If anyone has time, take a read as this piece makes some good points (and some weak points, IMO). The gist is that government will often blame capitalism for market failures, when capitalism should be blaming the government for market failures. Well, is it Capitalism or Government to blame? Let me introduce to you Exhibit A: http://www.capmag.com/article.asp?ID=5302
Its neither one nor the other because advances in GDP and quality of living as a result of pure capitalism and its proper allocation of capital gives it the power to resist government intervention through its track-record, but the blips and violent ups and downs of the free market encourage government intervention to protect those at the bottom…and now those who were once at the top and now at the bottom (ie. banks) The one part of government that I do like and I think is necessary to maintain the western quality of life for all is the creation and maintenance of automatic stabilizers like employment insurance which allows for less violent downturns on the business and individual levels. This is the part of government that is good. The part that is bad, is where we have stock market returns out the wazoo, ie. the last 30 years, and taxes continue to drop, creating further leverage, creating higher gains, thereby making the inevitable fall much more violent. Just as it is the government’s duty to make sure the downturns are smooth and undamaging, they must also ensure the upturns are smooth and don’t overshoot thereby creating bubbles like these, in turn making the downturns far worse than is manageable. I’ve talked about this before in earlier posts, but the average return in the FTSE All-Share index since 1800 has been 2.5%. That is 210 years of returns only equalling 2.5%. The 1800s included a lot of deflation. Between 1800 and 1900, the return in the market was 0%. Between 1900 and 2000, the return was 4.5%. Yet today, investor expectations of return, still hover between 7-12% because of the returns we’ve seen in the last 30 years, creating unrealistic return expectations showing us that greed may be driving the market, not fundamentals. It is my opinion that government has not only created asset bubbles, but they have created bubbles in the minds of every western citizen, which will never go away until it corrects itself, through years and years of poor returns as individuals must draw from these accounts. I’m not saying this process is happening now, but it will at some point. The problem with any society, no matter the ideology, is that the ones who make the rules are not regulated themselves. You cannot have a society where there is not an elite group deciding the fate of the masses. The only cure would be to make every decision up to the general population, thereby spreading the responsibility to all individuals, though the time to make decisions would be much longer than now. Will this be the result of our next big revolution?
“You cannot have a society where there is not an elite group deciding the fate of the masses” thats called a Government.you are advocating no govt?
Interesting Post. Very Macro in nature. “The only cure would be to make every decision up to the general population, thereby spreading the responsibility to all individuals, though the time to make decisions would be much longer than now. Will this be the result of our next big revolution?” I don’t understand - taking it on plain meaning, how in the world is it feasible to let every decision up to the general pop? If you mean by voting with your pocketbook, then I agree. If you mean voting via Congressman, that’s what we have now.
I meant… Make polling/voting easier and for questions like “Should be bail out big auto”? Go to your voting station and vote on it. Government would merely be the vehicle by which voting occurs. Representatives would still exist to clarify different arguments and positions that exist on votable issues so that voters know what they are voting for and understand their vote. This makes more sense than politicians voting on financial issues where many have little to no understanding of the underlying calculations or reasoning. The problem with America et al is that in every facet of the world, we have created specialists to deal with each and every situation. We are investment professionals and we sell services that could easily be beaten should ‘unexperienced’ investors educate themselves, understand the market and risk, and take their trading and advice into their own hands. There are legal professionals who understand the law, but with a little education, you can be your own lawyer. The same is true with government. We pay these people to represent us because we don’t have the time to represent ourselves. But we would if there were means to allow us to take part in government. I would love to vote on 5 things a week and know that my vote actually takes part in deciding the laws I live by. Isn’t this true democracy? Government as we know it is an obstacle to achieving true democracy. Voting between two men that we don’t really know doesn’t reflect the democracy that I wish to live in. I live in Canada, but the situation is the same, it ends up being a race between two. I say, get rid of Washington and return the government to America. Get rid of Ottawa and return it to Canada. This may not be feasible now, but it is much more feasible now than it was 25 years ago. Create automated voting stations across the country and if you feel strongly about something, you are able to vote on it. Governments will then have to relay their positions to the people instead of their colleagues who may be just as biased as they are.
