Government, Not Free Market, Caused Subprime Crisis

[BBSA]

OK, the thrust of the article you posted suggests first of all that the US govt shouldn't be bailing anyone out. The results of them *not* doing that would make the great depression look like a mere blip on the screen. The resulting run on the markets would be nothing short of catastrophic (and no, this is not hyperbole).

No, that is not correct. The thrust of the article is the Government cased the mess. How we going to get out of it is a totally different debate.

 

[alloytoo]

So you must regulate to compensate for governments mistakes? Would it not be better if Government stay out of the market in the first place?

No. You regulate to curb institutions taking on excessive risk.

Monetary and fiscal policy may have accelerated the bubble, but sooner or later the bankers would have, in the absence of regulation, gone there irrespective of monetary or fiscal policy.

Using poor monetary and fiscal policy as a reason not to regulate shows a very poor grasp of basic economics.

 

[Arthur]

Just out of curiosity, what do you think socialism is?

It's a large topic, as you know. The Freedom vs Socialism debate draws deeply on Philosophy, Anthropology, Ethics, Politics, Economics, History, even Psychology ... and a whole network of related and interrelated fields.

The fundamental principle is this: socialism is implemented to the degree that ownership of property is located in the collective (usually but not necessarily Caesar), rather than in private hands. Any mitigation of the fundamental human right to fully own and posssess property is a step towards socialism and a step away from freedom.

Like all collectivisms and statisms, there are of course degrees of implementation. Especially in the Twentieth Century Caesar has developed all sorts of legal tricks to limit, reduce, mitigate, curtail, cramp, suppress, and expropriate property rights to a lesser or greater extent. Caesar's power has expanded beyond anything seen since High French Absolutism and its Jacobin successors.

At root, socialism's premiss is that an individual human person does not have full title to his/her person and the fruits of his/her labour, that somehow the collective (society, state, whatever) has a lien on their peson and on their labour; that social lien is claimed primarily through the mitigation of property rights, but it inevitably extends even to the enforcement and proscription of ideas.

Socialism is in principle indistinguishable from slavery. The only difference is one of degree.

 

[BBSA]

Monetary and fiscal policy may have accelerated the bubble, but sooner or later the bankers would have, in the absence of regulation, gone there irrespective of monetary or fiscal policy.

Not at all. If the market determent the interest rate, and not the government, the interest rates would have gone up much faster hence preventing the housing bubble to occur in the first place. The market would have indicate to the bankers what the true risk is.

 

[alloytoo]

Not at all. If the market determent the interest rate, and not the government, the interest rates would have gone up much faster hence preventing the housing bubble to occur in the first place. The market would have indicate to the bankers what the true risk is.

nonsense you're ignoring the historical context of the Supernormal profits arising from the normalization of soviet block economies. They were seeking to retain those supernormal profits.

Not withstanding the fact that decent legislation provides a barrier for poor fiscal and monetary policy going forward.

 

[alloytoo]

It's a large topic, as you know. The Freedom vs Socialism debate draws deeply on Philosophy, Anthropology, Ethics, Politics, Economics, History, even Psychology ... and a whole network of related and interrelated fields.

The fundamental principle is this: socialism is implemented to the degree that ownership of property is located in the collective (usually but not necessarily Caesar), rather than in private hands. Any mitigation of the fundamental human right to fully own and posssess property is a step towards socialism and a step away from freedom.

Like all collectivisms and statisms, there are of course degrees of implementation. Especially in the Twentieth Century Caesar has developed all sorts of legal tricks to limit, reduce, mitigate, curtail, cramp, suppress, and expropriate property rights to a lesser or greater extent. Caesar's power has expanded beyond anything seen since High French Absolutism and its Jacobin successors.

At root, socialism's premiss is that an individual human person does not have full title to his/her person and the fruits of his/her labour, that somehow the collective (society, state, whatever) has a lien on their peson and on their labour; that social lien is claimed primarily through the mitigation of property rights, but it inevitably extends even to the enforcement and proscription of ideas.

Socialism is in principle indistinguishable from slavery. The only difference is one of degree.

There's a balance to be had here.

Between ruthless Darwinian forces of the market and the stifling inefficent command economies of pure Communism.

Socialism acknowledges in part that we are a herdlike species.

