News Occupy Wall Street protest in New-York

[John Creighto]

I know, that was sarcasm.

Well it wasn't.

Well yes, those economies are singularly different in that they have enjoyed riotous deficit spending. Yes different currencies would have automatically addressed that difference, in part.

Whatever you think about the morality of deficit spending is irrelevant. Japan was able to sustain a higher debt to GDP then Greece. What is different is that Greece has to deal with the ideology of Eruo where the currency is not allowed to inflate as a means to adjust for large unbalanced finical outflows. This puts Greece at a considerable disadvantage to China which continues to PEG it’s currency to western nations to keep the cost of production low at the expense of the Chinese consumer.

 

[John Creighto]

Robert Reich? Who does not stress the need for improving education in the US? In any case without looking I expect whatever Reich calls for is likely to be an impediment to improving US education.

Whether or not he has the right solution to education is irrelevant. The fact is everyone must take responsibility for the consequences of the educational system. To simply blame failures of education on the youth is fundamentally unfair.

 

[mheslep]

Well it wasn't.

Thanks for trying to help me out by reading my mind but in this case I'll go with my own take on when I am or am not attempting sarcasm. Hey! There was some more!

Whatever you think about the morality of deficit spending is irrelevant.

Who said anything about the morality of deficit spending?

Japan was able to sustain a higher debt to GDP then Greece.

Good for them but that's largely irrelevant (for now) as the problem w/ Greece depends on more than just previously incurred debt.

What is different is that Greece has to deal with the ideology of Eruo where the currency is not allowed to inflate as a means to adjust for large unbalanced finical outflows.

Growth rates in deficit spending combined with debt-to-GDP tells lenders the likelihood of default. Greece has reached a point where even if they cut all discretionary spending they still need to borrow (i.e. deficit spend) to pay off the interest on the debt load. Yes dropping the Euro would allow them to deflate and export, growing revenues.

 

[Char. Limit]

To John: There's a multi-quote button so you don't have to triple-post.

BACK ON TOPIC, while I may not agree with the OWS protester's aims (largely because they have too many, and not all are even remotely connected), I do find it interesting that the movement appears to be spreading. Why just yesterday I heard of an Occupy Spokane protest happening right now to echo the OWS protest.

So obviously this movement is popular. I also happen to like the leaderless form of the movement. Now some celebrities like Michael Moore might try to hijack it, but right now the movement has no leaders and from what I've heard doesn't WANT leaders.

 

[Galteeth]

To John: There's a multi-quote button so you don't have to triple-post.

BACK ON TOPIC, while I may not agree with the OWS protester's aims (largely because they have too many, and not all are even remotely connected), I do find it interesting that the movement appears to be spreading. Why just yesterday I heard of an Occupy Spokane protest happening right now to echo the OWS protest.

So obviously this movement is popular. I also happen to like the leaderless form of the movement. Now some celebrities like Michael Moore might try to hijack it, but right now the movement has no leaders and from what I've heard doesn't WANT leaders.

Funny, the things you like and dislike are two sides of the same coin. This method actually seems to be working. Hive mind of individuals indeed.

 

[Char. Limit]

Well, a movement can be leaderless and still have a clear goal. Take the Chanology movement for example. There are no clear leaders of that movement (and indeed, it makes a conscious effort to drive out people who want to be leaders, calling them "egofags"). However, it has a perfectly clear goal (undermine Scientology).

But yes, it seems to be working. Only time will tell of course.

 

[chiro]

If these people really (and I mean really) want to protest against the system, then the first thing they should do is to stop supporting it in any way that they can and live their lives by their deeds.

The first thing they should do is get out of debt. The debt is the one thing that is screwing themselves and their country. If they want to lead by example they need to get out of debt, and stay out of debt.

The truth is that debt is one of the greatest control mechanisms that exist today and the scariest thing about it is that it is a "willful" form of enslavement. You consciously sign the dotted line and have made an agreement that is legally binding. Tyrants used to just march their armies into the territories to capture the enemies, but now all they have to do is get the opponent to sign a contract that with a good enough sized debt, will enslave them in a way that no forceful army could.

So if there are protestors reading and you want to do something about the system, get out of debt and encourage your friends and family to do the same.

 

[mege]

Because of the fractional banking system when a bank issues a loan they create money (because most of the money they lend is deposited back into the banking system and therefore can be relent as new money). The amount backs can lend is primarily restricted by the amount of leverage they are allowed to have. However, assets considered risk free (Such as government treasuries) do not constrain the leverage which a banks are allowed. Moreover a bank can inflate the asset values of it’s capital by under reporting the risk to make it look like it has a smaller leverage ratio then it would if it would have to value assets based on the possibility of systemic risk.

For instance how are facial institutions reporting the value of any Greek bonds that they own and does this adequately reflect the loss that would result from a default? A large part of any destruction in value due to a future Greek default must be attributed at least in part to an over inflated value of Greek bonds in corporate financial statements. The longer governments continue to prop up Greek bonds the longer period of times finical institutions are able to make large yields of Greek bonds.

The yields can be extreme given the high leverage ratios that they are allowed to have and the low interest rate which they are allowed to borrow.

Is it fair for finical institutions to be able to borrow at significantly cheaper rates than the average person? What economic advantages does this give to finical institutions which aren’t available to other members of the economy? What part may this contribute to the over inflated size of the banking sector that existed in the United States? Does a banking sector which is 20% of the economy represent efficient markets or simply an over bureaucratic form of wealth extraction from the rest of the population which does not have the means to play this game?

