What is Digg?116 Comments
- quakerorts, on 03/24/2008, -14/+56We deregulate the energy industry and we get the California energy crisis and Enron.
We deregulate the banking industry and we get the current financial crisis.
Our forbears knew what they were doing when they enacted these regulations. The Reagan Republicans were tools of industry when they discarded these vital protections of the people. - Berkana, on 03/24/2008, -1/+17It is a bit more complicated than deregulation; deregulating banking works IF banks only lend money they have. Banks don't do that; banks lend more money than they actually have (known as fractional reserve banking), inflating the money supply. But of course, the money the lend out must be paid back with interest, so following the initial boom, as the money supply slowly trickles out of the economy, taking out not only what was put in, but interest as well, the economy goes into a recession. That is the consequence of having a debt based money system. Remeber this?:
http://digg.com/business_finance/Our_Debt_based_Mo ...
The problem isn't just regulation; the problem is that even when regulated, the system of banking we currently use naturally causes a "swinging pendulum," as banks can create money, and subsequently destroy it after the economy has adjusted to having more of it around. (a.k.a. inflation.) The first thing needed to fix this problem is to outlaw the monetization of debt, and to have permanent money that doesn't need to be continually borrowed just to exist, and to enforce that banks only loan out money they actually have. Right now, 95% of our money supply is created by someone borrowing it into existence; unless this stops, we will continue to suffer the same problems. - StingingNettle, on 03/24/2008, -3/+18"Normally, banks satisfy both desires: depositors have access to their funds whenever they want, yet most of the money placed in a bank’s care is used to make long-term loans. The reason this works is that withdrawals are usually more or less matched by new deposits, so that a bank only needs a modest cash reserve to make good on its promises."
That was the most kind way to describe fractional reserve banking I have ever seen. - thecoolestguy, on 03/24/2008, -0/+10We get here because PEOPLE DON'T LISTEN. The journalists and pundits DON'T LISTEN to the experts, and keep regurgitating the garbage the lobby-owned politicians spew.
You can't spend the Social Security Trust money on programs other than Social Security, yet that is exactly what politicians have been doing for the last 3 decades (Ron Paul tried to stop that by introducing a bill that would prevent the money in the Social Security Trust from being spent on any thing except Social Security, but of course Congress ignored it).
You can't expand medicare when it's already unsustainable as it currently is. The prescription drug bill was described as "probably the most fiscally irresponsible piece of legislation since the 1960's" by the Comptroller General of the United States.
http://www.youtube.com/watch?v=KGpY2hw7ao8
Since Nixon took the US off of the gold standard in 1971, it gave the federal reserve free reign to inflate the money supply as much as it wanted. It doesn't work!
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In the 34 years before Nixon closed the gold window, the money supply in the U.S. grew less than two fold. In the 34 years after Nixon’s action, the money supply expanded 13 fold. T
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The United States has never been so regulated as it is now. The tax code is complex now that it requires 66,000 pages to describe it all. The tax code is so difficult to navigate, that the paper work required to file taxes incurs a cost of $275 billion a year. That's 2% of GDP, used up just for compliance
You can't tax and spend your way to prosperity. Freedom, which means minimal government is the only way.
You can't manage the banking industry through a centralized top down command structure headed by the Federal Reserve. It doesn't work. The Fed will inevitably fail. Centralized control of any facet of the economy doesn't work, the Soviet economy proved that. - chkdg8, on 03/24/2008, -0/+9They're burning down the bar and collecting the insurance. That's why the rest of the world is selling off their U.S. assets.
- veloscaper, on 03/24/2008, -3/+11Dumbass, the energy companies created rolling blackouts to drive up demand to make more profits. They were free to do so because they were deregulated. Nobody but the customers took a loss to this very day with rates more than 2x what they were, some old ladies lost their lives.
- RegalGSX, on 03/24/2008, -5/+13Forget the economy. We have bigger problems. In 5 billion years the sun is going to explode. Then what?
- danconia, on 03/24/2008, -4/+12Yeah and for the record Enron was cooking the books in a way that our government does on a daily basis.
