Fannie Mae and Freddie Mac

[jasmine]

I can't help saying, in the light of what the defenders of free market capitalism have been writing here, just how hilarious I find this government takeover/bale out of two mortgage giants in the USA.

It's even funnier because it's George Bush doing it.

Here's a link to quite a long article analysing the collapse but two lines sum up the main polemical point:


The philosophy of “stand on your own two feet”, preached to single mothers on welfare and New Orleans residents trying to recover from the calamity of Hurricane Katrina , is deemed too stringent and inflexible when it comes to the pillars of finance.

http://www.permanentrevolution.net/entry/2290

[Jazzratt]

This is less surprising when you consider how corporations, when treated as seperate legal entities, seem to receive a hell of a lot of easy breaks in current capitalism. All the "free market" stuff is just rhetoric because all but the most cultish Friedmenite/Randroid economists realise that it's a recipe for disaster.

This just shows, though, that as far as the bourgeoisie is concerned the state is just a subsidy granting body for them to use, pretty much, at will.

[Robert]

Pusher Robot and I tried, apparently with no success, to explain here http://www.revleft.com/vb/time-begin-seriously-t88753/index2.html

what this "government takeover [it's not a "baleout"] of two mortgage giants in the USA" actually means to the taxpayers, the mortgage debtors who owe the money to Freddie/Fannie, the officers and shareholder/owners of Freddie/Fannie (the capitalists), and the secured creditors of the two corporations.

I think the conservatorship is probably a bad idea on balance. Actually, many who oppose it would support if they understood what it was, unless they want an abrupt end to capitalism RIGHT NOW.

As for survivors of Katrina's survivors being left to fend for themselves, read this:

http://www.fema.gov/news/newsrelease.fema?id=18841

The aid is real, if insufficient.

[Bud Struggle]

One of George Soros's partners said that with this bailout the United States is more Communist than Communist China. :rolleyes:

[jasmine]

Pusher Robot and I tried, apparently with no success, to explain here http://www.revleft.com/vb/time-begin...53/index2.html (http://www.revleft.com/vb/time-begin-seriously-t88753/index2.html)

what this "government takeover [it's not a "baleout"] of two mortgage giants in the USA" actually means to the taxpayers, the mortgage debtors who owe the money to Freddie/Fannie, the officers and shareholder/owners of Freddie/Fannie (the capitalists), and the secured creditors of the two corporations.


I didn't say this was good, bad or indifferent. I'm just observing that it's hardly free market captalism. The market cannot be allowed to run without government intervention can it?

[jasmine]

As for survivors of Katrina's survivors being left to fend for themselves, read this:



This doesn't make it clear how much money is being made available - almost certainly as you yourself say, not enough, certainly not for people whose lives have been literally washed away.

But my question to the free market capitalists is - should any money at all have been made available?

[Lynx]

First they said their ability to intervene would be enough to stabilize the market. Now they've intervened. Now the cappies are suggesting the intervention will be enough to stabilize the market. Forgive me if I'm wary of 'stab me twice, shame on me' coming true.


I think the conservatorship is probably a bad idea on balance. Actually, many who oppose it would support if they understood what it was, unless they want an abrupt end to capitalism RIGHT NOW.
Hell yeah!!
Tell BB to get his helicopters ready.

[Lynx]

This is less surprising when you consider how corporations, when treated as seperate legal entities, seem to receive a hell of a lot of easy breaks in current capitalism. All the "free market" stuff is just rhetoric because all but the most cultish Friedmenite/Randroid economists realise that it's a recipe for disaster.

This just shows, though, that as far as the bourgeoisie is concerned the state is just a subsidy granting body for them to use, pretty much, at will.
Money talks, politicians listen.

[Robert]

Oh, I don't know that the hurricane relief was or wasn't enough. But I honestly don't know a single soul demanding that government stay out of reconstruction or relief efforts.


