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Governments actually have very little control of the economy. They can tax stuff to discourage it, or adjust interest rates. Pretty much anything else they do h

by gridspy 16y ago

Governments actually have very little control of the economy. They can tax stuff to discourage it, or adjust interest rates. Pretty much anything else they do has horrible side effects that are very difficult to predict and often take years to exhibit. To see what they can do: http://en.wikipedia.org/wiki/Monetary_policy http://en.wikipedia.org/wiki/Monetary_policy http://en.wikipedia.org/wiki/Macroeconomics http://en.wikipedia.org/wiki/Macroeconomics Or to put it more concisely, how exactly would you like the government to intervene? So yeah, it _is_ the Banks who are to blame.

gaius 16y ago
They can tax stuff to discourage it, or adjust interest rates. Or borrow and spend, which ought to drive up inflation, but require the BoE to keep inflation low, by artificially holding interest rates low making money too cheap and risk impossible to assess. I say it again: if you are bank A and you won't lend at a low rate and banks B, C and D do then A goes out of business when its customers desert it for doing the "right thing" and the situation is unchanged. The alternative is for A, B, C and D to get together and fix interest rates (prices) themselves, at which point their CEOs are looking at jail time. The banks are merely scapegoats for the politicians. And you've fallen for it hook, line and sinker. What would I like the government to do instead? It can start by paying off the deficit...
- gridspy 16y ago
  Okay, so the government should cut domestic spending, reducing the amount of cash available to government agencies and their suppliers? Or did you mean it should raise taxes to collect more funds, essentially putting a drag on the economy and sending tax-sensitive organisations elsewhere? Possibly you meant it should print money, causing hyper-inflation and destroying the value of savings and the public's faith in them. All three options suck, and all three would lead to negative publicity. I think that the government should cut spending on stuff that I don't think is important. But you and I would probably disagree on what stuff that is. As for the banks model, bank A would probably launch an adversing campaign clearly describing that investing in banks B,C + D is a sure way to loose your money. This campaign (when successful) would make more funds available (term deposits, savings accounts) to A which it could then safely invest. Note of course that banks A..D are probably not competing on interest rates (they set them all the same) but instead on loan terms. Bank A decides that it is not in its best interest to grant loans to people without security/equity making money instead from 80% mortgages and the like. Bank A looses high-risk, heavy spending customers and attracts risk-adverse savers and spenders.
cynicalkane 16y ago
Governments actually have very little control of the economy. They can tax stuff to discourage it, or adjust interest rates. Or governments can, you know, use the legislature to control all legal economic activity. In particular, the US Congress has power over almost all commerce.
- anamax 16y ago
  > In particular, the US Congress has power over almost all commerce. And, post-Wickard, http://en.wikipedia.org/wiki/Wickard_v._Filburn http://en.wikipedia.org/wiki/Wickard_v._Filburn , all potential commerce. That case involves Wickard producing wheat for his own use. The court decided that his wheat growing can be regulated because he used that wheat instead of buying wheat. A lower court has upheld the Obamacare individual mandate tax on the same basis. (Since Obama says that the healthcare legislation is one of his significant achievements, Obamacare is giving him credit.)

by gridspy 16y ago

gaius 16y ago

They can tax stuff to discourage it, or adjust interest rates. Or borrow and spend, which ought to drive up inflation, but require the BoE to keep inflation low, by artificially holding interest rates low making money too cheap and risk impossible to assess. I say it again: if you are bank A and you won't lend at a low rate and banks B, C and D do then A goes out of business when its customers desert it for doing the "right thing" and the situation is unchanged. The alternative is for A, B, C and D to get together and fix interest rates (prices) themselves, at which point their CEOs are looking at jail time. The banks are merely scapegoats for the politicians. And you've fallen for it hook, line and sinker. What would I like the government to do instead? It can start by paying off the deficit...

gridspy 16y ago
Okay, so the government should cut domestic spending, reducing the amount of cash available to government agencies and their suppliers? Or did you mean it should raise taxes to collect more funds, essentially putting a drag on the economy and sending tax-sensitive organisations elsewhere? Possibly you meant it should print money, causing hyper-inflation and destroying the value of savings and the public's faith in them. All three options suck, and all three would lead to negative publicity. I think that the government should cut spending on stuff that I don't think is important. But you and I would probably disagree on what stuff that is. As for the banks model, bank A would probably launch an adversing campaign clearly describing that investing in banks B,C + D is a sure way to loose your money. This campaign (when successful) would make more funds available (term deposits, savings accounts) to A which it could then safely invest. Note of course that banks A..D are probably not competing on interest rates (they set them all the same) but instead on loan terms. Bank A decides that it is not in its best interest to grant loans to people without security/equity making money instead from 80% mortgages and the like. Bank A looses high-risk, heavy spending customers and attracts risk-adverse savers and spenders.

cynicalkane 16y ago

Governments actually have very little control of the economy. They can tax stuff to discourage it, or adjust interest rates. Or governments can, you know, use the legislature to control all legal economic activity. In particular, the US Congress has power over almost all commerce.

anamax 16y ago
> In particular, the US Congress has power over almost all commerce. And, post-Wickard, http://en.wikipedia.org/wiki/Wickard_v._Filburn http://en.wikipedia.org/wiki/Wickard_v._Filburn , all potential commerce. That case involves Wickard producing wheat for his own use. The court decided that his wheat growing can be regulated because he used that wheat instead of buying wheat. A lower court has upheld the Obamacare individual mandate tax on the same basis. (Since Obama says that the healthcare legislation is one of his significant achievements, Obamacare is giving him credit.)