Daniel Hannan: Financial regulation

(Sort of like what the ‘Detroit’ video one post ago said:  the more regulation you have, the more you strangle the goose that lays the golden eggs…)

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11 Responses to “Daniel Hannan: Financial regulation”

  1. politicallyincorrectandnotadumbredneck Says:

    That guy is an idiot.

    The lack of regulation in the US and in particular the repeal of the Glass-Steagel act directly led to the financial meltdown. There was also zero oversight of the credit default swaps. The whole thing was a sham.

    Here in Canada our strict regulations not only saved us from banks going under but made us the envy of the financial world.

    • CodeSlinger Says:

      politicallyincorrectandnotadumbredneck:

      The Canadian government talks out of both sides of its mouth.

      One day, they said “our system is so solid we don’t need any bail-outs.”

      The next day, they said “but we’re giving out 60 billion in bail-outs anyway.”

      So, either they lied about the solidity of our system, or they stole 60 billion dollars from the people of this country. Probably both.

      I agree that the repeal of Glass-Steagall was a very bad move, because it opened the door for pressure by progressives to lend vast sums money to unqualified buyers on purely political grounds.

      It was a perfect example of what happens when progressives and globalists get in bed together.

      This is the kind of perfidy you get when government is too big and corporations are too big and the unnatural union of the two forms the totalitarian collectivist corporocratic state.

      For a closer look at what’s really wrong with the criminal relationship between big government and big business, see my reply to Xanthippa below.

      In case you’re tempted to complain that it’s “too long,” here’s the short version: the name of the game is…

      Privatize the profits, socialize the losses.

      This is why people can’t agree on whether we live under socialism or fascism.

      It’s neither; it’s the worst of both.

      • politicallyincorrectandnotadumbredneck Says:

        None of our banks failed or needed to the purchased by the government. That is a huge difference.

        We were not handing out mortgages like popsicles. Our banks were forced to carry higher reserves. It was those kind of strict regulations that saved us from that mess.

      • xanthippa Says:

        You forget that the US banks were forced, by US government regulation, to ‘hand out mortgages like popsicles’, as you put it.

        It was Barrack Obama who was handpicked to be the lead litigator on a lawsuit that forced Bill Clinton to pass these very regulations, which were said to help minorities afford homes but which, in reality, forbade banks from lending money for mortgages to people who did not qualify for them, and could therefore not repay them, if the applicants were members of a visible minority.

        Yeah, progressive government ‘regulation’ at its ‘best’!

  2. CodeSlinger Says:

    Xanthippa:

    Regulations are touted as protections for the little guy, but their actual effect is the exact opposite: they increase the cost and complexity of doing business to the point where the little guy just can’t compete.

    The only proper involvement of government in business is to protect the freedom of the market, maintain the stability of the currency, enforce contracts, and prohibit fraud.

    Contract law and fraud are relatively straight forward, so let’s talk about free markets and stable currencies. Let’s start with the following realization:

    Oligopoly is organized crime.

    There can be no fairness in the absence of a free market, and there can be no free market unless there are so many competitors that collusion among them is impossible. Under any other conditions, more regulations just mean more loopholes for corporate criminals to hide behind.

    Thus, keeping the market free means vigorously enforcing ant-trust law in addition to prohibiting unfair competition like price-fixing and racketeering. Without strict enforcement of anti-trust law, some corporations become so large that they can fix prices just like cartels and coerce both suppliers and customers, just like racketeers. Not only that, but if they fail, they send waves of destruction crashing through the market; this is where we get the egregiously false idea that it’s necessary – or even legitimate – to protect such companies from failure with public funds.

    The real truth is that too big to fail means too big to exist.

    The whole purpose of anti-trust law is to enforce that dictum. When a company gets so big that its operations distort the market, it means the market is no longer free. Therefore that company should be required by law to split into two or more separate arms-length companies. There is no other way to restore a free market with fair competition and fair prices.

