You are absolutely right. I believe Capitalism is not equal to absent of government as much as possible. I believe Capitalism means just free enterprise regulated more or less depending on circumstances, cultures, religions and many other factors. What I am really pissed is that we call today's system "Capitalism" What we have today is Corporate Socialism. The only mean by which corrupt, inept, uncompetitive, greedy few capitalist pray on on the rest trough the use of government.
We've had regulation UP THE WAZOO... look where that got us.. There must be 7 or 8 regulatory "layers" and agencies supposedly regulating the banks... Ever hear a bigger joke?
This is how I understood fractional reserves as well. No idea why he said $190 go to the bank for each $100 , with Liesman aquiescing. Maybe he meant $90. Anyway Paul often sounds like an out of touch nerd, but I like his ideas even though I don't know everything about his views and how they would affect for ex. the environment for which he said no government is needed.
Paul knows full well that those efforts to 'audit the fed' will just lead to more pressure for easy money policies, exactly the opposite of what he usually recommends. It appears that he is trying to undermine the fed's power even if it is at the cost of price stability and the dollar
and what about the Fed s' lobbyists? How come the Fed has its own lobbyists ? Who pays for them , in whose name ? That's unbelievable .
Regulation is not a bad word. In everyday life we live by rules whether written or not. I think many other capitalist oriented countries have been succesful with their regulations much more than the US. To corporate socialist america, regulation is just a word, not a rule they must obey. The system is a joke not regulation or rules.
Yes -- the idea that we're all beautiful, benevolent beings of pure light who would never screw each other if only regulations would get out of the way...
The banking system doesn't really operate as described in this thread. It is much more bizarre than many think (at least what I thought) A "bank" is strictly defined as an institution with access to the Fed and there are indeed reserve requirements which can be adjusted theoretically controlling lending. However, the "actual" market mechanisms used to control banking are driven by other factors. For one thing, excess reserves at one institution are generally made available to other banks using overnight lending. This doesn't change the Fractional Reserve aggregate but its important when considering other system dynamics such as government spending. Essentially, what happens (and this gets mind blowing pretty quickly) is the government spends money which credits bank accounts -> increases excess reserves which puts downward pressure on overnight rates (yup, you read that right, government spending decreases interest rates). When the rates fall below target, the Fed sells bonds and participates in other "open market" operations... which decreases liquidity (sops up excess reserves) and pushes rates up. In short, reserves are available irrespective of private deposits at an institution given the overnight lending mechanism which is driven by excess reserves which is driven by government spending which is controlled by selling treasuries. So, the auction of treasuries are in response to interest rate issues. From an external perspective, clearly, when the government spends in excess of revenue, its gonna need to sell bonds... but the actual dynamics are far more subtle and why things like "money supply" are also things which need to be controlled as opposed to simply dictating money multipliers through the bank reserve requirement. All this relates to the "shadow banking" system as well. While non-banks don't have access to the Fed window, they certainly have access to credit. They can borrow at rates related to those available to regular banks (sometimes the same rate or marginally higher) and lend - invest. In recent years, these shadow institutions have played a much larger role as lenders but the Fed has no direct control over these institutions through reserve requirements etc. Therefore, the control is indirect, again through debt issuance. Where things get very tricky is during panics as the Fed can't intervene directly with the shadow banking system... information asymmetry causes a freeze in credit flows which can trigger cascading defaults even if there is no "actual" problem. BTW, this is where the naked short sale game is played and how Bear and Lehman were taken down. Naked short selling is much more sinister than has been portrayed... but I digress. (and I don't really understand the whole thing yet... but it sure ain't Fractional Banking like I thought it was) -glenn
The only workable definition of Capitalism involves the cost of failure if you bet wrong. If you hedge your bet with insurance at AIG, then you both (should) lose. If we hadn't bailed out AIG, the European banking system would likely have collapsed. No capitalism there, either. NAKED SHORTS: If you own a seat on the exchange your trade cost is nil, and you are not exposed to a broker's supervision. You can sell a few hundred shares in a few separate trades, and then cover them and buy more when the herd panics. Note that this applies even if you are long that stock. In that case you would only try this trick with a stock that has an upside.