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2008-10-13 Home Front Economy

Volker on the strength of the US economy

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Posted by lotp 2008-10-13 09:36|| || Front Page|| [11138 views ] Top

#1 This has been a huge misallocation of resources.

Posted by Anguper Hupomosing9418 2008-10-13 09:50|| 2008-10-13 09:50|| Front Page Top

#2 A huge misallocation is correct. HOWEVER, that's true only if you believe that individuals making as much money for themselves as possible is wrong.

I'm afraid that the misallocation is due to the incentives built into a system that is governed by esoteric regulations and crony capitalism where the cronies are the ones writing those regs.

What is needed, though I don't have a clue how to get there, is an economy / society where the risk reward calculation is real. If all these bozos who go rich on paper from high risk schemes had to suffer the consequences we'd see a lot fewer such schemes. BUT, they always knew that their cronies would bail them out so that the millions would be theirs to keep.

We'll get more EEs & CEs when being one of those provides more incentives than being an FE.

Posted by AlanC 2008-10-13 10:55|| 2008-10-13 10:55|| Front Page Top

#3 esoteric regulations and crony capitalism where the cronies are the ones writing those regs
--- Complicated regs and cronyism are inherent problems in our regulated system. Those who write the rules have to continually keep track of those who continuously develop cunning evasions around the rules. This is analogous to the engineering maxim: As soon as we make something foolproof, Nature invents a better fool.
--- The other catch is that those whose job is to protect the general welfare have conflicts of interest.

Posted by Anguper Hupomosing9418 2008-10-13 11:07|| 2008-10-13 11:07|| Front Page Top

#4 that's true only if you believe that individuals making as much money for themselves as possible is wrong Life, liberty and the pursuit of happiness are community goals as well as individual ones. That's one reason why murder for hire is outlawed.

Posted by Anguper Hupomosing9418 2008-10-13 11:09|| 2008-10-13 11:09|| Front Page Top

#5 I'd rather have the greedy ones working in the financial area where they can only cause occasional panics, than have them become engineers and build dangerous bridges and oil refineries, and put melamine in the milk powder.

Posted by trailing wife ">trailing wife 2008-10-13 11:32|| 2008-10-13 11:32|| Front Page Top

#6 How about physicians, physicians' assistants, and nurses?

Posted by Perfesser 2008-10-13 12:11|| 2008-10-13 12:11|| Front Page Top

#7 Volker is talking about people with strong quantitative analysis skills. Not only do we need the engineers he mentions, they have the aptitude to master engineering.

Posted by lotp 2008-10-13 12:22|| 2008-10-13 12:22|| Front Page Top

#8 I'd rather have the greedy ones working in the financial area where they can only cause occasional panics, than have them become engineers and build dangerous bridges and oil refineries, and put melamine in the milk powder.

It's not the engineers who get to make those sorts of decisions about robbing Peter to pay Paul; it's the management, typically. I doubt the melamine-in-cat-food thing was something done by a rogue chemical engineer.

Also, I'd like to suggest that whatever behavior you incentivize, you're going to get.

Posted by Tranquil Mechanical Yeti 2008-10-13 12:25|| 2008-10-13 12:25|| Front Page Top

#9 Capitalism and the great American experiment was built upon a moral foundation and is successful only when all the players have a conscience with an awareness of the impact on others. It must be voluntary, not compulsory, and that is the rub. Human nature always serves self first. The man-made bricks that built the Tower of Babel always eventually crumble but God's ways are eternally solid.

Posted by Danielle 2008-10-13 12:32|| 2008-10-13 12:32|| Front Page Top

#10 I've been trying to explain as apolitically as possible the difference between Socialism and Capitalism to my son. He got virtually no economics in high school or college worthy of the name and seems to think that socialism is a benign form of welfare.

Danielle has hit on the main problem with Capitalism. How are peopled protected from the rogues and robbers wearing white collars as they are from the rouges and robbers in blue?

If our financial types were given to lending their cynical amorality and cunning to physical crime I'm sure they'd find loopholes that would make rape & murder legal.

Honesty & simplicity need to be the keystone of needed regulations coupled with some serious punishment when breached.

Posted by AlanC 2008-10-13 12:42|| 2008-10-13 12:42|| Front Page Top

#11 Term limits - REAL term limits will break the crony link. In for a term and then OUT. Get a real job. Not enough time in to the collect the contacts or time in to repay the bribes.

