But rather, like most economists today, is just biased towards progress and technology. Anyway, I don't think he could have been *entirely* unaware of such examples as the Chinookian Trade of the Pacific Northwest, the Incan Empire of South America, the Apostolic Communes of first century Christianity, or the Roman Empire itself.
But like most, he had a modernist bias that prevented him from seeing the truth about these earlier cultures.
Today, we have an equal bias against the Gross National Happiness indicator put forth by such nations as Bhutan and Vanuatu. But these are merely biases against other forms of measuring wealth, just as modernists such as Prof. Friedman choose not to see the different measures of wealth used in hunter-gatherer societies, and thus ended up making the mistake of claiming that only through the sins of greed and fraud can we have progress, as if the laws of physics only respond to greed and fraud.
Ok, I'm now skirting the "rules" of this blog, since to some here, h/g economics is as much "fiction" due to our current worldwide population as any other economic fiction, but here goes:
Any system that fails to separate sin from virtue, punish evil and reward good, is a system that will eventually fail under it's own weight. The late professor may not have known that he was practicing moral relativism to the point of confusing good with evil, but that is EXACTLY the outcome of his theories today.
And I'd point out that on the Happy Planet Index, which was put forth by the British Conservative party, the United States ranks a mere 150, and ALL the countries below us have one thing in common- they confuse good with evil, and their leaders both economic and political are engaged in fraudulent behavior.
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
The stock market has given up all of yesterday's gains and more today, breaking to new 12-year lows.
Even more importantly, Citicorp has "broken the buck" today. As in, their stocks are below a dollar.
Citigroup fell to $1.03 at 12:32 p.m. on the New York Stock Exchange after reaching 97 cents earlier today, marking an 85 percent decline this year and giving the New York-based company a market value of $5.5 billion. At its peak in late 2006, Citigroup stock was worth $55.70, for a market value of $277.2 billion.
At this rate Citi will be hard-pressed to make it to the Financial Friday Failure so the government can nationalize them. Investors have given up on them. Their capital is now too thin to cover their liabilities.
And this was the largest bank in the world we are talking about. What sort of derivatives meltdown will Citi's failure trigger?
Such as the Incan Empire, which was so rich that gold was just another metal to them; the Chinook Trading Society, which was so wealthy that they used charity as a weapon of shame and many of the individual tribes claimed to be "wealthy peoples"; the Apostolic Communes of the first century (though one could say they could only exist being supported by the capitalism and slavery of the Roman empire); and of course, the Greek and Roman empires themselves where it was better to be a slave than a king in your own country.
I'm shocked that Professor Friedman wouldn't know of these four examples of alternate times in history when the masses gained power and wealth. But he's got the same blinders as most people do to the past, I suppose.
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
So there are at least 4 cases in 'unrecorded' history that Milton Friedman was unaware of, but YOU somehow know allowed the masses to escape poverty? I guess I could point out that I am aware of at least 6 cases in unrecorded history that prove Friedman was right, but I hate to show off.
"There is no need for writing if there is no property."
- Plus then we wouldn't have had to memorize all that Shakespeare, either.
I rebutted the quotation you cite in the bodgy of my diary.
The Great American middle class did not arise out of the laissez-faire capitalism of the 1800s. It only arose after the New Deal reforms of the 1930s. Left to their own devices, laissez-faire economies concentrate wealth at the top, and drive the rest of society towards poverty.
the fact that business etc., may try to engage in regulatory capture only means they have to spend a lot of time and effort trying to get to the power they would otherwise have without it.
As to me being on the wrong side of history, you just woke up and didn't experience the last ten years, right?
I have to disagree. I know of at least 4 alternate economies in which the masses have escaped from grinding poverty. But I'm not surprised that your Milton Friedman didn't know about them, because THEY ARE NOT IN RECORDED HISTORY. In fact, two of them even failed to invent writing- because there is no need for writing if there is no property.
I'm also coming back to make clear that rebel capitalist isn't me under an assumed account, playing closer to the rules. I believe my latest post on on economics as religion and the correct response to heresy in that religion is outside of this blog's rules, and that's still the level of anger that I'm at, so my posts here will be rare until something happens to fix that anger (either internally, or externally).
