The GFC explained

acotrel says:

06:24am | 13/12/10

Glad you find that funny, Nicole - I DON’T !

Fazal says:

01:26pm | 21/12/10

Chill out, acotrel. You married to a ‘Banker’ o0r what?

sha says:

09:48pm | 12/12/10

Met your match eric?

Likes Joining Dots says:

05:49pm | 10/12/10

@toby, you may be right, but it might not be remiss to put a quid on a Scot in a close sworn race.  The barrage and burr-age of a scot in full flight is something wondrous to behold.

acotrel says:

06:04am | 13/12/10

It’s all part of their act! It impresses the tourists.

Keith Austin says:

02:22pm | 13/12/10

bollocks! londoners swear the best!

iansand says:

06:43pm | 11/12/10

The vibe?

PaulB says:

11:50pm | 11/12/10

Say it, and you get called a conspiracy theorist.  Its true of course, but you aren’t allowed to say it for fear of derision and ridicule.  The Mainstream media has done its job well and most people believe what is required of them.

BT says:

04:32pm | 12/12/10

@iansand, yeah the vibe… plus a degree in Social Science and Diploma of Business sort of taught me a thing or two as well.
@PaulB - I know what you mean, but I find that if you patiently explain your point and provide evidence to back up your claims then people start to think you have a valid reason for your beliefs.

nosthow says:

08:20pm | 10/12/10

Magic stuff Badge - admire your work !  You and I bring sanity to the Punch fella !

jf says:

01:44pm | 11/12/10

Do you mean, Badger, because of the irony of two very, very rich people pontificating about the evil of rich people?

Ben81 says:

04:29pm | 11/12/10

Oh god, the sad part is that nosthow truly believes what he just said.

acotrel says:

06:22am | 13/12/10

I just love it when a genius like Dick Smith says we should have an economy without growth.  Surely that’s an example of Liberal Jack?  I’m alright, I’m aboard, pull up the ladder!

acotrel says:

06:39am | 13/12/10

Loved the clip about Wanda Sykes.  It shows that the average citizen isn’t really stupid enough not to recognise when they’re getting screwed!

acotrel says:

06:01am | 13/12/10

So you don’t believe in ‘the free market economy’?

acotrel says:

06:19am | 13/12/10

While the economy is in a downturn, that’s the time to do the belt tightening thing, and start saving - YEAH, SURE!  Keep taking the medication!

Richard says:

12:36pm | 11/12/10

America blaming China for the world’s financial problems by saving too much is like the F student blaming the A student for bringing down the cohort average by studying too much: its nonsense.

Saving generates capital; it is the only way to generate capital. Blame idiot regulators and governments for the way that this capital eventually ended up in the US housing market (as well as the inflexible communist system they have in China, but that goes without saying.)

In a true free market that capital would have been put to productive purposes and raised the wealth and living standard of the whole world. But inflexible regulation and stupid government planning always gets in the way of the free market and ruins things for everybody.

Shane From Melbourne says:

10:50am | 12/12/10

@ Michael- Nothing on CDOs? Deregulation? Sub prime loans? Absolute BS, the banks were willing participants in the whole mess up to their eyeballs. The U.S government should have never bailed out those #@&*!!!

acotrel says:

06:09am | 13/12/10

‘In a true free market that capital would have been put to productive purposes and raised the wealth and living standard of the whole world. But inflexible regulation and stupid government planning always gets in the way of the free market and ruins things for everybody. ‘

STILL A BELIEVER, RICHARD?  That ideology you’re smoking must be strong stuff?
The word ‘balance’ should mean something to you? - balance between regulation and freedom?

acotrel says:

06:15am | 13/12/10

Shane, the banks were always well aware that if they stuffed up, they’d be bailed out by the taxpayer!  No government could ever afford a total collapse of the finanancial sector. To say the banks should not have been bailed out is stupidity.  We were looking at an utter and unmitigated social disaster, French Revolution style!

Richard says:

05:53pm | 13/12/10

Nah, a banking collapse wouldn’t have been that bad acotrel. Of course, there’s no way to know for sure, but I doubt it would have been apocalyptic. My estimation is that we would have seen a very sharp and destructive recession, which would have cleared out all the toxic debt from the system, and then we would have had a genuine recovery by now already, and the world economy would be just about to hit its straps again. Instead what we are getting is a long, drawn out period of stagflation. I know which one I’d rather be experiencing.

Flat Michael says:

08:29pm | 12/12/10

Even then, he was just having a spray. “Stupid fookin’ government” and “a regulator asleep at the wheel” don’t count as in-depth analysis.

If it’s been going on for 20 years as he claims, there’s been many changes of government and many opportunities to set things right. Maybe people - his people - just voted for more money.

nosthow says:

08:04pm | 11/12/10

@Richard - yeah Dick - forgotten the GFC and the government bailouts already fella !  hahahhhh

Shane From Melbourne says:

11:01pm | 11/12/10

Capitalism works because it is an endless ponzi scheme based upon infinite growth in a finite world.

marley says:

07:36am | 12/12/10

I don’t entirely agree with this.  Australia was very late on board with the idea of deposit guarantees, and then arguably went to the extreme of putting in place quite massive guarantees which distorted the markets here.  But other countries have had more modest deposit guarantees for decades - not to protect the banks from their own misdemeanours, but to protect their clients.  The depositor needs something more than self-regulation to protect him.

