And what if people don't act in their own self interest? I don't see how that makes an argument at all. Are you saying that people are all going to smoke crack because we don't act in our self interest from time to time? (No, but how is legalization the answer when it's already a problem being banned?)

I don't understand the jist of this objection, perhaps you could elaborate. (glad to, personal responsibility only goes so far- do the poor have a RIGHT to starve to death because its their personal responsibility to find work or should society help the less fortunate?. the RIGHT to destroy your body with elicit drug use as a tenant of freedom of expression means that ALL drugs would have to be on the table & the crucial element that keeps these items blacklisted is 'Control' - people can smoke a cigarette and work, drive etc. Drinking alcohol is ceased when a person is reaching an intoxicated level by a duty of care, pot the way that is done now is OK with me regulated by those who need it, but to equate its accessibility along the same lines as cigarettes would be dangerous (yes cigarettes cause more deaths), but 'long-term to the INDIVIDUAL', not short-term to society as you cannot use it and be as fluid a cigarette usage (remember these are social conventions).


You also create a moral hazard by restricting freedoms. More people might die of drug abuse if it is legal, but those are people who chose to do drugs (are they choosers or addicts?, also do you want your government producing heroin like a pusher?. What about the entire countries who's populations are in fear of gun touting drug lords? (the only way to stop the cartel's is by legalizing all class A drugs, and why subject the majority of society to dangerous substances which you admit would find no use in having such things only to stop the criminal element which will always evolve to newer things?).

And what if people don't act in their own self interest? I don't see how that makes an argument at all. Are you saying that people are all going to smoke crack because we don't act in our self interest from time to time? (No, but how is legalization the answer when it's already a problem being banned?)

I don't understand the jist of this objection, perhaps you could elaborate. (glad to, personal responsibility only goes so far- do the poor have a RIGHT to starve to death because its their personal responsibility to find work or should society help the less fortunate?. the RIGHT to destroy your body with elicit drug use as a tenant of freedom of expression means that ALL drugs would have to be on the table & the crucial element that keeps these items blacklisted is 'Control' - people can smoke a cigarette and work, drive etc. Drinking alcohol is ceased when a person is reaching an intoxicated level by a duty of care, pot the way that is done now is OK with me regulated by those who need it, but to equate its accessibility along the same lines as cigarettes would be dangerous (yes cigarettes cause more deaths), but 'long-term to the INDIVIDUAL', not short-term to society as you cannot use it and be as fluid a cigarette usage (remember these are social conventions).


You also create a moral hazard by restricting freedoms. More people might die of drug abuse if it is legal, but those are people who chose to do drugs (are they choosers or addicts?, also do you want your government producing heroin like a pusher?. What about the entire countries who's populations are in fear of gun touting drug lords? (the only way to stop the cartel's is by legalizing all class A drugs, and why subject the majority of society to dangerous substances which you admit would find no use in having such things only to stop the criminal element which will always evolve to newer things?).

@truth-is-the-nemesis:



And what if people don't act in their own self interest? I don't see how that makes an argument at all. Are you saying that people are all going to smoke crack because we don't act in our self interest from time to time? I don't understand the jist of this objection, perhaps you could elaborate. Let me address what I think you mean. 2 possibilities; a person makes a bad/wrong/unwise/irrational choice, person doesn't choose/to lazy to choose/doesn't know to choose. In all of these cases, though, it is people being themselves for themselves, or not.

And that, my friend, is always the thing I care about most. It is one thing to force someone not to eat a cheese burger, it is another thing to have him choose not to. One is the real road to paradise, the other is brutality creating a hell to create a paradise. It isn't enough to live in paradise, we have to earn it. My point is slightly elusive, so I will use Minority Report as an example. Is stopping murder worth anything at all if you haven't stopped the drive to murder? It is worth some, sure. But you will always have a need for the most strict of police to stop all murders, and to the loss of any privacy and personal liberty from the government.

I am not trying to force a false dichotomy because of a movie, but just illustrating that you have to choose a foundation from which to build your government on. One pure concept for which all others support. I think most liberals favor equality as this primary tenate, and most classical liberals favor freedom, and modern conservatives safety/"morality". Which on is right, imposable to know. However, from a mathematical outlook, the one that gives you the highest degree of all 3 would be optimal to satisfy the most people. I, for one, think freedom gives you the most ability of those things above.

