Economics - FRONTLINE: The Warning

[iNow]

Some of us here on the forums have become a bit exasperated with the way certain economic ideologies keep hijacking every thread... frustrated with how frequently the topic under discussion gets completely derailed by these Austrian pet theories. Too often lately someone will interject some assertion pertaining to free market ideals... about how we should not regulate... and how government should be completely hands off when it comes to economic policy, and also too often these people will continue interjecting the same assertions even after their premises have been shown to be flawed and non-representative. It actually reminds me a bit of a troll we used to have here named Farsight, who would ruin practically every thread in the Physics section with his insistence on infesting them with his own pet theories. Interestingly, this behavior is happening in several places it seems, and not just here at SFN.

 

 

 

With that said, I find it incredibly fascinating how even those who previously were the "wizards" of our economic system are now beginning to realize the mistakes and holes in their previously held ideologies. For example, Alan Greenspan himself... who for years was strictly against regulation... who followed the ideals set forth by Ayn Rand... conceded that:

 

There was flaw in the model that I perceived is the critical functioning structure that defines how the world works.

 

[...]

 

I made a mistake in presuming that the self-interest of organizations' date=' specifically banks and others, was such as they were best capable of protecting their own shareholders. [/quote']

 

bAH-o7oEiyY

 

 

 

To summarize what the chairman said above, "I was wrong, and anti-regulation/governmental non-involvement simply doesn't work." Unfortunately, despite these concessions from the top minds who have spent their entire lives studying and implementing these ideas... and despite the fact that our experience has repeatedly shown these ideologies to be unworkable and based on too many idealized assumptions... essentially contrary to and without utility in the reality in which we exist... it seems that some people remain content to beat their ideological drums and refuse to accept valid counter arguments to their assertions and claims.

 

 

Perhaps in response to this ideological entrenchment we keep seeing, this week FRONTLINE did a special called The Warning which addresses much of this head-on.

 

http://www.pbs.org/wgbh/pages/frontline/warning/

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

 

In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.

 

<...>

 

Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. "Born faced a formidable struggle pushing for regulation at a time when the stock market was booming," Kirk says. "Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves."

 

Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.

 

<...>

 

Following the publication of the concept release, Born testified before Congress in support of regulating derivatives. Federal Reserve Chairman Alan Greenspan, Deputy Treasury Secretary Lawrence Summers and SEC Chairman Arthur Levitt all testified against regulation.

 

 

You should watch this special. It's slightly less than an hour, and pulls together some of the most critical human elements which led to the current crisis, and how mistaken ideologies have caused us all so much strife.

 

 

Watch online --> http://www.pbs.org/wgbh/pages/frontline/warning/view/

 

 

 

A recent quote I read sums up the situation nicely. I will share that here with you below:

 

Samuel Brittan’s recipe for recovery

The point is that what passes for “sound” economics these days (and maybe most days) isn’t actually sound economics — it’s economic analysis trimmed and softened to fit political realities/prejudices. Questioning that notion of soundness isn’t being radical; it’s just being intellectually honest.

 

 

What did you think of the special? What do you think of the ideas I've presented in this post?

Please. Discuss.

Edited October 24, 2009 by iNow
spelling

[ParanoiA]

Some of us here on the forums have become a bit exasperated with the way certain economic ideologies keep hijacking every thread... frustrated with how frequently the topic under discussion gets completely derailed by these Austrian pet theories.

 

You've just said it all right there. You're tired of differing opinions and different depths of opinion. You don't want an academically diverse forum where you might have to support your base assumptions - like the notion of a republic, or the principle of the first amendment, or central fractional reserve banking...rather, you want to agree to the modern set of assumptions and work from there. Well honestly that's myopic and uninteresting.

 

I have no right to insist on what kind of forum you all should have. But this place used to be far more diverse in opinion and depth of political philosophy, and thus more valuable. Because it seemed to be less about pushing agendas and controlling the scope of political discussion and more about discovery and indulging in philosophies that may be obscure to some and educational nonetheless, no matter your ideology. A way to audit your belief system. Critical thinking is not just for your opponents.

