You either believe in capitalism or you don't.As someone who has fought for capitalism in a real physical sense, as well as argued for it, I find this statement quite bizarre.Capitalism is a set of models and decision making tools based upon some assumptions and experience.Do you "believe" in Black Scholes ?I don't.It fits some observed facts, and is useful, a good servant, a lousy master. The market is not "immoral" if the implied vol differs from the realised vol, it just does what it does, like room full of cats.Capitalism is not some moral ideal, any more than democracy. They are tools with which large societies can make decisions with relatively few people getting killed in the rows over who gets what and who does what to whom.They both screw up big time occasionally, as we now see. So does calculus, or rather people do it wrong and occasionally bridges fall down or engines explode.When you subsidize an activity you end up with too much of it.Thats not right, it barely even makes it to wrong.In the short term, your simplistic model is correct, but when you look at the British transport system that Traden4alpha cites, you see that there is not enough of it, not too much. Fact is that when it is subsidized you get the wrong amount. Same applies to grain production in the Soviet Union which nearly starved through food subsidies.Education in America is subsidised to a scale that is bigger than the whole economy of some countries, few think that "too much" education is provided.If public money is being used to repacitalize the banking system, well then the public should own it, otherwise we're making the moral hazard problem even worse. Wrong.To avoid moral hazard, you need to ensure that the decision makers who screwed up do not benefit.Those in control are walking away with serious money."punishing the banks" is as rational as putting their PCs in jail.In medieval times Christians used to punish animals. I don't mean kicking a dog that bit you, they had trials, juries and judicial executions of cows.A lot of this mess was caused by Excel, are we to see errant spreadsheets printed out and then burned ?Actually seeing American politicians talk about this, I have a bottle of Pol Roger Champagne to wager that an American politico will do something like this before (say) August 1.Any takers ?I guess DavidJN does not have kids ?They learn very different lessons in discipline than what you think you are teaching them.They often learn that what you think is "respect for elders" is actually "do what bigger people say else you get hurt", and "if you are bigger you have the right to make small people shut up".The lesson being learned by the next generation of bank leadership is to spend more money on PR, and to take less of their renumeration in cash.

QuoteOriginally posted by: BullBear"Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism."Karl Marx, in Das Kapital, 1867This quote has been circulated in the net, and turns out that it was a joke. Apparently Karl Marx never wrote that.

I would argue that the optimal course would be, in fact, to temporarily nationalize the banks, like the Scandis did. At the moment, all they're contributing to the system is added uncertainty. Afterwards, they need to be properly redesigned and gently introduced back into the wild...I like capitalism, per se, especially having experienced the heinous alternative first-hand. It's a practical paradigm that, currently, fits humankind best. However, it has its flaws. Specifically, what people have been discussing here, in various guises, is the problem of provision of public goods. For years we have been evading the basic contradiction that we treat banking and finance as a public good, but it's provided by the market. Ultimately, as we can see now, this doesn't fly. Which suggests to me that banks have to be redesigned to separate the utility bit from the other bits. The banking utility companies need to exist independently and be regulated completely differently (no fractional reserve lending, perhaps). Now, whether the utility bank functions properly, or is a pezza di merda, like the UK train system, is an entirely different question.My 2c (but pls take with a pinch of salt, as I am tired and it's late).

QuoteOriginally posted by: MartinghoulI would argue that the optimal course would be, in fact, to temporarily nationalize the banks, like the Scandis did. At the moment, all they're contributing to the system is added uncertainty. Afterwards, they need to be properly redesigned and gently introduced back into the wild...I like capitalism, per se, especially having experienced the heinous alternative first-hand. It's a practical paradigm that, currently, fits humankind best. However, it has its flaws. Specifically, what people have been discussing here, in various guises, is the problem of provision of public goods. For years we have been evading the basic contradiction that we treat banking and finance as a public good, but it's provided by the market. Ultimately, as we can see now, this doesn't fly. Which suggests to me that banks have to be redesigned to separate the utility bit from the other bits. The banking utility companies need to exist independently and be regulated completely differently. Now, whether the utility bank functions properly, or is a pezza di merda, like the UK train system, is an entirely different question.My 2c (but pls take with a pinch of salt, as I am tired and it's late).Good point you are making but unfortunatelly banks or bankers are there to make a profit - it's part of our profession

QuoteOriginally posted by: MartinghoulAfterwards, they need to be properly redesigned and gently introduced back into the wild...Tagged, microchipped and neutered/spayed!P

QuoteOriginally posted by: HOOKQuoteOriginally posted by: BullBear"Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism."Karl Marx, in Das Kapital, 1867This quote has been circulated in the net, and turns out that it was a joke. Apparently Karl Marx never wrote that.It's easy to tell it's a fake if you've ever tried to read "Capital". The language is so arcane and the sentence constriction so complex that it's unreadable to all but the most dedicated. The "quote" above is far to simple and clear to a modern English speaker to have been written by Marx in the 19th century.