Oh, and as far as I'm concerned, Milton's just another heretic, and if he were still alive would deserve what all heretics should get.
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
You refer to Milton Friedman's ideas. I wonder if you have been exposed to any of his ideas beyond a 2-minute video. If you had you would be aware that Friedman did not 'enable' the 'wealthy plutocracy' but in fact understood and warned that businessmen have incentives to manipulate the system to their benefit. Guarding against that is among the proper roles of government. (And it is frankly insulting to the departed Professor Friedman to imply that he was either unaware of or in disagreement with James Madison.)
The more control the government has of the economy the larger the incentive for businesses and other special interests (unions, farmers, etc.) to spend time and money lobbying in their self interest (greed, if you will). A smaller government reduces the incentive to do so.
You are also on the wrong side of history, as Friedman points out in your video:
"In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history are where they have had capitalism and largely free trade. If you want to know where the masses are worst off, it’s exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear: that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system."
China uses foreign engineering services (German, American, etc.) for many of its huge infratstructural projects... buildings, airports, tramways, etc., albeit Chinese labor is used in all cases. They do cater to the world, to be sure. But they do have huge population shifts occurring and they tend to plan 50-75 years ahead.
Why does the government keep doing things like this? People make bad purchases all of the time. They still have to pay for them, unless they go to court to fight them or declare bankruptcy. It's too bad that people purchased houses at the height of the real estate boom, but these things happen in a free market. People bought at the height of the stock boom, bond boom, and right now the gold boom. Should they also be bailed out when the value drops?
Instead of adjusting loans or offering forgiveness, the government should be figuring out ways to keep it's citizens employed. Don't protect people from their bad decisions, make it possible for them to survive, learn, and recover from them.
I've said it before, if a person qualified for the loan and has remained employed at the same wage they will be able to continue making their payments. If they lied on their application, then they are being caught now. The liars are punished by losing their houses, and the banks punished for not catching them.
On the other hand, if someone loses their job or has to get another job at a lower salary, they may lose their house because they can no longer afford it. This is where the government should be trying to help.
What's the first step they could do? Stop importing workers for cheap wages and cancel the renewal of current work visas. Offer tax incentives to educate citizen workers only. Cut back on the number of foreign students in our universities and charge them the actual costs of their education instead of the government-subsidized costs.
Next they could start enforcing the fair-trade aspects of international agreements. Charge tariffs on imported good from countries who don't comply with the same requirements our domestic manufacturers must comply with. Labor laws, environmental laws, etc.
Finally, tax companies that offshore jobs for domestic work. Remove the financial incentive to move operations out of the country. If a company says they will leave the country for good, who cares? Someone else will come in and take their place. It's called the cost of doing business in the US.
This kind of reminds me of biology class in high school. When the blood supply to leaches gets cut off, the leaches start to die. As an economy that is dependent on another economy, China will have a hard time making their own 'blood'. They depend on the success of other countries to stay alive. As a communist country, they can still nationalize whatever they want and quash and dissent. Will they nationalize factories? Whole industries? Or will they let their people continue to protest and stay unemployed?
Decade after decade the American electorate has sent incumbents back to Washington.
How the heck could one expect change when the wolfs are reelected to guard the hen house?
Fellow citizens, please send NEW faces to Congress.
Send people who campaign with the pledge to install term limits, for public financing of elections, who vow to serve a few terms and leave.
The passage of TARP should serve as a real wake up call.
The vast majority of voters opposed it yet it still passed.
Doesn't that tell everyone that Congress is beholden to their monied sponsors first & foremost!
The Moral Hazard argument is sour grapes and just very out of touch, as though there's choice involved. This is a systemic, structural problem. All the folks complaining--the Rick Santelli's of the world--were benefitted by the bubble. No one wants to default or go into bankruptcy, but if they're underwater, let the investors take the hit. This is not about bailing out dead beat homeowners--it's about returning the bankruptcy code to a pre-Bush position so that it works and doesn't just bail out dead beat banks that screwed up.
to me, #1 is to get everyone who is in a predatory loan, those ARMs, variable rates, interest only and so on, should be allowed to refinance, period.
