About the 3-minute mark, Maher quotes Ed. Snowden's about the choice being between Trump and Goldman Sachs. Maher is close to getting it, but falls short.

The choice wasn't between Trump and Godman Sachs, it was between Godman Sachs and Goldman Sachs.

Hillary might have ended up being 'not quite as bad,' but 'not quite as bad' doesn't equal "good."

She'd probably have appointed just as many people from G.S., though probably different people for different positions.

The problem is still present: the banks run America.

Pure quality by John, as usual.

There are a few points I'd like to add, in order of appearance.

5:10 – Greek default or Grexit could be manageable by the rest of the EZ, economically. Italy looks a bit shaky and Spain still looks like shit, so things could spiral out of control, but chances would be better now than they were in, say, 2010.

However, Grexit would be a political nightmare. EZ membership is supposed to be irreversible, so Grexit would reduce the Euro from a common currency to a peg when viewed from the outside. That's open season on the rest of the PIIGS. If Greek then rebounds, other people might very well decide to give Germany the finger and leave as well. If Greece fails, you have a NATO member turn into a failed state, which not only gives NATO the shivers, but also buries any notion of solidarity within the EU. This union survives because of the promises it makes, which include increasing standards of living and solidarity among different peoples. Without it, we're left with... what exactly?

And nevermind the humanitarian catastrophe taking part in Greece. We've conditioned ourselves to block out the pain and suffering of people in Africa. We even manage to shrug at the cesspool of corruption that is Kosovo. But if we do that to Greece as well, what little moral authority Europe might still have left would be gone then.

5:32 – The last payment Greece received was in August, long before Syriza took over. The previous government was in disagreement with the Troika and therefore transfers were frozen.

5:57 – Troika payments are required to service previous debt obligations. They are separate from what the Greek banks require to maintain their liquidity. That would be Emergency Liquidiy Assistance (ELA) from the ECB, which is a different thing entirely, even though it comes from a member of the Troika.

The ECB is bound by law to maintain and ensure the stability of the banking system(s) within the EZ. If a bank runs into liquidity problems, support is provided by the national bank of the respective country, which funnels funds from the ECB to the troubled bank. That's ELA, and a limit on ELA is a limit on the amount of funds that banks can draw from through this process. If an illiquid bank is cut off from ELA, it goes belly up. Bad idea.

Some argue that the ECB should not provide ELA to those Greek banks anymore, since they are insolvent, and ECB rules forbid ELA to insolvent banks. But as Varoufakis said, even the ECB's own Single Supervisory Mechanism (SSM) department, which is the new banking oversight, declares the four large Greek banks to be solvent. So there is no reason for the ECB to cut ELA to Greek banks. It's all political, and the ECB is designed to be outside of politics. That's also a reason why its membership in the Troika is so controversial.

The political argument for cutting off ELA is that Germany et al. are on the hook for the total amount should Greece itself go belly up. Somewhere along the line, someone made the glorious decision to install the ECB as a currency issuer without providing it with the attributes of a regular currency issuer. If the Bank of Japan or the Bank of England racks up losses, noone cares. They issue their own currency, they cannot go bankrupt, whatever debt they have in their books is irrelevant, for this discussion anyways. But the ECB has to balance its books, it has to receive funds from its members to balance losses, and in proportion to their economic size.

They made sure that politicians can scare the demos by pointing out how they have to foot the bill for this shit, even though it's the one entity where debt truly doesn't matter at all.

By the way, the funds that Greece is hoping to acquire are meant, primarily, for two purposes: making debt payments and to provide financial room to convert ECB(?) debt into EFSF debt (4% interest down to 1%). That's all. No spending.

6:54 – "Printing" money is generating demand out of thin air. There is a shortage of demand throughout the entire continent. So yeah, if the folks at the ECB could type in a few numbers, that would be swell.

Even Germany has a shortage of demand. We are merely hiding it behind the €200b+ of demand that we steal from other countries, i.e. our current account surplus. But the infrastructure and investment spending over here is at all time lows. We'd need an additional €200b+ just to get the infrastructure back to the state it was in a decade ago.

There is no productivity growth in Europe. The UK actually lost a lot of productivity by its introduction of zero hour jobs and other forms of slavery. Without sufficient demand, there is no need to improve production capacities – they can't even sell what they could produce right now.

@oritteropo

There is a long history of Latin American currency crises which I would refer you to as examples of disorderly collapse. That Tsipras would break most of his electoral promises in his recent 4 month extension agreement should tell you that he knows how catastrophic it would be. You can't quantitatively approximate these kinds of events but qualitatively* (TYPO) the following is likely to occur:

1) Bank run - You saw significant withdrawals even leading up to the meeting with the Troika because of the possibility funding will abruptly stop. A stop to euro lending will see mass outflows with the expectation of bank collapse which will itself likely lead to the collapse of multiple banking institutions.

2) Foreign flows of currencies will dry up - Greek bond yields will spike, in effect no one will lend to the Greek government from overseas. Since like any economy, Greece needs to pay its public sector workers and requires foreign capital for imports, to preserve what it has, it will rapidly convert back to using the Drachma which it can issue and print/create. It is likely the banks will follow in turn and convert deposits to Drachma (another reason why people will withdraw money from banks as soon as they think euro support is over).

3) Drachma collapse - The Drachma will then depreciate rapidly. Again, the expectation of depreciation pretty much causes the depreciation. If people expect their currency to be worth less in the future, they will sell it, causing it to be worth less. Any existing savings accounts remaining will be decimated in value. Wages will fall drastically for everyone. Suddenly the cost of anything that relies on imported products (hint, a lot in any economy, especially Greece) will rise several-fold. This will lead to further job cuts, collapse of industries, which will precipitate further job loss, unemployment, output loss etc etc etc.