Posted by Hellfish 2008-10-13 12:43|| 2008-10-13 12:43|| Front Page Top

#12 I can explain the difference between capitalism and socialism.

Under capitalism, people who take risks keep the rewards from the risks they take and pay the costs.

Under socialism, people who take risks don't get to keep the rewards or pay the costs (and consequently rarely take the risk).

What we are seeing at the moment is socialising of losses, which the market correctly predicted would occur.

Posted by phil_b 2008-10-13 13:38|| 2008-10-13 13:38|| Front Page Top

#13 Danielle's onto something.

It seems our Constitution requires a certain threshold percentage of the populace to take seriously Judeo-Christian morals in order to work. Furthermore, it requires an even higher number in the cultural/economic elites for it to continue to function.

The converse is also true.

Once a certain critical mass of the people has complete disregard for the Judeo-Christian memeset, the Constitution can no longer function as a governing document for our society. And it takes a much smaller percentage of the elites to fall away for similar results. This has been the aim of Gramscianism and postmodernish for most of the past eighty years, and that critical point may have been reached.

Posted by no mo uro 2008-10-13 14:37|| 2008-10-13 14:37|| Front Page Top

#14 phil_b, that's exactly what I'm trying to explain.

The one problem with term limits that would need to be overcome (and this is NOT a reason to avoid term limits) is that it increases the power of the standing bureaucracy. Having a very high turnover in "mgmt" gives the workers pretty much free rein.

Posted by AlanC 2008-10-13 14:38|| 2008-10-13 14:38|| Front Page Top

#15 Feeling financial pain? First, blame all the scientists

Posted by tipper 2008-10-13 14:40|| 2008-10-13 14:40|| Front Page Top

#16 I don't think you can divorce economics from politics, they are too closely related. The US system does thrive when its participants have a strong moral sense. That doesn't always work, as we are finding out -- therefore our system of incentives, regulations & punishments.
The losses are being socialized, with and/or without government involvement. One of the defining characteristics of modern corporations is limited liability -- corporate insiders and stockholders can get away with comparatively small losses while someone else takes the big ones.

Posted by Anguper Hupomosing9418 2008-10-13 14:40|| 2008-10-13 14:40|| Front Page Top

#17 One of the major problems is that the government of the United States has spent almost 90 years engaged in social experimentation. There is no justification for the government to do such experimentation in our Constitution or in generally accepted common behavior. The four "pillars" of today's over-regulated, controlled, mis-managed and disaster-prone financial insitutions are Woodrow Wilson, FDR, Jimmah Kahtah, and William J. Clinton, and the congresses that aided, abetted, and supported them. We're going to have to do some radical surgery on the laws of this nation in order to ensure we don't compound the errors caused by the "Progressives" in our society. Sarbanes/Oxley is one very good place to start. FDR-era labor laws are another. Overturning the 17th Amendment would do wonders, too. Eliminating the power of the States to appoint senators has also eliminated any control the Senate had on actions harmful to the States. Bad, bad move, and we're paying for it in the likes of Dodd, Reid, Kennedy, Byrd, Biden, and a host of other "lifetime" senators.

Posted by Old Patriot">Old Patriot 2008-10-13 15:45|| http://oldpatriot.blogspot.com/]">[http://oldpatriot.blogspot.com/] 2008-10-13 15:45|| Front Page Top

#18 You left out LBJ, OP.

Posted by no mo uro 2008-10-13 16:48|| 2008-10-13 16:48|| Front Page Top

#19 AlanC I recommend "Economics In One Lesson" by Henry Hazlitt for your son. We'll I'd recommend it for members of Congress too, but that audience is mostly beyond hope.

Posted by Classical_Liberal 2008-10-13 20:09|| 2008-10-13 20:09|| Front Page Top

#20 Whahahahhaahaa....C_L.

Posted by Besoeker 2008-10-13 20:35|| 2008-10-13 20:35|| Front Page Top

#21 Compare wid TOPIX > PUTIN: WORLD TRUST IN THE USA HAS BEEN LOST + US CAN NEVER REGAIN ITS TRUST, STATUS/LEADERSHIP IN GLOBAL FINANCIAL MARKETS + ONLY CHINA CAN SAVE THE WORLD FROM US CRISIS.

Posted by JosephMendiola 2008-10-13 22:19|| 2008-10-13 22:19|| Front Page Top

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