And they should cap credit card rates and fees also.
But in this plan it appears irresponsible borrowers can get quite the deal and while it seems to me better to let people get away with financial recklessness than corporations I don't think that's the answer.
On basically reducing overall principle of the price of the home, I'm not totally sure on that, I mean they bought in a bubble and I don't think these various financial institutions should necessarily be reimbursed but instead should be forced to take the loss or the responsibility divided up to a degree.
So, in other words I believe in bottom up but I'm not quite sure these details are right.
several years ago Gates was quoted as marveling how inexpensive the food in the Microsoft cafeteria in India was. He's completely clueless that his food was prepared by slumdogs and grown in the conditions described in this article.
the scary thing, if the people calling for "leveling the playing field" get their way, this will be life in USA for the what is now the middle-class.
Gates and Ellison will have their gulfstreams and yachts in monaco either way - so no worries.
I'm retired but my wife still works. I bought 5 years ago, (2 years before peak in my area) and put 60% down. I was immediately offered a LOC for the 60%, which I took. I hit that for $10k 3 years ago to pay for my wife's Master's degree but have paid most of it off. So, now I sit in a deteriorating housing market watching my equity vaporize. Why shouldn't I just take the original down payment back in cash and just pay rent and sit on the cash. Then, just before the program runs out I'll file for modification and get rid of the LOC debt. Sounds like a helluva plan to me. Beats any investment opportunities I might have, doesn't it? And like I said earlier, I don't like the house anyway, so once the modification happens, I'll just stop paying the mortgage and ride it out to eviction. I will still have the cash and will be free to go off and rent somewhere else. This bailout nonsense has to stop, there is always moral hazard.
But rather, like most economists today, is just biased towards progress and technology. Anyway, I don't think he could have been *entirely* unaware of such examples as the Chinookian Trade of the Pacific Northwest, the Incan Empire of South America, the Apostolic Communes of first century Christianity, or the Roman Empire itself.
But like most, he had a modernist bias that prevented him from seeing the truth about these earlier cultures.
Today, we have an equal bias against the Gross National Happiness indicator put forth by such nations as Bhutan and Vanuatu. But these are merely biases against other forms of measuring wealth, just as modernists such as Prof. Friedman choose not to see the different measures of wealth used in hunter-gatherer societies, and thus ended up making the mistake of claiming that only through the sins of greed and fraud can we have progress, as if the laws of physics only respond to greed and fraud.
Ok, I'm now skirting the "rules" of this blog, since to some here, h/g economics is as much "fiction" due to our current worldwide population as any other economic fiction, but here goes:
Any system that fails to separate sin from virtue, punish evil and reward good, is a system that will eventually fail under it's own weight. The late professor may not have known that he was practicing moral relativism to the point of confusing good with evil, but that is EXACTLY the outcome of his theories today.
And I'd point out that on the Happy Planet Index, which was put forth by the British Conservative party, the United States ranks a mere 150, and ALL the countries below us have one thing in common- they confuse good with evil, and their leaders both economic and political are engaged in fraudulent behavior.
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
The stock market has given up all of yesterday's gains and more today, breaking to new 12-year lows.
Even more importantly, Citicorp has "broken the buck" today. As in, their stocks are below a dollar.
At this rate Citi will be hard-pressed to make it to the Financial Friday Failure so the government can nationalize them. Investors have given up on them. Their capital is now too thin to cover their liabilities.
And this was the largest bank in the world we are talking about. What sort of derivatives meltdown will Citi's failure trigger?
Such as the Incan Empire, which was so rich that gold was just another metal to them; the Chinook Trading Society, which was so wealthy that they used charity as a weapon of shame and many of the individual tribes claimed to be "wealthy peoples"; the Apostolic Communes of the first century (though one could say they could only exist being supported by the capitalism and slavery of the Roman empire); and of course, the Greek and Roman empires themselves where it was better to be a slave than a king in your own country.