Whatever you think of the behavior of the American consumer the excessively low interest rates that existed for a long time represent a large subsidy to the banking sector and have made it very difficult for the average American to save.

So assuming your presumptions all true - what's the solution? Eliminate banks?

If banks loaned money at the same rate that it lent money, there would be zero incentive to actually be a bank. From a simpler stance - this is just buying bulk at a reduced rate. Consumers see this same effect on CDs, etc. When you're putting millions/billions into treasuries of course the returns are going to be better than buying a $100 savings bond - else why would there even need to be banks to save in? So, yes - it is totally proper for a larger entity to be able to obtain currency at a lower rate. Without mercantilism at some level - the system falls apart due to non-differentiation of scale.

Don't get me wrong - I think the system is screwed up due to the some of the steering the government has done (subprime home loans, etc), but I think too much stock is being put into some conspiracy theory that bank managers set this all up to make consumers subservient. However, I do share the sentiment of above (without some of the implications) - individuals need to learn to manage debt better. If they understand the system, then everyone is better off. Currency is a good bought and sold and stocked just like anything else in a market (even internally to a country) - but I'd wager 90% of folks don't think of it that way and see currency just as money. I still go back to - what's the point of these protests? What are they hoping to accomplish - debt forgiveness? These are really just 'screw the system' sit-ins that have no real motivation for specific goals. Some of these same egalitarian 'help' policies are why we're in this mess in the first place.

The irony of your question about 20% of the economy being the financial sector: we'd probably have far less total wealth if it weren't for the practices of the financial sector. So when the markets naturally evolved that bureaucratic system, it's still more wealth for everyone than without. Does that mean it's perfect? Absolutely not, but saying that it's an intrinsic negative I believe is very wrong and not counting what it's done for the economy as whole (warts and all).

 

[chiro]

So assuming your presumptions all true - what's the solution? Eliminate banks?

You don't have to get rid of banks altogether, you just need to modify them. The role of a bank is a crucial thing in the modern age, and banks do have the potential to create good structuring of society by focusing on ways of allocating important resources to where they are needed.

What we need to do is return control back to the people for credit creation. Right now a private set of banks loans the country money, and this organization is allowed to control all aspects of this credit creation.

Along with this, we also need to pick a currency that is not subject (or at least minimized to) the nature of abuse like many fiat currencies (ends up being backed by nothing, eventually becomes worthless, from this causes absolute chaos) but is also is not based purely on something like a gold standard.

The other thing is to stop encouraging debt. Debt is the tool that is getting everyone, whether it is a government or a family in really deep trouble. This has to extend to the banks: they should be able to be leveraged at the rates that they are, it's a time-bomb waiting to go off and as we have seen from 2007/2008 it can have the affect on more than just a few financial institutions.

If you want to stop encouraging debt, it means you want to encourage saving. If you serious about this you raise interest rates. Interest rates reward savers and punish borrowers. These savings create capital that can be used to fund ventures of capitalism.

Also in line with the above paragraph, if you want to encourage saving, you base tax on consumption and not on income. Savers should be rewarded, and this is a way to do that.

If banks loaned money at the same rate that it lent money, there would be zero incentive to actually be a bank. From a simpler stance - this is just buying bulk at a reduced rate. Consumers see this same effect on CDs, etc. When you're putting millions/billions into treasuries of course the returns are going to be better than buying a $100 savings bond - else why would there even need to be banks to save in? So, yes - it is totally proper for a larger entity to be able to obtain currency at a lower rate. Without mercantilism at some level - the system falls apart due to non-differentiation of scale.

Let's look at what is happening at the moment.

The Federal Reserve has currently lent out trillions of dollars in backdoor deals to a range of institutions all over the world at near 0% interest. The institutions can then take that money and lend it out at at least 3/4% interest. They could do this in a number of ways but that's for another discussion.

So basically if they borrow money at say 0.1 or 0.01 percent and charge 3% interest on say 10 billion dollars, then in one period of lending they make roughly 3% of 10 billion which is 300 million dollars.

Now if you ever do a financial mathematics course, you are taught that the markets will always go to a situation of no-arbitrage. This means that the market will eventually correct itself so that profits like these won't be made.

Now the Federal Reserve has promised to keep rates low for at least 2 years. With these kind of deals, the no-arbitrage rule does not apply, and these institutions are making completely risk-free transactions.

With this kind of environment you encourage financial speculation, not saving. You punish the people putting money in their pension or bank accounts by giving them no return and you allow others access to ridiculously cheap credit who by any standard means should not have access to this.

The idea of risk is that for higher risk you charge higher interest rates. That is why people like governments and oil companies can borrow so cheaply: they are (or were) most likely to pay the money bank. It's also why credit cards have higher interest. The credit requirements to get access to government bond type liquidity is not the same as what you need with a credit card application.

But this doesn't mean governments always get this kind of treatment. If they act like an irresponsible person who never pays their bills, they end up being downgraded just like we all do, and this is what is happening.

Also I need to ask you: "What do you think the role of a bank should be?". To me the role of a bank should be to allocate resources to the best of its ability for the need of society to function and progress. Clearly this is not the case.

Don't get me wrong - I think the system is screwed up due to the some of the steering the government has done (subprime home loans, etc), but I think too much stock is being put into some conspiracy theory that bank managers set this all up to make consumers subservient. However, I do share the sentiment of above (without some of the implications) - individuals need to learn to manage debt better. If they understand the system, then everyone is better off. Currency is a good bought and sold and stocked just like anything else in a market (even internally to a country) - but I'd wager 90% of folks don't think of it that way and see currency just as money. I still go back to - what's the point of these protests? What are they hoping to accomplish - debt forgiveness? These are really just 'screw the system' sit-ins that have no real motivation for specific goals. Some of these same egalitarian 'help' policies are why we're in this mess in the first place.

