SpicyTurkey Posted November 18, 2011 Share Posted November 18, 2011 That is adorable. Fraud is rewarded in a free market because it is usually more profitable. Honesty is punished because it is not as profitable. And the fraudsters have more money so they get to make the rules, pay to enforce the rules, and generally pull a Wall Street/1984 esque Greed is Good reprogramming on the population. Honesty doesn't win, power wins.That is completely false. In a true free market society contracts, and property rights are respected. If for any reason one party differentiates from the written agreement, then the person on the reserving end has every right to sue and demand recompense. It seems that most do not understand that regulations tend to serve those being "regulated". Though from your response it seems that you believe that people are too stupid to take care of themselves, and that without government to hold our hands, then everything would divert into chaos. Link to comment Share on other sites More sharing options...
SpicyTurkey Posted November 18, 2011 Share Posted November 18, 2011 Such a charmingly predictable Reaganite. Because in a true free market, law and government could never be suborned by wealth, right? Fraudulent actions are clear and provable in a True Free Market and bad guys wouldn't get away with it and only virtuous captains of finance and industry are rewarded, eh? The True Free Market fixes everything. Everything just works in a True Free Market. The basic corruptibility of human nature would be defeated by the logical beauty and efficiency of the True Free Market!I wish EHK could have gotten hold of your precious little head.The purpose of the free markets is to remove government from the market for that same purpose. The free market takes human greed into account. The free market is not perfect, but it's much better than the alternative. It would seem that when the subject of greed is mentioned government regulators have a horrid track record. Link to comment Share on other sites More sharing options...
SpicyTurkey Posted November 18, 2011 Share Posted November 18, 2011 On the first I may have Moody's/S&P around the wrong way. But in the mid-00's Moody's changed its rules on how it was going to rate a certain capital structure. Within a week, S&P changed their structure to rate that the same way. We now know that the reason they did this was because their competitor did. They knew if they didn't then people wouldn't come to them for ratings (and pay them) - even if their model was more accurate. So they switched. Rating agencies is an area of the market with minimal government intervention (any?) and it FAILED SPECTACULARLY! And the worse bit? Despite no government intervention - the players haven't been punished one bit.And how to you propose to regulate a rating agency? The second example is around risks. If you believe the business leaders knew the risks they were taken you are out of your mind. A large part of what was pricing these products were hugely complicated models that had some underlying assumptions that nobody in management really understood. Hell, there are examples of some of them tweaking to this and reacting pre-crisis - but then doing other stuff which which put them back in a hole because they didn't realise how inter-related it all was. They didn't understand it.When you take a risk, then there is a chance of failure. (After all that is a definition of risk.) My main argument is that they got bailed out. When you lend money, then you are taking a risk. Simple. Link to comment Share on other sites More sharing options...
Shryke Posted November 18, 2011 Share Posted November 18, 2011 That is completely false. In a true free market society contracts, and property rights are respected. If for any reason one party differentiates from the written agreement, then the person on the reserving end has every right to sue and demand recompense. It seems that most do not understand that regulations tend to serve those being "regulated". Though from your response it seems that you believe that people are too stupid to take care of themselves, and that without government to hold our hands, then everything would divert into chaos.You do realise the first half of your post contradicts the second half right?Who do you think is enforcing property rights and contracts? Link to comment Share on other sites More sharing options...
SpicyTurkey Posted November 18, 2011 Share Posted November 18, 2011 Not necessarily, no. My understanding is that lenders managed to persuade regulators that CDO buyers did not have to maintain the same capital reserves as the original lending entities, which means that no law was broken. The ratings agencies were not suborned through threats of force but rather through the application of business pressure; namely, if TrackerNeil Ratings Inc. ever wanted to work with Lehman Brothers again, it would think carefully about rating their loans badly. That's wasn't illegal either.Nuff said. Link to comment Share on other sites More sharing options...
