Why doesn't the market have confidence in Obama?

myp said:

Had to split it up because the message was too long:
You, along with a lot of the left-wing (I am not saying you are part of the left, I am simply saying they tend to agree with you here) seem to underestimate the power of the consumer and the power of the demand curve in the market. In today's age with the internet and the mass media there IS a way to get this information in an unbiased way. The consumer just needs to be wary- that is all. Government really can't do anything about it anyway. Currently, most of these toys and such aren't recalled until after they are released and when someone complains or gets hurt anyway. We can just cut out the middle man of government because the media would report it anyway and stores, for the sake of making their consumers happy and staying with them, would simply warn customers.

Again, make these other companies self-responsible by making them do the research. If they make a bad investment, it is their fault not the governments. Anyway, how is government supposed to catch it before it happens? Most likely, just as in this case, it will be overlooked by inefficient programs like the SEC. The government should monitor for fraud, but getting dirty into the books of companies is a very dangerous thing because it holds the government responsible and in the long run it is very costly to the people.

By law the government does make sure the contracts go through and if they don't the other companies can sue. I am not arguing against holding legal contracts valid- obviously I am for that if I am for private markets. What I am saying is that AIG should have applied for bankruptcy instead of getting a government handout and if the companies who bought their assets saw a breach in contract, they could sue.


Government is supposed to be there to uphold contracts, so I have no idea what you are talking about. Anyone for a private market knows that the government would uphold contacts. There is no disconnect in my logic, there is simply the understanding that with certain things you will have fraud and delusion, but it is better to let the market solve it. With your logic, you look to the government for help and think it is some sort of savior, which is fine, but the problem is that you have nothing to back that up with because history has always shown government hasn't been efficient at regulating markets and it always ends up making things worse. Why don't you give me actual examples of the regulation you want and tell me how government will physically carry out the regulation. Also, I want to know the actual deregulation that hurt us- the actual names of legislation and the actual actions of government. Screaming "Regulation is good! Deregulation is bad!" is not really an intelligent approach to this matter.

Sorry for being a bit crude at the end here, but as you can tell we really disagree on these points and I think some of your arguments are just absurd. Nothing personal though.

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Of course people could pick it out. Why should they have to? They would have to work through advertisements, corrupt rating agencies, bad agencies, etc. Just try looking for a laptop. Look at the reviews and honestly tell me there's a clear cut information out there.

Here's another bit of Econ 101. Things work better with better information that's easy to find and sort. Regulations help give perfect information by giving standards. It's that simple. What would we possible gain by getting rid of them?

This then goes to finance. Half of the crisis was the problem of the finances not being transparent. Just how were they supposed to tell who was good and who was bad? How exactly? I guess this information would have just come out perfectly in the market though. Wouldn't want to make your costumers angry .

I already pointed it out, but do you realize what would happen if AIG went bankrupt. Every one of those toxic assets would have lost every single bit of their value and a whole lot more banks would have gone under. That would have been disastrous. We've been over that before.

Finally, the government isn't a savior. It's just a fairly unbiased way to provide decent information. As far as them actually helping...

Let's see:
About 19 trusts that destroyed the free market in the early 1900s were broken up.
The Fed has drastically reduced the number of recessions caused by wildcat banking (just look at the 1800s)

Those are two off the top of my head. Please name specific examples were regulations had an observably bad effect. I'm sure that they're out there, but I'd like to see what you feel blew the government's credibility as a central information provider.

myp said:

You, along with a lot of the left-wing (I am not saying you are part of the left, I am simply saying they tend to agree with you here)

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Well, I am part of the left, so 'accuse' me all you want. Where did you get the idea that one of us who disagrees with you would be offended by that?

myp said:

Again, make these other companies self-responsible by making them do the research.

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Wouldn't that require, gasp, a regulation?

myp said:

history has always shown government hasn't been efficient at regulating markets and it always ends up making things worse.

