Wall Street Occupation

[weaponsfree 46]

I would take it a step further. I would say the drive toward the maximization of power is the fundamental essence of life itself, not merely human life. This is why the weak and the unlucky are in favor of the of the subversion of liberty and forceful redistribution of wealth: They could not attain it otherwise. The problem with this, in my view, is that it necessarily requires that we hold back (or outright destroy) the most excellent (meant literally, as in someone who excels) members of our society. The rationale seems to be that this is a worthwhile sacrifice in the quest for equality and the common good; however, I put it to you that historically that which has been common has never been good -- the very idea of "good" is derived from a quality that is considered above-average. The concept of "common good" is thus self-defeating; the best we can hope for in a system in which equality is considered to be the ultimate goal is utter mediocrity.

Of course rewards for labour are necessary, and the market system is a pretty good way to divide labour. But the system proposed does not help excellent or productive members of society. It only benefits those who offer marketable or profitable skills. So forget most teachers, firemen, and all the people working on the CERN collider. There are highly productive and hard working people who do not happen to care about accumulating wealth or power, and they will suffer under a system that only protects accumulated wealth. The obvious result is that those interested in power and wealth rise to the top, and productive members of society as well as the "weak and unlucky" become more dependent on them.

There is no causation between accumulating power, and progress as you seem to define it. Progress happens despite the machinations of the powerful, not because of it. Most of the leg work done in advancing technology, in educating our youth, in opening the door of opportunity come from people who simply want to produce, to create, to better. The system you propose would allow the powerful to resort to feudal agriculture if need be, regardless of what is produced, as long as the rule is obeyed: I must concentrate as much power as I can, through whatever means, and I must hold on to it at all costs. Musicians, engineers, teachers, firemen, electricians, physisists, doctors, all do what they do because they want to do it. Their motivations are rarely in the accumulation of wealth. That particular desire is the specialty of only a few. From Caesar to Marcus Goldman, to the warlords of Somalia, these few have sought out power and influence. The rest of society continues to advance despite their sometimes necessary, but more often devastating actions.

This is true in the smallest tribe to the biggest civilizations that ever existed. I do not think this minority should have undue power, nor do I believe their collective self-aggrandizing opinion that their search for power is the engine of progress.

[gammadust 12]

Banks like making profits.

They didn't embrace the sub prime market because the sub prime market is too high risk.

They were forced.

So you were indeed refering to the "Community Reinvestment Act" thing... the problem is that THAT does not enforce anything, it is an "encouragement" an "incentive":

The Community Reinvestment Act is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods, consistent with safe and sound operations.

(...)

Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution's individual circumstances. Nor does the law require institutions to make high-risk loans that jeopardize their safety. To the contrary, the law makes it clear that an institution's CRA activities should be undertaken in a safe and sound manner.

source

The stated "enforcement" if one can even call that is:

The CRA requires that each insured depository institution's record in helping meet the credit needs of its entire community be evaluated periodically. That record is taken into account in considering an institution's application for deposit facilities, including mergers and acquisitions.

source

...a track record of compliance. (WOOOO, scary enforcement LAW) If I have a bad track record of credit I am also blacklisted to apply for other financing. Would it be fair to not require the banks to comply the same way?

It's no good you paying me back 10% a year or even 100% a year, if you can reasonably be expected to default before I get my investment back.

That's not profits from high intrests rates, that is a massive loss.

Banks won't do it.

They have to be forced.

Wrong premise again.

My local lender, Northern Rock was wiped out in the America Sub Prime market.

Investment banks and High Street Banks are not seperated here.

All my local lenders in this country either operate in the U.S. or had lent money to banks that did.

In fact most banks around the world had. America has one of the biggest banking sectors world wide.

Ok...

Credit default swaps is not the reason the banks collapsed. It is the reason banks on the other side of the world collapsed instead.

Bad debt is the reason the banks collapsed. Who sold who which bad debt and who was left holding those bad debts when the music stopped doesn't change that it was the American Sub Prime debts that were the bad debts in question.

I haven't claimed that. My exact quote is:

Anyways, the loan banks, given the new regulation* were risk free through the selling of CDOs, getting rid of the risk to investment banks which by their turn got rid of it through CDSs (Credit Default Swaps) leaving the risk to investor funds and insurance. This was the scheme.

CDSs are what made AIG collapse (insurance), and their inability to payback the investors wich insured their CDOs with AIG, in a market "free" to insane levels of speculation. The "junk" CDOs rated AAA, in a mixed bag of good loans, became perceived by the market for what they are worth, their real value, which was criminaly inflated by Rating Agencies, bringing good ones along with it. (in other words, it's when those arrows turned red that AIG iniciated the domino effect throughout the system. Everybody looses but those privy with the scheme and in a position to benefit from it)

I previously posted you the name of the relavant law. My mouse finger is old and arthritic, so I'm sure you won't mind sourcing your own research this time.

Sory it was hard for me to accept that was the law you were refering to, because THAT one does not enforce any significant penalties as I have sourced previously.

We do have a voice. I voted on any number of decisions the banks I am invested make. Particularly during the crisis.

But yes, my vote is not the ruling vote, it is equal in voice to the amount of shares I own.

I find the public companies I am invested in to be vastly more democratically accountable to me than say the country I live in, or the country you live in.

I am not making an apology of National Banking over Private Banking, by current standards they both lead to nationwide and globalwide injustices. And if in practice they both don't serve direct public interest (the first because it fails on its mandate, the second because it is not supposed to), I am left theorizing about what could be that system which upholds justice. That would be one where management decisions are processed through democratic means. Definitely NOT "One Dollar One Vote".

Any decision, wherever its made, about whichever topic, which influences society to a sufficient extent should be left to societies' means of consensus building.

Fundamental principle here, and also one which lays foundation for Politics, nevermind what that means in practice today (the concept is as perverted as it can be).

What are you talking about?

The banks wrote down 30% of their percieved value worldwide during the crisis.

3% ROFLMAO.

Try 60% and you will be closer to how much I expect to have lost before this debt crisis ends.

I was talking about a 3% on the leveraged value. With the latter (~30:1), a mere 3% loss of value is sufficient to wipe out banks assets. Therefore the critique of these insane leverage ratios. Even the banking sector recognizes the requirements of core capital in sufficient amount against operating financial values. Herein lies the REAL danger of having a mergers of the commercial with the financial banking system, previously prevented to occur with the Glass Steagall Act which was instated after the Great Depression with exacly this in mind. This was a known danger. See also related Basel accords, which estabilish the failsafes for when things turn bad.

Very very few banks have collapsed wiping out all the investors savings completely.

And in the cases where the government did intervene, they completely destroyed working banks in the attempts to attach them to failing banks and hence avoid paying the bailouts themselves.

Don't for a minute think that banks were wanting bailouts form governments, they weren't they wanted them from other banks. Governments add to many pre-conditions. Too many regulations and petty vengeful (but crowd pleasing) punishments.

"Crowd pleasing punishments" you say? Crowd took the punishment by bailing them out with their tax money, NOT the CEOs and Shareholders which took both their bonuses and annual dividends for years until sh*t hit the fan.

"Don't for a minute think that banks were wanting bailouts form governments..." you are in blatant denial, unless by "banks" you mean their management and shareholders alone which already had benefited. Depositors which would lose their savings otherwise were legitimately concerned, and to some extent justified recipients of the bailout.

Edited October 12, 2011 by gammadust

[st_dux 26]

Really? Fundemtal essence of life? I don't seek maximum power in that context -but rather peaceful equilibrium in as many aspects of life as possible. Get rid of laws, rules, constraints and regulations -and the most viscious man in town will murder his rivals -thereby maximizing his power.

It's an unconscious impulse that can be sublimated in a wide variety of ways. I doubt very much that many people in our society today consciously think of themselves as "seeking power" in the traditional sense, yet I can think of no other impulse that could consistently explain our behavior. Even the will to live is occasionally met with blatant contradiction (think martyrs).

Your hypothetical situation of lawlessness is correct, of course, but humans (and other social animals) have known that individual power can be increased further by mutually agreeing with others of comparable physical strength to refrain from violently attacking one another since time immemorial. The brute who attacks all and takes all is quickly subjugated by those who use their intelligence and communication to cooperate.