 

I watched it turn into a typical pundit show. Blah. Now you're no more interesting than any cable news channel with wrinkly washington sellouts.

 

If that's the kind of forum you want, it's certainly your right. But don't be shocked when you lose so much diversity your posts just end up being high-fives and intellectual handjobs.

 

 

Too often lately someone will interject some assertion pertaining to free market ideals... about how we should not regulate... and how government should be completely hands off when it comes to economic policy, and also too often these people will continue interjecting the same assertions even after their premises have been shown to be flawed and non-representative.

 

And because you won't accept the depth of those free market arguments you keep missing the point that the "Austrian Pet Theories" don't support central banking and the fractional reserve banking system. That changes the dynamics of the free market arguments subtending that assumption, profoundly. And since you don't want to talk on that level of economics, and reject them, you conflate the arguments and pretend as if they were baseless with a flawed premise. Laughable since you refused to contextualize their premise in the first place.

 

It is our contention that fractional reserve banking creates false growth - which is why you have business cycles. The credit is a lie. It's based on money they don't actually have. Similar to religion, as long as everyone is drinking the kool-aid, and doesn't question and actually look for the capital, it works generally well...until some capitalist does something you didn't plan for, then poof! - it's all his fauilt. Right...

 

 

 

Oh, and Alan Greenspan loves the federal reserve and the fraudulent reserve system so his views on deregulation do not reconcile. You have to have regulation in this scam. Why it took him all these years to realize that, I'll never know...

 

 

Good luck with it guys. This time I really will stop crying about this place. It's just sad, I really learned alot here.

[jackson33]

iNow quote;

Some of us here on the forums have become a bit exasperated with the way certain economic ideologies keep hijacking every thread. [/Quote]

 

 

I believe your thread is a 'set up' to naturally claim 'hijacking'...That is, you either agree or your attempting a hijacking. I'll add, if disagreement to YOUR ideologies and as you say "Some of us" are frustrating of "exasperating", why don't you set up a locked thread to any others than who ever those "some of us" are and converse in private. To me it seems rather useless to take time out and post agreeing comments, pats on the back or in some manner taking all the rest reading into some apparent 'click'.

 

 

A loose explanation of a free market based on consumption the majority of any capitalist societies economy;

 

The availability of any product or service, for the consumer to CHOOSE from and purchase.

 

The opposite is; The limitation of the consumer to purchase any product or service, that for any reason is not allowed to be sold.

 

Any self sustainable society, is going to place some restrictions on P/S for any number of reasons.

 

Laws/Prohibition; 'Illegal drugs' or may 'human smuggling', to emphasize the point. Import/Export Tariffs to protect existing or hurting business operation. National Interest or the security of itself, sale of fire arms, military equipment etc., and many others.

 

Protection of the people, from themselves, disease or any perceived harmful product of the society.

 

Control and management that could or is disrupting their individual economy, as in Monetary Policy, inflation/deflation and the like.

 

The questions and answers for any and all free societies is when and where these limitations, in laws or by legislation/regulation for any reason, begin tending toward socialism or unacceptable to the charter, constitution or traditional system of governance of that society, or in the case in the US today, ahead of the perceived viable reasons for control.

 

It actually reminds me a bit of a troll we used to have here named Farsight, who would ruin practically every thread in the Physics section with his insistence on infesting them with his own pet theories. [/Quote]

 

I don't know this troll (Farsight), but I can name you several dozen, that IMO were far to bright to be slighted, humiliated or banned and in fact were. You also have "Pet Theories", we all do, that may go against the current theory and I would hope the appropriate place to test or discuss them should be on a public forum.

 

Interestingly, this behavior is happening in several places it seems, and not just here at SFN.[/Quote]

 

I am a little confused on "happening". Are you saying Dr. Krugman, in his op-ed is incorrect or some of the responses. He is regularly on FNC and seems to qualify most his comments. I'll add, there may be a difference between the 'New York Times' and SFN. Aside from that, his below comment, is correct and we can only evaluate plans/programs on precious results, not potential future results. I believe is also a Democrat, loyal liberal, but opposed to the recent and current US monetary policy.