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If you think government always makes things worse, then you must believe that the stock market should be totally unregulated. When that happens, I'll draft up some papers that say I run a major consulting company that makes a billion dollars a year and sell shares in it. Of course, none of that is true, but without regulations, that won't matter. The market will sort it all out. Of course, I'll be living high on the hog in the Caymans, so who cares? And without regulation, the stock exchange could decide not to settle transactions for months, so they could keep the float on the money.

There are some countries out there that don't have much in the way of regulations. Unfortunately, none of them are developed countries, and some are the real basket cases of the world. Go invest or live in Somalia, the Sudan, or the Congo (formerly Zaire). Anarchy actually isn't much fun, I hear.

myp said:

Why don't you give me actual examples of the regulation you want and tell me how government will physically carry out the regulation. Also, I want to know the actual deregulation that hurt us- the actual names of legislation and the actual actions of government. Screaming "Regulation is good! Deregulation is bad!" is not really an intelligent approach to this matter.

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Well, banks used to be required to maintain significantly more capital in reserve. Just for an example.

The Parakeet said:

Well, again, they made a lot of money by playing the bubble. I don't think they expected the solvency crisis, since they didn't think AIG would go under or that the credit market would freeze like it did.

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They didn't expect it and they didn't see it coming and it is those same people today who have suffered the losses. The bottom line fact is that most people, including the government, either didn't see this crisis coming or didn't care that it was coming. Only a few saw the true disaster that it would cause.

The Parakeet said:

As far as gold goes, do you see the problem in your argument? People want gold because they have faith in it...kinda sounds like a currency. There isn't any intrinsic value to it (not at the moment at least). People just like it because it has traditional value. You don't seem to get the link with the oil one either. The chance of the US instantly devaluing the money is about as likely as us magically not needing a commodity anymore. The only benefit is that it has an international market, so it wouldn't necessarily be hurt by national policy. It also won't help in rallies though. It's just a half-decent counter-cyclical hedge.

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Gold is NOT like fiat money. There is a very limited supply of gold, which is why it will always be worth something because the demand compared to supply will be higher. The same cannot be said with fiat money. Also, the US HAS devalued the money and continues to devalue the money. When the Fed bought over a trillion dollars in its own bonds, that was an almost instant devaluation of the currency. The only reason we haven't felt it yet is because of banks holding on to capital and because of slowed down global demand for goods.

The Parakeet said:

I'm also confused about your thing with the fractional reserve. You brought it up as something relevant to the argument and I was just pointing out why it wasn't really. The reserve rates for savings accounts don't carry over to the funds of the I-Banks.

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It is all connected and I explained that in my previous posts. You really need to look at the big picture here, not the small section. I know Keynesianism often only looks at the small picture, but that is what has drastically worsened this crisis- it is time to look to the future and the big picture.

The Parakeet said:

Yes. It'd be possible for there to be a low reserve rate with the Fed. It would probably be 1% at a lot of places and ther would be huge concerns over bank solvency. The Fed acts as a standard to ensure that they actually keep the reserve at reasonable levels.

The low reserve rates do lead to more money in circulation. That's Econ 101. I'm confused as to why you ask this.

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I know that low reserve rates lead to more money in circulation, when did I argue against that?

The Parakeet said:

Your next point is a little odd. I've downplayed the role of the Fed because it isn't in contention. They shouldn't have kept the rate low. That wasn't necessarily part of the crisis though (it was part of the mess...but not the heart). The crisis was a crisis of solvency. It had bigger problems than some bad loans.

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Again, look at the BIG PICTURE. The solvency crisis was created because of all of the credit created through the Fed's policies.

The Parakeet said:

I'm also not sure how less regulation would have done a dang thing to protect against bank runs. Keeping a proper reserve does that.

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And again, I am for sound money, so yes a higher reserve rate is needed. Anyway, do you even know why the Federal Reserve was created in the first place? To stop bank runs. It has obviously failed and it is another argument for why it is time to end the Fed.

The Parakeet said:

I'm not sure what you're talking about the fractional reserve system. It's simple. It's talking about only having to hold a certain percentage of one's savings. It really doesn't have much to do with investment banking. I believe they are governed by different leverage rules. What exactly are you talking about with the rest? It's just something that happens in banking.