The tl;dr version of this is that government funding crises whether caused by debt or currency collapse in the first instance are self reinforcing and the consequences of an unmanaged collapse are all but guaranteed to be much worse than austerity but order. There is some evidence that countries who have a massive collapse and see their currency depreciate are then about to recover faster afterwards (a cheap currency boost exports, tourism etc) but the human toll is much more sudden and much more severe.

As far as IMF estimates being unrealistic, sure. All I'm arguing about is what is likely to happen and which outcome Greeks should prefer.

Sure Syriza has talked about the good kind of reform, but he's also promised the rest of what I talked about. None of which the Troika will let him do if he wants retain their funding. Anyone following this should have known he would not be allowed any of these promises he made in his election. Surely Tsipras himself knew this. It was either posturing/bluster or pure politics. Now the stability of his government is going to depend on how he can manage down his unrealistic expectations.

http://www.theguardian.com/world/2015/jan/28/alexis-tsipras-athens-lightning-speed-anti-austerity-policies

@RedSky

Ah, we've been down this road... I totally forgot, sorry.

Just briefly then: Greece fucked up prior to the crisis. Fudged numbers, corruption, banks run by the worst of the worst, economy exposed to exterior shocks, the works. They were hit hard when the crisis began, and it magnified the pre-existing conditions to a point where the entire thing became unstable.

When their banks finally admitted to being completely screwed, Greece was "motivated" to socialize the problem by bailing out the banks. If the Greek banks had gone bust, the German and French banks would have had to crawl back to Merkel and Sarkozy and beg for a bailout, only a year or so after they were bailed out the first time. Both governments would have been thrown out of office if they had bailed out the banks again, after swearing not to do it. So it was left to Greece to deal with the mess in a way that kept German and French banks out of it.

They did the same in Ireland, just like Bill Black testified before their parliamentary committee three weeks ago.

But the real mess, the social devastation, was primarily a result of "The Program". Some say it was the Greek government who enforced the measures, nobody told them to cut pensions in half. Well, the IMF still provides access to the Memorandum of Understanding, which clearly outlines just that. It was mandated by the troika and the Greek government went along all too willingly. As a result of the first troika program, GDP went down the toilet.

Anyway, the establishment in Greece is to blame for most of this, but the German/French banks (and their governments) are also to blame. Yet somehow, it is the lower/middle class in Greece who receive the punishment, and the lower/working class in Germany/Finland/Netherlands/etc who are expected to foot the bill this punishment causes for the entirety of Europe. Pisses me off to no end.

>> ^marbles:

>> ^crotchflame:
BUT this came at the cost of a more serious threat of deflation and bank runs, which you can easily argue is much worse.

That's a false argument. You can't have deflation without first having inflation. And your argument is well we have to suffer inflation otherwise we might suffer deflation. That's illogical. Deflation is mostly good for us and bad for banks. Deflation would mean lower food and commodity prices. When a bubble pops, it's essentially canceling out that bubble's expansion of the monetary base. The realized inflation in prices is caught in an imbalance. If left to a natural correction, prices would fall and reach an equilibrium. But the government and central bank usually step in with a monetary solution to "stabilize" the economy. This is just horseshit excuse to keep the inflation from the bubble and pass on the cost to the tax payers.


Netrunner's already pointed this out, but this is special pleading. You say that prices go up and down in the market with a fixed currency, but that's not inflation because inflation is expansion of the money supply. You're saying that inflation only happens under a fiat system, therefore a fiat system is the only way we can have inflation. It's not very interesting. Inflation can only be measured as an aggregate of general prices, like the billion prices project. If all the prices are going up, that's inflation; down, that's deflation. Arguing which came first is a chicken and egg question.

The rest of what you say doesn't address the link I gave to why deflation is worse.

>> ^crotchflame:
BUT this came at the cost of a more serious threat of deflation and bank runs, which you can easily argue is much worse.


That's a false argument. You can't have deflation without first having inflation. And your argument is well we have to suffer inflation otherwise we might suffer deflation. That's illogical. Deflation is mostly good for us and bad for banks. Deflation would mean lower food and commodity prices. When a bubble pops, it's essentially canceling out that bubble's expansion of the monetary base. The realized inflation in prices is caught in an imbalance. If left to a natural correction, prices would fall and reach an equilibrium. But the government and central bank usually step in with a monetary solution to "stabilize" the economy. This is just horseshit excuse to keep the inflation from the bubble and pass on the cost to the tax payers.

>> ^marbles:

>> ^crotchflame:
There's nothing about inflation or speculation that requires fiat money.

Huh? That's what inflation is--the expansion of the fiat monetary base. WTF are you talking about?
Without a system built on fractional reserve debt, there is no method to engage in fraudulent speculation. There is no bubble, there is no artificial expansion in debt.


Inflation is a rise in general price levels. Just because the price of gold is fixed with a gold standard doesn't mean everything else is. But to be fair, inflation did tend to be lower under fixed currencies with little threat of runaway inflation and the long-run prices determined by gold mining activity. BUT this came at the cost of a more serious threat of deflation and bank runs, which you can easily argue is much worse.

What's the difference between speculation and investment? It seems people are always certain which is which after the fact, but a full reserve banking system would reduce both activities. It's a matter of degree, there are no magic bullets.

Let me clarify what I meant by "Great Depression style." I was mostly meaning a general recession that coincides with a series of bank runs, along with liquidity issues.

I'd be interested to see some hard economic data that went back to the 1600's. Personally, I think pre-industrial revolution economic data is not terribly relevant to the modern economy, but certainly economic crises did happen before there was a United States too (tulipmania being a favorite example).

