Capitalism

digme

If I understand this correctly, under capitalism your supposed to leave the bad companies/banks fail.
Is this not feudalism we are under now?

Ambersky

DarkRaven

...this is just too rare...

nesf

Under fundamentalist free market capitalism, yes you leave banks fail. You also don't give a guarantee to ordinary depositors so they lose their money when a bank fails in such a system. It's not a very nice system.

johnnyskeleton

nesf wrote: »

Under fundamentalist free market capitalism, yes you leave banks fail. You also don't give a guarantee to ordinary depositors so they lose their money when a bank fails in such a system. It's not a very nice system.

But...if you put your savings into a bank you are, to at least a certain point, putting your faith in that institution.

It's not a nice system fair enough, but is it not fairer than a system which socialises losses and privatises gains? Because what we are living under at the moment is neither capitalism nor communism; we live in a corruptocracy.

I'd rather see it all go to pot in a not very nice system than to see it all be squandered in the current system.

robbyvibes

digme wrote:

If I understand this correctly, under capitalism your supposed to leave the bad companies/banks fail.
Is this not feudalism we are under now?

If you're somebody in society, you never lose ...

But this is a little ambiguous, so take as example the character Nicky from the film, 'Casino'

He is the Mafia's "muscle" in Las Vegas. Anyone who messes with the casino's owned by the Mafia answer to 'Nicky' - he's the governor or the regulator.

However, he also likes to gamble in these casinos...and he has absolute impunity.
Take a quote from the movie...

Nicky's methods of betting weren't scientific, but they worked. When he won, he collected. When he lost, he told the bookies to go **** themselves. I mean, what were they going to do, muscle Nicky? Nicky was the muscle.

This is essentially how the current government of Ireland work... they are collectively 'Nicky' ..who like to gamble and when they lose money on the so-called Free Market...pass the debts onto someone else, in this case, the Irish taxpayer.

Of course, Brian Lenihan and the Irish government aren't saying on tv "Go **** yourselves" but they're doing this to Irish taxpayer anyway, and some are even apologetic for it..

So..this is the way it goes.

Ireland faces a deep depression with or without the european union and it's because of 'Nicky' influencing fiscal policy.

nesf

johnnyskeleton wrote: »

But...if you put your savings into a bank you are, to at least a certain point, putting your faith in that institution.

It's not a nice system fair enough, but is it not fairer than a system which socialises losses and privatises gains? Because what we are living under at the moment is neither capitalism nor communism; we live in a corruptocracy.

I'd rather see it all go to pot in a not very nice system than to see it all be squandered in the current system.

Meh, the nasty system doesn't work very well unfortunately and losing life savings is not exactly a trivial price to pay either. I get where you're coming from on this and agree that socialised losses and privatised gains is a really bad way to run the system. That doesn't mean that we should leave banks fail though only that we need to rethink how we save them.

robbyvibes

nesf wrote:

That doesn't mean that we should leave banks fail though only that we need to rethink how we save them.

All the bailout does in reality is keep prices artificially high for the gangsters until we as a country are refused anymore credit from the international community, including ECB.

We should be embracing a depression and TRUE Free Market right now in order to restart growth in our economy...however, we're being fooled and run by gangsters who tell us what's best for us....who keep spending money like we can afford it...

With Ireland's current spending forecast, depression is inevitable in 2010/11...you can't keep borrowing money without any productivity and savings...it's financial suicide, common sense would tell each individual this.

SLUSK

nesf wrote: »

Under fundamentalist free market capitalism, yes you leave banks fail. You also don't give a guarantee to ordinary depositors so they lose their money when a bank fails in such a system. It's not a very nice system.

It's a much better system than this current system which is morally bankrupt. The current system rewards those who are incompetent and those who take excessive risks. I am guessing this is the system you advocate.

In a free market system the competent would keep their money and the incompetent would lose it.

silverharp

you have to broaden it out, under the current debt based system due to high taxes people are forced into high borrowings and are discouraged from savings. In a free market model people would save for their various lifetime commitments. As it is now there are no education reserves or unemployment reserves.
Also I dont buy the disadvantages that have been mentioned. Again in a free market model, if the savings are that important to you then you could choose how they are used and not dumped into a big pot as is the current model.