You also create a moral hazard by restricting freedoms. More people might die of drug abuse if it is legal, but those are people who chose to do drugs. What about the entire countries who's populations are in fear of gun touting drug lords? What about the thousands that have died in drug related crimes, I mean innocent people here dying in drive bys and the like (which is over 10k per year in just drive bys). I am not ok with that. But since it is law, I have to be. It is me locking people up and throwing away the key.

>> ^quantumushroom:

With apologies because Netrunner isn't here to comment on his comment:
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It does seem like the right-wing consensus will be to just double-down on the original racist dog whistle, rather than shift to one of the others they've tried out since 2007.

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Stop hiding behind your extremist rhetoric and engage in an ACTUAL dialogue with left leaners and you'd realize that we all want the same thing.
>>> It's sad that demanding a reasonably-sized government answerable to the Constitution is now considered "extremist".

I'm easilly summoned, just put an @ sign in front of my name, and I'll appear.

I don't think living up to the Constitutional requirements are "extremist", what I think is that Obama met the legal standards all the way back when he got on the ballot. I think the witch hunt we've seen the right go on has pretty obviously not been about the Constitution, but about the refusal to accept the legitimacy of a black Democrat being President.

I'm sure for some people it's more about the "Democrat" half than the "black" half, but it's never really been about the documents or the Constitution.

>> ^quantumushroom:
The left views free market capitalism as exploitive and evil (to an extent true) while "my" side sees it as the fastest and most efficient way to lift people out of poverty. It's impossible to argue anything without common ground, and the reality is, not everyone in life ends up a winner, due to poor choices, heredity or plain bad luck. It's not government's job to right every wrong.

I think a lot of the problem I have with the right is that they see distributive justice and market prosperity as being mutually exclusive, and that there's some a priori reason government shouldn't be about righting every wrong.

Personally, I think markets are a good thing on the whole, and I wouldn't get rid of them. I think the difference is that when they lead to human suffering, I think that's a black mark on markets as a societal mechanism, while on the right it seems like if the market causes a human to suffer, that human should have a black mark on them. It comes across to me (and probably most liberals) like some weird superstitious cult: "he got laid off when the recession hit, therefore we should not give him medicine when he gets sick for fear that it would anger the gods of moral hazard."

I think the only reason to shy away from trying to have government "right every wrong" would be over practical concerns -- I don't think we can always properly recognize every wrong, I know that we can't substantively help with them all, and I do recognize that government is still comprised of fallible human beings who might do stupid or immoral things. But, if there's a clear way to recognize them, a straightforward way to help, and we set up reasonable checks and balances against stupidity or evilness, then I see no reason not to try it out.

@ghark

Ok, so you are saying that Ron Paul is secretly working for the mainline Republican party? Interesting, I don't think he is doing a good job. Let us examine this. One, he has run as a third party candidate. This not only undermines the republican party entirely, logic dictates that his voter pool will come, by in large, from the republican pool... further undermining it.

And then you point out his voting record...the very evidence of him standing out against his party via decades of standing for his ideals. You twist that evidence to support a conclusion of indifference through effect. That, because what you are doing hasn't gotten the results you wanted, you have failed. In a certain since, this is true, but if it is the only fight you can fight, it is worth fighting for. That is an opinion of course, and one Dr. Paul obviously shares, as he has frequently said that he only ran for president because his pool of constituents said he should, he had no great desires to. Blaming Ron Paul for the 200 years of political development on capital hill is lunacy.

To me, it really seems like you have your heart set on hating Paul based in nothing, an irrational position based on emotion. If a man striving after his ideals for 20 years, never compromising, or throwing in the towel, and managing to come to moderate popularity against very entrenched powers working against you daily doesn't move you to sympathy, I don't know what will. Dennis Kucinich is such a man on the other side of the political equation from me, but I respect his purity. I don't understand how you can not. It seems sort of bigoted.

