Capitalism Discussion Thread

[moraldeficiency]

I love capitalism, I do think it should be regulated with laws and oversight so that it can stay true to its nature and create competitive markets rooted in innovation. Nothing will ever be perfect that's the nature of the world, but I think capitalism as an economic principle provided there are some rules and penalities for abusing the system, is about as close as we're gonna get with the maximum freedoms allowed.

 

[Paradoxium]

But you seem to subscribe to some naive belief that removing all regulations on corporations will make things better, which I believe is an unfeasible ideal.

We have laws that govern people, we have a police force, we don't just assume that people are going to police themselves, so why should corporations be any different? Why should there be enforcements on regular people and not corporations?

Where did I say I am against removing all regulations? You are putting words in my mouth again.

I do think there is a difference between good and bad regulation. And having more does not necessarily make it better, it's the crazy idea of quality over quantity. Simplified and elegant ones are superior to complicated ones with 100 holes in it.

 

[BillyZaned]

good and bad regulations.... isn't it all relative to the indvidual?

 

[Paradoxium]

Good ones don't have many or any unintended consequences. Stuff like anti-trust.

 

[The Overlord]

Where did I say I am against removing all regulations? You are putting words in my mouth again.

I do think there is a difference between good and bad regulation. And having more does not necessarily make it better, it's the crazy idea of quality over quantity. Simplified and elegant ones are superior to complicated ones with 100 holes in it.

But you haven't clearly defined what is a good regulation and what is a bad one. Give me an example of both then.

Good ones don't have many or any unintended consequences. Stuff like anti-trust.

That's pretty vague, how do you know when something will have unintended consequences or not.

 

[Paradoxium]

What people forget it is not only the how the policy is constructed but the enforcement.

Take Ponzi schemes, it's illegal. This is "regulated". Case in point, Madoff. Just that they turned a ****ing blind eyes when many competitors were screaming about his BS (not replicable numbers complaints, for an entire decade). The regulators said he was fine. Except you know they were wrong, and suckered people into doing business with him (SEC says it's fine thus people believe them on this face sense security).

This is not a result of no regulation... it is bad regulation.

BTW the government runs one too, aka Social Security.

 

[moraldeficiency]

Just use standard common sense, if someone is exploiting the market in a way that allows them unfair and uncompetative advantages plug that hole with some law and move on. Capitalism thrives with competition, make sure everyone can compete on some level and move on.

 

[Paradoxium]

But you haven't clearly defined what is a good regulation and what is a bad one. Give me an example of both then.



That's pretty vague, how do you know when something will have unintended consequences or not.

The more simple something is, the more predictable a intended consequences will arise from it. The more complicated, the higher propensity for unintended ones. There are so much examples of this in practice, I don't even know where to begin. It's the Chimera effect. Politicians have this propensity to solve a problem by creating two new ones. As an abstract idea, it even happens outside of politics.

 

[BillyZaned]

to bad that SS is going to run out... due to the fact that the rich cash out of paying taxes on it... and if that didn't happen, SS would NOT run out

 

[The Overlord]

What people forget it is not only the how the policy is constructed but the enforcement.

Take Ponzi schemes, it's illegal. This is "regulated". Case in point, Madoff. Just that they turned a ****ing blind eyes when many competitors were screaming about his BS (not replicable numbers complaints, for an entire decade). The regulators said he was fine. Except you know they were wrong, and suckered people into doing business with him (SEC says it's fine thus people believe them on this face sense security).

This is not a result of no regulation... it is bad regulation.

BTW the government runs one too, aka Social Security.

But clearly there is a problem with the system, if the regulations are not enforced. That's what ultra left wingers criticize about capitalism they believe the regulations to apply to certain people. So should we not a stronger enforcement body here?

I think one of the problems with the current system is it seems say that making money is the most important thing and if making money is the most important thing, why should people follow the rules, if they can make more money breaking them?

 

[Paradoxium]

The people "enforcing" some of the laws or reviewing the books are morons or are too green. We had an entire discussion about this on some accounting tricks that caused the mortgage and banking debacle (i.e. use of SIVs).

A lot of "regulators" are fresh college law graduates that take cooked books at face value. The people qualified to do so, won't do it because they rather make more money in the private market. The people who smart enough to can create simple and elegant policy would also rather make more money in the private market.

