What I Would Do 22 comments
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My friend Dr. Jeff wrote in response to one of my articles:
Most of the questions you ask have been answered on the public record. They are available for our evaluation.
In the case of Lehman, the Fed could not take the collateral because it did not qualify. If they had, you would have been leading the charge in objecting. Treasury had no authority.
In the case of AIG, there was concern about counter-party risk that extended worldwide. We got a demonstration of that from Lehman.
I am mystified by your criticism of the Obama administration — yet to weigh in on this.
As a careful, loyal, respectful, and interested reader of your work, I have some questions. You have been critical of elected officials, appointed officials, independent bodies — in fact — every agency of government. Just how do you think we should be setting policy?
Is there some other country or system that is doing this better?
Just wondering…
Look, Jeff, I feel the same way, I hate being merely a critic. That is one reason that I submitted many of my policy ideas to the Obama administration. Given the limitations of their website, though, I can’t easily point to what I submitted.
Aside from China, the competitive fringe in Asia is doing better. Aside from that, other countries are a tie at best.
But what I would propose as a solution to our current crisis is this:
If I were offered the opportunity to fix things, I would take it, and:
Create a new chapter in the bankruptcy code for Too Big To Fail institutions
Create a means of resolving home foreclosure issues in a manner similar to Chapter 11, which would lead to more compromises.
Institute true tax reform that eliminates the sheltering of income, and eliminates all tax preferences.
Wind down the Fed’s current “solutions”
Begin inflating the currency to force up the value of collateral relative to nominal debt levels
The last one I like the least, but I’m afraid it would have to be done. Phase two would be:
Move to a currency that is gold-backed.
Replace the Fed with a currency board.
Create a new unified regulator of all depositary institutions.
Slowly raise bank capital requirements, and make them countercyclical.
Bring all agreements onto the balance sheet with full disclosure.
Enforce a strict separation between regulated and non-regulated financials. No cross-ownership, no cross-lending, no derivative agreements between them.
Bar investment banks from being publicly traded, and if regulated, with strict leverage/risk-based capital limits.
Move back to balanced budgets, and prepare for the pensions/entitlements crisis.
That is my proposal, and it is better thought out than the politically driven drivel that occupies DC today. I am thinking longer term than most politicians do, and aiming for a society that can work in the long run.
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I think I have a deja-vu O_o
The problem with all the financial systems was people don't care about it's stability, but how they can profit more out of it, and this mostly harmed it.
Fed and other institutions only wants stability when the only thing we can tell about the future is : things always change.
People will easy speculate about anything, so why try to fix the system and not doing what everybody is doing :)
Yes the forefathers put together a system of checks and balances, but over the years that system has been undone through amendments to the constitution and rendered mute by the process of party affiliation.
What good is it to have the congress or courts as a check on the executive if both or all are controlled by the same party?
Issues are pre-determined in private party offices then implemented in the public offices of government. Political parties function effectively as a form of shadow government.
Actually they are but one layer of shadow government, another layer being the special interest.
So what is the solution? The initial solution is simple, don´t vote for a single party for every political office. And secondly America needs a third rail in it´s political arena. There are at least 3 credit bureaus, rating agencies, major banks, etc, etc. but only two major parties?
What is wrong with that? Simple...three is company...two is a couple!
Carp Diem
What do you do when your "solution" causes world war three with nuclear weapons? I am just curious, when everyone dies by the cure, was the solution really worth it?
Kind Regards
Could someone weigh in? Thanks!
"Institute true tax reform that eliminates the sheltering of income, and eliminates all tax preferences."
The only real, workable, true tax reform is the abolishment of ALL confiscatory taxation, which the Founders viewed as abominable!!
dollar TV is only work 1 dollar, and the parts of even less, how many of those will actually get produced. and its not like when we were on the gold standard that the economy wasn't either gamed, or didn't have recessions or depressions (though they did call them panics back then. it appears depression was invented for the crash in 29 to avoid a ..panic.)
and as far as letting the market fix it, how will letting group think fix it? the market has been corrupted by private and public entities (some times...ok lots of time at the behest of private entities) since it was even thought of? and how can you have a free market without total and complete transparency.
and i guess one could also add remove all of the credits available to corporations.
On Jan 15 01:47 PM Roowns wrote:
> "Move to a currency that is gold-backed"
>
> I think I have a deja-vu O_o
>
> The problem with all the financial systems was people don't care
> about it's stability, but how they can profit more out of it, and
> this mostly harmed it.