Permabear

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P. Breathnach

SLUSK wrote: »

... In a free market system the competent would keep their money and the incompetent would lose it.

That's sloganeering, not reasoned argument. By such reasoning, placing your savings on deposit in a bank is incompetence, while keeping it in a box under the bed is competent. In effect, competence is defined by having money, and incompetence is defined by being broke.

silverharp wrote: »

you have to broaden it out, under the current debt based system due to high taxes people are forced into high borrowings and are discouraged from savings. In a free market model people would save for their various lifetime commitments...

The faith people place in free markets is astonishing. What is a "debt based system"? How would such a system be disallowed by free markets? What high taxes force people into borrowing? Most of all, can you explain why people would save to buy a home rather than borrow? And, while you are at it, can you explain why that should be seen as a good thing?

P. Breathnach

donegalfella wrote: »

This post has been deleted.

I simply do not believe that. I really doubt if any banker thought about the possibility of getting into such trouble as to need a bailout in order for the business to survive. In my opinion, they deluded themselves into feeling invincible, and never gave a thought to how things might play out if the property market collapsed.

Permabear

This post has been deleted.

silverharp

P. Breathnach wrote: »

What is a "debt based system"?

the current monetary system. ie its not backed by gold or other commodty asset.

P. Breathnach wrote: »

How would such a system be disallowed by free markets?

It wouldnt be however it would be left to the market to determine interest rates so it would be up to savers to decide between risk free saving where the bank does not lend out your savings all the way up the risk curve. Currently even a conservative pensioner is likey to see his savings end up being invested in speculative projects.

P. Breathnach wrote: »

What high taxes force people into borrowing?

sure it does, as a 20 something is not in a position to save as around 40% of his income is taken in taxes he or she is not in a position to save to buy their house. result excessive take up of credit by younger people.

P. Breathnach wrote: »

Most of all, can you explain why people would save to buy a home rather than borrow? And, while you are at it, can you explain why that should be seen as a good thing?

less risk, I own my own home and have built up savings I have a 100% chance of staying in my own home even if I was made unemployed tomorrow and never worked again.
Not all borrowing is bad or wrong however one has to agree that excessive leverage is ultra risky as people are finding out now.

P. Breathnach

silverharp wrote: »

the current monetary system. ie its not backed by gold or other commodty asset.

The exchange value of gold is as much a social construct as any other backing for money. In any event, the money supply is not solely determined by the amount of gold available to back it. I am quite happy to go along with the idea of managing the money supply, but I don't think we need a gold standard for that to happen.

It wouldnt be however it would be left to the market to determine interest rates so it would be up to savers to decide between risk free saving where the bank does not lend out your savings all the way up the risk curve. Currently even a conservative pensioner is likey to see his savings end up being invested in speculative projects.

Until very recently, placing your savings on deposit in a long-established traditional bank was considered to be conservative low-risk investment. It now appears that the pursuit of profits by bankers in a fairly unregulated environment has removed that option from the menu. The average person does not have the time or the expertise to keep up with the way the game is developing, and can be the victim of institutions going the high-risk route.

sure it does, as a 20 something is not in a position to save as around 40% of his income is taken in taxes he or she is not in a position to save to buy their house. result excessive take up of credit by younger people.

This, I think you will agree, is the libertarian vision. I'm simply not interested in debating it -- there isn't enough time, even for a retired person like myself. I think you may already know that I don't subscribe to that view.

less risk, I own my own home and have built up savings I have a 100% chance of staying in my own home even if I was made unemployed tomorrow and never worked again.
Not all borrowing is bad or wrong however one has to agree that excessive leverage is ultra risky as people are finding out now.

So it has been possible to arrive at a secure position with the sort of arrangements we have had over the years. My experience is similar: Herself and I became home-owners when taxes were higher than they now are, and rates of interest were far into double digits. I do agree that in recent years leverage has been excessive. My preferred answer would have been strong regulation rather than trusting in free markets.