 

All this is very familiar: the same thing happened in Japan back in 2000. It seems to be really hard for central bankers to accept the need for prolonged easy money, even if all the data say that’s what is needed. [/Quote]

 

On Mr. Greenspan; I hold a great deal of respect for his contributions over the years. I believe he and Paul Volcker along with an agreeable Reagan, kicked off the economy of the past 25 years. It would be hard TO EXPLAIN these results, now indicating those policies were incorrect. He may be trying to justify years of ultra low monetary access, the Feds, prime rates over years of dynamic growth (2003/2006), in part causing the 'Housing Bubble' burst and related sector failures or it may be at 83/4 yo, you have a change of heart. At any rate Bernanke, seems to have continued those policies.

On Samuel Brittain's recipe for recovery; I totally disagree, insisting the US economy should be based on sound/established policy, allowing the free flow of activity based on that sound policy, creating the 'confidence' of the general public and INVESTOR. Simplistic as that may sound, we have had little support for confidence since September 2008, which has been DECREASED by actions/policy of the new Administration, since the election results.

[iNow]

Right... So did either of you watch the ****ing video or not? You know... the one explicitly referenced in the thread title?

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You're tired of differing opinions and different depths of opinion. You don't want an academically diverse forum where you might have to support your base assumptions - like the notion of a republic, or the principle of the first amendment, or central fractional reserve banking...rather, you want to agree to the modern set of assumptions and work from there. Well honestly that's myopic and uninteresting.

That is a completely unfair misrepresentation, and I think you know it. I am ALWAYS open to differing ideas and opinions, but I also refuse to accept arguments grounded in premises which are non-representative and/or inaccurate. These arguments cannot be made in isolation, and we must consider all recommendations in context of the world as a whole. Idealized assumptions only work in idealized cases. We do not live in an idealized economy, and we cannot simply pretend that the world works in one very specific way when, in fact, it does not.

 

That is all. Criticism of flawed premises is not a personal attack, nor can it be dismissed as "wanting people to agree with me."

 

 

 

Because it seemed to be less about pushing agendas and controlling the scope of political discussion and more about discovery and indulging in philosophies that may be obscure to some and educational nonetheless, no matter your ideology. A way to audit your belief system. Critical thinking is not just for your opponents.

 

I watched it turn into a typical pundit show. Blah. Now you're no more interesting than any cable news channel with wrinkly washington sellouts.

 

If that's the kind of forum you want, it's certainly your right.

Can we please remain focused on the merits of the various positions and criticisms, and avoid turning this into YET another thread which gets closed?

 

My hope is to focus specifically on the FRONTLINE special I shared. If you cannot do that, then please do not post. Comments such as these:

 

But don't be shocked when you lose so much diversity your posts just end up being high-fives and intellectual handjobs.

...have no place here.

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Consecutive posts merged

I believe your thread is a 'set up' to naturally claim 'hijacking'...That is, you either agree or your attempting a hijacking. I'll add, if disagreement to YOUR ideologies and as you say "Some of us" are frustrating of "exasperating", why don't you set up a locked thread to any others than who ever those "some of us" are and converse in private. To me it seems rather useless to take time out and post agreeing comments, pats on the back or in some manner taking all the rest reading into some apparent 'click'.

Please see my comments above to ParanoiA. The same apply to you.

 

 

The questions and answers for any and all free societies is when and where these limitations, in laws or by legislation/regulation for any reason, begin tending toward socialism or unacceptable to the charter, constitution or traditional system of governance of that society, or in the case in the US today, ahead of the perceived viable reasons for control.

That is far removed and separate from the topic this thread was opened to explore. Please do not hesitate to open your own thread to explore those interesting ideas, but please also do not discuss them here. They are off-topic (which I get to decide since I opened the thread).

 

 

 

I am a little confused on "happening". Are you saying Dr. Krugman, in his op-ed is incorrect or some of the responses.

