7 ms·

I think the problem with 2008 was that no one was doing anything illegal, just a lot of poor judgement and lack of regulations.

anthony_barker 6y ago
Tell that to Madoff
- arcticbull 6y ago
  Well not nobody obviously, crime still happened.
- vmception 6y ago
  Madoff became a convict because of the crash, not because he was liquidating massive amounts or had a large portfolio of collateralized debt that would exacerbate a crash.
roenxi 6y ago
Bitcoin was created by people who were so peeved at the regulator's interventions in the '08 crisis that they decided that bypassing the entire financial system was the best option. Forever immortalising "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks" just as a reminder of why they were doing what they did [0]. We don't need better regulation. We need, when financial firms muck up on a global scale, to replace the people who run those firms with different people. There is an easy way to do that, let them go broke. The biggest problem in the room is that the regulators have bought in to the idea that some companies are "too big to fail". That is a stupid idea, fundamentally unfair, completely throwing out the best part of capitalism which is that recognised idiots aren't allowed to be in charge. That problem will certainly not be solved by giving the regulators more power. [0] https://en.bitcoin.it/wiki/Genesis_block https://en.bitcoin.it/wiki/Genesis_block
- arcticbull 6y ago
  Bitcoin was most likely created by Paul Le Roux to launder money for his questionable business empire. The rest was just a flag to wrap around.
  - ogogmad 6y ago
    WTF? Do you actually understand Bitcoin? BTC solved the problem of having concensus in a decentralised, distributed system without deferring to a dictator... Finding a way to do that was an open problem for decades. I used to think you had something intelligent to say about Bitcoin, but you've opened my eyes now.
    - arcticbull 6y ago
      Right, yeah, just very incredibly super duper inefficiently. I don't disagree that wasting an entire country's worth of electricity is a novel and unique way of solving the byzantine generals problem up to 7 transactions per second. I just don't think it should be used in the real world, certainly not as a currency. I think it's worth separating my appreciation for Bitcoin in the strictest, most technical sense. I get it, it's neat, it's got that allure of being challenging and having many perceived potential use cases. It solved a legitimate hard problem. I think the tool is fascinating. I think the use cases though, just aren't. Apologies to have disappointed, though!
      - petre 6y ago
        True that. Residents of Abkhazia (breakaway Georgian province on the Black Sea coast) were recently left in the dark because of bitcoin mining. https://www.rferl.org/a/bitcoin-blackouts-russian-cryptocurrency-miners-minting-millions-sucking-abkhazia-electricity-grid-dry/30968307.html https://www.rferl.org/a/bitcoin-blackouts-russian-cryptocurr...
        arcticbull 6y ago
        The Iranians too, I think. [1] https://apnews.com/article/iran-media-social-media-bitcoin-coronavirus-pandemic-6d1c703a7faa1f85b0f94011259ec63e https://apnews.com/article/iran-media-social-media-bitcoin-c...
- A4ET8a8uTh0 6y ago
  "We need, when financial firms muck up on a global scale, to replace the people who run those firms with different people." I don't really disagree, but he with gold makes the rules. Attempting to limit their power will result in a backlash. Yellen's testimony can be seen as that, but in truth, it is not a new stance. Crypto was merely tolerated until now.
- FabHK 6y ago
  > "too big to fail" [...] is a stupid idea It's not that simple. When the government let Lehmann Brothers fail, all hell broke loose. That is the fundamental difficulty of financial regulation, moral hazard: You have to convincingly say that you won't bail out anyone, and then when things go awry, you have to bail them out. And that makes regulation and monitoring imperative. Well understood and studied.
  - jl2718 6y ago
    Well if we had a stable store of value then we wouldn’t really care about the investment assets crashing. Force people into 401k and yeah, now we’re a helpless part of the machine.
- westurner 6y ago
  Bitcoin was created in context to "Transparency and Accountability": a campaign motto not coincidentally found in the title of the "Federal Funding Accountability and Transparency Act of 2006". > The Federal Funding Accountability and Transparency Act of 2006 (S. 2590)[2] is an Act of Congress that requires the full disclosure to the public of all entities or organizations receiving federal funds beginning in fiscal year (FY) 2007. The website USAspending.gov opened in December 2007 as a result of the act Sen. Obama's office is the origin of this bill; which was fronted by Sens Coburn and McCain, who had the clout. https://usaspending.gov/ https://usaspending.gov/ creates a mandatory database with budgetary line item metadata. Where money actually goes is something that is far more transparent and accountable with bitcoin and other public ledgers than any existing ledger covered by bank secrecy laws. For context, in 2008-09, global financial systems were failing as a result of the American economy: housing bubble burst, HFT "flash crash" that we didn't have CAT or big data tools to determine the cause of, DDOS attacks and cyber security losses increasing YoY, credit default swaps had been rated as AAA securities (they sold