The weak -lol! Maybe different people have different primary drives in life -also wishing for the greater good of their society over personal net worth -a wild concept I know. When it is fact that the wealthy are getting richer and widening gap grows between that "elite" and the rest -asking for more in taxes ain't gonna destroy the rich -it may irk them tho.

I should have emphasized unlucky more. It's quite true that people who would meet the definition of "strong" in one or several capacities are sometimes disadvantaged nevertheless. Moreover, a strong argument could be made that such a distinction is rather unnecessary, as how strong or weak someone is to become is ultimately a matter of chance anyway: No one is in control over his inherited genetic makeup or environmental situation (which encompasses several factors such as geographical location, inherited wealth, parental situation, etc.), and it is the combination of these factors and nothing else that leads all of us through the paths of our lives.

There are many people, especially today, who fancy themselves as sacrificing personal gain for the "greater good" of society at large; however, I would argue that it is impossible for anyone to know what is good for everyone because "good" is a relative concept. Furthermore, you'll notice that people who wish always to sacrifice for others generally expect recognition for it (and not always explicitly). It is but another perceived route to power (despite the fact that it is rarely thought as such consciously).

As for taxes, I agree that much needs to be reformed. Most importantly, tax loopholes that allow huge corporations like GE to pay next to nothing in taxes should be closed. Not only does this promote crony capitalism and political corruption, but it also means that these companies are wasting considerable resources on hiring accountants to game the system instead of working on improving company performance. This is not capitalism, and it has been able to occur only because the government has too much power.

Those who excel in their fields don't always have monetary success as their primary motivating force and those with huge coffers are't always the best at what they do nor the best quality people.

Absolutely true, although I must respond to your first point that money isn't the sole source of power. As for your second point, while it will always be true to some extent, the number of people who can get by with grossly mismanaged assets is diminished most in a system of laissez faire capitalism. The less the government is able to assist its corporate cronies through "economic regulation" and the like, the more the businessman is required to meet his customers' demands in order to succeed.

Edited October 12, 2011 by ST_Dux

[Baff1 0]

"Crowd pleasing punishments" you say? Crowd took the punishment by bailing them out with their tax money, NOT the CEOs and Shareholders which took both their bonuses and annual dividends for years until sh*t hit the fan.

But the handful of banks that were bailed out aren't the only ones being punished are they?

A whole load of completely innocent repsonsable and entirely blameless banks (and their CEO and shareholders) are all being punished too.

All those banks, they pay tax money. They pay in more tax money than anyone else.

They didn't take it out, and the banking sector as whole, does not take it out. It is quite probably the single largest tax contributor you have.

---------- Post added at 08:35 PM ---------- Previous post was at 08:28 PM ----------

"Don't for a minute think that banks were wanting bailouts form governments..." you are in blatant denial, .

You are in blatant ignorance.

It is a matter of historical record that I voted against my banks accepting government bail outs. That most shareholders did.

They tried to force Barclays to take one, but Barclays stalled them until it got private investment. I voted for that too.

Almost all banks refused government bail outs.

I prefer one dollar one vote. That way you don't get a bunch of numpty student types telling people who do know how to run banks, how to run banks.

I don't want society being run by nihilisits. Sorry.

Why should I work my arse off to have they who do nothing have a say in what I do with my money?

If you aren't willing to contribute to society then you should have zero say over what should be done with said contributions.

You don't get to opt out of the work and opt back in for payday.

If you want a say in the running of banks, then contribute towards them.

There is nothing undemcratic about paying your own way in life. Nothing undemocratic about not giving people who don't participate in a society a say in it's governance.

Every single member of your country is legally allowed to participate. They all have the same equal opportunity.

If you choose not to take it, then you have disqualified yourself.

Put up or shut up. Your money where your mouth is.

You don't have a right to my money. There is no concensus I'm willing to accept taking control over it.

I'll destroy everything I own rather than allow that.

You may think you are "socially" justified in stealing my stuff. But I don't and I can and will prevent you from doing so.

The only way you are going to get it is if you work for it yourself. You aren't going to gang up and just "vote" it off us. It doesn't work that way.

Edited October 12, 2011 by Baff1

[gammadust 12]

But the handful of banks that were bailed out aren't the only ones being punished are they?

A whole load of completely innocent repsonsable and entirely blameless banks (and their CEO and shareholders) are all being punished too.

I give in certainly here: where banking institutions which were not involved in the scheme, and indeed were also losers. They were in loss as much as the society as a whole was due to the systemic nature of the scheme. All power to you, and I would recommend you to hit the streets werever you are, because indeed (if this is the case) you have reasons to be upset, don't take the wrong route here and defend the deregulation system which enabled this crisis.

All those banks, they pay tax money. They pay in more tax money than anyone else.

They didn't take it out, and the banking sector as whole, does not take it out. It is quite probably the single largest tax contributor you have.

Yes, nominaly, they're the biggest tax contributors. BUT as a percentage on the dollar they pay tax that ammounts to around 12% of income in contrast with smaller income businesses which pay from 25% to 40% depending on the fiscal regime.

In reality banking sector pays less taxes then remaining businesses (small and big), about half then everyone else. And with an activity with brings much more risk to a society stability as the current crisis demonstrates.

"Don't for a minute think that banks were wanting bailouts form governments..." you are in blatant denial, .

You are in blatant ignorance.

It is a matter of historical record that I voted against my banks accepting government bail outs. That most shareholders did.

They tried to force Barclays to take one, but Barclays stalled them until it got private investment. I voted for that too.

Almost all banks refused government bail outs.

If you keep selecting what suites your needs and what not from my quotes of course I make less sense, please don't do that. Full quote:

"Don't for a minute think that banks were wanting bailouts form governments..." you are in blatant denial, unless by "banks" you mean their management and shareholders alone which already had benefited. Depositors which would lose their savings otherwise were legitimately concerned, and to some extent justified recipients of the bailout.

The removed part makes all the difference and also distinguishes when is a bailout justified and when it is not. If you were a shareholder in bank did you pay any compensation for the depositors loss? Because, you know... you were managing their money!

I prefer one dollar one vote. That way you don't get a bunch of numpty student types telling people who do know how to run banks, how to run banks.

I don't want society being run by nihilisits. Sorry.

Why should I work my arse off to have they who do nothing have a say in what I do with my money?

If you aren't willing to contribute to society then you should have zero say over what should be done with said contributions.

You don't get to opt out of the work and opt back in for payday.

If you want a say in the running of banks, then contribute towards them.

There is nothing undemcratic about paying your own way in life. Nothing undemocratic about not giving people who don't participate in a society a say in it's governance.

Every single member of your country is legally allowed to participate. They all have the same equal opportunity.

If you choose not to take it, then you have disqualified yourself.

Put up or shut up. Your money where your mouth is.

You don't have a right to my money. There is no concensus I'm willing to accept taking control over it.

I'll destroy everything I own rather than allow that.

You may think you are "socially" justified in stealing my stuff. But I don't and I can and will prevent you from doing so.

The only way you are going to get it is if you work for it yourself. You aren't going to gang up and just "vote" it off us. It doesn't work that way.

I will simply not address this rant, because I never claimed anything of the like, you are simply extrapolating carelessly what I have said. Put some sense in your words, one topic at a time, and I will be pleased to share my opinion on it.

Edited October 12, 2011 by gammadust

[froggyluv 2136]

It's an unconscious impulse that can be sublimated in a wide variety of ways. I doubt very much that many people in our society today consciously think of themselves as "seeking power" in the traditional sense, yet I can think of no other impulse that could consistently explain our behavior

Yes but these drives can happen in degrees as well as be re-prioritized if indeed they are animal nature. Some want it all, other want enough to take care of their families and not seeing their neighbors suffer. Others are ok living off the state or charity of others. Freud would say all"power seeking" is done to attract the best or most quality mate(s). In todays world quality mate getting is much more complicated and while having "more power" is without question a help, a young slacker prettyboy on a moped may have more success then world class business game changer.

but humans (and other social animals) have known that individual power can be increased further by mutually agreeing with others of comparable physical strength to refrain from violently attacking one another since time immemorial. The brute who attacks all and takes all is quickly subjugated by those who use their intelligence and communication to cooperate

.