I'm shocked that Professor Friedman wouldn't know of these four examples of alternate times in history when the masses gained power and wealth. But he's got the same blinders as most people do to the past, I suppose.
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
So there are at least 4 cases in 'unrecorded' history that Milton Friedman was unaware of, but YOU somehow know allowed the masses to escape poverty? I guess I could point out that I am aware of at least 6 cases in unrecorded history that prove Friedman was right, but I hate to show off.
"There is no need for writing if there is no property."
- Plus then we wouldn't have had to memorize all that Shakespeare, either.
In addition to the US, the British middle class also was a creation of the reining in of 19th century laissez-faire economy also.
I rebutted the quotation you cite in the bodgy of my diary.
The Great American middle class did not arise out of the laissez-faire capitalism of the 1800s. It only arose after the New Deal reforms of the 1930s. Left to their own devices, laissez-faire economies concentrate wealth at the top, and drive the rest of society towards poverty.
the fact that business etc., may try to engage in regulatory capture only means they have to spend a lot of time and effort trying to get to the power they would otherwise have without it.
As to me being on the wrong side of history, you just woke up and didn't experience the last ten years, right?
HAHAHAHAHAHAHA
I have to disagree. I know of at least 4 alternate economies in which the masses have escaped from grinding poverty. But I'm not surprised that your Milton Friedman didn't know about them, because THEY ARE NOT IN RECORDED HISTORY. In fact, two of them even failed to invent writing- because there is no need for writing if there is no property.
I'm also coming back to make clear that rebel capitalist isn't me under an assumed account, playing closer to the rules. I believe my latest post on on economics as religion and the correct response to heresy in that religion is outside of this blog's rules, and that's still the level of anger that I'm at, so my posts here will be rare until something happens to fix that anger (either internally, or externally).
Oh, and as far as I'm concerned, Milton's just another heretic, and if he were still alive would deserve what all heretics should get.
-------------------------------------
Moral hazards would not exist in a system designed to eliminate fraud.
You refer to Milton Friedman's ideas. I wonder if you have been exposed to any of his ideas beyond a 2-minute video. If you had you would be aware that Friedman did not 'enable' the 'wealthy plutocracy' but in fact understood and warned that businessmen have incentives to manipulate the system to their benefit. Guarding against that is among the proper roles of government. (And it is frankly insulting to the departed Professor Friedman to imply that he was either unaware of or in disagreement with James Madison.)
The more control the government has of the economy the larger the incentive for businesses and other special interests (unions, farmers, etc.) to spend time and money lobbying in their self interest (greed, if you will). A smaller government reduces the incentive to do so.
You are also on the wrong side of history, as Friedman points out in your video:
"In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history are where they have had capitalism and largely free trade. If you want to know where the masses are worst off, it’s exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear: that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system."
China uses foreign engineering services (German, American, etc.) for many of its huge infratstructural projects... buildings, airports, tramways, etc., albeit Chinese labor is used in all cases. They do cater to the world, to be sure. But they do have huge population shifts occurring and they tend to plan 50-75 years ahead.
Why does the government keep doing things like this? People make bad purchases all of the time. They still have to pay for them, unless they go to court to fight them or declare bankruptcy. It's too bad that people purchased houses at the height of the real estate boom, but these things happen in a free market. People bought at the height of the stock boom, bond boom, and right now the gold boom. Should they also be bailed out when the value drops?
Instead of adjusting loans or offering forgiveness, the government should be figuring out ways to keep it's citizens employed. Don't protect people from their bad decisions, make it possible for them to survive, learn, and recover from them.
I've said it before, if a person qualified for the loan and has remained employed at the same wage they will be able to continue making their payments. If they lied on their application, then they are being caught now. The liars are punished by losing their houses, and the banks punished for not catching them.
On the other hand, if someone loses their job or has to get another job at a lower salary, they may lose their house because they can no longer afford it. This is where the government should be trying to help.