bundled bad debt like it was worth something, and then wrote down losses), Enron energy speculation amidst rolling blackouts that were leaving hospitals in the dark, on gas generators, government investments in renewables had been paltry since the Carter administration had put solar panels on the roof of the White House before the whole oil price shock, and oil commodity speculation had driven the price of oil to like 2-4x the 2000 price (with resultant price effects on most CPI inflation/PPP basket goods); but electricity consumption was down in 2008 and renewables hadn't reached production volumes necessary to reach the competitive price point that renewables now present: cheaper than nonrenewables. Who would have thought that the speculative price would continue to exceed the production cost. incentives or penalties? Externalities per dollar returned per kWh is one way to assess the total costs of electricity production methods. "Buy Gold" was the refrain of the day: TV commercials, signs out in front of piano stores (a somewhat-arbitrary commodity, sales of which are observed to be a leading indicator of economic health), signs on the road. And the message was "take your money out the market and put it in gold" which drives up the prices for chips and boards and medical equipment that rely upon that commodity as a material input. Gold is necessary for tropical spec components in high-humidity environments: gold hinges are prized, for example. But, "look, there's water flowing from the chocolate fountain; so you can go ahead and go" and "you know you want to put it back in there, in that market" we're the appropriate messages given our revenue at the time.
jokethrowaway 6y ago
The problem is the creation of the wrong incentives by Keynesian governments
- FabHK 6y ago
  In the run-up to 2008, financial regulations in the US were shredded by Republican governments (literally [1]), hardly Keynesian. [1] https://www.propublica.org/article/banks-favorite-toothless-regulator-1125 https://www.propublica.org/article/banks-favorite-toothless-...
  - seaourfreed 6y ago
    Republicans like to say they aren't Keynesian, but that is wrong. Keynes says deficit spending should occur when a bubble (business cycle) bursts, in order to force full employment when mass unemployment would happen. But in the USA in the last 50 years, politicians deficit spend every year. They deficit spend in all stages of bubbles. They deficit spend when there is already full employment. "Politician macroeconomics" is far more deficit spending than Keynes. This includes Republicans. They just do it with tax cuts and increased defense spending to create deficit spending.
    - FabHK 6y ago
      You’re completely correct that Republicans fret and complain about the deficit when a Democrat president is in office and social spending and aid for the poor is concerned, and then turn around and institute huge gratuitous tax cuts when they’re in power (the deficit be damned), and empirically increase the deficit more than Democrat presidents. I’d call that hypocrisy though, not principled and appropriate Keynesianism. Remember for example the opposition to the Obama stimulus after the financial crisis, which promptly resulted in a stimulus package that was too small and needlessly slowed recovery, followed by Trump’s tax cut for corporations and the wealthy. Keynes calls for anti cyclical spending, not indiscriminate one.
  - CryptoPunk 6y ago
    In the decade before the financial crisis, regulatory pressure was used to force banks to issue more subprime mortgages. This article from 2000 warns of the consequences: https://www.city-journal.org/html/trillion-dollar-bank-shakedown-bodes-ill-cities-12096.html https://www.city-journal.org/html/trillion-dollar-bank-shake... Government sponsored enteprises, which underwrite 50% of the entire US mortgage market, started massively increasing their subprime loan guarantees at the same time. And then you have Federal Reserve mouthpiece, New York Times columnist Paul Krugman, advocating in this 2002 article that the Federal Reserve create a housing bubble: https://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html https://www.nytimes.com/2002/08/02/opinion/dubya-s-double-di... "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." This revisionist account of the causes of the financial crisis is just these same powerful forces, who are receiving billions in kickbacks from all of this corruption, pinning the blame for the financial crisis on the mythical deregulation-bogeyman.
lakecresva 6y ago
There was widespread fraud (of the criminal variety) in the run-up to 2008. A number of journalists, particularly Matt Taibbi, have written extensively about this.
fortran77 6y ago
Many, many people filled out fraudulent loan applications. Many, many people took "first time home buyers tax credits" they weren't entitled to. But the Government decided it would look bad to prosecuted hundreds of thousands of small-time tax cheats and fraudsters. According to this story, 50% of people getting the first-time home buyers tax credit in 2008 weren't entitled to it. The IRS itself estimates that over 50 percent of the individuals claiming the first-time credit will not be complying with that requirement to supply proof that they actually purchased a home. https://www.npr.org/templates/story/story.php?storyId=126010317?storyId=126010317 https://www.npr.org/templates/story/story.php?storyId=126010... Of course, NPR simply says these people were "confused."

