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Adventurer
Joined: 28 Jan 2006
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 Posted: Thu Oct 09, 2008 9:42 am Post subject: FDR type policies in America now? |
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In the U.S., I long advocated Left of centre ideals. I do believe in government regulation and interventionism, and I've cringed for years at the massive de-regulation, because we know what capitalism that is unregulated does. Of course, a centralized, command economy is communism, and we do not want that as it kills incentive, but capitalism that is not regulated as the last pope said basically encourages huge disparities, injustice and greed.
Now, the US Government is thinking of partially nationalizing the banks.
I think the U.S. should have a central bank like many nations, increase taxes for the top 5% income earning Americans to pay off the deficit, fund alternative energy, help American industry.
We need private enterprise, but simply leaving things to the market doesn't work. De-regulation to some extent is good and too little regulation is disasterous. Many of those in power have abused our trust and acted as if all regulation was bad. And now we have to pay for that.
Massive de-regulation started under Carter and accelerated under Reagan, and it appears Bush didn't provide much oversight. The S&L Crisis that happened under the first Bush administration should have been a clear signal that the country has been heading in the wrong direction.
There was growth under the Reagan era, but too much emphasis on de-regulation during his era and after it and the lowering of taxes too much leading to too a huge budget deficit hasn't been good, I think.
I am no expert on economics. That's my father's profession. I would be more than happy to hear what someone has to say about all what's going on, especially those with some in depth knowledge regarding economic matters. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Thu Oct 09, 2008 10:11 am Post subject: |
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I'm not an expert on economics, either. But I think this cry for 'regulation' is deeply misleading. There's more than this false choice between regulation and de-regulation: there's better regulation.
Here's the response to the threat of over-regulation.
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| The fact that, as Sebastian Mallaby pointed out in a recent op-ed in The Washington Post, "lightly regulated hedge funds resisted buying toxic waste for the most part" also belies the notion that deregulation was the culprit. The real purchasers were U.S. investment banks regulated by the Securities and Exchange Commission, U.S. commercial banks regulated by the Fed, and European banks that are among the most regulated in the world. |
And here's Warren Buffett, cautioning against faith in regulatory reaction:
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QUICK: If you imagine where things will go with Fannie and Freddie, and you think about the regulators, where were the regulators for what was happening, and can something like this be prevented from happening again?
Mr. BUFFETT: Well, it's really an incredible case study in regulation
because something called OFHEO was set up in 1992 by Congress, and the sole job of OFHEO was to watch over Fannie and Freddie, someone to watch over them. And they were there to evaluate the soundness and the accounting and all of that. Two companies were all they had to regulate. OFHEO has over 200 employees now. They have a budget now that's $65 million a year, and all they have to do is look at two companies. I mean, you know, I look at more than two companies.
QUICK: Mm-hmm.
Mr. BUFFETT: And they sat there, made reports to the Congress, you can get them on the Internet, every year. And, in fact, they reported to Sarbanes and Oxley every year. And they went--wrote 100 page reports, and they said, 'We've looked at these people and their standards are fine and their directors are fine and everything was fine.' And then all of a sudden you had two of the greatest accounting misstatements in history. You had all kinds of management malfeasance, and it all came out. And, of course, the classic thing was that after it all came out, OFHEO wrote a 350--340 page report examining what went wrong, and they blamed the management, they blamed the directors, they blamed the audit committee. They didn't have a word in there about themselves, and they're the ones that 200 people were going to work every day with just two companies to think about. It just shows the problems of regulation.
QUICK: That sounds like an argument against regulation, though. Is that what you're saying?
Mr. BUFFETT: It's an argument explaining--it's an argument that managing complex financial institutions where the management wants to deceive you can be very, very difficult. |
Please don't forget that we had a bi-partisan regulatory regime set up in the wake of Enron. It is called Sarbanes-Oxley.
Market is psychology. And our psychology fails. Human nature is the same, always.
We need to stop looking left and right when we craft legislation. We need to take the Clintonesque approach and take a wide look around us. We need to find the best solution. The best solution is rarely partisan. |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Thu Oct 09, 2008 10:25 am Post subject: |
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| I am no expert on economics. That's my father's profession. I would be more than happy to hear what someone has to say about all what's going on, especially those with some in depth knowledge regarding economic matters. |
Thank you for your honesty.
