entirely of it. When and for what purposes are a part of that as well. If they can bail out one bank why do they do so and not another bank? How do they choose? You might assume it is for reasons that are best for the economy and the nation and they would tell you that. If that is true, based upon circumstance they make the determination of what action to take. But they do make the choice. Ronald Reagan would probably choose not to bailout corporations. Obama would chose to fund Solar Power companies and bail out certain corporations. They create the "money out of thin air" and then direct where it goes. Sometimes its political payback. I call that creating it at will for their specific purposes.

If a hurricane Sandy hits they better be able to "at will" create some cash for it.

Am I just making this up?

As for what ground you've covered, it's actually not much. You've ranted about the evils of fiat currency, but doesn't address the real issues. You've claimed it addressed cronyism and corruption, but it doesn't. You've wrote longingly of a golden age of "real capitalism" that never actually existed. Cronyism and graft and corruption have been in the mix since day one. You were unable to address the short-term gain mentality that has given executives the opportunity to make outrageous bonuses in the short term by engaging in practices that put their companies' long-term future in grave danger. You've offered the claim that fiat money is behind all of these evils, but were unable to justify that claim.

-k

As you look further into it you will find in general people don't really care about these things and whatever the experts tell them they accept to be true.

Purpose has a lot to do with people's decisions and choices they make. What are they trying to accomplish is a good question to ask.

We know with the laws they have made and the creation of a fiat currency they have a better ability to accomplish the goal of a stable economy. That is their stated goal and the reasoning behind the creation of the extant economic system.

Does it look like they are able to do this. Most of the system, at least in the US was created a century ago, although it took until 1971 to entirely abandon the gold standard. Have they been successful in achieving what they want? Has there been peace and prosperity? Has there been peace and prosperity over the last century? Maybe they had to establish the system in other nations to realize the stability they desired? Now it is a global system, only three nations don't have a central bank - Iran, Somalia and North Korea. So...are things more stable?

They pretty much have the structure in place. But I see quite a bit of instability, both nationally and internationally.

Are things stable? Well there are problems with religion in the middle east. Russia and China are rising economies and the US seems to be losing its place as the world's only superpower. These are de-stabilizing factors. What economic tools can they use to maintain stability? Probably, build up the military! Maybe set up a Dictatorship in some country that will act as an ally...or not. They can do this "at will". Certainly the taxpayer will have to pay it back but $17 trillion dollars later....

I would suggest the fact you can't see that a fiat currency would contribute to the creation of cronyism and corruption is simply a demonstration of the depth of your understanding.

[kimmy]

Government debt isn't financed by expanding the money supply, it's financed by borrowing from the existing money supply. Almost the entirety of government debt is held by private entities. So blaming fiat money for bailouts just doesn't work. The government's ability to borrow is what enables bailouts.

One can certainly dispute the wisdom of the bailouts and ask whether it is fair that some companies received bailouts while others did not. But that's an issue of government policy, not a criticism of the monetary system.

-k

[Pliny]

kimmy, on 15 Jun 2013 - 08:41 AM, said:

Government debt isn't financed by expanding the money supply, it's financed by borrowing from the existing money supply.

Quantitative easing isn't happening then? I think you will find the Federal Reserve bought the 800 billion dollar bond in 2008 and created the "money" out of thin air to do so?

Quote

Almost the entirety of government debt is held by private entities. So blaming fiat money for bailouts just doesn't work. The government's ability to borrow is what enables bailouts.

Yes, the Federal Reserve is a private entity. In an emergency, situation like a bailout or financial collapse government creates a bond and the central bank buys it. The central bank then creates the funds.

Yes, there are Canada Savings bonds and other bonds. A good portion of the debt is owed to the central bank though. In the US it is a private entity called the Federal Reserve which, incidentally, has acknowledged it is even buying mortgage backed derivatives from Fanny and Freddie these days. Buying debt from them with "money" created out of thin air.

The central bank is apparently not a private entity in Canada.(But I have a suspicion it is.) China holds a couple of trillion in US debt.

Most of the "money" supply is created by commercial banks making loans.

Quote

One can certainly dispute the wisdom of the bailouts and ask whether it is fair that some companies received bailouts while others did not. But that's an issue of government policy, not a criticism of the monetary system.

-k

Of course it is government policy and it is government policy because the fiat currency system enables it, just like quantitative easing is enabled by the monetary system. It wouldn't be done without a fiat currency. Since it can't create money out of thin air for every event, if it were a commodity backed currency, it would stick pretty close to its budget. It would have to live like the rest of us and pay its bills.

