Bailout Theory
saveuplife
Posts: 1,173
At first I agreed with the bailouts. I considered the issue to be systematic and one of contagion. But, that's when we were looking at financial industries which were tied to housing via MBS and tied to one another via CDS. But, the more I think about it now and the more the bailouts spread to other industries, the more I question it. It's a hard stretch to tie some of these industries to housing and the housing bubble that burst. This article is very interesting. It's titled in defense of the depression. The idea is simple... let things work themselves out and the depression (in this case recession) will be less in length and severity. The more I think about it, the more I think they are right on...
http://www.becker-posner-blog.com/archives/2008/11/do_depressions.html
Thoughts?
http://www.becker-posner-blog.com/archives/2008/11/do_depressions.html
Thoughts?
Post edited by Unknown User on
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Comments
I know this runs contrary to my opinion on the auto industry bail out but that is only because I don't see another alternative.
as long as the people allow this dangerous, inflationary, bubble creating, and manipulation ridden system to continue ...
BAILOUT WILL BE INEVITABLE.
You have the fox in charge of the hen house.
How can you complain when some chickens turn up missing?
It is a self-defeating system, that requires bailouts by its nature.
That is what i think.
All this talk of "bailout or no bailout" is beside the point.
We need to have a renewed focus on the issues old Andrew Jackson brought up, the issues Jefferson fought it out with Hamilton over ...
should America even have a central bank, should we allow 10-1 leverage, should we violate our constitution by outsourcing the creation of money to a private company and stripping that currency of its metal backing.
Are legal tender laws constitutional, and should the people be given a monitary option that safeguards the value of their wealth over the longterm.
THOSE are the questions we need to look at,
because the question of bailout isn't even secondary, its tertiary at best, and it is WAY beside the point.
If I opened it now would you not understand?
In a way, I am on-board with your point. I'm a RBC theory guy, so I don't support Keynes, but think Monetarism was a bit more plausible. That said, I think business cycles are real.
SURE business cycles are real.
Hell, they used business cycles as an excuse, THE REASON, for implementation of the Fed.
DID IT WORK?
HAS IT EVER WORKED?
Can historians name ONE decade, ONE event, ONE instance, where having a central bank "smoothed out" a business cycle?
Doubtfull.
If anything, all having a nonmarket rate curve has done is amplify and further distort the cycles. Not only that but they destroy private wealth through constant inflation.
And here is the other thing that pisses me off.
The REAL problem behind business cycles IS and ALWAYS HAS BEEN POOR REGULATORY STRUCTURES.
THAT was what got us in to trouble at the beginning of the 19th century.
We didn't have a central bank, and YES, we had a business cycle go bust... and WHY did it go bust? Because of RAMPANT speculation, poor market regulation, and greedy low down scoundrel bankers taking advantage of the lax regulation.
Fast forward to 2007\08 and what are all the pundits (and liberals, ESPECIALLY the liberals) blaming this whole thing on? DEREGULATION.
Yeah.
SO here we are 100 years later, and we have implemented the most massive fraud in history against the people (The "Federal" "Reserve") which has done NOTHING to reduce the risk of business cycles ... and we have ABSOLUTELY FAILED TO ADDRESS THE PROBLEMS OF ADEQUATE MARKET REGULATION.
So,
why don't we just skip the lousy central banking pyramid scheme,
and get on with letting some honest folk design some honest systems for managing the "free markets" to allow for accountability, adequate transparency, and some modicum of "stability"?
If I opened it now would you not understand?
This! Drifting is smoking the clarifying herb today I see.
What do you think of the idea that people will always outsmart regulations, and that regulators are not omnipotent and don't have the foresight to effectively regulate?
What about transparency?
What about the Austrian theory of business cycles?
I think that is obviously true.
But what about it?
People can obviously outsmart "liberty" too, and impose tyranny through gradualism. But we shouldn't just give up on the idea.
Regulation and a general citizen\voter\consumer vigilance are the only clear (so far as i know, anyone else?) and effective weapons against such woes.
What about it?
I don't think anyone can dispute the fact that fractional reserve lending is the root cause of business cycles.
That being said,
the severity of those cycles can be reduced by providing the consumers (depositors at banks) with accurate information about their business practices.
If you simply continued to use fractional reserve lending, but got rid of the Federal Reserve, and ended the FDIC you could let the "free" market determine lending rates and just as importantly you could let appropriately regulated ratings agencies and insurance agencies provide guidance to the public on which banks have are leveraged conservatively, and which ones are engaged in wildly speculative and highly leveraged transactions.
The MARKET could then determine where to keep its money, so that it doesn't "vanish" in a magic-crash situation.
???
If I opened it now would you not understand?