But my question to the free market capitalists is - should any money at all have been made available?Well, if you mean "should have" consistent with absolute free market ideals? I can't imagine any libertarian or anarcho-capitalist, whatever the hell that is, saying "yes" to that. (I'm neither.) The irony here is that the hard left and the hard right come out in exactly the same spot! But that's only because the left apparently has this idea that "the bailout" is the government giving taxpayer money to capitalists to pay off their bad debts. That's not a fair summary of what's going on.

That said, I admit that any time money switches hands, for whatever reason, there's always somebody in the middle or on the periphery available to "facilitate" the transfer. For a small fee, of course.

[jasmine]

Well, if you mean "should have" consistent with absolute free market ideals? I can't imagine any libertarian or anarcho-capitalist, whatever the hell that is, saying "yes" to that. (I'm neither.) The irony here is that the hard left and the hard right come out in exactly the same spot. But that's only because the left apparently has this idea that the bailout it's the government giving money to capitalists to pay off their bad debts. That's not what's going on.

It's at least part of what's going on (paying off debts) and it's certainly a necessity in shoring up a significant part of captalist finance. The problem is that we keep hearing (here I mean) how everyone in America has the chance to become a millionaire but the reality is that you could work really hard, take out significant loans, and through no fault of your own lose everything because a market collapses.

There is no such thing as free market capitalism in the 21st century - it was tried and failed in the early 20th century.

Of course no reasonable person would have demanded that the government stay out of the reconstruction efforts but people here continue to argue that the market can resolve every problem.

I'm just pointing out how absurd this is.

[Bud Struggle]

Oh, I don't know that the hurricane relief was or wasn't enough. But I honestly don't know a single soul demanding that government stay out of reconstruction or relief efforts.

Well, what should happen in such circumstances is that the Government should provide some sort of safety net. In most cases people should take care of their own needs, buy their own insurance, etc. But in a general catastrophe the government should provide assistance to the states and cities or communities to rebuild and provide general assistance to help people reestablish themselves.

The government isn't responsible for restoring people to "wholeness" that is what private insurance if for--though the government should make sure that the private insurers do their jobs.

Now, if people want to hang out in the Superdome and pee and crap all over themselves waiting for the government to wipe their asses when they go--that's another matter.

[Kwisatz Haderach]

One of George Soros's partners said that with this bailout the United States is more Communist than Communist China. :rolleyes:
Funnily enough, given how capitalist China has become these days, that might not be as far from the truth as you think.

I'm quite certain that the Scandinavian countries, at least, are "more Communist than Communist China". It's really not that hard to be more communist than China.


Oh, I don't know that the hurricane relief was or wasn't enough. But I honestly don't know a single soul demanding that government stay out of reconstruction or relief efforts.
You should check out the Ayn Rand Institute. A few years ago they were arguing against relief for the victims of the Indian Ocean Tsunami on the grounds that people living on the coast should have known the risks of a tsunami and prepared for it; and if they didn't prepare it was their fault that they died or lost their homes. :rolleyes:

[Robert]

It's at least part of what's going on (paying off debts)Well, I admit you're right there, and I take back my quibble over the "bailout" term.


From the New York Times (http://www.nytimes.com/2008/09/06/business/06fannie.html?_r=2&hp&oref=slogin&oref=slogin):
Senior officials from the Bush administration and the Federal Reserve on Friday informed top executives of Fannie Mae and Freddie Mac, the mortgage finance giants, that the government was preparing to seize the two companies and place them in a conservatorship, officials and company executives briefed on the discussions said.

The plan, effectively a government bailout, was outlined in separate meetings that the chief executives were summoned to attend on Friday at the office of the companies’ new regulator. The executives were told that, under the plan, they and their boards would be replaced, shareholders would be virtually wiped out, but the companies would be able to continue functioning with the government generally standing behind their debt, people briefed on the discussions said.
Jasmine, you indicate above that you didn't say it was good, bad or indifferent. Well, do you think it's one or the other? Looks to me like the executives and the boards are getting canned, and the stockholders are toast.

You're kicking my ass here, Jasmine. I like it.

A little.

[jasmine]

Robert The Great:

I'm not trying to kick your ass, you seem like a reasonable person who wants to discuss and exchange. But there are some here who have a different agenda - and yes I am trying to kick their asses.

