Freedom & Frugality go hand in hand.

[maat55]

[QUOTE]

And greed. And short term gain. And the inherent risks of an under regulated financial industry.

Derivatives where packaged mortgages and other loans, many of the loans became toxic due to not knowing which were good and which were not. The problems was how many were becoming toxic. In the free market, there would not have been enough to sour the investment. The government does not operate as an functionable business, when it decides to make homes more accessable it introduces improper market risk, this is what caused the economic collapse, not wallstreet for taking advantage of the rules government made.

Seriously, to come out of 2008 and think the US needs less regulation of financial markets baffles me.

We do not necessarily need more regulation(i'm sure there is somewhere it would help), what we need is no government intervention(F&F,government backed student loans,medicare,medicaid for those over 18). Government intrusion introduces extreme risk and distorts market prices.

This crisis is government caused, the free market would not have allowed mass numbers of toxic assets. For some reason, people ignor the governments intrusions into the free market and blame wallstreet and capitalism.

I can understand the romantic appeal of ideals of free markets and peoples, but in reality a more nuanced approach often reaps best results. I don't care much for labels and slogans, I care for effective approaches to goals and challenges.

When businesses operate improperly, they will fail. The free market manages risk and eliminates inefficiency, it is designed to produce goods at the lowest price possible. This is what makes things more affordable, while creating jobs.

The government does not operate in this manner, it operates as an mob which spends as it pleases and extorts taxpayers and/or just prints money at will.

Take your usntof the word freedom, for starters. What does it mean?

Freedom means, I am responsible for me and no one else(other than my children). I provide my own food, clothing, shelter, healthcare, retirement, education(State or local entity) and income. I choose who I give charity to. I am responsible for my prosperity in a fairly regulated free market.

The government is not as motivated as I am to provide my wants or needs. It by nature is not efficient. It never applies the right solution, it only applies compromised solutions, it should only control things that are general in nature(common defense and general welfare, go to my blog for an better understanding of general welfare as explained by James Madison(father of the constitution).Freedom, Frugality, Personal Responsibility and Charity=Prosperity

How about the concept that "more free" markets are always best. Take your claims on the costs of higher education.

We do not know how affordable higher ed could be, it has not been based in free market principles for quite some time. Government backed student loans create far too much demand with little incentive for competition.

In most other developed countries (western europe, canada, australia, etc.), higher education costs are significantly lower than in the US because government has had greater control of such costs while footing a much larger portion of the bill than in the US. Similar for health care. Did you know that the US government spends a larger percentage of GDP on health care than most other developed countries while covering much fewer services? As with education, a "more free" market for these services has lead to much higher service costs.

Again, our markets are distorted by government intrusion and regulations.

I think it best to stay away from simplistic ideological catch phrases and over generalizations when discussing public policy.

I see the world for what it is, and I understand human nature. I see the world governments heavy in debt and placing an unfair burden on future generations. Aside from this is the fact that mankind was not created to be ruled, the american experiment has proven that freedom works and big government fails.

[thekid]

[QUOTE=maat55;267538]

Derivatives where packaged mortgages and other loans, many of the loans became toxic due to not knowing which were good and which were not. The problems was how many were becoming toxic. In the free market, there would not have been enough to sour the investment. The government does not operate as an functionable business, when it decides to make homes more accessable it introduces improper market risk, this is what caused the economic collapse, not wallstreet for taking advantage of the rules government made.



We do not necessarily need more regulation(i'm sure there is somewhere it would help), what we need is no government intervention(F&F,government backed student loans,medicare,medicaid for those over 18). Government intrusion introduces extreme risk and distorts market prices.

This crisis is government caused, the free market would not have allowed mass numbers of toxic assets. For some reason, people ignor the governments intrusions into the free market and blame wallstreet and capitalism.

To each their own I guess.