 

[Arthur]

There's a balance to be had here.

Between ruthless Darwinian forces of the market and the stifling inefficent command economies of pure Communism.

Socialism acknowledges in part that we are a herdlike species.

Why? What balance is to be had between right and wrong, freedom and slavery, justice and injustice?

I'm not sure precisely what kind of force a 'Darwinian force' is. Gravity, pehaps?

So often people (not necessarily you, alloytoo) just assume that free market private enterprise means dog-eat-dog brutalism where anything goes. Nothing could be further from the truth. All the usual rules of social living must of necessaity be in place for private enterprise to survive let alone work: the banishment of force and fraud from human relations - the State's sole raison d'etre is to be the objective agency that manages the retaliatory use of force, of which it a legal monopoly.

It is a paradox of our human condition that greater justice requires greater responsibility, which requires greater freedom (which is not the same a libertine license).

 

[BBSA]

nonsense you're ignoring the historical context of the Supernormal profits arising from the normalization of soviet block economies. They were seeking to retain those supernormal profits..

The imbalance was created by soviet block government interference. Classic example why NOT to interfere.

Not withstanding the fact that decent legislation provides a barrier for poor fiscal and monetary policy going forward.

We have discuss this before. If government does not interfere in the free market we will not have to legislation and regulate to death.

 

[Xarog]

No, that is not correct. The thrust of the article is the Government cased the mess. How we going to get out of it is a totally different debate.

I have pointed out why there are two fundamental things that had to occur in order for the current mess to exist. One was Greenspan's policy of wealth creation via increase in asset price. The other was the repeal of regulatory legislation that controlled the behaviour of financial institutions (btw, the glass-steagall act was enacted in the wake of the great depression to stop another great depression from happening). Do I need to go find sources proving to you how the financial industry lobbied to get the act repealed?

The financial sector is at least as culpable as government, but probably more-so.

It's a large topic, as you know. The Freedom vs Socialism debate draws deeply on Philosophy, Anthropology, Ethics, Politics, Economics, History, even Psychology ... and a whole network of related and interrelated fields.

The fundamental principle is this: socialism is implemented to the degree that ownership of property is located in the collective (usually but not necessarily Caesar), rather than in private hands. Any mitigation of the fundamental human right to fully own and posssess property is a step towards socialism and a step away from freedom.

Like all collectivisms and statisms, there are of course degrees of implementation. Especially in the Twentieth Century Caesar has developed all sorts of legal tricks to limit, reduce, mitigate, curtail, cramp, suppress, and expropriate property rights to a lesser or greater extent. Caesar's power has expanded beyond anything seen since High French Absolutism and its Jacobin successors.

At root, socialism's premiss is that an individual human person does not have full title to his/her person and the fruits of his/her labour, that somehow the collective (society, state, whatever) has a lien on their peson and on their labour; that social lien is claimed primarily through the mitigation of property rights, but it inevitably extends even to the enforcement and proscription of ideas.

Socialism is in principle indistinguishable from slavery. The only difference is one of degree.

More or less what I expected.

the problem with your argument is that the world required to support that level of "freedom" is a make-believe world. We all act upon one another, we all depend on one another for there to even be a civilisation. It has been shown time and time again that capitalism fails when it comes to generally uplifting people or granting them "freedom". Laissez-faire capitalism shows again and again that the result is that all the wealth is concentrated in the hands of a few who control the economic system, with serfdom and poverty being the price paid by the many. The industrial revolution only helped people in britain achieve a better living standard and quality of life *after* there was a social outcry against the behaviour of the money barons. It was only after society mobilised as a whole and demanded that government introduce regulations that curbed the "freedom" of the upper class to exploit the lower classes, that things improved.

I don't have the freedom to kill whom I want. That's a law put in place by a government to regulate the behaviour of its citizens. That's a restriction on my ability to use the fruits of my labour for a specific purpose. By your argument that is socialism at work. But it is not. It is simply regulation of human behaviour in order to prevent the worst characteristics of humanity from being displayed.

You don't have some sovereign right to ignore the interests of others. Economic activity is *inherently* a societal activity. Without society, there is no economy. Thus economic activity has to gauge the interests of the community vs. the interests of the individual. The irony is that with a government strongly geared towards protecting the community as a whole (but nonetheless with a good degree of free-trade), that individual people get the *most* personal freedom.

