EdwardBaiamonte
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- Nov 23, 2011
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- #101
One of the reasons that we had the recent collapse was because investment banks and other financial institutions were leveraging up to and over 40 to1.
You assume that a genius liberal regulator knows what the correct leverage ratio is and all he has to do is impose it. Imagine if you guess wrong and the economy grows at half the speed it should have or too high and everyone goes to the correct liberal level and everyone then collapses at the same time because it was too high.
The most constructive role the government could play is to require each bank to print its leverage ration on all transactions so the free market could decide what was correct for each bank. Those who wanted to speculate could and those who wanted safety could have it.