The Socialists and Crony Capitalists Have Removed The Incentive To Work

[eric pebble]

Under Thatcher, the work incentive was still there. House prices had not gone sonic. My parents were able to buy a nice house with only my dad working. Workers need to be incentivised to work i.e. you work to buy things which people who don't work can't afford. This concept was turned on its head under labour.

Lazy people exist under every government, same as they have done throughout the ages. Yet people from the working classes, like myself, who took advantages of the 80's education system, did well out of it. Where would I have got under this current numpty labour government? Raising a large family on state benefits in a council owned house probably.

In the last 12 years, civil liberties, education, individual responsibility, social mobility etc have been eroded to disintegration and to add to this, the state has no money left. QE can't hold us up forever. When it ends, you'll see how shite Labour really were. Coming soon...

I largely agree with this. Even though, imho, Thatchler lost her marbles especially towards here last years in power, at least - in the 80's and early to mid-90's you had a reasonable chance to go out there, do any kind of job, and on a rough estimate, buy a roof over your head for around 3-4 x your income. There were FAR fewer bent Mortgage Lenders - therefore far less stupid lending sloshing money out into the economy & merely pumping up house prices by 10-20% a year -- which is what happened under New Labia almost form the start.

Thus - the ordinary bod doing an ordinary job had a fair chance to put the roof over his/her head - and the market wasn't completely skewed by bent EA's, brokers, developers etc etc. Of course they existed - but nothing like to the extent they exist now.

The fact that the Moneylenders have resorted to lend liar loans/6, 7, 8, 9, 10, 11, 12 x salary has done NOTHING good for society except to drive up property prices to completely ludicrous and unsustainable levels. Hence where we are today - at stalemate.

NOTHING is going to get better until and unless house prices go back to around 3 x NON LIAR salary. It really is that simple. It is only THEN that people will be able to go out and do a days work and feel content - and not ripped off.

[Meerkat]

Just to balance out the other thread, after 30 years of wonderful Ayn Rand style lassiez-faire capitalism it is now impossible to put a roof over your head and feed yourself for most of those on lower incomes.

Discuss.

You have a serious intellectual/informational problem if you truly think the current fall-out is due to lassiez-faire capitalism. It is exactly the opposite: the problems have been caused by the state dictatorship of how much the capital must cost.

Do yourself a favour and find that 1966 Greenspan article on gold standard, inflation & theft that was later included in Rand's 1967 book. If after reading that article, you still maintain that lassez-faire approach is to blame for the current economic woes (rather than Greenspan's later policy to contradict his own views expressed in the article), then your case is beyond help.

[Godley]

Under Thatcher, the work incentive was still there. House prices had not gone sonic. My parents were able to buy a nice house with only my dad working. Workers need to be incentivised to work i.e. you work to buy things which people who don't work can't afford. This concept was turned on its head under labour.

Lazy people exist under every government, same as they have done throughout the ages. Yet people from the working classes, like myself, who took advantages of the 80's education system, did well out of it. Where would I have got under this current numpty labour government? Raising a large family on state benefits in a council owned house probably.

In the last 12 years, civil liberties, education, individual responsibility, social mobility etc have been eroded to disintegration and to add to this, the state has no money left. QE can't hold us up forever. When it ends, you'll see how shite Labour really were. Coming soon...

And just when you think the loonies have taken over the asylum you get a post like this...........

Your're not wrong pal, only 7 more months now before this bunch of evil socialists are removed from power.

[D.C.]

You have a serious intellectual/informational problem if you truly think the current fall-out is due to lassiez-faire capitalism. It is exactly the opposite: the problems have been caused by the state dictatorship of how much the capital must cost.

Do yourself a favour and find that 1966 Greenspan article on gold standard, inflation & theft that was later included in Rand's 1967 book. If after reading that article, you still maintain that lassez-faire approach is to blame for the current economic woes (rather than Greenspan's later policy to contradict his own views expressed in the article), then your case is beyond help.

I don't recall any bankers complaining about low rates, governments were doing the bidding of the banks (or their lobbyists).

I don't recall a huge amount of legislation getting passed controlling what banks could or couldn't do.

I don't recall the FSA ever enforcing what little regulation was left.

Could you add a bit more evidence that our evil communist overlords held a gun to Fred Goodwin's head and made him mismanage his bank into the biggest financial disaster in our history?

I really can't find that smoking gun...

[Traktion]

I don't recall any bankers complaining about low rates, governments were doing the bidding of the banks (or their lobbyists).

I don't recall a huge amount of legislation getting passed controlling what banks could or couldn't do.

I don't recall the FSA ever enforcing what little regulation was left.

Could you add a bit more evidence that our evil communist overlords held a gun to Fred Goodwin's head and made him mismanage his bank into the biggest financial disaster in our history?

I really can't find that smoking gun...

