PCutter said:
1. I thought I had made it pretty clear through my explanation that no system is perfect, and economies aren’t run in text books. But free markets in my view, remain the far better option to lift the wealth of impoverished nations than the alternative. And even Rhumbomra conceded that a Marxist utopia is an unrealistic standard for him to expect, so Im not sure why I should be expected the meet a utopian standard if no one else has to.
If you feel unhappy with how the “rules” are, you can exercise your democratic right to vote for someone who’s views are more aligned with yours, and they can regulate away the riggness. And if you can make a compelling enough argument, you should be able to bring enough voters along with you.
My point is that there is no such thing as free market economy. It's a fantasy. Markets are restricted due to circumstance, restricted information, made deliberately opaque or affected by any other types of factors anyway. And despite all the rhetoric, large players like it that way, because it can easily be rigged to profit them (and screw others).
The question was never between the 'evil' of regulation and free markets (and I'm surprised that someone who professes knowledge of economics has such a simplistic view), but a question of how much regulation is needed to make a market work efficient (i.e. to avoid trusts, to ease access etc.).
Just to make one example: the market for MBS has utterly broken down in 2008, certainly not because of too much regulation, but because it became an inefficient market (no one knew what any of the cr@p was worth any more because of entirely opaque practices.)
And yes, I could probably try yo get sufficient voters to vote for change of the system. It probably was maybe even possible in 2008, so no wonder that 'Citizens United' came along.
PCutter said:
2. “Debt pushed onto the consumer”? Please, did some bank hold a gun to your head and say you must buy a new car? Your don’t appear happy to outsource labour, but more than happy to outsource responsibility.
The Renminbi is pegged to the USD, and it is the devaluation (not overvaluation) of the USD as America seeks to inflate its way out of debt which has resulted in the majority of the undervaluation currently in the Chinese currency. Fox News isn’t the best place to get economic commentary.
As for your Caribbean (or Luxumbourg Schleckies) taxation argument, that is one of domestic taxation policy, not an argument for or against free markets. There are any number of taxation triggers which can be pulled to work around the setting up of offshore tax havens – consumption taxes as one example. As to my view on the idea of tax minimization, I take that of the late Kerry Packer:
“Anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra”
Yes, debt pushed onto the consumer. Take the case of a normal middle class family. The point is that the real wages have stagnated and gone down over the last two to three decades. If you want to keep your standard of living, then the only way to proceed is to supplant your shrinking wages with debt. Maybe not a smart choice but definitely helped along by all the 'smart' economists and bankers, all of which profited to sell these loans.
There's a lot of middle class families which get by living from paycheck to paycheck, maybe even saving a bit extra for retirement, but if the car breaks down unexpectedly, or the second kid would also like to go to college, there's just no other way than to take a second mortgage or to borrow against your own retirement savings or whatever. What's your solution?
Your other comments are not appreciated. Outsourcing responsibility? After decades of socializing losses with the biggest bang the complete outsourcing of all credit risks and unpaid CDS to the taxpayer? Please, give me a break. Here's three letters to ponder: AIG
As to Fox News as source of economic news, see me response to point 1. It seems you're the guilty part here. The US inflating its way out of debt? Dude, do you know what the inflation rate is at the moment? Do you even know why it has been so low the last two years, despite the stimulus and new debt? I'm sorry but I can't take you seriously. Try to at least answer this honestly. As to what's undervalued and overvalued: if the Chinese decide to decouple the renminbi from the US$, what do you think would happen? The US$ dropping or the renminbi gaining in value relative to all other currencies?
Now, consumption tax offsetting the loss of tax revenue to tax shelters, that's a funny idea. Are you even remotely serious? How can this ever make sense? So we let a whole class of businesses off the hook paying taxes and squeeze the consumers even more?
PCutter said:
3. The “race to the bottom” argument was populist nonsense when it was perpetuated in the ‘70’s in response the rise of post war industrial Japan and it is populist nonsense now. If you don’t want to compete for customers on the back of lower wages, you had better find another way to compete. Might I suggest innovation? This is why I drive a German car and watch a German television, as I’ve bought into the (real or perceived) benefits of the country’s higher levels of engineering and build quality when I could have bought a comparably size car (or TV) for considerably less money, manufactured in China or Korea. I was happy to pay more, and support the higher wages of German manufacturing plants, as I perceived a benefit beyond the lowest level of wages possible. Last time I checked (and Im not expert on the German economy) salaries in Germany were relatively high, as are social and environmental standards, though, courtesy of the PIGS the Euro is slightly undervalued.
I bet there're many who'd enjoy the luxury of a German car. Let's all get one for just $299 a month and $5000 down on signing. Oh, wait a minute, there was this thing about debt not being pushed onto the consumer.
The German economy does fine, but it's an export driven economy, which can't be model for the entire world. Also, if you talk to younger people in Germany, you'll notice that there's a high degree of unhappiness with their situation, where few of them can score a real, well paid job like their parents were used to (Generation Praktikum).
I'm surprised that there are still German TV manufacturers since consumer electronics hasn't been the strong side of German economy for a long time. The German economy is actually illuminating my point were many industries (steel, textile etc.) with high environmental impact, and a high number of relatively low-wage jobs, simply have disappeared or at least been greatly diminished in size by the race to the bottom. What is left is a very specialized high-tech industry which is relatively research intensive and where companies, due to innovation, have a quasi monopoly of the market (at least in terms of quality of the product).
PCutter said:
As for the oligarchs/bad men in the closet taking all the money argument, the industrial revolution occurred in the west in the 18th and 19th centuries, so we’ve had 100 years or more for the wealth to spread, but you seem to expect China to achieve it all in 10 years. The west had oligarchs too, its just that Standard Oil was broken up long ago.
As for the environments stuffed, no more resources arguments, while these arguments are somewhat away from my original contention that if the price the west has to pay for the worlds poorest to feed and shelter themselves is a few trinkets of social welfare than so be it, I believe (no surprise here) that the market will deliver the answer! As a microcosm for an example, I do believe in the peak oil story, which in turn leads to market responses, ie. more efficient vehicles to cope with the higher oil prices. A very basic example, but I obviously have more faith in the human race’s ability to innovate than you.
As for more regulation, the crisis, at its heart, was caused by governments trying to bend the free market through social regulation. Clinton introduced a change in lending standards to force Freddie Mac and Fannie Mae to lower lending standards to minorities as a way to imbed wealth into these historically disadvantaged groups. So while the free market suggested these people couldn’t afford home loans, the government regulated that they could. And we all know how that turned out. I’m not sure regulation is the answer.
Reports of capitalisms death have been greatly exaggerated.
This rubbish doesn't really deserve any answer. The wealth was spread not because of unfettered market capitalism, but despite it, with the help of workers union and socialist ideas. And the point is not and has never been the false choice between 'keeping social standards here' vs. 'giving work to the poor in developing countries' (but it's nice of you to acknowledge the race to the bottom). No, the point should always be, 'elevating developing countries to a higher standard while maintaining the already high standard here'.
Again, your false remark on my faith in innovation is not appreciated. I never said anything along this line. You only make yourself look like a fool.
Fortunately, your utter falsification of history concerning Fannie and Freddie has been addressed by others already. Thanks TFF.
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