A fair point yet is missing one key ingredient -entrenchment. While the dumb, strongarming brute may see his dominance challenged from the get go, the intelligent brute RE:devious, will have built alliances, rapidly work to create favourable conditions be it laws, societal constraints etc.. to ensure he stays around a bit. This can be seen with our own 2 part political system, in which although having intelligent detractors, find they are pitted against an avalanche of resistence from the status quo. It's not that far of a leap for some to believe the same exist for the "money elite".

There are many people, especially today, who fancy themselves as sacrificing personal gain for the "greater good" of society at large; however, I would argue that it is impossible for anyone to know what is good for everyone because "good" is a relative concept

While true in it's relativity, I would suggest that even without holy books ruling us, people generally have a sense of fair and good. If a tiny ruling class have everything in abundance and the vast majority of citizens are struggling for basic needs such as food and water -the disparity is plain and known.

Furthermore, you'll notice that people who wish always to sacrifice for others generally expect recognition for it (and not always explicitly). It is but another perceived route to power (despite the fact that it is rarely thought as such consciously).

I would argue that there is a distinction between "route to power" in the context of gaining maximum assests and self empowerment thru means of helping others.

The less the government is able to assist its corporate cronies through "economic regulation" and the like, the more the businessman is required to meet his customers' demands in order to succeed

An interesting point and one I'd truly like to believe yet who is there to protect the public from Corporations who blantanly pollute our environment or use predatory lending techniques in the name of maximum profits? Perhaps in a small society when the welfare of all and the land they live on is truly a village concern -that could work. In our present day CEO living behind his gated community - it's just very hard to believe they posses those types of scruples. The only thing a dirty Corporation will listen to is the law if its members and shareholders posses no ethical boundries for the common good.

[Baff1 0]

I give in certainly here: where banking institutions which were not involved in the scheme, and indeed were also losers. They were in loss as much as the society as a whole was due to the systemic nature of the scheme. All power to you, and I would recommend you to hit the streets werever you are, because indeed (if this is the case) you have reasons to be upset, don't take the wrong route here and defend the deregulation system which enabled this crisis..

I select the parts of your post I am intrested in replying to, you can scroll back up the page if you wish to see the full context you wrote it in.

Sorry but I don't consider the crisis to have been caused by deregualtion as previously noted. I consider the opposite to be the case.

While I note that your opinions on the matter seems better considered that many others, I do not find them to be in anyway persuasive. But rather, counter-intuative. Obviously flawed.

Take note those banks that were not takers of bailiouts, did not suffer equally with the rest of society. They have been massively penalised by crowd pleasing regulation.

They have paid what every tax payer has paid and... very much more besides.

Milked by the hand of political convenience.

In reality the banking sector does not pay less taxes than other sectors.

A lower percentage of a great deal is significantly more that a higher percentage of very little.

What risk does banking bring to society exactly?

Cancer? Explosions? Radiation?

What a preposterous and inflammatory thing to say.

All those little business? All those other businesses that are not banks... They depend on banks.

All your credit cards, you games of World Of Warcraft and your online shopping. It depends on banks.

Do our car industries get bailouts. Yes. Our steel industries. Yes. Our Airline industries, yes. Our Aircraft industries, yes. Our defence industries Yes. Our farms, yes.

Do all our critical industries receive bailouts when they go askew... yes.

Do all of these recieve bailouts far more often the banks. Hell yes.

Far from being unstable, the banks are about as stable an industry as we historically know of. Some of them are hundreds of years old.

Your reaction strikes me as all a bit knee jerk.

The depositors in the banks I am a shareholder in didn't make any loss. In fact no depositors anywhere in the country lost anything.

So no, as a shareholder I didn't pay them (or myself) any money as far as I am aware.

Edited October 12, 2011 by Baff1

[gammadust 12]

I select the parts of your post I am intrested in replying to, you can scroll back up the page if you wish to see the full context you wrote it in.

Of course, but if you split a sentence on a comma you will have trouble showing you considered everything your interlocutor took into account.

Sorry but I don't consider the crisis to have been caused by deregualtion as previously noted. I consider the opposite to be the case.

While I note that your opinions on the matter seems better considered that many others, I do not find them to be in anyway persuasive. But rather, counter-intuative. Obviously flawed.

From "considered" to "flawed" in 2 steps. That is a world record. :)

Seriously though, this is definitely our main point of disagreement, no doubt, that of Regulation/Deregulation, Planned Economy/Free Market, that is some dialetics there undoubtfully. You may then note that none of the extremes is/may be suitable, Society's stability largely depend on striking the correct balance.

I claim that Regulation, in another words, Legislation helps in striking that balance. By contrast you claim that less Legislation is more helpful. Are we really talking about striking a Society's Collective Interest here or a fraction of that Society's Interest? Or none of this and you really mean the Law of the Jungle (no Law at all) - Stateless Anarchy?

Because if that is the case I wonder what one means by "Free Market". I would point out at this instant that "with Liberty comes Responsability" and our argument is even more fundamentaly divergent.

It is true that my efforts are in persuading you to be able to understand the need for legislation and regulations to help mantain a society's order and by extention even civilization, no matter the domain those responsabilities and duties are to be applied. It does not entertain me failing there.

Take note those banks that were not takers of bailiouts, did not suffer equally with the rest of society. They have been massively penalised by crowd pleasing regulation.

They have paid what every tax payer has paid and... very much more besides.

Milked by the hand of political convenience.

In reality the banking sector does not pay less taxes than other sectors.

A lower percentage of a great deal is significantly more that a higher percentage of very little.

That is why I mentioned "nominal" but not "percentage", and why is this useful destinction? Because it is the contributor entity that is put as a whole at stake depending on the percentage and not on a nominal value. What you said is just true, but very much so also in the case were the minor nominal contributor pays less but also paying 100% of its earnings, what do you think would happen then? It is self-evident that for comparison purposes in regards to fiscal contributions the relevant number is as a percentage and not nominal.

What risk does banking bring to society exactly?

Cancer? Explosions? Radiation?

What a preposterous and inflammatory thing to say.

All those little business? All those other businesses that are not banks... They depend on banks.

All your credit cards, you games of World Of Warcraft and your online shopping. It depends on banks.

Do our car industries get bailouts. Yes. Our steel industries. Yes. Our Airline industries, yes. Our Aircraft industries, yes. Our defence industries Yes. Our farms, yes.

Do all our critical industries receive bailouts when they go askew... yes.

Do all of these recieve bailouts far more often the banks. Hell yes.

Far from being unstable, the banks are about as stable an industry as we historically know of. Some of them are hundreds of years old.

Now you just picked the exact examples and evidence to just answer your very question:

What risk does banking bring to society exactly?

The risk is exacly through all that pervasiveness. It is so relevant to ALL human activity. Its function permeates society so deeply rooted that if it fails brings the society down.

What risk you ask? The consequential failure of all relevant examples you gave if the bank is mismanaged.

Your reaction strikes me as all a bit knee jerk.

Believe me spending 30-40 minutes at a time, is anything but knee jerk reaction on my part. These issues I follow with great interest for a long time since they influence my life so deeply, but it does not come easy, these complex matters require thoughtful consideration (one thing you were able to see, I took note of that it does help keeping up).

The depositors in the banks I am a shareholder in didn't make any loss. In fact no depositors anywhere in the country lost anything.

So no, as a shareholder I didn't pay them (or myself) any money as far as I am aware.

Consider yourself, at least relatively, lucky, because elsewhere entire funds were lost, pensionists saw their lifetime savings vanish. Some fraudulent banking activities even surfaced to attest to the real crime that was going. The folowing credit recess crushed entire economies to freeze, where it was not "negative growing" instead. Business shutdown, unemployment through the roof.

It was the whole system at stake, at the expense of the tax payer, putting him hostage to the inevitable, either pay the bailouts, or face even worse: the consequent economy crash of a crisis with its genesis in the financial sector. More than nationwide it was global, entire populations all over the world were faced with the same question and suffered the consequences.

Beneficiares of all this are much less then 1%, one could even call the 99% Movement the 99.99%.