You can't simple say "we will add more enforcement" or create more new laws. The quality is subpar. More subpar enforcement or laws doesn't solve anything.

 

[The Overlord]

The people "enforcing" some of the laws or reviewing the books are morons or are too green. We had an entire discussion about this on some accounting tricks that caused the mortgage and banking debacle (i.e. use of SIVs).

A lot of "regulators" are fresh college law graduates that take cooked books at face value. The people qualified to do so, won't do it because they rather make more money in the private market. The people who smart enough to can create simple and elegant policy would also rather make more money in the private market.

You can't simple say "we will add more enforcement" or create more new laws. The quality is subpar. More subpar enforcement or laws doesn't solve anything.

So what's your solution then? Let these people regulate themselves?

What's next, should we get rid of laws against drunk driving and murder, because drunk driving and murder still happen despite the fact the laws are in place.

 

[Paradoxium]

If you want regulation you are going to have hire people with experience at a competitive rate. The second thing, is streamline and simplify the regulations so it's realistically manageable. The third thing is acknowledge the reality there is no true assurances in the market. Everything has a risk no matter how you cut it, there is no true comfort cushion (like the ones people thought they had with Madoff). It's far from perfect, but feasible.

But with all that said and done, it is meaningless with the huge flaw in the monetary system. I think it begins with that.

 

[Paradoxium]

One problem is defining what constitutes as the "right experience". It's a pot shot really, I don't think it is possible in any system ever to find the right person of merit (at least the majority of times).

This is why I favor simplification, so they can at least enforce it correctly. This is more meaningful than a complicated piece of crap no one knows how to enforce with 8 trillion holes.

 

[The Overlord]

If you want regulation you are going to have hire people with experience at a competitive rate. The second thing, is streamline and simplify the regulations so it's realistically manageable. The third thing is acknowledge the reality there is no true assurances in the market. Everything has a risk no matter how you cut it, there is no true comfort cushion (like the ones people thought they had with Madoff). It's far from perfect, but feasible.

But with all that said and done, it is meaningless with the huge flaw in the monetary system. I think it begins with that.

One little problem with that, the Canadian government is the only government in the west that has not had to bail its banks.

Why, a number of reasons: more regulation, better regulation and Canadian society values prudence far more then American society, which means our banks did not take stupid risks. The banks were better regulated and better run by their CEOs.

Also despite Canada being a "socialist" country, the government has been obsessed with avoiding a deficit for the last two decades. There was a minor scandal when the Conservative government announced a 50 billion dollar deficit.

So clearly Canadian society is better at regulating its businesses then American society.

 

[Paradoxium]

One little problem with that, the Canadian government is the only government in the west that has not had to bail its banks.

Why, a number of reasons: more regulation, better regulation and Canadian society values prudence far more then American society, which means our banks did not take stupid risks. The banks were better regulated and better run by their CEOs.

Also despite Canada being a "socialist" country, the government has been obsessed with avoiding a deficit for the last two decades. There was a minor scandal when the Conservative government announced a 50 billion dollar deficit.

So clearly Canadian society is better at regulating its businesses then American society.

Sure there is no bailout. It still has a housing bubble, they are just inflating it slowly with regulation. Much of these bubble would not even need any regulating if you didn't supply the credit. And to top it off, Canada has a higher credit delinquency rate than the United States. There is solves NONE of the fundamental problems.

 

[The Overlord]

Sure there is no bailout. It still has a housing bubble, they are just inflating it slowly with regulation. Much of these bubble would not even need any regulating if you didn't supply the credit. And to top it off, Canada has a higher credit delinquency rate than the United States. There is solves NONE of the fundamental problems.

Where's the bubble? Canada's economy is doing better the US' and Canada is a better recovery position when the economy turns around.

 

[Paradoxium]

What part of there is a housing bubble there do you not understand? Bubbles does not equal economic prosperity. Why else did they lower interest as much as they have?

Canada has the natural resources to deal with, and to offset a trade deficits / retain capital. So did the UK at one point. It doesn't mean the system is sound, that is a Ad Hoc fallacy.

 

[SuBe]

I'm thinking of changing the Title of this thread to "Capitalism = Double Plus Ungood?"

 

[The Overlord]

What part of there is a housing bubble there do you not understand? Bubbles does not equal economic prosperity. Why else did they lower interest as much as they have?

