10 ms·

Exactly, the problem has got worse. Banks are larger and more centralised, the offenders unpunished know they can act with impunity, legislation is unchanged.

by deepnet 11y ago

Exactly, the problem has got worse. Banks are larger and more centralised, the offenders unpunished know they can act with impunity, legislation is unchanged. Banking/ finance types now know that if they are losing money they must simply lose big enough to trigger more bailouts and the taxpayer pays. This is despotic anti-capitalism: they keep the winnings and losses are generational debt on which they again profit. The only ways that have ever worked to inject capital is to pay the poor and middle class by national infrastructure projects or GWBush style $1000 cheques - everyone benefits as money circulates. Keynsian economics got this right. Banks and the rich largely hoard capital where it is useless, pretending risk aversion when it was outright fraud that caused the econopocalypse, not risky but legitimate loans to business. This will happen again unless investment and savings banks are again separated, but no nation wants to do it unilaterally fearing an exodus of non-dom capital they use to cook the government figures. Finance is rotten to its core. Quantative easing is bailouts by the backdoor. Austerity stagnates an economy.

forgetsusername 11y ago
>the offenders unpunished Unpunished...for what? What are the crimes? I mean, people were certainly punished financially when their banks equity was wiped out or bought for pennies on the dollar. >Quantative easing is bailouts by the backdoor. Please elaborate. >Keynsian economics got this right. Do you know the academic origins of QE?
- crdoconnor 11y ago
  >Unpunished...for what? What are the crimes? Wire fraud. Illegal since 1872. >Please elaborate. QE pushed up the value of assets which had plunged in value. Assets which were used by the banks as collateral for loans which were now bigger than the value of those assets and were going bad very quickly. That made those banks what is technically known as "insolvent"... until the stealth bailout. >Do you know the academic origins of QE? Monetarism. You can place the blame squarely at Milton Friedman's feet for QE, not Keynes. Keynes advocated fiscal expansion, not funny money tricks to reduce interest rates below zero. Milton Friedman was firmly of the opinion that tweaking interest rates was enough to successfully manage any economy. Clearly not so much...
  - edanm 11y ago
    Who was committing wire fraud?
- deepnet 11y ago
  The crime is wilful financial mismanagement, it took many forms: sub-prime morgages, LIBOR manipulation, fake AAA ratings, Goldman's advising its clients buy toxic assets to get them off the books, ... the list of actual crimes is huge and largely unprosecuted by the revolving door financiers/ regulators. Turning a blind eye, wilful ignorance should not be an excuse but it is a succesful one. Capitalism is self-interest - the idea of self-regulation is a nonsense, if one can make money and get away with it then someone will which is natural. What is wrong is the continued lack of oversight, either by lack of regulation; or the regulators and regulated change places - the revolving door. The economy is a golden goose, wealth is continually created, but if the money is hoarded, economies stagnate - no-one benefits, the goose is dead. Quantative easing removes value from money by printing more, then gives it to the banks who hoard it. Yes QE doesn't have to be bad, if the printed money recirculates, the problem is how it is done (no guarantees about lending from banks) - its origins doesn't stop them juking it to all heck. The problem is not capitalism but weak government who give out money but negotiate only vague promises not guarantees. As the voters are responsible for government then the electorate is ultimately responsible for this, but were they really given a choice ? On a humerous note perhaps in times of crisis the government should be suspended and let the civil-service run things with out the costly and unecessary changes indulged in by the popularity contests.
Shivetya 11y ago
You are still free to join about credit unions, use local banks, and the like. You get bigger because of all the support persons your need to comply with regulations. The auditors alone can be very burdensome to smaller banks. They certainly don't try to grow large just to fail. I am not sure you understand the words you are using. Paying the poor is a calculated game where politicians try to find the point they won't be annoyed enough to vote against them the next election and finding that point which they won't take stuff from those who are voting Keynsian is easily proven wrong on many accounts Capital pools until there is a good outlet for it. It also tends to pull when taxing systems become burdensome with regards to spending it Investment and savings do not need separation. you could say that making loans is a form