Patterico's Pontifications

3/28/2008

Obama and Financial Regulations

Filed under: 2008 Election — DRJ @ 1:05 pm



[Guest post by DRJ]

If you are a typical conservative, one of the top issues for you is a candidate’s financial policies. Professor Bainbridge analyzes Obama’s recent speech on financial regulation here.

Beldar adds his thoughts here.

Don’t miss either one.

— DRJ

7 Responses to “Obama and Financial Regulations”

  1. It’s one of those cases where Bainbridge is wrong on several details, but correct on the general thing. (The South Sea and Tulipmania bubbles were very much “irrational exuberance” and it’s disingenous to say they were examples of the market working rationally–except in the long term. Irrational demand led to high prices: that’s what happens in markets. But the underlying values were highly overpriced–irrationally overrpriced–by buyers and sellers, and the bubbles finally popped, as rationality regained its due place. So in the long term the market worked. But also, in the long term, we all die. And there are one or two other points I would characterize as incorrect or at least highly questionable.)

    One point that should have been highlighted more is Obama’s preference for Hamilton over Jefferson. Hamilton was the first and greatest big government advocate from the 1780s on. He is the ideological ancestor of the modern Democratic party, even if the Democratic party still claims Jefferson as their ancestor.

    kishnevi (225b9d)

  2. Since Obama is such a fan of Hamilton (according to kishnevi, at least), what we need is to find Aaron Burr (metaphorically, of course).

    Another Drew (f9dd2c)

  3. It seems like the only economics Obama knows are they traditional democrat party version. Keep the cost of a college education down to attact the younger voters. Tax the heck out of the rich and spend like hell to solve all your problems. Never cut a penny of government spending unless it’s out of the defense department.

    daleyrocks (906622)

  4. Which brings to mind the question of why Democrats are so eager to trust the government to do everything except the primary purpose for which it is organized.

    Diffus (fddeb6)

  5. …we failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practices.

    What “productivity and sound business practices” did Obama’s wife perform in order to triple her salary from approximately $100,000 per year to $300,000 per year?

    The result has been a distorted market that creates bubbles instead of steady, sustainable growth;…

    Yep, that central economic planning worked wonders for Cuba and the old Soviet Union.

    Perfect Sense (b6ec8c)

  6. The housing bubble Cliff Notes version…simply excessive expansion of credit and money supply. The money supply has a lot to do with credit expansion, but not totally. The money supply is directly controlled by the Fed and Treasury.

    Credit expansion occurs when credit risk is perceived to be extremely low, you see this in low interest rates. Credit contraction occurs when the loaner is afraid the loan will not be repaid, higher risk calls for higher interest rates and more focus on the borrower’s ability to repay the loan and interest. The Fed lowers the rates in full view of higher risk for non-performing loans. Loan people decide they aren’t going to loan. Logical. Therefore the loaner of last resort has become the taxpayer now and into the distant future courtesy of the Fed.

    Some people will gain in this arrangement, some won’t. I know how to gain either way, so I have a neutral financial stance. But from the perspective of a US citizen I’m truly disappointed in the Fed’s strategy even though I understand it implicitly. The outcome will not be favorable to our nation’s well being. The only thing not so bad in this is that the whole globe is printing up currency almost as fast as we are. Just not as much on an absolute basis, and not with our humongous debt levels, both public and private. In essence, this is all to keep a lifeSTYLE going, not the life of a nation. The market will take care of this eventually. Regulations made in haste will only stir up the mud and make it more difficult to see what’s really happening. The true result of the Sarbanes fix has been to hammer the small entrepeneurs and small cap companies who have to take even more profits and move them to the expense line for the compliance requirements. Big corporation can much more easily absorb these compliance costs, and in a perverse way enjoy an even larger advantage of size over their smaller competitors.

    Regulations to ‘fix’ the credit bubble fallout will just work at ground level to make more red tape for real people doing real things after the REAL problem goes away because the real world market forces make them go away. Not to mention the increases in tax dollars that will go to administering all the new regs. Plus, the new glistening buildings in the Virginia woods. Ugly.

    allan (c8bce1)

  7. Here’s a link that’s pertinent both for the quote from Obama and the historical background.

    kishnevi (7dd83d)


Powered by WordPress.

Page loaded in: 0.0876 secs.