What's the "logical basis" for concluding that they think it's good for anyone to collapse economies?
I don't think this weak "gotcha" rhetoric is conducive to good discussion. You're trying to disarm their point by putting words in their mouth. And you're taking it off topic.
For example, since you only mention banks and large corporations, can we assume you're okay with every other possible way economies can be collapsed? No, that would have no "logical basis."
>If 'too big to fail' banks and companies were immediately broken up on commencement of recessions, there would be many less recessions.
I'm curious what the justification for this is. It seems like the kneejerk reaction toward any big/powerful entity (eg. "break up the tech companies!").
This is flawed reasoning. They're not collapsing because of the natural disaster, they're collapsing because of a financial disaster of their own making.
"The whole financial system and everybody that depends on it was a beneficiary of the bailouts. If everything collapsed, everybody would have suffered."
A narrative convenient for powerful banks that was created by powerful banks and allied politicians. People have suffered and continue to suffer because of the crimes these institutions have committed. Propping up their corpses only helps the criminals who created the situation. Clearing out bad businesses so that new ones can take their place is a central pillar of capitalism. If you really believe a bunch of billionaires who claim the world's going to end if they lose their billions, well, you're gullible at best. Far from forestalling suffering, the continued operation of these entities and their influence on legislation perpetuates it. Their collapse is the best thing we could hope for, even if it causes short term turbulence.
The incentives in capitalism "crash the economy". Yes, there was bad behavior. However focusing on individual behavior misses the forest for the trees.
Here's how it works.
Banks start off conservative. Banks only offer loans that pay themselves off. There's a run of good years. The incentive in capitalism is to make more money, and based off the recent history of good years, Bank A realizes they can offer more aggressive loans (e.g. interest only), take market share, and make more money. So Bank A does that.
Bank B now has the choice of matching Bank A, or losing market share (and maybe their business). So Bank B matches and maybe also offers less money down. This cycle continues with progressively more aggressive loan offerings until there's a run of bad years and things and people are stuck with too aggressive financing.
Its fascinating how narratives can have such a outsized impact on our worldview, often distorting reality. In this context, we see the "evil bankers" vs "free market" trope but in reality, neither sides couldn't be further from the truth.
You can prevent the bank runs and massive economic booms/busts by simply prohibiting banks from monetising deposits. We wont do this because it will collapse the nation-state as we know it.
Banks and the government have an agreement where banks operate as if deposits are stable in order to buy long-term assets, while the government insures deposit stability.
These assets primarily comprise of lending to governments, businesses and mortgages. In other words, the banking system essentially acts as a quasi-arm of the government, enabling the welfare state to function both explicitly by buying government debt and implicitly by expanding the monetary supply.
The progressive and libertarian narratives were both fighting against their own interests, which is why I find them both amusing. The reality is that we haven't had a free market for banks since the Federal Reserve Act of 1913, so it wasn't a battle between "evil bankers" and "poor poor lidl workers," but rather a game of king-making.
This in itself its own issue in that capitalism isn't doing what it should be when everything is subsidized by the gov.
Thus $500k 800 sq ft bungalows. You show me a chronic bubble and I'll show you a 'market' riven with subsidies, tax incentives, government secured debt and pencil whipping regulators. Healthcare, education, housing.... Yet when the bubble pops and the too-big-to-fails have to be 'recapitalized' all we get from the ruling class is more hating on markets.
Your last sentence is interesting:
the fact that too many economies rely on them to fall
I believe you meant that banks can't be permitted to fail. But it could also be read to mean that what we've self inflicted is a system whereby the greater fools are those found holding worthless CDOs (and all of their various derivatives) when the bubble pops; the market is ultimately expressing itself through the failure of financial institutions.
The real subversion of economics is at a higher level. This guy is just exposing (in this article and in his film) the patsy and placing all the blame on the patsy.
It is the federal reserve and the government that engineered this financial crisis. It was obvious there would be a housing bubble in (at least to me) 2001, before the bubble really started, when they forced interest rates below the rate of inflation- meaning lending was incentivized because the cost of money was below zero.
I knew about it early enough to profit from it on both sides, on the way up and on the way down.
But the heist of american money was a two-part job. The banks set it up in partnership with government which created freddie mac and fannie mae-- and then the governmetn actually stole the money with the bailouts.
If the government hadn't bailed out these banks they would have fallen and more worthy banks would have grown to take their place.