What now from here? Make sure it want happen again, the problem has been analysed by many previously Anti-regulation economists which are now raising the right questions. Yeah... a bunch of well positioned guys sent shockwaves all over the world. Not completely suitable, since all of this was NOT chaotic (it was manipulated) but the scale is that of the "Butterfly effect" order of magnitude.

Those who are still clinging to "anti-regulation" stance will have a hard time maintaining the position, it is becoming "too objectionable" by the day. That is my opinion.

[st_dux 26]

[T]he system proposed does not help excellent or productive members of society. It only benefits those who offer marketable or profitable skills. So forget most teachers, firemen, and all the people working on the CERN collider. There are highly productive and hard working people who do not happen to care about accumulating wealth or power, and they will suffer under a system that only protects accumulated wealth.

It seems to me that teachers and firemen would very much be in demand in most societies, particularly wealthier ones. As for the folks at CERN, it's true that they don't directly offer any consumable goods or services to anyone, making their existence in a market environment a tough sell. I would concede that, for this reason, research and development constitutes a perfectly valid use of excess tax money, so long as there actually is an excess. R&D is one of the few things that governments can demonstrably do fairly well. That being said, a lot of good research is conducted at privately-funded universities and institutions as well, and the degree to which this can occur is directly proportional to a society's overall wealth. Individual economic liberty, as it leads to increased wealth, actually promotes non-economic activities such as academic research in the long run. For a real-world example of this, just take a look at how many prestigious American universities and colleges were founded with money given by the ultra-wealthy kings of industry during the Gilded Age.

There is no causation between accumulating power, and progress as you seem to define it. Progress happens despite the machinations of the powerful, not because of it. Most of the leg work done in advancing technology, in educating our youth, in opening the door of opportunity come from people who simply want to produce, to create, to better. The system you propose would allow the powerful to resort to feudal agriculture if need be, regardless of what is produced, as long as the rule is obeyed: I must concentrate as much power as I can, through whatever means, and I must hold on to it at all costs. Musicians, engineers, teachers, firemen, electricians, physisists, doctors, all do what they do because they want to do it. Their motivations are rarely in the accumulation of wealth. That particular desire is the specialty of only a few. From Caesar to Marcus Goldman, to the warlords of Somalia, these few have sought out power and influence. The rest of society continues to advance despite their sometimes necessary, but more often devastating actions.

It sounds like you're using a much more myopic definition of power than I meant to imply. I am not merely talking about rich people, or people with a lot of guns, or people with political clout. I'm talking primarily about creative people, whether it be creation in art, creation in science or creation in industry, and indeed, it is precisely these people who have acted throughout history as the most significant catalysts of human progress.

A system of individual liberty, the primary rule of which is that violence is not tolerated except in defense (all other rules and rights, including property rights, follows from this), does not promote the concentration of power in one place, for there is too much competition inherent in such a system for such extreme concentration to readily occur. It also does not lead to equality; however, through its primary rule it subverts the power of physical force and shifts the balance of power toward those with the most creative and powerful minds, allowing these excellent people to assert themselves and succeed. This, to me, is a far worthier goal than egalitarianism.

The removed part makes all the difference and also distinguishes when is a bailout justified and when it is not.

I cannot imagine a single situation in which a taxpayer bailout would be justified. As I've said several times already, you cannot take the profit part of capitalism and leave the loss. Reckless banks and financial institutions, regardless of their size or the number of people that they employ, must be allowed to fail if more competent bankers and financiers are ever to take their place.

Society's stability largely depend on striking the correct balance.

And how do you define, in logically consistent terms, where that balance is? Government regulations to me seem to be mostly the result of knee-jerk reactions to unexpected circumstances that we don't fully understand. They are fundamentally arbitrary.

While the dumb, strongarming brute may see his dominance challenged from the get go, the intelligent brute RE:devious, will have built alliances, rapidly work to create favourable conditions be it laws, societal constraints etc.. to ensure he stays around a bit.

The intelligent "brute" is not a brute at all. That's the point: He wins.

While true in it's relativity, I would suggest that even without holy books ruling us, people generally have a sense of fair and good. If a tiny ruling class have everything in abundance and the vast majority of citizens are struggling for basic needs such as food and water -the disparity is plain and known.

"Fair" and "good" are abstract human concepts. The most common moral conception we in the Western world have of them today was created by citizens (mostly slaves, actually) who were struggling for basic needs while a ruling class had everything. They subverted their rulers' value system and created what we have in churches today. Wealth became greed; strength became exploitation; weakness became meekness. Evil was invented.

I would argue that there is a distinction between "route to power" in the context of gaining maximum assests and self empowerment thru means of helping others.

I would argue that these are but two manifestations of the same basic impulse. The distinction is an invention of mankind, one which I imagine was created at about the same time as the concept of evil.

An interesting point and one I'd truly like to believe yet who is there to protect the public from Corporations who blantanly pollute our environment or use predatory lending techniques in the name of maximum profits? [...] The only thing a dirty Corporation will listen to is the law if its members and shareholders posses no ethical boundries for the common good.

In the case of the environment, I will concede that government action is sometimes desirable. There is an inherent problem with common resources which have no owner, like air, and that is that there is no legal remedy available for damage to owner-less property (itself being a contradiction in terms). On the other hand, because resources such as air are essentially owned by everyone in an equal amount by their very nature, the prospect of centrally-planned regulation of these resources becomes far more tenable than similar regulation of scarce resources with an unequal distribution of partial owners. For these reasons, I support the government regulation of common resources.

As for predatory lending, I believe that the market will generally deal with this problem sufficiently. Banks known for deceptive lending practices can't last for long in the marketplace without government backing. For severe cases where the deception is more like flat-out lying, we have tort law.

With regard to your last point, the beautiful thing about a free market is that none of the individual actors within it need to actively pay attention to any conception of the "common good" to have a positive effect on people. The effect is axiomatic: Individual actors are ultimately only able to achieve success by appealing to the interests of other individual actors.

[froggyluv 2136]

The intelligent "brute" is not a brute at all. That's the point: He wins.

Wins what? Dominance over others lives while doing things that are widely considered morally reprhensible? A Hitler, a Nero, a *insert African warlord here*?

From your further posting, it appears that there is no such thing as right or wrong, good and bad...evil. This picture of a world you present feels very Mad Max, post-apocolyptic.....where morals are a thing of the past and it's all about who rules thru brute, and yes the most intelligent brute force.

"Fair" and "good" are abstract human concepts. The most common moral conception we in the Western world have of them today was created by citizens (mostly slaves, actually) who were struggling for basic needs while a ruling class had everything. They subverted their rulers' value system and created what we have in churches today. Wealth became greed; strength became exploitation; weakness became meekness. Evil was invented.

I don't mean to sound patronizing but I truly feel sorry for you if really don't see such a thing as evil behaviour. Slavery, colonization, apartheid, and genocide and the inherrent actions that take place under such horrific backrounds. The incestuos dealings of a alcoholic, the brutal killings in the name of racial superiority, the brutal treatment of women in many, many countries...they are evil. Evil was not invented, it is a side of every man that if he chooses to feed will consume him and others. Forget even religion, go back to Freud with Id, Ego and Superego. Those who live primarily by ID (pure selfishness with little to no thought to others) can still be very intelligent -an intelligent brute. At the other end of the spectrum are those who live by Superego, choosing to subvert the base drives that do in fact run beneath every human being in the name of a greater good..be it their child, the village, their country or humanity as a whole. If you honestly can't see a difference between any of these choosing to believe we are all soley ID, well I guess we'll never see eye to eye.

I would argue that these are but two manifestations of the same basic impulse. The distinction is an invention of mankind, one which I imagine was created at about the same time as the concept of evil.

Wow, just wow. A dull void sounds this existence. So there is absolutely no difference between Mothera Theresa's dealings with helping the poor and a hedge fudge broker an Enron CEO or bloodthirsty warlord? They're all after the exact same thing? Again, the dull brush of moral ambiguity paints false here.

As to your last point, it's hard to accept that all things will fall in line properly in a deregulated market if you propose there is no right and wrong -all means to an end is not a society I'd want to live in.

Edited October 13, 2011 by froggyluv

[Baff1 0]

I claim that Regulation, in another words, Legislation helps in striking that balance. By contrast you claim that less Legislation is more helpful. Are we really talking about striking a Society's Collective Interest here or a fraction of that Society's Interest? .

