5 ms·

+ Break free from regulatory capture & disguised incumbent-favouring policy. Open competition breeds innovation.

mrkramer 5y ago
>Break free from regulatory capture Yea in some industries like medicine but for example banking industry is one of the most regulated industries out there and every few decades or so there is major financial crisis that has roots in banking so perhaps more regulation was and is needed before and after 2007. >disguised incumbent-favouring policy Big companies have a lot of money and ofc they spend some of it to lobby Government that's not going away anytime soon.
- djbebs 5y ago
  One of the most highly regulated industries has regular meltdowns, and your solution to the issue is more regulation? Have you considered the possibility that the regulation is what causes the issues? The 2008 recession wasn't caused by lack of regulation, on the contrary it was caused by regulation that forced banks to give out loans that they otherwise wouldn't...
  - DiggyJohnson 5y ago
    I thought it was due to a variety of actors not understanding their own risky financial products, who was securing the financial products, and woefully inadequate risk models. I'm not dismissing your claim, but it is at odds with my understanding. Can you explain a bit more?
    - mrslave 5y ago
      You are right, but that is a magnifier downstream from the cause. I'm scouring my memory here so apologies for incompleteness. Also this is a somewhat political issue and I'm not necessarily throwing my hat into the ring on this one. From [0]: > The meltdown was the consequence of a combination of the easy money and low interest rates engineered by the Federal Reserve and the easy housing engineered by a variety of government agencies and policies. Those agencies include the Department of Housing and Urban Development (HUD) and two nominally private "government-sponsored enterprises" (GSEs), Fannie Mae and Freddie Mac. The agencies — along with laws such as the Community Reinvestment Act (passed in the 1970s, then fortified in the Clinton years), which required banks to make loans to people with poor and nonexistent credit histories — made widespread homeownership a national goal. This all led to a home-buying frenzy and an explosion of subprime and other non-prime mortgages, which banks and GSEs bundled into dubious securities and peddled to investors worldwide. Hovering in the background was the knowledge that the federal government would bail out troubled "too-big-to-fail" financial corporations, including Fannie and Freddie. So the impetus is really the insanely cheap money stemming from US Federal Reserve policy, and the steering of this cheap money into housing by policy. The "variety of actors not understanding their own risky financial products" has a governmental cause: all the ratings agencies (Moody's, S&P, Fitch [1]) are government licensed. And they all said the mortgage-backed securities (at least partially comprising sub-prime mortgages, if not entirely) are AAA premium grade. Some investment managers & other commentators called out the absurdity of these ratings but nobody really listened. [0] Clinton's Legacy: The Financial and Housing Meltdown https://reason.com/2012/10/14/clintons-legacy-the-financial-and-housin/ https://reason.com/2012/10/14/clintons-legacy-the-financial-... [1] Credit rating agencies and the subprime crisis https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the_subprime_crisis https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the...
  - mrkramer 5y ago
    >The 2008 recession wasn't caused by lack of regulation, on the contrary it was caused by regulation that forced banks to give out loans that they otherwise wouldn't... The purpose of banks is to give out loans and earn interest. 2007 financial crisis forced central banks and governments to introduce more financial regulation and protection mechanisms. And the purpose of money is to be spent or invested. Hoarding cash is almost always bad because inflation eats your savings. See this article and chart about Purchasing Power of the U.S. Dollar Over Time: https://www.visualcapitalist.com/purchasing-power-of-the-u-s-dollar-over-time/ https://www.visualcapitalist.com/purchasing-power-of-the-u-s... And read this article about The risks of hoarding cash: https://www.privatebanking.hsbc.com/wih/investments-Insights/investment-tips/hoarding-cash-risk/ https://www.privatebanking.hsbc.com/wih/investments-Insights...
  - elevenoh 5y ago
    Truth.

>Break free from regulatory capture Yea in some industries like medicine but for example banking industry is one of the most regulated industries out there and every few decades or so there is major financial crisis that has roots in banking so perhaps more regulation was and is needed before and after 2007. >disguised incumbent-favouring policy Big companies have a lot of money and ofc they spend some of it to lobby Government that's not going away anytime soon.

djbebs 5y ago
One of the most highly regulated industries has regular meltdowns, and your solution to the issue is more regulation? Have you considered the possibility that the regulation is what causes the issues? The 2008 recession wasn't caused by lack of regulation, on the contrary it was caused by regulation that forced banks to give out loans that they otherwise wouldn't...
- DiggyJohnson 5y ago
  I thought it was due to a variety of actors not understanding their own risky financial products, who was securing the financial products, and woefully inadequate risk models. I'm not dismissing your claim, but it is at odds with my understanding. Can you explain a bit more?
  - mrslave 5y ago
    You are right, but that is a magnifier downstream from the cause. I'm scouring my memory here so apologies for incompleteness. Also this is a somewhat political issue and I'm not necessarily throwing my hat into the ring on this one. From [0]: > The meltdown was the consequence of a combination of the easy money and low interest rates engineered by the Federal Reserve and the easy housing engineered by a variety of government agencies and policies. Those agencies include the Department of Housing and Urban Development (HUD) and two nominally private "government-sponsored enterprises" (GSEs), Fannie Mae and Freddie Mac. The agencies — along with laws such as the Community Reinvestment Act (passed in the 1970s, then fortified in the Clinton years), which required banks to make loans to people with poor and nonexistent credit histories — made widespread homeownership a national goal. This all led to a home-buying frenzy and an explosion of subprime and other non-prime mortgages, which banks and GSEs bundled into dubious securities and peddled to investors worldwide. Hovering in the background was the knowledge that the federal government would bail out troubled "too-big-to-fail" financial corporations, including Fannie and Freddie. So the impetus is really the insanely cheap money stemming from US Federal Reserve policy, and the steering of this cheap money into housing by policy. The "variety of actors not understanding their own risky financial products" has a governmental cause: all the ratings agencies (Moody's, S&P, Fitch [1]) are government licensed. And they all said the mortgage-backed securities (at least partially comprising sub-prime mortgages, if not entirely) are AAA premium grade. Some investment managers & other commentators called out the absurdity of these ratings but nobody really listened. [0] Clinton's Legacy: The Financial and Housing Meltdown https://reason.com/2012/10/14/clintons-legacy-the-financial-and-housin/ https://reason.com/2012/10/14/clintons-legacy-the-financial-... [1] Credit rating agencies and the subprime crisis https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the_subprime_crisis https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the...
- mrkramer 5y ago
  >The 2008 recession wasn't caused by lack of regulation, on the contrary it was caused by regulation that forced banks to give out loans that they otherwise wouldn't... The purpose of banks is to give out loans and earn interest. 2007 financial crisis forced central banks and governments to introduce more financial regulation and protection mechanisms. And the purpose of money is to be spent or invested. Hoarding cash is almost always bad because inflation eats your savings. See this article and chart about Purchasing Power of the U.S. Dollar Over Time: https://www.visualcapitalist.com/purchasing-power-of-the-u-s-dollar-over-time/ https://www.visualcapitalist.com/purchasing-power-of-the-u-s... And read this article about The risks of hoarding cash: https://www.privatebanking.hsbc.com/wih/investments-Insights/investment-tips/hoarding-cash-risk/ https://www.privatebanking.hsbc.com/wih/investments-Insights...
- elevenoh 5y ago
  Truth.