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Again, the two systems are linked together. The Gramm Leach Bliley Act was especially important in this link.

The Parakeet said:

That's probably the act. I don't know about the exact politics. It appeared to be fairly bipartisan when it was discussed in an economic seminar a few months ago. You are still ignoring one thing though. The choice to not regulate CDS. If those had been regulated, then the mortgage backed securities would have been rated properly. The bubble was created by the Fed and bipartisan housing goals, but it became a crisis because of the bad ratings and insolvency.

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And yet again you fail to tell me HOW you will regulate them. The CDOs are just like any new sort of investment in the history of economics- they caused overconfidence due to the prospect of making a lot of money from them. This happens with virtually every new technology on the market and there is no way to stop that. Look at the markets for automotives when cars were first created, the airline industry when airplanes were first made, the recent tech bubble, etc.

The Parakeet said:

Let me also speak on one point. You keep saying that we should have just let them fail. Do you understand the gravity of that? The entire credit market would have locked. Business would have collapsed and a whole lot of businesses would have been unfairly taken out in the fall.

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I realize fully what that means. But this is a repercussion of failed Keynesian policies and we have to live through it. By propping them up you are only creating a worse bubble in the future. Simple as that. By letting them fail, the suffering would've been worse temporarily, but we would've been better off in the long run and the crisis would be over shorter. Look at history if you need examples from the 1921 Depression vs. the Great Depression to Japan's lost decade.

The Parakeet said:

Of course people could pick it out. Why should they have to? They would have to work through advertisements, corrupt rating agencies, bad agencies, etc. Just try looking for a laptop. Look at the reviews and honestly tell me there's a clear cut information out there.

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The corrupt and bad agencies would quickly be weeded out as better alternatives arise. Anyway, how do you explain companies like Consumer Reports? That is not a government institution. You don't need the government to baby you.

The Parakeet said:

Here's another bit of Econ 101. Things work better with better information that's easy to find and sort. Regulations help give perfect information by giving standards. It's that simple. What would we possible gain by getting rid of them?

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Oh really? That is why the Federal Reserve and SEC saw the bubble coming and the liquidity crisis coming and the tech bubble earlier this decade right? Oh wait, they didn't...

The Parakeet said:

This then goes to finance. Half of the crisis was the problem of the finances not being transparent. Just how were they supposed to tell who was good and who was bad? How exactly? I guess this information would have just come out perfectly in the market though. Wouldn't want to make your costumers angry .

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Look if you think a company is too untransparent or risky, then you don't invest in it. Simple as that. If they can't get enough investments they will automatically start to open up.

The Parakeet said:

I already pointed it out, but do you realize what would happen if AIG went bankrupt. Every one of those toxic assets would have lost every single bit of their value and a whole lot more banks would have gone under. That would have been disastrous. We've been over that before.

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All of the banks were not involved in the MBS market and so, they all would not have failed. The ones that didn't act irresponsibly would simply grow and take over as market leaders.

The Parakeet said:

Finally, the government isn't a savior. It's just a fairly unbiased way to provide decent information. As far as them actually helping...

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And yet it fails at giving the information, taxes people a lot, and distorts the markets which actually creates more problems.

The Parakeet said:

Let's see:
About 19 trusts that destroyed the free market in the early 1900s were broken up.
The Fed has drastically reduced the number of recessions caused by wildcat banking (just look at the 1800s)

Those are two off the top of my head. Please name specific examples were regulations had an observably bad effect. I'm sure that they're out there, but I'd like to see what you feel blew the government's credibility as a central information provider.

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The government has failed as an information provider. Markets are a lot more efficient at doing this themselves. As for the trusts- do you even know what caused the panic of 1907 (which is what I assume you are referring to)? Even leftist historians and econmists will tell you that it was primarily inflation created by Treasury Secretary Shaw. The liquidity retraction by banks also played into it, but that was secondary to Shaw's policies. Eventually the Knickerbocker Trust failed and with it we had a similar problem to today with people panicing and withdrawing their money from banks. J.P. Morgan, one of the biggest financial names of the day, in fact helped the markets by creating a sort of private bailout where he used a lot of his own money and convinced banks to do the same, which helped the liquidity problem. The market isn't all evil, selfish people.