I'm not intrested in addressing your collective intrest in my money. I would rather destroy my wealth than let people like you take it from me.

You don't have any collective intrest in my wealth. You may wish you did, but you don't.

You should and could have a collective intrest in making your own. I can help you with that by showing you how I made mine.

I don't owe you or your society anything. The banks don't owe you or your society anything.

They contribute more to it than you do. More than you ever will. You owe them.

I don't want your legislation or regulation because all that is is a way for you to steal more from me.

So you can try it if you like, but I can move my money out of your juristiction very fast indeed and instead of taking a smaller more reasonable cut, you will get no cut.

I don't lend people my money for the collective good, I lend them it for mutual gain. If you feel you have some right to stick your nose in and steal some of that, then I can circumvent you completely. Lend that money elsewhere to one of your nations competitors instead.

You can count on me doing this. You country and mine are very bad places to do business. I have voted for all my bank holdings to leave them.

I'll leave you to regulate what litttle you have left after you scare anyone that can help you away.

You want to know what happens to all the other industries when the banks disappear?

You are going the right way to find out.

Calculating money contributed as a percentage of income is dishonest.

Not only is it dishonest it is stupid.

Most critically of all it is inaccurate.

If I work one hour a week, and contribite 100% of my income, that in no way equates to paying more than a person who works 40 hours a week (at the same hourly rate) and contributes 25%.

Neither does it reflect any greater burden on their lives and most critically of all, it doesn't equate to more.

To pay more, you have to pay more. Not a greater percentage of some arbitary figure. But an actual countable number.

$10 > $5 This is empirically true. Accurate.

That $5 is 25% of $20 and $10 is only 10% of $100 changes nothing whatsoever.

$10 > $5. This is empirically true. Accurate.

So if Fred pays $10 in tax and Harry pays $5 in tax. Fred pays more tax than Harry. This is empirically true.

Fred contributes more to the government than Harry. He pays more tax. All empirically true.

Harry's $5 may be a greater percentage of his income than Freds $10 is, but $10 > $5. Fred still pays more tax and still contributes more to his government.

You choose to use a percentage model, because that justifies you paying less than other people. That is all.

It's intellectually dishonest and it's morally questionable.

People who work harder than you and are more productive than you pay more than you. Empirically.

If a single bank is mismanaged, society will not collapse. The economy will not collapse.

A whole handful of banks recently collapsed and the world did not end.

Try not to be so apocalyptic.

I do consider myself lucky. I did indeed see my lifetimes saving vanish.

Unlike you who clearly hasn't.

Not only did I see them vanish, I saw where they went. I have endeavoured to share those experiences and the perceptions I have gained from this experience with you.

Take them as you will they are offered with my best intentions.

Edited October 13, 2011 by Baff1

[gammadust 12]

I cannot imagine a single situation in which a taxpayer bailout would be justified. As I've said several times already, you cannot take the profit part of capitalism and leave the loss. Reckless banks and financial institutions, regardless of their size or the number of people that they employ, must be allowed to fail if more competent bankers and financiers are ever to take their place.

In total agreement if, and only if, depositors, aside of shareholders and administration board, are allowed to partake in the decisions that involve their interests, not of any other kind but their capital, conceding temporarly on the proportion, if any, of those interests. OR if that is not acceptable by the decision makers, then do not bailout the bank, but implement regulation which assure the decision makers will compensate the depositors fully for their wrong, risky decisions. One is only willing to share the loss (therefore the risk) if one is able to have influence the risky decision, since depositors are not they should be fully compensated. Simple.

Now having the bank's management destroy depositors means of existence and not be accountible for the irresponsible decisions they made is outright criminal.

On the other hand if one understands the social function a bank accomplishes within a society, then through the society's own means of achieving consensus, an eventual collective commitment could be made for public tax money be invested in banking activity where while serving specific public interests the contributor/investor would be sharing the increased responsability of serving that function. Within these terms the eventual mismanagement for which a bailout would be required to keep the bank afloat could justify itself. This not giving in to those managereal positions wich would still be prosecuted if negligence was proven while not serving their mandate's objectives.

And how do you define, in logically consistent terms, where that balance is? Government regulations to me seem to be mostly the result of knee-jerk reactions to unexpected circumstances that we don't fully understand. They are fundamentally arbitrary.

I am not compelled to agree fully. The balance is obviously subject of debate, but I am neither a believer that THE socio-economic problem is simply a "weather prediction" type of problem, no matter how complex it definitely is.

Sociology has tackled many phenomenons, analiticaly mostly, but also in providing guiding to solutions, Economy has a very objective scientific foundation, and should not worry too much (as long as it is respected for its historical conclusions instead of repeating past errors).

Despite the fact that physics Newton Laws are today considered insuficient to describe for example the cosmological problem (or more simply: a rocket launch), does not imply it does not serve well for other well contained problems, also subject in nature to very entropic deviations from scientifically atainable and verifiable solutions, as long as error is properly considered.

Now we could make use a Relativistic (E=mc^2) "umbrella" to propell us to the "moon". Until then we have to make do with the "rail way train". All this 1990s "Globalization" drive was faced by Capitalism as a given piece of cake. But the increase in complexity of the problem was simply exacerbated to never tackled before issues which required new thought to be able to confront.

(Back to earth) The main problem is not how entropic and unpredictable human behaviour is when we look at "markets" which come with similar characteritics. Actually what is known scientifically about them is quasi deterministic. (Ease credit access > Bubble / Decrease credit acces > recession / Inflate goods prices > lower consumption / Deflate prices > waste of resources / etc > etc)

The main problem is to put what is known scientifically at the society's service for the general benefit instead of a small group of interests. The main problem is not Socio-Economic in initialy, though there are socio-economic consequences. The original problem is Political.

Of course, for one to agree with the last paragraph one has to genuinely believe in a cooperating peacefull society as the common tentative objective to be reached somewhere in the future. (Don't worry, doesn't relly matter how utopic this is, statistically speaking for 99.999...% of a population at nation or world scale it is UTOPIC to ever make a million in whichever currency)

In conclusion, what is "arbitrary", as you mentioned, is the Political nature of the underlying problem not an eventual scientific insuficiency to tackle the Economic problem part.

Politics (from Greek πολιτικός, "of, for, or relating to citizens"), is a process by which groups of people make collective decisions. The term is generally applied to the art or science of running governmental or state affairs. It also refers to behavior within civil governments. However, politics can be observed in other group interactions, including corporate, academic, and religious institutions. It consists of "social relations involving authority or power"[1] and refers to the regulation of public affairs within a political unit,[2] and to the methods and tactics used to formulate and apply policy.

(I was about to do some emphasis... but no point it worths every word)

I would conclude with the folowing from a not very famed Economist, but was Chief Economist at no other institution than the IMF 2003-2006:

1993 - Paper titled:

"Is the Glass-Steagall Act Justified? A Study of the U.S. Experience with Universal Banking before 1933"

Before 1933, commercial banks and their securities affiliates competed directly with investment banks in the business of originating and underwriting securities. The Glass-Steagall Act of 1933 ended this competition by legislating the separation of commercial and investment banking in the U.S. We evaluate the arguments made at that time for Glass-Steagall -- which essentially remain unchanged today -- that because of conflicts of interest, commercial banks systematically fooled the public into investing in low quality securities. We test this by comparing the relative performance of securities offered by commercial banks with those offered by independent investment banks prior to the Act. We find no evidence that commercial bank securities affiliates systematically fooled the public. Instead, the public appears to have rationally accounted for the possibility of conflicts of interest and that this constrained the underwriting activities of the bank affiliates.

2005 - Paper titled "Has Financial Development Made the World Riskier?"

In the last 30 yers, financial systems around the world have undergone revolutionary change. People can borrow greater amounts at cheaper rates then ever before, invest in a multitude of instruments catering to every possible profile of risk and return, and share risks with strangers across the globe. Have these undoubted benefits come at a cost? How concerned should central bankers and financial supervisors be, and what can they do about it? These are the issues examined in this paper.