of investment with similar risks and rewards finance is confusing to many but it isn't rotten quantitative easing is the result of poor money policy of the countries enacting it. usually the result of the same country borrowing so much money it depletes that which is available to others Austerity does not cause stagnation, first you would actually have to find a country that claimed austerity that actually reduced expenditure and not simply slowed the rate of increase. Greece is an exception to the rule In the end adopting a the sky is falling outlook never works. Politicians created this mess and they are damn good at ducking responsibility. This is because most operate under the ideals of fascism, meaning pretty much force the hands of private companies to behave a certain way and then blame them when it doesn't work. This lets politicians further exert control because the general population doesn't understand what is going on
- deleted 11y ago
  [deleted]
tosseraccount 11y ago
"Austerity stagnates an economy". How did overspending work out for Greece? [ edit: I'd be glad to discuss substance. The admittedly rhetorical question stands. What is the evidence on overspending and growth? ]
- malnourish 11y ago
  Not taking sides here but there are many middle-grounds between austerity and overspending.
- thedataslinger 11y ago
  Put simply: it is fraudulent when a creditor uses lies or deception. JP Morgan deceived the Greek people by masking a massive loan to the Greek government as a "currency swap", seemingly to avoid the financial regulators within the EU. See here: http://www.nytimes.com/2010/02/14/business/global/14debt.html?pagewanted=all http://www.nytimes.com/2010/02/14/business/global/14debt.htm...
  - tosseraccount 11y ago
    "Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere." Sounds like the Greek government was culpable. Not blaming the culture of corruption in Greece and not pointing out that the Greek overspending was the root of the problem is disingenuous.
    - cmrdporcupine 11y ago
      There have been two different Greek governments in this period. Smearing Syriza, a socialist formation which made the same critique as the above poster, and would never have signed those deals -- for the corrupt actions of New Democracy & PASOK which did is a little bit of intellectual dishonesty.
      - tosseraccount 11y ago
rosalinekarr 11y ago
> GWBush style $1000 cheques Note that none of those checks went to the poor or middle class, at least not with a value as high as $1000. All the $1000 checks were reserved for the relatively wealthy. http://www.sfgate.com/politics/article/Bush-signs-1-3-trillion-tax-cut-bill-300-600-2913184.php http://www.sfgate.com/politics/article/Bush-signs-1-3-trilli...
- cylinder 11y ago
  The fact that he got away with this with no real protest or outcry shows just how apathetic and disabled the lower classes in America are.
illumin8 11y ago
This can really be traced back to the repeal of Glass Steagal. After the great depression in the 30s, congress passed the Glass Steagal act, which put a firewall between investment banks and commercial banks. In other words, Wall Street investment banks could no longer gamble with customer deposits. This seems like common sense, and all of the financial problems actually occurred after Glass Steagal was repealed in the 90s. It seems fairly obvious in hindsight that Glass Steagal was good legislation. It led to a 60+ year period of extended prosperity, and the greatest economy in the world. Once it was repealed, it set us up for a global financial crisis a decade later.
- ktRolster 11y ago
  >This can really be traced back to the repeal of Glass Steagal. The evidence against this hypothesis is that Canada did not have Glass Steagal (or legislation similar to it), and yet they were not harmed by the financial crisis nearly as much. The banks were smart enough to not invest so deeply in mortgage backed securities.
  - ajlburke 11y ago
    Canadian banks have generally been much more regulated than US ones. Through the 90s and early 2000s they constantly complained about too much government regulation getting in the way of their profits etc. - they seem to have shut up about that since 2008.
  - badsock 11y ago
    They weren't smart enough. They were prevented by government regulation introduced in the 1990s.
  - tosseraccount 11y ago
    Canada does not have personal residence mortgage deductibility and was riding a commodities boom at the time. Speaking of the popular "austerity ruins the economy", Canada ran a budget surplus during the crisis, enabling them to weather the financial crisis quite well. Keeping an eye on the accounting books is always a good idea.
api 11y ago
Funny that GWB got away with such a blatant bit of Keynesianism. A Democrat would be crucified. This is actually the pretty well known "only Nixon could go to China" effect.
- ktRolster 11y ago
  Probably not, since Obama did the same thing (and Carter did too, for that matter).