I'm not sure what baseline you would use to call the growth of the economy between the 1940's and 1970's bad, certainly in the US it was a period of unprecedented growth and prosperity, and we didn't have a destroyed industrial base to rebuild.

After the 1970's, and in particular, post-Carter, America took a huge right turn on its policies across the board. Lots of things changed about the economy, and the philosophy driving economic policy. I'd argue that in essence, it was a massive push to return things to the way they were before the Great Depression and all the economic and political reform that it had spurred.

What did we get as a result? A new Gilded Age, and a new Great Depression.

But that's almost a tangent. If you're going to declare that the housing bubble is in some way primarily caused by (or made dangerous by) the Fed's expansionary monetary policy in the early 2000's, what is it that Greenspan should have done differently? Contract the money supply before a recovery began? Never cut rates in response to the crisis? It seems to me that monetary policy is the wrong tool for the job if what you really want is for people to properly price risk.

Maybe making money tight would indeed have slowed both bubbles, but it's a bit like chemotherapy; you're fighting the cancer by killing off all your body's fast-growing cells. It helps with the cancer, but it does lots of collateral damage in healthy areas too. Without more targeted treatment, it can be a bad idea.

In my view, the more targeted treatment would have been regulation. The market managed to make a system of trusts and obligations so complex that no one was able to accurately judge risk, and built itself a naturally-occurring ponzi scheme. Government could have kept things more transparent by regulating CDOs and CDSs, but it didn't because the people whose job it was to regulate the industry were all people who'd been chosen specifically for their disdain of regulating anything.

To me the instability we're seeing in recent decades has more to do with deregulation, and a cultural predisposition for searching for fast, easy money instead of trying to really create value, not some sort of issue with monetary policy.

Fed is the "lender of last resort" and is supposed to prevent bank runs. If recipients were made public it would trigger bank runs on the recipients.

Other countries' socialist policies, like in say, the whole of Europe, do quite well compared to us.

Actually, this is causation without correlation. If you go to Europe, living situations are deteriorating. Their massive amounts of welfare have created a situation in which immigrants are coming not for opportunity, but to be subsidized by programs they haven't paid into their whole lives like existing citizens. Sound familiar? Our programs are being strained by the same problem. I won't deny that they've made better decisions with their socialist powers over the past twenty years. If you want to make this an argument about whose dictator is doing a better job at emulating the market, then certainly Europe wins. France, for example, gets 80% of their energy from nuclear power and is the largest energy exporter in Europe. I'm jealous. That's what the market would have chosen. Our dictators, however, have been blocking it for thirty years due to the influence of the radical environmentalist lobby. Our government-directed economy has also pumped billions of forcibly appropriated money into agri-business bio-fuels like ethanol. It reduced the supply of food because it became more profitable after all the subsidies to grow corn for ethanol than some other crop for food. And it takes almost as much energy to create as it produces. Negative net result, that money would have been better off staying in the hands of people who really couldn't afford to have it taken away. We realize this now, but it never needed to happen. Any product that wouldn't be able to compete on the market without being funded with stolen money isn't worth a damn. So why did we think a bill could do something the market couldn't? All subsidies are retarded, they have collusive anti-competitive redistribution written all over them, and that's exactly what we got despite election year promises that it would give us miracles.

In fact, imagine if a stranger comes to your house and says "Hi, I'd like to take some of your money from your paycheck every week because I think I can spend it better than you can on products and services for your life. You look pretty busy, irresponsible, and unintelligent." Would you give it to them? Why would you do that? That's essentially socialism in a nutshell. People spending other people's money on the claim they can do so with greater thrift than the person that earned it.

Another thing that we do different than Europe is maintain a gigantic military empire. Of course their socialist programs are better, they don't have a military industrial complex sucking trillions of dollars away from them. It's really not necessary in the nuclear age. No nuclear power has ever been invaded domestically. Because it's a losing proposition. If you win the ground war, they have nothing to lose so they launch them. But we're idiots over here, we have this manchausen syndrome where our CIA creates problems that eventually blow back in our face, at which point we can launch all out invasions under the pretense of self-defense. This might include installing the Shah in Iran. Or giving bioweapons to Saddam during the Iran-Iraq conflict. Or arming afghani warriors to fight the Soviets. Or paying off Musharraf in Pakistan to be a puppet. Terrorist propaganda becomes effective because of this shit.

Nowhere else in the world has a more libertarian system than us, as near as I can tell, and it handicaps us.

Price fixing interest rates = socialist
Bailout out bankruptcy with forcibly appropriated money = socialist
Allowing one industry to loan out money they don't have, at interest = socialist
Subsidizing one company and not another = socialist
Taxing one company and not another = socialist
Nationalizing private industry to be financed with forcibly appropriated money = socialist
Directing industry and research with forcibly appropriated money = socialist
Declaring lending standards discriminatory to low income people and forcing banks to remove them via the Community Reinvestment Act = socialist
Issuing a non-market determined or constitutional money, banning competing currencies, and taxing dollar debasement gains on gold as if it were income = socialist
Blocking nuclear power for 30 years = socialist
Blocking domestic oil drilling for 20 years = socialist


Actually no, they would just need to get enough market power, and apply it ruthlessly to stomp out competition wherever it rises.

Bullshit, no one but the government has endless streams of capital to buy up anything and everything. Only government monopolies are self-sustaining, because they're the only monopolies financed with forcibly appropriated money.

In your version of the world, AMD shouldn't exist. Aptera Motors shouldn't exist. Right? I mean, giant corporations a thousand times their size existed before they even entered the market. They should have been bought out. Oh, wait, what's that? Not all companies are publicly traded.