Shryke Posted November 18, 2011 Share Posted November 18, 2011 Indeed. The big problem was that the CDO market convinced people they didn't need to be regulated.They were wrong, of course. Link to comment Share on other sites More sharing options...
ants Posted November 18, 2011 Share Posted November 18, 2011 Ants,Are you cool with lynching?No. But it is evidence that the state doesn't have to be involved to punish a criminal. :cool4:Ants,They have a duty to know. If they can't then they need to work to make the business manageable or sell their shares and the consequent responsiblity. Limited liablity is the sheild corporations use to screw all of us. It should be severely curtailed.Then come up with an alternative way for people with a day job to invest in a diversified portfolio for their retirement. The reality is that larger companies have generally out competed smaller ones, that they are too complicated for shareholders to understand, and to expect it is unrealistic. Even for smaller, simpler companies, it is going to be a stretch. Which means you either limit share ownership to a group of individuals who either have the time or skills to learn and know (i.e. the already rich or those with specialist training) or open it to everyone else. And if you really think this world would be better off by restricting company ownership to those with far more capital and skills than the average joe I'm a bit flabbergasted. Link to comment Share on other sites More sharing options...
MinDonner Posted November 18, 2011 Share Posted November 18, 2011 Wait wait wait. Does this D&D digression mean that I'm too late in posting this? :crying: Link to comment Share on other sites More sharing options...
DanteGabriel Posted November 18, 2011 Share Posted November 18, 2011 Wait wait wait. Does this D&D digression mean that I'm too late in posting this? :crying:I don't know, but reading the comments from "Trevor Hall" below made me wish I could stab people in the face across the Internet. Link to comment Share on other sites More sharing options...
ants Posted November 18, 2011 Share Posted November 18, 2011 I'm going to disagree with at least part of that. There are always risks, and in that market, people knew that the risks were larger. They just figured they could beat that risk, and it would be some other sucker getting caught short. It was like musical chairs, you could write as many shitty mortgages as you wanted, and as long as you could sell them off quickly enough, you had no liability.In a very real sense, there was a huge gambling element to it.I agree with that except to the extent you're talking about the GSE's, because in that case, talk of the risk/value of the implied guarantee had been widespread for a decade or so.I won't argue there wasn't an element of gambling, but especially with the people buying and on selling the mortgage backed securities I would strongly argue they were relying on really sophisticated models that their builders only barely understood the underlying assumptions on, and the higher ups didn't understand at all.On the second bit I'm not ruling out the implied guarantee having a little bit of an effect. I'm just arguing it was nowhere near the main cause, and the idea without it that the free market wouldn't have walked the path to self-destruction is very naive. Link to comment Share on other sites More sharing options...
SpicyTurkey Posted November 18, 2011 Share Posted November 18, 2011 You do realise the first half of your post contradicts the second half right?Who do you think is enforcing property rights and contracts?Property rights, and contracts are the axiomatic roots of a free market. Link to comment Share on other sites More sharing options...
Shryke Posted November 18, 2011 Share Posted November 18, 2011 Property rights, and contracts are the axiomatic roots of a free market.Indeed. And they are axiomatic because a government makes them so. Link to comment Share on other sites More sharing options...
ants Posted November 18, 2011 Share Posted November 18, 2011 And how to you propose to regulate a rating agency?When you take a risk, then there is a chance of failure. (After all that is a definition of risk.) My main argument is that they got bailed out. When you lend money, then you are taking a risk. Simple.Neither of which actually supports your statement. You remember - you said "What encouraged that behavior is that fact that some were "Too Big to Fail". Or at least they had to much influence to fail". After I questioned that the implicit guarantee led to the behaviour.Have you any evidence that companies that the government bail-out was more than a small part of why they did what they did, and that the main one wasn't that the free market screwed up in a bloody big way. Link to comment Share on other sites More sharing options...
TerraPrime Posted November 18, 2011 Share Posted November 18, 2011 When I see the words "real free market," my brain interprets them to say "true virgin unicorn."I don't know why. Link to comment Share on other sites More sharing options...
