Your country became more prosperous today.

[Kulindahr]

People usually compare the value of fiat money against that of the gold standard, as though gold is inherently valuable. But the value of gold is set by fiat as well. What is gold worth unless people wanted it for something?

Yes. I once saw a calculation made that a certain size asteroid made of pure solid gold would be worth $50 trillion dollars at today's gold prices. Then it noted that the moment that asteroid was headed here, gold futures would plummet, and by the time it got to earth orbit it would probably be worth only $35 trillion -- but if they sold it all at once, they'd be lucky to get $20 trillion.

The price of anything depends on both supply and demand, plus the cost of obtaining it. Drug prices are high because the government keeps them there by making obtaining them difficult -- were the misnamed "War on Drugs" ended tomorrow, by July 4th th price of any of them on the street would be only 10% to 25% of what they are presently.

One libertarian writer suggested having a land standard instead of a gold standard, because the supply of land is in essence fixed. Since the supply of gold is definitely not fixed -- and odds are we could find enough in the asteroids to double what the human race has (though not in pure form) -- a gold standard is just an off-beat form of gambling.

And they forget that in the Roman Empire, even with gold currency, inflation hit more than once (though once it was partly a matter of impure coin).

 

[bankside]

OOOH! I may just about be sold on the land standard!

 

[Kulindahr]

I don't really like currency based on any commodity as that still can lead to price shocks and runs on supply. It also eliminates room for monetary policy. Yes land is finite (obviously... unless we start colonizing other planets lol), but real estate can still collapse. Also it must be noted if we get an asteroid of pure solid gold it would cause a collapse in the prices because of the huge amount of supply coming onto the market... unless someone has it locked up somewhere and only lets little by little go on the market.

That was the guy's point: merely knowing that such an amount of gold was coming to earth would crash prices by 30%; once it got here they'd drop again.

An asteroid made of rare earths would be more valuable, because those are in such demand the price wouldn't suffer much.

 

[JB3]

I challenge you to prove that assertion a withdrawal of austerity would push the developed world into a recession. It's an empty claim I think. Spending most definitely is the only way here, as long as it is responsible. Austerity is a small government lie that is pushing countries deeper into recessions... it doesn't work and will cause instability. If Europe wants to pull out of recession, they need to spend responsibly. Not the way they were before, but certainly not with the austerity myths.

Look what happened with Greece. The turmoil caused by the mere prospect of them abandoning austerity, and the after-effects of such a decision, caused the world markets to sink and recession to be a realistic outcome.

 

[JB3]

I do.

Maybe you don't realize the culpability of the banks in this whole mess. JP Morgan, as I understand it, stood front and center in Greece's debacle. Not only did they know about the severity of the situation in Greece, they didn't care. The people who wrote the loans got their bonuses, their origination fees, and so on, and didn't care who they hurt.

Bankside, I know you live in Canada, so perhaps you don't fully appreciate the gravity of the situation in terms of the culpability of the United States banks. Our bankers, fueled by some foolish deregulation, wrote toxic finantial instruments on purpose, with malice aforethought, and have pretty nearly derailed the economies of the entire world, including Greece.

The banks did not do it with 'malice aforethought'. They put together financial instruments that got by regulatory scrutiny, but were incredibly complex as a result. And the way they were written caused a cascade effect through the markets when parts of them went bad.

No bank anywhere intended for the collapse to happen, nor have they intended for the situation to occur in Greece.

- - - Updated - - -

The turmoil? The turmoil in Greece is because of austerity. Not the other way around. One can try to blame everything on those protesting, but in reality those who call for austerity are the ones driving people to desperation and to the streets. It's unsupported saber-rattling. Austerity has done nothing brought further destruction and misery on the country.

Uh, no. The turmoil in Greece is because the country was run by idiots, and inhabited by people that don't understand that you can't get something for nothing.

 

[JB3]

Banks engaged in irregular activity that caused this entire financial disintegration to happen. If they didn't know, they were incredibly naive and shortsighted.