As for the Fed, it still allowed bank runs and all it has done with the help of government in the last century is to prop up bad parts of the market, which make subsequent bubbles even worse. It will all come falling down if we continue with this trend when the dollar loses its name as the world's fallback currency. The FDIC insurance and the Fed's policies only lead to worse decisions in the market due to the safety net they provide.

curious said:

Well, I am part of the left, so 'accuse' me all you want. Where did you get the idea that one of us who disagrees with you would be offended by that?

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No, I was simply tying Parakeet with the left and I know some people would take being part of the left as an offense.

curious said:

Wouldn't that require, gasp, a regulation?

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You misunderstood my phrasing. I am saying companies should be self-responsible, in that they would do the research themselves. I am not saying we have to force them to do the research. If they don't want to do it its their choice, but when their investments fail, the government shouldn't help them.

curious said:

If you think government always makes things worse, then you must believe that the stock market should be totally unregulated. When that happens, I'll draft up some papers that say I run a major consulting company that makes a billion dollars a year and sell shares in it. Of course, none of that is true, but without regulations, that won't matter. The market will sort it all out. Of course, I'll be living high on the hog in the Caymans, so who cares? And without regulation, the stock exchange could decide not to settle transactions for months, so they could keep the float on the money.

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Government should still hold up contracts. Do you understand what capitalist theory is? We want a private sector so we need the government to hold up contracts, no one is arguing against that. It ties into the fraud aspect you are bringing up. No economic theory condones fraud and most true capitalists still want oversight for fraud. Note that oversight is different than regulation in that it doesn't meddle in markets.

curious said:

There are some countries out there that don't have much in the way of regulations. Unfortunately, none of them are developed countries, and some are the real basket cases of the world. Go invest or live in Somalia, the Sudan, or the Congo (formerly Zaire). Anarchy actually isn't much fun, I hear.

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This is a very ignorant and naive response. There are far greater issues effecting those regions and you know it. Anyway, I am not calling for anarchy. I suggest you do some reading on Keynesianism, Austrian, Chicago, and Marxist theories because you are really lost.

curious said:

Well, banks used to be required to maintain significantly more capital in reserve. Just for an example.

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And again, I am all for that because I am for sound money.

myp said:

And again, I am all for that because I am for sound money.

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You asked for an example of deregulation that hurt our economy. I gave you one. And you seem to agree with me.

My problem with all the economic theory I was taught in grad school is that they really don't know. I took my economics in the mid-seventies, and just loved reading about slow economic growth and high inflation being reciprocals of each other, how you couldn't have them both at the same time. I loved it because we had exactly that situation at the time. We had stagflation.

curious said:

You asked for an example of deregulation that hurt our economy. I gave you one. And you seem to agree with me.

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That is not a matter of regulation, it is simply the structure of the monetary system. Changing to a hard currency or atleast one that has higher reserve rates would not require any regulation, it would just be a law change in the system. There is no bureaucracy or physical regulation involved with it.

So much to reply to. I'll also note that we're pretty much done with our exchange. Just repeating points at this point. I'll also explain some of Curious' confusion (it tends to match mine at the time). You seem to switch back and forth between modest libertarianism to full scale anarcho capitalism. It makes nailing your points down hard.

Gold - The point is that it has no intrinsic value. If everyone decided to not like it, then it would be worthless. The chances of that aren't much higher than the US government just printing a zillion dollars.

Fed Reserve Rate - I don't get why you brought it up though. Yes. I understand that it has to do with how much credit and money is available.

You are generally the one who isn't looking at "The Big Picture". I've acknowledged that the low interest rates caused the bubble. You generally brush aside my points about how your deserved deregulation also caused it.

Regulation - Like I said. They need to have more transparency. Possibly something like a 10-K or something. At least something that could be available upon request.

