Anti-regulation is antithetical to modern economies

[Gabriel]

I'm not watching these videos. Either summarize or quit posting them because I guarantee you that no one is going to watch them all the way through.

As for Canada, it's kind of biased when you only look at the 7 richest countries. Poland has been doing well for quite some time now and their goal is much more economic liberalization. Like I always say, yet people always do it, correlation does not prove causation. I mean, if tight regulation explains why Canada has recovered, then what's wrong with Europe (excluding Poland)?

Read more: CBC News - Canada - Harper credits regulations for preventing bank bailouts

Canada has achieved a balance in the regulation of its banks that will serve the country well once the global economy begins to recover, Prime Minister Stephen Harper said in an interview Sunday with a U.S. television network.

It is ironic however this man is not responsible for the regulation that saved the Canadian economy from being exposed to things like derivatives. Him being a free market fanatic it is actually quite a comment coming from him.

The video is a very credible story of the banking industry from roughly 1600 on. In there it explains the origins of the federal reserve (started by JP Morgan.) is a creation of the private sector banking interest. Derivatives are complicated to explain but they are like side bets you would make on a game with a friend or bookie. Its gambling. They were illegal for years but in 2000 the government made it legal to do .. unregulated. Watch the video has a clip of Ron Paul even.. It is ironic a libertarian is talking about regulatory control and the like of the Fed.

I wouldn't compare apples and oranges regarding Poland and Canada. The Canadian economy is much more matured then Poland’s. So if you want to talk cause and effect it is pretty clear the profits in Poland are generated in a far different manner.

 

[Gabriel]

Another interesting explaination of the banking industry.

[video=google;-7065177340464808778]http://video.google.com/videoplay?docid=-7065177340464808778#[/video]

 

[phattonez]

I wouldn't compare apples and oranges regarding Poland and Canada. The Canadian economy is much more matured then Poland’s. So if you want to talk cause and effect it is pretty clear the profits in Poland are generated in a far different manner.

This is just a shallow deflection. Just answer my question: if stronger government control is the reason that Canada is pulling out of the recession, then why is Europe which has even more control still failing and Poland which has much less control succeeding?

 

[PeteEU]

As for Canada, it's kind of biased when you only look at the 7 richest countries. Poland has been doing well for quite some time now and their goal is much more economic liberalization. Like I always say, yet people always do it, correlation does not prove causation. I mean, if tight regulation explains why Canada has recovered, then what's wrong with Europe (excluding Poland)?

God you are clueless some times. Yes Poland has had growth during the economic downturn, but it also has massive unemployment, high inflation and it started a very very low point relatively speaking compared to most of the industrialized world. It could only go up basically and having a very low wage, almost lazie-faire economic system (since they have been still building it) then it is not hard to do economic growth.

Now the rest of the industrialized world, including Canada are at a much higher level economical, legally and socially, and having 3+% growth every year forever is just not realistic. And that is what people like you dont understand. You expect growth to go on and on and on. But the reality is we can only consume a certain amount and since our growth is almost solely based on consumption and not production, then having a 0 to 2+% growth is good, as it maintains the status quo which should be our priority in the western industrialized world. The status quo is very very very high, especially compared to Poland and other Eastern European countries that you and your cohorts love to use as examples.

And like it or not regulation is needed to prevent people with more information on a subject to exploit this information for profit and to the detriment of the rest of us. Look at the subprime crisis, and what non regulation can do.

 

[BCR]

it's obvious we need regulation in the corporate sector, These massive companies typically only care about getting their profits and really could give two damns about the lives they could have a drastic effect on, i.e. BP and Enron.

 

[phattonez]

God you are clueless some times. Yes Poland has had growth during the economic downturn, but it also has massive unemployment, high inflation and it started a very very low point relatively speaking compared to most of the industrialized world. It could only go up basically and having a very low wage, almost lazie-faire economic system (since they have been still building it) then it is not hard to do economic growth.

Africa is pretty much at rock bottom, yet they're still in dumpster. Who's clueless?

Now the rest of the industrialized world, including Canada are at a much higher level economical, legally and socially, and having 3+% growth every year forever is just not realistic. And that is what people like you dont understand. You expect growth to go on and on and on. But the reality is we can only consume a certain amount and since our growth is almost solely based on consumption and not production, then having a 0 to 2+% growth is good, as it maintains the status quo which should be our priority in the western industrialized world. The status quo is very very very high, especially compared to Poland and other Eastern European countries that you and your cohorts love to use as examples.