Richard says:

12:57pm | 12/12/10

No nosthow, I haven’t forgot about the GFC and the government bailouts~ that’s what I’m talking about. I’m condemning governments for causing the GFC, for wasting the people’s money on bailouts, and for preventing the free market from making bankers pay consequences for their greed. You are labouring under the delusion that capitalism and the free market caused the GFC, but that’s nonsense. It was the distortions and imbalances in the free market caused by interventionist government policies and cheap money from the fed and that caused the GFC.

Capitalism in and of itself is not a ponzi scheme Shane From Melbourne. The fractional reserve banking system that is used to create money in this day and age is a ponzi scheme, but that hasn’t got anything to do with the free market per se.

The free market is just the basic principle that facilitates exchange by using supply and demand to find an equilibrium in price. The thing about the free market is: it will always find a way. Try to ban it, regulate it, mandate it, put price controls on it, guess what? You’ll just drive it underground for a while, create a black market, exacerbate the supply/demand imbalances and set yourself up for further problems down the track. We must work with the free market, because it is the natural order of human economies.

And I don’t believe that Infinite growth in a finite world is impossible.  Economic growth need not necessarily consume finite resources. Science and technology can find renewable or recycled substitutes for non-renewable resources and fossil fuels. I think growth is a fundamental tenet inherent in our expanding universe, ever since the big bang. Anything that stops growing, starts to die. There is no static state in a dynamic world.

And regarding marley’s point about the depositor needing something more than self-regulation to protect himself, I would argue that everyone must ultimately be responsible for themselves and their own money. You see, one of the benefits of the free market is that competition tends to drive increases in efficiency and innovation, as competitors constantly strive to give the consumer a better and better deal. At the moment, all these different financial institutions are competing on price, service, etc, etc; but none are competing on safety! So there aren’t any new innovations or greater efficiencies in keeping your savings safe, and the free market is being prevented from naturally regulating itself.

But its even worse than that, because when the government just steps in a smacks a guarantee on everything, all of a sudden it creates a huge moral hazard, and bankers seeking a greater return so they can get a bigger bonus this year are more inclined to take bigger risks, because all the fear of losing that money has been removed by the government guarantee. So then they take these huge risks, maybe loan funds to people who pose a real credit risk and may not be able to pay it back. If that happens on any kind of scale, well… you know what happens next.

Macon Paine says:

04:54pm | 12/12/10

@ Richard

I stand and applaud you sir!

Outstanding posts. Two of the best posts i’ve ever seen on this website and an exceptional defence of capitalism against those who snicker at the system that provides them with everything they take for granted.

Shane and nosthow go here and learn something about capitalism: http://www.youtube.com/watch?v=Br4s1R8uotw
I know its in 14 parts but it is a fantastic lecture supporting many of Richards claims with empirical data.

acotrel says:

06:52am | 13/12/10

‘Capitalism works, it straight does, because it operates within the parameters of two fundamental human emotions: greed and fear.’

There must be something lacking in my make-up.  I don’t experience either of those emotions under normal circumstances.

Matt says:

09:35am | 14/12/10

acotrel, any person who says that they don’t experience greed or fear under ‘normal circumstances’ is either the dalai lama or completely unaware of their own inner workings. You may not crave to be a billionaire, but I’m pretty sure you’d be excited to win the lottery. You may not walk down the street terrified of an anvil falling on your head, but do you get any form of insurance? Why? Afraid of losing something are we? They are both completely normal and natural instincts in all of us.

It’s a good post Richard, and you’re not wrong about the threat of losing money being the integral part that balances the investment. Ahh a world without constant government intervention.. it makes me warm and fuzzy inside to think about.

acotrel says:

07:28am | 21/12/10

Richard, just because the communist experiment failed in Russia, doesn’t mean ‘capitalism works’!  Being a believer won’t help if we hit rock bottom through some idiocy performed by the greedy amongst us. During the 30s depression three of my uncles rode push bikes from Melbourne to Cairns looking for work.  It might be what you end up doing yourself?

acotrel says:

06:46am | 13/12/10

’ I’m condemning governments for causing the GFC, for wasting the people’s money on bailouts, and for preventing the free market from making bankers pay consequences for their greed. .

Sorry to be so dumb, but didn’t the bailouts happen as a CONSEQUENCE of the GFC? It was never the banks who would pay for being greedy, it was always going to be the average punter!

Richard says:

10:53am | 13/12/10

I suppose you’re right acotrel, but that is an injustice in my book.

barnes says:

02:03pm | 13/12/10

the opposite of fear is trust

Reg says:

09:28am | 12/12/10

The clarity of the gentleman’s diction is quite remarkable as it so often is with the Irish voice. An excellent example for the English and of course the Scottish who still growl around is some long lost German dialect. There are many mumbling Australians who could also benefit from imitating this wonderful example.  Huh…?  What swearing?

It’s alright I’m half and half.

acotrel says:

07:37am | 21/12/10

RIchard, it might be an injustice, but the reality is that when the banks play their games, they know very well the risks involved.  The Australian giovernment will never let our banks fail, and the banks know that very well.  All this bulshe about the free market is exactly that.  The banks are playing a game in which they know they cannot lose!  I suggest that if our banks had been allowed to fail the resultant social upheaval could have lead to a bloody revolution! That is one of the risks in the capitalist system. It happened in Russia in 1917, and we are not immune!