In sum, while the experience in the 1998 crisis in the United States should offer a certain measure of confidence that liquidity will continue to be provided in a crisis, one should not becom overly sanguine. If banks also face credit losses and there is uncetainty about where those losses are located, only the very few unimpeachable banks will recieve the supply of liquidity fleeing other markets. If these banks also lose confidence in their liquidity-short brethren, the inter-bank market could freeze up, and one could well have a full-blown financial crisis.

Two full years of prediction. Take that Weather Report! Later in a interview when interviewed he said summarizing:

The title of the paper was essentially:

Is Financial Development Making the World Riskier?

And the conclusion was, uh... it is.

Well one thing is to put one willing man under escape velocity towards the moon facing difficult to judge probabilities of failure. Another thing is put the whole unsuspecting world facing the same type of odds at the financial engeneering mercy.

"Post" crisis in 2010 with a book titled: (EDIT: we have the crisis still undergoing of course)

"Fault Lines: How Hidden Fractures Still Threaten the World Economy."

He is awarded the best business book of 2010.

For someone which started his carreer in a paper with a argumented anti-regulation stance. Only to later have to recognize how risky all this amounted to, and become proven.

"Pro-deregulation" to "better raise the question than sorry" to "We are not risk free yet".

Shall we trust the "free deregulated market" again?

Edited October 13, 2011 by gammadust

[st_dux 26]

Wins what? Dominance over others lives while doing things that are widely considered morally reprhensible? A Hitler, a Nero, a *insert African warlord here*?

Hitler and Nero are historical losers. Mao is still considered a national hero in China, and arguably, he committed worse crimes against humanity than either.

From your further posting, it appears that there is no such thing as right or wrong, good and bad...evil. This picture of a world you present feels very Mad Max, post-apocolyptic.....where morals are a thing of the past and it's all about who rules thru brute, and yes the most intelligent brute force.

Morals are a thing of the past, the present, and in all likelihood, the immediate future. It's not about whether morality exists or not; clearly it exists in some form, else we couldn't be discussing it. My point is that there is no such thing as moral phenomena, i.e., there is no way to empirically observe "morality" in and of itself. Morality only arises as a particular interpretation of other phenomena, and the nature of this interpretation varies widely throughout history and between different cultures. In other words, morality is real, but it is a human creation. There is no such thing as an objective or "true" morality.

I don't mean to sound patronizing but I truly feel sorry for you if really don't see such a thing as evil behaviour. Slavery, colonization, apartheid, and genocide and the inherrent actions that take place under such horrific backrounds. The incestuos dealings of a alcoholic, the brutal killings in the name of racial superiority, the brutal treatment of women in many, many countries...they are evil.

From a contemporary Western moral perspective, you're quite right. It should be noted, however, that this was not always the mainstream perspective, and indeed there are still places today where not everything you listed would be considered evil. What makes us so sure that we've stumbled upon objective moral truth this time and not earlier? And is it not possible, given our apparent discovery that we were "wrong" about morality in the past, that we will find at some point in the future that we are "wrong" today?

Forget even religion, go back to Freud with Id, Ego and Superego. Those who live primarily by ID (pure selfishness with little to no thought to others) can still be very intelligent -an intelligent brute. At the other end of the spectrum are those who live by Superego, choosing to subvert the base drives that do in fact run beneath every human being in the name of a greater good

Ignoring for the moment that religion predates Freud substantially, the part of your quote that I emphasized is precisely what I've been talking about. The base drive, the will to power, is what drives everyone and everything. That doesn't mean that it can't take on many forms. Using your Freudian terminology, those who live primarily by the Id are simply weaker than those who live by the Superego; they're not as good at expressing their power.

As to your last point, it's hard to accept that all things will fall in line properly in a deregulated market if you propose there is no right and wrong -all means to an end is not a society I'd want to live in.

The free market is simply people making voluntary transactions with other people. While I would argue that there is no objective way to determine whether or not this is "right or wrong," I take it as self-evident that it produces desirable outcomes for both parties of the transaction; given that it is necessarily voluntarily, the transaction would not have occurred otherwise.

[gammadust 12]

You know what's the difference Baff1? I can totaly see your grief and PRECISELY how you feel cheated. I try the utmost I can to really, really understand how we as a society have come to this moment in time.

You sometimes try, other times do, other times just dismiss any effort to understand those who surround you. There is no free lunch right?

If you think a society is possible without a hint of "mutual" (your word) understanding, comprehension, the ever present "why"'s of everyones living in dependent social relations... Well, in that case, there is nothing more I can say about that type of individualism. Good ridance. I know my place, you know yours.

Since you prefer to rant than keep it civil, and accuse me of stuff I never claimed. Be my guest, this dialog is over.

[froggyluv 2136]

Interesting points ST_Dux I will contemplate on them :)

I do not wish to derail the thread into existentialism so Ill stop now, but i'll leave with moral relativism can be stretched easily into nihilism - so whether it's better now or worse now, its still worth seeking.

[Baff1 0]

You know what's the difference Baff1? I can totaly see your grief and PRECISELY how you feel cheated. I try the utmost I can to really, really understand how we as a society have come to this moment in time.

You sometimes try, other times do, other times just dismiss any effort to understand those who surround you. There is no free lunch right?

If you think a society is possible without a hint of "mutual" (your word) understanding, comprehension, the ever present "why"'s of everyones living in dependent social relations... Well, in that case, there is nothing more I can say about that type of individualism. Good ridance. I know my place, you know yours.

Since you prefer to rant than keep it civil, and accuse me of stuff I never claimed. Be my guest, this dialog is over.

I'm not looking to join your society.

And I'm not looking to "understand" you.

I'm offering you the benefit of my understanding on a subject I have been successfully involved in for over 30 years.

If you over regulate the banks, they will leave.

You quite clearly have been under-recognising and under-valuing the importance they play in your society.

I don't care if you feel cheated or abused or a victim. I don't care iof you think I do.

I'm not offering you social solutions or relationship councilling.

I'm not being rude to you and I am not falsely accusing you of anything.

I am simply giving you the reaction that your comments elicit. An insight into how you can expect investors like me to react to your ideas should they come to fruition.

I'm explaining to you that you have the ability to maintain a profitable world beating banking sector in your country if you wish to. But if you do wish to, it will be more on their terms than it will be on yours, because they don't need you anything like as much as you need them.

The current climate in your country is dreadful for the banking sector. It's a pariah industry.

The worlds biggest most profitable banking sector and those that profit from it for free are crying and rioting with ingratitude.

Nihilists and lemmings. A whole load of idiots have set themselves to self-destruct. Drowning, they blindly cast around for lifelines to grab taking all nearby to the bottom with them.

You think you are just going to shout and scream (or even "rationally debate") about how much evil and destruction banks do. Regulate them to be the enslaved financial engines of your private Utopia and they are going to crawl on their knees to you just begging for you to allow them to operate in your society.

But they aren't.

They are going to leave, just as so many other of your over regulated companies have.

Your country is running itself into the ground because it has an attitude problem.

Edited October 13, 2011 by Baff1

[weaponsfree 46]

A system of individual liberty, the primary rule of which is that violence is not tolerated except in defense (all other rules and rights, including property rights, follows from this), does not promote the concentration of power in one place, for there is too much competition inherent in such a system for such extreme concentration to readily occur. It also does not lead to equality; however, through its primary rule it subverts the power of physical force and shifts the balance of power toward those with the most creative and powerful minds, allowing these excellent people to assert themselves and succeed. This, to me, is a far worthier goal than egalitarianism.

The goal is not egalitarianism in my view. It's simply a question of opportunity. I think we may have to agree to disagree, because I think the idea that such a system does not promote concentrated power is absolutely incorrect. Wealth accumulates upwards naturally when self-interest is the guiding principle of a society. It is the natural human condition, and once you have wealth and power, it becomes exponentially easier to maintain and increase it, especially when the state's singular purpose is to protect accumulated wealth. I can not think of a single exception in human history.

Powerful corporations and individuals will be the masters of such a system (if it wasn't the case, the rich and powerful would be pining for the welfare state). As wealth and power concentrates, having a "powerful mind" won't help you much. There are powerful minds in the ghettos and refugee camps all over the world today, that alone does not give much in the way of opportunity. It takes some measure of power to exploit a person's natural gifts.

