Posted on 09/06/2009 12:30:57 PM PDT by stan_sipple
One of the goals of proposed regulatory changes of the financial industry is — as President Obama has argued — to create "a 21st century regulatory framework to ensure that a crisis like this can never happen again": Yet can a government — whether run by Republicans or Democrats — really anticipate future bubbles or meltdowns? And if it could, would the government have the political will (or political power) to prevent future meltdowns? The last time that we had a recession as deep as the current one was in 1980-82 when a Federal Reserve induced credit crunch caused short term interest rates to reach about 19%.
So if today we had an all-powerful systemic risk regulator who could act to prevent a future melt-down, she might consider taking bold steps to:
Reduce government spending dramatically, especially in the future;
Prevent cap-and-trade from passing;
Stop any expensive health care reforms (and favor cost-cutting measures);
Stop dangerous lending practices at the FHA and the Veterans Administration;
Cut the future costs of Social Security, Medicare, and Medicaid;
Finance much of the existing federal debt with 30-, 50-, and 100-year bonds while interest rates are low; and
Begin orderly sales over the next decade of substantial unused lands owned by the federal government (“It’s time for America to start an annual yard sale of stuff for which the government has little use. This has the ancillary positive effect of reducing excessive government power over its citizens and resources. Does the government really need to own 45% of the state of California?”).
(Excerpt) Read more at volokh.com ...
No.
how can government prevent the crises when government created them?
No. The private-sector ones couldn't, either.
The further away the risk manager is from the trade – the further away the trader is from the trade – the less skin he has in the game, the less effective his judgment of the trade will be. Now, every trader knows that an objective opinion is an edge in risk management. All big-money-machines need to managed. Even Alex Rodriguez – an individual and a risk taker – needs to be managed. But once he’s in the box, it’s his game, not his manager's. Accountability is not being denigrated here. The denigration of individuals, risk-takers, and specifically of individual risk-takers is.
The Fed stopped publishing M3 data in 2006. They intentionally covered up for and exacerbated the ‘swaps’. Less regulators who actually do their jobs would be ideal.
"Finally and to put M3 into proper perspective with inflation (as measured by CPI without lies from Shadow Stats), the M3 and M2 strong inflation link is virtually unquestionable. The longer term inflation picture is clear, although M2 shows a pause and likely temporary disinflation as of 2008. Certain bloggers are incorrect and have continually avoided these facts and the linked chart".
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