That is one thing that I think people do need to realize which you have pointed out is that they need to get out of debt. We can't just blame one group of people or a few institutions: we are all in some way a contributor to this. It's a great point and I think others should take heed of this message.

I agree with you that a lot of these protests will not accomplish anything. These people need to walk the walk by stopping getting into debt and supporting the system. If enough people stop borrowing money, it will have quite a profound effect on the system.

The irony of your question about 20% of the economy being the financial sector: we'd probably have far less total wealth if it weren't for the practices of the financial sector. So when the markets naturally evolved that bureaucratic system, it's still more wealth for everyone than without. Does that mean it's perfect? Absolutely not, but saying that it's an intrinsic negative I believe is very wrong and not counting what it's done for the economy as whole (warts and all).

But where is the wealth? Who has it? Who is it benefiting? Do you honestly think that the wealth is really shared among everyone?

 

[Proton Soup]

If these people really (and I mean really) want to protest against the system, then the first thing they should do is to stop supporting it in any way that they can and live their lives by their deeds.

The first thing they should do is get out of debt. The debt is the one thing that is screwing themselves and their country. If they want to lead by example they need to get out of debt, and stay out of debt.

The truth is that debt is one of the greatest control mechanisms that exist today and the scariest thing about it is that it is a "willful" form of enslavement. You consciously sign the dotted line and have made an agreement that is legally binding. Tyrants used to just march their armies into the territories to capture the enemies, but now all they have to do is get the opponent to sign a contract that with a good enough sized debt, will enslave them in a way that no forceful army could.

So if there are protestors reading and you want to do something about the system, get out of debt and encourage your friends and family to do the same.

yes, this is exactly why Greece should just default. Greece is being asked to give up Greece.
http://www.reuters.com/article/2011/07/03/us-greece-juncker-idUSTRE7620ZK20110703

i do wonder, tho, just how far this will go. will the Fed end up as the defacto sovereign of europe for bailing them out?

 

[MarcoD]

yes, this is exactly why Greece should just default. Greece is being asked to give up Greece.
http://www.reuters.com/article/2011/07/03/us-greece-juncker-idUSTRE7620ZK20110703

The best thing overall would have been to let Greece go bankrupt first, and then save Greece and the European banks involved. It would simply have been cheaper since now the burden has become larger and is -increasingly- in the hands of the European public.

A default now would be very messy, and since the bill can be paid, just not worth it for the rest of Europe.

i do wonder, tho, just how far this will go. will the Fed end up as the defacto sovereign of europe for bailing them out?

The US, banks mostly, own 3% of Greece debt. Europe owns 60%, moving to 100% public. The Fed has nothing to do with it.

EDIT: An early default would have been a cheap, but very unpredictable, solution. There's no telling what it would have done to financial markets worldwide, or the interest rates of other countries. It's a bit of a predicament the PIIGS got the rest of Europe in. But the rest of Europe is also to blame, since they run their debts up too high anyway. It's a complete mess.

 

[John Creighto]

So assuming your presumptions all true - what's the solution? Eliminate banks?

The first thing I would do is change the accounting rules with determine how a bank determines it's capital adequacy. As it stands banks are allowed to consider government treasuries as zero risk and mortgages as 50% risk when measuring their risk weighted capital.


In other words government debt is considered always good and the valuation of a mortgage asset is completely determined by market conditions. Government debt is not always good because there reaches a point where governments cannot pay their debt without either inflating the currency or defaulting. While short term debt does not have the same inflation risk it does not ensure capital adequacy against long term debt because the yields earned on short term government debt are usually less then inflation.

I would rate the risk of government debt based on the debt to GNP ratio of a country. (I'll work out the details of these calculations later).

In terms of capital adequacy I would cap the value declarable for a mortgage asset based on it's square footage in such a way that the mortgage payments at a reasonable rate (say 7%) over a reasonable period of time (20 years) should be such that they are affordable (does not exceed 30% of a household's gross income). The weighting should be such that a three bedroom apartment is affordable for a family earning the median household income .

As for tier 1 capital, the value common shares can be counted as teir 1 capital should be based on the price to earnings and the current leverage of the company (with respect to historical leverage ratios (industry specific). Letting common share capital be entirely valued based on markets creates fictional valuations of a banks capital which which results in under estimating their leverage ratios.

If banks loaned money at the same rate that it lent money, there would be zero incentive to actually be a bank. From a simpler stance - this is just buying bulk at a reduced rate. Consumers see this same effect on CDs, etc. When you're putting millions/billions into treasuries of course the returns are going to be better than buying a $100 savings bond - else why would there even need to be banks to save in? So, yes - it is totally proper for a larger entity to be able to obtain currency at a lower rate. Without mercantilism at some level - the system falls apart due to non-differentiation of scale.