To me it is clear that irresponsible sub prime loans were made because lenders would package them with lower risk loans and sell them off (broadly, lower risk loans covering for the higher risk ones and providing investors with better rates of return than simply the more credit worthy loans). Commercial paper of this nature was given AAA credit rating, mainly because it was believed that the collateral was sufficient (it was as per then market rates). Creating and selling these instruments made extending sub prime loans good commercial practice. When the subprime bubble burst, all of these instruments became virtually unsellable as no one knew to which extent they contained bad loans. Financial instruments fueled the bubble. The housing market didn't go bunkers on affordable housing programs (which i'm not a fan of anyway).

In Canada, real estate loans and bank speculatory practices with such financial instruments were much more stringently regulated and as a consequence zero canadian banks failed and there was no housing bubble and subsequent crash. Canada has affordable housing programs and a governmental equivalent of feddie/fannie.

I do believe in free markets, not as an ideology though.



[QUOTE=maat55;267538]

When businesses operate improperly, they will fail. The free market manages risk and eliminates inefficiency, it is designed to produce goods at the lowest price possible. This is what makes things more affordable, while creating jobs.

Don't know that people realize the extent to which the worlds biggest financial institutions failed. Without state intervention, the world's financial system would have crumbled. The businesses that operated imporperly were the world's biggest financial institutions and they would have gone bankrupt in scores. Anybody that thinks this should have happened as per free market ideology needs to look at the consequences of that. It is unthinkable. It would have sent the world economies into the dark ages.


[QUOTE=maat55;267538]

We do not know how affordable higher ed could be, it has not been based in free market principles for quite some time. Government backed student loans create far too much demand with little incentive for competition.

For some reason every other developed western country has more governement intervention in the higher education market and lower costs. Health care is another biggy. Again, the US government spends a higher percentage of its GDP on health care than any other developed country (most of which have nationalised health care systems) while covering far fewer services. That's absurd! Lack of government intervention in these markets (not too much intervention) has lead to much higher prices. That's not all bad, the US has the best education and health care institutions in the world (the incentives are there). It's not all good either, everybody pays a higher price...even for (mostly) crapier educational and health care services.

[QUOTE=maat55;267538]

I see the world governments heavy in debt and placing an unfair burden on future generations. Aside from this is the fact that mankind was not created to be ruled, the american experiment has proven that freedom works and big government fails.

Ironically, the US national debt is in much worse shape than many other developed countries with greater social programs....much due to irresponsible tax cuts, unnecessary wars and massive bailouts of under regulated (too free?) financial institutions. As for the reasons mankind was created, I won't reply as that seems to fall out of the scope of a discussion forum on finance.

[snafu]

Some of this discussion is down right scary! When Americans abruptly stopped buy cars, GM went into bankruptcy, line workers were laid off, dealerships shut and a lot of those employees defaulted on their mortgages. The housing market crash had millions of jobs tied to its millions of components.

I could hardly believe what I was reading! So many posting described China. In that Communist country, everyone is responsible for their own success. It is almost totally a cash society. Credit cards are not available so if you want to buy something you must have the cash. If you want to eat, you must work. If you are sick, you'd better have good relationships with extended family who are willing to keep a roof over your head and food to sustain you. When you go to a walk-in medical clinic [very rare to have a private Dr. or appointment] the 1st person you see is the cashier. She takes your $$$ and gives you a paper which entitles you to go to the waiting room and wait until your turn [like a bake shop or a deli]. You may be sicker than the 100 people ahead of you but that's not how the system works.

Having a car is likely the number one desire of every family. Public transit is cheap, efficient and crowded beyond description. Deodorant isn't a well know product and the people jammed near you smell awful. Everyone want their children to go to school. Schools are mostly private and even public schools charge tuition. No money, no education, no education makes getting a job...any job nearly impossible. When you finally get a job as a porter carrying heavy bricks up bamboo ramps the contractor delays, forgets, never pays you. You have no support. Yes, there are laws that are similar to American laws but no one enforces them. The job of the government is to protect you from the unknown. They spend an incredible amount of money monitoring/spying on their own citizens. There is a camera on every light post. Chinese must have authorization to go to another city or another province. Tourists/foreigners can go where they like.

Taxes are very low, in a cash only society earnings and profit are what you say it is. No check back system. 2.1 billion people so the government is thrilled they have mostly ended people dying from starvation.