anthony_barker 6y ago

Tell that to Madoff

arcticbull 6y ago
Well not nobody obviously, crime still happened.
vmception 6y ago
Madoff became a convict because of the crash, not because he was liquidating massive amounts or had a large portfolio of collateralized debt that would exacerbate a crash.

roenxi 6y ago

Bitcoin was created by people who were so peeved at the regulator's interventions in the '08 crisis that they decided that bypassing the entire financial system was the best option. Forever immortalising "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks" just as a reminder of why they were doing what they did [0]. We don't need better regulation. We need, when financial firms muck up on a global scale, to replace the people who run those firms with different people. There is an easy way to do that, let them go broke. The biggest problem in the room is that the regulators have bought in to the idea that some companies are "too big to fail". That is a stupid idea, fundamentally unfair, completely throwing out the best part of capitalism which is that recognised idiots aren't allowed to be in charge. That problem will certainly not be solved by giving the regulators more power. [0] https://en.bitcoin.it/wiki/Genesis_block https://en.bitcoin.it/wiki/Genesis_block

arcticbull 6y ago
Bitcoin was most likely created by Paul Le Roux to launder money for his questionable business empire. The rest was just a flag to wrap around.
- ogogmad 6y ago
  WTF? Do you actually understand Bitcoin? BTC solved the problem of having concensus in a decentralised, distributed system without deferring to a dictator... Finding a way to do that was an open problem for decades. I used to think you had something intelligent to say about Bitcoin, but you've opened my eyes now.
  - arcticbull 6y ago
    Right, yeah, just very incredibly super duper inefficiently. I don't disagree that wasting an entire country's worth of electricity is a novel and unique way of solving the byzantine generals problem up to 7 transactions per second. I just don't think it should be used in the real world, certainly not as a currency. I think it's worth separating my appreciation for Bitcoin in the strictest, most technical sense. I get it, it's neat, it's got that allure of being challenging and having many perceived potential use cases. It solved a legitimate hard problem. I think the tool is fascinating. I think the use cases though, just aren't. Apologies to have disappointed, though!
    - petre 6y ago
      True that. Residents of Abkhazia (breakaway Georgian province on the Black Sea coast) were recently left in the dark because of bitcoin mining. https://www.rferl.org/a/bitcoin-blackouts-russian-cryptocurrency-miners-minting-millions-sucking-abkhazia-electricity-grid-dry/30968307.html https://www.rferl.org/a/bitcoin-blackouts-russian-cryptocurr...
      - arcticbull 6y ago
        The Iranians too, I think. [1] https://apnews.com/article/iran-media-social-media-bitcoin-coronavirus-pandemic-6d1c703a7faa1f85b0f94011259ec63e https://apnews.com/article/iran-media-social-media-bitcoin-c...
A4ET8a8uTh0 6y ago
"We need, when financial firms muck up on a global scale, to replace the people who run those firms with different people." I don't really disagree, but he with gold makes the rules. Attempting to limit their power will result in a backlash. Yellen's testimony can be seen as that, but in truth, it is not a new stance. Crypto was merely tolerated until now.
FabHK 6y ago
> "too big to fail" [...] is a stupid idea It's not that simple. When the government let Lehmann Brothers fail, all hell broke loose. That is the fundamental difficulty of financial regulation, moral hazard: You have to convincingly say that you won't bail out anyone, and then when things go awry, you have to bail them out. And that makes regulation and monitoring imperative. Well understood and studied.
- jl2718 6y ago
  Well if we had a stable store of value then we wouldn’t really care about the investment assets crashing. Force people into 401k and yeah, now we’re a helpless part of the machine.
westurner 6y ago
Bitcoin was created in context to "Transparency and Accountability": a campaign motto not coincidentally found in the title of the "Federal Funding Accountability and Transparency Act of 2006". > The Federal Funding Accountability and Transparency Act of 2006 (S. 2590)[2] is an Act of Congress that requires the full disclosure to the public of all entities or organizations receiving federal funds beginning in fiscal year (FY) 2007. The website USAspending.gov opened in December 2007 as a result of the act Sen. Obama's office is the origin of this bill; which was fronted by Sens Coburn and McCain, who had the clout. https://usaspending.gov/ https://usaspending.gov/ creates a mandatory database with budgetary line item metadata. Where money actually goes is something that is far more transparent and accountable with bitcoin and other public ledgers than any existing ledger covered by bank secrecy laws. For context, in 2008-09, global financial systems were failing as a result of the American economy: housing bubble burst, HFT "flash crash" that we didn't have CAT or big data tools to determine the cause of, DDOS attacks and cyber security losses increasing YoY, credit default swaps had been rated as AAA securities (they sold bundled bad debt like it was worth something, and then wrote down losses), Enron energy speculation amidst rolling blackouts that were leaving hospitals in the dark, on gas generators, government investments in renewables had been paltry since the Carter administration had put solar panels on the roof of the White House before the whole oil price shock, and oil commodity speculation had driven the price of oil to like 2-4x the 2000 price (with resultant price effects on most CPI inflation/PPP basket goods); but electricity consumption was down in 2008 and renewables hadn't reached production volumes necessary to reach the competitive price point that renewables now present: cheaper than nonrenewables. Who would have thought that the speculative price would continue to exceed the production cost. incentives or penalties? Externalities per dollar returned per kWh is one way to assess the total costs of electricity production methods. "Buy Gold" was the refrain of the day: TV commercials, signs out in front of piano stores (a somewhat-arbitrary commodity, sales of which are observed to be a leading indicator of economic health), signs on the road. And the message was "take your money out the market and put it in gold" which drives up the prices for chips and boards and medical equipment that rely upon that commodity as a material input. Gold is necessary for tropical spec components in high-humidity environments: gold hinges are prized, for example. But, "look, there's water flowing from the chocolate fountain; so you can go ahead and go" and "you know you want to put it back in there, in that market" we're the appropriate messages given our revenue at the time.