There is a difference between being able to borrow at a cheaper rate and having the government protect an industry subsidizing that cheaper rate. When the bank can borrow from the federal reserve at a cheaper rate then the rest of the population it is effectively a subsidy for banks and a form of market protection. Government regulations which protect monopolies create inefficiencies where the monopoly can extract rents for their services above those which they could obtain in free markets. Well there is some compitition in banking:

"In general, "competition" is worthless when all the competing firms share the same pathological, high-overhead organizational culture. And government price regulation is worthless when it shares the same conventional operating assumptions as the high-overhead entities it's regulating. The military contractor, with its culture of cost-plus markup that gave us the $600 toilet seat, is the classic example of the regulated utility model.
...
In his obsession with the need for market power to enable pricing above marginal cost and
guarantee payment, Lanier is—as we saw with Keen—Schumpeterian. But he takes it a step further:
not only should the artist be able to find some way of monetizing his performances, but he should be guaranteed a reliable source of future revenue without ongoing labor. “...[P]eople need to be secure that they're earning their dignity and don't need to sing for their supper every night.”130 Oddly enough, though, the guy who works on an assembly line has to keep making widgets for his supper every day. And I have to keep emptying bedpans at the hospital where I work to pay my bills. It's only through the magic of copyright that a content creator can rest on his laurels and live off a one-hit wonder for the rest of his life.
"
http://c4ss.org/wp-content/uploads/2010/06/Thermidor-of-the-Progressives.pdf

Don't get me wrong - I think the system is screwed up due to the some of the steering the government has done (subprime home loans, etc), but I think too much stock is being put into some conspiracy theory that bank managers set this all up to make consumers subservient.

The problem with conspiracy theory arguments is they confuse motive with influence. We all act in our own interest and the power of large corporations gives them considerably more influence then the average person. People act for many reasons. These can be monitory or to achieve some other good but the basic theory of cognitive dissonance teaches us that in general most people think their actions are proper. When there is a conflict in interest people often rationalize their actions to resolve this dissonance.

""You reason like the king, who, being sent across the frontier, called out, 'What will become of my poor subjects without me?'.""
http://www.panarchy.org/kropotkin/1896.eng.html

When regulators frame the regulations in the interest of the regulators this is known as regulatory capture. Regulation for an industry is often drafted (or at least lobbied for) by that industry. When people are so influenced by the system they do not see how it is contrary to their own interest this is known as deep capture. Well regulators are usually separate from corporations well being a regulator there is considerable crossover between regulators and corporations. Consequently there is considerable influence by corporations on the regulations within the nation:

"There are still other unsettling statistics concerning the “revolving door” between
industry and regulators. For example, before coming to the FCC, Powell worked at the
law firm of O’Melveny & Myers LLP, of which the GTE Corporation was a major client.
GTE later merged with Bell Atlantic to form Verizon, the largest local phone company
in the United States, but Powell never recused himself from participating in
deliberations or votes relating to either company. Nathaniel Heller, Ctr. for Pub.
Integrity, New FCC Chairman Had Big Telephone Player as a Major Client, at
http://www.public-i.org/dtaweb/report.asp?ReportID=135&L1=10&L2=70&L3=15
&L4=0&L5=0&State=&Year=2001 (Feb. 13, 2001). To be sure, his actions appear to
have been within the letter of the law. The Code of Federal Regulations requires only
a one-year cooling-off period. 5 C.F.R. § 2635.502(b)(1)(iv) (2003). However, one
wonders how well his actions comport with the spirit of that law. Since the time Powell
took office through the present, Verizon has had many regulatory issues before the
FCC, relating from cell phones to the Internet. And in his role as Commissioner,
Powell has often taken the pro-Verizon position, bemoaning what he sees as the harsh
“interconnection and market-opening requirements” imposed on GTE and others. Id.
http://www.pennumbra.com/issues/pdfs/152-1/HansonYosifon.pdf

I still go back to - what's the point of these protests? What are they hoping to accomplish - debt forgiveness? These are really just 'screw the system' sit-ins that have no real motivation for specific goals. Some of these same egalitarian 'help' policies are why we're in this mess in the first place.

Does it need a point? Do people need to know how to fix something to need to know something is wrong. Perhaps the lack of point is the point is the point. Perhaps people want to heard as individuals rather then as some group to be led.

The egalitarian policies which created the mess in the first place are an example of the powerful convincing the people that policies pushed by them were in the interest of the people. As Marx said, "The Dominate Material force is the Dominant intellectual force". The fact that people aren't looking for another leader is the real revolution. Kevin A. Carson calls this the network revolution.

The irony of your question about 20% of the economy being the financial sector: we'd probably have far less total wealth if it weren't for the practices of the financial sector. So when the markets naturally evolved that bureaucratic system, it's still more wealth for everyone than without. Does that mean it's perfect? Absolutely not, but saying that it's an intrinsic negative I believe is very wrong and not counting what it's done for the economy as whole (warts and all).

The recent gains in GDP prior to the recent recession have not been shared or enjoyed by the majority of the population. The argument that we are better off under the current system then some straw man alternative says nothing about how optimal or equitable our current system is.

You don't have to get rid of banks altogether, you just need to modify them. The role of a bank is a crucial thing in the modern age, and banks do have the potential to create good structuring of society by focusing on ways of allocating important resources to where they are needed.

What we need to do is return control back to the people for credit creation. Right now a private set of banks loans the country money, and this organization is allowed to control all aspects of this credit creation.

Along with this, we also need to pick a currency that is not subject (or at least minimized to) the nature of abuse like many fiat currencies (ends up being backed by nothing, eventually becomes worthless, from this causes absolute chaos) but is also is not based purely on something like a gold standard.

In our current system money is backed by something. Money is backed by government debt (which is the future work of the people) corporate shares (A largely fictitious form of capital) and secured loans (Mortgages). The problem is that these basis for a currency represent nothing physical and consequently there is nothing to back stop large deflation due to massive deleveraging. By setting caps on what capital can be valued on based on physical things (like the square footage of a standard three bedroom house.) wen determining capital adequacy the market can not create money by leveraging against factious measures.

