[ExI] Greed + Incompetence + A Belief in Market Efficiency = Disaster

[Rafal Smigrodzki]

Just to chime in after a long silence - bravo, there are still
libertarians on the ExI list!

Give the statists some pain, lord!

Rafal

On Fri, Jan 30, 2009 at 11:38 AM, painlord2k at libero.it
<painlord2k at libero.it> wrote:
> Il 30/01/2009 10.04, BillK ha scritto:
>>
>> On Thu, Jan 29, 2009 at 10:55 PM, painlord2k wrote:
>>>
>>> Market are not perfect because they are run by human beings.
>>> Like governments.
>>> But market are adaptable and the loop is very short, so the negative
>>> feedback is able to function better. People doing bad choices pay for
>>> them
>>> so they learn to don't do them again. The same is for good choices.
>
>> That's a restatement of the 'efficient' market theory and it just
>> isn't what happens in real life.
>
> Where in real life I can find a market more regulated by laws apart the
> banking sector? Or the medical sector?
>
>> Nice and neat in theory but nothing
>> to do with what actually happens.
>
> Please, point us to a service a government is able to sell better than a
> private enterprise without resorting to the use of the force to sell it or
> keep other sellers away.
> Or a market that is not heavy regulated.
>
>> Booms and busts happen because of the human 'herd' mentality.
>
> The "herd mentality" is good, because we look at what other do, what are the
> outcomes and repeat what they do, if we think the outcomes are good.
> In a market, one free of government interference, the outcomes are strictly
> correlated with the actions. If the actions of others are wrong, we are able
> to see them for what they are in a short time (few hours, day or years)
> where in the same happen with the government we see
>
> Boom and bust are a feature of the economy, because the existence of:
>
> 1) fractional reserve banking
> 2) fiat currency
> 3) legal interferences with the market
>
>> The
>> recent boom had everybody piling on because they didn't want to miss
>> out on the profits everyone else appeared to be making. Like a ponzi
>> scheme, it was great for those who got in early and got out before the
>> boom collapsed. (Also great for the facilitators who just sat there
>> raking in commissions on every trade).
>
> In the recent boom, the causes were:
> 1) government forcing the banks to loan to people without credit (to avoid
> "redlining")
> 2) government forcing FM&FM to securitize the bad assets of (1)
> 3) the FED lowering the rate to nil for a few years, then rising them.
>
> The government did it because they are "incompetent" or simply because they
> are interested in please their constituency? The span of an elected official
> is 2-4 years, so what will happen after is negligible; more than so if can
> be unloaded over "bad, evil, capitalists".
>
>
>> The point is they were all making good choices on the way up and the
>> feedback encouraged more of the same behavior. Then the house of cards
>> fell in.
>
> Suppose you are right.
> The government give them a bailout of a trillion of $.
> Why do they need to change their behaviour?
> They acted so because they expected to be bailed out if problem arisen.
> This is what the taxpayers are for.
> To bailout the friends of the governments.
>
> Mirco
>
>
>
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-- 
Rafal Smigrodzki, MD-PhD
Chief Clinical Officer,
Gencia Corporation
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