They engaged in activity that was not irregular, but it was incredibly complex. So complex that, like I said, a failure in any single part of those instruments caused a collapse in the rest.

 

[JB3]

That's an quick fire answer, and it's completely unsupported. One can claim that, but you don't have proof. You can't get something for nothing? This isn't a libertarian world I hate to break it to you. Things don't work the way you claim.

So you're telling me that healthcare is free? That the high number of vacation days is free? That ANYTHING anyone does is free?

There is a cost for EVERYTHING anyone does. NOTHING in this world is free, and everything has a cost.

And it's disrespectful to dismiss an entire country like that. You know who are the idiots here? The bankers that keep bleeding countries dry by advocating stupid policies like austerity in the middle of a recession. IT DOES NOT WORK. I've seen AUSTERITY FAIL MISERABLY in person when I was living in Argentina.

*Sorry this post didn't add itself to my prior post... strange JUB.

Its not disrespectful, its the truth. The Greeks got used to living a certain way, without understanding the costs involved. It came back to bite them in the ass. Other nations are coming to grips with the same thing. (including the US)

 

[JB3]

Another quickfire response, and again no proof for this one. It isn't complex. It's rather quick simple... they engaged in criminal activity and the regulatory agencies turned a blind eye to it. Perhaps what they did was complex, but lets look at the bigger picture.

The financial instruments we're talking about were so complex that its taken YEARS for regulators to unwind them. Many of them aren't even completely unraveled yet. And your assertion that what they did is criminal is not supported by the facts or the law. What they did followed the law to the T. SOME individuals acted outside the law, and they are still being investigated. (again, the complexity issue rears its head)

This FactCheck piece has a good breakdown of who is at fault at the end of it, and also notes how complex the collapse really was:
FactCheck.org : Who Caused the Economic Crisis?

And here is a New York times piece published when the congressional investigation on the collapse was concluded.
http://www.nytimes.com/2011/01/26/business/economy/26inquiry.html

 

[JB3]

Health care is provided free in many developed countries where the taxation system isn't broken. The oldest national health care system exists in Germany. There needs to be a proper taxation structure to fund the system and a system of regulation to prevent abuses.

Except it ISN'T free. It has a cost.

And where did I say anything was free?

In response to my saying you can't get something for nothing:

You can't get something for nothing? This isn't a libertarian world I hate to break it to you. Things don't work the way you claim.

You cannot get something for nothing. You cannot get healthcare for nothing. Your vacation days cost something. So does EVERY activity you undertake as a human being.

No, it's wrong. It's absolutely wrong. It's not looking at what is really happening. The Greeks got used to living a certain way? No no. The bankers got used to living a certain way, and now they are demanding unrealistic disgusting "reforms" onto countries. The bankers caused this mess... and now we expect them to get us out of it?

The bankers did not cause this mess. What caused this mess is that the Greeks had an unsustainable level of debt and spending brought on by decades of mismanagement and societal issues. When the reality of that hit home is when austerity measures began to be demanded. The world could have let Greece collapse, but they did not.

The Greeks share blame. Any interpretation otherwise ignores the reality of what has happened.

 

[JB3]

Fine it is a complex story, but the banks still committed various abuses.

You have not presented me a single piece of evidence that austerity is the answer. The financial regulations existed but were nto properly enforced. Is not supported by the facts? You haven't backed up your case as far as austerity is concerned, so you expect me to take your word here? The complexity issue? Lets look at the bigger picture again.

We're talking across each other. That post was talking entirely about the financial collapse and had not a single thing to do with austerity.

NOWHERE have I said austerity is the only answer. But it MUST be one component of many in any solution if a nation actually intends to fix any problems.

 

[bankside]

Completely disregarding what I said in part of that paragraph regarding taxation, but I don't expect you to respond to parts of the argument that aren't convenient to your unsupported argument.



The bankers did not cause this mess? Hahah... is that a joke?