The attempt by industry to extract the maximum amount of capital from the economy through a plethora of regulations based on fictitious measures creates period of what Marx called Regimes of capital accumulation. Such regimes always come to an end as the debt burden resulting from these fictitious assets cannot be supported by the real economy.

Let's look at what is happening at the moment.

The Federal Reserve has currently lent out trillions of dollars in backdoor deals to a range of institutions all over the world at near 0% interest. The institutions can then take that money and lend it out at at least 3/4% interest. They could do this in a number of ways but that's for another discussion.

So basically if they borrow money at say 0.1 or 0.01 percent and charge 3% interest on say 10 billion dollars, then in one period of lending they make roughly 3% of 10 billion which is 300 million dollars.

Now if you ever do a financial mathematics course, you are taught that the markets will always go to a situation of no-arbitrage. This means that the market will eventually correct itself so that profits like these won't be made.

Now the Federal Reserve has promised to keep rates low for at least 2 years. With these kind of deals, the no-arbitrage rule does not apply, and these institutions are making completely risk-free transactions.

exactly!

With this kind of environment you encourage financial speculation, not saving. You punish the people putting money in their pension or bank accounts by giving them no return and you allow others access to ridiculously cheap credit who by any standard means should not have access to this.

here here!

The idea of risk is that for higher risk you charge higher interest rates. That is why people like governments and oil companies can borrow so cheaply: they are (or were) most likely to pay the money bank. It's also why credit cards have higher interest. The credit requirements to get access to government bond type liquidity is not the same as what you need with a credit card application.

But this doesn't mean governments always get this kind of treatment. If they act like an irresponsible person who never pays their bills, they end up being downgraded just like we all do, and this is what is happening.

Not only do governments get special treatment they subsidize industries which over value the worth of government debt obligations.

Also I need to ask you: "What do you think the role of a bank should be?". To me the role of a bank should be to allocate resources to the best of its ability for the need of society to function and progress. Clearly this is not the case.

This sounds like a good role of a bank but aren't there other market forces (such as investments) that do this?

That is one thing that I think people do need to realize which you have pointed out is that they need to get out of debt. We can't just blame one group of people or a few institutions: we are all in some way a contributor to this. It's a great point and I think others should take heed of this message.

This is difficult when the system is set up to encourage borrowing and the median earning continues to get erroded.

I agree with you that a lot of these protests will not accomplish anything. These people need to walk the walk by stopping getting into debt and supporting the system. If enough people stop borrowing money, it will have quite a profound effect on the system.

Wouldn't it be much easier to not borrow if they had the means to do so?

But where is the wealth? Who has it? Who is it benefiting? Do you honestly think that the wealth is really shared among everyone?

The basis for the ownership of wealth an power is the result of a social contract between people government and business. The purpose of this contract is for the well being of all. The purpose of this contract is not to justify enslavement and extraction of wealth by the powerful.

 

[John Creighto]

The best thing overall would have been to let Greece go bankrupt first, and then save Greece and the European banks involved. It would simply have been cheaper since now the burden has become larger and is -increasingly- in the hands of the European public.

I agree. Propping up Greece just makes the value of the debt over inflated and subsidies people earning high yields off these bonds. I don't think it's a question of whether Greece should default. I think it's a question of how much debt they should be able to write off.

 

[MarcoD]

I agree. Propping up Greece just makes the value of the debt over inflated and subsidies people earning high yields off these bonds. I don't think it's a question of whether Greece should default. I think it's a question of how much debt they should be able to write off.

IMO, it's too late for that. That would have been a risky solution in the early days, but by now the financial markets must have dropped the debt, except for some risky hedge fund constructions. My best guess is that, by and large, the total debt must be in the hands of the European public and banks (which is the European public too.)

Even if you write off debt, someone is picking up the bill, which is Europe. There's probably nothing else left to do except for divide it 'justly,' place it in Eurobonds, place it on the market again at very low rates, and work it off 'silently.' (A combination of reducing debt, taxing banks, and inflating our way out of it.)

The average debt of European states needs to drop to, say, 50% GDP. I just pray that other countries won't look at Eurobonds as a cheap manner to 'finance' our economies into oblivion.

(To be honest. I imagine that most of the fuzz created is just there that Greece, or other, debt can be bought back cheaply. But maybe I have a bit too much of an imagination there.)

(Anyway, I guess it's just bean counting. If the debt is offloaded outside of Europe -or outside Germany/France,- you'll see a haircut; if not, it'll be restructured towards Eurobonds. That's my best guess.)

 

[CheckMate]

The European mistake was to create a single currency without creating a single government.

Just to clear things out.

 

[MarcoD]

The European mistake was to create a single currency without creating a single government.

Just to clear things out.

Actually, this is a weakness which may turn out to become a strength since there isn't a single point of failure. Now, we, of course, have many points of failure, but as we progress towards a more robust system where states' spending is monitored centrally, it may turn out to become a blessing.

 

[DoggerDan]

I support their protests against corporate access to our government. It was meant to the for the people, by the people, and of the people. I didn't see anything about corporations in the Declaration of Independence, the Constitution, or the Bill of Rights. That was pure lunacy of the courts to decide that a million-dollar corporation who can afford walk-in lobbyists should have the "same" right of access as your average joe who can only afford a letter or e-mail.

Now Obama says he won't look at anything unless we manage to convince 500 other Americans about it.

No wonder they feel We, the little People are getting trampled on. We are!

 

[chiro]

This is difficult when the system is set up to encourage borrowing and the median earning continues to get erroded.

