Comments on: “Socialized Risk, with Still Highly Leveraged Survivors”

By: Can’t stand to see FAIL? Let’s approve another $290 billion of short term rescue instead of a systemic fix | Schizo America

Tue, 05 Jan 2010 04:12:11 +0000

[...] hat tip to Barry Ritholtz “Any healthy system needs a way to correct error and remove waste. Nature has extinction, the economy has loss, bankruptcy, liquidation. Interfering in this process lengthens feedback loops. Error and waste are allowed to accumulate, and you ultimately get a massive collapse. [...]

By: Kevin Duffy

Kevin Duffy — Mon, 28 Dec 2009 19:27:21 +0000

The market has only one way to regulate – failure – but this option has been removed by decades of safety nets and bailouts. To believe bureaucrats are capable of performing this function, you have to believe they have vision and are beyond political influence. In other words, you have to believe in Santa Claus and the Tooth Fairy at the same time.

By: Jack

Jack — Mon, 28 Dec 2009 01:04:01 +0000

What’s a credit market? Question from 150 million (more or less) US citizens.

By: Moss

Moss — Mon, 28 Dec 2009 00:29:35 +0000

I think the term ‘political capitalists’ aptly describes the scenario we have morphed into. It seems to me that all participants have garnered that mantle. I would also like to know where the Austrian’ model was ever in place. While I agree with some of the principles of the school I know of no economic system on earth that ‘practices’ the Austrian doctrine. Where is this Austrian model? Which country best exhibits it either now or in the past?

By: demand side

demand side — Sun, 27 Dec 2009 23:56:34 +0000

Very feeble stuff, if you ask me. Failure has been generated by the innovation and aggressiveness of the banking sector. Then, since they control the regulatory machinery, they bail themselves out. The “interventionists” are the authors of the crisis, none different. Admittedly they don’t see it coming, but they ARE are the capitalists.

“As a country we’ve become less tolerant of economic failure. The result has been a series of interventions, such as meddling in the credit markets, promoting homeownership and creating a variety of safety nets for investors. Each crisis leads to an even greater crisis. The solution is always greater doses of intervention. So the system becomes increasingly unstable. The interventionists never see the bust coming, then blame it on “capitalism.””

By: prismatic_prism

prismatic_prism — Sun, 27 Dec 2009 21:53:50 +0000

I believe Kevin/Austrians is dead right on his estimation on how markets fundamentaly works! I believe that he/Austrians is dead wrong on how the world in reality works! … you see there can never be a state that dos not interfere with the market to some extent! Can you picture a world where the state dosnt have to fund an army, or try to protect theire citizens from drugs with police and enforce the rule of law, create highways etc. ? … thought not… Can we stop pretending now ?

By: mathman

mathman — Sun, 27 Dec 2009 20:51:47 +0000

@ DL: (b) is effectively worthless as an agent of “real change” (see last 3 elections for proof).

By: Linkfest (December 27, 2009) « Playing the Devil's Advocate

Linkfest (December 27, 2009) « Playing the Devil's Advocate — Sun, 27 Dec 2009 20:07:39 +0000

[...] Socialized Risk, with Still Highly Leveraged Survivors Too Big To Fail! Many free market supporters still believe that CEOs, board members and other assorted MBA scum deserve their compensation. [...]

By: Winston Munn

Winston Munn — Sun, 27 Dec 2009 19:14:51 +0000

This reads like Ayn Rand writing footnotes for Minsky.

This part is accurate: “Any healthy system needs a way to correct error and remove waste. Nature has extinction, the economy has loss, bankruptcy, liquidation. Interfering in this process lengthens feedback loops.”

From that point onward, I don’t see a sound argument for the implied Gramm-like conclusion that capitalism is grand and will self-correct if only we don’t interfere.

Seems we have tried that tact before and didn’t much like it. Capitalism is surely better than any other system, but perfect and self-regulating it is not.

By: Winston Munn

Winston Munn — Sun, 27 Dec 2009 18:41:35 +0000

“Any healthy system needs a way to correct error and remove waste. Nature has extinction, the economy has loss, bankruptcy, liquidation. Interfering in this process lengthens feedback loops. Error and waste are allowed to accumulate, and you ultimately get a massive collapse.”

I certainly agree with these premises but I believe the conclusion flawed: interfering does not cause a massive collapse – that is due to an unhealthy system – interfering only slows the rate of collapse.

Therefore, interfering in this process lengthens feedback loops, leading to long periods of sub-standard growth interspersed with recession, i.e., The Slow Depression.