You can't blame this one on the free market, guys. There hadn't been many bad recessions until the Federal Reserve was enacted and started to artificially manipulate the economy. The Fed keeps injecting money to put off the depression but what people don't realize is that every time we put off the recession it will get worse once it does hit.
Recessions are only the market's way of naturally correcting distortions within the economy. They really should not be *feared* because although they aren't very fun they certainly are necessary for prosperity. We can't have our cake and eat it too. The Fed is devaluing the dollar, the world is losing faith in this dollar, and thus it loses even more value. I know people don't want to hear us talk about Ron Paul on here but he really was the one candidate who knew all one could know about the economy. I mean come on he would completely school Bernanke everytime he spoke to him publicly. Strangely enough McCain, the admitted economic dunce, got the damned nomination. Here's to hoping Barack at least knows his stuff! But even if he does I wouldn't put much faith in the government... they know they'll all be fine even if the middle class is completely falling apart. - kingmanic, on 03/24/2008, -0/+8Although the US nuclear arsenal is impressive still and could end civilization as we know it, it would not cover the earth 100%. There is around 5k warheads. about 400 or so ICBM mirvs and a lot of tactical missiles. Right now the US could lightly toast the earth. The 10 times over may have been true in The US arsenals hey day but almost everything in the US has been downsized except your waste lines. Your economy shrunk, your army shrunk, your nuclear arsenal shrunk, your global influence shrunk, your manufacturing industry shrunk, and your reputation has shrunk. It's been going on for some time now.
- Napoleone, on 03/24/2008, -13/+20Revisionist drivel.
Bernanke is doing little more than injecting collagen into this market bubble so that it can stretch a little more, but in the end, it will pop. He's doing this with our money and at our near future expense for the sake of preserving the fortunes of already very wealthy people.
Some form of regulation is prudent, so long it not be too constricting or intrusive, and has as its primary goal the curtailing of fraud, but this housing bubble monster is not the creation of any free market. This baby was created by a meddling Fed who keeps feeding the beast our money.
Krugman is disinformationist of the highest order. - Trigeno, on 03/24/2008, -0/+7They are acting as though the future long term solutions will not be necessary, and that a mere delaying of the inevitable is the only thing neccessary, long enough for all peices to be in place.
- radu79, on 03/24/2008, -2/+9That's a very simplistic article, and doesn't really describe what the problem is: Lending way too much money by the banks. They were supposed to be able to lend 'only' 10 times the money they have (in cash), but via some 'smart' moves, such as selling debt packages to investors, they bypassed that limit, and we are where we are now.
Of course, there is also the problem of people getting money even though the banks knew they can not pay back, hoping that their homes will magically become more and more expensive. - danconia, on 03/24/2008, -0/+7You mean that magician was actually willing to trade the beans for American dollars? Definitely must not have been able to see the future =P
- Xiney, on 03/24/2008, -2/+8Screw you New York Times, I don't want to log in. Pain in the ass.
- DeathJux, on 03/24/2008, -2/+8You think that's bad? I can't even get the ***** lid off this jar of pickles!! WHAT AM I SUPPOSED TO DO NOW?!
- seanpetrash, on 03/25/2008, -0/+6While you seem to be very well informed, you are incorrect. A fiat currency not backed by gold will fail. In fact, do some research and you'll find that all fiat currencies not backed by gold have failed. The reason? Fiat currencies become the property of a government-sponsored central bank. The dictator or party that is in rule inevitably wants more power, which, means more money. If they raise taxes they will be voted (or kicked) out of office by the populace. The same is true if the leaders cut spending from "social programs." So what do they do? They create money out of thin air by way of a fiat currency that has no rules responsibility to the populace at all. Printing money causes inflation. Inflation is the reason people can no longer afford the adjustable rate mortgages that they put their houses under. Legalized counterfeiting. And the fact that you can attribute deregulation to the cause of the Great Depression is beyond me. The Fed was established in 1913. And since then has seen 2 major inflationary recessions and a Great Depression. It has also seen the value of the dollar dwindle down to 4 cents of what it was. And you call that stability? Negative. This is the evaporation of the middle class because guess who repossesses the houses? And it goes all the way to the top. And guess what happens when the big guys default on their loans? The Fed bails them out! Who's going to bail out Joe American that borrowed a little too much with inflation taking care of the rest? Is anyone in here even aware that the dollar lost 1.7% of it's value in a singe day!? I will agree that this is a direct result of foolish ignorance, but I do not and will never see the government as a good thing unless it's ensuring freedom and a free market - NOT REGULATING IT!