Lastly, socialism is not the antithesis of freedom. Socialism is better lined up with capitalism. Either system practised purely is designed for a world that doesn't exist.

And btw, it is interesting to note that America has a wealth disparity so great that only a few banana republics in Africa can match it in terms of difference in wealth between the rich and the poor. How can you be free when you have barely any money, when you're working a horrible job at entry level fees, when you have to work more than 1 job at once, when you actually have to PAY to get an education (which you can't because you don't have the money), all to ensure that the majority of the proceeds goes to some fatcat at the top making large profits off your labour? Or better yet, how the hell is that gaining the full fruits of one's labour? Short answer : it isn't; that societal system is geared so that most of us either have to work or starve.

 

[Arthur]

More or less what I expected.

...The industrial revolution only helped people in britain achieve a better living standard and quality of life *after* there was a social outcry against the behaviour of the money barons. It was only after society mobilised as a whole and demanded that government introduce regulations that curbed the "freedom" of the upper class to exploit the lower classes, that things improved.

Your argument leaves out half of history and the reason why the Ind Rev resulted in such in unjust distribution: the status quo ante. Ever since the Great Land Grab in the Sixteeenth Century, the British landed gentry were entrenched in their ownership through myriad laws that prevented anyone but them from engaging in any trade or enterprise much beyond subsistence level. All foreign and regioinal trade, local production and manufacture was done only with State approbation - you had to get a Charter to engage in a mercantile or productive enterprise, and this locked out everyone except the gentry. In other words, it was State control that robbed people of their natural right to own and trade property. It was government that caused and legally protected the concentration of wealth. The gentry simply used State power to muscle in on the new inventions, factories and production techniques - they used the State to keep competitors out and themselves in. Thank goodness the ordinary people rioted - I would have right there with them.

I don't have the freedom to kill whom I want. That's a law put in place by a government to regulate the behaviour of its citizens. That's a restriction on my ability to use the fruits of my labour for a specific purpose. By your argument that is socialism at work. But it is not. It is simply regulation of human behaviour in order to prevent the worst characteristics of humanity from being displayed.

Sigh. What has this to do with property rights? You labour under the misconception that getting the State out of the economy means the State abandons everything. No-one is making a case that laws against force (assault, murder, etc) or fraud (misrepresentation, etc) be abandoned - where on earth do you get that impression?! The alternative to socialism is not chaos free-for-all lawlessness, murder and mayhem. You fail to distinguish between categories of law. Indeed, I am simply advocating that the State get back to doing what it exists for: protection of citizens against violators of their person or property from other citizens (police, courts, prisons) or foreigners (military). You forget why we have a State in the first place - to banish force from human relations and to protect people's rights, ie integrity of person and property from the violence or threat of others.

You don't have some sovereign right to ignore the interests of others. Economic activity is *inherently* a societal activity. Without society, there is no economy. Thus economic activity has to gauge the interests of the community vs. the interests of the individual. The irony is that with a government strongly geared towards protecting the community as a whole (but nonetheless with a good degree of free-trade), that individual people get the *most* personal freedom.

Huh? What's that got to do with the argument? Of course it's a social activity ... but no-one is arguing against social acitivities, or social living. Indeed, true social activity requires authentic freedom, including the freedom to enter into commercial compacts and relations others both local and foreign.

Your root error is that you conflate the State and society. What a grim and jaundiced view of Society it is to confuse social life with that unique and special agency that alone legally wields the sword.

Lastly, socialism is not the antithesis of freedom. Socialism is better lined up with capitalism. Either system practised purely is designed for a world that doesn't exist.

And btw, it is interesting to note that America has a wealth disparity so great that only a few banana republics in Africa can match it in terms of difference in wealth between the rich and the poor. How can you be free when you have barely any money, when you're working a horrible job at entry level fees, when you have to work more than 1 job at once, when you actually have to PAY to get an education (which you can't because you don't have the money), all to ensure that the majority of the proceeds goes to some fatcat at the top making large profits off your labour? Or better yet, how the hell is that gaining the full fruits of one's labour? Short answer : it isn't; that societal system is geared so that most of us either have to work or starve.

