Regulation of The Credit Market

[patton]

As we've all seen in this economic crisis, when the credits markets take a downturn, the entire economy does. Credit is so vital to our economy that having a credit bubble build is inevitable, and that bubble is bound to burst. But, like my fellow republicans, I reject the idea that the government should be making decisions on who banks should be giving loans to.

So here's my idea for regulating the credit market: force banks to actually have more of their capital on hand. Currently, banks are required to have 25% of their capital on hand at any given time, which means 75% of their money is being lent out. So when all those loans are defaulted on, bad things happen for banks. So by not allowing them to lend out as much capital I do a few things: first of all it will make people like Ron Paul happy because it indirectly reduces the importance of the FED, second it keeps democrats happy because they want more regulation of the credit markets, it keeps republicans happy because we have BANKS deciding who should get a loan instead of the government, and it keeps everyone happy because it reduces the possibility for formation of/ popping of a giant credit bubble.


Thoughts?

[The Better Version]

That's a great idea but unfortunately it's not your great idea because that's what the Obama administration is doing....or so they say they are currently doing but I don't congratulate anyone until the job is done. Feel free to debunk me, but I'm under the impression from various news articles that your proposal is part of the plan already "to force banks to keep higher capital reserves".

And I disagree with the notion that the government shouldn't oversee what loans banks are making because part of the reason we got into this mess was because banks were loaning money out to anyone, even people with bad credit. We need to give them their space but we also need to oversee OUR MONEY to make sure they make good investments. I suppose the logic one could use is that if we're giving money to the government who are giving it to banks for bailout, they should at least allow us to regulate where that money is going.

[patton]

That's a great idea but unfortunately it's not your great idea because that's what the Obama administration is doing....or so they say they are currently doing but I don't congratulate anyone until the job is done. Feel free to debunk me, but I'm under the impression from various news articles that your proposal is part of the plan already "to force banks to keep higher capital reserves".

And I disagree with the notion that the government shouldn't oversee what loans banks are making because part of the reason we got into this mess was because banks were loaning money out to anyone, even people with bad credit. We need to give them their space but we also need to oversee OUR MONEY to make sure they make good investments. I suppose the logic one could use is that if we're giving money to the government who are giving it to banks for bailout, they should at least allow us to regulate where that money is going.

The Obama administration is forcing banks to have larger capital reserves, however they're not doing it through changing the law. They're simply injecting capital into the banks books, and forcing them to take it. That's right, the government now has the ability to FORCE private banks to take the TARP funds.
I should note that I would definitely wait to do this. This would make credit harder to get, so we can't do it at a time when it's already extremely hard to get. Obama is forcing banks to have higher total capital reserves as a means to making credit easier to get for the time being.
Or at least that's my understanding of it, as this would be the antithesis of what Obama's trying to do (return the credit markets to "normalcy")

As to the second point, it's sort of moot to me. Yes we should be able to oversee our own money, but I don't think those bailouts should have happened in the first place. And also if we say that, is there ever a time when government no longer has a right to control private companies?
The liberals would argue no, since w/o govt money those companies would have gone bankrupt. And that worries me.

[Vargus]

As we've all seen in this economic crisis, when the credits markets take a downturn, the entire economy does. Credit is so vital to our economy that having a credit bubble build is inevitable, and that bubble is bound to burst. But, like my fellow republicans, I reject the idea that the government should be making decisions on who banks should be giving loans to.

So here's my idea for regulating the credit market: force banks to actually have more of their capital on hand. Currently, banks are required to have 25% of their capital on hand at any given time, which means 75% of their money is being lent out. So when all those loans are defaulted on, bad things happen for banks. So by not allowing them to lend out as much capital I do a few things: first of all it will make people like Ron Paul happy because it indirectly reduces the importance of the FED, second it keeps democrats happy because they want more regulation of the credit markets, it keeps republicans happy because we have BANKS deciding who should get a loan instead of the government, and it keeps everyone happy because it reduces the possibility for formation of/ popping of a giant credit bubble.

Thoughts?

Increasing the reserve rate decreases the amount of credit that banks can lend. If they want more, they have to borrow from the Fed.

[Vargus]

The Obama administration is forcing banks to have larger capital reserves, however they're not doing it through changing the law. They're simply injecting capital into the banks books, and forcing them to take it. That's right, the government now has the ability to FORCE private banks to take the TARP funds.
I should note that I would definitely wait to do this. This would make credit harder to get, so we can't do it at a time when it's already extremely hard to get. Obama is forcing banks to have higher total capital reserves as a means to making credit easier to get for the time being.
Or at least that's my understanding of it, as this would be the antithesis of what Obama's trying to do (return the credit markets to "normalcy")

As to the second point, it's sort of moot to me. Yes we should be able to oversee our own money, but I don't think those bailouts should have happened in the first place. And also if we say that, is there ever a time when government no longer has a right to control private companies?
The liberals would argue no, since w/o govt money those companies would have gone bankrupt. And that worries me.

First, I'm going to need some sauce on forcing the banks to take TARP money. Second, the normalcy of the credit markets is higher than it is now, so the TARP program gives the banks more money on the books so they have more money to loan out. Thus, credit markets should tend towards this normalcy with the TARP program.

The point of having more money in reserves is so that they can keep their doors open in case of a run or if lots of people default again.

[patton]

First, I'm going to need some sauce on forcing the banks to take TARP money. Second, the normalcy of the credit markets is higher than it is now, so the TARP program gives the banks more money on the books so they have more money to loan out. Thus, credit markets should tend towards this normalcy with the TARP program.

The point of having more money in reserves is so that they can keep their doors open in case of a run or if lots of people default again.

Well I'm currently in high school and working on a stupid ass project due tomorrow: so here's all I could find one banks being forced to take the TARP money http://objectivistindividualist.blogspot.com/2009/04/why-did-banks-take-tarp-money.html. I know I had seen a better source before, but I'll have to get that to you at some point in the future.