We already have a central bank: The Federal Reserve. It has a peculiar structure, but it is essentially a central bank. It has failed. It is the problem. None of our problems come from deregulation. In fact, we still have overregulation and that IS the cause of many of our problems.
The 1st Great Depression, and every recession since have been caused by the Federal Reserve. This has all been explained and analyzed by the Austrian school of economics. They are the only economists who can be called real economists at this point in history. They are now able to predict that future recessions are coming and why and explain the past recessions. No other "so-called" economists can do either of those things.
FDR made the 1st Great Depression much deeper and last much longer than it would have had he not interfered in the marketplace.
Hoover and the Fed tried massive intervention to reinflate the bubble. It failed. They passed the Smoot-Hawley tariff in response and that bill caused the stock market crash. FDR's intervention kept the depression going.
Bush, (Paulson, really, Bush doesn't even have the brains to be stupid) and the Fed are trying massive intervention again. It will fail again. It will make things worse. The stock market is still falling (down again Thurs) because the market is recognizing, little by little, that the "bailout" is doomed to fail. It will hold prices up that need to fall and prevent the liquidation of the malinvestment. It may, if big enough, pump up the bubble just enough to explode (instead of popping) before a final fall into the 2nd Great Depression.
And this bailout is much bigger than advertised. The Fed has already pumped over $1 trillion into the market, before the bailout bill. And just this week they promised tens of billions to a variety of people and another $1.3 trillion for bank CDs, all of this outside the $830 billion bailout bill that passed. Add in the trillions by other nations, and we have a huge fiat money explosion trying to reinflate this bubble.
Every recession in the history of the US was caused by going off the gold standard and printing Fiat money, or today, by staying off the gold standard and printing fiat money.
We also have a looming National debt problem to follow this financial/monetary crisis. The Federal Government is now $70 trillion dollars in debt. It cannot be paid. It doesn't matter who you want to tax. It cannot be paid. The entitlements must be legislatively unwound or the Federal Government will go into default.
This has all been explained on other threads.
One of our biggest problems is that we have people who "believe" in government regulation and interventionism. Such socialist ideas constitute a religion but not a valid political or economic solution.
Socialism ALWAYS fails. This was proven irrefutably in the 1870s.
The Soviet Government employed hundreds of highly intelligent individuals for decades in an attempt to show that socialism could work. They failed. I met with some of them in Moscow in the 1970s. They reported to the Communist leadership that socialism doesn't work.
Only unregulated free markets can solve the complex puzzle of production and distribution of goods and services.
There are ways to help people who are in need. But, socialism is NOT one of those ways. |
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Thu Oct 09, 2008 10:57 am Post subject: |
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| but too much emphasis on de-regulation |
I agree there has been far too much emphasis on de-regulation. The form it has taken over the past decades is 'Government isn't the solution, it's the problem' and 'Get the heavy hand of government off...' etc. This anti-governmentism has been highly destructive and enormously expensive.
The debate has always been that any government regulation is bad. It's rather disingenuous at this time of the utter failure of the unregulated financial mess to try to shift the focus to the problems with over-regulation. People will always disagree about just how much regulation is the right amount, but it would help the situation if we could start from the consensus that regulation is an attempt to prevent the worst abuses and work from there to hit the right balance. But no regulation is just crackpot fanaticism. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Thu Oct 09, 2008 1:04 pm Post subject: |
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| Ya-ta Boy wrote: |
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| but too much emphasis on de-regulation |
I agree there has been far too much emphasis on de-regulation. The form it has taken over the past decades is 'Government isn't the solution, it's the problem' and 'Get the heavy hand of government off...' etc. This anti-governmentism has been highly destructive and enormously expensive.