- ep103 11y ago
  Not sure he actually did though, he gave huge sums of money to the upper class. We'd need to see a report that actually said more went to the middle / lower than the upper, and somehow I very much doubt that occurred. Though, of course, that also explains how he got away with it.
cm2187 11y ago
> Banking/ finance types now know that if they are losing money they must simply lose big enough to trigger more bailouts and the taxpayer pays. This is ignoring a fundamental change in legislation that happened pretty much in every major country: the introduction of bail-in. For those who are unfamiliar with the concept, it is a major change to corporate law, it is a power given to the regulators to declare a bank non viable, and to impose losses on bond and equity holders over a week end, a sort of instantaneous chapter 11. The impact of which is to increase the capital of the bank and allow it to re-open the next Monday, affecting the creditors of the bank but not the economy. It is extremely unlikely that a politician, in any major country, would authorise a bail-out before having first attempted a bail-in. And banks are now required to hold a sufficient amount of bail-inable debt (called TLAC or MREL) to ensure that the bank can be recapitalised should it become non viable. > This will happen again unless investment and savings banks are again separated, but no nation wants to do it In the UK the regulators are implementing a strict ring-fencing which requires investment banking and retail banking activities to be in two separate and independent entities such that one can go bust without impacting the other. > Banks and the rich largely hoard capital where it is useless That's true, banks are hoarding capital, but not because bank like to make useless investment, because they have been required since the financial crisis to increase their capital ratios significantly, which means they need to hold more capital (or reduce their exposure) and not deploy it. But that's the price for a stronger banking system than in 2007. > Austerity stagnates an economy. Who does austerity? Everywhere I look I see massive amount of money printing and huge budget deficits. That's not austerity.
DickingAround 11y ago
I worry we're confusing a number of different things here. I don't think Keynsian or Austrian economics is in favor of or really even addresses the idea of bank bailouts. Those two forms of economic thinking are much more about how to fundamentally run/grow an economy. This bank bailout thing is mostly about corruption and systemic risk management, which is really totally different.
- splintercell 11y ago
  Austrian Economics clearly favors letting banks fail. Keynesian Economics and Chicago School Monetarists support bailing out banks. Although you have to infer these things out. http://www.wsj.com/articles/SB10001424052702303443904575578202202857136 http://www.wsj.com/articles/SB100014240527023034439045755782...
- roymurdock 11y ago
  > I don't think Keynsian or Austrian economics is in favor of or really even addresses the idea of bank bailouts Neither school directly addresses the idea in the form we observe today - QE injections of liquidity to prevent runs that should bankrupt institutions that trade against/leverage an unsustainable amount of toxic assets - because central banks did not count QE as a viable option in their quiver of monetary policy tools until the BOJ (Bank of Japan) began to use QE in the early 2000's to try and solve secular stagnation. Hence why QE was termed "unconventional" monetary policy when the Fed and other major central banks started to use it as the FFR approached zero post financial-crisis. "Keynesian" economists tend to favor intervention (leaning towards market manipulation), whereas "Austrian" economists tend to favor austerity (leaning towards free market). This is a gross oversimplification, as there is a huge range of thinking on both sides that spans many different views on the role of government in various markets. But let's use it as a rough way to judge QE: OK, so corruption got out of hand - bankers did not live up to their fiduciary duty to protect investors. Predatory investors took out loans with the intent to default and dump property on banks. Excess leverage backed with toxic assets occurs and the system fails. Fine. What do we do next? Austrians would call for austerity - let the corrupt institutions fail, enter bankruptcy, and be reformed. The system would tear itself apart and be reborn from the ashes. No misdirection of resources, no boom and bust. Keynesians (who largely supported QE [1]) would call for intervention - prop the old system up, relieve the private sector of risk, inject liquidity into failing institutions, create artificial demand. Obviously neither economic system calls for more corruption, but both acknowledge that it is an inherent human trait. Where they generally differ is in their response to crises brought on by corruption.