Instead we have institutionalized corruption. The concept of "to big to fail" is considered legitimate, and moral hazard is now standard operating procedure.
So long as everyone pretends like the bailouts where a natural consequence and not the largest theft in american history.... we're set up nicely for them to do it again. And again. And again.
I suggest people who are genuinely interested in these things should read The Creature from Jekyll Island by Griffen. It covers the history of the federal reserve, and how they play the bailout game every other decade. Each time the amount is larger and the audacity and greed on the part of government and bankers is larger... and then when we've forgotten about it, they do it again.
You might be wondering how government profits form this. The individuals in government profit financially, though of course the money is laundered as cushy jobs, book deals and campaign contributions... but they also profit by gaining more power over the economy.
The free market runs on firm failure, not just firm success.
To an outsider, the problem seems that the current establishment, posing as laissez-faire, has made an art of "privatizing the benefit, socializing the loss". With a bank, no one is risking the chaos of millions of people stripped out of their savings, roaming and ransacking. The prevention measures differ.
For example, Sweden nationalized a bank which nearly bankrupted, thus punishing the stakeholders by removing their profits. The USA just pays them more money. The message is clear: let's resume the financial bonfire, because risk pays.
At the end of the day who are more "libertarian", the socialists or the neo-liberals?
>if our choices as a society are: 1) major government intervention and problems, or 2) little government intervention and problems, I think I'd prefer the latter.
If this summation was accurate, I would tend to agree with your conclusion that little government intervention is preferable. However, I respectfully disagree with the premise, pointing to the success of Glass-Steagall (read 'government intervention') in maintaining a healthy separation of depository/commercial financial intermediaries and their investment bank counterparts. It was, clearly, the deregulation and removal of said safeguard that allowed for the conditions of 'too big to fail' and gave meaningful, even disastrous implications for the average citizen. Finally, the author is either misinformed or intentionally ignoring the causal relationship between deregulation embodied in the Gramm-Leach-Bliley Act and the financial meltdown.
Bankers aren't the cause of the financial crisis. Societies have always had a scapegoat to conveniently break societal tensions, previously with physical sacrifices, and presently with sacrificing the money of scapegoated individuals.
It's unlikely that a single sector of economy could suddenly cause a widespread collapse, especially without unrecoverable failure. A more cogent explanation is the behavior of the Federal Reserve. Similar to the Great Depression, the growth rate of the M3 was reduced by around 10 percent during the peaks of the recessions.
An economic breakdown is not the same thing as an "end of civilization" event. As much as the finance bros want you to believe that the world can't exist without debt and bonds and all of the modern machinations built on top of those things, a breakdown in those systems merely means that those systems stop working.
Obviously the finance system is completely entangled with modern supply chains and a million other things that more directly effect our daily lives. But lets not pretend that life as we know it would cease to be if a couple of banks had failed in 2008. I've read plenty on the subject and it's very clear to me that 2008's "financial crisis" represents an almost complete failure of government duty to the common man in favor of a few very rich individuals made even richer by the bailout.
Please, for a moment, try to engage politely with others on the forum. Just because someone believes differently from you doesn't mean they aren't well read. Sometimes we've just read different things than you. If you engage politely, you might be able to convince me that your worldview makes more sense! But if you act like a jerk and break the civil communication rules in place on this forum, there's not a snowball's chance in hell that I'll come around to your way of thinking.
>Banking is the single most heavily regulated part of the economy. It is fantastic to claim the financial crisis was caused by solely private actors while dropping the governmental context.
Banking might be the "most heavily regulated part of the economy", but the regulations that mattered were also disbanded one by one in the 2 decades leading to the crisis.
The government gave free reign to those "private actors".
Besides government, when it doesn't play its role as being there for all citizens interests, is just a lackey for private interests and powerful lobbies (and, no, "no government" wouldn't be a solution: just more of the problem).
That's a very odd view. The bankers did ruin the economy, because an economy with a bubble + the ensuing shock is far worse by most metrics than one where the bubble never happened in the first place.
The observation wasn't that the banks would go bankrupt. The observation was that if the practice was reliably so destructive to the value of the purchased businesses that the loans couldn't be repaid (including interest), the banks would stop choosing to make loans for that purpose. I think that observation is probably true. I also think that there are possible ways to accommodate that observation while preserving the main thrust (or perhaps even the entirety) of the criticisms, but I don't know which of those match reality (if any) or to what degree.
Can you expand further on the logical basis for that belief?
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