Sand

@Nesf

I get where you're coming from on this and agree that socialised losses and privatised gains is a really bad way to run the system. That doesn't mean that we should leave banks fail though only that we need to rethink how we save them.

Maybe we need to rethink how we allow banks to operate? If the loss is going to be socialised, then by any definition of justice & capitalism the gains should be too. If I am apparently an unwitting stakeholder in AIB and BoI then I demand my cut of the AIB and BoI profits as a stakeholder.

If we nationalise all the banks and strictly limit their operations to a deposits only funded model, with business only as complicated as basic mortgage lending (with some upper limit based on taxable earnings in legislation), car loans and credit cards with low limits theres not too much they can screw up on.

silverharp

P. Breathnach wrote: »

The exchange value of gold is as much a social construct as any other backing for money. In any event, the money supply is not solely determined by the amount of gold available to back it. I am quite happy to go along with the idea of managing the money supply, but I don't think we need a gold standard for that to happen.

One doesnt need a gold standard, but regulation is doomed to fail. If you look back at people like Greenspan , every little turn in the road was used to pump the money supply so one would need a system whereby the money supply was out of the hands of politicians and central bankers.

P. Breathnach wrote: »

Until very recently, placing your savings on deposit in a long-established traditional bank was considered to be conservative low-risk investment. It now appears that the pursuit of profits by bankers in a fairly unregulated environment has removed that option from the menu. The average person does not have the time or the expertise to keep up with the way the game is developing, and can be the victim of institutions going the high-risk route.

again regulation failure, everyone thought everyone else had it covered. Btw this doesnt preclude depositors paying insurance to cover their deposits. The uniformed depositor could be guided by the "expert"

P. Breathnach wrote: »

This, I think you will agree, is the libertarian vision. I'm simply not interested in debating it -- there isn't enough time, even for a retired person like myself. I think you may already know that I don't subscribe to that view.

fair enough but at least if people are happy to live with a flawed system and least understand the flaws and compensate for them in your own life, works for me

P. Breathnach wrote: »

So it has been possible to arrive at a secure position with the sort of arrangements we have had over the years. My experience is similar: Herself and I became home-owners when taxes were higher than they now are, and rates of interest were far into double digits. I do agree that in recent years leverage has been excessive. My preferred answer would have been strong regulation rather than trusting in free markets.

it has but was based on me having very conservative financial views which I dont see much of with my peers. My first mortgage was about 60% and my second was less and my first objective was to pay it off which I did around 2003. The average person on the other hand seems to only think in monthly repayments and some of the blame for this is down to gov. giving them a free ride. My grandparents would never have made the mistakes the present generation made
Trusting regulation takes a leap of faith plus ignoring history to a certain extent. Tbh financial regulation will not be an issue as such for the foreseeable future as in this environment the "margin clerk" has more say then some suits tucked away somewhere in their ivory tower.

ei.sdraob

digme wrote: »

If I understand this correctly, under capitalism your supposed to leave the bad companies/banks fail.
Is this not feudalism we are under now?

no a perverse and cruel version of socialism and gombeenism we are under now

privatize the profits, socialize the risks

Soldie

P. Breathnach wrote:

Until very recently, placing your savings on deposit in a long-established traditional bank was considered to be conservative low-risk investment. It now appears that the pursuit of profits by bankers in a fairly unregulated environment has removed that option from the menu.