The reality is, in order for a MARKET monopoly (note: in an environment where they don't have access to government specific powers like inflation and subsidization) to stay that way is to continue to offering the best product at the best price. Because then there's no window, no opportunity for someone else to come in and eat into that marketshare. If a company is delivering crap or overcharging, however, that immediately opens a window for someone else to come in. That's how AMD got so large, Intel was doing exactly that with netburst architecture. Even with a monopoly position, competition was waiting in the wings.

Suppose Microsoft took XP off the market and put Windows 3.1 on the shelf? Do you think they wouldn't go bankrupt? Do you think a competitor wouldn't arise to take their place? Because they're an all-powerful monopoly, right? They don't have to deliver shit, they can just buy Macintosh and anyone else while they pay thousands of programmers to create a product that doesn't sell.

Doh. Someone doesn't understand basic market principles.

One of my favorites from the roaring 20's was the rate war. Slash your prices to nearly nothing, and let your company lose a lot of money, on the premise that the smaller company will go bankrupt before you do.

Actually, large businesses with lots of workers have far more overhead and are much more inefficiently run. That's why most businesses today are small businesses. My mother owns an advertising business for wedding directories with no one but herself employed. A local newspaper owned by the Gannett company recently created a staff of twenty people to try and compete with her. They lasted two years before the magazine ended the operation. It was costing way more money than it was bringing in, and the so-called greedy megagiant slashed it.

Nuttery, Ron Paul is the only politician who believes in the law? Seriously, that's what you're saying? He's probably the only Republican who believes in the law being supreme, but there's more than a few Democrats who believe in the supremacy of law (including some joker with a law degree from Harvard running for President...).

Supreme law is the constitution doofus. It's the law that came before all other laws, it's the laws against government to prevent them from becoming a tyrannical, collusive nuthouse like all other governments before it by assessing which powers, which enablements, it shouldn't have under any circumstances. And inflation was one of them. But after a couple hundred years, people became complacent, arrogant, and ignorant, like yourself, and politicians found that they could ignore it with impunity. There was no longer a bunch of gun-toting, tea-hating radicals ready to hang them on the nearest tree when they broke it. There was nothing but the opposing party. But that party loves to spend, too. So they compromise by allowing the other to break it so long as they get to break it in another way. Remember how the bailout failed and then got passed? They put some extra pork in there to get the votes they needed. Rum and arrowheads...

http://www.greenfaucet.com/economy/porky-the-bailout-bill/19680

Welcome to our country, and the socialist enablements that make this spending possible.

No, but he can still bribe the politicians to look the other way on violation of rights. They do it now, and I'm not sure why it would change, just because the companies have more money to spend (according to your theory).

The bottom line here is that attacking Democrats as being socialist is a huge fucking straw man. We like the free market, and we want it to work.

No, you don't, You don't even know what it is.

Most investment banks are now crying out to be regulated in the wake of this credit crisis, and given that they bribed the government into deregulating them in the first place, that should tell you something.

They're not crying to be regulated, they're crying to be bailed out after being regulated. What do you think regulation is exactly? Do you realize that the fundamental way in which banks operate is fraudulent? How do you regulate that? How do you oversee to make sure fraud is being conducted in the best way possible?

http://en.wikipedia.org/wiki/Fractional_reserve_banking#Money_creation

This is the type of nonsense I hear from the republicrat camp. Regulation, the buzzword of the day. It's meaningless. To "regulate" the bank runs this system was causing, the Federal Reserve was created to backstop bankruptcy. Yes, failure, that free market pinnacle that makes private business suffer and fear consequences for risk and imprudent policy. Or how about the FDIC, FEDERAL GOVERNMENT INSURANCE on deposits. Don't worry, now you don't have to fear about losing your deposit on this scam industry. We've regulated it with the FDIC. OOPS, THE FEAR OF LOSING ONE'S DEPOSIT WAS WHAT DETERRED PEOPLE FROM GIVING IT TO HIGHLY LEVERAGED INVESTMENT BANKS OFFERING ABNORMAL YIELDS, CAUSING THAT BUSINESS MODEL TO GROW, CAUSING OTHER BANKS TO FOLLOW SUIT IN ORDER TO COMPETE.

The problem is regulation on fraudulent activity that should have never been allowed. It slowly but surely eliminated basic deterrents and self-regulating principles by backstopping risk and rewarding bad behavior.

>> ^MINK:
lithuania has a fairly free market because it's fucking corrupt, and i can tell you it's not beneficial to the consumer. the lies they get away with in unregulated advertising are shocking. of course they do it, because they can and it works.
corruption is what humans do unless someone with a bigger gun tells them not to.
individual freedom will always fuck up the common good. crime does pay. if you legalise business practices which are currently criminal, you'll get more of it, not a magical balanced free utopia.
Imstellar, in your version of a free market, who would stop Microsoft dominating the place with shitty software? I think we need MORE regulation there, not less. How is it efficient for microsoft to keep churning out that crap? you are asking for everything to be a marketing, bribery and advertising contest.
here on the sift we have a free market of ideas and video uploads, and look what happens, a bunch of cliques and lolcats and vote whores and the noise level is so high that you can't find the good shit without watching 10 crappy videos. Can you imagine what it would be like here if siftbot stopped checking for sock puppet accounts?


You're confused, I blame the all-encompassing buzzword of the day "regulation" for this, people don't understand the markets and have come to take it as meaning "government making it all better and overseeing greed." Government indeed has desirable functions in law enforcement and offering recourse through courts for disputes. They should NOT be price-fixing, monopolizing money, or handing out taxpayer money under socialist ideals of directing industry or "enhancing market confidence," this has collusion and corruption written all over it. Politicians are humans and someone spending millions of his own money to get in a low-salary position of controlling other people's money is probably going to be a more harmful source of greed than any businessman. Because even though Henry Ford became a millionaire, thousands of people got cars out of the deal. Not sure the same would have come from government expenditures...