Wouldn't it be much easier to not borrow if they had the means to do so?

To me these two statements really emphasize the crux of one of the major problems: in other words debt is encouraged and considered to be a social norm.

In order to change the system, people need to really make a concerted effort to get out of debt. In order to do this, many people need to get out of the mindset of "living and spending for today" with no regard for tomorrow, next week, or even the next couple of decades.

This is a very big problem, and I believe there is a big spiritual component to it in parallel to the financial or economic component.

In order for a change of this magnitude to happen, we need a lot of people to change their ways. Things like credit cards, excessive mortgages, and other forms of debt need to be eliminated or at the very least severely minimized.

The hard part of this though is that so many people depend so much on debt, that their standard of living and daily functioning would be severely affected by this, in the same kind of way that austerity measures by governments affect a country's people.

In my opinion, it is going to happen one way or another. The saying that if you owe the bank one dollar its your problem, but if you owe the bank a million dollars it is their problem is very true. Look at what China and other countries are doing: they are slowly dropping their US debt burden and they have publicly asked the US government to shape up and start acting mature with regards to their debt situation.

It will happen one way or another and I don't take any pride or elation in saying this.

 

[Proton Soup]

I support their protests against corporate access to our government. It was meant to the for the people, by the people, and of the people. I didn't see anything about corporations in the Declaration of Independence, the Constitution, or the Bill of Rights. That was pure lunacy of the courts to decide that a million-dollar corporation who can afford walk-in lobbyists should have the "same" right of access as your average joe who can only afford a letter or e-mail.

Now Obama says he won't look at anything unless we manage to convince 500 other Americans about it.

No wonder they feel We, the little People are getting trampled on. We are!

it's not just the lobbyists, it's the eyeballs. back in the broadcast days, there was at least the pretense of "in the public interest". that pretense is gone now - one of the reasons that net neutrality is so important if we are to have a chance in hades of extracting ourselves from the current mess.

 

[mege]

But where is the wealth? Who has it? Who is it benefiting? Do you honestly think that the wealth is really shared among everyone?

Shared in what way? Does it need to be equally divided among every citizen of the country? Why not spread the wealth around the world then.

The egalitarian policies which created the mess in the first place are an example of the powerful convincing the people that policies pushed by them were in the interest of the people. As Marx said, "The Dominate Material force is the Dominant intellectual force". The fact that people aren't looking for another leader is the real revolution. Kevin A. Carson calls this the network revolution.

This needs more explaining. So, because the government and banks worked together in an attempt to help the people (and by most accounts created a large destructive wake) they need to keep on doing it?

What is in the interest of the people? The government basically lured 'the people' to take loans and eventually default on them. It was this government intervention that caused it - but... we want more government intervention along similar lines?

The recent gains in GDP prior to the recent recession have not been shared or enjoyed by the majority of the population. The argument that we are better off under the current system then some straw man alternative says nothing about how optimal or equitable our current system is.

A few years of a slight downturn (even if it is 'the worst ever') and people are still better off than if our aggressive financial institutions weren't in place. Now, I agree that the government should stop meddling with them and creating demand for loans where there shouldn't be. The devil is really why these policies are being driven, which I think your posts are missing. You explain the situation, and then provide random devoutly anti-capitalist reports as citations for strawmen.

The basis for the ownership of wealth an power is the result of a social contract between people government and business. The purpose of this contract is for the well being of all. The purpose of this contract is not to justify enslavement and extraction of wealth by the powerful.

What?

I support their protests against corporate access to our government. It was meant to the for the people, by the people, and of the people. I didn't see anything about corporations in the Declaration of Independence, the Constitution, or the Bill of Rights. That was pure lunacy of the courts to decide that a million-dollar corporation who can afford walk-in lobbyists should have the "same" right of access as your average joe who can only afford a letter or e-mail.

Now Obama says he won't look at anything unless we manage to convince 500 other Americans about it.

No wonder they feel We, the little People are getting trampled on. We are!

Does a small business owner have any different rights than a CEO of a corporation? You're argument is basically 'because an individual is involved in running a business, they should have less rights'. Now, that said - I do think more individual accountability needs to be had in the corporate spheres so business leaders cannot hide behind the protection of a corporation as easilly. But that shouldn't preclude a business leader from being allowed to donate to a candidate, etc. Corporations don't vote... individuals do.

 

[chiro]

Shared in what way? Does it need to be equally divided among every citizen of the country? Why not spread the wealth around the world then.

What I mean is shared in a way where the people who it is "shared" among get some kind of benefit for it.

For example if you build a bridge using some form of collected wealth (transferring one form of wealth into another), then a lot of people are directly benefiting from this new form of infrastructure.

It's the same thing if you injected real capital into businesses that needed them: these people could generate revenues, hire people, and through a chain reaction, you get a massive influx of wealth generation for a large number of participants.

The fact is none of this is happening with the massive influx of cheap credit that a selected group of people are getting. It's not used to build infrastructure, and it's not given to your small business people.

So to answer your question, the wealth doesn't need to be "divided" per se, it just needs to be used so that everyone can share in it. You can't realistically divide a bridge into pieces and allocate one block of concrete to an individual: that's the wrong approach. It's better to just think about a way where everyone gains a satisfactory benefit from the valuable thing in question.

With regards to spreading the wealth around the world, then in the context of the above statement, why not? Under the current system, it won't probably happen, and its designed in a way where it won't (or should not) happen.

 

[LaurieAG]

The protesters will be a good barometer for how far the US government is prepared to go with its own citizens now that they have been accorded the same right to summary execution without trial outside US borders that citizens of the rest of the world already have.