by deepnet 11y ago

forgetsusername 11y ago

>the offenders unpunished Unpunished...for what? What are the crimes? I mean, people were certainly punished financially when their banks equity was wiped out or bought for pennies on the dollar. >Quantative easing is bailouts by the backdoor. Please elaborate. >Keynsian economics got this right. Do you know the academic origins of QE?

crdoconnor 11y ago
>Unpunished...for what? What are the crimes? Wire fraud. Illegal since 1872. >Please elaborate. QE pushed up the value of assets which had plunged in value. Assets which were used by the banks as collateral for loans which were now bigger than the value of those assets and were going bad very quickly. That made those banks what is technically known as "insolvent"... until the stealth bailout. >Do you know the academic origins of QE? Monetarism. You can place the blame squarely at Milton Friedman's feet for QE, not Keynes. Keynes advocated fiscal expansion, not funny money tricks to reduce interest rates below zero. Milton Friedman was firmly of the opinion that tweaking interest rates was enough to successfully manage any economy. Clearly not so much...
- edanm 11y ago
  Who was committing wire fraud?
deepnet 11y ago
The crime is wilful financial mismanagement, it took many forms: sub-prime morgages, LIBOR manipulation, fake AAA ratings, Goldman's advising its clients buy toxic assets to get them off the books, ... the list of actual crimes is huge and largely unprosecuted by the revolving door financiers/ regulators. Turning a blind eye, wilful ignorance should not be an excuse but it is a succesful one. Capitalism is self-interest - the idea of self-regulation is a nonsense, if one can make money and get away with it then someone will which is natural. What is wrong is the continued lack of oversight, either by lack of regulation; or the regulators and regulated change places - the revolving door. The economy is a golden goose, wealth is continually created, but if the money is hoarded, economies stagnate - no-one benefits, the goose is dead. Quantative easing removes value from money by printing more, then gives it to the banks who hoard it. Yes QE doesn't have to be bad, if the printed money recirculates, the problem is how it is done (no guarantees about lending from banks) - its origins doesn't stop them juking it to all heck. The problem is not capitalism but weak government who give out money but negotiate only vague promises not guarantees. As the voters are responsible for government then the electorate is ultimately responsible for this, but were they really given a choice ? On a humerous note perhaps in times of crisis the government should be suspended and let the civil-service run things with out the costly and unecessary changes indulged in by the popularity contests.

Shivetya 11y ago

You are still free to join about credit unions, use local banks, and the like. You get bigger because of all the support persons your need to comply with regulations. The auditors alone can be very burdensome to smaller banks. They certainly don't try to grow large just to fail. I am not sure you understand the words you are using. Paying the poor is a calculated game where politicians try to find the point they won't be annoyed enough to vote against them the next election and finding that point which they won't take stuff from those who are voting Keynsian is easily proven wrong on many accounts Capital pools until there is a good outlet for it. It also tends to pull when taxing systems become burdensome with regards to spending it Investment and savings do not need separation. you could say that making loans is a form of investment with similar risks and rewards finance is confusing to many but it isn't rotten quantitative easing is the result of poor money policy of the countries enacting it. usually the result of the same country borrowing so much money it depletes that which is available to others Austerity does not cause stagnation, first you would actually have to find a country that claimed austerity that actually reduced expenditure and not simply slowed the rate of increase. Greece is an exception to the rule In the end adopting a the sky is falling outlook never works. Politicians created this mess and they are damn good at ducking responsibility. This is because most operate under the ideals of fascism, meaning pretty much force the hands of private companies to behave a certain way and then blame them when it doesn't work. This lets politicians further exert control because the general population doesn't understand what is going on