> Fed and other institutions only wants stability when the only thing
> we can tell about the future is : things always change.
> People will easy speculate about anything, so why try to fix the
> system and not doing what everybody is doing :)
I guess they have a magic wand? I continue to be astonished how otherwise savvy authors keep missing the central point here. Have you seen any increase of money velocity, at all, even with all that has been done already? The Fed's monetary policy can only work if lenders are willing to lend, and more importantly borrowers WANT and are ABLE to borrow.
It just aint happening, nor did it when Japan tried it.
Also if you might describe how a country of 330 million people would get by without taxes to fund a government, how's Somalia doing these days?
ussmex - agree with you. Gold as a currency backing is silly and if it was instituted the government would have to confiscate all gold in public hands, so no, goldbugs would not profit, although they would have a whole new set of things to complain about. Using gold lies in the fact that it is finite, however cannot be destroyed. People who site it do basically so that the money supply can be controlled(which they somehow think will make things all okay).
Levin70 - Bingo!!! You are right on. People like to come up with some ideas without realizing the unintended consequence is everyone is going to be wiped out(either money/wealth-wise or physically-dead.) Its kind of like wasting trillions of dollars on global warming like humans can control the overall temperature of earth or thinking that when push comes to shove people are going to care about being green when they are out of energy to survive. Survival will dictate the rules and invention blooms out of necessity.
curbs-in - always agree with your points, but there will be a sunnier day...may not be this year, may not be this decade but it will come. This isn't it for the world. This is a bump in the road of globalization, but its time will continue to come. We have nothing to fear but an asteroid and even then we'll all be gone, so we won't even know it came.
Or: "Move back to balanced budgets, and prepare for the pensions/entitlements crisis" -- if the Obama Administration leaves office in 2017 having achieved just those two item, that would be an incredible success.
But a realistic solution means being realistic about what a government _can_ do, and picking the very few best things and putting their efforts behind that effort. Saying "I'd like everything, please, and right now" is gratifying, but we aren't going to get "everything"
You make excellent points. But how about this?
L E A V E T H E M A R K E T S A L O N E!!!
We do not elect the politicians to run business. They do not know anything about making money and the government all over the world are living proof of it.
You want to solve the housing crisis? Let the prices drop till buyers emerge out of woodwork and buy the properties to rent out in a profitable manner. Let the sick banks and businesses go out of business to make room for the new. We did not bailout dot coms!
Let the interest rate raise so people around the world would want to invest in US.
It won't do any harm to this country if all these deadbeat homeowners move in to a rental apartment or a house and hold 3 jobs to pay their debt.
There is no reason for the government to support $5,000 TV, $70,000 Car, $2,000 Coffee machine and a $500,000 second homes.
I'd love to see it, but a better idea is to just let the market decide what the money will be. It probably would be gold, but it might be silver. It might be both. Heck, it might be ipods for all we know.
The main thing is not replacing fiat money with gold backed slightly less fiat government money. The main thing we need to do is to take the printing press away from the government completely.
Let the market choose the money.
If the currency is gold backed as you propose, what function requires a currency board? Either the gold is there or it's not. Let the market decide on relative currency valuations between other countries fiat and our gold-backed currency.
Providing the gub'mint some means of "controlling" the money will only lead us back to the spot we're in now.
One other item I would suggest as something to consider would be to abolish all fractional reserve banking and eliminate FDIC insurance.
If the public is aware that their bank might lose their money in some form or fashion they will be much more likely to put their money in banks that engage in less risky behavior.
Redefine banks as warehouses for money. Specifically note in the law that the bank does not 'own' the money you deposit to do with as they wish (as is the case now), but are rather safeguarding your property, with the attendant liability.
The system must discourage the expansion of the money supply to the maximum extent to minimize the probabilities of future credit bubbles being created and deflated in recessions.
I am taking a run at Congress in 2012. I am in Health sector but have worked for some of the biggest names in politics on political data collection and analysis in Washington. Win or lose I will sure expose some truth publically. And if I get elected I will be the most hated man in Washington, a one term deal no doubt :)
On Jan 15 01:32 PM Jackson Cash wrote:
> You have my vote, now run for office!
On Jan 15 02:36 PM Levin70 wrote:
> David
>
> What do you do when your "solution" causes world war three with nuclear
> weapons? I am just curious, when everyone dies by the cure, was the
> solution really worth it?
>
> Kind Regards