Kent State didn't stop the Vietnam war but the television footage of a US supported ARVN Officer summary executing a prisoner with a pistol hilighted the chasm between public morality and political reality. Is using a drone any different to placing a pistol against someones head and pulling the trigger?

I sincerely hope that no one is injured in this and any further protests in the US.

 

[mheslep]

...
Let's look at what is happening at the moment.

The Federal Reserve has currently lent out trillions of dollars in backdoor deals to a range of institutions all over the world at near 0% interest. The institutions can then take that money and lend it out at at least 3/4% interest. They could do this in a number of ways but that's for another discussion.

So basically if they borrow money at say 0.1 or 0.01 percent and charge 3% interest on say 10 billion dollars, then in one period of lending they make roughly 3% of 10 billion which is 300 million dollars.

Now if you ever do a financial mathematics course, you are taught that the markets will always go to a situation of no-arbitrage. This means that the market will eventually correct itself so that profits like these won't be made.

Now the Federal Reserve has promised to keep rates low for at least 2 years. With these kind of deals, the no-arbitrage rule does not apply, and these institutions are making completely risk-free transactions.

With this kind of environment you encourage financial speculation, not saving. You punish the people putting money in their pension or bank accounts by giving them no return and you allow others access to ridiculously cheap credit who by any standard means should not have access to this.

The idea of risk is that for higher risk you charge higher interest rates. That is why people like governments and oil companies can borrow so cheaply: they are (or were) most likely to pay the money bank. It's also why credit cards have higher interest. The credit requirements to get access to government bond type liquidity is not the same as what you need with a credit card application.

...

If I may, jumping in ...

I agree with all of the above, though I think there's a required piece missing to create the situation we now see. That is the recognition of how the banks are able to re-lend in a "number ways" the money they acquire from Fed: they can buy US treasuries, because $1.6T in treasuries are available annually, and banks have indeed been adding treasuries to the their balance sheets in unprecedented amounts. This kind of lending i) carries no risk as far as the regulators are concerned, and ii) effectively shuts out normal commercial lending. Thus the Federal Reserve and the US Treasury combined are crowding out the private economy of the United States.

 

[vici10]

Meanwhile wall street occupation protests are continuing. Yesterday more than 700 protesters were arrested during the march on Brooklyn Bridge, according to NYTimes.

http://cityroom.blogs.nytimes.com/2011/10/01/police-arresting-protesters-on-brooklyn-bridge/"
This march and arrests were recorded also on youtube.

https://www.youtube.com/watch?v=a1tCYAEDl6g

People also were angry on what happened previous week when high ranking officer pepper sprayed peaceful women standing behind orange net on sidewalk.

http://cityroom.blogs.nytimes.com/2...rotesters-being-pepper-sprayed/?ref=nyregion"

https://www.youtube.com/watch?v=TZ05rWx1pig&feature=player_embedded

It seems that protests spread to other cities. Three thousand people rally in Boston Financial District.
http://plymouthdailynews.com/occupy-boston-joins-wall-street-protest-movement-14489"

In Los Angeles people marched on City Hall.
http://www.nbclosangeles.com/news/l...Protesters-March-on-City-Hall-130914483.html"

The smaller protest was taken place in San-Francisco in front of bank of America.
http://www.huffingtonpost.com/2011/09/30/occupy-wall-street-san-francisco_n_988180.html"

 

[John Creighto]

This needs more explaining. So, because the government and banks worked together in an attempt to help the people (and by most accounts created a large destructive wake) they need to keep on doing it?

Actually, I'm saying the opposite. I am saying the social contract has been violated and hence all personal gains due to this violation are suspect.

There is the more general social contract outlined here:

"The social contract is an intellectual device intended to explain the appropriate relationship between individuals and their governments. Social contract arguments assert that individuals unite into political societies by a process of mutual consent, agreeing to abide by common rules and accept corresponding duties to protect themselves and one another from violence and other kinds of harm."
http://en.wikipedia.org/wiki/Social_contract

Which basically says institutions work together for the mutual good, and there is the more specific version "Jean-Jacques Rousseau":

" Man is born free, and everywhere he is in chains.[1]

The Sovereign, having no force other than the legislative power, acts only by means of the laws; and the laws being solely the authentic acts of the general will, the Sovereign cannot act save when the people is assembled.[2]

Every law the people have not ratified in person is null and void — is, in fact, not a law.[3]

The legislative power belongs to the people, and can belong to it alone.[4]

http://en.wikipedia.org/wiki/The_Social_Contract

which essential says that all laws without the consent of the people aren't valid. This version has clearly been violated given the undue influence over our laws by corporate lobbies. What should we do? Well we certainly the laws should be reformed so that people start out with a more equal footing in terms of: access to knowledge, the tools of production and education. As for whether there should be any reparations or wealth transfers (such as a tax on the rich) I'll leave that up to the politicians.

What is in the interest of the people? The government basically lured 'the people' to take loans and eventually default on them. It was this government intervention that caused it - but... we want more government intervention along similar lines?

I said nothing about wanting more government and each of the links I posted argued for less government (except possibly one). With regards to the interest of the people I simply want to reform the laws as to not give corporate monopolies any advantages over small business. The fact that the people don't know well what is in there own interest means that we need to teach more of the history of philosophy, economics and political science in school.

A few years of a slight downturn (even if it is 'the worst ever') and people are still better off than if our aggressive financial institutions weren't in place.

How do you support this argument?