But to your second point: the problem is that we don't know what "normal" is. What's been considered "normal" lending practices over the past 30 years have led us into the economic crisis that we are in today. All the policies that Obama is pushing are all about making credit easier to get, so they will temporarily fix the problem. But Obama has done NOTHING to prevent another credit bubble from forming. The TARP fund will make it easier for people to get loans, but unless we have some change in the way things are done, that will just lead to another credit bubble pop down the road- and possibly a bigger one. My idea would prevent another bubble from ever forming. If banks were forced to keep over half of their capital in reserve rather than loan it out, it would be a lot tougher for a credit bubble to form at all.

[patton]

Increasing the reserve rate decreases the amount of credit that banks can lend. If they want more, they have to borrow from the Fed.

Almost all banks will loan out all the capital they can (75%). They know they're going to have to borrow money from the FED, but they assume their investments will give them a positive return so they don't care.
The only way to get banks to loan out significantly less of their capital is to absolutely restrict it. This also allows you the plus of being able to keep interest rates flexible, so that in the event of a recession you can respond quickly by dropping them, and in a prolonged period of economic growth, you can slowly raise them.

[Vargus]

Almost all banks will loan out all the capital they can (75%). They know they're going to have to borrow money from the FED, but they assume their investments will give them a positive return so they don't care.
The only way to get banks to loan out significantly less of their capital is to absolutely restrict it. This also allows you the plus of being able to keep interest rates flexible, so that in the event of a recession you can respond quickly by dropping them, and in a prolonged period of economic growth, you can slowly raise them.

Except they wouldn't need to borrow from the Fed if the administration did not increase the reserve rate. Borrowing from the Fed costs money and that cuts into their profits.

But to your second point: the problem is that we don't know what "normal" is.

Bullshit. You would say that market normalization is a good thing, correct? Are we better off now than we were 6-12 months ago? No. What changed? Well for one credit is much harder to obtain. TARP was supposed to assist in making credit easier to obtain, getting the credit market back to where it was which is closer to normal.

All the policies that Obama is pushing are all about making credit easier to get, so they will temporarily fix the problem.

Many businesses are going bankrupt specifically because they rely on credit to make payrolls. They don't have money right now, but they have a job they will complete in a week. The workers sure as hell aren't going to wait around a week to get paid if they can get paid on time. That is where that credit comes in.

Moreso, credit is used to buy tools, supplies, expand, etc. Tighter credit markets mean there is less economic growth.

But Obama has done NOTHING to prevent another credit bubble from forming.

Is another credit bubble forming? Credit in and of itself is not the problem. Giving so much credit to people who are credit risks for that much is the problem when they start defaulting.

My idea would prevent another bubble from ever forming. If banks were forced to keep over half of their capital in reserve rather than loan it out, it would be a lot tougher for a credit bubble to form at all.

And you have a poorly performing economy as a result. So instead of taking common sense measurements by restricting credit to those with high risk, you want to take the scourched earth method to ensure less credit is given to anyone.




Also, I'll be waiting for your better source. Lets hope that it's not written by someone who is proud of being an Objectivist who wants Ayn Rand propaganda being taught in university settings or someone who is a complete corporate whore. Lets not even mention there are no sources listed in this blog.

[patton]

I'm completely agreeing with you that credit is vital to our economy right now. Our addiction to credit is why we ended up taking it to far, and caused this problem. So yes, right now we might need things like TARP and the bailouts to allow people to start to get loans again and revitalize the economy. But the problem is that what are we going to do differently to prevent another credit bubble from forming?

We're going to use TARP to "normalize" the credit markets, which will get the economy pumping again. With the new credit funded by government capital, the economy will (theoretically) continue to grow and grow. As it grows, credit becomes easier to get. As credit becomes easier to get, it grows even more. This cycle keeps going until a bubble forms, and continues going until that bubble pops.

So I wouldn't suggest imposing this reform NOW, but we need to do it eventually. Of course right now I don't want to make credit even harder to get, I want to make it easier. But all I've seen from the Obama administration was how he's going to make credit easier to get, when it was easy credit that caused this!

Again, let me repeat that I fully understand how important credit is. I've made the same argument that you're making now to Ron Paul fanatics who want the FED abolished. But once we return credit markets to functioning capacity, let's make sure this never happens again. I don't want to do that by having govt make the decisions on who can get a loan. I'd rather have banks make that decision. So a fair compromise seems to just be to raise the amount of capital they need to have in reserve. And again, I don't think we should do that in the middle of a time when credit is already extremely hard to get, but at a time before the bubble starts forming (and we can never know when that is). So once we're out of the recession, we should do that.

[Wither]

Despite you saying that it does, I don't see how this permanently stops credit bubbles from forming. I would agree that it may reduce their severity, simply because stupid banks are not able to make quite as many stupid loans, but it doesn't actually fix the whole giving out stupid loans part. And as another poster said, with less people able to get credit, the market would slow down as a result.

Lately I've been toying with the idea of getting rid of the whole government decided reserve rate, and letting banks have whatever rate they want. If someone is okay with putting their money in a bank that only ever has 2% of its money on hand at any given time, let em. It both parties agree to it then they can suffer the consequences of their actions. Personally, I would want one with a significant higher rate, as would, I assume, most people. For this to work, the government would obviously have to make it clear that it will never in any way artificially prop up any company or industry, so as to ensure that banks, and companies in general, will be more careful with how they use their money. This would, in the end, have a similar effect as your idea, but with the added bonus of people actually paying attention to what banks do with the money, and without that nasty part of having the government involved. It's somewhat of an appealing idea, but I haven't really thought about it enough yet to state it as my position. Also, my understanding of the relationship between private banks and the central bank could most readily be described as...lacking; and I suspect this is a key aspect that I'm missing. Criticisms would be welcomed.

[patton]

Despite you saying that it does, I don't see how this permanently stops credit bubbles from forming. I would agree that it may reduce their severity, simply because stupid banks are not able to make quite as many stupid loans, but it doesn't actually fix the whole giving out stupid loans part. And as another poster said, with less people able to get credit, the market would slow down as a result.

