Capitalism After the Crisis

[DrunkenAsparagus]

We have yet to see any evidence that they cause bubbles at all (they have yet to provide valid correlation let alone causation).

As for empirical evidence, this will be lacking in all theories. However as for theoretical evidence. Their setting interest rates to low as a response to earlier financial disruptions around 2000 encouraged too much lending. Rates were so low, that it became almost stupid to hold on to large amounts of money. I'm not saying that this is absolutely right, but evidence is there

Financial Market Reform - Reason Magazine

http://www.cato.org/pubs/journal/cj29n1/cj29n1-9.pdf

 

[phattonez]

We have yet to see any evidence that they cause bubbles at all (they have yet to provide valid correlation let alone causation).

Why? Because there haven't been artificially low interest rates before all bubbles?

You ignore the nuance of the Austrian Business Cycle Theory, set up a straw man, and easily destroy it. The theory is that too much lending and credit set up the bubbles. Artificially high lending can be caused by a variety of methods.

 

[Mach]

I keep forgetting, those capitalist companies:

1. Did not willingly create financial instruments that behaved like well established/regulated instruments, but were not covered by the same regulation.
2. Did not willingly increase their risk by offering loans to sub-prime candidates, riskier interest schemes, etc.
3. Did not willingly rate securities as AAA when by any reasonable estimation they were not.
4. Did not willingly take in enormous sums of capital to invest in these risky deals.
5. Did not willingly provide good transparency in the process.
6. Did not willingly lobby to keep things as they were.

7. And they certainly did not profit wildly as they did so.

They were free to, they did, they collapsed the economy. They were expressing their libertarian freedoms, and showed you all exactly what they can do when they have sufficient freedom to **** you.

Interest rates are changed for different reasons, at different times, WTF does that have to do with free will?

It's like having a friend tell you they just bought a really nice new home, and you claiming that it's because of your friend's buying a house, that you had to run out and buy a bigger house to keep up. It's silly...are capitalists a bunch of monkey-see-monkey-do that simply cannot control their destructive impuleses and higher brain function just because the fed changed interest rates? Come on, stop. They gambled, and most of you probably did the losing for them.

If their industry has no incentive to not be assholes, they will be assholes. If you make a lot of money, there is incentive for people to rob you...so you support robbing? Good gods, we get a real life test over and over of these principles and we still have nay sayers.


WE HUMANS CAUSE BUBBLES. Stop with the theories and Cato propoganda links, it's irrelevant.
We get excited about things, new frontiers, the wild west, we see an opportunity to become wealthy and powerful and we take it. Those around us see us getting all the gold, and emulate, as befits human nature. This how bubbles start. It's got **** to do with austria or theories or governments.

 

[Kushinator]

Why? Because there haven't been artificially low interest rates before all bubbles?

Correct. In order for the theory to be thought of as correct, it would have to hold true in all instances.

You ignore the nuance of the Austrian Business Cycle Theory, set up a straw man, and easily destroy it. The theory is that too much lending and credit set up the bubbles. Artificially high lending can be caused by a variety of methods.

Sorry, the evidence does not support the theory. Its wrong!

 

[phattonez]

Correct. In order for the theory to be thought of as correct, it would have to hold true in all instances.

You're ignoring what the theory actually says though, and also some logic.

If A, then B. From this, you cannot logically conclude If B, then A.

 

[Ethereal]

I keep forgetting, those capitalist companies:

1. Did not willingly create financial instruments that behaved like well established/regulated instruments, but were not covered by the same regulation.
2. Did not willingly increase their risk by offering loans to sub-prime candidates, riskier interest schemes, etc.
3. Did not willingly rate securities as AAA when by any reasonable estimation they were not.
4. Did not willingly take in enormous sums of capital to invest in these risky deals.
5. Did not willingly provide good transparency in the process.
6. Did not willingly lobby to keep things as they were.

7. And they certainly did not profit wildly as they did so.

They were free to, they did, they collapsed the economy. They were expressing their libertarian freedoms, and showed you all exactly what they can do when they have sufficient freedom to **** you.

