Economics and free market

[LaurieAG]

Originally Posted by charles brough

Interesting! It makes no sense to make a product without knowing if you can get people to buy it.

Hi Charles,

You said it. Here's a clipping from todays Australian newspaper written by Matt West.

Vultures already circling

Last week a US Vulture fund, Citadel Investments Group, stumped up US$800 million for Etrade's portfolio of asset backed securities(ABS) which had a book value of US$3 Billion. The deal sheds some light on the sort of pricing beginning to emerge for the likes of ABSs, CDOs, CLOs and other such junky bundles of debt that were the first product victims of the sub-prime crisis.

Ken Griffin, the guy who runs Citadel, has already picked up bombed out assets from Sowood Capital and Sentinel Management - Two hedge fund casualties who had been big in CDOs. Etrade was simply short of cash and willing to accept 27 cents in the dollar.

As there was some equity thrown in, the actual figure was more like 17 cents in the dollar. Imagine if all the big Wall Street banks had to revalue their SIVs and so forth at 17 cents to the dollar. Now that's ugly. Even now, though, four months after the meltdown, Ken Griffin is one of the only bottom pickers brave enough to have a real lash.

Amid the deluge of comment over this credit market disaster, scarey little facts bob up everywhere. One is the existence of credit default swap contracts outstanding which total some 45.5 Trillion. That figure has balooned 9 fold in the past 3 years alone. That is five times the national debt in an unregulated market, apparently with no prescribed reserves for future losses.

[Michaelangelica]

Originally Posted by charles brough

I agree. The Free-Enterprise, free market or simply capitalism is not working well now. But look at the problems and you see a common thread. They all involve people really not concerned with or caring about the long term. They cannot and do not want to afford the cost of building for the future. We are letting our bridges fall from lack of maintence. Our indistries slip behind because of being absorbed with the bottom line for the quarterly earnings report.

Also, there is a growing lack of honor, integrity. People do not keep their word. The classes and divisions in our society are also growing to hate each other. Strife is adding more stress to our lives.

So, it is not the economic system as such but a change that is occuring in the public itself that is causing the problem. Our religious/secular ideology is failing us. It needs to be replaced.

A very dismal view Chales.
I hope you are wrong; but I fear you may be right.

A lot of our institutions are based on the structure of the Roman Legions (EG Catholic Church, most Govt. departments). This enforces mindless conformity.
but it is great way to 'win' whatever that means.

[Mike C]

To All

A true 'free market' would not create any millionaires or billionaires. Why?
Because granting patent and copyrights to individuals creates a 'monopoly.
If the government grants rights to property ownerships and the patents and copyroghts that create these monopolies, than why should not the government also place restrictions on these grants that would create some equity amongst the people?
Our Constitution promotes equality in education, workplace opportunity, voting rights, freedom of speech and religious choice.
In the private sector, sporting enterprises try to maintain some degree of equality by allowing the bottom teams have 1st choice for the new talent in the amateur sectors of colleges and other such competing education systems plus controls with salary caps by the teams.

So, why is not this freedom not applicable to politics and the economy?
If it were, we could get rid of the political corruption and protect the workers rights to have representative organizations to give these people a much greater share of the 'pie' that they produce in the first place?

Mike C

[Zythryn]

Originally Posted by Mike C

In the private sector, sporting enterprises try to maintain some degree of equality by allowing the bottom teams have 1st choice for the new talent in the amateur sectors of colleges and other such competing education systems plus controls with salary caps by the teams.

So, why is not this freedom not applicable to politics and the economy?
If it were, we could get rid of the political corruption and protect the workers rights to have representative organizations to give these people a much greater share of the 'pie' that they produce in the first place?

Sporting organizations due this to make games more exciting. The idea is if the worse team gets first pick, then they will improve more than the best teams. No one wants to pay to see a game which is so lopsided it can no longer be called a contest.

This has no place in innovation. It slows innovation and would lead to just as much corruption as the current system. Companies would jockey for position at the bottom so they could get the advantages that would bring.

The idea behind capitalism is that those that do well, get rewarded for it. That is what drives innovation.