Japan Lost Decade - It's funny that you mention it. They tried not doing anything for awhile. The delayed response is usually blamed for the further action being ineffective. We won't know whether they're right until this plays out in the end.

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Second Message

Your point about them not seeing the crisis coming is pointless. I noted that there was a problem in transparency.

Your other points ignore the power that the government exercises in areas where it does have the power to guarantee good information (toys, drugs, etc.). Better comparisons would be the problems that they have dealing with the meat industry, in which they have less power.

Examples - The Panic of 1907 had nothing to do with my point. I was merely pointing out that the trusts made it impossible for competition to take place.

The Fed (Again) - I don't get your point. The FDIC gave people confidence in banks. That's it.

Your are forgetting one key thing when it comes to information. The market flows freely because we have guarantees and protection. Do you want to have to check every bank to make sure that they are solvent? Can you imagine doing that with every single thing you'd buy, consume, use, interact with, etc.

How would these things really work in your mind? How would they inspect the banks? How would we guarantee honesty? The problems were ones of transparency. How would less regulation help that?

Rational ignorance runs most of the world. We know that the government will crack down on liars and frauds. If everyone had to put in hours of work for any decision, there'd probably be a lot of deadweight lose. There is a reason that these things arose.

The Parakeet said:

Gold - The point is that it has no intrinsic value. If everyone decided to not like it, then it would be worthless. The chances of that aren't much higher than the US government just printing a zillion dollars.

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This is theoretically possible, but I cannot see that happening. Gold will always have lots of value. It has had value for centuries and centuries.

The Parakeet said:

Fed Reserve Rate - I don't get why you brought it up though. Yes. I understand that it has to do with how much credit and money is available.

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I'm not an expert in economics, but I seem to recall a few years ago, the markets were always waiting for Greenspan to say something and then stocks would bubble up again. Who decides on what the Fed Reserve Rate is to be? And why?

The Parakeet said:

Your are forgetting one key thing when it comes to information. The market flows freely because we have guarantees and protection. Do you want to have to check every bank to make sure that they are solvent? Can you imagine doing that with every single thing you'd buy, consume, use, interact with, etc.

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Perhaps that would not be a bad idea. The fact that it should appear to be so onerous may be identification of a serious problem of lack of transparency in their activities. Why is it so difficult to figure out if a bank is solvent or not? I also wonder why it is so difficult to figure out how the large investment banks have sorted out their toxic debts and how the mechanics are working?

The Parakeet said:

Rational ignorance runs most of the world. We know that the government will crack down on liars and frauds.

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With more regulation I believe there is a greater risk of the liars and frauds being government officials. Give them 1.2-trillion and millions become short change. The more regulation there is, the more sins can be hidden.

Gold isn't that protected though. The same things that give dollars value give Gold value. The only difference is that it is now believed to be a good hedge by the world, giving it a bit more stability (although it did just bubble and pop about a week ago).

The Fed Reserve Rate is set by the Fed with the intent of controlling the money supply. Low reserve rates mean the banks can lend more, which grows the money supply.

It would be an onerous task though. Determining solvency requires in-depth knowledge of their assets, which is hard to know right now because the government lets them form these secretive investment tools.

They are sorting it out now because they just had to open their whole books to the government and seek help for the loans that were going bad.

There is always a risk of government fraud, but it can at least be controlled well (once every few years). They will not be able to hide secrets long in this world without the other party jumping on them. It's just the truth.

First off, I agree with you that we do seem to be going in circles, but I think that is because so many topics have arisen in this thread (and we are way off-topic too.) We should've gone to a new thread a while ago, but I think we have some really good issues here and I will probably start some threads about the specific issues sometime later.

Anyway, first let me explain my position. I think you misunderstand what I stand for and I can see how I might've been a little confusing since I didn't really explain exactly what I stand for. I am not an anarcho-capitalist. I am not a believer in libertarian socialism or left-libertarianism. I am a believer in right-libertarianism, or conservative libertarianism. It is a view that is really in line with the beliefs of our founding fathers as well as traditional conservatives- people like Barry Goldwater and Ron Paul.