It certainly doesn't totally stop a credit bubble from ever forming, but it helps an awful lot. It's awfully tough for a giant credit bubble to form when banks can only lend out less than half of their total capital. This is simply because the government has put an upward limit on how much credit there can be. Since the government also control the money supply, they can completely control how much credit there can possibly be. Even as a conservative, I wouldn't mind this as long as banks are still making the decisions on who gets a loan.
We can never totally prevent a credit bubbling from forming (except for reverting back to an all cash economy), but we can help to prevent it. I think this is the best idea simply because it allows you to have some government regulation without having the government try to micromanage the economy.

Lately I've been toying with the idea of getting rid of the whole government decided reserve rate, and letting banks have whatever rate they want. If someone is okay with putting their money in a bank that only ever has 2% of its money on hand at any given time, let em. It both parties agree to it then they can suffer the consequences of their actions. Personally, I would want one with a significant higher rate, as would, I assume, most people. For this to work, the government would obviously have to make it clear that it will never in any way artificially prop up any company or industry, so as to ensure that banks, and companies in general, will be more careful with how they use their money. This would, in the end, have a similar effect as your idea, but with the added bonus of people actually paying attention to what banks do with the money, and without that nasty part of having the government involved. It's somewhat of an appealing idea, but I haven't really thought about it enough yet to state it as my position. Also, my understanding of the relationship between private banks and the central bank could most readily be described as...lacking; and I suspect this is a key aspect that I'm missing. Criticisms would be welcomed.


I think the biggest problem with this is simply that the vast majority of people don't understand how all of this works.

[Rust]

1. As was already posted, this would decrease the amount the banks can lend; ultimately having the same effect you claim not to want (i.e. forcing banks to lend to certain people). Banks would have to not lend to certain people they might otherwise want to, or lend less.


2. Banks were never told who they had to lend to; they ultimately had the last word. This was already explained to you before.

[patton]

1. As was already posted, this would decrease the amount the banks can lend; ultimately having the same effect you claim not to want (i.e. forcing banks to lend to certain people). Banks would have to not lend to certain people they might otherwise want to, or lend less.

Wait, what effect would this have that I don't want?
I want banks to have to lend out less credit, but have them choose who to lend it to. For example instead of having the government let them lend out a million dollars and tell them who to lend it to, I'd rather a bank only be able to lend out $500,000 but have them decide who to lend it to.

2. Banks were never told who they had to lend to; they ultimately had the last word. This was already explained to you before.



First of all, they were; but that's irrelevant here.
Whether or not it happened in the past is totally irrelevant, because all I'm saying is I don't want it happening in the future.
Democrats are inevitably going to want to regulate the credit market, and they're probably going to want to impose restrictions on who banks can loan to. I'm just offering an alternative solution that achieves the same result, and probably works out better.

[Vargus]

t both parties agree to it then they can suffer the consequences of their actions.

Casuall observation of the previous 12 months shows that a lot of extremely high risk gambling got us into this mess and now you advocate raising the stakes?

This capitalism thing doesn't work so well when you have an almost-vegitative population.

[Rust]

Wait, what effect would this have that I don't want?
I want banks to have to lend out less credit, but have them choose who to lend it to. For example instead of having the government let them lend out a million dollars and tell them who to lend it to, I'd rather a bank only be able to lend out $500,000 but have them decide who to lend it to.

You said you don't want the government deciding who they must lend to. That would essentially happen, directly or indirectly, by tampering with how much capital they can lend. If I have 10 dollars to lend then I can choose to lend out 1 dollar to 10 people. If I now have 5 dollars, I must choose 5 among those previous 10.

The final effect is the same: your suggestion either forces them not to lend to certain people, or forces them to lend less to all (in order to lend at least something to all people). It's still an imposition on who (or how much) they can lend to.



First of all, they were; but that's irrelevant here.
Whether or not it happened in the past is totally irrelevant, because all I'm saying is I don't want it happening in the future.
Democrats are inevitably going to want to regulate the credit market, and they're probably going to want to impose restrictions on who banks can loan to. I'm just offering an alternative solution that achieves the same result, and probably works out better.

If you're claiming they were, then you have to prove it. As was already explained to you before, the CRP didn't force anyone as they could have opted out Fed insurance. Fed insurance was an incentive.

And I don't believe that's irrelevant here because if it has happened in the past has an effect on how easily or difficult it can be to happen in the future. Moreover could also study it's effects and see how good or bad is was, in order to determine whether it would be a good or bad idea in the future!

[patton]

You said you don't want the government deciding who they must lend to. That would essentially happen, directly or indirectly, by tampering with how much capital they can lend. If I have 10 dollars to lend then I can choose to lend out 1 dollar to 10 people. If I now have 5 dollars, I must choose 5 among those previous 10.

The final effect is the same: your suggestion either forces them not to lend to certain people, or forces them to lend less to all (in order to lend at least something to all people). It's still an imposition on who (or how much) they can lend to.


But all I would want to avoid is the government actually making the decision on who gets the credit. What's good about this idea is that the government is regulating the credit market by preventing a bubble from forming. But they're not actually going to be the ones making the decisions on who gets the credit. They still leave that choice 100% up to the banks, just give them less capital to do it with.
So with your example: rather than the government let you lend out those 10 dollars, but choose which 10 people to lend it to- the government only lets you lend out 5 but you choose which 5 to lend it to.
Since we assume you'd be a profit driven banker, I'd rather have you make that decision than the more (supposedly) altruistic government. It's possible that the government would choose 10 people who don't deserve credit. So I'd rather have you lend out less money, but make the right decision on who gets it.

If you're claiming they were, then you have to prove it. As was already explained to you before, the CRP didn't force anyone as they could have opted out Fed insurance. Fed insurance was an incentive.

And I don't believe that's irrelevant here because if it has happened in the past has an effect on how easily or difficult it can be to happen in the future. Moreover could also study it's effects and see how good or bad is was, in order to determine whether it would be a good or bad idea in the future!


No reasonable person is going to put their money in a bank that isn't insured. So if a bank wanted to stay in business, they had to submit to the regulations of the CRA. The CRA's purpose was to stop red-lining and make sure credit was available to people with lower incomes.
So yes, they did.

And I'm already convinced that it would be a horrible idea. The free market is a wonderful thing, let's use it.
If you want to debate whether or not it would be a good idea, then that's a different story.