DanteGabriel Posted November 18, 2011 Share Posted November 18, 2011 When I see the words "real free market," my brain interprets them to say "true virgin unicorn."I don't know why.Strange why you'd get those confused. One is a mythical, made-up creature believed by the overly credulous to have magical powers, and the other is a horse with a horn that has learned how to distinguish the delicate aroma of an intact hymen. Link to comment Share on other sites More sharing options...
Shryke Posted November 19, 2011 Share Posted November 19, 2011 I thought one was just a horse with 1 horn that hadn't got fucked yet. Link to comment Share on other sites More sharing options...
SpicyTurkey Posted November 19, 2011 Share Posted November 19, 2011 Indeed. And they are axiomatic because a government makes them so.They are axiomatic, because people make them so. Link to comment Share on other sites More sharing options...
SpicyTurkey Posted November 19, 2011 Share Posted November 19, 2011 Neither of which actually supports your statement. You remember - you said "What encouraged that behavior is that fact that some were "Too Big to Fail". Or at least they had to much influence to fail". After I questioned that the implicit guarantee led to the behaviour.Have you any evidence that companies that the government bail-out was more than a small part of why they did what they did, and that the main one wasn't that the free market screwed up in a bloody big way.The free market would let them fail.Though What I find funny is that you speak of a free market when there is none. When a central bank is in charge of the money supply, and the rate of interest it's hardly a free market. A central banks is the anathema of a free market. You also seem to discount the role of Freddy Mea and freddie Mac. When a Central Banks stands ready to "rescue" the economy, then you bet your ass they were confident of a bailout. Link to comment Share on other sites More sharing options...
ThinkerX Posted November 19, 2011 Share Posted November 19, 2011 In 2008, the big banks came whining to Congress that they needed a lot of cash fast, no questions asked, or they'd go under and take the economy with them. Despite a lack of real evidence of this claim, they got their money. The utterly stupid idea was that these criminals - and that is what they are, not matter what weasel words and legal trickery is used - would start investing sanely, and then start loaning money again instead of gambling.Instead, they went and gambled even more, and now they are hurting very badly again, making false claims of solid profits to pretend otherwise.As evidence:http://www.bloomberg.com/news/2011-11-16/citigroup-said-to-consider-3-000-job-cuts-as-pandit-trims-costs.html#200,000 finance jobs lost just this year - many of them from institutions claiming a significant profit. These profits are pure fiction, come up with via the sort of accounting fraud that under nearly any other circumstance would result in prison time. And with the Europe situation, and the major Securities Lawsuits working their way through system, it is only going to get worse.So...when these institutions play the 'too big to fail' card again to latch onto yet another bailout, should they actually get it? I would argue instead of abailout, it is high time to ressurect the old RTC.People - even people here - keep whining about how big and important these institutions are. Grow up. The financial sector is five times larger than what it needs to be. That leaves room for an 80% reduction. I figure one way or another it will happen. Link to comment Share on other sites More sharing options...
Shryke Posted November 19, 2011 Share Posted November 19, 2011 They are axiomatic, because people make them so..... through a government.A government is what enforces property rights, contract rights and the various other systems that are necessary for even an unregulated "free market" to exist. And there are many more if you want your "free market" to reach the sort of complexity required for, say, the modern world.And that's all still assuming have a flat out free market, the kind that utterly fails in many respects, like in accounting for externalities.The free market would let them fail.Though What I find funny is that you speak of a free market when there is none. When a central bank is in charge of the money supply, and the rate of interest it's hardly a free market. A central banks is the anathema of a free market. You also seem to discount the role of Freddy Mea and freddie Mac. When a Central Banks stands ready to "rescue" the economy, then you bet your ass they were confident of a bailout.What the hell are you talking about?Do you even understand what a free market is? Or a central bank for that matter? Link to comment Share on other sites More sharing options...
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