What's the first step they could do? Stop importing workers for cheap wages and cancel the renewal of current work visas. Offer tax incentives to educate citizen workers only. Cut back on the number of foreign students in our universities and charge them the actual costs of their education instead of the government-subsidized costs.
Next they could start enforcing the fair-trade aspects of international agreements. Charge tariffs on imported good from countries who don't comply with the same requirements our domestic manufacturers must comply with. Labor laws, environmental laws, etc.
Finally, tax companies that offshore jobs for domestic work. Remove the financial incentive to move operations out of the country. If a company says they will leave the country for good, who cares? Someone else will come in and take their place. It's called the cost of doing business in the US.
This kind of reminds me of biology class in high school. When the blood supply to leaches gets cut off, the leaches start to die. As an economy that is dependent on another economy, China will have a hard time making their own 'blood'. They depend on the success of other countries to stay alive. As a communist country, they can still nationalize whatever they want and quash and dissent. Will they nationalize factories? Whole industries? Or will they let their people continue to protest and stay unemployed?
Particularly Larry Summers.
Decade after decade the American electorate has sent incumbents back to Washington.
How the heck could one expect change when the wolfs are reelected to guard the hen house?
Fellow citizens, please send NEW faces to Congress.
Send people who campaign with the pledge to install term limits, for public financing of elections, who vow to serve a few terms and leave.
The passage of TARP should serve as a real wake up call.
The vast majority of voters opposed it yet it still passed.
Doesn't that tell everyone that Congress is beholden to their monied sponsors first & foremost!
The Moral Hazard argument is sour grapes and just very out of touch, as though there's choice involved. This is a systemic, structural problem. All the folks complaining--the Rick Santelli's of the world--were benefitted by the bubble. No one wants to default or go into bankruptcy, but if they're underwater, let the investors take the hit. This is not about bailing out dead beat homeowners--it's about returning the bankruptcy code to a pre-Bush position so that it works and doesn't just bail out dead beat banks that screwed up.
If Fair issac had been such a great predictor, would we be in this mess?
Part of the reason I posted this is because yesterday I was sarcastic on the term scatonomics ;)
but Good God, that's disgusting and I am sure India is not alone.
But that's what happens when one arbitrages....the phrase you get what you pay for comes through.
to me, #1 is to get everyone who is in a predatory loan, those ARMs, variable rates, interest only and so on, should be allowed to refinance, period.
And they should cap credit card rates and fees also.
But in this plan it appears irresponsible borrowers can get quite the deal and while it seems to me better to let people get away with financial recklessness than corporations I don't think that's the answer.
On basically reducing overall principle of the price of the home, I'm not totally sure on that, I mean they bought in a bubble and I don't think these various financial institutions should necessarily be reimbursed but instead should be forced to take the loss or the responsibility divided up to a degree.
So, in other words I believe in bottom up but I'm not quite sure these details are right.
several years ago Gates was quoted as marveling how inexpensive the food in the Microsoft cafeteria in India was. He's completely clueless that his food was prepared by slumdogs and grown in the conditions described in this article.
the scary thing, if the people calling for "leveling the playing field" get their way, this will be life in USA for the what is now the middle-class.
Gates and Ellison will have their gulfstreams and yachts in monaco either way - so no worries.
Link
1) Borrower has to have sufficient income to support new debt and
2) First mortgage cannot exceed 105% of current market value of property
I'm retired but my wife still works. I bought 5 years ago, (2 years before peak in my area) and put 60% down. I was immediately offered a LOC for the 60%, which I took. I hit that for $10k 3 years ago to pay for my wife's Master's degree but have paid most of it off. So, now I sit in a deteriorating housing market watching my equity vaporize. Why shouldn't I just take the original down payment back in cash and just pay rent and sit on the cash. Then, just before the program runs out I'll file for modification and get rid of the LOC debt. Sounds like a helluva plan to me. Beats any investment opportunities I might have, doesn't it? And like I said earlier, I don't like the house anyway, so once the modification happens, I'll just stop paying the mortgage and ride it out to eviction. I will still have the cash and will be free to go off and rent somewhere else. This bailout nonsense has to stop, there is always moral hazard.
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