I think it's bad, bad, bad except for the executives who failed (please take note Tomk, Pusher, these people failed, fucked up, lost money) and have been rewarded for their failure - America is not a meritocracy.

[Bud Struggle]

I think it's bad, bad, bad except for the executives who failed (please take note Tomk, Pusher, these people failed, fucked up, lost money) and have been rewarded for their failure - America is not a meritocracy.

You contradict yourself, Sister. These Managers were BAD managers--they deserve their failure. I have no problem with these CEO's getting fired.

America is muchly a meritocracy. Not completely, of course--but muchly.

[Robert]

It appears Fannie and Freddie are as guilty as anybody for not blowing the whistle on the subprime loan party, though they no doubt had unknowable pressures to keep the money flowing to risky borrowers, as Pusher explained.

But you ignore Tom's point, Jasmine. The execs have already been terminated and and investors who bought the stock lost their money. The government's decision to announce that it's "standing behind" the debts (many owed to ordinary people and retirement funds that bought securities) isn't designed to rescue the executives, who weren't personally liable for the debts anyway. The motive is to try and avoid a complete collapse in credit markets. People still need to borrow money to buy homes. Freddie plays an important role in keeping that complicated machinery oiled. I don't understand your apparent indignation.

To bring this Katrina relief thing back into immediate focus, how do you all feel about the citizens who decided not to heed government warnings about Hurricane Ike? Now rescue workers will have to work overtime and fly and boat in and out of Galveston to rescue many of them. There were dozens of government supported and private shelters up and down the highways leading out of south Texas, with directions and continuous pleas by fed, state and local agents for days to get out. (Small churches are very generous with this kind of help, by the way, not to start another argument.)

[Hiero]

Check out this discussion between two economicst, one from the US and one from Australia on Dateline about the Fannie Mae and Freddie Mac bailout.

Here (http://news.sbs.com.au/dateline/), it is on the right under the menu video watch online.

The American economist is anti government intervention. He says interest rates need to soar, people need to lose their homes and companies need to go bankrupt and governments need to allow the recession to run it's course. The Australian is more hands on and says that it is outdated to think that allowing interest rates to soar will in time bounce back the economy.

[Robert]

Wow. Maybe it is worse than I thought. Or better, from some of you guys' points of view. I still say the moderator is overstating the amount of debt that the government is taking on throught the conservatorship, i.e., it's not promising to pay off everyone's home loan.

Thanks for the link.

[Lynx]

Did the disgraced executives receive compensation?

[Bud Struggle]

Did the disgraced executives receive compensation?

I checked, but I can't find out right now. I'd be PISSED if they did. (Full disclosure: I own no shares in either company.)

BTW: I'm in the real estate business--only of the commercial side, well away from all of this. But EVERYONE in the industry saw this becomming a big mess as it was going on. "Giving away" mortages and a whim and a prayer to ANYONE--it was pretty obvious that this all was going to fall apart. It produced a huge bubble in the price of homes and produced a vast amout of people that had no idea what they could pay and couldn't

This whole crisis is about the personal financial STUPIDITY of the American Public. Nothing more.

Eventually as this thing cools, people with money will start buying up these homes (it's already began,) and the idiots that didn't know they couldn't afford an ajustable mortgage will be the one's to suffer.

More money for the rich, because the poor just freakin' give it away.

[Die Neue Zeit]

I checked, but I can't find out right now. I'd be PISSED if they did. (Full disclosure: I own no shares in either company.)

http://www.reuters.com/article/vcCandidateFeed2/idUSWAT01001720080909


Freddie Mac's Syron is entitled to about $14.1 million in severance and other payments as long as his employment is ended "without cause," according to an analysis by executive compensation consulting firm James F. Reda & Associates LLC.

Fannie Mae's Mudd stands to get a payout of nearly $9.3 million, including severance, pension benefits and deferred compensation, according to the calculations.

[Bud Struggle]

http://www.reuters.com/article/vcCandidateFeed2/idUSWAT01001720080909

Well here I agree with you.

THAT SUCKS. At least it's not too much money.