They charged the guy who made the decision to add bleach to baby powder milk formula to make it whiter and more appealing to new mothers. Yes, several hundred babies died and government officials were embarrassed by international attention.

Prior to the Beijing Olympics, they wanted to tear down the more than 100 y/o Hutongs [communities] as they still lacked indoor plumbing. The seniors were summarily moved out even though they could prove generations of ownership. The developers could see the god of PROFIT.

ok, kicked over the soapbox BUT Watch out what you wish for, I doubt you would like it.

[maat55]

[QUOTE]

Financial instruments fueled the bubble. The housing market didn't go bunkers on affordable housing programs (which i'm not a fan of anyway).

Many of the subprime loans were accepted by F&F which were promoted by the government. Investors would not have participated without government backing.

In Canada, real estate loans and bank speculatory practices with such financial instruments were much more stringently regulated and as a consequence zero canadian banks failed and there was no housing bubble and subsequent crash. Canada has affordable housing programs and a governmental equivalent of feddie/fannie.

Despite driving the cost of housing up since the 70's, F&F operated fairly safely. It was the CRA initiative that prodded the bubble into existence, along with Bush's housing policy.

I do believe in free markets, not as an ideology though.

Free markets are not an idiology, and they are not supposed to be purely free, it is to have limited fair regulation, not heavy government participation.

Don't know that people realize the extent to which the worlds biggest financial institutions failed. Without state intervention, the world's financial system would have crumbled. The businesses that operated imporperly were the world's biggest financial institutions and they would have gone bankrupt in scores. Anybody that thinks this should have happened as per free market ideology needs to look at the consequences of that. It is unthinkable. It would have sent the world economies into the dark ages.

This is a tough call, but this country would have been better off in the longterm to have allowed them to fail. IMO, the government exposed them to a virus but they accepted it. The whole point of a free market is to self regulate risk, they allowed the government to distort free market principles.

For some reason every other developed western country has more governement intervention in the higher education market and lower costs. Health care is another biggy. Again, the US government spends a higher percentage of its GDP on health care than any other developed country (most of which have nationalised health care systems) while covering far fewer services. That's absurd! Lack of government intervention in these markets (not too much intervention) has lead to much higher prices. That's not all bad, the US has the best education and health care institutions in the world (the incentives are there). It's not all good either, everybody pays a higher price...even for (mostly) crapier educational and health care services.

We have the best institutions in the world, the best facilities, the most resources, this is not due to government management. What we do have is enough government intrusion to distort their costs. Canada has a handfull of MRI machines, the us has over 2500, you cannot compare the us to any other country.

Ironically, the US national debt is in much worse shape than many other developed countries with greater social programs....much due to irresponsible tax cuts, unnecessary wars and massive bailouts of under regulated (too free?) financial institutions.

We have too much debt due to too much defense spending and social programs. The bailouts should not have occured, and again, the financial institutions were distorted with government involvement into the free market.

As for the reasons mankind was created, I won't reply as that seems to fall out of the scope of a discussion forum on finance.

I bring this up due to the world is not one big secular arena, it is filled with those of some form of faith. This country was based on christian beliefs. How we conduct our government and economy is not just an dicussion from an secular point of view, the american Constitution was designed to protect God given freedoms, this plays a very important role in the governing and economy of this country. As this country turns secular, it is also decaying.

[thekid]

We agree that the norm should be free markets and that regulation should be the exception. We disagree on the impact and optimal scope of such regulation.

That's fine. I've said my piece, you've said yours and it was a fun discussion.

I won't get into a religious discussion save as it relates to finances and limit that intervention to stating that I clearly think that religious belief should be of no consideation when discussing economic policy.

[maat55]

We agree that the norm should be free markets and that regulation should be the exception. We disagree on the impact and optimal scope of such regulation.

That's fine. I've said my piece, you've said yours and it was a fun discussion.

I won't get into a religious discussion save as it relates to finances and limit that intervention to stating that I clearly think that religious belief should be of no consideation when discussing economic policy.

Enjoyed it, live long and prosper.