Neither. I am saying that all across the internet we are seeing the interjection of austrian ideals even when they do not apply to the subject under discussion. I am saying that they are like a cult, and are beginning to remind me of how creationists interject into evolution discussions, and remind me of how global warming denialists interject into all climate science discussions.

 

I'm simply commenting on how wide-spread the phenomenon is becoming, and how it is not limited to threads on discussion forums such as SFN. I am saying that different ideas are good, but those ideas must be representative and based in reality. I am saying that there are far too many flawed assumptions in the austrian approach for it to be as ideologically entrenched as it has become. I am saying that people are letting their ideology and political preferences trump empiricism, and that this is becoming exasperating.

 

 

On Mr. Greenspan; I hold a great deal of respect for his contributions over the years. I believe he and Paul Volcker along with an agreeable Reagan, kicked off the economy of the past 25 years. It would be hard TO EXPLAIN these results, now indicating those policies were incorrect. He may be trying to justify years of ultra low monetary access, the Feds, prime rates over years of dynamic growth (2003/2006), in part causing the 'Housing Bubble' burst and related sector failures or it may be at 83/4 yo, you have a change of heart. At any rate Bernanke, seems to have continued those policies.

On Samuel Brittain's recipe for recovery; I totally disagree, insisting the US economy should be based on sound/established policy, allowing the free flow of activity based on that sound policy, creating the 'confidence' of the general public and INVESTOR. Simplistic as that may sound, we have had little support for confidence since September 2008, which has been DECREASED by actions/policy of the new Administration, since the election results.

Again, most of that is off-topic. The few parts which were on topic are directly rebutted by reality. We had the policy you advocate... we had it for decades... and it is precisely what led to the current crisis we're all experiencing. Your model of the world is flawed. Greenspan was man enough to admit it. Why aren't you?

Edited October 24, 2009 by iNow
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[jackson33]

iNow; In all honesty I had not seen 'ParanoiA's post until after submitting my own. It' should be remarkable, even to you, the first impressions, some of your post bring out.

 

To the thread title and your comments; You went off on a tangent having nothing to do with your own title. I responded TO YOUR comments or to your site references, completely with in the scope of your POST. It is your thread and you have the right, I'm sure, to take it in the direction you want, however you can't go off topic, then expressing some rather harsh comments opposed to posters comments HERE AND ELSEWHERE, go unanswered.

 

One comment;

Too often lately someone will interject some assertion pertaining to free market ideals...[/Quote]

 

For this one I gave you a brief outline of free market v socialism, which fits with in the scope any free market economy and to the degree acceptable by that society. Additionally I did not add Greenspan to the thread or Mr. Brittan, you did and I commented accordingly.

 

No I didn't listen to your frontline presentation, nor do I have to, in oder to get the general message. Here come the message and my personal response....with explaination.

 

In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008. [/Quote]

 

To simplify what a derivative is, it's the equivalent of a share of stock in a corporation, created and traded by major financial institutions around the world, today primarily in GB, based on a future value of whatever makes up the derivative (Home, Auto, Commercial Property Contracts). Apparently there are or were trillion dollars contracts (I really question) traded between financial giants, but a good many are literally traded over the counter.

 

Since we're talking the Housing Bubble, those values plummeted overnight, some 20-30% or as a share of stock often does. The derivative however had a value, a good many continued trading, are doing so today, but since the value of homes, or the worries about Commercial Real Estates are involve, buyers are and were limited. Keep in mind, Stock Markets around the world lost trillions, some suggest up to 25T$, but not very many Companies actually went out of business, or was there ever NOT a buyer of shares at some price.

 

Now to the point; Under normal circumstances, the future values of anything can go up or down with plenty of 'Risk Takers' willing to take that risk. Paulson/Bush, in order to prop up this market, felt infusing 700B$ into the banking system, should stabilize that market, which by the way totals about 300T$, worldwide. They banked their opinions on a general recovery of the economy, that confidence in the system could be restored and the investor would continue to take chances and the consumer would continue to consume.