It might be better if government just organized collections for emergencies. Do you think the people would respond to an appeal to contribute to bailing out a corporation?

You have to ask some vital fundamental questions, like why did government turn our money into a fiat currency? What are the advantages?

[GostHacked]

Here's my point: It is wrong to believe that markets/capitalism are short term. On the contrary, prices force people to think about time. People consider the resale value of what they buy.

The stock market is all about short term gains.

[GostHacked]

Bitcoins have been by far the most rapidly appreciating/growing asset class I hold. Kinda wish I'd thrown more at them. I've gotten ~110x return so far...

I have serious issues with Bitcoin as a currency. There is nothing backing it up. Highly volatile. As a first run, it was a success even if it fails overall. Proving the technology and delivery system.

Anyone getting into the bitcoins now and with some of these hardware set ups are paying way more than what the potential return of Bitcoins are worth. Early on the algorithm was easy for PCs to calculate. Now as more coins are 'mined' by nothing more than number crunching (to what end, what are these algorithms?) the alborithm gets bigger and it gets harder to mine the remaining coins. As it gets closer to that arbitrary cap of 21 million bitcoins, it will be to expensive to continue. I will be surprised if all 21 million of them are able to be mined.

Here is the next problem. What is the value of this digital currency after all are mined? The expensive rigs people invested in to mine the coins are useless unless there is another currency that requires bit mining. From what I see there are already a couple others out there that people are starting to invest in.

[kimmy]

Quantitative easing isn't happening then? I think you will find the Federal Reserve bought the 800 billion dollar bond in 2008 and created the "money" out of thin air to do so?

From what I am reading, "quantitative easing" is a very new concept, it hadn't been done in America before 2008, and hadn't been done anywhere before Japan's central bank in 2001.

So while "quantitative easing" was a part of this particular bailout, it doesn't factor in to any previous bailouts (which is no small number of bailouts) which were all financed the old-fashioned way, by government borrowing.

And from what I'm reading, the quantitative easing in the US has been specific to mortgage-backed securities. Assistance to GM and Chrysler, and probably AIG and other financial bailouts as well, was not performed by buying MBSs. So while you're correct in claiming that quantitative easing by the Fed was part of the 2008 bailout, the point remains that the government could have (and did) provide bailouts by borrowing.

Of course it is government policy and it is government policy because the fiat currency system enables it, just like quantitative easing is enabled by the monetary system. It wouldn't be done without a fiat currency.

It could be, would be, and has been.

Quantitative easing isn't necessary to bailouts, and it wasn't part of any bailouts until the past decade. All that's required for a bailout is for the government to have money.

You have to ask some vital fundamental questions, like why did government turn our money into a fiat currency? What are the advantages?

You ought to ask yourself some fundamental questions too, like "is there any possible chance that we would ever return to the gold standard?" and "if we could return to the gold standard, would it cure corporations of acting irresponsibly?" and "if we could return to the gold standard, would it stop the government from bailing out corporations that screwed up?" (the answer all 3 of those questions is "No", by the way.)

-k

[Shady]

Getting back to Tamerlan Tsarnaev, did anyone else see the story about a pro-gun control group had him listed as a victim of gun violence?

[bush_cheney2004]

Getting back to Tamerlan Tsarnaev, did anyone else see the story about a pro-gun control group had him listed as a victim of gun violence?

Well, if he wasn't, he sure would be now if still alive!

Edited June 20, 2013 by bush_cheney2004

[Pliny]

You ought to ask yourself some fundamental questions too, like "is there any possible chance that we would ever return to the gold standard?" and "if we could return to the gold standard, would it cure corporations of acting irresponsibly?" and "if we could return to the gold standard, would it stop the government from bailing out corporations that screwed up?" (the answer all 3 of those questions is "No", by the way.)

-k

Well, that's a pretty definitive confirmation of those points.

My view happens to be different and being an optimist those three things are somewhat possible. A commodity backed currency, be it gold or whatever, is necessary to accomplish the latter two points but it will not eliminate irresponsibility entirely, it will serve to reduce it. A government that has to borrow from it's citizens is far more desirable than a government that borrows from a central bank, bailouts of irresponsible corporations, would then not be a consideration - result fewer irresponsible corporations around. I note there are a few still around after the 2008 bailout. GSEs Fannie and Freddy, for example.

The whole point of this thread is about being able to recognize responsibility.