The debate has always been that any government regulation is bad. It's rather disingenuous at this time of the utter failure of the unregulated financial mess to try to shift the focus to the problems with over-regulation. People will always disagree about just how much regulation is the right amount, but it would help the situation if we could start from the consensus that regulation is an attempt to prevent the worst abuses and work from there to hit the right balance. But no regulation is just crackpot fanaticism. |
Corporate lawyers are always one step ahead of the regulations. You cannot defeat those who want to be succeed. What you need is a regulatory scheme much like border security; simple, efficient, and reasonably effective. But its a balancing test. Just as you don't want to harass those entering the country for minimal security gains (or no real point at all), you also do not want to needlessly obstruct those many people actually trying to make an honest living. |
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Thu Oct 09, 2008 1:56 pm Post subject: |
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| Corporate lawyers are always one step ahead of the regulations. |
I can think of two solutions:
a) Sept. 14 and Oct. 29 should be days set aside for the public hanging of one Wall Street fat cat, perhaps chosen by lottery from the pool of those who ended up in court that year.
b) Regulatory agencies with the power to delay new schemes that need to be reviewed until regulations are implemented. It needn't be a draconian system, just one that inserts public safety as one of the factors that needs to be included in the mix. |
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Jandar
Joined: 11 Jun 2008
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| Posted: Thu Oct 09, 2008 5:30 pm Post subject: |
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Wax and Wane, ebb and tide.
There is no cushy center.
Free Markets Open Markets are all pie in the sky.
The free flow of trade through out the world is nice ideal but it really never happens there are always imbalances that are followed by counter measures to balnce the equation. |
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VanIslander
Joined: 18 Aug 2003
Location: Geoje, Hadong, Tongyeong,... now in a small coastal island town outside Gyeongsangnamdo!
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| Posted: Thu Oct 09, 2008 5:48 pm Post subject: |
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(1) public funding of private corporations is neither socialism nor communism and only in the common good under the trickle down theory of conservative economics
(2) of course the stability gained by curbing the natural boom and bust cycles of a free market is to the benefit of everyone in the short term and it's in the interest of capitalists to move toward monopoly
therefore
(3) the bailouts |
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Adventurer
Joined: 28 Jan 2006
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| Posted: Fri Oct 10, 2008 7:10 am Post subject: |
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| As far as I can understand, there has been tons of deregulation over the past few decades and regulation that is done blindly is not positive, either, but it is necessary to have some regulation, but that must be combined with adequate oversight and there needs to be proper financial safe-guards. As far as what FDR did and others in the West, it helped saved the capitalist order, perhaps, as it could have led to revolutions. Frankly, if World War II did not happen, who knows what kind of system would exist in the U.S. The fight against Hitler helped save capitalism in a certain way some may argue. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Fri Oct 10, 2008 10:38 am Post subject: |
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| Adventurer wrote: |
| As far as I can understand, there has been tons of deregulation over the past few decades and regulation that is done blindly is not positive, either, but it is necessary to have some regulation, but that must be combined with adequate oversight and there needs to be proper financial safe-guards. |
The two largest regulatory acts since FDR's establishment of the Securities Exchange Commission (SEC) and the subsequent Investment Acts are Sarbanes-Oxley (2002) and the Rating Agency Reform Act (2006).
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| The law is designed to curb alleged abusive practices cited by members of Congress and corporate trade groups, including the practice of sending a company unsolicited ratings with a bill; notching, which occurs when a firm lowers ratings on asset-backed securities unless the firm rates a substantial portion of the underlying assets; and tying ratings to the purchase of additional services. |
And of course, SarbOx is one of the most massive regulatory acts ever to have passed US Congress.
I am not arguing that we have enough or too much regulation. I am simply arguing that we do have serious regulation, and it was implemented both before (2002) and during (2006) this crisis.
This was a policy failure on behalf of the Federal Reserve. This was a policy failure on behalf of Freddie Mac, Fannae Mae, and the many private mortgage-based securities (MBS) bundlers.
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| As far as what FDR did and others in the West, it helped saved the capitalist order, perhaps, as it could have led to revolutions. Frankly, if World War II did not happen, who knows what kind of system would exist in the U.S. The fight against Hitler helped save capitalism in a certain way some may argue. |
Let's just say that's highly disputable. |
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Fri Oct 10, 2008 8:34 pm Post subject: |
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| Let's just say that's highly disputable. |
Well, yes. Disputable in the same way Darwinian evolution is disputable with the flat earth crowd.