But many would consider this form of corporate wealth redistribution "regulating" the market. I don't.

Your example of false advertising is an example of where law enforcement should take place. Can I sell a product that purports to do something it doesn't? No, that's a swindle, the contract was not upheld, and you can go to government-provided courts to be compensated. Similar things apply to other swindles, though in most cases even the government can't prevent you from falling for some e-mail scam to a Nigerian clearing house. Unless, of course, you agree to have them snoop all your incoming e-mail to check for this stuff. I'd hope you understand that that's a pretty stupid of you, though, for giving up your privacy in order to protect yourself from being gullible. Not understanding cost/benefit ratios is a huge socialist mistake. They're always missing the potential costs and focusing on the benefit.

Gun bans, for example, have the intention of reducing violence but in reality remove the deterrent criminals otherwise have against a society that does have them, causing crime to increase. Plus, it makes you defenseless to oppressive government. The utopian allure of creating a "perfect" society where no gun crime exists and everyone can live in peace and trust is what gets them to miss the greater cost incurred that any thinking man would have foreseen.

The Fed is another one. Fractional reserves caused a lot of bank runs in the old days. Instead of banning this practice, they backstopped it with a central bank, but the central bank price fixed interest rates, causing a crash in 29. Further temporary socialist measures turned it into a fifteen year depression, a nuclear explosion compared to the firecrackers of the original problem. Then the FDIC was created. This incentivized a lot of risk and borrowing, which has helped the current problem fester. See how the failure to correctly solve one problem has led to a cascade of "solutions" that create even more problems that beget even more solutions? That's socialism, my friends. It just builds and builds until eventual collapse.

I would say that another socialist mistake you are making is that law enforcement itself is a proper regulatory measure. Not when they're selective, they're not. There is plenty of legislation out there that legalizes something for one industry, but not the other. Banks can loan out money they don't have at interest. Any other industry, and you're thrown in jail for fraudulent lending practices.

LOLskers at your Microsoft argument, too. Who prevents Microsoft from churning out crap? Consumers, mayhaps? People were free to not adopt Windows ME or Vista, and that's exactly what happened, their sales were disappointing for both. Anyone investing in Microsoft don't like failures leading to lost earnings. But Microsoft is smart and continues to sell XP, which is a perfectly good OS even today. But if they currently get any tax credits or subsidies, they shouldn't. No company should have access to forcibly appropriated money, period.

I think the real scary thing about all this, besides the fact that you don't understand it, is that you seem to be implying that a government office operating on forcibly appropriated money is capable of greater efficiency than the private sector. Maybe it comes close for laying pavement and picking up garbage. But in the grander scheme, no. It wasn't the case with Chernobyl and it ain't today, buddy. You take a hell of lot of innovations and products for granted if you believe that.

>> ^imstellar28:
"maybe we do need to have some sort of bailout, but it really has to have really strong regulations"
well your in luck lady, that's exactly what you're gonna get. that, and a severe depression. hope you're not in the bottom 25% of workers!


Regulations or not, 700bn or 3trillion, either way a depression is coming.
Its everyones fault.

Government for removing regulations that prevent this kind of behavior, companies for acting irresponsibly, and the general population for taking loans they could never afford.

Lessons learned yet ?
Not much...id be pretty surprised if a new economic framework was drawn up, let alone just putting a few regulations back in place.

Unfettered free-market capitalism relies on people not being greedy or irresponsible. Unfortunately that's rarely the case, which is why regulations are needed.

Too much regulations is a bad thing just as too little are, theres gotta be a balance between stymieing investment and letting banks run wild.

>> ^spoco2
I'm not in a position to really state whether any of that is true, but if it is, and the Republicans have been in power for the last 8 years... then surely it'd be stupid to vote in more of the same leadership?
No? And if you're going to try to suggest that all the problems are because of a democrat being in office in the 1930s... please, respectfully... f ck off.
If your chosen part has been in power for the past 8 years and has done nothing but help your country sink into its own financial abyss, then have the bloody balls to accept that, don't pull some shit about someone 70 years ago causing the trouble now.
That's some serious blinker you have on there.


Though it sounds like quantum doesn't really understand what he's parroting, to those learned libertarians in world who understand the problem, he's actually kind of right and it's not as ridiculous as it sounds. It's entirely a matter of socialist big government policies that have been building over a long period of time, just waiting for someone highly corrupt to abuse them. Are you aware of the benevolent dictator argument? The idea that just because it's possible to have a benevolent dictatorship for a certain period of time, the costs of that system ultimately catch up to it because as long as those highly centralized powers EXIST, they WILL be abused by an eventual regime change and destroy the country. This is why we embrace constitutional limits on government and a system of inefficiency in which it is (supposed to be) extremely difficult for any political group to do this. Those limits started to get ignored at the turn of the 20th century and are almost all violated in some fashion today. It doesn't matter how convinced you are that your candidate is telling you the truth, some powers shouldn't exist. The system should not come down to who can pick the best dictator, and then being left with the consolation of "I told you so" when the people finally screw up and elect the wrong guy. Because there are actually two ways to do harm: through stupidity or through deceit. It's perfectly possible to be a well-intentioned, charismatic guy that is just plain wrong or ignorant how to best solve a problem. It's also possible for someone to promise to do one thing to get elected, and do the opposite once elected. People on this forum are educated enough to see #2. They're not seeing #1.