With respect, I think that the "pursuit of profits by bankers" line that is often trotted out these days is sloaganeering, too. It's true, banks did pursue profits -- but in highlighting this fact above others it ignores the reason why they were able to do so in such a reckless way. For example, it's unlikely that banks would have had such a reckless lending policy if the ECB had the base borrowing rate set at 25% for the past few years. I think calls for increased regulation ignore this fundamental problem.

ei.sdraob

Soldie wrote: »

With respect, I think that the "pursuit of profits by bankers" line that is often trotted out these days is sloaganeering, too. It's true, banks did pursue profits -- but in highlighting this fact above others it ignores the reason why they were able to do so in such a reckless way. For example, it's unlikely that banks would have had such a reckless lending policy if the ECB had the base borrowing rate set at 25% for the past few years. I think calls for increased regulation ignore this fundamental problem.

this has little to do with ECB, banks now have units in many countries and can tap the money from there

if it wasnt ECB they would have taken money from FED (and they did just that in the billions) or BOE who had even lower rates

look at Iceland, they were outside ECB/Eurozone yet it didnt stop their bankers borrowing from abroad to the results we seen

lets not forget the huge Yen carry trade, putting an end to which was one of the causes of the "crisis"

johnnyskeleton

nesf wrote: »

Meh, the nasty system doesn't work very well unfortunately and losing life savings is not exactly a trivial price to pay either. I get where you're coming from on this and agree that socialised losses and privatised gains is a really bad way to run the system. That doesn't mean that we should leave banks fail though only that we need to rethink how we save them.

Of all the ways to lose your life savings, surely losing most of them (i.e. you still get the old deposit guarantee payout) in one bank that fails is surely better than losing all of them through hyperinflation or because of soverign default later on.

At least if you lose your savings through a bank default there's still an economy left for you to pick youself back up and work in.

And there's also the argument that you probably should have diversified your savings into e.g. precious metals etc.

Soldie

ei.sdraob wrote: »

this has little to do with ECB, banks now have units in many countries and can tap the money from there

if it wasnt ECB they would have taken money from FED (and they did just that in the billions) or BOE who had even lower rates

look at Iceland, they were outside ECB/Eurozone yet it didnt stop their bankers borrowing from abroad to the results we seen

lets not forget the huge Yen carry trade, putting an end to which was one of the causes of the "crisis"

I'm not so sure that the role played by the ECB can be sidelined to such an extent. The ECB has never had a base borrowing rate higher than 4.75%, so I don't accept the claim that its low interest rates didn't create an environment whereby banks could pursue reckless lending policies.

Naturally, I'm not suggesting that the ECB are completely responsible, and the examples you outlined are valid. However, like Iceland, Switzerland is also an example of a country outside the Eurozone, and they seem to be weathering the storm somewhat better than other countries. I do think that the expansionary monetary policies pursued by countries around the world are predominantly responsible for the current mess we're in.

ei.sdraob

Soldie wrote: »

I'm not so sure that the role played by the ECB can be sidelined to such an extent. The ECB has never had a base borrowing rate higher than 4.75%, so I don't accept the claim that its low interest rates didn't create an environment whereby banks could pursue reckless lending policies.

Naturally, I'm not suggesting that the ECB are completely responsible, and the examples you outlined are valid. However, like Iceland, Switzerland is also an example of a country outside the Eurozone, and they seem to be weathering the storm somewhat better than other countries. I do think that the expansionary monetary policies pursued by countries around the world are predominantly responsible for the current mess we're in.

yes they might have had a factor but what i was trying to say, blaming ECB for all the issues is shortsighted

but out of all the big economic zones controlled by central banks their rates where (and are still) higher than rest

currently theres a bubble developing in china (property as well) with money being pumped in by the tightly controlled central bank there

should be "fun" watching that implode

Soldie

ei.sdraob wrote: »

currently theres a bubble developing in china (property as well) with money being pumped in by the tightly controlled central bank there

should be "fun" watching that implode

An interesting article on China I came across: http://www.politico.com/news/stories/1109/29330.html

ei.sdraob

Soldie wrote: »

An interesting article on China I came across: http://www.politico.com/news/stories/1109/29330.html

yeh few articles like that around, in a country where average wage is well below west, having apartments in Beijing etc costing close to a million dollars is not gonna end well


i noticed this

Treasury Secretary Timothy Geithner said during a trip to Beijing this spring. “In China, ... growth that is sustainable will require a very substantial shift from external to domestic demand, from an investment and export-intensive growth to growth led by consumption.”

rewind ~10 years and replace the word China with Ireland in above sentence, moving away from exports to domestic consumption worked out great for us