De-Regulation Leads to Banking Crises

[Toro]

Great historical perspective of financial crises for anyone who is interested.

Also consonant with the modern theory of crises is the striking correlation between freer capital mobility and the incidence of banking crises, as illustrated in Figure 3. Periods of high international capital mobility have repeatedly produced international banking crises, not only famously as they did in the 1990s, but historically.

http://www.publicpolicy.umd.edu/news/This_Time_Is_Different_04_16_2008 REISSUE.pdf

 

[Paulie]

Fractional Reserve lending leads to crises. It's a stupid policy that can not possibly lead to prosperity. If consumers understood the policy and cared enough to inform themselves of their prospective banks' balance sheet health, maybe it could work. But we don't, because we are either too ignorant, or too apathetic to care.

We want regulations instead, so that we don't have to be bothered with actually investigating who we do business with.

 

[NOBama]

I’m not about to read a 124 page document written in legalese. However, I’m convinced that the Democratic party was the primary cause of our current banking crises which lead to our current depression, which will lead to an eventual depression. Deregulation had nothing to do with it. For cryin’ out loud, the powers that be can’t enforce regulations currently on the books so what’s the point of creating more given that the same people who have already failed us are – and will remain – in power.

 

[Toro]

I’m not about to read a 124 page document written in legalese. However, I’m convinced that the Democratic party was the primary cause of our current banking crises which lead to our current depression, which will lead to an eventual depression. Deregulation had nothing to do with it. For cryin’ out loud, the powers that be can’t enforce regulations currently on the books so what’s the point of creating more given that the same people who have already failed us are – and will remain – in power.

First, its not "legalese." The paper is written in easy-to-read English, 8.5x11, double-spaced 12" font. The body is about 50 pages and takes 30 minutes to read.

Second, I have no doubt that if you are a conservative partisan, you will believe that the Democrats caused the financial crisis, no matter what facts are as presented.

Its not hard to understand why financial de-regulation causes financial crises. Financial de-regulation often causes a boom in credit. A boom in credit causes asset prices to inflate. Asset price inflation causes banks to increase debt. Then, eventually when the bubble pops, asset prices deflate but debt does not, causing financial institutions to contract credit and often collapse.

Of course, not all financial de-regulation is bad. Generally the market should set the price for credit. However, not all financial de-regulation is good either, as history has shown, including the most recent crisis.

 

[NOBama]

Second, I have no doubt that if you are a conservative partisan, you will believe that the Democrats caused the financial crisis, no matter what facts are as presented.

I didn't say the Democrats "caused" the financial crisis, I said "I’m convinced that the Democratic party was the primary cause of our current banking crisis...". There are probably very few, if any, members of congress who do not share in the responsibility for our current banking/financial crisis. Nevertheless, collectively, they choose to ignore the warnings of the Administration.

If that 124 page PDF document is a Liberal presentation of the (so called) facts, your right, I would most likely disagree with it.

 

[Toro]

I didn't say the Democrats "caused" the financial crisis, I said "I’m convinced that the Democratic party was the primary cause of our current banking crisis...". There are probably very few, if any, members of congress who do not share in the responsibility for our current banking/financial crisis. Nevertheless, collectively, they choose to ignore the warnings of the Administration.

No, it was not the primary cause. I don't know anyone other than partisan people who think so.

The primary cause is outside of the political arena. Partisan people look to politics first when the answer is often outside politics.

If that 124 page PDF document is a Liberal presentation of the (so called) facts, your right, I would most likely disagree with it.

Well, that's very open-minded of you to make a judgment without actually opening it.

 

[Truthmatters]

The rebuplicans had help from some Democrats in making the mess but the people who controled the regulations at the time the crisis was taking form were the Republicans. They pushed for deregulation and did nothing to avert it when they had the chance. Bush appointed people who ignored its escalation and called all regulation bad. Look waht happened to Spitzer when he tried to do something about it when his state and others tried to step in.

This was a mess urged into being by idiots who thought all regulation was bad.

 

[mash107]

No, it was not the primary cause. I don't know anyone other than partisan people who think so.

The primary cause is outside of the political arena. Partisan people look to politics first when the answer is often outside politics.



Well, that's very open-minded of you to make a judgment without actually opening it.

Exactly. It's been rather clear that our current banking and financial system, most recently since 1971, hasn't been working. Partisan hacks fail to realize that both parties support the same monetary system that can dilute our currency for whatever government construes is important.

Shame partisan politics gets in the way.

 

[NOBama]

Well, that's very open-minded of you to make a judgment without actually opening it.