    We do have anti-trust law in Canada, but it’s a travesty. It’s called the Competition Act and, like much of Canadian law, it’s ill conceived and completely ineffectual. Instead of recognizing the dangerous criminality of monopoly and oligopoly (as the older Combines Act did), this piece of legislative trash actually legitimizes the idea that a company should be allowed to hold a “dominant position” in the market, and then proceeds with all manner of legalistic hand-wringing about what constitutes “abuse of a dominant position.”

    What is swept under the carpet by this law is that the very existence of a dominant position constitutes abuse of every legitimate player in the market! Instead of being prosecuted, companies which are so uncompetitive that they should go bankrupt and so large that they should be broken up are rewarded by being bailed out at the taxpayers’ expense.

    Thus, instead of keeping the market free, the Competition Act enshrines and legalizes the central goal of the corporocratic state:

    Privatize the profits, socialize the losses.

    Regarding stability of the currency, everything that needs to be said can be summed up in one simple sentence:

    Inflation is theft and fractional-reserve banking is fraud.

    If you or I tried to lend out money we don’t have, we would go to jail. If would be called fraud, and rightly so. But when banks do the exact same thing, it’s called fractional-reserve banking. Why the double standard? Because otherwise the government could not borrow money into existence, and the engine driving inflation would grind to a halt.

    We will not concern ourselves with the relative merits of borrowing money into existence or printing it outright, because the only real difference is how the profit is divided up. For our purposes it makes little difference. The real problem rests on the continual creation of new money, however it is done.

    Why? Because those closest to the centre, who get their hands on the new money first, have an unfair advantage: they can use the new money to buy goods at the old prices. As the money moves outward through the economy, prices rise, and the general public – particularly prudent people who save money – find themselves in the exact opposite position: they are forced to use the old money to buy goods at the new prices.

    This results in a continuous, systematic, and hidden flow of wealth from the edges to the centre of the economy. That is, from the poor to the rich. It is hidden by the fact that it isn’t money, per se, which is siphoned out of people’s bank accounts, it’s purchasing power. But it amounts to the same thing: theft. Pure and simple.

    People treat money as a unit of measure – specifically, the measure of price. But units of measure that are not constant from time to time and place to place are fraudulent. And therein lies the problem: the law requires the public to treat money as a unit of measure, but allows bankers to treat money as a good. The difference is that the price of a good fluctuates with supply and demand, when measured in constant units.

    What if metres, kilograms or litres fluctuated with supply and demand like dollars do?

    Everyone recognizes this as obvious fraud.

    But when it comes to money, most people don’t understand that exactly the same logic applies! Of course they don’t. They’re barely taught to make change, let alone such “advanced” topics as the compound nature of inflation or how fractional-reserve banking works.

    This schizophrenic treatment of money as a unit of measure or as a good – depending on where you are in the economic food chain – lies at the very core of the greatest fraud ever perpetrated on the public.

    To allow the dollar to be used as a valid unit to measure price, the balance of supply and demand must be prevented from affecting it. And there is only way to do that:

    Fix the number of dollars, once and for all.

    Then each dollar is worth a fixed fraction of all the assets in existence on a particular day. And all prices at all other times and places would be expressed in those terms. This is exactly like the idea of all measurements of length being expressed in terms of one single unique standard metre.

    Then prices fluctuate only with supply and demand, and there is no way to hide the real nature of inflation: a river of wealth which makes the rich richer and the poor poorer. If people were really better off today than ten years ago it would be obvious: most things would be cheaper. And vice versa.

    There would be no way to fudge the books. There would be no way to hide the relentless, progressive impoverishment of the people, to the benefit of the globalist oligarchs of the corporocratic state. And that is why things are not done that way.

    All the laws and regulations have one goal:

    Privatize the profits, socialize the losses.

    And that is what needs to change.

    • xanthippa Says:

      CodeSlinger,

      the funny thing is that much of the current ‘economic laws’ as they are now were physically penned by my father-in-law.

      Not a joke!

      As an economics and poli-Sci student, he wrote an essay critical of Lester B. Pearson’s economic platform. What he did not know was yhat his prof and Lester B. were drinking buddies. Next thing he knows, he get a phone call: “So you don’t think I know how to run this country?”

      Plus a job offer…

      He went from Graduation straight to become Lester B.’s special economic advisor – and as such, he was the one to actually draft much of the legislation.

