well, i support your views
Couldn’t be more wrong. Government-driven economy never works so they should stay away from their interest rate and spending intervention. The economy is seriously sick and the only way out is to sicken it through. If you look at government for the solution you’re looking wrong. We’ve tried that it Russia, Cuba and some other countries and (just between you and me) it didn’t work very well. US is playing the Zimbabwe trick right now, printing money to pay for stuff is not sustainable.
I think you need to separate capitalism “in theory,” which has a laissez-faire view of regulation, and capitalism “in practice,” which actually has a certain amount of regulation already. You do this somehwhat, but we don’t really get a clear enough picture to make a judgement. We are almost certainly in for more regulation over the next 10 years or so as a result of the crisis, but that doesn’t mean there has been no regulation in the past. It’s also unclear whether other money centers (e.g. Signapore) will regulate. I don’t think capitalism is dead, but it has taken a body blow and will need some time to recover. The way you talk about Risk=this and Risk=that doesn’t seem to make a lot of sense. I can fill in the blanks to see how Risk=superior profit, but there are some intermediate causal steps that one might not agree with. I do agree with your “Here is what will likely change in years to come” section, though I think the attractiveness of American assets will improve after recovery - though it may still be a lower percentage of an optimal portfolio than it once was.
How can the attractiveness of American assets improve if the US dollar is heading for a collapse?
Please post you comments on the blog, so that other people Beside AF can benefit from it.
Charles Wheelan basically brings up all the same points. I have no idea where this guy is coming from and his ideology seems pretty inconsistent. http://finance.yahoo.com/expert/article/economist/117255
The free market is not dead it never existed. The closest the US got to free market capitalism occurred in the late 19th century. This was a disastrous time for our country – a lost generation – as corporations were more concerned with maintaining power than providing and maintaining the most efficient and productive industry. We all know how much power the various business tycoons wielded at the time and, unfortunately for the country, they were more than willing to put their private interest before, not only the common good of the state, but the forces of the free market (competitors were eliminated using other means). Imagine the ruinous effects that monopolistic control of business had on the development of the infrastructure of our country. Under a regulated free market system we would have had true competition in industry leading to better roads, railroads, factories, urban projects, etc. Instead, we got essentially what a few power brokers thought was best for us, not the best ingenuity that the market had to offer at the time. Any discussion about regulation, specifically its hindrance on the free market, needs to include the efficiency destroying effect of monopolies and laissez-faire style capitalism’s constant drift toward single-party inefficient decision making in industry. The fundamental need of capitalism is regulation; the only question is what the best non-intrusive way to implement it is.
Gristide, isn’t it a form of government interventionism that initially led to the fall of freddie and fannie? Obviously, being backed by the american government, these entities took a lot more risk then they should have no? In french we call this problem “l’aléa moral” I don’t know if there is a specific english term for it. Also, and I may be wrong, but I don’t think the requirements to have access for a credit will drastically change. Wouldn’t it more likely be that access to lower cost credit will be more restricted. Therefore, riskier entities will be borrowing at a higher rate which better match their risk level? J.
Please post you comments on the blog, so that other people can benefit from it.
Dude, stop pimping your blog already. If the content is there, commentors will follow.
Uh, I always like when people post interesting stuff but should we r4eally have a discussion about a blog that ends with “Here is what will likely change in years to come 1. The degree of trust in the market self-regulation ability 2. The requirements to have access to a credit 3.The american life style 4.The attractiveness of american assets” Were there really any themes or interesting new thoughts in that blog? J. - “l’aléa moral” = “moral hazard” in English. As far as capitalism being dead, blah, blah, we will just have a new round of regulations of that which is not particularly easily to regulate. Ultimately, markets will sort through the stuff that works and get rid of the stuff that doesn’t. We’ve been here and done this over and over again.
Thanks Joey, I always wondered what was the exact english term. I never saw it in an english publication. In the french speaking media and economist community, the term itself was overused and has almost become a cliché when talking about the credit crunch. I have read many economic / financial articles (in english) describing this phenomenon without ever seeing that term coined. Thanks again… J.
<