TIPPING POINT

[jensend]

fransisco do you think the usa is still a capitalist country as you watch them socialize their financial services industry? if not, what happened to cause this failure? maybe pure capitalism doesn't work any better than pure socialism.

[Fransisco]

Actually the start of this whole housing mess goes back to the Carter administration. That's when the regulation of creditors started.

It's regulation, not de-regulation that's responsible here. Look up the Community reinvestment act, you'll see what I'm talking about

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

Washington regulated creditors into taking on loans that they themselves did not want to take. It was done under the guise of "helping" the poor. If they didn't give out so many risky loans they got penalized.

Left on their own these banks/creditors never would have taken the risk. Economist Yaron Brook hits the nail on the head when he says , "The Government Did It:" through the stick of the CRA [and] the carrot of Fannie Mae and Freddie Mac, the fed created the mortgage market debacle.

This is not the free market and this is not capitalism, it is looney left wing economic engineering on a massive scale, the chickens have come home to roost and in true socialist fashion everyone is expected to pay for its economic failure.

[Fransisco]

Sorry about that jensen, I didn't see your question as I was writing my last post, and a power failure just took out my answer. I'll give it another try.

[jensend]

i don't see it as being that simple to determine the cause. there is no seminal moment when the system went askew. i think it's a natural evolution from free enterprise to where the usa is today. because it has happened in such a broad manner over a long period of time there is no simple fix to it either. it would be far better if they printed their $700 billion or however many trillions they will eventually throw at this, took the money and burnt it. that way it wouldn't add to the amount of crud they will have to flush out of the economy if it's to be healthy again.

[GrainBeetle]

Franny: why didn't your family immigrate to the USA instead of Canada? Social Benefits?
By the way, is your church Rebulican or Demorcratic, and why?

[Fransisco]

I do not believe the USA was ever a pure Capitalist country. They probably got closer to it than any other ever did when they started out, but they have always been what is called a mixed economy. Some parts free, some parts regulated, some parts completely run by government. Most western democratic countries follow this basic model its just that the mixture varies.

I have heard the line that pure capitalism doesn't work any better than pure socialism many, many times and frankly I don't buy into it. It is one of the rationals for the mixed economy that we are living in right now. Because it is mixed and that mix is always in flux, it is inherently unstable, we don't know which industries will be left alone and which ones will be meddled with.

You asked the question earlier, " do you foresee price controls on food?" It's a valid question and a valid concern. In a pure Capitalist society one would answer no, that is not an option, in a pure socialist one the answer would be of course we are going to control the price of food. Since we are in a mixed economy with mixed premises the answer is -maybe-. Maybe we will, maybe we won't, maybe not today, but maybe tomorrow.

We know that pure socialism doesn't work. History has taught us that time and again. But we have never tried pure capitalism so I think that it is unfair to say that it wouldn't work either.

This financial crisis is more evidence that when the government gets involved with the economy it screws things up. Look at the wikipedia entry on the community reinvestment act...

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

and ask yourself if you think this mess would be unfolding today if this government created ball never got rolling back in 1977. That is where the seeds of this failure can be found. It took thirty years to bear its rotten fruit, but here we are.

My guess is that this latest bailout/intervention is just going to make matters worse in the long run. It's the same type of people, using the same kind of thinking who are using the same tools they used to create this fiasco in the first place, to try and fix this thing. They have found themselves in a hole and have concluded that the only way out is to keep on digging.

[GrainBeetle]

Franny, you said on Sep 22, 2008, "jensen that is socialism, not Capitalism". "So-called businessmen or corporate welfare bums who are looking for help from Washington or Ottawa are not "capitalists".

Do you recall 1997? What was your take?

[Fransisco]

And from the ask a stupid question get a stupid answer file...

Grainbeetle: why didn't your family immigrate to Cuba or China instead of Canada? Freedom?
By the way, is your pastor Castro or Mao and why?

[Fransisco]

Are you asking about the Asian financial crisis of 1997?

[Fransisco]

If it is, I believe that it was not all together different than what we are seeing in the States right now. There were government policies in those Asian countries which put the kibosh on the normal borrower-lender relationships, creating an artificial cheap credit environment. This artificially drove asset prices which eventually collapsed.