If freedom is what concerns you, I think you should be wary of such a system. Today's corporate environment does not tolerate dissent. You work under a tyrant that does not need your consent, and in a system where there is no safety net, the whims of the tyrant means you fall in line, or you starve. Tyranny can't be escaped on planet earth. At the very least, you have to face the tyranny of hunger. What we're talking about is where we want that tyranny to be transferred to.

An upwards concentration of wealth and power into fewer hands, means the source of tyranny becomes a small group of un-elected individuals. And as seen during the Guilded Age (and today), that increased concentration unavoidably corrupts the political system, further eroding the possibility for people to live in a system they consent to.

By the way, there are a lot of parallel discussions going on in this thread, most are very interesting. Thanks ST_Dux for taking the time to plow through these issues, I enjoy trying to wrestle some sense out of and into smart people who feel strongly about their opinions.

[.kju 3244]

CHARTS: Here's What The Wall Street Protesters Are So Angry About...

http://www.businessinsider.com/what-wall-street-protesters-are-so-angry-about-2011-10?op=1

[st_dux 26]

In total agreement if, and only if, depositors, aside of shareholders and administration board, are allowed to partake in the decisions that involve their interests, not of any other kind but their capital, conceding temporarly on the proportion, if any, of those interests. OR if that is not acceptable by the decision makers, then do not bailout the bank, but implement regulation which assure the decision makers will compensate the depositors fully for their wrong, risky decisions. One is only willing to share the loss (therefore the risk) if one is able to have influence the risky decision, since depositors are not they should be fully compensated. Simple.

If the bank has collapsed, the "decision makers" won't be able to fully compensate the depositors fully by definition. Simple legislation informing them that they must do so would have no affect on the fact that the money is gone. I don't see this as a problem. After all, the depositors voluntarily deposited their money into the bank, and despite the massive moral hazard that contemporary Western governments have introduced into the banking industry over the years (think FDIC), there actually is risk associated with depositing money into a bank. The fact that governments have tried to do everything in their power to mitigate this risk and make it invisible to the everyday consumer over the last several decades is one of the main reasons why banks were able to become so reckless in the first place. Think about it: No one even considers the safety of a bank before opening up an account. Everyone just assumes that it's perfectly safe everywhere.

It's true that whenever there is an economic crisis there are people who, through no direct fault of their own, lose a substantial amount of wealth. Unfortunately, that's just the way it goes. There is no way to restrict the loss only to those "who deserve it." Let's imagine for a moment that all of the depositors of all the banks that collapsed were part of the banking decision-making process as you suggested (we'll ignore the logistical impossibility of such an arrangement for the time being). Certainly, some of them would have opposed the actions of the shareholders et al. that ultimately led to the banks' demise, but what if the majority did not? Is being privy to the decision-making process in and of itself a legitimate reason to suffer losses? Should we absolve completely all those who voted against the measures that led to the banks' demise, assuming of course that we can somehow surmise with perfect knowledge exactly how each decision affected the outcome? Should we then say that those people who voted for the destructive measures ought to bare a more substantial portion of the loss for having voted the wrong way? The bottom line is that no one seeks financial ruin on purpose. People don't necessarily get what they deserve, and we are powerless to change this fact about life.

Economy has a very objective scientific foundation, and should not worry too much (as long as it is respected for its historical conclusions instead of repeating past errors).

I would argue that economics really doesn't have a very objective scientific foundation and that every attempt to establish one has failed. The fact that there are so many professional economists with such widely divergent opinions on the nature of their profession makes this much evident.

The problem with treating economics like a science is that it lacks any means of empirical observation in a controlled environment. There is no way to observe precisely how human actors will deal with complex economical situations under controlled (laboratory) conditions without necessarily altering their behavior; simply stated, laboratory conditions do not adequately represent the complexity of the real market. Understanding in economics is thus best established philosophically, using axioms of human action as a starting point.

For someone which started his carreer in a paper with a argumented anti-regulation stance. Only to later have to recognize how risky all this amounted to, and become proven.

Neither of the two quotes from that paper you provided suggest what the cause of the risky financial behavior was; they merely suggest that the result might be disastrous, which everyone now knows to be accurate. I see nothing in either quote that suggests that a lack of regulation was the cause of the problem. Going back to my cliff/parachute analogy from earlier, I submit to you that certain regulations could have very well acted as a parachute that broke our fall, but it does not follow from this that lacking a parachute causes one to fall. There must be something that drove us off the cliff initially, and to me it seems there is no explanation more plausible than government intervention.

[gammadust 12]

If the bank has collapsed, the "decision makers" won't be able to fully compensate the depositors fully by definition. Simple legislation informing them that they must do so would have no affect on the fact that the money is gone. I don't see this as a problem. After all, the depositors voluntarily deposited their money into the bank, and despite the massive moral hazard that contemporary Western governments have introduced into the banking industry over the years (think FDIC), there actually is risk associated with depositing money into a bank. The fact that governments have tried to do everything in their power to mitigate this risk and make it invisible to the everyday consumer over the last several decades is one of the main reasons why banks were able to become so reckless in the first place. Think about it: No one even considers the safety of a bank before opening up an account. Everyone just assumes that it's perfectly safe everywhere.

Extremely good point. Insuring deposits and hiding that the failsafe exists (meaning that when things go bad it is the whole population tax money that goes to compensations) is EXACLY what gives leeway and induces fraudulent management of credit capital, by easing their access criteria to higher risk levels. It induces the risk taking to lunatic levels because those decisions are taken without any fear of later accountability, by being able to diversify the risk elsewhere. It hides Responsbaility from the risk taker at all levels, not just depositors. The diversification of risk is taken as a panacea, but it does not solve the economic risk problem, and given the proper conditions (during a bust) the risk comes back after everyone, regardless of level of responsability.

It's true that whenever there is an economic crisis there are people who, through no direct fault of their own, lose a substantial amount of wealth. Unfortunately, that's just the way it goes. There is no way to restrict the loss only to those "who deserve it." Let's imagine for a moment that all of the depositors of all the banks that collapsed were part of the banking decision-making process as you suggested (we'll ignore the logistical impossibility of such an arrangement for the time being). Certainly, some of them would have opposed the actions of the shareholders et al. that ultimately led to the banks' demise, but what if the majority did not? Is being privy to the decision-making process in and of itself a legitimate reason to suffer losses? Should we absolve completely all those who voted against the measures that led to the banks' demise, assuming of course that we can somehow surmise with perfect knowledge exactly how each decision affected the outcome? Should we then say that those people who voted for the destructive measures ought to bare a more substantial portion of the loss for having voted the wrong way? The bottom line is that no one seeks financial ruin on purpose. People don't necessarily get what they deserve, and we are powerless to change this fact about life.

Definitely, there is responsability in all this risk taking chain, from the depositor level to the last investor, speculator in the Securitization market. But I am able to understand that it is where the credit management decisions are made that the highest level of responsability lies.

Keeping my thinking in FDIC, "Deposits are backed by the full faith and credit of the United States Government", akin to "in God we trust", but more close in its practical meaning of:

"In the tax payers money shall lie confidence that the commitment of compensation will be honored in the eventuality of this premium paying private entity fails to secure the depositors interests", of course that does not fit the billboard :)

But it is very true that even from the depositors, their own responsability is shoved way from sight. If we are free to choose on which bank will we keep our savings, then we should also assume responsability for that decision, which might imply in an extreme case loosing it (to be accepted on a genuine free competition cenario). That is why despite the "logistical" difficulties that may exist to involve general depositors in the process of decision making, that is the only way still of one to be in a position to accept responsability, at least "idealy".

The bottom line is that no one seeks financial ruin on purpose.

I am extracting this one as an aside to stress one traversing analysis that is today possible by adding:

"No one seeks financial ruin purposefully, unless one individually finds no reason to fear any significant consequence under a individual's self serving purpose alone". And by "no reason to fear any significant consequence" I mean a "business bankrupcy" be sufficient enough to serve as a dissuading factor since Bonusses and Annual Divindends are out of the equation already by the time of the event.

EDIT: Only to add the reservation that honest managers do exist and just because they can does not mean that they will automatically take advantage of the possibility. The point is that the possibility is left wide open.

we'll ignore the logistical impossibility of such an arrangement for the time being.