Why should the government set the rates at all?

Why should the government (taxpayer) guarantee any money in the banks?

While you can call the banks morally corrupt for taking advantage of the situation, the government should never have put the banks in such a cushy position. Why would the banks complain about the arrangement, when they get to keep all their profits and socialise all their losses?

If it was true "lassiez-faire capitalism", no insurance/guarantees would have been offered, nor given. There would be no central bank interest rates, as supply and demand for money would have set the interest rates. People would have acted accordingly, only trusting banks which seemed sound/open, offering the right risk/reward. Any losses would have been accepted should they have arisen (despite grumbling about them - there would be no bailouts).

[scepticus]

Why should the government set the rates at all?

The government doesn't set rates otherwise the BoE would have done so in 1694 and that would have been that.

The CB can set short term rates within some margin of the market interest rate but it can't deviate too far otherwise the entire system breaks down. However this is not to say that the govenment can't in collusion with banks and other institutions make money too easy. 2003-2007 we had a period of easy money - 125%LTV etc. It was this that caused the bubble and not low rates.

That's not to say low rates won't have an effect on asset prices - they will - but if the market rate is forced lower by fundamental variables such as oversupply of money or low real growth then there is little or nothing the CB can do about that.

The interest rate has been trending downwards since the 50s and the reason for this is not central banking.

[D.C.]

Why should the government set the rates at all?

Why should the government (taxpayer) guarantee any money in the banks?

While you can call the banks morally corrupt for taking advantage of the situation, the government should never have put the banks in such a cushy position. Why would the banks complain about the arrangement, when they get to keep all their profits and socialise all their losses?

If it was true "lassiez-faire capitalism", no insurance/guarantees would have been offered, nor given. There would be no central bank interest rates, as supply and demand for money would have set the interest rates. People would have acted accordingly, only trusting banks which seemed sound/open, offering the right risk/reward. Any losses would have been accepted should they have arisen (despite grumbling about them - there would be no bailouts).

That is a very broken line of reasoning.

On the one hand you say "the government should never have put the banks in such a cushy position" implying that the state should have tight control of the banks and not let them take the piss.

But on the other hand you claim that 'true' lassiez-faire (no state intervention) would have been more stable.

Reality is pretty obvious, if the banking system had collapsed and not been bailed out, nobody would have been able to do business, exchange goods, get paid or buy food. Modern civilisation would have collapsed into mad max/somalia style anarchy.

[Meerkat]

I don't recall any bankers complaining about low rates, governments were doing the bidding of the banks (or their lobbyists).

I don't recall a huge amount of legislation getting passed controlling what banks could or couldn't do.

I don't recall the FSA ever enforcing what little regulation was left.

Could you add a bit more evidence that our evil communist overlords held a gun to Fred Goodwin's head and made him mismanage his bank into the biggest financial disaster in our history?

I really can't find that smoking gun...

You don't need to put guns to anyone's head. Just tricking and creating bad economic incentives due to this dictatorship (rather than letting market determine the equilibrium cost of capital just like for any other economic good or resource) is enough. If you create and support conditions for moral hazard and the principle of short-run, a man will seize these opprtunities as it's just natural for all of us to act in our own best interests. True, you can blame Goodwin for immoral, ignorant or incompetent attitude, but it is not the cause of the problem. It is a consequence. You should address the causes of the disease, not its symptoms.

Edit: spelling

Edited November 11, 2009 by Meerkat

[Meerkat]

The government doesn't set rates otherwise the BoE would have done so in 1694 and that would have been that.

Are you pretending or are really that thick? CB is a government institution. But, of course, you would be right to observe that it has been acting in the interests of banking cartel and reckless governments rather than the median citizen.

[Meerkat]

Reality is pretty obvious, if the banking system had collapsed and not been bailed out, nobody would have been able to do business, exchange goods, get paid or buy food. Modern civilisation would have collapsed into mad max/somalia style anarchy.

No, you are seeing it in a wishfully wrong way again. Remove the implicit government support (moral hazard), and boy will you see some magic - all of a sudden banks will start lending responsibly because there would be no-one to bail the shareholders out. Those that don't will go out of the business just like any other enteprise in other industries.

Edited November 11, 2009 by Meerkat

[Traktion]

The government doesn't set rates otherwise the BoE would have done so in 1694 and that would have been that.

The CB can set short term rates within some margin of the market interest rate but it can't deviate too far otherwise the entire system breaks down. However this is not to say that the govenment can't in collusion with banks and other institutions make money too easy. 2003-2007 we had a period of easy money - 125%LTV etc. It was this that caused the bubble and not low rates.

That's not to say low rates won't have an effect on asset prices - they will - but if the market rate is forced lower by fundamental variables such as oversupply of money or low real growth then there is little or nothing the CB can do about that.