[Rust]

But all I would want to avoid is the government actually making the decision on who gets the credit. What's good about this idea is that the government is regulating the credit market by preventing a bubble from forming. But they're not actually going to be the ones making the decisions on who gets the credit. They still leave that choice 100% up to the banks, just give them less capital to do it with.

So with your example: rather than the government let you lend out those 10 dollars, but choose which 10 people to lend it to- the government only lets you lend out 5 but you choose which 5 to lend it to.
Since we assume you'd be a profit driven banker, I'd rather have you make that decision than the more (supposedly) altruistic government. It's possible that the government would choose 10 people who don't deserve credit. So I'd rather have you lend out less money, but make the right decision on who gets it.

1.You haven't established that the government has ever made the decision on who gets the credit, nor that it would do so in the future. So you are avoiding a, as of now at least, non-existent problem.

2. This idea might not dictate with exactitude who gets the money, but to claim that 100% of the choice is up to the banks is incorrect. You are limiting their choices pretty much by definition, since you're allowing less money for the to lend, and thus they must pick and choose a smaller group of people to lend it to.

To continue using the example, the very fact that they have to pick 5 people instead of 10 is already the government forcing them on who to lend money to.



No reasonable person is going to put their money in a bank that isn't insured. So if a bank wanted to stay in business, they had to submit to the regulations of the CRA. The CRA's purpose was to stop red-lining and make sure credit was available to people with lower incomes.
So yes, they did.

That is demonstrably false and goes to show how you're not reading the information being given to you, or that you are dishonestly ignoring it. In the other thread dealing with the CRA you were given information showing how there were indeed many banks that did not fall under the guidelines of the CRA precisely because they thrived quite well without Federal insurance.

The Federal government indeed incentivized the CRA. That much is certain. However, having an amazing incentive - an incentive that according to you no reasonable person would pass off - is still not forcing anything on anyone. Used car salesmen incentivize lemons all the time. That's not force. They can tempt to to buy a lemon with a million blowjobs, that's still not force.

So that CRA attempted to make loans more available to lower income families by incentivizing banks to fall under its guidelines does not make it forced.


And I'm already convinced that it would be a horrible idea. The free market is a wonderful thing, let's use it.
If you want to debate whether or not it would be a good idea, then that's a different story.

Your suggestion isn't a free market since, as was already established, it limits how many people banks can lend to and thus forces them to choose who to lend it to.

To use yet another analogy, imagine your father bought you an electric car that has a 100mi range. You're father can either tell you not to go to the strip club that is 87 miles from your house, and not to go to the neighborhood that is 95 miles from your house, and not go to the beach which is 83 miles from your house... Or he can simply lower the batteries in your car and reduce your range to 75 miles.

In the end, the effect is the same: you can't go to any of those places.

[patton]

You're simply not getting it, and what you're saying is completely missing the point.
Banks are going to naturally lend to the people MOST likely to pay back loans. The government however, is not. This can be shown through the CRA, which was not concerned with who could pay money back but with the banks loaning money to lower income people. Therefore, I don't want the government micromanaging the decisions on who loans go to. This is because the governments decision on who "deserves" credit isn't based on who can pay back.
But at the same time, with no regulation there is a very strong possibility for the formation of another credit bubble. So it makes sense to put a limit on the total amount of credit that banks can lend out.

To tell you the truth, I don't think you actually agree with me here all that much, but you just want to be a jackass, and a hypocritical one at that.
You're arguing that my proposal would dictate who banks can lend to indirectly, and saying that constitutes "forcing" banks to do something.
Yet at the same time, you're arguing that the CRA didn't force banks to do anything. The CRA forces banks to do much more than my proposal, even if you want to say it's indirectly since if they didn't agree they'd be forced out of business by not agreeing.

The fact is I've never denied that my proposal is a regulation of the credit market, it even says "regulation" in the freaking title! But what's unique about this regulation compared to other ones is that it doesn't include any government micromanaging of the economy, which would result in disaster.

[Rust]

Banks are going to naturally lend to the people MOST likely to pay back loans. The government however, is not. This can be shown through the CRA, which was not concerned with who could pay money back but with the banks loaning money to lower income people.

More falsehoods. The CRA states that that is a concern since the statutes explicitly say even those banks that opted to fall under its guidelines to get Federal Insurance did not have to lend money if it was too risky. You are making things up, yet again.

Therefore, I don't want the government micromanaging the decisions on who loans go to.

Except you were railing against a specific form of government intervention which your own suggestion would fall under: regulation that affects who the banks can lend to. By limiting the amount they can lend, you are forcing them to choose a specific group of people.


To tell you the truth, I don't think you actually agree with me here all that much, but you just want to be a jackass, and a hypocritical one at that.
You're arguing that my proposal would dictate who banks can lend to indirectly, and saying that constitutes "forcing" banks to do something.
Yet at the same time, you're arguing that the CRA didn't force banks to do anything. The CRA forces banks to do much more than my proposal, even if you want to say it's indirectly since if they didn't agree they'd be forced out of business by not agreeing.

1. The CRA didn't force anything to do anything because it wasn't mandatory. What you're proposing is. That's the difference. There is no hypocrisy here, just you not wanting to accept the difference between an incentive to join program X, and being actually forced to join program X.

2. They would not be forced out of business because there were plenty of banks that did not fall under the CRA. There still are banks that don't fall under the CRA. I already explained this to you. Now you're just willfully ignoring the facts because they contradict your ridiculous claims. :thumbsdown:


The fact is I've never denied that my proposal is a regulation of the credit market, it even says "regulation" in the freaking title! But what's unique about this regulation compared to other ones is that it doesn't include any government micromanaging of the economy, which would result in disaster.

I didn't say you denied it was regulation. My argument in this thread was two-fold:

1. I'm pointing out how it's not only regulation but regulation in the same vein as what you accused the government of doing: regulation that affects who the banks can lend to.

2. That you were incorrect in your accusations regarding the government - implicitly accusing the CRA of forcing banks to lend to lower income families.