[jasmine]

But you ignore Tom's point, Jasmine. The execs have already been terminated and and investors who bought the stock lost their money. The government's decision to announce that it's "standing behind" the debts (many owed to ordinary people and retirement funds that bought securities) isn't designed to rescue the executives, who weren't personally liable for the debts anyway. The motive is to try and avoid a complete collapse in credit markets. People still need to borrow money to buy homes. Freddie plays an important role in keeping that complicated machinery oiled. I don't understand your apparent indignation.



I wish I could get sacked and be paid upwards of $9 million in compensation. Of course it's better that the government intervened but TomK consistently preaches the virtues of the free market until it collapses - the great depression was the unfettered free market at work.



To bring this Katrina relief thing back into immediate focus, how do you all feel about the citizens who decided not to heed government warnings about Hurricane Ike? Now rescue workers will have to work overtime and fly and boat in and out of Galveston to rescue many of them. There were dozens of government supported and private shelters up and down the highways leading out of south Texas, with directions and continuous pleas by fed, state and local agents for days to get out. (Small churches are very generous with this kind of help, by the way, not to start another argument.)

People are stupid. People make mistakes, How about a bit of compassion and kindness? Or should we just make everbody pay every time - unless of course they are senior executives and can be handed millions of dollars as a reward for failure.


Now, if people want to hang out in the Superdome and pee and crap all over themselves waiting for the government to wipe their asses when they go--that's another matter.

This is from TomK of course - vile and disgusting - why does anybody like this utter scumbag?

[Bud Struggle]

People are stupid. People make mistakes, How about a bit of compassion and kindness? Or should we just make everbody pay every time - unless of course they are senior executives and can be handed millions of dollars as a reward for failure.


People take risks in life--life isn't a chair of bolies.

And at the low pay out those guys got--it's quite the humiliation.

And read this Sista:

http://www.usm.edu/afterkatrina/Bueto.html

And Norton be a Brother. ;)

[Robert]

This is from TomK of course - vile and disgusting - why does anybody like this utter ______?Because he's not an "utter ______." He's made lots of friends here. There's a reason for that.

Second, he has and is entitled to a point of view, as do you and I.

Third, because he's answering a question you avoid: "what if anything is the individual's obligation to to himself and to society?" Maybe he is at one extreme. Are you at the other?

Fourth, he's successful.

Fifth, he's merry.

Sixth, he's tolerant of opposing views. Are you?

Seventh, if you were stranded in Galveston and he had a way to get you out, he'd be in there to rescue you before you could dial 9-1-1.

That's all I can think of.

Merrily,

Rob

p.s. On the golden parachutes of Mudd and whoever ran FMAC, stand by for news on that, Jasmine. The conservator has the power to deny payment of those bonuses. I hope it does, but unlike some (you and Tom agree on this Jasmine -- how about that!) , I don't know that the ultimate failure of the two corporations could have been avoided without much harsher enforcement of lending guidelines, which in turn would have translated into fewer home sales and stupid lawsuits claiming "lending discrimination." Or some such progressive nonsense. Would that have been better?

[Bud Struggle]

Seventh, if you were stranded in Galveston and he had a way to get you out, he'd be in there to rescue you before you could dial 9-1-1.


Actually, you dial 9-1-2 to get me. :lol:

Thanks Rob. Brother Rob.

Tom

[jasmine]

Because he's not an "utter ______." He's made lots of friends here. There's a reason for that.


He's entertaining and facile - but the knife goes in periodically and is not noticed because of that.


Second, he has and is entitled to a point of view, as do you and I.

Hitler had a point of view - was he entitled to ii?


Third, because he's answering a question you avoid: "what if anything is the individual's obligation to to himself and to society?" Maybe he is at one extreme. Are you at the other?


I don't think so. I think he doesn't give a shit about anyone else apart from himself. You've been confused by the charm offensive.


Fourth, he's successful.

So why is he posting here every day? I mean ask yourself, why does a middle-aged, multi millionaire post here every day? On average more than ten times a day. For seven months! He's supposed to have a family for god's sake but he's even here at weekends.


Fifth, he's merry.

Boring and repetitive.