Lol, Sorry about that, but I couldn’t help but laugh at your last post matt. In Canada, the power is very decentralized. Have you ever listened to the federal elections debate. The federal government has almost no discretionary power on what the average citizen would consider important. Let’s see, the federal decides on: - Taxes - Army - Part of the roads and bridges budget On the other hand, the provinces governments are allowed a lot of decisional power, they manage everything that affects the average citizen the most: Healthcare, education, the other part of roads, finances, etc… Now I don’t live in the states, and I don’t remember if their government is more / or less centralized then ours, but your vision of democracy, although interesting and defendable is utopian at best. Look at the recent election participation rates in Canada, or even in the US (if you of course eliminate the last race). Voting five times a week would engender tremendous administrative work to compile all the votes, and would probably result in a low participation rate most of the time. Furthermore hoping to create what you define as a “truer democracy”, you’d also be adding weight to your bureaucracy. Their is a reason why political parties have a platform. It allows the voter to predict how they will react in different situations / problematics. Finally, why would you wanna ask the people if they want the bailout. Most of us here are doing the CFA and have strong academic backgrounds and don’t even entirely understand what’s at stake. I’d rather vote for a government knowing their political platform once than voting every week for details that I already know how my elected officials will react to if I voted responsibly initially. Just my 2 cents… J.
Policy making by plebiscite isn’t as great as it sounds – I think it was Thomas Jefferson who said “Beware of the masses.” People will never vote for the tough short-term decisions that must be made as a society. The general public would’ve voted down TARP and any bailout of the “Big 3,” and while this may be good policy (I disagree but you can make a sound argument for or against), the decision would not have been made with the nation’s best interest at heart. Also imagine social issues, to this day in many different parts of the country, we wouldn’t have equal rights for different races, genders, and people of different sexual orientations. Lastly, elected officials are put in place to make these decisions so the populace doesn’t have to be bogged down with all of the details and paperwork involved in the legislative process. Of course it’s our responsibility to keep an eye on these guys.
The problem is that you don’t have choice in who you choose to run the country. You get to decide between 2 guys. 2 guys out of 31 million, 2 guys out of 310 million. I do understand the obstacle with constant voting, the costs and time required, but I mentioned it as a preliminary idea of how we should be more involved in our government, and I feel there are a lot of people in North America who would like to be more involved. Like I said, every day we are getting closer and closer to that idea becoming feasible as data can get from Hawaii to Miami in nanoseconds. Secondly, we have a country of people (Canada and US) who are uneducated in many things which are now easy to learn. Like I said, finance, law, etc can now be learned at home if you wish. You can compile your own studies of the CFA exam if you wanted to and learn exactly what we learn minus the designation. One day the people are going to crack. Entitlement is high, while possibility of deliverance is low. Promise people something one day and when the day comes saying, ‘we don’t have it’ isn’t good enough. People will take what they need if they aren’t given it. The solution is educating ourselves so that professionals lose their power over commoners (we will be finance pros but most of us aren’t any other kind of pro); that way we spread the wealth and thereby the power. Pass the power of gov’t to the people somehow. All I know is that this is not democracy. This is an early stage fascist government. But then again, this country was founded by those who were the richest with land out the wazoo. You’re either a slave owner, or a slave yourself, In capitalism/facism, you own or attempt to obtain capital. In communism, you run or work for the state. It comes down to: are you able to walk the street at night without being murdered, if yes, then you’re in the right place.
Return the government to the people? You’re advocating a pure democracy, not a republic, by which the majority rules in all cases? Yeah, terrible idea. Everybody being a jack of all trades? Even worse idea.
So I’m assuming you’re in the brilliant group of going with the flow. How inquisitive. You don’t have to be a jack of all trades, but decent knowledge puts pressure on professionals to perform more, and there is less incentive to pay ridiculous amounts for advice that comes at the cost of an hour of study… in some cases. Also, is there any evidence that a democracy is any worse than a republic? I recognize that the majority can force influence on minorities, but thats better than a minority forcing influence on a majority.
MattLikesAnalysis Wrote: ------------------------------------------------------- > So I’m assuming you’re in the brilliant group of > going with the flow. How inquisitive. > > You don’t have to be a jack of all trades, but > decent knowledge puts pressure on professionals to > perform more, and there is less incentive to pay > ridiculous amounts for advice that comes at the > cost of an hour of study… in some cases. > > Also, is there any evidence that a democracy is > any worse than a republic? > I recognize that the majority can force influence > on minorities, but thats better than a minority > forcing influence on a majority. Yeah, I’m just a follower. I only believe in the status quo because I’m lazy, apathetic, and disaffected. Please, that shtick is old. An hour of study? Are you a lawyer? I’d love to see what profession you think you can learn in an hour that you can represent yourself, except for maybe a janitor. As much as the 18th century governments got it wrong, they got the idea of equal representation and mitigating the tyranny of the majority, correct. There are ample examples throughout history why the majority is often ignorant and should be curbed. Need we go any further than flat earth, slavery, womens rights, minority rights, and even now, gay rights? I’d love to know what libertopian society you grew up in, because where I come from, we are taught that people are inherently selfish, xenophobic, and irrational. That is why curbs must be placed upon them to limit the damage those irrational thoughts can do to others, even Thomas Jefferson acknowledged that. Really, it’d be great to be so egalitarian as to think that society could be rational enough to consider all viewpoints and build in all information. However, the world isn’t a vacuum and humans, generally, suck at being rational. It’s why libertopianism, socialism, capitalism, communism, all fail to one degree or another. It’s why finance thinks it can derive financial information from formulas, without considering human behavior, and why EMH is nothing but a pipedream. But hey, you keep being libertopian loving, all of us realistic “sheep” need a good laugh once in a while.
