US Financial Crisis

But as I understand it, the economy is more like collective social opinion - something that regulation cannot effectively control.
Sure you can make regulations, but how can you enforce them?

I wonder if you could change the economic fortunes of a country using nothing but an extensive propaganda campaign - get people to believe the economy is doing worse/better and see if it actually occurs.

Originally posted by ulrich von hutten Originally posted by gcle2003  the economy is essentially out of human control.     Can't agree. The economy is subject to legality, like any other matter on this planet. Yes, there are fluctuations and variances, but in general the main course is obvious.   A redistribution of wealth, mostly in one direction, bottom-up, takes place. It's would be foolish to belive, that only a planned economy has guidelines. The capitalistic one is dominated by the joint-stock companies and follows the rules of their leader and their henchmen.

the cause of the current problem will exist in a socialist state, Human nature. You cant change, but only try to limit the damage from it - esp human greed. that is, its in human control but we cant control ourselves.

The logic of the derivatives are (mostly) sound, greed changes how they are used and makes them toxic. The logic behind freddie and fannie is sound, their current sitution is  due to greed. Every part of what went wrong in the US and other countries has more to do with typical human faults. The part that compounded it in the US is lack of regulations to limit those moments in the market cycle where everone feels bullet proof. So may i add laziness and a very short term memory 'this time its different'. The system is fine it just needs more active and independant oversight. if the current democracies can just move from an arms length away from big business, and regulate according we wil not have such massive high and lows.

 IIRC Germany had always jacked up rates before a boom got carried away, they had lower inflation targets (2%) and never let them be compromised. They preferd mini, manageable reccesions than boom times, but always for the greater good of sustainable linear growth. Same system different style, boring, safe but none of these drama's with no pure socialism needed. Take a look at their infrasture and systems compared to the anglo economies, yeah we are were in consumer heaven but our education, roads, trains and other systems suck compared to theirs (unless your rich). slow growth can work.

the hedgies are doin what they are paid to do, make money in every situation. If the go short a weak bank, dont blame them. they're doin what we expect them to do, blame the bank for getting in that situation . You dont short healthy well run companies. As long as there are robust disclosure laws.

Originally posted by hugoestr I found the solution for the U.S. financial problems yesterday at a newstand: WASHINGTON—A panel of top business leaders testified before Congress about the worsening recession Monday, demanding the government provide Americans with a new irresponsible and largely illusory economic bubble in which to invest. "What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future," said Thomas Jenkins, CFO of the Boston-area Jenkins Financial Group, a bubble-based investment firm. "We are in a crisis, and that crisis demands an unviable short-term solution." The current economic woes, brought on by the collapse of the so-called "housing bubble," are considered the worst to hit investors since the equally untenable dot-com bubble burst in 2001. According to investment experts, now that the option of making millions of dollars in a short time with imaginary profits from bad real-estate deals has disappeared, the need for another spontaneous make-believe source of wealth has never been more urgent. ... "The U.S. economy cannot survive on sound investments alone," Carlisle added. ... Demand for a new investment bubble began months ago, when the subprime mortgage bubble burst and left the business world without a suitable source of pretend income. But as more and more time has passed with no substitute bubble forthcoming, investors have begun to fear that the worst-case scenario—an outcome known among economists as "real-world repercussions"—may be inevitable. ... Solution to US. Financial Problems

Going back to gold standard would be a start but that would face much opposition from the hedgies and other finance businesses pumping out billionaires simply by playing with the numbers. The corrupt congress also would never pass it into law mostly because they are bought out but also because far too many are stupid to understand it or know anything about the time when this was the rule guarding the stability of world economics.
The time will come when Americans will be forced to take matters into their own hands and we are getting closer and closer to that day the way things are going here.

The gold standard makes no difference to anything. The collapse of '29 and all the earlier depressions took place under the gold standard.

Originally posted by gcle2003 The gold standard makes no difference to anything. The collapse of '29 and all the earlier depressions took place under the gold standard.   In fact, a strict implementation of the gold standard is a surefire road to depression, since it only allows for sporadic and erratic expansion of the money supply. (By strict implementation I mean restricting the power of the banks to isue notes to the value of the gold they hold.)   It's not as though gold is actually worth anything in particular.   Entertaining reads on this subject are Terry Pratchett's two recent Discworld novels - Going Postal and Making Money.

I read a few of Pratchett's Discworld novels and I was going to order Making Money but instead I got Pyramids which was pretty entertaining.

The collapse of 29 did happen during the gold standard but as far as I know it was mostly due to the increase of tariffs which caused it or at least made the economic crisis far worse than initially expected. So i guess it was mostly due to bad decisions by government rather than flaws of the gold standard system.

I simply can't see how our system of unrestricted fiat money supply can be any better than the gold standard. I read a book a while back on this, Gold: The Once and Future Money that explains in great detail why gold was and still will be for a long time to come a safe metal of value to base an economic system on.
Unless our civilization completely crashes down and we go back to a subsistence life I can't see how gold will lose its value to us. Its simply ingrained into our psyche that gold is wealth, countless physical objects from stone disks to sea shells have been used before but none have lasted as much as gold (and other similar precious metals).

Originally posted by vulkan02 That is a possibility but realize that our times are not the same as the 30's. During that time many people had an unshakable view of the credibility of governments that today many more do not, and I'm not talking about just America here. The industrialization of America was still well under way, people saw the great depression simply as a retribution for a care-free lifestyle many were pursuing during the 20's. Plus back then religion(christianity) was nearly universal in America, Darwin was ridiculed and you had your ridiculous Scope's trials etc. If a major crisis really does hit here(like GD) in the near future then U$ authorities can try to hold power through a military dictatorship but for now its mostly through media manipulation of vast numbers of Americans to stay politically apathetic.

Vulkan02,

The 1930s were the right time for a revolution. Besides of the destruction of society as it was known, the crash ended the belief in the market system for most people in that generation. The U.S. counted with many active and competent communists and unions at the time. The country was more literate, and so, more thinking. People lost property and became homeless.

The U.S. didn't revolt then.

Today we have two generations that have grown under the world of the free market fundamentalists, many who still have faith in the unrestrained market even though its failures are obvious now. We have television, which slows down thinking, and our TV news channels are nothing more but right wing propaganda. Our sedition laws (I mean, terrorism, but I like the sound of the world. Call me old fashion ) are stronger than ever. We don't have the active communists who would be willing to lead a revolt and who were disciplined enough to be able to pull it out.

And the Army has really powerful weapons, and the best trained soldiers to handle it. Who would fight them? At the best, a rebellion can hope to create in the U.S. a situation like that of Iraq of constant instability. But who will provide the rebels with the needed weapons? Not Canada. Not Mexico, especially since the arms trade flows from the U.S. to Mexico, not the other way.

The only possible confrontation would be a massive nonviolent movement. I don't think it would work, but let me think through it.

The reason the 'Revolution' never happened in the main Western countries (don't forget it happened in the fascist - broad meaning - countries as well as the communist ones) is zthat it was defused into a gradual peaceful one with the coming of varying degrees of egalitarian socialism and the welfare state.