Sixth, he's tolerant of opposing views. Are you?

How so? It seems to me he has a very limited and simplistic ideology. I'm intolerant towards dogmas.



Seventh, if you were stranded in Galveston and he had a way to get you out, he'd be in there to rescue you before you could dial 9-1-1.

How do you know this?



That's all I can think of.


It wan`t much was it?

[Bud Struggle]

He's entertaining and facile - but the knife goes in periodically and is not noticed because of that.



Hitler had a point of view - was he entitled to ii?



I don't think so. I think he doesn't give a shit about anyone else apart from himself. You've been confused by the charm offensive.



So why is he posting here every day? I mean ask yourself, why does a middle-aged, multi millionaire post here every day? On average more than ten times a day. For seven months! He's supposed to have a family for god's sake but he's even here at weekends.



Boring and repetitive.


How so? It seems to me he has a very limited and simplistic ideology. I'm intolerant towards dogmas.


How do you know this?



It wan`t much was it?

She's infatuated. Maybe in love--why else would she waist so much time---;)

Let's see how this play's out.:tt1:

[jasmine]

She's infatuated. Maybe in love--why else would she waist so much time


Because I care, about the sincere people here who you are lying to and behind your hand laughing at.

[Bud Struggle]

Because I care, about the sincere people here who you are lying to and behind your hand laughing at.

It doesn't seem you have cared much about ingratiated yourself to those people as I have.

;)

Does it? Phoney.

FYI: Jazzrrat is going to be pissed. :(

[jasmine]

It doesn't seem you have cared much about ingratiated yourself to those people as I have.



Whilst many here have disagreed with me, been infuriated by me, I doubt many have questioned my sincerity.

You play on the inexperience here. You are utter scum - I may be banned for saying so, I don't care, but I think Jazzratt and others know better.

[Self-Owner]

But my question to the free market capitalists is - should any money at all have been made available?

Freddie Mac and Fannie Mae should never have been created in the first place - you can blame FDR for that. But it's important to bear in mid that neither the collapse or the bailout has nothing to do with free markets - get rid of the government intervening in the first place and there wouldn't have been a problem.

[Bud Struggle]

Whilst many here have disagreed with me, been infuriated by me, I doubt many have questioned my sincerity.

You play on the inexperience here. You are utter scum - I may be banned for saying so, I don't care, but I think Jazzratt and others know better.

Nobody's going to ban you. You haven't broken any OI rules. (Well the flaming--but I'm sure that can be forgiven.)

You are quite sweet in your misunderstandings. You mean well and that's what counts in this world.

I personally find you rather endearing.

Please, post on. :)

[Demogorgon]

Freddie Mac and Fannie Mae should never have been created in the first place - you can blame FDR for that. But it's important to bear in mid that neither the collapse or the bailout has nothing to do with free markets - get rid of the government intervening in the first place and there wouldn't have been a problem.

Non Government backed lending systems swing from catastrophe to disaster with gay abandon. I always find it hilarious when people claim that if we went back to a given period in the past we would find a perfect financial system. No we wouldn't, ever done any nineteenth century history?

[Self-Owner]

Non Government backed lending systems swing from catastrophe to disaster with gay abandon. I always find it hilarious when people claim that if we went back to a given period in the past we would find a perfect financial system. No we wouldn't, ever done any nineteenth century history?

I don't claim that there has ever been a perfect financial system - a perfect financial system would require the government to stay the hell away, and governments are usually disinclined to do that. From what I do know about 19th century financial crises, they were caused in no small part by intervention.

[Demogorgon]

I don't claim that there has ever been a perfect financial system - a perfect financial system would require the government to stay the hell away, and governments are usually disinclined to do that. From what I do know about 19th century financial crises, they were caused in no small part by intervention.
Caused by intervention? The intervention rarely came until it was time to sort out whatever crisis the financial institutions had gotten themselves into. The trouble with those of your political persuasion is you hunt for any sign of intervention in any crises and declare that it must have been the unequivocal cause. It really doesn't cut it though.