Canada has the natural resources to deal with, and to offset a trade deficits / retain capital. So did the UK at one point. It doesn't mean the system is sound, that is a Ad Hoc fallacy.

Canada did not have a sub prime mortgage crisis, the housing bubble was far more of a US problem then Canadian problem and we do not have as toxic loans as the US did, which is why the Canadian government didn't need to give money to the banks in order to get them free up credit.

Frankly Canadian banks don't give out stupid loans to people who can't afford it, so yeah the bubble is way less of a problem because our banks don't take stupid and insane risks, which mean there are far fewer options for people to refinance their mortgages up here. So there is less of a problem with a bubble because the banks don't take stupid risks.

Not to mention who has a smaller debt, Canada or the US? Who is having a better economic recovery, Canada or the US?

I'm thinking of changing the Title of this thread to "Capitalism = Double Plus Ungood?"

Whatever floats your boat man. You can rename it "Capitalism: Better then Strawberry Ice cream", if you want.

 

[SuBe]

Those High Risk Loans were pushed by the Government.

 

[Paradoxium]

Natural market constraints would not have allowed it to begin with, if you there was a culling of money and credit (aka not the way it is regulated currently). This again doesn't change the fact there is still bubble forming in Canada. The monetary system always lends towards this.

 

[SuBe]

Whatever floats your boat man. You can rename it "Capitalism: Better then Strawberry Ice cream", if you want.

Why would I say it's "Better then Strawberry Ice Cream"? If I was comparing two things I wouldn't say "Then", I would say "Than".

 

[The Overlord]

Why would I say it's "Better then Strawberry Ice Cream"? If I was comparing two things I wouldn't say "Then", I would say "Than".

You have no sense humour.

 

[Paradoxium]

Let's start talking about Fail Canadian Pseudo Capitalism edition

http://globaleconomicanalysis.blogspot.com/2009/11/canadian-says-short-canada.html

Mish,

Observing the attached August 2009 GDP report you’ll note that Canada’s economy is still receding and it has not escaped recession. Furthermore, the only sectors that are growing are from the result of one of two things: stimulus and a massively inflationary credit environment.

Canadian Real Estate:

Canada’s home prices have skyrocketed in this recession. When the dollar was at 97 cents US a couple weeks ago, average Canadian home prices hit roughly $320,000 US – an all-time high. Residential mortgage debt has over doubled since 2002. We will surpass the US in per capita residential debt within the next year. In 2009 alone, we will add 100 billion in fresh residential mortgage credit (equivalent of about 1 trillion in the US on a per capita basis)

The average price of a detached Toronto home has approached $600,000. I have attached a home listed at $559,000. The home is about a 15 minute drive from downtown in an average location. It is clearly overvalued.

The listing-to-sales ratio in Toronto, the fifth largest city in North America, has surpassed the late 1980’s bubble. Moments after that point Toronto’s housing market crashed losing 25% of its value and the country went into a deep recession. Toronto’s housing market took 12 years to recover, and needless to say its recovery was brought on by a massively inflationary credit environment.

In the greater Vancouver area, our third largest metropolis after Montreal, the average price of a detached home in March 2008 was $921,000. In fall of 2008 the market tanked, but only to find itself growing again in 2009. By September 2009 the average price was back up to $904,000. Average household incomes in Vancouver are lower than average incomes in Toronto. They hover somewhere around the $70,000 mark.

All of these prices are one hundred percent attributable to ultra low interest rates and a government insured credit market. CMHC, the equivalent of Fannie and Freddie, has expanded securitization of mortgage debt to nearly 100% of the credit market in Canada. The government of Canada insures the securities. The healthy banks in Canada, something that gets bragged about internationally, have fewer loans on their books then they did in 2007. This is despite the credit market growing by 30% since then.

The Bank of Canada has already admitted to a real estate bubble in Canada. Mark Carney, head of the BOC, has threatened to manipulate the mortgage market if borrowers don’t come to their senses.

You remember Gordon Brown the dumbass clown who sold gold at 200-300 an ounce? Did you know he wasn't the only dumbass to do this? I give you a hint, another country did it. It starts with "Can" and ends with "ada". Apparantly Canada was busy doing this in the early 2000s - whoever was running the show then was a gigantic idiot.