Bush is a highly corrupt individual, no question about it. But to restrict the debate to a choice between liberalism and neo-conservatism is to restrict the debate to socialism, because that's exactly what both of them are with minor differences. This population needs to understand libertarian principles, and fast. Because make no mistake, these socialist enablements and crises and scandals have plagued politics in general over the years and it was bound to come to a head sooner or later. We are in the late stages of socialism, there is nothing "regulatory" that can be done about something that is inherently fraudulent or corruptible. You simply have to understand that markets are merely individuals making mutually agreeable transactions with one another. Government's main functions are very simple, it is to make sure rights are not infringed with police/fire/national defense, and to provide a system of courts for recourse and the settlement of disputes. It is not to have its hands in every part of the market to regulate "greed," this is a nonsensical statement that assumes politicians with privileged power to forcibly appropriate money are not themselves greedy. This is the kind of idealist thinking that enables lobbying, corporatism, etc, and it's stunning that people haven't figured this out yet. The only way a person or a company can turn a profit, without infringing on people's rights, and without colluding with government-specific powers that they do not have (see:below), is to create a product/service that people will want to improve their lives with. That's it. It doesn't matter that the primary goal in a business venture is to make money in a truly free market, because the only way to make money in that system and keep it is to meet the demands of someone else. The EFFECT is that both parties benefit, even though the goals are both driven by self-interest. People are also very generous and are more apt to give excesses to charity under this system, charity was at its highest in America in the late 19th century. Because we didn't have inflation and we didn't have an income tax. Here is a short list of things that have brought us here and Ron Paul was the only one talking about any of them.

1. Centralized price fixing of interest rates by the Federal Reserve System: sends the wrong signals to investors to prevent politically inconvenient recessions, incentivizing massive misallocations of capital investment. Enables catastrophic insolvency, market scapegoating and further socialist interventions. This is THE root cause of the two market bubbles which are now collapsing, as well as the bubble that formed in the 20s and crashed in 29. This one spanned both Clinton and Bush presidencies, started with the easy money policies of the 90s that led to the tech stocks collapsing, then the inflation was filtered into real estate by Greenspan's 1% artificially low interest rates in 2000 (he also egged on the market for years, completely oblivious to what he was doing), and finally the inflation is coming home to roost in basic commodities. Borrowers are walking away and banks that invested heavily in the housing mania with are now left with mortgages that are nowhere near worth the price that they could actually sell the home. The housing market mania was so intense that people were buying homes to flip them to other people who were buying homes to flip them, until eventually, all that was left was speculative sellers with no one buying to LIVE in them other than idiots with bad credit who bought with no down payments.
2. An unconstitutional, non-market determined money: easily manufactured at no labor or material cost by the banking industry that controls it, transferring purchasing power from those who have to work for them to the recipients of this free money in wall street and in the government without asking the working man. Morally reprehensible and enables bailout legislation to deal with the insolvency that #1 causes.
3. Fractional Reserve Banking: government enables the banking industry to fraudelently loan out credit many times what it actually has in reserves and earn interest off of it. The effect cascades as a result of successive deposits of this phantom credit between banks and enables bank runs and extremely unstable leverage, creating an environment that all but necessitates an FDIC and central bank to be lender of last resort in the event of a run, which of course leads to the creation of #1.
3. Heavy subsidization: enables corporate lobbying for government handouts of forcibly appropriated money as an anti-competitive advantage
4. Income-taxation, a direct tax on production, very difficult to enforce without intimidation tactics, enables special tax credits as an anti-competitive advantage
5. Anti-competitive regulation: who's regulating the regulator? Idealist FDA powers to ban products from being chosen on the market have led to anti-competitive bans such as Stevia, resulting in health repercussions unbecoming of an agency that is supposed to protect it. Special legislation such as NAFTA, a 100-page "free-trade" agreement acting as a pretense to lower tariffs to get the WTO to raise tariffs
6. Nationalization of industry: enables predatory anti-competitive takeovers for the largest institutions of smaller institutions, enables government monopoly in industry financed by forcibly appropriated money.
7. Medicare, SS: Unsustainable, government run ponzi schemes purporting to be welfare measures. New investors paying old investors in real time, continually increasing tax rates to prolong solvency, continually changing rules about retirement age to prolong solvency. Trust fund anually tapped by congress to spend the excess by replacing them with government promises of future dollars (bonds). CPI-adjusted payouts, allowing government to underpay by understating real inflation.

And after listing all of this shit, it should be obvious to see why I'm so incensed by simple little quips like charliem's that get rated up: "unethical" loans. You want to talk about ethical lending? You think the government doing the things above under either party gives one bloody shit about ethics? Lending money is a gamble, it's a gamble you implictly allowed that bank to take by giving them your money to gamble with. Banks aren't a free storing house for money, they immediately take the money you give them and loan most of it out to someone else at interest, that's how they pay YOU interest for keeping it on their books when you could otherwise put your savings in a lockbox for a fee. But seeing as how people are cheap, ignorant bastards that have no idea how fraudulent the current system is, they will continue to ask politicians to coo-coo them with "ethics reform" and other nonsense that do nothing to solve the fundamental problems.

And let me make this dirt simple if I haven't already: you can't "regulate" or "oversee" these activities any more than you can "regulate" or "oversee" murder. It is fundamentally fraudulent to loan out something you don't have, price fixing of interest rates creates shortages of capital when people otherwise would save it, and an easily inflatable currency is nothing more than legalized counterfeiting for government and anyone who colludes with them. Wake up already.

>> ^jwray:
The point is that gold has insufficient actual USES to fall back on as a basis for its high value.

It doesn't have to be useful for consumption, it is useful as money. Do you understand what money is and why it's an important good in a modern economy. Do you understand that people can demand and want something for this purpose rather than to consume it or play with it? Do you understand that that's exactly what happened with gold when people were left to their own devices?