We're running out of natural goods? Proof?

And like it or not regulation is needed to prevent people with more information on a subject to exploit this information for profit and to the detriment of the rest of us. Look at the subprime crisis, and what non regulation can do.

I can see you still refuse to understand the Austrian concept of malinvestment, which occurs when you loan more than you have multiple claims to the same dollar.

 

[phattonez]

it's obvious we need regulation in the corporate sector, These massive companies typically only care about getting their profits and really could give two damns about the lives they could have a drastic effect on, i.e. BP and Enron.

Enron was fraud, and we already have laws against that. There is no one on this board arguing that we repeal laws against fraud. As for BP, that is what happens when you have no property rights. BP would have been forced to be much safer if people owned the rights to use the water around the well.

 

[Gabriel]

This is just a shallow deflection. Just answer my question: if stronger government control is the reason that Canada is pulling out of the recession, then why is Europe which has even more control still failing and Poland which has much less control succeeding?

No it isn't a shallow deflection. "Matured" economies don't have huge portions of their economies devoted to manufacturing and agriculture.. In Canada the service industry represents a whopping 76% where in Poland it is only ~50%. I could point out dozens of disparities but that is pointless. Here we have a bait and switch.. now it isn't comparing Canada and Poland but Poland with the rest of Europe. The government in Poland has implemented counter cyclical polices which basically translates into Keynesian economics ironically. The policy was to save in the good times before the recession and spend when it got bad.

But this has nothing to do with their banking industry per say. I mean out of the eastern block countries its banks are ranked in the top three with low banking services penetration. Crazy.. Their banks had little exposure to derivatives so their banks were not really subject to solvency. That doesn’t mean that if they were involved deeply enough with unregulated FX derivatives they wouldn’t be in the same mess as other European countries.

Essentially all you’re desperately trying to do is show some benefit for deregulation but Poland isn’t that great of a success really. Canada’s unemployment rate fell below 8% and the government is now starting to talk about stimulus cuts to the market since the private sector has had good growth in the job market. Canada’s inflation rate is near zero. On and on.. Hrm, maybe you could use China for your example? Err.

 

[phattonez]

Inflation is at 0? Maybe if you use CPI to measure it which is a flawed measure of inflation because the total stock of goods has changed. I'm sure that they're still pumping money into the economy. And unemployment below 8%? Come back to me when they have a real recovery.

The fact is, no one uses a real free market economy anymore. There is intrustion everywhere. The fact is, you're ignoring the rest of Europe (Britain, France, Spain, etc.) and focusing only on Canada. Kind of biased sampling, don't you think?

 

[Gabriel]

Inflation is at 0? Maybe if you use CPI to measure it which is a flawed measure of inflation because the total stock of goods has changed. I'm sure that they're still pumping money into the economy. And unemployment below 8%? Come back to me when they have a real recovery.

The fact is, no one uses a real free market economy anymore. There is intrustion everywhere. The fact is, you're ignoring the rest of Europe (Britain, France, Spain, etc.) and focusing only on Canada. Kind of biased sampling, don't you think?

Well yes it is biased because none of the countries you listed had sufficient regulation to avoid the derivatives mess.

Canadian job machine revs into high gear - The Globe and Mail

 

[phattonez]

Well yes it is biased because none of the countries you listed had sufficient regulation to avoid the derivatives mess.

Canadian job machine revs into high gear - The Globe and Mail

France had insufficient regulation? Well that's a bold claim.

 

[Gabriel]

France had insufficient regulation? Well that's a bold claim.

Paris Derivatives Jobs Burn as Market Rues Exotics (Update1) - Bloomberg

“The French are big structured equity-derivatives players, a business where retail clients are still shell-shocked,” said Simon Yates, co-head of European equities at Zurich-based Credit Suisse Group AG. “When the retail market does bounce back, it will be to buy more straightforward, less complex investments.”

 

[phattonez]

Paris Derivatives Jobs Burn as Market Rues Exotics (Update1) - Bloomberg

Do you think we're going to see a derivative market get going again in this country anytime soon? And remember that many derivatives were based on equity, and that market crashed for other reasons (malinvestment, to use the Austrian term).

 

[Gabriel]

Do you think we're going to see a derivative market get going again in this country anytime soon? And remember that many derivatives were based on equity, and that market crashed for other reasons (malinvestment, to use the Austrian term).