Word is Obama has been reading up furiously on FDR's administrations, so let's keep our fingers crossed that he's a quick study. |
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Adventurer
Joined: 28 Jan 2006
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| Posted: Fri Oct 10, 2008 9:52 pm Post subject: |
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| Kuros wrote: |
| Adventurer wrote: |
| As far as I can understand, there has been tons of deregulation over the past few decades and regulation that is done blindly is not positive, either, but it is necessary to have some regulation, but that must be combined with adequate oversight and there needs to be proper financial safe-guards. |
The two largest regulatory acts since FDR's establishment of the Securities Exchange Commission (SEC) and the subsequent Investment Acts are Sarbanes-Oxley (2002) and the Rating Agency Reform Act (2006).
| Quote: |
| The law is designed to curb alleged abusive practices cited by members of Congress and corporate trade groups, including the practice of sending a company unsolicited ratings with a bill; notching, which occurs when a firm lowers ratings on asset-backed securities unless the firm rates a substantial portion of the underlying assets; and tying ratings to the purchase of additional services. |
And of course, SarbOx is one of the most massive regulatory acts ever to have passed US Congress.
I am not arguing that we have enough or too much regulation. I am simply arguing that we do have serious regulation, and it was implemented both before (2002) and during (2006) this crisis.
This was a policy failure on behalf of the Federal Reserve. This was a policy failure on behalf of Freddie Mac, Fannae Mae, and the many private mortgage-based securities (MBS) bundlers.
| Quote: |
| As far as what FDR did and others in the West, it helped saved the capitalist order, perhaps, as it could have led to revolutions. Frankly, if World War II did not happen, who knows what kind of system would exist in the U.S. The fight against Hitler helped save capitalism in a certain way some may argue. |
Let's just say that's highly disputable. |
It appears, Kuros, there has been decades of de-regulation since the late 1970s in the U.S. Some de-regulation is positive to allow for economic growth, but when businesses are allowed to take such risks in a fashion that could cause serious economic problems due to reckless behavior they are doing it in an environment where there has been such a long push for de-regulation. This is not to say Sarbox was not quite regulatory in manner, but it was one major example of regular in a sea of de-regulation. Again, I am not for blind regulation. However, this environment of businesses should be able to do what they want without any restraints including taking Great Depression type risks and taking on excessive debt whether they're in Iceland or the United States is just horrible. What happened to good old fashion conservative business sense? Regulations exist because some in the private sector end up with excesses, and I think more objective economists and financiers should be at the helm making sure they are serving the American people and not simply some of the elites of Wall Street. It is kind of interesting how the government bails all these businesses out and at the request of the private sector has made bankruptcy impossible for your average Joe.
I am not sure you can say it is highly disputable that the war against Germany didn't help stimulate the economy in the U.S. and take it out of the Great Depression. That's not really disputed by economists as far as I know. The war lead the government to employ millions in the armed forces, all kinds of weapons were produced on a massive scale and so many industries benefited and business benefited immensely. What is exactly disputable about that? |
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Kuros
Joined: 27 Apr 2004
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| Posted: Sat Oct 11, 2008 5:05 am Post subject: |
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| Adventurer wrote: |
| Kuros wrote: |
| Adventurer wrote: |
| As far as I can understand, there has been tons of deregulation over the past few decades and regulation that is done blindly is not positive, either, but it is necessary to have some regulation, but that must be combined with adequate oversight and there needs to be proper financial safe-guards. |
The two largest regulatory acts since FDR's establishment of the Securities Exchange Commission (SEC) and the subsequent Investment Acts are Sarbanes-Oxley (2002) and the Rating Agency Reform Act (2006).
| Quote: |
| The law is designed to curb alleged abusive practices cited by members of Congress and corporate trade groups, including the practice of sending a company unsolicited ratings with a bill; notching, which occurs when a firm lowers ratings on asset-backed securities unless the firm rates a substantial portion of the underlying assets; and tying ratings to the purchase of additional services. |
And of course, SarbOx is one of the most massive regulatory acts ever to have passed US Congress.
I am not arguing that we have enough or too much regulation. I am simply arguing that we do have serious regulation, and it was implemented both before (2002) and during (2006) this crisis.