>> ^jwray:
The price of gold is subject to the volatile whims of the people, and has fluctuated a great deal over the last 100 years.

The value of the dollar relative to other currencies has fallen 70% in the last ten years, and 300% relative to gold. That's not volatile? See, your mistake is you're looking at the value relationship in the wrong way. You see the dollar maintaining its value and everything else flailing wildly against it. Instead, the dollar and people's confidence in it is what's flailing wildly. Look at a chart comparing gold to oil (both priced in dollars) the last thirty years - almost completely flat. If gold was money, gas prices would have gone nowhere.

http://www.kitco.com/ind/saville/may022006.html

Also interesting to note from this chart is what the price for both was in ~1971. Guess what happened in 1971 that caused the chart to start moving up for thirty years? Nixon scratched the bretton woods semi-gold standard, removing the last link of the dollar to gold. A nation that built its country on gold and became the reserve currency of the world on gold, inflated heavily in the 60s to finance pointless activities like Vietnam, The War on Poverty, the Great Society. It got to a point where gold reserves were far less than the debt owed to foreigners by 1971, the equivalent of an fractional reserve bank run. Those foreigners began calling in the debt, and rather than stop inflating and cutting a deal, Nixon got on a podium and broke the contract because it wasn't in "our best interest." Just like that. It later became permanent. Full fiat. Now there was NOTHING backing the dollar but confidence in its scarcity which is controlled by government.

http://www.youtube.com/watch?v=iRzr1QU6K1o

We currently lie about inflation and pay foreigners back in devalued dollars, probably more devalued than the interest return on those bonds, but the CPI hides it with hedonics adjustment, substitution, and geometric weighting added during the Clinton years. The bond market is the last major bubble in the U.S. economy.

But since we libertarians understand human behavior and the nature of government, it meant inevitable hyperinflationary collapse. Because like every other fiat currency in history, it will be debased by its spendthrift government and the citizens will stand by and let it happen because they are exactly like you: ignorant of economics and eternally trustful of government. That's why our forefathers tried to illegalize fiat in the constitution after they saw the continental dollar hyperinflated.

http://www.safehaven.com/article-9534.htm

>> ^jwray:
Platinum, Iridium, and Silver would work just as well as gold. But if a great depression comes I would rather have a stockpile of wheat than a stockpile of gold.

How long is that wheat going to last before spoiling? Where are you going to store it? How are you going to carry it around and pay people with it? What if someone already has enough wheat and they want berries, and the guy who has berries doesn't want wheat either, he wants leather? You're reducing yourself to barter. You can't run a modern economy that way.

>> ^jwray:
Under the current federal reserve system, if they set interest rates properly and avoid excess printing, inflation can be kept below 2%. Theoretically, if the fiat money system is done properly, it can be more stable in value than a gold-backed currency.

Welcome to today's powerful neo-Keynesian economic circles. Centralized control curriculums, a sexy interventionist theory financed by the benefactors of inflation, overrides history, human behavior, and all rational skepticism. The benevolent dictator argument, in its truest form. The fallacy that because its possible to have a benevolent dictator more efficient than any system that divides powers and makes it impossible for one man to destroy a country, that we should institute that system. No different than the Federal Reserve, in my opinion. They are THE ROOT CAUSE of most of our problems today. Right down to health care costs, another victim of inflation and HMO legislation, which the socialists are again trying to blame the free market on to build up more socialism. It all comes back to what system preserves wealth, and this ain't it.

http://www.youtube.com/watch?v=iYZM58dulPE

>> ^jwray:
The Euro is doing just fine with an inflation rate of 1.8%.

Measured by whom, and for how long? We could have said the same thing years ago. Will hyperinflation occur under you or your children or your grandchildren? Who knows, right? All you know is it's happened before in Europe, now it's just more centralized so all countries will be affected when it happens. Congrats.

Do you understand why we're fucked now? Why it's hopeless, why I bury my head every time someone calls Ron Paul a kook. You are just one of 200 million people I have to convince in this country, and it took me five hours with you and I probably still didn't make a dent.

In fact, here's the hilarious trickery of Keynesian economics. China holds over 1 trillion U.S. dollars in their reserves. That's right, we borrow from them, they're the largest creditor nation and we're the largest debtor (we actually used to be the largest creditor, that's how far we've fallen). But the reason they do it: they falsely believe that Americans consuming their products is driving their economy. In the beginning, this was true because they did have a legitimately weak currency relative to ours. But now things are different. They're INTENTIONALLY debasing their money to keep trying to grow this way even though they don't need to: currency appreciation would allow them to consume their own products without us. So they are intentionally devaluing their currency by inflating and buying up our bonds, on a grand scale, essentially paying Americans to consume their exports even though they can only afford them because of these payments. Insanity! If they ever figured this out, the bond bubble will pop. Even the ECB is not hiking rates when they should be. The world has been fooled into thinking that the American consumer is responsible for all their growth and is fearful of letting it collapse. Consumption over production, putting the cart before the horse, the mainstay of Keynesian thinking.

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> Paul Volcker is one such exception, but as you yourself pointed out - Greenspan made 180k per year. I don't know if you quite get this, but the average American makes around 33k per year.
Average American doesn't have Greenspan's qualifications. The point is that someone like Greenspan could make over a million per year by accepting a position in private sector. And a quick google search shows that Greenspan's family wasn't rich either.
http://www.nytimes.com/books/first/m/martin-greenspan.html



> "The Congress would always be pressured to lower the interest rates and stimulate the economy, regardless of long-term consequences."
> Here's one question for you - assuming the Congress took over control of the monetary system(as they have the right to do), what would be the purpose of an interest rate? The interest rate only sustains the profits and dividends of member shareholders of the Fed - operating costs are covered by the budget of money the Fed has allotted itself to print. So why would there be a need for an interest rate?