The reoccurring theme of your anger seems to be denoted at some of his comments on the oil spill. Here is a great interview of his giving his semi-support for Obama, like a true republican. He also talks about the moral hazard [government] created by totally dismissing the property rights of fisherman in the area, and the flaw of [government] limiting the liability of corporations responsible for the oil spill. From what I heard, he isn't defending BP anymore than he logically should for something that is, indeed, and accident. Do you think BP did the oil spill on purpose? Was this a plan by the Obama administration to have a great disaster to recover from.

His ideals have made HIM popular, not the republican mainstream. This is evident by republicans booing his victory in the CPAC during 2010 and 2011. While he might drive some to the republican party, they are people the main republican party doesn't like, he is causing a revolution within the party, changing the system from within. You asked how is this going to be fixed, this is how.

"If a country can't save itself through the volunteer service of its own free people, then I say : Let the damned thing go down the drain!" - Robert Heinlein

I'm more inclined to believe this narrow view of politics that anything else.

People do vote on narrow issues. When their union is saying that party X will prevent their job from being outsourced, the choice is clear. When party Y offers generous handouts to a particular constituency they lap it up. Last election here in Australia, a coworker told me she voted singlehandedly for a particular party because they provided more generous maternity benefits. When it comes down to it, people have neither the time, effort or often the desire to analyse and determine the utilitarian option. Cynical sure, but just about everything from my experiences has supported this view.

Capitalism as a system, is built on incentives. Correctly calibrated with the right regulatory adjustments to prevent malfeasants like pollution, moral hazard and other negative externalities, it works incredibly well.

I think the same thing should apply to politics. For all intents and purposes that's what (a representational) democracy is grounded in anyway. Elected officials act in the interest of their constituents because that's what gets them elected. When, as in the US, campaign contributions (as a result of the almost limitless campaign financing rules) play such an important role, incentives are skewed. Curtis seems to draw the distorted view that adapting politics to a more capitalist based system implies surrendering its authority wholly to private companies when this is simply not a fair representation of game theory which on its pure theory alone implies or suggests nothing of the sort.

I really like Curtis's work, it often provides a very well thought out philosophy grounded in reason but I think he tends to oversimplify and draw swathes in describing complex issues.

@BansheeX I think anyone who promotes the idea of a return to a gold standard has to realize that deflation is just as bad, if not worse than inflation.

What we're seeing right now in the economy is the effect of mere disinflation (i.e. a drop in the rate of inflation), and the result is lots of unemployment, and very low investment in actual economic activity because it's far too attractive to hoard cash (or more accurately financial assets so safe they're as good as cash).

Part of how you break out of that cycle is to create an expectation of inflation, and you have no hope of that under a gold standard, because you can't increase the money supply. In fact, you're guaranteed to see a steady rate of deflation whenever your population grows, or your economy tries to expand and that will put a drag on growth.

I don't think there's much of a case to be made that the Fed is unconstitutional (and what case there is rests on the word "coin" carrying a lot more weight than the phrase "regulate the value thereof" which follows it). Even if some SCOTUS ruled it unconstitutional, you'd see an amendment to the Constitution passed before you can say the phrase "the Senator from Goldman Sachs". Like Cenk said, our government is nothing but quick and efficient when it comes to serving the interests of the rich and powerful.

Which ultimately is what I think Cenk said that carries the most weight -- the problem isn't that the Fed exists and has the power to do things like this, it's that the actions it takes are quick and decisive when banks and investors are in trouble, but regular people not so much.

In this case, the Fed bought a lot of toxic assets at face value. I like this a lot more than Congress authorizing treasury to do the same thing, because unlike Treasury and Congress, the Fed can just print the money rather than borrow it. We don't have to pay interest on those dollars to anyone, and we don't need to collect them back with taxes, either. We might see inflation, but right now inflation would be good for the economy.

What the Fed could have done instead is print up money and give it to people to pay off their mortgages. In effect it could still do this by just writing off the toxic assets it holds, and not foreclosing on the mortgages it has on its balance sheet. It may still do this, and I suspect it will have to for some percentage of them. I also expect right-wing people to bitch about "moral hazard" and lazy parasites mooching off the producers in society if/when it happens.