The interest rate has been trending downwards since the 50s and the reason for this is not central banking.

Yes, but the BoE can still set the base rate to what it thinks is best and what the markets will allow.

I had noticed the trending down on interest rates too, which is one of the reasons why I think the current system may fail. If the trend continues, negative interest rates may be the only tool left and it may spell disaster for the fiat monetary system as we know it.

Anyway, that is wondering OT a bit... the point is, the original premise in the OP is flawed - we did not have lassiez-faire capitalism in the first place, so how can it have been the cause?

[Y-QUERK]

Remove the implicit government support (moral hazard), and boy will you see some magic - all of a sudden banks will start lending responsibly because there would be no-one to bail the shareholders out.

So did the banks know there would definately be a bailout during the reckless years?

[D.C.]

No, you are seeing it in a wishfully wrong way again. Remove the implicit government support (moral hazard), and boy will you see some magic - all of a sudden banks will start lending responsibly because there would be no-one to bail the shareholders out. Those that don't will go out of the business just like any other enteprise in other industries.

So I take it the reason the banks started trading MBS's and sacking their head's of risk was because the evil government made them do it?

How many traders, estate agent's, brokers, bankers etc etc were thinking 'I really wish the government were not making me do this, it is going to collapse the banking system' in the last decade and how many were thinking 'Kerching, my bonus is going to be huge!'?

You are living in a complete fantasy world...

[Meerkat]

Yes, but the BoE can still set the base rate to what it thinks is best and what the markets will allow.

I had noticed the trending down on interest rates too, which is one of the reasons why I think the current system may fail. If the trend continues, negative interest rates may be the only tool left and it may spell disaster for the fiat monetary system as we know it.

Anyway, that is wondering OT a bit... the point is, the original premise in the OP is flawed - we did not have lassiez-faire capitalism in the first place, so how can it have been the cause?

Exactly, it's a bit of a mess wrt causes and consequences. Septicus and the OP seem to be insisting that what happened before the crunch was a normal market operation and that's why governments are making the right decisions now by socialising and dictating the whole thing even more...

[scepticus]

Anyway, that is wondering OT a bit... the point is, the original premise in the OP is flawed - we did not have lassiez-faire capitalism in the first place, so how can it have been the cause?

And you never will have it, because it is an oxymoron.

Capitalism depends on property rights.

All property rights depend on the state to define and enforce them.

States need taxes, which creates a debate as to which sectors of the economy should be taxed.

States need voters, which creates a debate about what property rights are and are not to be assigned.

States need parties.

Parties can be bankrolled and bought by capitalists and other interest groups, but mainly by capitalists since they have the money.

[D.C.]

Exactly, it's a bit of a mess wrt causes and consequences. Septicus and the OP seem to be insisting that what happened before the crunch was a normal market operation and that's why governments are making the right decisions now by socialising and dictating the whole thing even more...

Nope.

Deregulation was a mistake.

It never should have happened.

Banks and bankers can not be trusted with the stability of the banking system.

Government should have reigned them in.

[Game_Over]

The government doesn't set rates otherwise the BoE would have done so in 1694 and that would have been that.

The CB can set short term rates within some margin of the market interest rate but it can't deviate too far otherwise the entire system breaks down. However this is not to say that the govenment can't in collusion with banks and other institutions make money too easy. 2003-2007 we had a period of easy money - 125%LTV etc. It was this that caused the bubble and not low rates.

That's not to say low rates won't have an effect on asset prices - they will - but if the market rate is forced lower by fundamental variables such as oversupply of money or low real growth then there is little or nothing the CB can do about that.

The interest rate has been trending downwards since the 50s and the reason for this is not central banking.

This is what is happening now - REAL interest rates are much higher than BOE base rate.

And the BOE has not made a single independent decision in the last 10 years IMHO.

[Traktion]

That is a very broken line of reasoning.

On the one hand you say "the government should never have put the banks in such a cushy position" implying that the state should have tight control of the banks and not let them take the piss.

But on the other hand you claim that 'true' lassiez-faire (no state intervention) would have been more stable.

Reality is pretty obvious, if the banking system had collapsed and not been bailed out, nobody would have been able to do business, exchange goods, get paid or buy food. Modern civilisation would have collapsed into mad max/somalia style anarchy.

No, I did imply the state should have tight control - I implied the state should have no control; they simply shouldn't have made the promises to insure the money in the first place.

I also did not claim that "'true' lassiez-faire" would have been more stable. I merely pointed out that lassiez-faire capitalism wasn't in operation, so the premise is false.

Of course the system would have failed without support, but then it would have never been built up so high without guarantees/insurance and complacency that the BoE/government could limit risk and keep everything from going bad. The state built a rod for its own back, unfortunately.

