Posted on 09/17/2009 9:17:28 AM PDT by parsifal
Will regulation hobble capitalism? I think the opposite is true. Properly done – and I think most of the financial regulation that is envisioned fits into this camp – government regulation of the financial industry will move the industry closer to the capitalist ideal. By capitalism, I mean where those who take the risks and put up the money get the fruits of their labor. And, importantly, where those who take the risks and put up the money actually do take the risks, bearing the full costs of failure as well as success.
(Excerpt) Read more at seekingalpha.com ...
parsy, who has said it a thousand times
Under the new Obama "capitalism" you may want to talk to the "secured" creditors in the Chrysler deal. They ain't dancing, that's for sure.
I see. I still don’t agree.
Regulation today is being used to stifle capitalism. Cap N Trade is a Cap on Prosperity.
It already has, for some time now.
The power to regulate, like the power to tax, is the power to destroy.
So some regulator is supposed to do a better job with someone’s money than the person who actually has a vested interest in what happens to that money? If the parties involved with the money want to know the costs (and it would probably benefit them to, though this can only be determined in each individual case), then they’ll do it without the need of a regulator.
Here’s an idea: stop the bailouts, moral hazard, and easy credit. People don’t take excessively extreme risk when there’s actually risk involved. Regulators haven’t stopped a single crisis before, but government action is always responsible for creating the conditions that prevent free market forces from working.
“A cynic is a man who knows the price of everything, and the value of nothing.”
—Oscar Wilde
Well, the financial meltdown didn’t result so much from a lack of regulation (small banks endure plenty of it) as from a “special relationship” between the major banks and the government. Specifically, an employer-employee relationship, where the politicians were threatened with termination if they didn’t bend the rules for their employers. Obama’s bosses at Goldman Sachs must be pleased with his performance so far. :)
Of course not. Regulation leads to fascism. Doesn't that make you feel much better?
***The flip side is that with capitalist regulation, no one can take on more risk than they are capable of absorbing.***
Are people really so ignorant of economics? In the free market, there are natural forces that keep people from taking on “more risk than they are capable of absorbing,”. No agent in the economy acts unless ex ante he believes it will benefit him. That is the check against “excessive” risk. Only the government can distort this and through implied backing should the assets go under during the boom with easy credit and subsequent bailouts with even easier credit during the bust, it has effectively eliminated the free market forces that keep people in check.
The riskier an activity, the higher the likely payout. When you take away the risk, all that’s left is the chance to make lots of money. Where do you think people are going to go when the government hands them free money?
ping
That keep “people” from taking on risks??? How about “corporations”, where the management is playing with the stockholders’ money? Do you really think Richard Fuld would have leveraged his own money 30 to 1?
parsy, who says “Wakey, wakey”
In bankruptcy courts, strange things happen.
parsy, who says you loans your money, you takes your chances
Errrr... secured creditors are supposed to be SECURE. If not, then creditors and investment capital drys up.
I agree cap and trade is “crap and played”. Read this rather longer article by the guy who wrote Liars Poker. Tell me after reading this that something ain’t wrong that needs fixing. Its about a guy, Steve Eisman, who caught on to the sub-prime thing, and made money betting against it. I like the term, “dog sh*t” he uses.
parsy, who is going to change your mind
If the stock holders don’t want to know what’s going on in the corporation, or are too apathetic to find out, or don’t have the right to know through some contract (or lack thereof) made when they bought stock, that’s their problem. If the company management wants to waste a bunch of money and run the company into the ground, that’s their problem. If both the management and the stock holders really don’t care what happens to their money, that’s their problem.
If they don’t care because the government gave them an implicit bailout when they began making risky investments should those investments go under and/or because they got easy credit, that’s the government’s problem.
Actually, you are mostly incorrect. Try this article about 25 People At the Heart of the Meltdown. I used to think highly of Greenspan and Phil Gramm. No longer.
http://www.guardian.co.uk/business/2009/jan/26/road-ruin-recession-individuals-economy
Note the ones who worked their little booties off trying to keep the derivatives de-regulated.
parsy, who is disgusted with Phil Gramm
I like his deathbed quote, “Either me or this wallpaper has got to go.”
parsy, who asks if you know Wilde traveled in the Wild West
I’ll read stuff, but its not going to change my mind. =o)
Yeah, and when they start deleveraging, it becomes a problem for all the rest of us. Your theories, if carried to their logical conclusion, would deprive us of police, under the theory we could all just carry guns. It might work, but we would sure have to be dodging bullets a lot. Intelligent people, set up police forces. And gov’ts. And have rules.
parsy, who says your kind of anarchism doesn’t work
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