View Single Post
Unread 30 Jul 2009, 09:37   #29
Tietäjä
Good Son
 
Tietäjä's Avatar
 
Join Date: May 2001
Location: Finland
Posts: 3,990
Tietäjä single handedly makes these forums a better placeTietäjä single handedly makes these forums a better placeTietäjä single handedly makes these forums a better placeTietäjä single handedly makes these forums a better placeTietäjä single handedly makes these forums a better placeTietäjä single handedly makes these forums a better placeTietäjä single handedly makes these forums a better placeTietäjä single handedly makes these forums a better placeTietäjä single handedly makes these forums a better placeTietäjä single handedly makes these forums a better placeTietäjä single handedly makes these forums a better place
Re: Is Bigger Government Better

Quote:
Originally Posted by Tactitus View Post
In capitalism, bankruptcy is not a bug, it's a feature. Poorly run companies should go out of business. Subsidizing incompetence does little to reduce or eliminate it; if anything, it only serves to increase it.
But private sector failures aren't necessarily bailed out. It's only the same if you accept the premise of crony capitalism, where some companies are not allowed to fail.[/quote]

Must was a bit of a poor choice of words, admitted. "May have to" is more like it. TBFT, especially on the financial sector, is a bit of a problem.

Of course, private sector failures aren't necessarily bailed out, and they should, as you point out, not always be bailed out. But the fact that a bail-out feature is there inherently creates a moral hazard. The banking system is a good example of where, the government, has historically paid the price for private sector failure.

Quote:
I don't accept that premise.
I was actually considering putting out a more complex reply involving a discussion of why the lender of last resort needs to be there, and why the bail outs are necessary to keep confidence especially on the financial sector despite it creating moral hazard, but I've come to second thoughts. If your point is, that companies that fail should never be bailed out I'm simply better off asking you a question.

How crippling do you think letting the half the financial system go down in a blast would have been? How long do you think it'd take for the market to regain confidence in the system again, when, the system is technically an essential part of resource allocation between corporations? This is, considering that it wasn't only the shadow banking responsible for the subprime packages and toxic waste funds, but a good part of the "actual" banks as well? How happy do you think those few hundred thousand UK and Netherlands clients of certain Icelandic banks would've been if, umm, their savings in these banks had simply defaulted?

I'm not sure if you're actually saying that, the government should, never, bail anything out, but if you are, then I'm keen to hear how you think the financial market would actually work. If you aren't, then I'm sure we can agree that sometimes things must be bailed out mostly due to private sector failure, and the remains are not paid by the stock holders.

Quote:
Originally Posted by Yahwe
... and of course America, being poorly run, virtually bankrupt, and the cause of global economic chaos ought also be allowed to fail.
UK is virtually bankrupt. China isn't. We can probably concede that China is one of the best ran (economically speaking) countries in the world: the former communist China, the country where there was massive propaganda outlets to essentially force people to save. Whereas the west was consuming. Private sector success has made China rich?

Quote:
Originally Posted by JBG
It's worth remembering that not all the banks which took funds even wanted to take them. A number of them, such as Goldman Sachs, didn't really need anything and only took part under pressure from the US Treasury.
Sure. And some of the banks would've gone insolvent without these funds. The problem generally is, that an poorly run bank going default can cause a chain reaction which ends up with healthy banks being victims of an assault too, which is part of the reason why the EU, the UK, and the US have all been keen on defending the banks. Case 1929-1933 is good for this.

Last edited by Tietäjä; 30 Jul 2009 at 09:45.
Tietäjä is offline   Reply With Quote