Response to TheSkepticalHeretic Re: the Financial Crisis

[shanedk]

No, it was an economist, and I read it somewhere online, but I don't remember who or where.

Yes, people make mistakes, but generally whenever someone makes a mistake one way someone else makes a mistake the opposite way and it all balances out.

"Blaming greed for a crisis is like blaming gravity for a plane crash."

Love it!

[rcdny]

one thing to remember: Leverage. when the interest rate is too low, more people make leveraged bets because the expected rates of return are greater. housing, hedge funds, etc. when the fed raises rates again, the deleveraging must occur and a big risk off trade happens

[shanedk]

The Invisible Hand simply refers to the activities of people engaging in peaceful, voluntary transactions. When viewed in the aggregate, it can have the illusion of directed action, much in the same sense that evolution has the illusion of design, so the Invisible Hand refers to that.

[shanedk]

"only assumption i disagree with is that there is some balance that markets are always seeking to restore."

That's not an assumption; that's basic economics.

"The current system does not seem to seek that balance, it is drifting away exponentially from the stable points."

The current system is FAR from a free market.

[shanedk]

That was by design. At the time, Congress was at least pretending to follow the Constitution, and the unconstitutionality of a central bank was an issue that had long been settled. So they gave it the appearance of being an independent entity.

So, while many people think the Federal Reserve is a private company posing as a government entity, it's actually the other way around.

[hugesinker]

Good response! I really appreciate how you managed to avoid the pedantic points and focus on the significant issues here.

[shanedk]

The Federal Reserve is managed by a Board of Governors, appointed by Congress and the President to 14-year terms, led by a Chairman, appointed by Congress and the President to 4-year terms.

And the Federal Reserve Act gives Congress 100% authority over them.

[shanedk]

You know there are plenty of places where they've removed traffic lights and accidents, injuries, and fatalities DROPPED, right?

[Rfc]

In your example of the dark traffic light, either consensus or traffic law says you should treat it as a four-way stop sign. This is why, when installing traffic lights that are not yet activated, they will put a black plastic bag over them. Your notice that people slowed down and were more careful is one of the reason city planners now recommend roundabouts in place of traffic signals. They are just a little bit confusing, which means people pay more attention, there are fewer accidents and fewer problems for pedestrians trying to cross.

[shanedk]

Pretty much every president since and including Carter played a role in the CRA and its influence on the housing market. Even George W. Bush.

[OptimalOwl]

I don't know who said that, but it was indeed a magnificent metaphor. If it were someone here on YouTube, then I wouldn't be surprised if it were Lord T. Hawkeye, he's usually good with metaphors.

I think it's fair to say that bubbles can happen without government, but that government intervention tends to greatly exacerbate them. People can and do make mistakes, and what's important is how you discover and correct them.

Blaming greed for a crisis is like blaming gravity for a plane crash.

[shanedk]

Nice quote-mine. Stossel is obviously talking about GOVERNMENT regulation, not private regulatory bodies like UL that Altimadark was speaking of.

[rockandrock]

The evolution of Keynesian thought and the differing schools is really fascinating. Post-Keynesians like Steven Keen argue that even people like Krugman and Stiglitz aren't 'real Keynesians'.

[shanedk]

Actually, that's not true. Since the 1980s Canadian banks have been able to back investments with commercial assets as long as those investments follow the rules for commercial accounts.

[Brassmouth]

Keynes was like Krugman in that he often wrote completely contradictory arguments throughout his career. You can even dig up Keynes arguing for a gold standard. So there's really no such thing as "Keynesianism" other than "do whatever the political class wants"

[shanedk]

"It's not a strawman."

It is ABSOLUTELY a strawman because it's NOT WHAT LIBERTARIANS CLAIM.

"I provided a link to a video and a prominent libertarian"

Arguing against regulation BY GOVERNMENT. At NO POINT did he argue against UL or IEEE or Fish Legal or any of the others.

[shanedk]

Hey, I know what could go wrong: a greedy corporation could charge people money if they go through a red light, set up cameras to catch them, and then shorten the yellow-light time to make it unavoidable!

Oh, wait, government already did that! And unlike our corporation, government can actually force people to pay up!

[fenderboy]

Funny how Krugman argues that the CRA didnt have anything at all to do with the sub prime mortgage meltdown.

[Redmond]

Pay more attention; Stossel is talking about the FDA, a monopolized govt regulator, and only supports my point. The FDA is the only regulator on the market BY LAW, and can take a decade or so to permit the sale/use of beneficial drugs (most of this time is testing efficacy, not safety). Erstwhile, UL is one of many regulators testing products. While no specific regulation is necessary for sale/use, resellers still insist upon a certain level of testing before allowing a product on their shelves.

[shanedk]

He can never bring himself to blame his Holy Government for anything.