Interest rates are changed for different reasons, at different times, WTF does that have to do with free will?

It's like having a friend tell you they just bought a really nice new home, and you claiming that it's because of your friend's buying a house, that you had to run out and buy a bigger house to keep up. It's silly...are capitalists a bunch of monkey-see-monkey-do that simply cannot control their destructive impuleses and higher brain function just because the fed changed interest rates? Come on, stop. They gambled, and most of you probably did the losing for them.

If their industry has no incentive to not be assholes, they will be assholes. If you make a lot of money, there is incentive for people to rob you...so you support robbing? Good gods, we get a real life test over and over of these principles and we still have nay sayers.


WE HUMANS CAUSE BUBBLES. Stop with the theories and Cato propoganda links, it's irrelevant.
We get excited about things, new frontiers, the wild west, we see an opportunity to become wealthy and powerful and we take it. Those around us see us getting all the gold, and emulate, as befits human nature. This how bubbles start. It's got **** to do with austria or theories or governments.

Humans cause bubbles...a profound strawman (since nobody has suggested otherwise) and an exercise in irony when one considers the composition of a government (hint: it's made up of humans).

It's simply amazing how economic leftists can unflinchingly ignore the government's role in the downturn. The cause of it is almost so simple that only a really "smart" guy like Ben Bernanke could miss it.

The government loaned out too much money and created a giant bubble in the housing market via mandated lending standards and removal of natural market barriers (down payments, closing costs). Naturally, the asset bubble burst and dragged the entire economy down with it; the fact that housing is heavily collateralized and securitized necessitated the kind of systemic meltdown we witnessed in virtually all sectors of the economy. It had nothing to do with the failures of capitalism or free market economics.

Of course, this ignores the role the average American played in this mess, with their anemic savings rates and over-reliance on credit. You can't consistently spend more money than you make / save and expect to remain financially secure. To think otherwise is to turn simple arithmetic on its head, which, I suspect, is the modus operandi of many economic leftists.

If capitalism is just a concept and only humans can create bubbles, where does that leave your theories? In the same place as our economy, it seems.

 

[Ethereal]

Austrian sentiment that asset bubbles are created by artificially low interest rates is incorrect. For it to hold true, low federal funds rates would have to precede all bubbles.

I'm not sure about "Austrian sentiment" but nobody is suggesting that artificially low interest rates are the sole culprit of the housing bubble, since the legislative aspects of increasing home ownership amongst low income families was as much to blame as anything.

Both aspects (monetary policy and progressive lending) are necessary elements of the free market argument concerning the government's role in creating the bubble; neither should be viewed in isolation.

 

[Kushinator]

I'm not sure about "Austrian sentiment" but nobody is suggesting that artificially low interest rates are the sole culprit of the housing bubble, since the legislative aspects of increasing home ownership amongst low income families was as much to blame as anything.

Both aspects (monetary policy and progressive lending) are necessary elements of the free market argument concerning the government's role in creating the bubble; neither should be viewed in isolation.

The percentage make up of low income families in the housing market during the boom years was spit in the bucket. I am not going to look it up (unless you ask of course), but i am fairly certain the nominal figure of high end housing defaults in LA, Phoenix, Las Vegas, and South Florida was something like 10:1 in regards the nominal figure in ALL low end defaults.

Your bold statement asserts the theory is false.

 

[phattonez]

The percentage make up of low income families in the housing market during the boom years was spit in the bucket. I am not going to look it up (unless you ask of course), but i am fairly certain the nominal figure of high end housing defaults in LA, Phoenix, Las Vegas, and South Florida was something like 10:1 in regards the nominal figure in ALL low end defaults.

Your bold statement asserts the theory is false.

How does that invalidate what he was saying?

 

[Kushinator]

How does that invalidate what he was saying?

There really is no need to mention low income housing. HUD and the likes were not pushing for lower lending standards on $500,000 properties. Were their proper risk adverse lending standards being lowered in regards to potential low income buyers? Yes, but when they made up less than 1% of the nominal market, the blame can only flow so far.