“Also imagine social issues, to this day in many different parts of the country, we wouldn’t have equal rights for different races, genders, and people of different sexual orientations.” We still don’t have these things. We are getting closest to equal wages for women but some opportunities are still denied due to the chance of getting pregnant. There is still prejudice towards minority races, people my age, early 20s probably see the least of it, but i still see it… be best friends with a black guy for 10 years and actually see what he goes through, i have. and those with non-mainstream sexual orientations are still shunned on the street in even the most liberal areas because of some outliers. Its my understanding that most of the US doesn’t allow gay marriage or allow the rights to a couple of men that they’d give to a ‘normal’ couple (ie. economic incentives, etc). I think we’d be in the exact same place we are now with a direct democracy. Do you believe that progress made in how we teach our kids how to think is dependent on law by representation. We noticed the struggles we didn’t notice before and we attempted to make substantial change. The same efforts would have been made either way.
"An hour of study? Are you a lawyer? I’d love to see what profession you think you can learn in an hour that you can represent yourself, except for maybe a janitor. " Now now, it takes years to master the custodian arts… J.
I have studied law and so long as you are not getting into patent defence, yes, maybe not in an hour, but a solid day worth of studying can often cover the topic that needs defence. “I’d love to know what libertopian society you grew up in, because where I come from, we are taught that people are inherently selfish, xenophobic, and irrational.” Maybe this is where we differ. You are a Hobbes and I am a Locke. To use 18th century references is ridiculous as most of the government formed in that era were the first of their kind, coming out of repression and war. Do I have to remind you what happened out of the 20th century’s experimentation with republics in countries also facing hardship… 50 million dead, 6 million dead of a minority group. I believe that comment disregards your comment referring to the 18th century. Unless you’re an expert on the French Revolution and you wish to discuss it with me, then I’ll consider the comment discarded. Attacking me really doesn’t justify your point that a republic is any better than a democracy.
I asked Joe Sixpack, he said it’s Wall Street Fat Cats.
“Need we go any further than flat earth, slavery, womens rights, minority rights, and even now, gay rights?” Also, I believe the republic in america was around, blocking women’s rights, minority rights and gay rights and still does. It went along with slavery for a while too. To even mention flat earth is to completely disregard the timing of the Scientific Revolution. 1800s? America’s republic began in the 1800s right? hmm, seems to me that they went along with almost everything that the ‘faulty’ democracies went along with.
MattLikesAnalysis Wrote: ------------------------------------------------------- > “Need we go any further than flat earth, slavery, > womens rights, minority rights, and even now, gay > rights?” > > Also, I believe the republic in america was > around, blocking women’s rights, minority rights > and gay rights and still does. It went along with > slavery for a while too. To even mention flat > earth is to completely disregard the timing of the > Scientific Revolution. 1800s? America’s republic > began in the 1800s right? hmm, seems to me that > they went along with almost everything that the > ‘faulty’ democracies went along with. Yes, the original status of the government denied those people rights. However, through time those people have been able to organize and get the rights they deserve, despite being the minority and the majority still trying to deny those rights. Even now, in CA, the majority are denying the minority rights. However, there are avenues to pursue outside of a simple majority vote to give those individuals rights, avenues that a pure democracy would deny those individuals. The flat-earth reference was thrown in for mainly hyperbole, but also to show that the majority *IS* tyrannical and irrational and should be checked.
I do understand the dangers of the mob. But what happens when the opportunity for advancement no longer exists for a majority in a republic? Is it rebellion? Is it then persecution of the ‘capital mongers’? It likely will be, just as Germany had its, so shall we have ours, maybe not to the same degree or with such haste and disregard for human life, but the most dangerous thing in the world is a human being trying to survive. Now picture 100 million human beings trying to survive off nothing as the promises made were not kept. We obviously don’t love our leaders and that we are run by our own fear of being broke and hungry; maybe Machiavelli wasn’t debating whether its better to be loved or feared as a leader, but that being a ‘leader’ is not what is intended… Hybrid seems to be the flavour of the decade so maybe there is a compromise between a republic and a direct democracy that can cure the problems of each (would likely just end up with other problems though)
alexis de toqueville’s -democracy in america is an interesting read as far as matt’s arguments are concerned. Id especially point out the secion on the oligarchicl tendencies of democracy