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Author Topic: An Annoying Market Failure  (Read 3209 times)
bitconformist
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September 08, 2011, 11:22:00 AM
 #61

How will you end collusion when the banksters are entrenched not only in the regulatory bodies but Congress itself. Have you considered that the more centralized power there is the higher the incentive for these groups to try to hijack it?

Assuming this analysis is correct, it only shows that government can't work. The electorate and politicians are fickle and what you've described will always happen. If program X requires that much consistency to succeed then it won't work in a democracy, maybe it might in a monarchy or dictatorship.
You reduce the collusion by taking money out of politics. Plenty of countries have elections that don't involve trillion dollar advertising budgets!

It shows that the US government is fundamentally broken due to decades of political misinformation (anyone who still believes Reaganomics is obviously deluded), a terrible secondary education system, and a political system that runs on a combination of bribery and bombast.
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Hawker
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September 08, 2011, 11:29:59 AM
 #62

Fund managers are not regulated as to which companies they invest in.  Normally they are a proactive bunch and CEOs who are not performing are made very aware of that fact.

http://www.bbc.co.uk/news/business-14816077 Carol Bartz is a fine example of someone who was not performing and was fired.  Thats a good thing and we want it to happen.

As you can see in the article linked in OP, fund managers do that regularly but for some reason ignore failing bank management.  They simply are not making the management pay for poor performance in banking the way they are made to pay for poor performance in the technology sector.

1. The fund managers are regulated.
2. They get their money from the banking system to leverage and are completely influenced by the supply of money and credit.


Please, make some sense.

Quote
I've googled a bit and the problem seems to be http://en.wikipedia.org/wiki/Information_asymmetry.   Its a known cause of market failure.  And as the article says, its not one that regulation would help.

Neoclassical economics assumed until the 70's that information was given. Austrian economics has always assumed information was local and fragmented and no one had all the information. This fact was one of the main arguments of austrians to prove that centralized systems dont work and the free market is the best solution to distribute resources.

Austrian economists called out neo-classicals (including the keynesians and monetarists) on it, but they refused to listen. Then during the 70's some keynesians claimed they had discovered a flaw in the economic though, and that was that information was not given. Ignoring that this was exactly what the austrians had been saying all along, they call it information asymetry (they are always very good with the marketing). Stiglitz even got the Nobel prize for this "discovery". Then they said it was a market failure, when in reality is one of the main arguments for the free market.

Fund managers are regulated in the sense that they are not allowed to pack your pension fund in a suitcase and emigrate to the Bahamas.  But they are NOT regulated as to which of the firms they praise the CEO of and which they demand the CEO be sacked.  Yet they are sacking failing technology CEOs and praising failing banking CEOs.  Of course this is simplifying what is happening but the point remains its strange and inconsistent behaviour.

I take your point about Austrians not agreeing with the terminology.
 

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September 08, 2011, 11:51:50 AM
 #63

Fund managers are regulated in the sense that they are not allowed to pack your pension fund in a suitcase and emigrate to the Bahamas.  But they are NOT regulated as to which of the firms they praise the CEO of and which they demand the CEO be sacked.  Yet they are sacking failing technology CEOs and praising failing banking CEOs.  Of course this is simplifying what is happening but the point remains its strange and inconsistent behaviour.

And they are heavily regulated in the amount of money they have access to which is one of the most important issues and my point all along.
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September 08, 2011, 12:30:27 PM
 #64

The only reason British banks collapsed was because Reagans best friend Margarat Thatcher Deregulated all the fucking banks during her reign of terror, in addition to essentially closing all the mines, factories, salting the north so nothing would grow and making ritual satanic sacrifices a requirement to join the tory party.
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September 08, 2011, 12:42:18 PM
 #65

The only reason British banks collapsed was because Reagans best friend Margarat Thatcher Deregulated all the fucking banks during her reign of terror, in addition to essentially closing all the mines, factories, salting the north so nothing would grow and making ritual satanic sacrifices a requirement to join the tory party.

Neither Reagan nor Margareth Thatcher removed any of the banking regulations that Ive metioned.

If you want to try to prove that they did, please go ahead.
AyeYo
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September 08, 2011, 01:58:57 PM
 #66

Fund managers are regulated in the sense that they are not allowed to pack your pension fund in a suitcase and emigrate to the Bahamas.  But they are NOT regulated as to which of the firms they praise the CEO of and which they demand the CEO be sacked.  Yet they are sacking failing technology CEOs and praising failing banking CEOs.  Of course this is simplifying what is happening but the point remains its strange and inconsistent behaviour.

And they are heavily regulated in the amount of money they have access to which is one of the most important issues and my point all along.


There's no limit to what can be blamed on regulation.

When company A rapes and pillages society, pollutes the environment, keeps children as sex slaves, and murders local villagers... it's all the government's fault because of that building code about the minimum height of door frames.  If it wasn't for that evil regulation, everything else would have gone differently.

Enjoying the dose of reality or getting a laugh out of my posts? Feel free to toss me a penny or two, everyone else seems to be doing it! 1Kn8NqvbCC83zpvBsKMtu4sjso5PjrQEu1
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September 08, 2011, 03:27:00 PM
 #67

There's no limit to what can be blamed on regulation.

When company A rapes and pillages society, pollutes the environment, keeps children as sex slaves, and murders local villagers... it's all the government's fault because of that building code about the minimum height of door frames.  If it wasn't for that evil regulation, everything else would have gone differently.

Another example of constructive an on-topic comment of AyeYo. Very interesting your explanation about banking regulations. Keep the good work.
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September 08, 2011, 03:30:46 PM
 #68

Fund managers are regulated in the sense that they are not allowed to pack your pension fund in a suitcase and emigrate to the Bahamas.  But they are NOT regulated as to which of the firms they praise the CEO of and which they demand the CEO be sacked.  Yet they are sacking failing technology CEOs and praising failing banking CEOs.  Of course this is simplifying what is happening but the point remains its strange and inconsistent behaviour.

And they are heavily regulated in the amount of money they have access to which is one of the most important issues and my point all along.

Its true but off topic.   

Anyway, bored of this.  Regardless of the cause there doesn't seem to be anything a retail investor can do about it.

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