About as open minded as you slinging the word Partisan around and I must have just GUESSED that it's a 124 page PDF document.

 

[Paulie]

Toro, how do you feel about fractional reserve lending, and do you think we could be a prosperous nation without it? If not, why?

 

[Toro]

About as open minded as you slinging the word Partisan around and I must have just GUESSED that it's a 124 page PDF document.

So you opened it and concluded that an 800 year historical landscape of banking crises by a world-renowned economist is a partisan liberal puff-piece?

(Unless you really did guess. Then I'll stake you in Vegas at the roulette wheel! )

 

[Toro]

Toro, how do you feel about fractional reserve lending, and do you think we could be a prosperous nation without it? If not, why?

By which you mean that every dollar lent should be backed by something at the bank?

If that's what you mean, I think it would literally crush the economy and send this country into riots because the amount of credit that would need to be taken out of the economy would be astronomical.

 

[Zoomie1980]

Toro, how do you feel about fractional reserve lending, and do you think we could be a prosperous nation without it? If not, why?

Ugh.... Give it up. All the silliness about returning our monetary system to some 19th century tangible standard would essentially revert modern society back to the living standards of.....the 19th CENTURY!!!

Get this through your thick, Ron Paul worshiping head.

1) We will NEVER be a PRODUCER Nation, EVER AGAIN.

2) The United States was NEVER financially independent at any point in it's history

3) A manufacturing centric economy is simply incapable of providing the standard of living Americans have become accustom to.

4) The economy is GLOBAL, not American. And with each passing year America becomes an ever SMALLER percentage of what makes it up. We will either find our place in it, or DIE as a nation, period.

 

[Paulie]

Ugh.... Give it up. All the silliness about returning our monetary system to some 19th century tangible standard would essentially revert modern society back to the living standards of.....the 19th CENTURY!!!

Get this through your thick, Ron Paul worshiping head.

1) We will NEVER be a PRODUCER Nation, EVER AGAIN.

2) The United States was NEVER financially independent at any point in it's history

3) A manufacturing centric economy is simply incapable of providing the standard of living Americans have become accustom to.

4) The economy is GLOBAL, not American. And with each passing year America becomes an ever SMALLER percentage of what makes it up. We will either find our place in it, or DIE as a nation, period.

You can't fool me, zoomie. I remember back when the banks started collapsing earlier in the year and everyone thought it was the end. I picked up on the tone in your posts. You were quite humble back then, I could sense the fear. You were actually entertaining the idea of sound currency. If I had the time and patience to go dig posts up I would. For about a week there was something different about you. And then when the dust settled and it wasn't the apocolypse, you started reverting back to your usual fuck everyone else mentality.

You change your position back and forth like a bitch changes bras. You come in here all the time talking about how we spend too much, and we need to save and invest and be fiscally responsible. Now you're saying we aren't that kind of nation.

Not to mention how you constantly say the Fed has "zero control over the economy", and then later on come in and say they cause bubbles.

You're a regular fucking riot around here, you know that?

 

[NOBama]

So you opened it and concluded that an 800 year historical landscape of banking crises by a world-renowned economist is a partisan liberal puff-piece?

(Unless you really did guess. Then I'll stake you in Vegas at the roulette wheel! )

Real fucking SIMPLE. I opened it and saw a 124 page PDF doument. How many people do you expect to actually read that?

 

[Toro]

Real fucking SIMPLE. I opened it and saw a 124 page PDF doument. How many people do you expect to actually read that?

There are several people on here who have a good grasp of economics and economic history - gonegolfin, Baron von Bigmeat, Paulitics, mash, and several others. Since we are having an ongoing debate about the broad economy, they might find it interesting. And it takes about 30-45 minutes to read. I didn't realize that would be so daunting for some people.

I also didn't realize that some would assume the conclusion would be "liberal," especially after they hadn't read it and would complain it was too hard to read anyways.

 

[Ravi]

Sound bites from FOX are easier for some.

 

[Paulie]

Sound bites from FOX are easier for some.

You don't listen to sound bites from, say, msnbc?

We all know most people listen to the TV before they'll ever pick up a book.

 

[Ravi]

You don't listen to sound bites from, say, msnbc?

We all know most people listen to the TV before they'll ever pick up a book.

I only watch the news if I'm dead bored...maybe once a year, or if a hurricane is on its way.

 

[Paulie]

I only watch the news if I'm dead bored...maybe once a year, or if a hurricane is on its way.

like you're only bored once a year

But seriously though, where do you get your news from then?