jokethrowaway 6y ago

The problem is the creation of the wrong incentives by Keynesian governments

FabHK 6y ago
In the run-up to 2008, financial regulations in the US were shredded by Republican governments (literally [1]), hardly Keynesian. [1] https://www.propublica.org/article/banks-favorite-toothless-regulator-1125 https://www.propublica.org/article/banks-favorite-toothless-...
- seaourfreed 6y ago
  Republicans like to say they aren't Keynesian, but that is wrong. Keynes says deficit spending should occur when a bubble (business cycle) bursts, in order to force full employment when mass unemployment would happen. But in the USA in the last 50 years, politicians deficit spend every year. They deficit spend in all stages of bubbles. They deficit spend when there is already full employment. "Politician macroeconomics" is far more deficit spending than Keynes. This includes Republicans. They just do it with tax cuts and increased defense spending to create deficit spending.
  - FabHK 6y ago
    You’re completely correct that Republicans fret and complain about the deficit when a Democrat president is in office and social spending and aid for the poor is concerned, and then turn around and institute huge gratuitous tax cuts when they’re in power (the deficit be damned), and empirically increase the deficit more than Democrat presidents. I’d call that hypocrisy though, not principled and appropriate Keynesianism. Remember for example the opposition to the Obama stimulus after the financial crisis, which promptly resulted in a stimulus package that was too small and needlessly slowed recovery, followed by Trump’s tax cut for corporations and the wealthy. Keynes calls for anti cyclical spending, not indiscriminate one.
- CryptoPunk 6y ago
  In the decade before the financial crisis, regulatory pressure was used to force banks to issue more subprime mortgages. This article from 2000 warns of the consequences: https://www.city-journal.org/html/trillion-dollar-bank-shakedown-bodes-ill-cities-12096.html https://www.city-journal.org/html/trillion-dollar-bank-shake... Government sponsored enteprises, which underwrite 50% of the entire US mortgage market, started massively increasing their subprime loan guarantees at the same time. And then you have Federal Reserve mouthpiece, New York Times columnist Paul Krugman, advocating in this 2002 article that the Federal Reserve create a housing bubble: https://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html https://www.nytimes.com/2002/08/02/opinion/dubya-s-double-di... "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." This revisionist account of the causes of the financial crisis is just these same powerful forces, who are receiving billions in kickbacks from all of this corruption, pinning the blame for the financial crisis on the mythical deregulation-bogeyman.

lakecresva 6y ago

There was widespread fraud (of the criminal variety) in the run-up to 2008. A number of journalists, particularly Matt Taibbi, have written extensively about this.

fortran77 6y ago

Many, many people filled out fraudulent loan applications. Many, many people took "first time home buyers tax credits" they weren't entitled to. But the Government decided it would look bad to prosecuted hundreds of thousands of small-time tax cheats and fraudsters. According to this story, 50% of people getting the first-time home buyers tax credit in 2008 weren't entitled to it. The IRS itself estimates that over 50 percent of the individuals claiming the first-time credit will not be complying with that requirement to supply proof that they actually purchased a home. https://www.npr.org/templates/story/story.php?storyId=126010317?storyId=126010317 https://www.npr.org/templates/story/story.php?storyId=126010... Of course, NPR simply says these people were "confused."