- Berkana, on 03/24/2008, -0/+6I think "kind" is too generous; it was simply inaccurate. Banks do not lend out money they have; they lend out entirely new money backed by nothing by the borrower's debt. That's how we as a nation can have a collective debt of $45 trillion. Have you ever thought about how there could be so much money to lend out to begin with?
The background on fractional reserve banking is expounded on in this:
http://digg.com/business_finance/Our_Debt_based_Mo ... - WoollyMittens, on 03/24/2008, -2/+8When your country imports more than it exports you will have a trade-deficit and a growing debt. Intellectual property was the only thing of value left and the USA even outsourced that to China and India. There is nothing left to sell, but the whole damn continent of consumers itself... and nobody wants it.
The only thing the US have going for them is enough bombs to scorch the surface of this planet 10 times over. - danconia, on 03/24/2008, -1/+6But do not forget the very important point that a bank that deals in a risky or foolish way will lose the business of many people who are aware of these foolish acts. As things stand right now people just assume the government is keeping an eye on them and when the ***** hits the fans... government bureaucrats are only looking out for themselves.
- danconia, on 03/24/2008, -3/+8Don't forget who gave them a monopoly on power supply in their area though... yep the government.
Regulation doesn't work well because it opens the industry up to lobbying efforts. Those who should regulate in a way that's best for the people will naturally, and unfortunately, just end up regulating in whatever way gets them the most lobbying money and campaign donations from people working at places like Enron. - satori3000, on 03/24/2008, -2/+7Can you imagine what would of happened if Bush's proposed plan to move retirement funds into stock investments? I'm in Canada and all our banks still have fierce regulations in place. I'm now hearing from friends on IRC that Americans are moving their funds to Canadian banks because their money will still be there if the banks fail. As good as that might be for the Canadian Banking system, it would be bad for the world. Don't make a run on your bank unless you think collapsing your bank is a good idea.
- BESTenemy, on 03/24/2008, -0/+5@ afruff
The people are putting themselves out of jobs without RP being anywhere near. That's what the depression is. The question is whether the next man in the office is going to take a path to recovery or sell us out completely and irreversibly.
The monetary system is doomed. Having jobs means absolutely nothing if you're making money that cannot buy you anything. It comes down to fundamentals of goods and services exchange. Since the whole system had been structured upon unsound money, fractional reserve banking and private monetary monopoly, no matter what you do to taxes, interest rates or lending policy is going to matter, as you'll be fighting the effects instead of the causes.
As for painful restructuring, it's going to happen whether you like it or not. People are going to loose jobs. The issue is not whether they will or not, but what happens after. - NSResponder, on 03/24/2008, -0/+5" Lending way too much money by the banks. "
More to the point, the problem was the effectively unlimited amount of credit that the fed made available to the banks. If you had someone who would would lend you all you wanted for 3%, and you could lend it out to someone else for 6% and make 3% on money you never had in the first place, that's a racket that most bankers that have ever lived would jump on.
The incentives for the banks were to lend as much as they possibly could, and since they weren't lending any actual savings, there was no market feedback to indicate scarcity of capital. Upshot: malinvestment as houses were built and sold to speculators.
-jcr - danconia, on 03/24/2008, -1/+5You have no choice, this is the case of an emergency, you need to smash the glass jar.
- Berkana, on 03/24/2008, -0/+4Good point, but what I'm saying is that the entire system itself is risky and foolish; permitting banks to inflate the money supply by monetizing debt and trading these debts on the market (as was done leading up to the mortgage crisis) is folly at its height, but it is perfectly legal, in spite of the suffering it will cause when this whole mess matures. We have no other choice right now because the entire system is corrupted and flawed, so we can't just move as a group to reward another system in competition, because right now there is no competition for our monetary system.