A person that points a finger and says someone did not build a business, obviously meaning he could not have done it alone and there is a whole community behind him, is correct but it took the co-ordination of all the necessary resources to build it and the person who did that is the one who built it. Is it a reason to then attack that person and say that he must now give back to the community on the basis that he didn't build that?

No matter what Barack Obama says - that person is responsible for building his business and he is rewarded by the commmunity in direct ratio to his contribution to the community.

The intent of what Obama said was that the person with the business needed to recognize the community through paying higher taxes and contributing back to the community in some manner with absolutely no recognition of the person's ability to organize and employ the resources that work together to improve the lives of those in the community. The business would simply not exist if it didn't supply a need or want to the community.

The businessman or entrepreneur is responsible - he did build it.

Blurring the true responsibility, the actual individual that brought it all about, and claiming he couldn't do it without the community is not only an insult to the individual but is detrimental to the whole business community. If the community wasn't there, there would be no reason to co-ordinate necessary resources and provide a service or product to improve the lives of those in the community, would there? I think that's pretty obvious.

Of course no one wants to be responsible for negative acts in society, such as the Boston Marathon event. So we try and target an individual or individuals or a certain group. We don't say, they didn't build that. We don't demand that the community make recompense because the Tsarneav's couldn't have committed their atrocity without the community.

Have a glorious day!

Edited June 21, 2013 by Pliny

[kimmy]

Well, that's a pretty definitive confirmation of those points.

My view happens to be different and being an optimist those three things are somewhat possible. A commodity backed currency, be it gold or whatever, is necessary to accomplish the latter two points but it will not eliminate irresponsibility entirely, it will serve to reduce it. A government that has to borrow from it's citizens is far more desirable than a government that borrows from a central bank, bailouts of irresponsible corporations, would then not be a consideration - result fewer irresponsible corporations around. I note there are a few still around after the 2008 bailout. GSEs Fannie and Freddy, for example.

Most bailouts have been financed by government debt. Most government debt exists in the form of government bonds and bills and securities that are held by private citizens and privately owned funds. Most bailouts have, therefore, been funded by borrowing from citizens. So the idea you're trying to sell just doesn't work.

Bailouts aren't always unpopular, either. While people are certainly angry at the Wall Street bailouts, the same is not true in general. For example, you'll recall how damaging the "let Detroit go bankrupt" theme was to the Romney campaign.

You make another faulty assumption: you assume that the expectation of a bailout was behind the recklessness in the first place. The problem with that is obvious: there was so much money to be made in the short term that the long term became irrelevant. The CEO who ran Lehman Brothers into the ground pocketed several hundred million dollars in performance bonuses in the years leading up to its collapse. Why would he even care if there was a bailout? If you could make $250 million in take-home pay from your company between 2001 and 2007, why would you worry if your company went out of business in 2008?

The whole industry worked the same way. Brokers got paid on the sheer number of mortgages they could shovel out the door, not whether the mortgages were smart long-term investments. The agents at AIG who wrote all of those disastrous insurance policies on Wall Street MBS products got bonuses for the number of policies they wrote, not whether those policies were good long term risks. A reward system that prioritizes short term gain over long-term stability created the mess, not the expectation of a bailout when everything went south. The problem was not that people expected the government to save their companies when the collapse happened. The problem was that nobody had any incentive to even care whether a collapse would happen, because they were rewarded for the sheer volume of work they could do in the short term, not the long-term quality of their work.

-k

[kimmy]

A person that points a finger and says someone did not build a business, obviously meaning he could not have done it alone and there is a whole community behind him, is correct but it took the co-ordination of all the necessary resources to build it and the person who did that is the one who built it. Is it a reason to then attack that person and say that he must now give back to the community on the basis that he didn't build that?

No matter what Barack Obama says - that person is responsible for building his business and he is rewarded by the commmunity in direct ratio to his contribution to the community.

He must give back to the community because it played a role in his success and makes his continued success possible.

The intent of what Obama said was that the person with the business needed to recognize the community through paying higher taxes and contributing back to the community in some manner with absolutely no recognition of the person's ability to organize and employ the resources that work together to improve the lives of those in the community. The business would simply not exist if it didn't supply a need or want to the community.

The bolded part is crap. Business people receive recognition aplenty. But it's a two-way street. The Heroic Job Creators side refuses to give recognition to the fact that they do business in an environment that makes a successful business possible, and is instead working furiously to undermine the foundations of that environment.