Socialism is indeed the antithesis of freedom because each and every expression of it requires ipso facto and of necessity the removal of someone else's natural and moral right to property or economic relations.

A few profound errors in your last para:
* Education is never free and always has to be paid for. State education is the worst possible kind, because Caesar wants good citizens, not free and independent adults, which is why his ideology always infects State education and turns out socialist drones.
* You pay twice for State education. When all costs are considered, it's the most expensive education, and usually the worst.

Finally, a philosophical note: Your conception of rights is what may be termed teleological rather than formal or substantive. You do not believe that people can be free until they have all the material means to achieve their highest ends. This will of course never happen, as I'm sure you must know. The classical and historical conception of rights is substantive and ontological.

Apartheid is a form of racial socialism. It was socialist because it used state power (ie police) to severely curtail economic and social relations between people, and it was racist because the basis of that discrimination was racial. As a white man, I was prevented by law from selling my house to the overwhelming majority of my fellow citizens. It is MY house, not the State's. I was prevented by law from providing cinema, restaurant, entertainment and recreation services to 80% of my fellow citizens. Now it is true that I never had a cinema or a restaurant, nor ever wanted one, nor could I even afford them -- but the point is that I was not free to do so even if I had the means and the desire. The intended effect, of course, was to prevent racial mixing, and it resulted in the impoverishment of millions.

When you strip away all the lovely idealistic notions of equality and justice, there's no getting away from the ugly and brutal fact that your conception of socialism rests on economic compulsion enforced by police power. You see, there's a subtle but extremely important difference between using the State to restrain economic relations on the one hand, and using the state's power to restrain malefactors, brigands and murderers.

 

[Xarog]

Your argument leaves out half of history and the reason why the Ind Rev resulted in such in unjust distribution: the status quo ante. Ever since the Great Land Grab in the Sixteeenth Century, the British landed gentry were entrenched in their ownership through myriad laws that prevented anyone but them from engaging in any trade or enterprise much beyond subsistence level. All foreign and regioinal trade, local production and manufacture was done only with State approbation - you had to get a Charter to engage in a mercantile or productive enterprise, and this locked out everyone except the gentry. In other words, it was State control that robbed people of their natural right to own and trade property. It was government that caused and legally protected the concentration of wealth. The gentry simply used State power to muscle in on the new inventions, factories and production techniques - they used the State to keep competitors out and themselves in. Thank goodness the ordinary people rioted - I would have right there with them.

I'll do research on that.

Sigh. What has this to do with property rights? You labour under the misconception that getting the State out of the economy means the State abandons everything. No-one is making a case that laws against force (assault, murder, etc) or fraud (misrepresentation, etc) be abandoned - where on earth do you get that impression?! The alternative to socialism is not chaos free-for-all lawlessness, murder and mayhem. You fail to distinguish between categories of law. Indeed, I am simply advocating that the State get back to doing what it exists for: protection of citizens against violators of their person or property from other citizens (police, courts, prisons) or foreigners (military). You forget why we have a State in the first place - to banish force from human relations and to protect people's rights, ie integrity of person and property from the violence or threat of others.

No, I am pointing out that human freedoms are curbed in the interests of the common good on a daily basis. As the saying goes, "your right to swing your fist stops where my face starts". In the "proection of citizens against violators of their person or property from other citizens", regulation of economic activity is quite essential. What is the right to education worth if no one can afford it?

Huh? What's that got to do with the argument? Of course it's a social activity ... but no-one is arguing against social acitivities, or social living. Indeed, true social activity requires authentic freedom, including the freedom to enter into commercial compacts and relations others both local and foreign.

But such freedom is not unlimited. The state is justified in regulating it so that it doesn't harm the common good. And that's what anti-pollution laws and so forth do. You equate socialism with the restriction of freedom, so by your argument anti-pollution laws are socialistic.

But the main point is that without the society there would be no economic freedom. Society needs to exist for economic freedom to be available. Thus, economic activity needs to be regulated in such a manner that it doesn't harm society as a whole. And that usually means the introduction of "socialistic" programs such as welfare, state subsidies of education, universal healthcare, etc. etc. etc.

Your root error is that you conflate the State and society. What a grim and jaundiced view of Society it is to confuse social life with that unique and special agency that alone legally wields the sword.

