Root Cause of the Financial Crisis

Discussion in 'Economy' started by gonegolfin, Oct 22, 2008.

  1. gonegolfin
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    gonegolfin Member

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    The following is an excellent article from Steve Saville pinpointing the root cause of the financial crisis. Not allowing free market forces (through the supply and demand for money) to determine the cost of credit results in the mis-allocation of capital (mal-investment). In our present case, a gross mis-allocation of capital that must be purged from the financial system. Yet, the choices being made by government leaders is perpetuating a problem that has been caused by precisely the same measures that are being proposed to fix the problem. Massive supplies of money and cheap credit.

    Trying To Get Something for Nothing

    Brian
     
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  2. Truthmatters
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    The sec has already said the reason was gramm leach bliley
     
  3. dilloduck
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    dilloduck Diamond Member

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    The SEC isn't God .
     
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    http://www.sec.gov/news/press/2008/2008-230.htm




    Chairman Cox Announces End of Consolidated Supervised Entities Program
    FOR IMMEDIATE RELEASE
    2008-230
    Washington, D.C., Sept. 26, 2008 — Securities and Exchange Commission Chairman Christopher Cox today announced a decision by the Division of Trading and Markets to end the Consolidated Supervised Entities (CSE) program, created in 2004 as a way for global investment bank conglomerates that lack a supervisor under law to voluntarily submit to regulation. Chairman Cox also described the agency's plans for enhancing SEC oversight of the broker-dealer subsidiaries of bank holding companies regulated by the Federal Reserve, based on the recent Memorandum of Understanding (MOU) between the SEC and the Fed.

    Chairman Cox made the following statement:

    The last six months have made it abundantly clear that voluntary regulation does not work. When Congress passed the Gramm-Leach-Bliley Act, it created a significant regulatory gap by failing to give to the SEC or any agency the authority to regulate large investment bank holding companies, like Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns.

    Because of the lack of explicit statutory authority for the Commission to require these investment bank holding companies to report their capital, maintain liquidity, or submit to leverage requirements, the Commission in 2004 created a voluntary program, the Consolidated Supervised Entities program, in an effort to fill this regulatory gap.
     
    Last edited: Oct 22, 2008
  5. dilloduck
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    dilloduck Diamond Member

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    Any capital provided by the government to the banks will first have to be extracted from other parts of the economy via taxation or inflation or borrowing. In other words, the government's provision of additional capital to sick businesses can only happen at the expense of the more healthy parts of the economy.

    Can we nail that to Congresses forehead ?
     
  6. Truthmatters
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    U.S. Securities and Exchange Commission - Wikipedia, the free encyclopedia


    The U.S. Securities and Exchange Commission (commonly known as the SEC) is an independent agency of the United States government which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets. The SEC was created by section 4 of the Securities Exchange Act of 1934 (now codified as 15 U.S.C. § 78d and commonly referred to as the 1934 Act). In addition to the 1934 Act that created it, the SEC enforces the Securities Act of 1933, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Sarbanes-Oxley Act of 2002 and other statutes.
     
  7. Valerie
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    Valerie Gold Member

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    Thanks!

    from the article -->

     
  8. Truthmatters
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    Guys the people who are tasked with dealing with these issues has said it was the GLB act of 1999 that cause this.

    End of story.
     
  9. dilloduck
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    dilloduck Diamond Member

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    It doesn't say they are right about everything anywhere in there. This is ANOTHER example of you clinging to a piece of information that you like the best. Stop clinging, you dork. :tongue:
     
  10. Truthmatters
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    It is the determination of the people who are in charge of policing the market.

    It is the Securities and exchange Commission for gods sake man.

    The guy is a Bush appointee.

    Its an unbiased assesment of the situation dude.

    Tell me what you know about GLB 1999?
     

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