The businessman or entrepreneur is responsible - he did build it.

Blurring the true responsibility, the actual individual that brought it all about, and claiming he couldn't do it without the community is not only an insult to the individual but is detrimental to the whole business community. If the community wasn't there, there would be no reason to co-ordinate necessary resources and provide a service or product to improve the lives of those in the community, would there? I think that's pretty obvious.

Claiming he couldn't do it without the community is a plain fact. Sorry if that hurts the feelings of the Heroic Job Creator, but it's a fact. I keep asking you why Mogadishu isn't the business capital of the world, when it sounds like an idyllic haven for you John Galt types to function in. Low corporate taxes! No job-killing regulations to hold back business! Truly, the Somali entrepreneur has been unshackled in a way that his American counterpart can only dream of! It kind of makes you wonder why Willard hasn't packed up and headed there already, doesn't it?

Of course no one wants to be responsible for negative acts in society, such as the Boston Marathon event. So we try and target an individual or individuals or a certain group. We don't say, they didn't build that. We don't demand that the community make recompense because the Tsarneav's couldn't have committed their atrocity without the community.

The community *is* making recompense, both by repairing the damage and caring for the injured.

-k

[Pliny]

Most bailouts have been financed by government debt. Most government debt exists in the form of government bonds and bills and securities that are held by private citizens and privately owned funds. Most bailouts have, therefore, been funded by borrowing from citizens. So the idea you're trying to sell just doesn't work.

Sorry, kimmy, the 800 or so billion dollars that created the TARP fund was entirely fronted by the Federal Reserve.

There was no other sale of government bonds.

Bailouts aren't always unpopular, either. While people are certainly angry at the Wall Street bailouts, the same is not true in general. For example, you'll recall how damaging the "let Detroit go bankrupt" theme was to the Romney campaign.

Correct, bailouts are not unpopular. No one likes to see groups of people hurt or suffering even if they did make their own bed.

You make another faulty assumption: you assume that the expectation of a bailout was behind the recklessness in the first place. The problem with that is obvious: there was so much money to be made in the short term that the long term became irrelevant. The CEO who ran Lehman Brothers into the ground pocketed several hundred million dollars in performance bonuses in the years leading up to its collapse. Why would he even care if there was a bailout? If you could make $250 million in take-home pay from your company between 2001 and 2007, why would you worry if your company went out of business in 2008?

Another faulty assumption? How many is that now?

The CEO's responsibility was not to himself it was to the company. Certainly, he abandoned prudence and the company was destroyed. I don't see government taking him to task for some reason?

CNN's list of responsible individuals placed him at #9 on those responsible for the collapse. Number one was the Consumer and number two was Franklin Raines, CEO of Fannie and Freddie.

You don't seem to recognize any imprudence on the part of those having mortgages forced upon them by the greedy banks or investors buying up mortgage backed derivatives. They probably had the thought they shouldn't invest or be in the house they have but they went ahead anyway assured by bankers that all was well.

Was it greed that caused their imprudence? Greed is a base instinctual survival mechanism and what holds it at bay is the future and consequences. It seems that the masses in typical mob mentality didn't look down the road too far and brushed aside any concerns about consequences to live the moment.

Barney Franks egged them on with assurances as late as July of 2008 that all was well with Fannie and Freddie and the mortgage market. The collapse occurred in September.

The whole industry worked the same way. Brokers got paid on the sheer number of mortgages they could shovel out the door, not whether the mortgages were smart long-term investments. The agents at AIG who wrote all of those disastrous insurance policies on Wall Street MBS products got bonuses for the number of policies they wrote, not whether those policies were good long term risks. A reward system that prioritizes short term gain over long-term stability created the mess, not the expectation of a bailout when everything went south. The problem was not that people expected the government to save their companies when the collapse happened. The problem was that nobody had any incentive to even care whether a collapse would happen, because they were rewarded for the sheer volume of work they could do in the short term, not the long-term quality of their work.

-k

I agree the consequences were ignored in the created scenario of moral hazard. No one knew they would get bailed out but there was perhaps a consideration of being "too big to fail" pervading the offices of the banks on Wall Street.

Don't forget. Wall street is a mistress of Government wile it pretends to be married to Main Street.

Edited June 29, 2013 by Pliny

[Pliny]

He must give back to the community because it played a role in his success and makes his continued success possible.

If you define a community as the interaction of individuals with common interests then they are all contributing to their own welfare. No one should be asking to get a bigger share than what they contribute to the community. Government tends to distort that by playing favourites through subsidies and tax breaks or levies.