[patton]

More falsehoods. The CRA states that that is a concern since the statutes explicitly say even those banks that opted to fall under its guidelines to get Federal Insurance did not have to lend money if it was too risky. You are making things up, yet again.
Oh, well that makes it all better.
The obvious problem is that it's the government who decides what's too risky, rather than the banks. The inherent problem is that the government isn't interested in having the banks make money, they're interested in getting loans to people with lower incomes (who are therefore slightly less likely to pay them back).

Except you were railing against a specific form of government intervention which your own suggestion would fall under: regulation that affects who the banks can lend to. By limiting the amount they can lend, you are forcing them to choose a specific group of people.
Yeah, but the idea is I'm letting the bank select the group of people who they lend to. Again, banks are obviously going to lend to people who are lower risks. Doesn't that sound like a good thing to you? Seeing as how loaning to people who were high risk caused the whole economic crisis, I think it'd be a pretty good idea.

1. The CRA didn't force anything to do anything because it wasn't mandatory. What you're proposing is. That's the difference. There is no hypocrisy here, just you not wanting to accept the difference between an incentive to join program X, and being actually forced to join program X.


I'm sure the banks would be a lot happier to be forced to join this program rather than being dictated to on who to give loans to.
Of course this program would have to be mandatory, that's just the nature of it. The CRA may not have been outright mandatory, but honestly, would you put your money in a bank that wasn't insured by the fed?
Because I certainly wouldn't.


1. I'm pointing out how it's not only regulation but regulation in the same vein as what you accused the government of doing: regulation that affects who the banks can lend to.
And I continually explain to you how it's very different. This would ensure that only the best people get credit, rather than people at a higher risk to default. If we let the government decide who the banks should give loans to then it's inevitable that some people will get loans and can't pay them back.

2. That you were incorrect in your accusations regarding the government - implicitly accusing the CRA of forcing banks to lend to lower income families.

First of all, that's a separate argument, I still disagree with you.
But again, I will reiterate: THAT'S IRRELEVANT..
You brought up the CRA, not me.

[Wither]

Casuall observation of the previous 12 months shows that a lot of extremely high risk gambling got us into this mess and now you advocate raising the stakes?

This capitalism thing doesn't work so well when you have an almost-vegitative population.

If the stakes are higher, maybe people will actually get out of this "vegetative" state and pay some damn attention. If they don't, to bad for them. If we let them fall, and fall hard, perhaps people will stop betting on impossible odds and consuming in unsustainable ways.

I have a commie friend who actually agrees with me on this, but he wants it because he thinks it'll lead to the end of capitalism and a new communist world...But at least we can agree on the course of action! :p

I have to go to work right now, but I'll add more later.

[Rust]

Oh, well that makes it all better.
The obvious problem is that it's the government who decides what's too risky, rather than the banks. The inherent problem is that the government isn't interested in having the banks make money, they're interested in getting loans to people with lower incomes (who are therefore slightly less likely to pay them back).

It doesn't make it all better, it just makes what you said false which is what I wanted to point out. As for the rest, to suggest that the government isn't interested in banks making money is a pretty ludicrous accusation given that:

a. The continued existence of the government essentially depends on banks.

b. You're suggesting regulation, by the government, that you claim would make the banks money (or lose less money)!


Yeah, but the idea is I'm letting the bank select the group of people who they lend to. Again, banks are obviously going to lend to people who are lower risks. Doesn't that sound like a good thing to you? Seeing as how loaning to people who were high risk caused the whole economic crisis, I think it'd be a pretty good idea.


1. Except you're not really doing that. You're not letting the banks select the group of people they want to lend to because you're limiting who they can lend to! The were lending to 10 people and now must only lend to 5. That's not letting banks lend to who they want - unless all banks magically wanted to lend to 5 people only...

To use the car analogy again, you are essentially saying "You can go anywhere you want in the car! .... except that I'm going to limit your range to 50 miles". Well then you're limiting where they can go by necessity!

2. Banks are going to lend to whoever makes them money, which is why, and again this was already explained to you, plenty of banks that didn't fall under the CRA guidelines made riskier loans than those banks that fell under the CRA!

I'm sure the banks would be a lot happier to be forced to join this program rather than being dictated to on who to give loans to.
Of course this program would have to be mandatory, that's just the nature of it. The CRA may not have been outright mandatory, but honestly, would you put your money in a bank that wasn't insured by the fed?
Because I certainly wouldn't.

Whether you or I would (or would not) do so is irrelevant seeing as there clearly where plenty of people doing so since, again, there were many banks that did not fall under the CRA. There still are.

You're trying to make it seem as if they were coerced to join the CRA because it meant either joining or failing. That's not the case. The facts refute that implication of yours.


And I continually explain to you how it's very different. This would ensure that only the best people get credit, rather than people at a higher risk to default. If we let the government decide who the banks should give loans to then it's inevitable that some people will get loans and can't pay them back.

1. You're explaining something that doesn't need explaining. I know what you're suggesting means. I'm pointing out how that is still affecting who the banks can lend to. In the end, you're still saying "Banks, you can only lend to these people".

2. Your suggestion still has problems even if we ignore this. You would either set too tight a restriction on the amount of money they have available to lend, which then means there are people that can re-pay but aren't getting loans - which would be bad for the economy - or you set the restriction too loose and the banks still lend to people who have a higher risk of defaulting.


First of all, that's a separate argument, I still disagree with you.
But again, I will reiterate: THAT'S IRRELEVANT..
You brought up the CRA, not me.

You first mentioned the government forcing banks to lend to certain people. I asked to to substantiate that. That's perfectly relevant. Don't like people asking you to substantiate your allegations? Don't make them. Moreover whether it has happened in the past has an effect on how easily or difficult it would be for it to happen in the future and we could study it's effects and see how good or bad is was, in order to determine whether your idea would be better or not. All of that is relevant.

[patton]

If the stakes are higher, maybe people will actually get out of this "vegetative" state and pay some damn attention. If they don't, to bad for them. If we let them fall, and fall hard, perhaps people will stop betting on impossible odds and consuming in unsustainable ways.


No, they won't. I'm all for letting people ruin themselves for being idiots, but they'd be ruining other people too.