The Nineteenth century crises were born from the Gold Standard and its hideously unstable nature. If it wasn't lenders issuing more gold certificates than they could honour it was changes in the value of gold relative to the rest of the economy throwing everything off balance.

I find it telling that economic disaster on the scale of the Great Depression were common in the nineteenth century but have been unknown since we abandoned the Gold Standard. Don't get me wrong, I am no fan of the current financial system, I am a Communist after all! But claiming that horrendously unstable commodity backed financial systems are better than Government backed systems simply ignores history.

[Self-Owner]

Caused by intervention? The intervention rarely came until it was time to sort out whatever crisis the financial institutions had gotten themselves into. The trouble with those of your political persuasion is you hunt for any sign of intervention in any crises and declare that it must have been the unequivocal cause. It really doesn't cut it though.

I don't think this is true at all. I mean, macroeconomics is hard and all, but the fact that the vast majority of 19th century fiscal crises are concurrent with some sort of government intervention in the money supply might really be because the intervention did cause the crisis. I don't make the claim (as you say I do) that intervention is the unequivocal cause - but I don't see what basis you have for ruling it out a priori.



The Nineteenth century crises were born from the Gold Standard and its hideously unstable nature. If it wasn't lenders issuing more gold certificates than they could honour it was changes in the value of gold relative to the rest of the economy throwing everything off balance.

It wasn't so much the gold standards' instability as much as the inability of governments to let a gold standard run without interference. The temptation is always there to try and cream off some seignorage. And I think if you look closely enough at the biggest depressions, you'll see that there was some manipulation of currency - suspension of specie payments, the coupling or decoupling of an additional silver standard at an artificial rate, government financing of wars, or something of the kind.


I find it telling that economic disaster on the scale of the Great Depression were common in the nineteenth century but have been unknown since we abandoned the Gold Standard. Don't get me wrong, I am no fan of the current financial system, I am a Communist after all! But claiming that horrendously unstable commodity backed financial systems are better than Government backed systems simply ignores history.\

Well, there's a good argument for saying the Great Depression was actually exacerbated to a substantial extent by... you guessed it, government policies. I know you don't like Milton Friedman, but he certainly knew his economics:

"The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy"

['cum'rade robie]

I don't claim that there has ever been a perfect financial system - a perfect financial system would require the government to stay the hell away, and governments are usually disinclined to do that.
It's impossible to keep the government out of financial matters in a capitalist system where all it takes is a couple mill to buy it out and use it to help you make more money(which as you point out, sucks for everyone else). Money is power you know, a lot more power than the government can hope to have.

[Self-Owner]

It's impossible to keep the government out of financial matters in a capitalist system where all it takes is a couple mill to buy it out and use it to help you make more money(which as you point out, sucks for everyone else). Money is power you know, a lot more power than the government can hope to have.

Which is precisely why I'm (at least leaning towards being) an anarchist. I suspect there's not a vast intellectual gap between me (and ancaps in general) and some of the mutualists/georgists on this board.

[Demogorgon]

I don't think this is true at all. I mean, macroeconomics is hard and all, but the fact that the vast majority of 19th century fiscal crises are concurrent with some sort of government intervention in the money supply might really be because the intervention did cause the crisis. I don't make the claim (as you say I do) that intervention is the unequivocal cause - but I don't see what basis you have for ruling it out a priori.
To say that it was caused by Government intervention, you will need to provide strong evidence, because the Nineteenth century had a far less stable financial system than we have now despite having much less in the way of intervention. To claim that Government intervention is always bad requires one to accept that as an abstract truth first of all and then interpret the evidence through such a lense to make it fit. To me who has no ideological inclination towards this, it just seems silly to claim that Governemnt intervention is always bad. Not least because it ignores vast swathes of economic knowledge built up over the years. I believe that Government intervention sometimes makes things better and sometimes makes things worse, so give me a reason, not based on the pre-suposition that intervention always fails to believe that nineteenth century financial crises were Government caused.

Incidentally, you will naturally enough think about American examples, here, being American and in fact I was thinking about America too, Nineteenth Century American history being one of my passions sadly enough, but when I think closer to home about Britain's economics in the nineteenth century, Britain kept much tighter control on its currency than America and enjoyed a much more stable financial system as a result. That tells me something.