      Oh, you should hear us battle for the minds of the next generation!!!

      The rest of the family tries to shut us up, but put a devoted Keynsian in a room with me and it won’t be quiet!

      Of course, the fact that we have genuine deep affection for each other moderates the tone of the discussion, but I will still not let him get away with using meaningless terms like ‘public good’…

    • xanthippa Says:

      CodeSlinger, I also owe you a reply regarding ‘regulation’:

      The calls for ‘regulation’ of a specific industry always comes from the largest, most prosperous members of that industry. Its purpose has never, ever been to ‘protect the public’ or some such nonsense: it has always been to entrench established practices, prevent innovation, and make it more difficult for competitors to enter the marketplace.

      Thus, ‘regulation’ legislation inevitably leads to ‘whale and plankton’ economy (as it is sometimes called): huge and cumbersome companies which dominate the market (and are ‘too big to fail’) – your whales – and tiny, small companies that cannot grow due to the regulatory burden – your plankton – which are swallowed up by the whales before they can grow into healthy, medium sized businesses.

      Such an economy is intrinsically unstable and requires further government interventions to save the whales for fear of destroying the whole ecosystem.

      And thus corruption thrives at the expense of the regular people.

      • CodeSlinger Says:

        Xanthippa:

        Many years ago, I was chatting with the then-Minister of Industry, Trade and Commerce.

        I said, “you know, the problem with the Canadian economy is that we don’t have a well-formed food chain. We don’t have big fish, feeding on slightly smaller fish, feeding on yet smaller fish, and so on down the line. We have blue whales feeding on plankton.”

        He looked at me sharply and replied, “we don’t talk about that.”

        It was my first bit of evidence that the “mistakes” in the structure and function of this country’s political economy were not made by mistake.

        The people who run this place know exactly what they’re doing.

        And why.

      • xanthippa Says:

        Absolutely!

        Did I mention my father-in-law?

  3. CodeSlinger Says:

    politicallyincorrectandnotadumbredneck:

    Let me be more specific:

    The repeal of Glass-Steagall was necessary to achieve the progressive goals of the Community Reinvestment Act and the Housing and Community Development Act.

    The fanatical progressives at the Department of Housing and Urban Development used those two acts to put pressure on banks to lend money to unqualified borrowers, on the ridiculous grounds that most of them belonged to minorities (mostly black; also many hispanic). However, not only is it bad banking practice to write garbage loans for political reasons, but it was actually illegal under the Glass-Steagall Act to bundle these toxic mortgages into the commercial paper that banks trade for a living.

    In addition to being necessary for the progressive political agenda, the repeal of the Glass-Steagall Act also tore down the regulatory wall between commercial and investment banks. That was the tit-for-tat which the big banks extracted from big government in return for embracing their political agenda by writing fraudulent loans.

    Do you get it yet?

    It wasn’t deregulation that caused the crisis, it was the use of regulation to legalize fraudulent business practices in pursuit of political goals.

    Who got stuck with the bill?

    The people.

    That’s where collusion between big government and big business always leads:

    Privatize the profits, socialize the losses.

  4. CodeSlinger Says:

    politicallyincorrectandnotadumbredneck:

    Do you want to know just how deep the rabbit hole goes, when it comes to privatizing the profits and socializing the losses?

    Read The Housing and Economic Recovery Act of 2008: An Analysis by Catherine Austin Fitts.

    If anyone can set you straight, it’s Catherine Austin Fitts, former managing director of Dillon Read & Co. and Assistant Secretary of Housing and Federal Housing Commissioner under George H.W. Bush.

    To get a very clear picture of how the game is played, read about what happened to her company, Hamilton Securities, when they developed a geographical information system that revealed the link between sub-prime mortgage defaults and laundering of narco-dollars in The Myth of the Rule of Law.

    And while you’re at it, read Narcodollars for Beginners: How the Money Works in the Illicit Drug Trade.

    Then reflect on the song by Roger Waters (of Pink Floyd fame):

    It all makes perfect sense,
    Expressed in pounds, shillings and pence.


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