[patton]

It doesn't make it all better, it just makes what you said false which is what I wanted to point out. As for the rest, to suggest that the government isn't interested in banks making money is a pretty ludicrous accusation given that:

a. The continued existence of the government essentially depends on banks.

b. You're suggesting regulation, by the government, that you claim would make the banks money (or lose less money)!


Oh I didn't say that the government shouldn't care if banks make money or not, they certainly should. But if they really cared all that much then we wouldn't have legislation like the CRA, which didn't focus on increasing profit for banks but rather on getting loans to low income people.


1. Except you're not really doing that. You're not letting the banks select the group of people they want to lend to because you're limiting who they can lend to! The were lending to 10 people and now must only lend to 5. That's not letting banks lend to who they want - unless all banks magically wanted to lend to 5 people only...


To use the car analogy again, you are essentially saying "You can go anywhere you want in the car! .... except that I'm going to limit your range to 50 miles". Well then you're limiting where they can go by necessity!

2. Banks are going to lend to whoever makes them money, which is why, and again this was already explained to you, plenty of banks that didn't fall under the CRA guidelines made riskier loans than those banks that fell under the CRA!


But I'm not dictating to them who they can loan to. I'm not going in and saying that person A and person B should get loans and person C shouldn't. I'm letting the banks decide which people out of A B and C get the money, just giving less money to make the loans with. But we've gone over this plenty of times, it's different, just get over it.


1. You're explaining something that doesn't need explaining. I know what you're suggesting means. I'm pointing out how that is still affecting who the banks can lend to. In the end, you're still saying "Banks, you can only lend to these people".

2. Your suggestion still has problems even if we ignore this. You would either set too tight a restriction on the amount of money they have available to lend, which then means there are people that can re-pay but aren't getting loans - which would be bad for the economy - or you set the restriction too loose and the banks still lend to people who have a higher risk of defaulting.


But the key is I don't specify who "these people" are. That's the only difference, but it's a vital difference. Because when banks have less money to loan out, obviously they have to loan to fewer people. When they have to pick less people, they're going to pick only the people with the lowest risks. When only people with the lowest risks are given loans, we avoid a crisis like this.

It is very possible that I would set the regulation too high, which is why I haven't quantified it at all during this thread. I don't know exactly what the number would and should be- I'm not an economist. But I know I'd rather have slightly less people getting credit (which I agree is bad for the economy) than have way too many people getting credit. The worst thing is for a bubble to form and pop.

You first mentioned the government forcing banks to lend to certain people. I asked to to substantiate that. That's perfectly relevant. Don't like people asking you to substantiate your allegations? Don't make them. Moreover whether it has happened in the past has an effect on how easily or difficult it would be for it to happen in the future and we could study it's effects and see how good or bad is was, in order to determine whether your idea would be better or not. All of that is relevant.

I talked about it in the future, not in the past. I never said that we had done it in the past (which we had). But this thread was never meant to be about the CRA, we've already had that argument.
All I said was that in the future, I'd rather have this than have government micromanagement of the economy.
(this isn't me conceding to you about the CRA, just seems silly to debate the same thing twice)

[Rust]

Oh I didn't say that the government shouldn't care if banks make money or not, they certainly should. But if they really cared all that much then we wouldn't have legislation like the CRA, which didn't focus on increasing profit for banks but rather on getting loans to low income people.

No, you said "the government isn't interested in having the banks make money " and have provided no real argument to support that save for, now, the claim that legislation like the CRA shows that they don't care, which is a ridiculous argument for multiple reasons:

a. The fact that they pass certain legislation that you disagree with doesn't mean the continued existence of banks - which occurs by they making profits - isn't also on their mind.

b. The CRA didn't negatively affect the profits of banks since the banks that opted for the CRA performed better on average that doesn't that didn't! They incurred less of the risky loans that you're blaming for this mess!

This was already explained to you. You're ignoring it now, yet again.


But I'm not dictating to them who they can loan to. I'm not going in and saying that person A and person B should get loans and person C shouldn't. I'm letting the banks decide which people out of A B and C get the money, just giving less money to make the loans with. But we've gone over this plenty of times, it's different, just get over it.


What you're doing is affecting who they can lend to, which is exactly what I've been saying all along.

You're dictating who they have the capacity to lend to just as you would dictate where a person could travel by limiting their range (i.e. the electric car analogy). Oh, and I could take a cue from you and play your own game and say that those banks that voluntarily opted for the CRA weren't told who to lend to either because they weren't told "You have to lend to Person A, B and C", but instead to lend to "low income" families which is a subset of the American public, just as "lower risk families" is a subset of the American public.

But all of this is irrelevant. I said that you were restricting who they can lend to. That much is true. I was entirely correct.

But the key is I don't specify who "these people" are. That's the only difference, but it's a vital difference. Because when banks have less money to loan out, obviously they have to loan to fewer people. When they have to pick less people, they're going to pick only the people with the lowest risks. When only people with the lowest risks are given loans, we avoid a crisis like this.

It is very possible that I would set the regulation too high, which is why I haven't quantified it at all during this thread. I don't know exactly what the number would and should be- I'm not an economist. But I know I'd rather have slightly less people getting credit (which I agree is bad for the economy) than have way too many people getting credit. The worst thing is for a bubble to form and pop.


1. See above. You are affecting who they lend to, which is what I said.

2. The very fact that you haven't quantified it is a very good reason not to trust this as a solution. In other words, it's not a positive but a negative.

3. You still haven't shown how this would prevent a bubble from forming and popping. You just said it would.



I talked about it in the future, not in the past. I never said that we had done it in the past (which we had). But this thread was never meant to be about the CRA, we've already had that argument.
All I said was that in the future, I'd rather have this than have government micromanagement of the economy.
(this isn't me conceding to you about the CRA, just seems silly to debate the same thing twice)

1. Please. You know full well you were implying that they had done so in the past which is why when I first mentioned that they hadn't you replied that they had...

But even if we ignore this, whether or not it has happened would still be relevant in a discussion about the future since we could get an idea of how easy it is for it to happen, and how good or bad it would be if it indeed happened.