Ultimately, the only downside to any of what the Fed is doing is that it might lead to inflation. But so far nothing it's done has created even the slightest increase in the year-over-year inflation rate, which is already well below the 2% target. Furthermore, all market indicators are predicting inflation of essentially 0% as far out as 7 years, even though the scale of the Fed's actions are public knowledge.

I've said it before and I'll say it again, gambling is a shitty metaphor for credit default swaps.

The only thing that credit default swaps do is create a mechanism for transferring risk. To state the obvious to obscenity, it doesn't force anyone to take that risk, certis parabis it doesn't inflate the overall amount of risk that banks or lenders take on and then resell unless there are willing 3rd parties people to take on that risk from them.

The fact is, credit default swaps were a financial innovation. Anyone who makes any form of investment from 'risk-free' government bonds to venture capital is exposed to some degree of risk, and just like how most industries producing physical goods specialise in products, it makes sense that those who are particularly good at analyzing risk would be given the opportunity to analyse good investments and take on that risk for them if they were confident that they would not fail, or vice versa.

THAT was where the problem started. Simply put, the likes of AIG did not correctly factor in the probability of house prices falling. They sucked at what they were supposed to specialise in. In the end moral hazard, ultimately the critical importance of a massive international insurer among other financial firms in keeping the world economy puttering along was what required them to be bailed out.

Ironically though it turned out that while companies like AIG were terrible at risk management - government regulation, prudential supervision and policies for dealing with delinquent banks were worse, which ultimately meant the buck was passed down to taxpayers and so on ...

Now, how you can turn those simple facts on their head and blame a financial instrument that is designed to manage risk is beyond me.

It's like blaming a seatbelt you didn't use in a car accident.

They did inflate the currency. The definition of inflation has nothing to do with the value of the currency. It has to do with the quantity of currency. The actions they've taken have increased the money supply. That's what I meant by the dollar is being irrationally overvalued. The markets haven't priced in their actions yet.

We do agree on the houses however. Oddly enough, that particular form of recapitalizing the banks was referred to as "moral hazard." So if a homeowner can't make good on his liabilities, bailing him out is "moral hazard." If a bank can't make good on its liabilities on the other hand...

>> ^NetRunner:

>> ^bmacs27:
The fed can do little to remedy any of these problems, other than maybe inflating the currency so quickly that suddenly that salary everyone is used to making is palatable to employers. The fact is, they've already done that, it's just that the dollar is still irrationally overvalued (against, for instance, the yuan).
I think I'd characterize that as they tried to inflate the currency, but it didn't work.
Totally agree about buying up the houses though. Back during the TARP debate, that seemed like the most moral way to go about stabilizing the banks -- help out the homeowners, and thereby stabilize the banks.

@blankfist, since you seem to want my thoughts on this (but for some reason, wanted to edit the comment to look like you were just clearing your throat), I'll give you my rebuttal.

I'll take his three points in reverse order.

#3 about regulatory uncertainty is one of these universal conservative economic fantasies. There's no evidence that this really has any kind of macroeconomic effect. Certainly the usual conservative and business advocacy groups always get a laundry list of businessmen to all line up and say how they won't be able to function if they have to pay compensation to workers injured on the job, have to check to see if the products they produce are poisonous or otherwise unsafe, can't dump toxic chemicals into lakes and rivers, can't use slave labor, etc, etc. They always fight against efforts to stop them from being able to leverage negative market externalities for extra profit.

#2 The Yahoo Finance link itself debunks this, because what Schiff says is a flat-out lie. Here's what that link says:

In contrast to Schiff's warning, the law does the following, according to Reuters:

“The bill would set up an "orderly liquidation" process that the government could use in emergencies, instead of bankruptcy or bailouts, to dismantle firms on the verge of collapse.

“The goal is to end the idea that some firms are 'too big to fail' and avoid a repeat of 2008, when the Bush administration bailed out AIG and other firms but not Lehman Brothers. Lehman's subsequent bankruptcy froze capital markets.

“Under the new rule, firms would have to have 'funeral plans' that describe how they could be shut down quickly.”

Liberal critics also question whether the bill addresses "Too Big to Fail", but they're talking about limits on the overall size of banks.