You completely failed to respond to the crux of my argument involving the Argentina example (where austerity took the country down further into recession). You haven't supported your austerity argument. You just keep claiming it is needed. Austerity is NOT the answer, and isn't demanded by anyone but the idiots in central banks.

You haven't backed up anything related to austerity. And quite frankly, I'm tired of it. You keep repeating the same unsubstantiated points about them living beyond their means and what-not... and then claim austerity (which drives economic productivity and growth DOWN) is the answer.

I'll just have to ignore you. Have a nice day.

Argentina prospered by defaulting, i.e., stealing, the money that it chose to borrow and then conveniently decided not to pay back. It is the worst kind of racketeering.

How about this, you lend me €100 000 and I. Promise. To. Pay. It. Back. Scout's honour.

 

[bankside]

No, you can't create the illusion of responsibility where there was none.

Argentina defaulted and then paid back what they felt like "the way they wanted" ("restructured" as you put it). It's theft. They didn't pay a premium for the inconvenience and lost opportunity of the investors.

When my mother in law got robbed, the police eventually gave her back the empty purse. She still got robbed. That's what Greece is doing now to the people who invested there, so that Greeks can continue to retire early.

So can I borrow the €100 000? I reserve the right to restructure of course.

And if Greece any be trusted to pay back euros, who would anyone ever trust them to pay back zombie drachmas raised from the grave of dead currencies. No one would. That would be fine as long as they don't need to import petrol, capital, technology... Perhaps they are happy to return to bartering lambs for ouzo. Doesn't seem attractive to me.

 

[bankside]

With those ideas you don't have the credit rating to buy my argument.

I see that capitalism is the best system for generating the most economic activity, i.e., prosperity. I also accept that taxation is the proper way to address hardships of economic inequality. That is far different than saying investors should have to endure the theft of their hard-earned assets in the name of some kind of robin hood mentality approach to equality. There is no ethical foundation for what Greece is trying to do. If anything Merkel has been too soft on Greece.

 

[bankside]

The trouble is, the Greek government is responsible for the Greek financial regulations that would either permit or preclude that kind of financial transaction. Even if Greece and the banks sat down and said quite openly "Hah! Look at us both doing this stupid unsustainable thing that should clearly be illegal" however only one side of that table actually has the duty to make laws governing businesses, and that is the Government of Greece.

Given that they even had Greek finance ministers willing to fake the revenue projections and sign their names to it, I would sooner accept that the banks had been taken advantage of in that transaction. If I had faked the letter from work showing my salary, what claim do you think I should have to keep my house when I fail to make the mortgage payments?

If the Greeks should be holding anyone accountable, it is the politicians who overspent and undertaxed them and faked their accounts instead of making a country with economic legitimacy. Hanging's too good for that lot. But the investors should be paid, whether investors like Donald Trump, or investors holding mutual funds in their modest pension plans. All of those people worked for the right to that money. The Greek people did not have that right.

And it is not a quesiton of "capacity to pay." Greece is facing awful unemployment and wage pressure right now. But they still earn way more than the baltic states. Let them live within their means for a generation.

 

[bankside]

If you expect any corporation to go to Greece and debate the Greek government as to whether it is truly in the Greek national interest or not...well, I'm afraid I'm not the naïve one. It is the duty solely of the Greek government to define its national interest. It is the duty solely of the Greek government to regulate financial transactions and mechanisms in which it permits itself to participate. I don't know of any government that has exceeded that of Greece in its failure to acheive these basic things.

I would not cry a tear if JPMorgan went bankrupt for lack of customers. But Greece and countries like it are the ones that have to say no. They aren't maroons without means or intellect. They are adults in charge of a country, not a burger shop, and they need to act like it.

 

[Benvolio]

I am curious, GC, why you chose to come to the worlds most confirmed Capitalist country, feeling as you do? We have had the greatest economy in history thnks to our Capitalim. The ineqalites you complain about result from our easy immigration, not from capitalism. We do 't want another thread on that. I think it is fair to ask why you chose America.