I would address this one as an aside too. What are Mutualities then? if not the answer to this logistical problem on the very area of finance (and also insurance)? As a personal choice, and informed consumer, under this financial market, I chose to have my money in a Mututality, this allows me to inspect the decisions that are made and participate in them be involved and responsible by the trust I lay in this institution and its members (this was a system very common in European "Social Democracies").

What's up with that concurrent (along with Derregulation) drive to "Demutualize" what existed. These mutuals were less of risk takers, profits of its activity were filling sustainability purposes, had safe and sound balance sheets, upholded honorably their financial constumers interests (said members), and their failure was ciscunscribed to its organizational borders. Though they were absorbed by stock companies, in other words, privatized. Indeed they were not driven by profits, they were driven by results much more comprehensive such as healthy cooperation between its members. Much of it lost in this ultracompetitive financial drivel.

I would argue that economics really doesn't have a very objective scientific foundation and that every attempt to establish one has failed. The fact that there are so many professional economists with such widely divergent opinions on the nature of their profession makes this much evident.

The problem with treating economics like a science is that it lacks any means of empirical observation in a controlled environment. There is no way to observe precisely how human actors will deal with complex economical situations under controlled (laboratory) conditions without necessarily altering their behavior; simply stated, laboratory conditions do not adequately represent the complexity of the real market. Understanding in economics is thus best established philosophically, using axioms of human action as a starting point.

Calculus, Linear Algebra, Statistics, Game Theory, Computer Science, all of those are Math branches, this is "objective scientific foundation". Economists do not debate if 2+2=4, they debate in instances of the kind:

"Is a regulated economy more effective and beneficial than a deregulated one?"

And you may observe then that these are were Politics and Economics intermingle, were Math alone becomes insuficient to describe the problem, Sociology has to come aboard, methods of social organization, etc, etc... (I would say of course there are Philosofical issues, to the extent that Philosophy is the base of all sciences)

The so called "Observer Bias" or more broadly "Cognitive Bias" is a known factor in many sucessful sciences, physics, biological, social and behavioural. Its specific area of study has been elevated to its own discipline, it is methodical, it is verifiable, it is falsifiable, it is Science with capital "S".

To dismiss that recognizable limit of measurement and its influence on Economics, amounts to a Defeatist stance on the problem. "There is this problem, we will never be able to describe it and comprehend it, and tackle it accordingly" giving room for only one alternative "The problem will solve for itself" ("Let the market forces estabilish for themselves the economic equilibrium"). This is no good stance.

This stance has the currently observable consequences of wide sectors of economy worldwide be put in check, who knows if "-mate".

Humans have Science as a tool to overcome problems.

Further, the "Invisible Hand" in the sense of "The idea of markets automatically channeling self-interest toward socially desirable ends is the founding justification for the laissez-faire economic philosophy, which lies behind neoclassical economics." or other mostly faith based theories which only try to escape in face of the problem.

It has been proven time and time again, on every Boom and Bust, that markets DO NOT "automatically channel self-interest toward socially desirable ends."

The "Market manipulation" concept is this very admission that the "hand" is real (and not a all-determining unfathomable result of confluent economic agents' actions).

Prohibition Against Manipulation of Security Prices

(...)

(2) To effect, alone or with 1 or more other persons, a series

of transactions in any security other than a government security,

any security not so registered, or in connection with any security-

based swap or security-based swap agreement with respect to such

security creating actual or apparent active trading in such security,

or raising or depressing the price of such security, for the purpose

of inducing the purchase or sale of such security by others.

(...)

Market manipulation is prohibited in the United States under Section 9(a)(2) of the Securities Exchange Act of 1934 - Latest revision October 5 2010

Neither of the two quotes from that paper you provided suggest what the cause of the risky financial behavior was; they merely suggest that the result might be disastrous, which everyone now knows to be accurate. I see nothing in either quote that suggests that a lack of regulation was the cause of the problem. Going back to my cliff/parachute analogy from earlier, I submit to you that certain regulations could have very well acted as a parachute that broke our fall, but it does not follow from this that lacking a parachute causes one to fall. There must be something that drove us off the cliff initially, and to me it seems there is no explanation more plausible than government intervention.

Yes, Raghuram, rathers have a more subtle way to suggest that. Yes those are just the abstracts, but they do delve into the matters of "risk assement" "risk diversification" "risk sharing". His main point is that modern financial markets are more prone to risk than not and those who have decision on the matter should not underestimate it. "How concerned should central bankers and financial supervisors be, and what can they do about it?"

The derivatives market is a clever way to mask that risk, leaving room for a select few take advantage of that condition of the market.

It was not the "government's intervention" which rated packages of sub-prime mortgages CDOs with AAA, elevating risk to never seen before levels. It was not the "government's intervention" which sold at premium insurance CDSs on those packages multiple times. It was not the "government's intervention" which "speculated" downwards those CDOs to their real value regardless of the bust which this would provoke. It was not the "government's intervention" which claimed high Bonusses before and after the crisis settled.

What one is able to demonstrate is that it was through "government's intervention" in "relaxing regulations", or outright "removal of regulations", which facilitated those cited circumstances to materialize, it was through governments' laissez-faire policy which almost "asked" for this to happen. Hence my argument against the "deregulation" drive.

My trouble with that cliff/parachute/fall mataphore is this:

cliff - change of conditions in the economy which lead to one go bust (removal of solid "ground" choices and no way back)

parachute - preventive measures for when the eventuality materializes

fall - distressed economy

My problem with this is that regulations are not mere "preventive measures" for usage after the fact "during the fall". The point of regulations may very well be (ie. Glass-Steagall) to prevent "the height of the cliff to become lethal", as in, prevent the disconnect between real wealth and speculated wealth to reach proportions impossible to accomodate within the economy's tolerance, be those mad "leverage ratios" (ie. lethal high 30:1), be those systemic under-assement of risks (ie. Raghuram conclusion), be those outright criminal economic activity which create assorted type of "cliffs" for self-serving purposes (ie. market manipulation).

So to that methaphore the type of measures which are not pondered are an "effective break system" (ie. interest rates), a "terrain assessment device" (ie. banking leverage statistics) and a "prosecution system" for those who step the red line (ie. working justice system).

We have/had all of these regulations inplace since the Great Depression (out of which material analysis of a crisis of this severity had been made), but it appears to be a no-brainer that we should get rid of them, essential ones infact, I don't follow, I actually refuse to follow.

Edited October 13, 2011 by gammadust

[froggyluv 2136]

To dismiss that recognizable limit of measurement and its influence on Economics, amounts to a Defeatist stance on the problem. "There is this problem, we will never be able to describe it and comprehend it, and tackle it accordingly" giving room for only one alternative "The problem will solve for itself" ("Let the market forces estabilish for themselves the economic equilibrium"). This is no good stance.

This stance has the currently observable consequences of wide sectors of economy be in dire straits.

Humans have Science as a tool to overcome problems.

Really excellent quality post here mate - I learn alot just reading your stuff.

[Hans Ludwig 0]

Anyone find this leader of the crowd speaking and then crowd repeating stuff sort of, um, creepy?

qoPwo3STiXo

[Daniel 0]

That's incredibly creepy.

[mrcash2009 0]

Anyone find this leader of the crowd speaking and then crowd repeating stuff sort of, um, creepy?

Education system anyone?

I did love the fact they were acting like their own security with not wanting to be filmed, I suspect a few months ago they were at a demonstration about all of this from officials.

Problem with this is the sentiment is not wrong, but it can so easily be taken over and manipulated to smother the points (which are genuine points). Its a haven to be set up and demonised for TV and have "groups within the groups" playing the undermining game. But it shouldn't cloud the point of it overall by focusing in on things too much.

Although there have been some funny clips of people that do require a slice of facepalm in places. It reminds me of an interview for a job where your with a group and have to perform tasks, although you are all on the same level playing field you always get the "team leader wannabes" pushing forth to make it look bad for the rest of the "humble real folk" who are genuine and that dont need the constant soap box stardom to make a point.

Those type of people have the character profiles of those in power and are rich pickings to be manipulated for sure.

Edited October 14, 2011 by mrcash2009

[gammadust 12]

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EDIT: I like his back shirt distress code. Edited October 14, 2011 by gammadust