So what do I think the federal government's role in the market and in people's lives should be? Simply put- what the Constitution says it should be. I think the federal government should be there to provide national defense and I am a strong believer in that. It should also of course uphold the law through the courts and have the three branches of government run as envisioned by our founding fathers. I DO NOT believe however that the national government should tax people's income or make businesses do certain things because I believe it is the RIGHT of those people and businesses to make their own decisions and if they are bad decisions then they have to suffer the consequences- if they are good decisions then good for them. It is not the government's job to get involved in the markets. You can say that it would've stopped this bubble or this fraud or that, but at the end of the day the left has been saying this for the past century and more and more government has been created and the government has been more and more involved in the markets, yet the problems aren't getting solved- if anything they are becoming worse. Now the left in America, continues to cry for more regulation, as if that will be the solution to these problems. But, let me ask you- when will this end? When will you realize that this is the same thing the left has been calling for forever and it has never worked? All it has done is ended up robbing people of their freedoms and eventually their money at which point revolution happens. Where in history has this regulation and big government worked? Never. Every other regime that was the victim of revolution due to oppressive governments never thought that they would be in that position. They assumed that this little change here or this little control here will be ok, but in the end it never was and it never will be. All of the little regulations here and there just create more government and less freedom. As I said in the Cybersecurity Act thread, no one goes from freedom and small government to oppressive regimes and big government over night- it is the small moves over time like these regulations that lead up to it.

It is best to let people make their own decisions in the market because atleast at the end, the government will not be to blame. Furthermore, there will be more freedom and it will be easier for people who have lost a lot to come back.

Before I hear arguments about corporations taking advantage of people, let me add that the system I believe in would allow unions and workers rights, so long as they are optional and the workers create them themselves. If people are willing to work for $3 an hour, then you know what? Maybe they should work for $3 an hour. If they aren't then they can demand more. It is a strong reliance on the laws of supply and demand and basic economics.

As for the competition issue, in a free market there will always be room for competitors as long as the consumers demand it. If there is a monopoly and the monopolist is giving the consumers everything they want at a fair price, then you know what? That monopoly should be allowed to exist. Why not? If it moves away and starts abusing consumers, people will stop buying their product and a new competitor is bound to emerge.

As for the information aspect- the market, especially in today's age of mass media is more than capable of spreading information. In fact, I can make the argument that it is more effective than the government at doing so. What government agencies do you see that are willing to risk their own lives in order to get the "latest scoop" like many reporters are willing to do?

Government has only distorted markets and created overconfidence with its market intrusions. Things like the FDIC create blind confidence in the banking system because if the bank fails the people still get their money- where is that supposed to come from? It is a lot better to simply let the market handle it- if there is really an issue with too many people wasting too much time reviewing every single thing they buy or put their money in, then review agencies such as Consumer Reports and the rating agencies are bound to emerge. Then the people just have to make sure those institutions are legit. It really isn't a hard process. If you really want government oversight, that is fine but to an extent. The institutions should not meddle in the companies, they should just look over them for things like fraud. There is your transparency aspect. I would prefer most of it at the state and local levels, but I guess in some cases a Federal argument could be made.

As for Japan's lost decade, I don't know how familiar you are with it, but if you look at their position during the 1990s you will find that it was very similar to what we went through. Bubbles are a natural part of the market, but they usually solve themselves in a few years as we saw with the 1920s depression and as we would've if Japan had stayed out of the market. Every time the government meddles in the markets during bubbles, they end up making things worse by propping up bad parts of the market and creating newer bubbles. It does not work. It is best to let the market clean itself.

myp said:

That is not a matter of regulation, it is simply the structure of the monetary system. Changing to a hard currency or atleast one that has higher reserve rates would not require any regulation, it would just be a law change in the system. There is no bureaucracy or physical regulation involved with it.

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I'm sorry, but the reserve requirement qualifies as a regulation. Most regulations are passed as laws, so that doesn't make a difference. And the reserve requirement created a whole bureaucracy that requires reports and conducts reviews and audits.

