Seth wrote:GrahamH wrote:Seth wrote:Yup, socialists demand high wages and universal employment, but they do it without realizing (or caring) that this results directly in higher prices for goods, which reduces the value of the wages just as much as they were increased, if not more. It's called "inflation" by the way. Too much money (in the hands of workers as a result of excessive wages) chasing too few goods (caused by high costs of production that are the result of high labor costs).
It's a giant ponzi scheme and socialists as a class are simply too stupid, and to wound up in their egalitarian ideology to recognize hard economic facts. Supply and demand are going to bite the EU in the ass every time.
Capitalism is a 'giant Ponzi scheme based on everlasting economic growth, which is impossible.
No, it's just cyclical, which every good capitalist knows full well, and plans for.
I don;t know of a better system of economics, or politics, but it isn't the socialists that fucked up the western economies this time, by trading default swaps on shit mortgages, which led to ever more recless lending to keep the Ponzi scheme rolling.
Actually, it was. It was Barney Frank and Chris Dodd, who are as close to avowed socialists as it gets, who fucked up our economy by engaging in socialist redistributionist schemes under the Community Reinvestment Act. The mortgage market merely tried to cover it's collective ass with credit default swaps, and the FTC didn't catch on to the fact that the scheme was actually an insurance plan that, by law, was supposed to be fully funded, but wasn't.
But it was the "socialists" (progressives actually) in Congress who insisted that banks (on pain of dissolution through banking investigator harassment) lend money to people who had no business borrowing it in the first place. Absent the Frank and Dodd show and Carter's Community Reinvestment Act, banks NEVER would have made loans to unemployed or marginally employed people, and they would have remained what they always should have been: Renters.
While this scheme may have played a part, and even concentrated the collapse, the concept of sub-prime mortgages and of collatoralisation (or securitisation as it is known in Europe) were the invention of the Capital markets.
In fact, there is no particular problem with securitised products or with sub-prime mortgages. The real problem was that every step of the chain was incorrectly rewarded and motivated:
1. Rating agencies (because if they didn't give a good rating to securitised sub-prime mortgage books, they'd undermine their own credibility, as they'd given top ratings to the mortgage banks when they borrowed their capital to lend)
2. Mortgage banks incentivised their executives by connected bonuses to short term profits and volume
3. Mortgage banks incentivised their salesmen and broker networks by connecting commission to volume only.
This led to the widespread fraudulent mortgage applications that we've all heard of, in which brokers submitted falsified documents to secure mortages for people who couldn't actually afford them.
Banks overlooked this, because they knew they'd package up these dodgy mortgages and sell them off very quickly - leaving someone else stuck with a useless investment, and leaving the banks with bare profit - and executives with massive bonuses.
It effectively disconnected the banks from the (last remaining) consequences of highly risky lending. This is a very very bad thing.
The rating agencies would be able to point out the profitability of the bank as evidence that their rating was valid.
Rotten to the core, and absolutely against every business ethic going. This is not an argument in favour of socialism, it is an argument in favour of the harsh application of laws against fraud and in favour of good and prudent corporate governance.