No, that is a mistake in your interpretation of what I am saying. I am saying that without the state intervening in certain economic situations, that the majority suffers.

Do you not think anti-monopoly laws are a good thing? Aren't they yet another example of economic freedom curtailed for the common good? For example, the competition comission is quite vocal at times regarding what Telkom may and may not do with their funds. Do you agree with such limitations or not?

Socialism is indeed the antithesis of freedom because each and every expression of it requires ipso facto and of necessity the removal of someone else's natural and moral right to property or economic relations.

No. See above.

* Education is never free and always has to be paid for. State education is the worst possible kind, because Caesar wants good citizens, not free and independent adults, which is why his ideology always infects State education and turns out socialist drones.

Lol. So the state indoctrinates its citizens. What else is new? The US is quite happy to indoctrinate their citizens too, only they take a slightly different slant. With public education functioning alongside private education, you get the best balance of both worlds. State education for those that cannot afford anything else (and yes, it is subsidised, usually through taxes, but then that's exactly the point), and private education for anyone who is lucky enough to be able to afford it. No education is still worse than a bad education.

You pay twice for State education. When all costs are considered, it's the most expensive education, and usually the worst.

Irrelevant.

Finally, a philosophical note: Your conception of rights is what may be termed teleological rather than formal or substantive. You do not believe that people can be free until they have all the material means to achieve their highest ends. This will of course never happen, as I'm sure you must know. The classical and historical conception of rights is substantive and ontological.

Not quite. I merely believe that they have a basic human right to all the material means required to achive their highest ends. What they do with those means is their business. And yes, I do expect the state to provide those means to people that cannot provide it for themselves.

Apartheid is a form of racial socialism. It was socialist because it used state power (ie police) to severely curtail economic and social relations between people, and it was racist because the basis of that discrimination was racial. As a white man, I was prevented by law from selling my house to the overwhelming majority of my fellow citizens. It is MY house, not the State's. I was prevented by law from providing cinema, restaurant, entertainment and recreation services to 80% of my fellow citizens. Now it is true that I never had a cinema or a restaurant, nor ever wanted one, nor could I even afford them -- but the point is that I was not free to do so even if I had the means and the desire. The intended effect, of course, was to prevent racial mixing, and it resulted in the impoverishment of millions.

This is another red-herring. Of course there will be restrictions that are unreasonable. You can't point to one unreasonable restriction and then claim that all restructions are thus unreasonable. I've pointed out several restrictions which I DO think are reasonable (anti-pollution laws, anti-monopoly laws). The alternative is to claim that Telkom should have the right to be able to buy out IS, Vodacom, MTN and Cell C, provided they have the money and a willing buyer. This of course would lead to insane price-gouging and the community as a whole would be harmed as a result.

When you strip away all the lovely idealistic notions of equality and justice, there's no getting away from the ugly and brutal fact that your conception of socialism rests on economic compulsion enforced by police power. You see, there's a subtle but extremely important difference between using the State to restrain economic relations on the one hand, and using the state's power to restrain malefactors, brigands and murderers.

No, the difference is in your head I'm afraid. In both cases harmful behaviours are curbed in the interests of the common good. You think that all economic activity is somehow inherently innocent, and that is a rather terrible assumption to make.

 

[Vrotappel]

Your name isn't Arthur. That was a question levelled directly at him.

You appear to be in the need for some help. Consider it my socialist deed for the day.

 

[BBSA]

@ Xarog and alloytoo.

There is a direct relationship between the economical freedom of a country and its prosperity. Not only is a higher level of economic freedom clearly associated with a higher level of per capita gross domestic product, but those higher GDP growth rates seem to create a virtuous cycle, triggering further improvements in economic freedom and prosperity.

Economical freedom is the only way you will get a country out of poverty.

 

[alloytoo]

Why? What balance is to be had between right and wrong, freedom and slavery, justice and injustice?

I'm not sure precisely what kind of force a 'Darwinian force' is. Gravity, pehaps?

One too many debates with creationists.