#1 I've covered this fantasy of Schiff's about the nature of the crisis before. Here are two quick points I always make, which you never respond to: low interest rates don't create moral hazard, and Fannie and Freddie weren't even remotely the biggest players in the subprime mortgage-backed security space, much less the chief source of moral hazard.

All the moral hazard was created by the financial industry thinking it had found a way to insulate itself from the risks involved in bad mortgages using CDO's and CDS's -- without relying on government backing of any kind.

I'm happy to go into much more depth on #1 if you like, but you've never really demonstrated that you have any interest in listening to what I have to say on the topic with anything like an open mind.

Oh, and liberals agree that this bill doesn't really do enough in addressing the underlying problems that led to the crisis (the real ones). Basically, they say there's not enough rating agency reform, no leverage caps on investment banks, no Glass-Steagall separation of traditional and investment banks, no commitment to break up banks that grow beyond a certain size, etc.

In fact, from what I've read, the strongest part of this bill is exactly the part Schiff lied about -- it should prevent future Congresses from being forced to do taxpayer-funded bailouts. Instead, it'll be like the standard FDIC process for failed banks, only scaled up to deal with corporations of this size and complexity. Under that process, the bank shareholders, owners, and management get wiped out and fired, but the bank's creditors and depositors are made whole. The bank fails, but it doesn't take a huge chunk of the economy with it when it goes.

I lose interest the moment someone says greedy bankers. Bankers are no more greedy than any corporate entity. Like any element of a capitalist economy they provide a benefit for someone and derive a benefit themselves. The term greedy gets lumped on them for two main reasons:

1: Because their benefit is hard to concteputalise: that they're effectively redistributing capital into lucrative investments and taking a slither out of the borrowing and lending rate spread, thereby creating jobs and growing the economy. Everyone is impacted by this, but indirectly enough that they don't realise it. As far as investment banking goes, and the argument that they're gambling, again it's unwarranted. In every derivative transaction that involves say a farm producer wanting to transfer their risk away, there has to be a speculative counterparty to take this on. The risk doesn't disappear after all. Without speculators, this would be impossible. As far as endangering the entire economy, see point 2.

2: They make arguably excessive profits and have grown to a tremendous size relative to other aspects of the economy. You could make various arguments for why this is case. For one, you can say they have been exploiting moral hazard, the expectation by themselves and their investors that they will be bailed out if they were to collapse en-masse, thus allowing them more favourable borrowing rates and to take larger risks than otherwise and thereby earn higher returns as a result. The finance reform bill in the US and revisions to the Basel standards are expected to considerably address this and demonstrate that is a failure of regulation and not some inherent and idiosyncratic greediness. Any industry or firm given potential loopholes, or monopolistic market power exploits it, it has and always will be the job of regulators to prevent this just as with bank moral hazard.

Not to mention he completely goes off the rails when he starts contrasting rising finance with falling manufacturing. Two entirely different industries, where the latter was heavily impacted by free trade and automation advances and the prior wasn't. Pity, I thought the first half of the talk was altogether well done.

>> ^blankfist:

@NetRunner, don't pollute the message, homeslice. Conflating anti-poor and fundamentalism with free markets is ill-suited rhetoric.


Totally justified, "homeslice". Free market fundamentalism is a series of moral assessments that say the poor are poor for good, market-determined reasons, and that any attempt at charity is a horrible attempt to pollute the market by creating moral hazard.

The vast majority of people who are self-described advocates for the free market often use this line of reasoning against any attempt to engage in aid for the poor -- it's not that helping the poor is morally bad, it's just that it's only going to create dependents, rather than do any real good for people. In short, the argument goes, it's always doomed to fail.

You yourself rant this kind of thing at me on a semi-regular basis.

Do you not notice that this argument is fundamentally about assuming that the bulk of the poor are just that way because they're lazy, and trying to give them aid will just reward their laziness?

@Stormsinger, I hear ya, and I sympathize, but Stiglitz isn't one of the people who caused the crisis, and he has definitely been pissed at the way the bailouts were structured.