This was a policy failure on behalf of the Federal Reserve. This was a policy failure on behalf of Freddie Mac, Fannae Mae, and the many private mortgage-based securities (MBS) bundlers.
| Quote: |
| As far as what FDR did and others in the West, it helped saved the capitalist order, perhaps, as it could have led to revolutions. Frankly, if World War II did not happen, who knows what kind of system would exist in the U.S. The fight against Hitler helped save capitalism in a certain way some may argue. |
Let's just say that's highly disputable. |
It appears, Kuros, there has been decades of de-regulation since the late 1970s in the U.S. Some de-regulation is positive to allow for economic growth, but when businesses are allowed to take such risks in a fashion that could cause serious economic problems due to reckless behavior they are doing it in an environment where there has been such a long push for de-regulation. This is not to say Sarbox was not quite regulatory in manner, but it was one major example of regular in a sea of de-regulation. Again, I am not for blind regulation. However, this environment of businesses should be able to do what they want without any restraints including taking Great Depression type risks and taking on excessive debt whether they're in Iceland or the United States is just horrible. What happened to good old fashion conservative business sense? Regulations exist because some in the private sector end up with excesses, and I think more objective economists and financiers should be at the helm making sure they are serving the American people and not simply some of the elites of Wall Street. It is kind of interesting how the government bails all these businesses out and at the request of the private sector has made bankruptcy impossible for your average Joe. |
I don't care how many times Obama/Biden says it, de-regulation is not the problem. As you say, the problem is business sense. As my Buffet quote above demonstrates, you can't always effectively regulate that.
One of the better (and simpler) approaches we can take to avoid the derivative time bomb that occurred is listing derivatives on exchanges. This need not occur with government legislation.
Let me point out that I DO believe the bailout money specifically needs to be HIGHLY regulated. But thats an instance of nationalization, and we hope that such measures are rare.
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| I am not sure you can say it is highly disputable that the war against Germany didn't help stimulate the economy in the U.S. and take it out of the Great Depression. That's not really disputed by economists as far as I know. The war lead the government to employ millions in the armed forces, all kinds of weapons were produced on a massive scale and so many industries benefited and business benefited immensely. What is exactly disputable about that? |
That's not so disputable. If that's what you were arguing. I thought you were arguing that FDR's New Deal saved capitalism. |
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Sat Oct 11, 2008 6:35 am Post subject: |
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| I thought you were arguing that FDR's New Deal saved capitalism. |
So did I and yes it did. It may not be ontheway's definition of capitalism, but then no one after Andrew Jackson destroyed the Bank of the US would fit his definition. |
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Adventurer
Joined: 28 Jan 2006
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| Posted: Sat Oct 11, 2008 7:13 am Post subject: |
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| Ya-ta Boy wrote: |
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| I thought you were arguing that FDR's New Deal saved capitalism. |
So did I and yes it did. It may not be ontheway's definition of capitalism, but then no one after Andrew Jackson destroyed the Bank of the US would fit his definition. |
Well, increased demand did help stimulate the economy and Canadian born economist Galbraith and Lord Keynes did advocate demand-side economics. You can definitely say that if FDR did not employ so many millions out of work, it could have led to a worsening of the capitalist order which was in shambles at that time.
I don't think 12 million people would have just sat by idly with no jobs. In addition, the communist party was on the radar, though not really popular. Decades later, it was not really on the radar, but it was during those days. Capitalism was at risk. You can argue that the New Deal and World War II did stimulate the economy. Countries with huge disparities in income have been good breeding grounds for revolutionary thought, I imagine. Communism is not attractive in wealthy societies. European style socialism which is capitalist to the core is another story. But socialist thought in Europe did emerge in societies where there used to be huge income disparities.
I personally do believe a lack of proper oversight has led to this mess.
I mean there are economists and financiers if they were of an independent-minded sort and allowed to steer the ship, so to speak, and didn't have conflicts of interest like so many in government, then they would have been able to point to the risk of various financial transactions taking place. Regulation has not been popular and nor has been the placing of objective technocrats not affiliated with major firms in the past.
How is that a good notion for good governance?
Of course, you can argue that if the business community's offenders behaved in a manner in which they used common sense, then we wouldn't be in this mess, but you can say the same thing about those
who helped bring about the Great Depression. Yet, we still passed regulations then, and we should now, but I prefer people objective with years of experience and is somewhat conservatie when it comes to economics come up with the ideas. Kuros, it would be nice to live in a world where people don't run red lights, and there are, thus, no fines needed for commiting such moving violations. |
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