It wasn't so much the gold standards' instability as much as the inability of governments to let a gold standard run without interference. The temptation is always there to try and cream off some seignorage. And I think if you look closely enough at the biggest depressions, you'll see that there was some manipulation of currency - suspension of specie payments, the coupling or decoupling of an additional silver standard at an artificial rate, government financing of wars, or something of the kind.
I wouldn't be surprised if you can hear my sigh from across the Atlantic. The reality of economics is that there is always Government intervention so simply saying that there was intervention during crises does not say much. If we are to accept that the intervention must be related, then we will also have to accept that the intervention during economic triumphs was also responsible.

Tell me, without trying to convince me of the ideology, because that would just be a waste of time, what reason should I have for presuming the Gold standard actually works? Where is the empirical evidence? I know the economic theory as to why it works and I also know the arguments against it, arguments that I strongly agree with, but try to trump that, show actual real world evidence. The theoretical consensus in economics is that Fiat money is superior to the Gold Standard. Try and knock that down with some real world examples.

I should note once again, incidentally, that non of this is meant to praise the current financial system. Your statement that the mortgage companies under discussion here should never have existed is one that I agree with, albeit for different reasons, rather I am simply saying it is better than what came before.


Well, there's a good argument for saying the Great Depression was actually exacerbated to a substantial extent by... you guessed it, government policies. I know you don't like Milton Friedman, but he certainly knew his economics:

"The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy"
Before I answer that, let me ask what you hope to gain by quoting Milton Friedman? Am I to be bowled over by him? After all if I were to quote him on the stuff where you disagree with him, such as when he said that the Government should always intervene to correct market failure or that the public sector would have to consist of at least 20% of the economy to have a functioning system, would you throw in the towel or would you simply disagree with him as I am about to do?

Anyway, once again, look a little further than America. The Depression was a worldwide matter. In the places that tried to no-intervention stuff, things were a lot worse. Indeed Britain responded to it, by re-implementing the gold standard which had been suspended since the first world war and cutting taxes and tariffs. It was hit even worse than America was. Free market economists love to say that things were not all sunshine and roses after Roosevelt's programme of intervention and it is true they weren't, but they were still better than the equivalent situation over here where the Government was simply hoping that free market economics would save the day.

[Self-Owner]

To say that it was caused by Government intervention, you will need to provide strong evidence, because the Nineteenth century had a far less stable financial system than we have now despite having much less in the way of intervention. To claim that Government intervention is always bad requires one to accept that as an abstract truth first of all and then interpret the evidence through such a lense to make it fit. To me who has no ideological inclination towards this, it just seems silly to claim that Governemnt intervention is always bad. Not least because it ignores vast swathes of economic knowledge built up over the years. I believe that Government intervention sometimes makes things better and sometimes makes things worse, so give me a reason, not based on the pre-suposition that intervention always fails to believe that nineteenth century financial crises were Government caused.

If you want to pick an example or two to look at, I might have a chance: I don't see any way that I could even in principle show that government intervention is deleterious to an economy as you say, in the abstract. Pick a couple of examples and we can discuss the cases on their own merits. But let me be clear about my actual point. I don't hold the position, as you attribute to me, that government intervention is always bad (economically speaking - we can leave the moral question for another post). I think sometimes government intervention can be good; it's just that the nature of governments introduce perverse incentival and informational problems which ensure that, in reality, governments don't tend to have a good effect. For instance, a fiat currency which is inflated at precisely the rate of growth of the economy would not be such a terrible thing (I believe Milton Friedman proposed this at one point) - the problem is that once a currency is being printed, the temptation to increase the rate is always there - and I don't know any government which is able to rein in this temptation.


Incidentally, you will naturally enough think about American examples, here, being American and in fact I was thinking about America too, Nineteenth Century American history being one of my passions sadly enough, but when I think closer to home about Britain's economics in the nineteenth century, Britain kept much tighter control on its currency than America and enjoyed a much more stable financial system as a result. That tells me something.
I wouldn't be surprised if you can hear my sigh from across the Atlantic. The reality of economics is that there is always Government intervention so simply saying that there was intervention during crises does not say much. If we are to accept that the intervention must be related, then we will also have to accept that the intervention during economic triumphs was also responsible.

