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Unread 30 Jul 2009, 10:14   #34
Tietäjä
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Re: Is Bigger Government Better

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Originally Posted by Alessio View Post
Unfortunatly, in the case you mentioned, intervention or placing banks entirely in the public sector can't take away some of the major character flaws of banks, as the web of interest and our dependancy on them will remain. But, as I said earlier, taking the quirks out of the private sector should be the very role of the government (and thus the public sector).
The whole system, Goldman Sachs first in line, needs a good kick in the nuts and a revision. And indeed, I agree on the role of the government; to prevent such private sector misincentive and failure from happening: it seems inherent for Wall Street to fail like this, mostly because it's been deemed profitably to systematically mislead people into paying for nuclear waste because "it's surely going to rise in value until 3098", and for some reason people keep believing this.


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The public sector can't serve any other purpose then assisting the private market when they fail to provide proper services, as the public market has it's own share of unique character flaws, as I explained before.
The public sector must also provide for certain services the private sector is unwilling or unable to technically provide. These include Police, Justice System, Military, and so forth. I for one wouldn't find it hugely amusing if Goldman Sachs bought the Supreme Court and made the descisions there.

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Each sector has it's own advantages and disadvanteges making it necessary to make a proper destinction and finding a suitable combination of both. But denying disadvantages specific to the public market is a bit silly.
Definately. So's denying the disadvantages specific to the private market. So's denying disadvantages in general.

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The example you gave doesn't even really apply to the private market in general, as it is quite rare that organisations are actually bailed out by the central government. Even in a small country like the Netherlands (with 16 million people) on average 28 private organisations went bankrupt each day before the current financial crisis. 9349 organisations in 2004 and 9200 organisations in 2005. And we let those organisations go bankrupt for a very good reason: they aren't profitable.
This really depends on the scope: injecting capital is a fairly common and a stealthy way of rehabilitatings, and is done fairly often by the government. This time, it's just being done more visibly.

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Bankruptcy can actually be seen as one of the major features of the private market. It's a way to weed out the poor organisations and motivating organisations to improve. The general rule is that in the private sector poor organisations lose their market share, become obsolete and get replaces by better adjusted organisations. A rare occurrence in the public sector.
I'll ask you the same question: would you have let Wall Street implode? Would you have let the Icelandic banking sector as a whole implode?
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