2. The only reason we are debating it twice is because you completely ignore the facts when you don't like what they show. For example, you were shown how there were plenty of banks that existed without being under the CRA (and thus without Federal Insurance) and instead of admitting this you continued to repeated the same bullshit claim numerous times, just like how you did in this thread by claiming the CRA was forcing banks.

[patton]

No, you said "the government isn't interested in having the banks make money " and have provided no real argument to support that save for, now, the claim that legislation like the CRA shows that they don't care, which is a ridiculous argument for multiple reasons:

a. The fact that they pass certain legislation that you disagree with doesn't mean the continued existence of banks - which occurs by they making profits - isn't also on their mind.

b. The CRA didn't negatively affect the profits of banks since the banks that opted for the CRA performed better on average that doesn't that didn't! They incurred less of the risky loans that you're blaming for this mess!

This was already explained to you. You're ignoring it now, yet again.


My point is simply this: the CRA was not designed to help the profit margin of banks. It was designed for one purpose only: to help lower income people get credit. When it was passed, they didn't care if it positively or negatively effected the profits of banks. This is because liberals passed it, and liberals usually dont give a shit if big business is making money, until of course we have a crisis and they want to bail them out.


What you're doing is affecting who they can lend to, which is exactly what I've been saying all along.

You're dictating who they have the capacity to lend to just as you would dictate where a person could travel by limiting their range (i.e. the electric car analogy). Oh, and I could take a cue from you and play your own game and say that those banks that voluntarily opted for the CRA weren't told who to lend to either because they weren't told "You have to lend to Person A, B and C", but instead to lend to "low income" families which is a subset of the American public, just as "lower risk families" is a subset of the American public.

But all of this is irrelevant. I said that you were restricting who they can lend to. That much is true. I was entirely correct.


Of course I'm restricting who they can loan to. But it's a different kind of restriction than government micromanagement.
Tell me, do you not see the difference?
Because if you don't, then you are a moron.


1. See above. You are affecting who they lend to, which is what I said.

2. The very fact that you haven't quantified it is a very good reason not to trust this as a solution. In other words, it's not a positive but a negative.

3. You still haven't shown how this would prevent a bubble from forming and popping. You just said it would.

No, the fact I haven't quantified it at all just means that I am not an economist, and don't know what formulas I would have to use to come up with an accurate number. It does not at all detract from the validity of the solution.
When John Maynard Keynes first came up with the idea of deficit spending to fix the economy, he didn't quantify it because he wasn't sure. But that certainly didn't detract from the validity of his ideas. In the same way, me not quantifying this does NOT mean that it's not a valid idea, that's bullshit and you know it.
However, if you really want a number so bad then I'll give you one: I'd say around a 10% increase which brings it to 35% of their capital that they have to keep in reserve. I think 10% would be an increase substantial enough to prevent a bubble from forming, while at the same time wouldn't hinder the credit markets too much.

When did I say this would cause a bubble to form?
Obviously you misunderstood.
This would put a limit on how much money could be lent out, meaning banks would have to lend to less people. This is what keeps the bubble from forming. No matter how much the economy booms and credit standards are relaxed, they still can't lend out too much.

1. Please. You know full well you were implying that they had done so in the past which is why when I first mentioned that they hadn't you replied that they had...

No, actually I wasn't. But I know that there are many democrats in congress who would seek to have the kind of regulation that would constitute micromanagement of the economy. So I offered this as an alternative.
When you first brought up the CRA, I argued with you because I disagree with you. How does that show that I was implying that I was talking about the CRA in the beginning? It doesn't.

[Rust]

My point is simply this: the CRA was not designed to help the profit margin of banks. It was designed for one purpose only: to help lower income people get credit. When it was passed, they didn't care if it positively or negatively effected the profits of banks. This is because liberals passed it, and liberals usually dont give a shit if big business is making money, until of course we have a crisis and they want to bail them out.

And my point is that just because it wasn't designed to help the profit margins of banks - and if it had been, it would still be government intervention -does not mean they don't care about their profits. Government has a lot of things on its mind - a lot of things to juggle - than just the profits of Banks.

You're taking a childish and naive approach (i.e. "Liberals don't care about banks!111!1") to a much more complicated subject and in this particular case you've failed miserably since the reality of the situation is that those banks under the CRA performed better! If the CRA had any effects on the profits of banks, it was positive since those under the CRA incurred less risky loans.

Of course I'm restricting who they can loan to. But it's a different kind of restriction than government micromanagement.
Tell me, do you not see the difference?
Because if you don't, then you are a moron.

I can see the slight difference - and I already told you this both explicitly and through my analogy - but I'm telling you that the government never micromanaged, and that your solution is still restricting who they can loan to.

If you agree with this, then you're essentially arguing for no reason other than to save face because, if you go ahead and read what I've said in this thread, that's all I said.


No, the fact I haven't quantified it at all just means that I am not an economist, and don't know what formulas I would have to use to come up with an accurate number. It does not at all detract from the validity of the solution.

Of course it does. Your theory holds less weight if you cannot put real-world numbers to it. That you cannot come up with a number means your audience is going to be much less convinced as to its viability. That you have a decent excuse for that ("I'm not an economist") doesn't change this.

That doesn't mean it's automatically wrong or not valid - that's a strawman you're making here - it just means it's a point against your argument.


When John Maynard Keynes first came up with the idea of deficit spending to fix the economy, he didn't quantify it because he wasn't sure. But that certainly didn't detract from the validity of his ideas. In the same way, me not quantifying this does NOT mean that it's not a valid idea, that's bullshit and you know it.

I didn't say it wasn't a valid idea stop putting words in my mouth. (Now that is bullshit.). I said it would be a point against your theory, and it would be. That doesn't mean it's automatically false, not valid or not worth hearing, just not something good about your proposal.

However, if you really want a number so bad then I'll give you one: I'd say around a 10% increase which brings it to 35% of their capital that they have to keep in reserve. I think 10% would be an increase substantial enough to prevent a bubble from forming, while at the same time wouldn't hinder the credit markets too much.

