The Economy is in Trouble - What do we do to fix this? Ideas Welcome -

[expat_panama]

...The problem with regulating banking and the stock market can be easily solved with a single piece of legislation. Congress should repeal the safe-harbor provisions of title 11 that exempt financial derivative contracts from bankruptcy. (Derivatives are really secret liens that conceal leveraged borrowing carried “off balance sheet”...

There's a lot controversy over derivatives such as exchange traded futures contracts and credit default swaps, and this is good because as markets change we need to change laws too. It's not so bad when most of the arguing helps lawyers more than markets; what's bad is when blind prejudice is stirred up by political hacks in order to grab power no matter how much harm is done. Most derivatives are transparent and useful. Most political attacks on derivatives are stupid, harmful, and self-serving.

If what you're proposing is really as 'simple' as you understand, the tell us exactly which derivative contract safe-harbor provision is excluded where. If it really isn't simple enough to nail down here, then let's agree that it's controversial and there are good people on both sides.

 

[Nemo]

Specifically, derivative contracts (forward contracts, repurchase agreements, credit default swaps, future contracts and options) are currently exempt from the automatic stay provisions under section 362(a); the rule against enforcement of ipso facto clauses under section 365(e)(1); and also protected from trustee avoidance actions for transfers that would otherwise be deemed as voidable preferences or fraudulent transfers under the Bankruptcy Code. See 11 U.S.C. § 546(e)-(g) and (j). To put it simply: the bankruptcy laws do not apply to derivatives. The question is whether this is a good thing. It is not, as the current financial crisis and bailout attest. (I would add to the list the like provisions that immunize leveraged buyouts “LBOs” from bankruptcy proceedings as these transactions have a high potential for fraud and abuse and consequential damage to the economy.) Elimination of these safe-harbor provisions will provide more transparency and promote more emphasis on value over high-risk speculation. The counterparties to these contracts will be forced to disclose their transactions in order to protect the priority of their security interests. The alternative is more heavy-handed, government-imposed regulation, which will have a stifling effect on business and economic growth.

 

[Flopper]

...the relatively weak federal government which existed after the founding of the nation did not lead to great economic property in following 75 years. It was only after the civil war that economic growth really took off, increasing in speed as both the nation and the government grew.

There are a lot of ways to actually measure historic economic wealth and crank out a data set, here's one right here that shows--

--over all growth about the same before and after the Civil War.

The primary reason for GDP growth in the first half of the 18th century was the growth in the size of the country. In the first half of the 18th century we more than doubled the number of states and increase the physical size of the country and it's territories by over 50 times. A better measure of prosperity is personal income.

File:GROWTH1850.JPG - Wikipedia, the free encyclopedia

 

[expat_panama]

...A better measure of prosperity is personal income.File:GROWTH1850.JPG - Wikipedia, the free encyclopedia

The link goes to this--

--and the plot doesn't seem to show the change in US growth before & after the Civil War you mentioned. Also missing is whether we're looking at real or current personal income (gdp component).

My link that you quoted also had percapita real gdp (which is mostly income anyway) and it grew on average at 1.5% before and 1.8% after the Civil War. So that would be in fact the increase you talked about, but crediting the strong post war big governments is a bit of a stretch--

--especially with the 1890-1940 stagnation that averaged 1.1%.

 

[Flopper]

...A better measure of prosperity is personal income.File:GROWTH1850.JPG - Wikipedia, the free encyclopedia

The link goes to this--

--and the plot doesn't seem to show the change in US growth before & after the Civil War you mentioned. Also missing is whether we're looking at real or current personal income (gdp component).

My link that you quoted also had percapita real gdp (which is mostly income anyway) and it grew on average at 1.5% before and 1.8% after the Civil War. So that would be in fact the increase you talked about, but crediting the strong post war big governments is a bit of a stretch--

--especially with the 1890-1940 stagnation that averaged 1.1%.

I don't the see the size of government as being relevant. There are other factors that are more important.

 

[expat_panama]

...I don't the see the size of government as being relevant. There are other factors that are more important.

Agreed, so we no longer believe--

...that the relatively weak federal government which existed after the founding of the nation did not lead to great economic property in following 75 years. It was only after the civil war that economic growth really took off, increasing in speed as both the nation and the government grew.