So often people (not necessarily you, alloytoo) just assume that free market private enterprise means dog-eat-dog brutalism where anything goes. Nothing could be further from the truth. All the usual rules of social living must of necessaity be in place for private enterprise to survive let alone work: the banishment of force and fraud from human relations - the State's sole raison d'etre is to be the objective agency that manages the retaliatory use of force, of which it a legal monopoly.

The pure Dog eat Dog brutality of the free market needs to be balanced with the the good of society.

Firstly, as you say, the banishment of Force and fraud, and secondly the provision of things which the market will probably never provide but which do benifit society as a whole.

 

[alloytoo]

The imbalance was created by soviet block government interference. Classic example why NOT to interfere.

You really don't read beyond a certain point do you?

We have discuss this before. If government does not interfere in the free market we will not have to legislation and regulate to death.

You don't regulate to death, you install moderate regulation, which provides a stable consistant framework.

To return ad nausea to my tyre analogy.

The accident was caused because the driver was driving recklessly on smooth tyres in the rain.

You can't stop the rain, but you can install penalties for reckless driving and make grooved tyres compulsary.

Your argument remains in essense that since the the non-existant penalties, and non existant grooved tyres didn't stop this accident they won't stop future accidents.

 

[alloytoo]

@ Xarog and alloytoo.

There is a direct relationship between the economical freedom of a country and its prosperity. Not only is a higher level of economic freedom clearly associated with a higher level of per capita gross domestic product, but those higher GDP growth rates seem to create a virtuous cycle, triggering further improvements in economic freedom and prosperity.

Economical freedom is the only way you will get a country out of poverty.

Sigh.

Economics 101, did you forget the rest of the lecture?

While the average performance of a pure free market economy will always be better (usually a lot better) than that of a command economy, the gaps between the wealthiest and the poorest is also far more extreme. As a result unfortunate social & ecological consequences arise.

Crime, polution, desease to name a few.

Intervention and regulation by the state is required to squeeze the gap between the richest of the rich and the poorest of the poor to address those social ills.

Regulation should be used to temper the extremes of free markets, not stifle them.

Even America, that paragon of the free market, has a regulated market.

 

[BBSA]

Sigh.

Economics 101, did you forget the rest of the lecture?

*** Double Sigh ***

Maybe you should have attended Economics 101

While the average performance of a pure free market economy will always be better (usually a lot better) than that of a command economy, the gaps between the wealthiest and the poorest is also far more extreme. As a result unfortunate social & ecological consequences arise.

Not true. Go and have a look at Singapore. They have a high level of economical freedom and there is not a high level of poverty. Even America does not have a high level of poverty. Poverty is usually associated with countries which have a low level of economical freedom.

Crime, polution, desease to name a few.

I'm talking about economical freedom.

Intervention and regulation by the state is required to squeeze the gap between the richest of the rich and the poorest of the poor to address those social ills.

Regulation should be used to temper the extremes of free markets, not stifle them.
.

Not true, Regulation cause imbalances in the market with disasters consequences.

Even America, that paragon of the free market, has a regulated market.

...... and see what a mess that has caused.

 

[alloytoo]

*** Double Sigh ***

Maybe you should have attended Economics 101

Passed it, and the second year course.

Not true. Go and have a look at Singapore. They have a high level of economical freedom and there is not a high level of poverty. Even America does not have a high level of poverty. Poverty is usually associated with countries which have a low level of economical freedom.

Not reading again.

the gaps between the wealthiest and the poorest is also far more extreme

The poorest of the poor in America are poorer than in a more socialist state, and the richest are also richer.

This gap causes social problems

I'm talking about economical freedom.

Social inequalities ultimately effect your economic freedom.

Not true, Regulation cause imbalances in the market with disasters consequences.

...... and see what a mess that has caused.

But there was no regulation in the banking sector, the regulation was repealed. See Xarog's posts.

The mess is a natural consequence of market correction, and many people predicted it's arrival.

 

[BBSA]

Not reading again.

You do not want to read it because you know it is true.

Less economical freedom = more poverty

Poverty can only be eradicated if you have a vibrant economy which is create by economical freedom.

Your concerned that a few people will get supper rich is blinding your justment.

 

[Sherbang]

Not true. Go and have a look at Singapore..

Singapore - you mean that place where they execute people for buying and selling certain products! That's free market and economic freedom for you!

(Yes, BBSA, I know you're not talking to me...)