The bolded part is crap. Business people receive recognition aplenty. But it's a two-way street. The Heroic Job Creators side refuses to give recognition to the fact that they do business in an environment that makes a successful business possible, and is instead working furiously to undermine the foundations of that environment.

Well, I see it as business being a part of the community and paying for government to oversee the safety of the community, not determine who the haves and the have nots should be by socially engineering it as a vested interest. It eventually destroys it.

Claiming he couldn't do it without the community is a plain fact. Sorry if that hurts the feelings of the Heroic Job Creator, but it's a fact. I keep asking you why Mogadishu isn't the business capital of the world, when it sounds like an idyllic haven for you John Galt types to function in. Low corporate taxes! No job-killing regulations to hold back business! Truly, the Somali entrepreneur has been unshackled in a way that his American counterpart can only dream of! It kind of makes you wonder why Willard hasn't packed up and headed there already, doesn't it?

It's pretty simple to see no one would accomplish anything if they worked entirely out of their own personal concerns and that chaos would ensue. A community however has common interests and everyone works harmoniously and co-operatively to achieve them.

Your idea of the greedy individual as sole perpetrator for all ills is wrongly placed. As I said in my earlier post the future is what tends to hold greed at bay. However, yes, there are criminals and mobs that live for the moment.

The community *is* making recompense, both by repairing the damage and caring for the injured.

-k

A community is working co-operatively and harmoniously or it is not a community. Government attempting to make people work harmoniously and co-operatively does not work because government is not part of the community. It is an overseer.

At a certain point it becomes parasitic and tyrannical. You are not aware of any tyranny and things are comfortable for you. Eventually, in years time, you may come to think it is going a bit too far but will it be too late then? Rhetorical question, I know but I feel we must be vigilant about the encroaching State and crony capitalism. We don't have to worry about businesses encroaching upon our lives unless they are granted some sort of monopoly or licence of perpetual existence as long as the State shall deem.

[Shady]

Sorry, kimmy, the 800 or so billion dollars that created the TARP fund was entirely fronted by the Federal Reserve.

There was no other sale of government bonds.

.

Quite right. When governement borrows money it changes the money supply. When it prints money, it changes the money supply.

[GostHacked]

Was it greed that caused their imprudence?

What other motivation would these people have?

[Pliny]

What other motivation would these people have?

Well, we don't know what everyone was thinking and each would probably have their own justification for participating in the frenzy of the moment but obviously the consequences were ignored. Most likely they saw someone benefiting and jumped in. Nothing wrong with not looking a gift horse in the mouth,especially when the government is forwarding the idea everyone deserves to live the American Dream. Of course, some may have realized a boom was happening and knew it would end where all booms end - in a bust. Timing is important in these events. By the time the public gets immersed in the activity it is near the bust.

[kimmy]

Sorry, kimmy, the 800 or so billion dollars that created the TARP fund was entirely fronted by the Federal Reserve.

There was no other sale of government bonds.

And that's TARP. It's not applicable to the automaker bailouts, or previous automaker bailouts, or a large number of other bailouts. TARP or not, most bailouts are funded by conventional government borrowing. Which means the overall argument you're attempting to make fails.

Correct, bailouts are not unpopular. No one likes to see groups of people hurt or suffering even if they did make their own bed.

If you work at GM and your job is assembling door panels or operating a painting machine, and you go to work one morning and the factory doors are chained shut, I'm not sure you "made your own bed".

Regardless of that, the reason people supported the automaker bailout wasn't so much that they felt sorry for laid-off workers, and were more concerned that the massive layoffs would result in a domino effect that would be devastating for the whole economy. Whether or not that's actually true, that was the reason.

But as pertains to this discussion, the point being made here is that bailouts are not necessarily unpopular. So the idea that voters would refuse to support bailouts if they were funded by taxpayer dollars fails. (and most bailouts *are* funded by taxpayer dollars, as we already discussed.)

Another faulty assumption? How many is that now?

I have lost count, to be honest. I think your whole premise is just one faulty assumption stacked onto another, all resting on a foundation of more faulty assumptions.

The CEO's responsibility was not to himself it was to the company. Certainly, he abandoned prudence and the company was destroyed. I don't see government taking him to task for some reason?

CNN's list of responsible individuals placed him at #9 on those responsible for the collapse. Number one was the Consumer and number two was Franklin Raines, CEO of Fannie and Freddie.

