Those who play the blame game can find plenty of targets here: the bankers and the regulators were equally clueless. But should anyone be blamed for not recognizing the implications of regulations that they don't even know exist?
Omniscience cannot be expected of human beings. One really would have had to be a god to master the millions of pages in the Federal Register — not to mention the pages of the Register's state, local, and now international counterparts — so one could pick out the specific group of regulations, issued in different fields over the course of decades, that would end up conspiring to create the greatest banking crisis since the Great Depression. This storm may have been perfect, therefore, but it may not prove to be rare. New regulations are bound to interact unexpectedly with old ones if the regulators, being human, are ignorant of the old ones and of their effects.
They go on to say:
The financial crisis was a convulsion in the corpulent body of social democracy. "Social democracy" is the modern mandate that government solve social problems as they arise. Its body is the mass of laws that grow up over time — seemingly in inverse proportion to the ability of its brain to comprehend the causes of the underlying problems.These are the general points. They go into good detail to justify these points. Basically, The People complain about risk to their standard of living or wealth, as they first did after the '29 Stock Market Crash. The government steps in to build cushions of safety, so if a disaster like the previous one happens, people won't be completely wiped out. But, rather than behave conservatively within this new safety cushion, people (individuals, banks, whoever) think "I can make more money if I push to the limits of this cushion", and then set themselves up for new disasters. I think this ties in neatly with the problems in Greece and California.
Their main point illustrates the economic principle stated in I-Pencil: that the economy is too complex for any one man or any bureaucracy to control. http://fee.org/library/books/i-pencil-2/
ReplyDeleteIntentional or not, government regulation led to the financial mess the world is in.
It seems like one regulation creates a need for another and so on; and if the government doesn't learn from its mistakes or refuses to, it continues until the government has complete control over the economy.
"Those who play the blame game can find plenty of targets here: the bankers and the regulators were equally clueless. But should anyone be blamed for not recognizing the implications of regulations that they don't even know exist?"
I would say yes. Since over regulation of the private sector is not in keeping with the principles of the Capitalism. And all they had to do was read I-Pencil, just joking.
"Omniscience cannot be expected of human beings. One really would have had to be a god to master the millions of pages in the Federal Register — not to mention the pages of the Register's state, local, and now international counterparts — so one could pick out the specific group of regulations, issued in different fields over the course of decades, that would end up conspiring to create the greatest banking crisis since the Great Depression. This storm may have been perfect, therefore, but it may not prove to be rare. New regulations are bound to interact unexpectedly with old ones if the regulators, being human, are ignorant of the old ones and of their effects."
This is exactly why the government doesn't need to over regulate the Private Sector.
The point about "Social democracy" above relates somewhat to that Toqueville chapter from the earlier post. People looking for the government to provide for them.
And that is how despotism would establish itself in a free nation under the guise of taking care of the people and the people looking for the government to take care of them.
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