FYI I'm not actually an American - I'm a Brit too. I don't know exactly what you mean when you say Britain kept a 'tighter control' of its currency - as far as I know, both Britain and the US were on the gold standard but Britain was far less daring in suspending specie payments, unlike the US (there's also the fragility of the US banking establishment caused by restrictions on branch banking). And it's highly plausible that this is in fact what caused the greater stability. As for your argument that blaming intervention for crises means we must give intervention the credit for successes, this is just a straightforward logical fallacy.


Tell me, without trying to convince me of the ideology, because that would just be a waste of time, what reason should I have for presuming the Gold standard actually works? Where is the empirical evidence? I know the economic theory as to why it works and I also know the arguments against it, arguments that I strongly agree with, but try to trump that, show actual real world evidence. The theoretical consensus in economics is that Fiat money is superior to the Gold Standard. Try and knock that down with some real world examples.

Well, I'll have a go: how about the fact that Canada, on the gold standard for the late 19th century and the early 20th century, never had any of the panics and suffered no banking panic during the great depression?


I should note once again, incidentally, that non of this is meant to praise the current financial system. Your statement that the mortgage companies under discussion here should never have existed is one that I agree with, albeit for different reasons, rather I am simply saying it is better than what came before.

I actually don't know how we got on to talking about the gold standard (which I am admittedly not an expert on). A fiat currency minus the big GSEs would be far superior to one with them, and I think (and you clearly disagree) that a free market in banking would be superior to both.



Before I answer that, let me ask what you hope to gain by quoting Milton Friedman? Am I to be bowled over by him? After all if I were to quote him on the stuff where you disagree with him, such as when he said that the Government should always intervene to correct market failure or that the public sector would have to consist of at least 20% of the economy to have a functioning system, would you throw in the towel or would you simply disagree with him as I am about to do?

First of all I'm not sure that he did hold all those positions for his entire life. And secondly, of course I'd disagree. My point wasn't to convince you by quoting Friedman, just to show that the idea that the Depression was caused by failings in the gold standard is by no means universal.


Anyway, once again, look a little further than America. The Depression was a worldwide matter. In the places that tried to no-intervention stuff, things were a lot worse. Indeed Britain responded to it, by re-implementing the gold standard which had been suspended since the first world war and cutting taxes and tariffs. It was hit even worse than America was. Free market economists love to say that things were not all sunshine and roses after Roosevelt's programme of intervention and it is true they weren't, but they were still better than the equivalent situation over here where the Government was simply hoping that free market economics would save the day.


There are other factors in the British case, most notably a reluctance to lower interest rates to the market level (I think for political reasons) which would clearly upset things. And like I already pointed out, Canada was not hit as badly at all, despite holding on to the gold standard.

I don't find debating about the gold standard particularly interesting, not least because I'm no expert and I don't think it is the most vital issue. But the one thing I would like to emphasise is that it was by no means 'free market economics' - it was state-capitalism, pure and simple.

[jasmine]

You are quite sweet in your misunderstandings. You mean well and that's what counts in this world.

I personally find you rather endearing.

I find you to be worse than something I trod on in the street. You are utter scum and not even worth spitting on - reference: lovable TomK's comments on the mostly black people forced into the stadium in New Orleans.

His hatred of African Americans is documented in his comments here.

What do you want here? The only thing I believe in your story is that you are middle aged and at home all day. How pathetic are you? Acting out your fantasies with a bunch of kids.

Have a nice day:)

[Bud Struggle]

As I've said on numerous occasion--I don't give a fat rat's ass what anyone believes or doesn't about me. I think this is an interesting discussion group with really provocative and creative ideas. I don't agree most of the time--but it doesn't mean that I'm not reading and learning. Hey, I came here believing the Soviet Union and Communist China were Communist countries. What did I know? Well, now I know better! :)

I appreciate this place a lot.