I think the point is, from a macroeconomic point of view, even a bailout that involves bad moral hazard (protecting bank CEO's jobs), can still be good for the economy, even if you would've preferred to do it in a way that would've insured that the people who made the mistakes were actually held accountable.

He's also very much in favor of re-regulating the banking industry.

This clip is just him responding to teabaggers (and Ron Paul supporters) who think everything would be fine now if the banks had been allowed to go down in flames. Simply put, it would've been much, much worse.

What I've always wondered about is really how many of these so called independents are really conscientiously impartial and making impartial decisions with fair consideration for both the parties' policies, and how many are simply swing voters, ready to be swayed by the next fear campaign or dumbed down populist argument.

Clearly with health care he's effectively lost the latter and made the prior ambivalent, with this move he has the chance to snap up both. Then again, everything is about posturing. Financial firms make up a highly disproportionate part of the economy, and both their lobbyists and Fox News will make every effort to vilify the taxes to be imposed on bank liabilities, whereas I'm sure any discussion on the proprietary trading ban for deposit banks will vanish in an instant.

Also the fact is, it is true that taxing financial firms will likely see the costs passed down in the form of higher and tighter lending rates. If they manage to tie that together with unemployment especially then it may be very damaging.

On the other hand, there's certainly reason to argue that this tax will fund any future financial calamities and will downsize the risk and cost of potential moral hazard in the future. While deleveraging banks and forcing them to keep larger capital requirements is also an option, only a financially crippling requirement would have prevented banks from getting in trouble in this financial crisis, so in that sense a fund creates an added level of risk prevention.

By bringing down prices. Insurance is for catastrophic needs, not standard care. If you remove standard care from the picture and boil 'insurance' down to catastrophic needs then it becomes easily affordable by anyone except for the most extreme, hard-luck, down-and-out exceptions. The needs of that tiny percentage can be handled easily without a massive, national, one-size-fits-all monstrosity. Such needs can be managed entirely with private charities, community care, or state/municipal programs.

The costs for standard care will rapidly decrease to proper market levels once the mentality of 'insurance covered' is removed. People will pay for what they need and negotiate directly with providers. Costs will lower to what the market can support - not what 'corporations' dictate. It happens every time like clockwork.

You express remarkable faith in the free market there. How are you so sure what would happen if we let the market have free reign? The economy is a highly complex system, and even professional economists have difficulty understanding it. But some guy from the internet really knows how it all works then? I for one am not willing to gamble with people's lives and health on the basis of unproven free market theory.

you seem to be embracing the "moral hazard" theory of health insurance, according to which health care costs are driven up because people with insurance purchase more health care than they otherwise would have. This theory is not universally accepted in the economics profession.

“Moral hazard is overblown,” the Princeton economist Uwe Reinhardt says. “You always hear that the demand for health care is unlimited. This is just not true. People who are very well insured, who are very rich, do you see them check into the hospital because it’s free? Do people really like to go to the doctor? Do they check into the hospital instead of playing golf?”


I recommend reading this: http://www.newyorker.com/archive/2005/08/29/050829fa_fact

Yes - but the equation has been altered by a government mandated series of insurance programs that meddle with the marketplace. HMOs only exist because of government edict. Insurance programs then had to start covering "standard" health care instead of just catastrophic care. In order to make that possible, they had to start developing new programs & rate systems that were financially (A) feasible and (B) profitable. Other GOVERNMENT laws prevented competition across state lines, and a bunch of other crap that turned 'insurance' into a hodgepodge of arcane, impenetrable 'covers everything' baloney as opposed to a simple "catastrophic care" transaction.

Um, at no point did you explain here how the market would help people with pre-existing conditions. Probably because it wouldn't. I'll grant you that our current system is probably less efficient than a free market one would be. However it doesn't follow from that that the free market is the solution to everything.

The point is that with freedom, almost everyone will be able to afford catastrophic care - and the needs of the remainder will be well within the grasp of private, municipal, & state means.

You mean you personally think that everyone will be able to afford catastrophic care, but you don't know. My point is that the freedom for rich people to buy yachts is not as important as people's basic health and well-being. So lets tax the yachts and make sure that everyone's needs are taken care of, like they should be in any civilized society.