Asessing Obama's New Regulatory Framework

In an oped today in the Washington Post, Obama's two chief economic advisors laid out the principles for the administration's new regulatory framework. There are five principles.

Here it is:

“Fifth, and finally, we live in a globalized world, and the actions we take here at home — no matter how smart and sound — will have little effect if we fail to raise international standards along with our own. We will lead the effort to improve regulation and supervision around the world. “

—

My response, UP YOURS.

A point that seems to escape many commentators is that major expansions of government power in this country tend to occur as a result of failure to regulate systematic risk: FDR is the most dramatic example, but Barack Obama could well be another.

What you get real world in the absence of the ability to successfully regulate at least the worst systematic risk is not free-market utopia, but rather major financial crashes which result in the election of Democratic Presidents - so real-world your alternative is not between total statism and totally free markets, your optimal alternatives lay between between a degree of regulation of systemic risk that prevents massive periodic economic reversals at the cost of economic efficiency, and unregulated systemic risk resulting in periodic economic reversals reversals which guarantee the ratcheting up of government power.

In this situation creating reasons why regulation of systemic risk is impossible IMO is to create reasons why the expansion of government power is inevitable - the trick for conservatives is instead is to decide how to achieve the optimum balance between regulating systemic risk and loss of economic efficiency - and a world of large capital markets, that it inevitably means large government regulators, like it or not.

Makes sense to me, part of the problem our own economy is having results from the fact that there was collapse of regulatory standards in many overseas economies.

In the case of lending for residential properties, for example, Ireland and Spain come to mind as examples of systems in which the regulatory failures were even greater than our own, on the other hand in countries such as Germany, where prudent mortgage underwriting standards remained in effect, there was a much less limited housing boom and a much less damaging housing bust.

So it's not just enough to clean up her own regulatory standards, we have to hope the rest of the world does so as well, and encourage them to do so, not the least by setting a good example ourselves.

Here is the Rub. You can make all the international standards you wish, but if other countries game the rules they are worse than not having standards to begin with.

The missing link is a common culture, on which all the rules in the world stand. It will never happen. The attempts to rule the world globally will always fail. They have since the “Tower of Babel”.

Our form of government was predicated on a moral people. In the absence of that it fails. Our founders understood that.

The “World Governments” will fail for the same reason.

This isn't about "World Government", this is about voluntary adherence to accounting and regulatory standards - no one can force anyone else to adopt them if they don't want to, nevertheless because they're mutually advantageous there are thousands of international economic agreements of various sorts already in place, and it wouldn't be possible to do business internationally without them.

And sure, every country attempts to game them, or avoid them (China and intellectual property, or the US and French agricultural support policies are examples that come to mind) and the level of some standards interoperability is pretty low between some aspects of some systems ("Islamic finance" and "Western State Capitalism", for example) but that's true to greater or lesser extent in the case of any such sort of agreement, just as it's true within countries and regional trade blocs, and less-than-perfect adherence to to such agreements does not mean that they pointless, or that the participants would be better off without them.

The bigger economic entity without barriers the better as long as they share a common set of moral values.

Value the truth.

Open and defined set of government rules.

Punish unlawful action. (Law must be just)

Respect personal freedom

Respect personal property

Respect personal contracts

There are others, but this is the minimum to be functional.

—

How do you resolve these problems when trading with countries who still allow slavery, women as chattel, and lies and deceit is normal?

Admitted the current monetary system is a sham. But be careful what you wish for when you try and replace it.

Fixed static monetary system is a failure and government fiat money system is a failure.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.