And when was this list compiled? I wonder if CNN made this list with the knowledge of what we know now about how the banks acted.

You don't seem to recognize any imprudence on the part of those having mortgages forced upon them by the greedy banks or investors buying up mortgage backed derivatives. They probably had the thought they shouldn't invest or be in the house they have but they went ahead anyway assured by bankers that all was well.

There is nothing wrong with a system where anybody can ask for a mortgage. You, me, or Hobo Joe can all wander into a bank and ask for a mortgage. There's absolutely no reason why any adult should not be able to go to a bank and ask for a mortgage.

The system didn't break because everybody can ask for a mortgage.

The system broke because everybody could *get* a mortgage.

The onus isn't on unqualified borrowers to know whether or not they should have a mortgage, the onus is on lenders to say "No" to people who they shouldn't lend money to. Why is it you people keep blaming consumers for asking for mortgages they shouldn't have got, and ignoring the people who decided to lend to them?

Millions and millions of hobos and deadbeats and could go to the bank and ask for mortgages and it would not make a speck of difference to the economy, as long as the mortgage lenders said "No." The fault doesn't lie with people who asked for mortgages they shouldn't have had. The fault lies with people like the CEO of Countrywide who decided that they should say "YES!" to people who shouldn't have mortgages. "Anybody who can fog a mirror."

I agree the consequences were ignored in the created scenario of moral hazard. No one knew they would get bailed out but there was perhaps a consideration of being "too big to fail" pervading the offices of the banks on Wall Street.

Don't forget. Wall street is a mistress of Government wile it pretends to be married to Main Street.

You still don't get it. The short term rewards were so great that long term risk became completely irrelevant. If you can pocket $120 million in bonuses this year, why would you care if your company goes out of business next year? The collapse of Lehman Brothers had consequences for a lot of people, but not for Dick Fuld, who pocketed somewhere between 300 and 500 million dollars in the years leading up to Lehman Brothers' demise.

-k

[kimmy]

If you define a community as the interaction of individuals with common interests then they are all contributing to their own welfare. No one should be asking to get a bigger share than what they contribute to the community. Government tends to distort that by playing favourites through subsidies and tax breaks or levies.

You want the things government does that you personally support to continue, but you don't think people should have to pay taxes because you're under the silly illusion that all of these good things will be done by magic for free in the absence of public management.

Well, I see it as business being a part of the community and paying for government to oversee the safety of the community, not determine who the haves and the have nots should be by socially engineering it as a vested interest. It eventually destroys it.

Rich-guys support government acting in ways that directly benefit them, like maintaining the roads that get their goods to market, or the police forces that protect their property, or the legal system that enforces contracts and ensures they keep getting paid. But functions of government that benefit other people-- labor standards, public education, environmental regulations, whatever-- that stuff, that's "social engineering" for "vested interests". Got it.

It's pretty simple to see no one would accomplish anything if they worked entirely out of their own personal concerns and that chaos would ensue. A community however has common interests and everyone works harmoniously and co-operatively to achieve them.

Your idea of the greedy individual as sole perpetrator for all ills is wrongly placed. As I said in my earlier post the future is what tends to hold greed at bay. However, yes, there are criminals and mobs that live for the moment.

The future doesn't hold greed at bay because people who have hundreds of millions of dollars at their disposal don't need to fear the future.

A community is working co-operatively and harmoniously or it is not a community. Government attempting to make people work harmoniously and co-operatively does not work because government is not part of the community.

I don't even care how you want to define "community". If you don't feel that "community" is the right word, you can substitute "society" or some other word you find more appropriate. It's a distraction from the relevant point, which is this: successful businesses benefit greatly from working in *our* system as opposed to one like Mogadishu. As such, successful businesses have an obligation to participate in the upkeep of that system.

It is an overseer.At a certain point it becomes parasitic and tyrannical. You are not aware of any tyranny and things are comfortable for you. Eventually, in years time, you may come to think it is going a bit too far but will it be too late then? Rhetorical question, I know but I feel we must be vigilant about the encroaching State and crony capitalism. We don't have to worry about businesses encroaching upon our lives unless they are granted some sort of monopoly or licence of perpetual existence as long as the State shall deem.

I find it odd that you keep complaining about crony capitalism, and yet you're basically acting as a spokesman for crony capitalists.

-k

Edited July 2, 2013 by kimmy

[bush_cheney2004]

As such, successful businesses have an obligation to participate in the upkeep of that system.

Just the "successful" ones ?