 

I have a two fold assessment, while opposing Ms. Born's;

 

First; Congress, by mandate (regulation) decided Citizenship could not be a reason to prevent a person from buying a home. I believe Paulson/Bush and the Administration realized a pending problem, along with McCain and other of both parties, long before September of 2008, tried to get Immigration Reform, adding stability to this segment. Coincidentally if the following is correct, there were 5 Million Loans, in these derivatives or being held by banks or financial institution and the average home loans in 2006-7 was 150,000$ that total was around 700B$ the requested amount to add solvency to the system. This story broke in October 2008.

 

Some five million fraudulent home mortgages are in the hands of illegal aliens, according to the U.S. Department of Housing and Urban Development. [/Quote]

 

http://www.freerepublic.com/focus/f-news/2100080/posts

 

Second; As with JFK, Reagan, Bush I, Clinton and Bush II, were faced with recessions but what later became or called mild interruptions in the economy, handling of the situation becomes the issue. The possible exception of Reagan's inheritance, which if handled differently could have blown into a real re-enactment of the GD. FDR and apparently Obama, took/is taking a different path, with the potential of the same results and a very long period of high unemployment, possible deflation of prices at home with a devaluation of the dollar on the world markets. IMO and a few million others, if the Obama Administration, had done many things differently (far too many to go over) not only would have employment been rebounding, those initial 700B$ been paid back, but there would have been no need for stimulus or all that's happened around the various States. Right now your looking at a GDP/Debt ratio of 87% on Jan. 1st 2010, up 20%+ from 2008 and likely well over 130% by 2019.

 

What did you think of the special? What do you think of the ideas I've presented in this post?

Please. Discuss. [/Quote]

 

Does this fit better into your request???

[Cap'n Refsmmat]

Some of us here on the forums have become a bit exasperated with the way certain economic ideologies keep hijacking every thread... frustrated with how frequently the topic under discussion gets completely derailed by these Austrian pet theories. Too often lately someone will interject some assertion pertaining to free market ideals... about how we should not regulate... and how government should be completely hands off when it comes to economic policy, and also too often these people will continue interjecting the same assertions even after their premises have been shown to be flawed and non-representative. It actually reminds me a bit of a troll we used to have here named Farsight, who would ruin practically every thread in the Physics section with his insistence on infesting them with his own pet theories. Interestingly, this behavior is happening in several places it seems, and not just here at SFN.

 

If you don't want your threads hijacked, why bait the people you are carefully attempting to avoid naming?

 

Really, iNow, I know you're frustrated with people you believe are totally wrong injecting their opinions into every thread you make. But you are not helping the situation by trying to bully them into shutting up. You're turning yourself into your own kind of troll.

[iNow]

You're turning yourself into your own kind of troll.

 

This would have probably been better as a PM. Thanks for further derailing my thread.

[The Bear's Key]

Because it seemed to be less about pushing agendas and controlling the scope of political discussion...

Your conclusion there seems off quite a bit.

 

Wouldn't it really be about controlling the scope of propaganda that's liberally () repeated by others after being shown inconclusive, false, or questionable? You'll notice more are dissecting or revealing the sources of propaganda than are cheerleading the manifesto of an organization. For example, can you pinpoint where any member has cheerleaded keynesian economics? (use search function).

 

Here's a revelation: most anyone who's mentioned it (keynesian economics) usually seems to be conservative. 21 posts total (22 now ). What do you suppose is the reason for that?

 

Yet upon searching "austrian" we find most of the 32 relevant posts before August '09 were by conservative supporting members....once again (however that's been reversed the past 3 months, I'd guess when people decided to not let the Autrian myth go unchallenged any longer).

 

Do explain that...if we indeed push agendas.

 

The only thing I sense being pushed by us is the dissection/exposure of falsities that usually skew perceptions in mass quantity and/or unsubstantiated attacks vs science.

 

 

...and more about discovery and indulging in philosophies that may be obscure to some and educational nonetheless, no matter your ideology. A way to audit your belief system.