Your definition of regulation vs. necessary contractural and legal support seems to be that if you like it, it isn't a regulation but something else, and if you don't like it, it's a regulation.

curious said:

I'm sorry, but the reserve requirement qualifies as a regulation. Most regulations are passed as laws, so that doesn't make a difference. And the reserve requirement created a whole bureaucracy that requires reports and conducts reviews and audits.

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It all really depends on your definition of regulation. Read my reply below. Particularly with the reserve requirements though, I am for higher requirements and sounder money.

curious said:

Your definition of regulation vs. necessary contractural and legal support seems to be that if you like it, it isn't a regulation but something else, and if you don't like it, it's a regulation.

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When I use the word regulation I mean it in ways where the market gets distorted because of it. I guess you can call laws regulation too, so in that case I do support some regulation- I am not calling for anarchy or anything. My main problem is with regulation that either distorts the market or is so inefficient that it costs tremendous amounts for the government to carry it out- all for something that can usually be done by the private markets.

edit: I thought I would clarify my stance a bit more... I obviously am not an anarchist, so I do believe the government should protect people's rights and uphold contracts and such. What I am against (basically what I mean when I say regulations) is when the government meddles in the affairs of businesses, making them do certain things with their money. I am also against taxes on corporations and income as well. I believe that interest rates should be solely set by the competitive market and not the government, which is why I am against the Fed. I also want the control of the currency to be returned to Congress as the Constitution specifies, not given to a third party entity with no elected officials- the Fed.

As for the monetary supply, I am for a currency that either has much higher reserve rates or more links with commodities. I am not a big fan of the government being about to run wild with currencies and devaluing them as much as they want- I am an advocate of sounder money. You made a valid point about regulation in overseeing the reserve requirement is met and I agree that that should still exist.

And last, but not least is the topic of oversight. I do believe some oversight is ok, but not excessive. I would also prefer oversight at state and local levels opposed to the federal government because it is a lot more efficient. Transparency can be a great thing, but it is not always good and when the government forces too much it can be disastrous due to the bureaucratic costs involved in it as well as the slow down of market activity. I would much rather have private entities do a lot of the oversight at the will of the market- and there are several institutions that already do this. The federal government should really only conduct oversight for a few specific things such as fraud oversight and whenever possible it should be kept out of the market altogether.

OK. I do agree with you that some regulations don't take the right approach. For example, requiring catalytic converters on cars was merely an expedient move. They were developed, ready to go, and could be added quickly. The requirement that automobile manufacturers meet a fleet average target for mileage made more sense, since it left the mechanism up to the companies themselves. They could develop new technologies, substitute plastic for metal, or change the mix of their fleet.

Now, eventually, the market would have forced changes because of the rise in oil prices. The problem with that is that technological development would lage the actual economic stimulous for change by too much. So we're back to that common good thing.

I've been told that the reason the Japanese were so far ahead with hybrid car design is that Clinton let the car companies off the hook for higher mileage standards by making them promise to develop hybrids. The US companies took it as a wink-wink thing, and did nothing. The Japanese, however, went off and worked on hybrids. And that turned out to be a really good thing.

I think the people at the Fed, even the bad ones, are a whole lot more competent and a whole lot smarter than Congress.

Money is an abstract idea, and I think tying it to physical things, such as gold, distorts the market.

On oversight, I think we went far too far in the other direction. Although this is the economics forum, I worry about the effect of Bush's having cut money out of the Department of Agriculture to the extent that we don't have enough meat inspectors. I would think the whole thalidimide thing from long ago would have taught us that. And I think that making us lose confidence in the safety of our food supply, and our water supply, has economic impacts.

curious said:

I think the people at the Fed, even the bad ones, are a whole lot more competent and a whole lot smarter than Congress.

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Possibly they are more shrewd than the ones in Congress, as the ones in Congress are more easy to track and are subject to scrutiny by the media. I think all of them are crooks. I wonder how many of those guys in the Fed had serious investment accounts with the large investment Banks that got bailed out! There had to have been a serious conflict of interest when the bail-out was urged!