 

[phattonez]

^^The problem wasn't necessarily with low-income buyers, but with people trying to buy homes that they could not afford.

 

[Ethereal]

The percentage make up of low income families in the housing market during the boom years was spit in the bucket. I am not going to look it up (unless you ask of course), but i am fairly certain the nominal figure of high end housing defaults in LA, Phoenix, Las Vegas, and South Florida was something like 10:1 in regards the nominal figure in ALL low end defaults.

Your bold statement asserts the theory is false.

If it's not too much trouble I'd like to look at the article.

 

[Kushinator]

If it's not too much trouble I'd like to look at the article.

Not an article, but simple chart analysis.

There are some other interesting finds 6-5 Beware Real Estate False Bottoms | Mr. Mortgage Blog | Field Check Group: Real Estate & Finance

 

[Mach]

Humans cause bubbles...a profound strawman (since nobody has suggested otherwise) and an exercise in irony when one considers the composition of a government (hint: it's made up of humans).

The claims were that interest rates were the cause, or specifically, *government*, which of course includes the humans that were responsible for those decisions.

The fact that I pointed out is that people in business cause them, consumers cause them, lobbyists, libertarian ideaology, stock brokers cause them...it's a result of people wanting to make a buck (i.e. most of us). Claiming it's "government" is just objectivist/libertarian/austrian nonsensical propoganda. By writing "humans cause bubbles", I mean more than just the few specific humans the libertarians scapegoat. Clear now I'm sure.

It's simply amazing how economic leftists can unflinchingly ignore the government's role in the downturn. The cause of it is almost so simple that only a really "smart" guy like Ben Bernanke could miss it.

Who are these ignorant leftists? Crying strawman when it's not, then immediately engaging in it with your next point, isn't useful. Most economists list a long string of issues as cause, including government, and consumers. They tend to be more realist, than idealist or partisan. I have done the same in numerous posts.

Why on earth would you claim only two causes, government and consumer stupidity? I already know it's because your ideaology *requries* it to never be the fault of free people, freely doing what they want. Never, that's heresay.

The government loaned out too much money and created a giant bubble in the housing market via mandated lending standards and removal of natural market barriers (down payments, closing costs).

Right. If you really believe that's either the primary cause, or the only cause, you're basically adhering to what amounts to conspiracy theory. You stated it right there "the government..created a giant bubble in the housing market". Still incorrect. People in all sectors of society create bubbles, but some, specifically those who know the system and do nothing about it, bear the largest blame. Just as a CEO bears the blame for a failed company, even if some employees were idiots.

Of course, this ignores the role the average American played in this mess, with their anemic savings rates and over-reliance on credit.

Who is ignoring that?

If capitalism is just a concept and only humans can create bubbles, where does that leave your theories? In the same place as our economy, it seems.

What theories? Why is capitalism just a concept? Who wrote these things. Please stay on track if you're going to rebutt specific points.

 

[Mach]

Let's check with the former Fed on this issue as to why he helped cause the problem, and what he believes drove him to it. Basically he bought into objectivist rheotoric, and bet our economy on that ideaology, and demonstrated it was incorrect.

[ame=http://en.wikipedia.org/wiki/Alan_Greenspan]Alan Greenspan - Wikipedia, the free encyclopedia[/ame]

In a congressional hearing on October 23, 2008 Greenspan admitted that his free-market ideology shunning certain regulations was flawed.[23]

Greenspan’s Mea Culpa - Economix Blog - NYTimes.com

Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.

“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”


It's such a basic fact of reality.
Games have rules. If the rules don't work, make new rules.
Greenspan's objectivitst ideaology? There are no rules, dur.

He was against consumer regulation, against regulating fraud, against regulating risk. Basically to Greenspawn there was no wortwhile regulation *at all*. Based on what? Bunk ideaology, not reason.

He had the wisdom to recognize it, and the balls to admit it. The best possible response after being essentially a cult-follower, rather than an individual, free-thinking, reasoning, member of society.

 

[phattonez]

The guy who sets interest rates too low blames the free market, hilarious.