deleted 11y ago
[deleted]

tosseraccount 11y ago

"Austerity stagnates an economy". How did overspending work out for Greece? [ edit: I'd be glad to discuss substance. The admittedly rhetorical question stands. What is the evidence on overspending and growth? ]

malnourish 11y ago
Not taking sides here but there are many middle-grounds between austerity and overspending.
thedataslinger 11y ago
Put simply: it is fraudulent when a creditor uses lies or deception. JP Morgan deceived the Greek people by masking a massive loan to the Greek government as a "currency swap", seemingly to avoid the financial regulators within the EU. See here: http://www.nytimes.com/2010/02/14/business/global/14debt.html?pagewanted=all http://www.nytimes.com/2010/02/14/business/global/14debt.htm...
- tosseraccount 11y ago
  "Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere." Sounds like the Greek government was culpable. Not blaming the culture of corruption in Greece and not pointing out that the Greek overspending was the root of the problem is disingenuous.
  - cmrdporcupine 11y ago
    There have been two different Greek governments in this period. Smearing Syriza, a socialist formation which made the same critique as the above poster, and would never have signed those deals -- for the corrupt actions of New Democracy & PASOK which did is a little bit of intellectual dishonesty.
    - tosseraccount 11y ago

rosalinekarr 11y ago

> GWBush style $1000 cheques Note that none of those checks went to the poor or middle class, at least not with a value as high as $1000. All the $1000 checks were reserved for the relatively wealthy. http://www.sfgate.com/politics/article/Bush-signs-1-3-trillion-tax-cut-bill-300-600-2913184.php http://www.sfgate.com/politics/article/Bush-signs-1-3-trilli...

cylinder 11y ago
The fact that he got away with this with no real protest or outcry shows just how apathetic and disabled the lower classes in America are.

illumin8 11y ago

This can really be traced back to the repeal of Glass Steagal. After the great depression in the 30s, congress passed the Glass Steagal act, which put a firewall between investment banks and commercial banks. In other words, Wall Street investment banks could no longer gamble with customer deposits. This seems like common sense, and all of the financial problems actually occurred after Glass Steagal was repealed in the 90s. It seems fairly obvious in hindsight that Glass Steagal was good legislation. It led to a 60+ year period of extended prosperity, and the greatest economy in the world. Once it was repealed, it set us up for a global financial crisis a decade later.

ktRolster 11y ago
>This can really be traced back to the repeal of Glass Steagal. The evidence against this hypothesis is that Canada did not have Glass Steagal (or legislation similar to it), and yet they were not harmed by the financial crisis nearly as much. The banks were smart enough to not invest so deeply in mortgage backed securities.
- ajlburke 11y ago
  Canadian banks have generally been much more regulated than US ones. Through the 90s and early 2000s they constantly complained about too much government regulation getting in the way of their profits etc. - they seem to have shut up about that since 2008.
- badsock 11y ago
  They weren't smart enough. They were prevented by government regulation introduced in the 1990s.
- tosseraccount 11y ago
  Canada does not have personal residence mortgage deductibility and was riding a commodities boom at the time. Speaking of the popular "austerity ruins the economy", Canada ran a budget surplus during the crisis, enabling them to weather the financial crisis quite well. Keeping an eye on the accounting books is always a good idea.

api 11y ago

Funny that GWB got away with such a blatant bit of Keynesianism. A Democrat would be crucified. This is actually the pretty well known "only Nixon could go to China" effect.