 

[bankside]

I think it's a terrible system and it does horribly at addressing inequalities in society. The banks are definitely given a free pass and are free to demand whatever they want out of a country regardless of past abuses of prior administrations (like Carlos Menem who misused money he borrowed). There is no ethical foundation what capitalist bankers and crooks are demanding from people.

The Ayn Rand view you hold has been proven false. There has never been a single case of austerity ever working. And banks are subscribing methods that would tank the world economy. Hard earned assets? HARD EARNED? You can't be so serious in thinking that. Investors are lying and are stealing. They are the THIEVES.

Capitalism is a system designed to provoke inequality; that's the idea behind specialization and trade, from Econ 101. It's designed to reward people for doing the things they are best at. Not everybody is equally good at all things. Not everybody is willing to work equally hard. That should result in different levels of material resources available to each person. If the world didn't have rich people, we'd be doing it wrong.

The taxes come in because there a basic minima required for human dignity, and because everyone is entitled to a certain investment in their potential to participate in the free market. Taxes pay for that. I don't remember Ayn Rand saying anything to that effect because I think she missed its relevance.

It is the job of governments to give businesses an even playing field, no more, no less. No government has to to let any business take advantage of the marketplace in order to have a free-market system with private capital. And governments have every right, indeed they have an obligation, to collect taxes to ensure basic human dignity for their citizens. Governments are not entitled to seize private capital assets or default on freely-entered obligations in order to let lazy people retire early or dodge their own taxes.

This is not about demolishing the state; this is about the rule of law. I expect you will find JP Morgan will have paid every cent of Greek tax due and follwed every letter of Greek law. If not, of course let the unlimited liability suits begin. But if the citizens were not well-protected by their laws, they only have to look to the legislature in Athens.

 

[Kulindahr]

No bank anywhere intended for the collapse to happen, nor have they intended for the situation to occur in Greece.

You're far too trusting.

Wow, what a coincidence that is! It boggles my mind that you lived in Argentina when those austerity measures were tried, and failed so badly.

I have to agree with you--austerity measures never work. Period.

It actually makes sense when one realizes that citizens of countries under austerity meausures can't spend. Who's supposed to buy the goods, and spur the economy back to health? The tooth fairy?

I beg to differ. Austerity measures by government do work to deal with deficits/debts, but again it's one of those things that only work under certain conditions; in this case, the foremost condition is a booming economy with virtually no unemployment, while the second is a sound and gleaming infrastructure

The tragedy is that when the economy booms, politicians want to expand government.

 

[Kulindahr]

The hell they wouldn't.

Bankside, you have a very naive, Ayn Randian outlook about American banks. JPMorgan worked directly behind the scenes in the Greek debacle.

Hey, Bankside, ask yourself this question: why do you think so many Americans want jail terms for the bankers who got us into this mess? It's because they were guilty of fraud.

If you ask me, jail terms are too mild a punishment for those bastards. I think they need to face the gallows.

Nah -- you know all the old money the Fed takes on when it's coming apart? Thust shred it, and make the bankers eat nothing else for a few days. They like money; let them choke on it.

 

[Kulindahr]

I can see this point of view, Kulindahr.

You raised one point that nobody talks about, that is "when the economy booms, politicians want to expand government." To a very large extent, I agree.

Sometimes, I think politicians have it backwards. I remember a few years back, they accidentally collected too much tax revenue here in Nevada. Instead of putting the money in a rainy day fund, they gave us all refunds. I saw it as bad policy then, and history has proven me right. Had they put that money in a rainy day fund, Nevada would have a much easier time today balancing her budget.

Apropos your point: if governments would get smaller during boom times, they would have a whole lot more room to expand (and boost the economy) during the lean times.

But back to the austerity point: as far as I'm able to discern, austerity measures have never helped a nation crippled by a moribund economy. In fact, it always seems to make it worse...

Yes; when both a national deficit and and dysfunctional e3conomy occur together, austerity is only a multiplier, making the whole problem worse.