- danconia, on 03/24/2008, -3/+7He wasn't a dunce, but you're right that any of his reforms would be met with huge resistance. That doesn't mean that we shouldn't try them though... what's the alternative? It's sad because people these days let the government have a monopoly on charity but no one seems to realize that the government's programs don't even come close to working. Poverty was actually steadily declining before LBJ implemented the "Great Society" and since he implemented it we haven't really seen poverty levels go down.
I hope some day we get back to the days of private charity. That way at least organizations would have to perform well in order to get the donations over their rivals. In our current system people just assume the government is fixing the problems and of course the government isn't even coming close. - cnorris1, on 03/24/2008, -0/+4I hear we are really good at pizza delivery too
- Nosnevets02, on 03/24/2008, -4/+8^^^^
Not that I'm trying to defend Enron in any way, what they did was highly illegal. However it was not very good foresight on the part of the policy makers. - danconia, on 03/24/2008, -1/+5Yes I think we can all agree that the banks get bailed out only because everyone who is part of the Federal Reserve probably has 90%+ of their friends working in the banking industry and don't want to see them become unemployed or lose their fortune(s). The Fed doesn't give two ***** about the people actually losing their houses over this stuff, and especially not about the middle-aged people whose savings accounts, in $US, are wasting away in front of their eyes.
Now as the cycle continues the banks keep lending out more dangerous/risky loans because they know their buddies at the Fed will just bail them out when they need them to. Considering the dunces we have in the Treasury Department I am NOT expecting a nice ending to this story.
Buy some gold, save while you can, and make good friends with your boss if you want to make it through this recession... things are going to get BAD. - NSResponder, on 03/24/2008, -0/+3I'll give Krugman the benefit of the doubt, and presume that he actually believes what he's saying. Sadly, most people in this country still believe that the Fed's job is to stabilize the dollar, and they also believe that it was instituted as a remedy for the great depression.
-jcr - seanpetrash, on 03/25/2008, -0/+3Maybe you should watch the internet movie "Freedom to Fascism." I'll give you props on being someone that can work a screwed system. But all fiat currencies not backed by gold eventually fail. Do some more research.
- Look4Truth, on 03/24/2008, -0/+3I hope you all are preparing for what's coming, it's going to get ugly.
- absurdist, on 03/24/2008, -2/+5I spend a lot of hours on Digg, due to moving around time zones. It never ceases to amaze/amuse me. What's posted in the middle of the night US time is pretty much guaranteed to gain a reactionary/conservative/republican response, while what's posted in the middle the day US time is pretty much guaranteed a progressive/liberal/democratic response. As a sub-genius, I'm busy picking all your pockets... but any comments?
- seanpetrash, on 03/25/2008, -0/+3While you seem to be very well informed, you are incorrect. A fiat currency not backed by gold will fail. In fact, do some research and you'll find that all fiat currencies not backed by gold have failed. The reason? Fiat currencies become the property of a government-sponsored central bank. The dictator or party that is in rule inevitably wants more power, which, means more money. If they raise taxes they will be voted (or kicked) out of office by the populace. The same is true if the leaders cut spending from "social programs." So what do they do? They create money out of thin air by way of a fiat currency that has no rules responsibility to the populace at all. Printing money causes inflation. Inflation is the reason people can no longer afford the adjustable rate mortgages that they put their houses under. Legalized counterfeiting. And the fact that you can attribute deregulation to the cause of the Great Depression is beyond me. The Fed was established in 1913. And since then has seen 2 major inflationary recessions and a Great Depression. It has also seen the value of the dollar dwindle down to 4 cents of what it was. And you call that stability? Negative. This is the evaporation of the middle class because guess who repossesses the houses? And it goes all the way to the top. And guess what happens when the big guys default on their loans? The Fed bails them out! Who's going to bail out Joe American that borrowed a little too much with inflation taking care of the rest? Is anyone in here even aware that the dollar lost 1.7% of it's value in a singe day!? I will agree that this is a direct result of foolish ignorance, but I do not and will never see the government as a good thing unless it's ensuring freedom and a free market - NOT REGULATING IT!
- ericdano, on 03/24/2008, -0/+3Eh, he's wrong.