How do you know they haven't, or don't practice it continually?

 

I've researched the "Austrian" philosophy long before seeing it mentioned on these forums, as I do various political and economic thoughts. Surely others have too.

 

Also, the "BNP on question time" posts led me to read their 54 page manifesto and do other research. Surprisingly, they didn't piss me off even with their racism -- so I had to ponder the difference why between them and normal politicians. Fairly simply: honesty. Even though I wouldn't vote for them ever in a million years, they didn't seem to be luring voters for another unmentioned purpose. And minus the racism and crude goals, a few of their other points would easily fit under Republican or Democrat. As one example: they look to strengthen both unions and industry while viewing each as potential harms.

 

Don't you think others here do the same? I/m confident that yes, but why not just ask people to find out instead of assuming?

 

 

Critical thinking is not just for your opponents.

This is the problem, when you're labeling those with different views as opponents to us. But do we view them as such? Or are you just assuming? The real opponents to me are the falsehoods/propaganda sources way at the top, not the ones who come away believers.

 

 

But don't be shocked when you lose so much diversity your posts just end up being high-fives and intellectual handjobs.

If that's really so, why has the poll on "bailouts a good idea" received just one answer since it was posted three days ago? No flood of "hell yeah!" responses there.

 

Could it be possible you're hung up on descriptions of a supposed "opposition" twisted by the noise media to see what's actually going on?

 

I haven't voted in the thread because my choice isn't listed: "Yes, only because we had no choice, however to keep it standard practice is a terrible idea, plus I'm angry theiving companies received so much government $$."

 

And because you won't accept the depth of those free market arguments

Oh it has depth, as indicated by the volumes of writings dedicated to the subject. It just lacks evidence. And perhaps substance -- no offense.

 

It's definitely has its own internal consistency, but so does Magic the Gathering (comprehensive ruleset about 169 pages of flawlessly intertwined variables). Yet how would the "Austrian" system's consistency fare in the outer (and) real world?

 

It's possible to find out.

 

But judging how the economic problems stemmed from lack of oversight, why not go experiment elsewhere?

 

http://www.cnn.com/2009/TECH/03/09/floating.cities.seasteading/index.html?iref=mpstoryview

Patri Friedman, a former Google engineer who now works for the Seasteading Institute, said floating cities are the perfect places to experiment with new forms of government.

........

"The idea isn't just about getting away from rules or getting rid of rules. It's about a system that encourages experimentation with different political systems," he said.

 

 

...you keep missing the point that the "Austrian Pet Theories" don't support central banking and the fractional reserve banking system. That changes the dynamics of the free market arguments subtending that assumption, profoundly. And since you don't want to talk on that level of economics, and reject them, you conflate the arguments and pretend as if they were baseless with a flawed premise.

Can't speak for iNow or anyone really, yet I bet they'd agree central banking is f*d up -- however the usually promoted cure includes the old tired song of massive deregulation and tax cuts. So it's no wonder the response isn't even lukewarm.

 

A difference I see is that the more liberal crowd is willing to mix different philosophies...

 

• Sure have tax cuts, although more for utilitarian fulfillments, and less for political allies or super rich businesses -- or let citizens vote which get the tax cuts or not.
  
• Definitely help industry thrive, but keep an eye on their activities.
  
• Yes shrink government waste, by flashing a clear and permanent spotlight on its acitivities thus exposing the waste.
  

 

 

Also, I laid out my views before which included no longer needing the Federal Reserve -- and no one challenged, even though some of the points were quite different from the norm.

 

....a company likely to cause system-wide market distress and/or crashes upon failure should be taxed accordingly, as insurance policy for society so we can let the company fail without need for bailouts, the Federal Reserve, or panic.

 

Some of my other views are simply...

 

No thieves controlling our government.

A root problem is any leadership's secrecy and obfuscation.

Government and business systems can each be innovative/effective or lousy/corrupt -- and it's only a handful of people responsible for either.

 

Hopefully you can agree that a free market solves none of those.