The Fed could loan money at 0% interest rate. Since the Fed can print money, that means it would hand out free money to any bank that asks. Surely you don't think that would be a good idea?


> FYI - I do not sustain any faith for the Capitalist system, as the end result of Capitalism is ultimately Plutocracy(which is what we are currently living under today - people that represent the richest 5% of the population control 95% of the population) - so, just so you know, I would have no qualms with abandoning the Capitalist system entirely.

Abandoning the system for what? Soviet-style Gulags? A lot of the inventions you are using right now are here thanks to capitalism. Take your computer for instance. Proof of concept transistor was developed in Bell Labs, and brought to the masses through capital ventures Shockley Semiconductors and Fairchild Semiconductors. Intel was one of the the child ventures. Those were all possible because of large investment. You need to have a workable alternative to capitalism, or admit that you don't care about progress. Neither communism, nor anarchy have proven themselves workable over long term.


> Bank runs are only a bad thing for the banks in most cases, because it shows, to their clients, exactly the level of corruption of a central banking system. Yes, people will lose faith - and they should. Yes, people will take what little money the bank has left for them out of the bank - AND THEY SHOULD.

It's not the banks that are hurt the most by bank runs, but the people who keep money in the banks. Banks are required to only keep 1/6th of the money it loans out on hand. So if everyone decides to take their money out, 83% of the people will be left holding an empty bag.

And when the people lose faith in banks and stop depositing money there, all the loan-takers will be hurt. How will someone get a mortage for a house? Or take an inventor with a bright idea who needs a large loan to develop it?

A worse thing would happen if public loses confidence in the Fed itself. The currency that we use are the Fed promissory notes. Without confidence in the currency, how will people continue their economic transactions? We could go back to barter, but that is annoyingly inefficient. Imagine having to find 2 goats, a hub-cap and a pile of dirt that someone wants in exchange for a new coat.


> They should be able to, as an exercise of power over the banks. In what is professed to be an ultimately Capitalist system, where is the competition to the banking industry that, should they mess something up, the public will exercise power over them?

What is the competition to the banking industry? The role of banking industry is to accumulate a large amounts of resources to direct into various areas of development. The capital is amassed because of people volunteering to store their capital is the banks. The main advantage of banking is that capital formation is done through volunteer means. One competition to this system is the Soviet-style system -- the government amasses resources through forceful means -- ie, by telling a million people to come together and dig a hole here and there. And if they don't want to dig a hole? Too bad, they should've been born in America.


> If there is to be a central bank, it must be addressable by the people themselves, SOMEHOW. The public themselves must be able to exercise some form of power over the bank in order to keep that very system in check...otherwise, the public is not responsible for what happens, and must not be legally bound to abide by such a corrupt system.


> Ultimately, if the banks are to be private, as the Federal Reserve currently is, the people should be allowed - encouraged, even, to create their own forms of currency to challenge the private form of currency.

What's stopping you from creating your own currency? Fed notes started by being promissory notes -- it was a note that you could exchange for a certain amount of gold if you brought to the bank. So likewise, you could hand out slips of paper, in promise to exchange them for something tangible if a person brings it back. In essence, shops handing out gift certificates are in essence issuing their own currency. There was a period of time in US when there was no universally accepted paper money. Each bank would issue their own promissory notes. However, because banks failed often, people would trust notes from bigger banks more. Eventually the "currency" from the biggest banks would outcompete everyone else.

> T-bonds/bills - what is a bond? The OED essentially defines it as an "Obligation," or a "promise to pay."

That's not the kind of bonds that government issues. The bonds are that the government issues are papers that US government promises to pay interest on. They don't promise to buy it back, and in fact, it's unlikely that the government will EVER buy it back. The government hasn't bought back any bonds since WWII.

> Can you imagine a form of currency that is not interest-bearing, that the people themselves CAN be held responsible for the rise or the fall of?

You really put a lot of trust in "the people". If people were so responsible, we could give each person a printing press and let them be directly in charge of the monetary policy. They would then rely on their superior knowledge of monetary policy and print more money exactly when it is needed. However, the reality of it is that people are greedy and irresponsible. In the scenario above, everybody would start cranking out money with no regard to economic harm that causes. That's a prime instance of the "tragedy of the commons"

The ideas you are advocating are far from new. People are by nature suspicious of rich people, especially bankers, and there have been many instances in the history when "the people" stepped in to "reign in their power of bankers." For instance, when Lenin carried out the revolution in then-capitalist Russia, his first targets were to take control of the railroads, the telegraph and the banks. The banks became the "property of the people", but that didn't help the people much when their savings have evaporated. My uncle worked as a pilot in Soviet far north for a decade and saved up an equivalent of $60,000 over the years, the savings that disappeared through governments mismanagement. Good politicians make bad bankers.

Or look at early American history. The ideas you are advocating are the credo of the Populist party, whose main ideal is to represent the rights of "the common people." Andrew Jackson was elected on the populist platform, and when he came to power, he destroyed the Central Bank by vetoing the renewal of it's charter. The government's money was then taken out of the bank, and distributed among various private banks. Needless to say it didn't work out too well, and US was back with a national bank 30 years later. You can read more about immediate effects here: http://www.maths.tcd.ie/local/JUNK/econrev/ser/html/destruction.html. Or read about "1837-1862: Free Banking Era" on "history of central banking" in Wikipedia.

The bottom line is that populist philosophy looks good in theory, but doesn't work well in practice, mainly because "the common people" are greedy and stupid. The current system isn't perfect, but it's better than the alternatives.


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