- MoofTheStoof, on 03/24/2008, -0/+3So we liberal insomniacs are screwed?
- JMellissa, on 03/24/2008, -4/+7I agree with the article. Paul Krugman is my favorite columnist and I think he's got it right again.
The one thing that most Americans are completely dedicated to is "having a good time". This leaves us living more
like the Grasshopper instead of the Ant. - oldgal, on 03/24/2008, -0/+2They also shipped power out of the state, up to Canada, and back into the state so they could jack up the prices.
- inactive, on 03/24/2008, -1/+3I posted this before . I'll post it again. Learn the truth about banking and power. This lays out exactly what we are doing and heading into.
http://video.google.com/videoplay?docid=4675077383 ...
http://video.google.com/videoplay?docid=-443054337 ... - spaceman77, on 03/24/2008, -0/+2Kinda makes me wonder if Greenspan saw it coming.
- loki49152, on 03/24/2008, -1/+3If you call mountains of new regulations "deregulation" then I have a double-plusgood bridge to sell you.
- thecoolestguy, on 03/25/2008, -0/+2---It is not a conspiracy, it is not a conceived plot by big business to defraud you and I.---
Nonsense, it is a conspiracy. The Federal Reserve was conceived by major bankers at jekyll island. This is a matter of historical fact. For some reason you can accept that powerful interests getting rich off the military-industrial complex, yet cannot fathom how banking interests can get rich off the government-federal reserve complex. - rockefeller2, on 03/24/2008, -0/+2Talking Heads?
- razorsharpwit, on 03/28/2008, -0/+2"Things fall apart -it's scientific"
- BESTenemy, on 03/24/2008, -0/+2You are absolutely correct. The credit expansion due to fractional reserve practice exponential debt growth against non-exponential growth of the collateral. In a society where at least half the jobs are service jobs that don't produce anything that can be treated as a physical asset, the tap runs dry q lot quicker than in a system where people produce goods. However in both cases the result is exactly the same. Saturation of credit causes periodic pendulum asset acquisitions by the manufacturer of the paper currency.
The debt on the FED legal tender is much greater than the entire amount of money in circulation. The only way to repay the debt is with the same money it was issued in. Somehow people don't understand what the trick is. Person A is only able to pay off his debt, if he gathers enough money off person B that happened to borrow even more off the FED.
The system is nearing collapse and the result is nothing short of economic slavery where citizens of this country own nothing but worthless paper and none of real assets the most fundamental of which is land. - hcharger, on 03/24/2008, -1/+3 Here we have an article that implicates a financial mess, yet in its simple terms we have believers and skeptics, ones who are brainwashed to think the government has everything under control and others who say they don't.
Well, think about it this way. What happens when people go needlessly in debt and a crisis occurs where that debt overwelms their ability to pay them off. Now, along comes a good samaritian that lends him the cash to pay his debt and lo and behold all his cash money are counterfeit bills...worthless.
Think about all the paper money being printed up using future reserves that do not have gold backing today. Think of the cost of the Iraqi war that also uses this same paper greenbacks to finance the effort.
Think about all the people who are so convinced that this will pass after the government does a little restructuring. Paul Krugman is correct, we have been partying like its 1929 and he furthers his comment by explaining that our day today is 1930.
When the banking insitutions finally realized the state of affairs that faced them, it already was too late to counteract any corrections. Hold on to your practicality skills folks, history is once again going to repeat itself, this time with a vengence that may be impossible to reverse.
And of course truth not being a popular message these days, the government will do its best con job to reassure you all is well, just as God shut the door of the ark before the rains came. - thecoolestguy, on 03/25/2008, -0/+2You can make money on a declining system, but the pie is getting smaller, and fewer people are going to make money than in a growing economy.
- netdance, on 03/25/2008, -0/+2While I don't disagree with much of what you say, to say that dollars are backed by bonds, and therefore assets, isn't at all accurate. The dollars are backed by bonds, which are denominated in dollars, and therefore have no true asset value. It's a circular system, which is, in effect, a fiat system.
But yeah, precious metal currencies used to fail all the time - primarily when they were debased too much (i.e., treated as fiat currencies). But also when they weren't debased enough, and deflation set in. -
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