If people are going to refer to capitalism, I wish they'd define what they mean by it. Most people who have bought the propaganda think that capitalism means free enterprise and free markets without government interference. In reality nothing could be further from the truth. Capitalism is a system for the private accumulation of capital. It destroys free markets and free enterprise and demands government interference in favour of capital. In other words: capitalism is a system of both government and market manipulation that enables privatisation of profits and socialisation of costs (i.e. private sequestration of public wealth).

You either believe in capitalism or you don't.As someone who has fought for capitalism in a real physical sense, as well as argued for it, I find this statement quite bizarre.What on earth is bizarre about this? Were you "fighting" for capitalism or were you fighting for rule of law? Do you understand the difference?I maintain that when you subsidize something you get too much of it. You claim to disagree, but then you say that when something is subsidized you get the wrong amount of it. How is that different?"A lot of this mess was caused by Excel, are we to see errant spreadsheets printed out and then burned ?"Ok, that's just ridiculous, enough of this!

QuoteOriginally posted by: PaulQuoteOriginally posted by: MartinghoulAfterwards, they need to be properly redesigned and gently introduced back into the wild...Tagged, microchipped and neutered/spayed!POuch! Do you really want to ban all financial replication?

Transcript:Ben Bernanke Remarks at National Press Club - Feb 18The Q&A was interesting as well.

QuoteOriginally posted by: DavidJNI maintain that when you subsidize something you get too much of it. You claim to disagree, but then you say that when something is subsidized you get the wrong amount of it. How is that different?I think he means that sometimes subsidies can induce a decline in the quantity of the product because of: 1) government regulation of the produced quantities; 2) government regulation of the end-consumer price (profit ceilings); 3) declines in demand for the product due to declines in the quality of the subsidized product which arise from a lack of incentives to maintain or improve the subsidized product.Yes, the first-order effect of subsidies is an artificial increase in production of that product, but correlated regulations and other effects can overpower the first order effect.

Also today:Federal Reserve - Open Market Committee - Press Release Feb 18"The Federal Reserve on Wednesday released, for the first time, longer-run economic projections made by Federal Open Market Committee (FOMC) participants--the Federal Reserve Board members and Federal Reserve Bank presidents--in connection with their regular quarterly projections. Since November 2007, the Federal Reserve has been publishing a quarterly Summary of Economic Projections (SEP), which has included projections typically up to a three-year horizon. The latest SEP, in addition to projections for 2009, 2010, and 2011, includes longer-run projections for output growth, unemployment, and inflation."The Federal Open Market Committee Minutes Jan 27-8

QuoteOriginally posted by: MartinghoulI would argue that the optimal course would be, in fact, to temporarily nationalize the banks, like the Scandis did. At the moment, all they're contributing to the system is added uncertainty. Afterwards, they need to be properly redesigned and gently introduced back into the wild...I like capitalism, per se, especially having experienced the heinous alternative first-hand. It's a practical paradigm that, currently, fits humankind best. However, it has its flaws. Specifically, what people have been discussing here, in various guises, is the problem of provision of public goods. For years we have been evading the basic contradiction that we treat banking and finance as a public good, but it's provided by the market. Ultimately, as we can see now, this doesn't fly. Which suggests to me that banks have to be redesigned to separate the utility bit from the other bits. The banking utility companies need to exist independently and be regulated completely differently (no fractional reserve lending, perhaps). Now, whether the utility bank functions properly, or is a pezza di merda, like the UK train system, is an entirely different question.My 2c (but pls take with a pinch of salt, as I am tired and it's late).Although I can see the attraction of tightly regulated full-reserve "utility" banks, I see two problems. First, no one would voluntarily put their money in a full reserve account. The behaviors of consumers and companies are what started us on the road to deregulation. Banks were being marginalized by the growing accessibility of yield-bearing instruments in the global financial markets. The ultra low cost of online transaction systems mean that it is drop-dead simple to replicate a saving or checking account that sweeps funds into the yield-bearing instrument (== fractional reserve instrument) of the depositor's choice. Unless you ban access to yield-bearing instruments, no one will use a utility bank.But the bigger issue is that this does not solve the problem unless we prevent consumers and companies from replicating fractional reserve activities. Any entity that can both borrow and lend assets simultaneously is acting as a fractional reserve entity (actually, any entity that can simultaneously accumulate both assets and liabilities will affect the economy as a fractional reserve entity). A fractional reserve entity doesn't have to be a bank, it can be a consumer that borrows against their house and puts the money in a CD or stock market. Part of the cause of this crisis was that the effective reserve ratios of consumers dropped too low when banks and mortgage lenders (including the government) allowed low-down-payment mortgages.There is nothing qualitatively wrong with fractional reserve. There is only the quantitative instability of it at low reserve ratios.

QuoteOriginally posted by: Traden4AlphaOuch! Do you really want to ban all financial replication?Just ban copula(tion)!P

You know what happened in the US when they tried Prohibition.Who would run the black market in copula(tion)?