Why Wall Street Fears Derivatives Regulation - BusinessWeek

While derivatives such as credit default swaps have become infamous for their role in the banking crisis, currency and interest-rate swaps represent a much bigger share of the business. U.S. commercial banks generated a record $22.6 billion in derivatives trading revenues in 2009, with $14.5 billion of that coming from interest-rate contracts, according to a survey of 1,030 federally insured banks by the Office of the Comptroller of the Currency.

 

[phattonez]

Are derivatives inherently bad?

 

[Gabriel]

Are derivatives inherently bad?

I am sorry I wish I could say they weren't considering how profitable they are.. but considering the economic collapse and the shady nature of the practice.

You should really watch this documentary, preferably all the way through but is terrible dry in places. There is a clear and concise description in the documentary.

[video=google;-466210540567002553]http://video.google.com/videoplay?docid=-466210540567002553#docid=-4020719354420953428[/video]

 

[obvious Child]

The examples that I saw in the first post all sounded like fraud. I don't think that anyone is calling for fraud to be legal.

Not quite. Financial advisers can push a product that is good for them and not feasible for the client without committing fraud. There is of course however, regulation requiring advisers first to examine the feasibility of the product for the client. Remove that regulation and what's stopping them from pushing high commission products that aren't good for clients but are too complex for the average client to figure out that it's not good for them?

 

[obvious Child]

Enron was fraud, and we already have laws against that. There is no one on this board arguing that we repeal laws against fraud.

Directly or indirectly? Do you doubt that are morons here who don't realize that some arguments they make are doing just that?

 

[drz-400]

Are derivatives inherently bad?

I don't think so. Credit and liquidity puts are necessary to keep the shadow banking system moving. These banks didn't have access to the fed or fdic to provide these, and they needed some way to facilitate buying and selling risk for hedging purposes.

Monoline insurers have existed historically as insurers of municipal bonds, which given the state of state and municipal finances I think they will continue to be important.

The problem arises when companies use derivatives as a way to excessively leverage themselves, rather than to hedge against risk. Another problem arises during runs, since private companies cannot internalize systemic risk. This is where an official garantee similar to deposit insurance, or access to the discount window would greatly improve the market.

 

[Gabriel]

I don't think so. Credit and liquidity puts are necessary to keep the shadow banking system moving. These banks didn't have access to the fed or fdic to provide these, and they needed some way to facilitate buying and selling risk for hedging purposes.

Monoline insurers have existed historically as insurers of municipal bonds, which given the state of state and municipal finances I think they will continue to be important.

The problem arises when companies use derivatives as a way to excessively leverage themselves, rather than to hedge against risk. Another problem arises during runs, since private companies cannot internalize systemic risk. This is where an official garantee similar to deposit insurance, or access to the discount window would greatly improve the market.

After nearly single handedly destroying the global economy someone makes an argument in favour of unregulated derivatives.. They used to be illegal for that reason. Yes they are dangerous and risky business. This is mind boggling.

 

[drz-400]

After nearly single handedly destroying the global economy someone makes an argument in favour of unregulated derivatives.. They used to be illegal for that reason. Yes they are dangerous and risky business. This is mind boggling.

There are gains from speacilization that occured in the shadow banking market. Not all of them were made profitable by regulatory arbitrage. Take the originate to distribute model for example. Sure, there are some incentive problems and problems with using excessive leverage, but it has made banking more efficient.

I don't know where I argued for unregulated derivatives. I think we should gaurd against excessive leverage, and we should extend official credit and liquidity puts to the shadow banks. I would argue against an outright ban of them though. You seriously want to ban options? How would FDIC even work then?

 

[Gabriel]

I don't think I said anything of the sort.

There are gains from speacilization that occured in the shadow banking market. Not all of them were made profitable by regulatory arbitrage. Take the originate to distribute model for example. Sure, there are some incentive problems and problems with using excessive leverage, but it has made banking more efficient.

Well I certainly wouldn't admit to defending the use of derivatives ether. Creation of profit out of speculative gambling is risky business. End of story, these particular trading practices can bring the global economy to it's knees again and it has little or nothing to do with the welfare bums on mainstreet. If you keep on rolling them dice it will happen again.

 

[Gabriel]

Awesome dirivatives commercial from 2008..



EDIT: Well was posted in 2008.

 

[Gabriel]

Credit Default Swaps explained clearly in five minutes

 

[Gabriel]

Credit Default Swaps are pyramid schemes.