As I said previously in this thread, if you suspected the bank was being risky and there were no guarantees/bailouts, would you risk your money by giving it to them to look after/invest? If you had known that the banks were operating on 3% reserves, would you have been keen to trust them with your savings or would you have rather picked one which had 20% reserves? The former may have offered higher interest on your savings, but the latter would likely be less risky - were you given this choice or made aware of it?

[Wario]

OK, that's it!

I think spelling nazis are the lowest of the low, and that misspelling ordinary words adds considerably to the gaiety of the nation, especially when it's deliberate ...

but

for fµck's sake, all of you. Lassiez, lassez and so on. If you're going to talk down to us by using high-falutin' foreign jibberjabber, try and make it halfway convincing that you have the slightest idea what you're on about. Make a fµcking effort and get it right!.

AAAAaaaaaaargghh!

Aaarghlegaaarghhargh!

[Meerkat]

So I take it the reason the banks started trading MBS's and sacking their head's of risk was because the evil government made them do it?

How many traders, estate agent's, brokers, bankers etc etc were thinking 'I really wish the government were not making me do this, it is going to collapse the banking system' in the last decade and how many were thinking 'Kerching, my bonus is going to be huge!'?

You are living in a complete fantasy world...

Well, the governments did not act to take corrective action (by simply removing its implicit guarantees, not by regulation, and punishing criminal financial irresponsibility of certain lending activities) despite plenty of whistle blowers out there! Just see some of the Eric Pebble's videos in his sig!

So, why was nothing done about it? You are living in a fantasy world if you don't see that governments that were supposed to represent everybody's interests were supporting scandalous financial orgy as it did create a short-run boom and boosted its political rating. Traders and other species that are at the mercy of the market make use of what is allowed and supported if they can make money out of it withou risking anything but their job if things don't turn out their way. What's so fantasy about this? There are plenty of guys that made money by shorting the market at the right time.

[D.C.]

No, I did imply the state should have tight control - I implied the state should have no control; they simply shouldn't have made the promises to insure the money in the first place.

That is a bit like saying the police cause crime, if there were no police there would be no crime.

In the real world, when you remove the state we don't all live in a happy Injin commune, we end up like Somalia...

Try visiting Somalia and see how well your 'zero state' rhetoric pans out in reality.

[Traktion]

So I take it the reason the banks started trading MBS's and sacking their head's of risk was because the evil government made them do it?

How many traders, estate agent's, brokers, bankers etc etc were thinking 'I really wish the government were not making me do this, it is going to collapse the banking system' in the last decade and how many were thinking 'Kerching, my bonus is going to be huge!'?

You are living in a complete fantasy world...

Made them do it? Nah, it encouraged them to do it, by moving the risk to the taxpayer. If I say to a gambler that I will bailout his mistakes, don't you agree that he will take more risks?

Nope.

Deregulation was a mistake.

It never should have happened.

Banks and bankers can not be trusted with the stability of the banking system.

Government should have reigned them in.

You either regulate well and offer insurance OR you shouldn't regulate at all, nor give insurance. IMO, in today's world, it is impossible to do the former, therefore it leaves us with only the latter.

It isn't just about needing to trust the bankers - it's about every individual doing due diligence and taking responsibility for their actions. The bankers will always try to make more profit, so all we can do as an individual is balance the risk against the potential gain. A low/no interest, low risk account vs a high interest, high risk account etc. Give people the information and the choice and they will try to make a responsible decision, based on it.

[scepticus]

Exactly, it's a bit of a mess wrt causes and consequences. Septicus and the OP seem to be insisting that what happened before the crunch was a normal market operation and that's why governments are making the right decisions now by socialising and dictating the whole thing even more...

Not at all. The mistakes you libertarians make and which are being highlighted here are:

- if only the market had worked like blah blah blah, it would have been ok, but you fail to examine whether such a mode of operation is workable or realistic in a democracy.

- EVERYTHING is the fault of government. Never mind about demographics, technological progress, inherent instabilities in a credit economy, income inequality as a result of capitalistic growth etc etc etc

- now everything is bust, we are going to propose to fix things as if our libertarian ideals had been in place prior to the bust, rather than fixing up the mess with a view to instituting the desired reforms once things are sorted out.

[Traktion]

And you never will have it, because it is an oxymoron.

Capitalism depends on property rights.

All property rights depend on the state to define and enforce them.

States need taxes, which creates a debate as to which sectors of the economy should be taxed.

States need voters, which creates a debate about what property rights are and are not to be assigned.

States need parties.

Parties can be bankrolled and bought by capitalists and other interest groups, but mainly by capitalists since they have the money.

If that is the case, it makes the OP even less meaningful.

[okaycuckoo]

We also need 90K of permanent staff + 170K volunteers to work for stasi.

Adjusted for population, this would be ~550K permanent staff and >1million volunteers.

That's just a bit more than the number of NHS workers.