Now, I agree that the government should stop meddling with them and creating demand for loans where there shouldn't be. The devil is really why these policies are being driven, which I think your posts are missing. You explain the situation, and then provide random devoutly anti-capitalist reports as citations for strawmen.

Actually what my post alludes to is that these policies were being created in order to create more financial products which can be mascaraed as something of value for the short term gains of the CEOs of the institutions which issued these loans.

Does a small business owner have any different rights than a CEO of a corporation?

The rules are such to allow large corporations protection by creating artificial barriers to entry. These include frivolous patients which they call "intellectual property", copyrights extending for ever greater lengths of times, an attack on what is considered fair use of content, abuse of buying power to obtain goods, uncompetitive prices, regionalization of media, the attack on privacy, the weakening of anti trust legislation, the eroding of consumer protection, the subsidization of the global transportation infrastructure which supports multi-national corporations, different trade laws for large corporations then consumers etc.

The great thing about being a monopoly is you don't have to collude to control prices you simply set it. The current business climate is an imperial conquest to devour the small and week in order to protect ones monopoly status. It is a climate where there can only be two of any product in any market and everyone must have the best.

As for the links I provided they aren't anti-capatilist, they are anti-state/corporate-capitalist. The principles of Laissez-faire which hasn't existed since before the new deal are perfectly compatible with the authors (with possibly the exception of JON HANSON† & DAVID YOSIFON need to re-read it). That said, one should not dismiss ones arguments simply because they disagree with the conclusion. When one simply looks for writers which confirm their ideas they severely limit the range of possibilities which they consider. A true intellectual seeks out opinions they disagree with as much or more with those they agree.

If I may, jumping in ...

I agree with all of the above, though I think there's a required piece missing to create the situation we now see. That is the recognition of how the banks are able to re-lend in a "number ways" the money they acquire from Fed: they can buy US treasuries, because $1.6T in treasuries are available annually, and banks have indeed been adding treasuries to the their balance sheets in unprecedented amounts. This kind of lending i) carries no risk as far as the regulators are concerned, and ii) effectively shuts out normal commercial lending. Thus the Federal Reserve and the US Treasury combined are crowding out the private economy of the United States.

And this is the problem. The credit rating of the United States has been downgraded yet as far as the bank rules are concerned these assets are considered risk free. This allows banks to under report their real leverage because "assets considered zero risk" are not counted in capital adequacy calculations of leverage. I wonder to what extent this is crowding out other loans but I bet it is significant.

 

[mheslep]

...

And this is the problem. The credit rating of the United States has been downgraded yet as far as the bank rules are concerned these assets are considered risk free. This allows banks to under report their real leverage because "assets considered zero risk" are not counted in capital adequacy calculations of leverage. I wonder to what extent this is crowding out other loans but I bet it is significant.

Bond lending is not being crowded out, but small business lending which is dependent on banks is sharply off, those loans replaced on the banks balance sheet by treasury notes.

 

[John Creighto]

Bond lending is not being crowded out, but small business lending which is dependent on banks is sharply off, those loans replaced on the banks balance sheet by treasury notes.

Which in the end creates a system which systematically favors large business over small and consequently protects large corporate monopolies.

 

[John Creighto]

https://www.youtube.com/watch?v=J4tM2r7jZl8
http://boingboing.net/2011/10/02/do..._campaign=Feed:+boingboing/iBag+(Boing+Boing)

 

[mheslep]

Which in the end creates a system which systematically favors large business over small and consequently protects large corporate

...business. Exactly.

monopolies.

Not necessarily, but it might enable the merely large and well connected become monopolies.

 

[DoggerDan]

...one of the reasons that net neutrality is so important if we are to have a chance in hades of extracting ourselves from the current mess.

So in order to arrive at a solution we're to refrain from offering any opinion? How does that work, exactly? Ouija board?

Does a small business owner have any different rights than a CEO of a corporation?

No.

You're argument is basically 'because an individual is involved in running a business, they should have less rights'.

No. Each individual, as an individual, should have equal access to government officials. Thus, the CEO of a company, one of it's principle stockholders, one of its minimum wage workers, and one of the employee's spouses, should have equal access.

The corporation, as an entity, should have no access whatsoever. A corporation is not a person. There is no such thing as a government of/by/for the people when non-person entities have buku bucks and lobbyists accessing Congress while the People do not. While a corporation may represent people in some respects, that is not, should not, and should never be to the government. People must be given unfettered ability to represent themselves, directly, should they choose to do so. If any individual chooses otherwise, so be it - that's their choice to do so.

When a corporation starts "representing" it's people to the government, they invariable err on the side of the corporate bottom line, which is often in opposition to the needs of its workers. That's not representation, that's counter-representation. Same thing goes with respect to the community in which a corporation operates.

Now, that said - I do think more individual accountability needs to be had in the corporate spheres so business leaders cannot hide behind the protection of a corporation as easilly. But that shouldn't preclude a business leader from being allowed to donate to a candidate, etc. Corporations don't vote... individuals do.

Agree wholeheartedly with this. The problem is, I'm not talking about a campaign contributions, which are monitored. I'm talking about lobbying activities, which are not, and which steal time and attention away from government representatives while stealing the voices of the people away from their government.

I think what they did today, breaking laws and getting some 700 of themselves arrested, was pretty foolish. What they're doing in general, however, should be head, as they have some worthwhile things to say.

For any government to say, "Hrumph! We've got things in had, thank you for sharing" is more foolish than the protesters break laws. The latter may be illegal, but a government who stops listening to it's people because it arrogantly thinks it "knows better" is immoral.