ktRolster 11y ago
Probably not, since Obama did the same thing (and Carter did too, for that matter).
ep103 11y ago
Not sure he actually did though, he gave huge sums of money to the upper class. We'd need to see a report that actually said more went to the middle / lower than the upper, and somehow I very much doubt that occurred. Though, of course, that also explains how he got away with it.

cm2187 11y ago

> Banking/ finance types now know that if they are losing money they must simply lose big enough to trigger more bailouts and the taxpayer pays. This is ignoring a fundamental change in legislation that happened pretty much in every major country: the introduction of bail-in. For those who are unfamiliar with the concept, it is a major change to corporate law, it is a power given to the regulators to declare a bank non viable, and to impose losses on bond and equity holders over a week end, a sort of instantaneous chapter 11. The impact of which is to increase the capital of the bank and allow it to re-open the next Monday, affecting the creditors of the bank but not the economy. It is extremely unlikely that a politician, in any major country, would authorise a bail-out before having first attempted a bail-in. And banks are now required to hold a sufficient amount of bail-inable debt (called TLAC or MREL) to ensure that the bank can be recapitalised should it become non viable. > This will happen again unless investment and savings banks are again separated, but no nation wants to do it In the UK the regulators are implementing a strict ring-fencing which requires investment banking and retail banking activities to be in two separate and independent entities such that one can go bust without impacting the other. > Banks and the rich largely hoard capital where it is useless That's true, banks are hoarding capital, but not because bank like to make useless investment, because they have been required since the financial crisis to increase their capital ratios significantly, which means they need to hold more capital (or reduce their exposure) and not deploy it. But that's the price for a stronger banking system than in 2007. > Austerity stagnates an economy. Who does austerity? Everywhere I look I see massive amount of money printing and huge budget deficits. That's not austerity.

DickingAround 11y ago

I worry we're confusing a number of different things here. I don't think Keynsian or Austrian economics is in favor of or really even addresses the idea of bank bailouts. Those two forms of economic thinking are much more about how to fundamentally run/grow an economy. This bank bailout thing is mostly about corruption and systemic risk management, which is really totally different.

splintercell 11y ago
Austrian Economics clearly favors letting banks fail. Keynesian Economics and Chicago School Monetarists support bailing out banks. Although you have to infer these things out. http://www.wsj.com/articles/SB10001424052702303443904575578202202857136 http://www.wsj.com/articles/SB100014240527023034439045755782...
roymurdock 11y ago
> I don't think Keynsian or Austrian economics is in favor of or really even addresses the idea of bank bailouts Neither school directly addresses the idea in the form we observe today - QE injections of liquidity to prevent runs that should bankrupt institutions that trade against/leverage an unsustainable amount of toxic assets - because central banks did not count QE as a viable option in their quiver of monetary policy tools until the BOJ (Bank of Japan) began to use QE in the early 2000's to try and solve secular stagnation. Hence why QE was termed "unconventional" monetary policy when the Fed and other major central banks started to use it as the FFR approached zero post financial-crisis. "Keynesian" economists tend to favor intervention (leaning towards market manipulation), whereas "Austrian" economists tend to favor austerity (leaning towards free market). This is a gross oversimplification, as there is a huge range of thinking on both sides that spans many different views on the role of government in various markets. But let's use it as a rough way to judge QE: OK, so corruption got out of hand - bankers did not live up to their fiduciary duty to protect investors. Predatory investors took out loans with the intent to default and dump property on banks. Excess leverage backed with toxic assets occurs and the system fails. Fine. What do we do next? Austrians would call for austerity - let the corrupt institutions fail, enter bankruptcy, and be reformed. The system would tear itself apart and be reborn from the ashes. No misdirection of resources, no boom and bust. Keynesians (who largely supported QE [1]) would call for intervention - prop the old system up, relieve the private sector of risk, inject liquidity into failing institutions, create artificial demand. Obviously neither economic system calls for more corruption, but both acknowledge that it is an inherent human trait. Where they generally differ is in their response to crises brought on by corruption.