What the US needs to do is have a 'seperation of government and business' doctrine. Then you would see more of a true free enterprise system.

[charles brough]

As Laurie says, the R.E. debt cycle has a long way to go yet. The government is going to have to pump up the liquidity a lot and force the dollar and interest rates down. That means much higher prices here for everything next year.

Zythe and Mike seem to think the problem is that our economic system needs to be reformed. The problems are caused by a growing lack of thought for the future. No one cares. Why else do people eat so much they grow obese, vote for the wrong candidates and then turn on them, and see so much crime and senseless murders?

I have no dismal picture of things because I know that when things get bad enough, people will adopt swing to a new world-view and way of thinking that will reverse all this---just as they always have in the past. That is what started every new civilization. The old religion was abandoned and a new world view adopted.

[Pyrotex]

Originally Posted by Buffy

First of all, supply and demand are highly organic: they interact dynamically as a continuous feedback loop. ...They don't call it the dismal science for nothing.

Economics shares some attributes with the water cycle of Earth. There is "supply"--the evaporation of water into the air (driven by heat from the sun); and there is "demand"--the condensation of water vapor back into a liquid, which typically rains down upon the land, forming rivers and lakes and seas.

You cannot understand the complexity of this cycle unless you realize that both sides are always in process simultaneously--and each side continuously affects the other. Neither side is given a "choice" to stop, start, speed up, slow down. The rain may "choose" (metaphor!) to fall in one river rather than another, or to briefly come down as snow and be stored on a mountain top, but the cycle as a whole... is indeed, a WHOLE.

We're all Keynesians now.

[Zythryn]

Originally Posted by Mike C

A true 'free market' would not create any millionaires or billionaires. Why?
Because granting patent and copyrights to individuals creates a 'monopoly.

This also stuck me as an odd statement.
Think about it carefully for a minute, do you honestly believe that there would not be a single millionaire or billionaire created without the use of patents or copyrights?

[Pyrotex]

Originally Posted by Mike C

A true 'free market' would not create any millionaires or billionaires. Why?
Because granting patent and copyrights to individuals creates a 'monopoly.
...why should not the government also place restrictions... that would create some equity [equality??] amongst the people?...

Because then you wouldn't have a FREE Market, Mike!!

There have been any manner of free markets over the centuries, and there are always an unequal distribution of wealth. Forget patents. There is always an unequal distribution of natural talent, of opportunity, of education, of passion, of the ability to handle risk and danger, even of physical strength and prowess. That alone is all one needs to explain the unequal distribution of wealth.

[charles brough]

I think Mike C has mistaken an ideal for an economic system. The underlying ideal in capitalism is: provide for your own economic needs in a way that also serves society." To achieve that, there has to be regulations as the system is not instinctive. The capitalistic economic system is the result. It works better than communes for large masses of people. There is no other system. Socialism is also only an ideal. It turns out, when run by Socialists, to be a welfare state version of the capitalistic system. The history of socialism is merely a history of the Socialist Cause.

[Michaelangelica]

Originally Posted by charles brough

I think Mike C has mistaken an ideal for an economic system. The underlying ideal in capitalism is: provide for your own economic needs in a way that also serves society."

An ideal seldom put into practice?
corporations are mostly amoral if not apolitical.

To achieve that, there has to be regulations as the system is not instinctive. The capitalistic economic system is the result.

there are many varitions on the theme of 'capitalistic economic system'

It works better than communes for large masses of people. There is no other system. Socialism is also only an ideal. It turns out, when run by Socialists, to be a welfare state version of the capitalistic system. The history of socialism is merely a history of the Socialist Cause.

Many Americans believe this, but given N. European economies and some middle eastern economies it does not have to be true.
At the slightest hint of "socialism' 'USAans' seem to go running in panic.
Personally I would rather like totally free education as in Venezuela and many other countries.

Patents and copyrights are one factor in collecting wealth for the copyright holder (Not necessarily the creator e.g., 'Beatles' music). Bill Gates didn't get where he is just by ripping of the Mac operating system, he had to protect it with patents and attorneys.
One of the nice things about open source software is its charity, generosity and sharing spirit. These are not necessarily the qualities always found in a capitalist "free" market system