Excellent! Now why do you think 10% would be substantial enough to prevent a bubble from forming while at the same time not hindering the credit market too much? Because as of now it just seems you pulled that number out of your ass an anointed it with those market saving qualities.

When did I say this would cause a bubble to form?
Obviously you misunderstood.
This would put a limit on how much money could be lent out, meaning banks would have to lend to less people. This is what keeps the bubble from forming. No matter how much the economy booms and credit standards are relaxed, they still can't lend out too much.

Read what I said again. I did not say you said a bubble would form. I said you claimed your solution would prevent one from forming and popping. My point being that you just said it. No actual evidence or substance, which is the problem here. Wither (http://www.zoklet.net/bbs/showpost.php?p=434325&postcount=10)(and I believe Vargus too) noticed this before me.


No, actually I wasn't. But I know that there are many democrats in congress who would seek to have the kind of regulation that would constitute micromanagement of the economy. So I offered this as an alternative.
When you first brought up the CRA, I argued with you because I disagree with you. How does that show that I was implying that I was talking about the CRA in the beginning? It doesn't.

You're having trouble keeping up the the discussion. I didn't say you were specifically talking about the CRA at the beginning. We were talking about government telling people who they must loan to - something much broader than just the CRA.

I said this:

"You first mentioned the government forcing banks to lend to certain people. I asked to to substantiate that. That's perfectly relevant."

To this you replied with:

"I talked about it in the future, not in the past. I never said that we had done it in the past (which we had)."

Which I believe is utter bullshit because you were just being vague about the subject just to have some sort of deniability.

But again, this is irrelevant. Talking about whether the government had done so in the past (and I mentioned the CRA because I knew from that other thread that you were perpetuating the ignorant claim that the CRA was forcing banks to lend to specific people) is still relevant because it gives us information about how easy or difficult it would be for it to happen in the future and how good or bad it would be if it did.

[patton]

And my point is that just because it wasn't designed to help the profit margins of banks - and if it had been, it would still be government intervention -does not mean they don't care about their profits. Government has a lot of things on its mind - a lot of things to juggle - than just the profits of Banks.

Thank you, you're helping me prove my point. Government has to many things on its mind to be trusted with micromanagement of the economy and deciding who gets a loan. But banks are concerned with only 1 thing: profit. As we've seen in this financial crisis, the economy suffers if banks aren't making big profits. So doesn't it make sense to leave those decisions up to the people who are concerned with only 1 thing: making money for the banks.

Of course the government is concerned with the profit margin of banks now, why else would they have passed TARP? (which I should not was a bad idea). But can you honestly tell me that the government is all that concerned wit the banks making money when the economy was booming? No, of course they weren't. They were concerned with poor people getting loans.

I can see the slight difference - and I already told you this both explicitly and through my analogy - but I'm telling you that the government never micromanaged, and that your solution is still restricting who they can loan to.

If you agree with this, then you're essentially arguing for no reason other than to save face because, if you go ahead and read what I've said in this thread, that's all I said.


Of course it restricts who they can loan to. That's the definition of regulation. But what I keep on stressing is that this is different than other types of legislation.

Of course it does. Your theory holds less weight if you cannot put real-world numbers to it. That you cannot come up with a number means your audience is going to be much less convinced as to its viability. That you have a decent excuse for that ("I'm not an economist") doesn't change this.

That doesn't mean it's automatically wrong or not valid - that's a strawman you're making here - it just means it's a point against your argument.
This is bullshit. Again, when John Maynard Keynes first came up with his theories they weren't quantified. That didn't at all detract from their validity.


I didn't say it wasn't a valid idea stop putting words in my mouth. (Now that is bullshit.). I said it would be a point against your theory, and it would be. That doesn't mean it's automatically false, not valid or not worth hearing, just not something good about your proposal.


You said it was a "good reason not to trust" it. Sounds a lot to me like saying its not valid.

Excellent! Now why do you think 10% would be substantial enough to prevent a bubble from forming while at the same time not hindering the credit market too much? Because as of now it just seems you pulled that number out of your ass an anointed it with those market saving qualities.

Actually, there was some math behind it. I looked at the current M1 money supply, which includes currency plus credit (among other things, which is why this is an approximate). The current M1 supply is 1562.3 billion dollars. About 700 billion of which is currency, meaning that around 850 billion of that is credit (and again, other stuff too). Then I looked at the same date for the early 1990's, when there was no credit bubble. The difference wasn't huge, around 15%. However I went with 10% because like I said, the M1 money supply contains a lot of money that isn't just credit.

Read what I said again. I did not say you said a bubble would form. I said you claimed your solution would prevent one from forming and popping. My point being that you just said it. No actual evidence or substance, which is the problem here. Wither (http://www.zoklet.net/bbs/showpost.php?p=434325&postcount=10)(and I believe Vargus too) noticed this before me.

Here's how it would prevent a credit bubble: first of all it would decrease the amount of credit that can be created by banks. That alone puts an upward limit on how big the credit bubble can become. As a result of that, banks will have to be more selective about who they loan to. This prevents them from giving out too many loans to people who default on them, which causes a pop. Even if the economy starts booming again, credit standards can never become so relaxed as to start the formation of another credit bubble.

You're having trouble keeping up the the discussion. I didn't say you were specifically talking about the CRA at the beginning. We were talking about government telling people who they must loan to - something much broader than just the CRA.

I said this:

"You first mentioned the government forcing banks to lend to certain people. I asked to to substantiate that. That's perfectly relevant."

To this you replied with:

"I talked about it in the future, not in the past. I never said that we had done it in the past (which we had)."

Which I believe is utter bullshit because you were just being vague about the subject just to have some sort of deniability.

But again, this is irrelevant. Talking about whether the government had done so in the past (and I mentioned the CRA because I knew from that other thread that you were perpetuating the ignorant claim that the CRA was forcing banks to lend to specific people) is still relevant because it gives us information about how easy or difficult it would be for it to happen in the future and how good or bad it would be if it did.

First of all, I wasn't talking about the CRA.
Second of all, it could happen very easily with a new democratic super majority in the senate (and a large minority in the house).
Third of all, we're not debating whether or not it's a good idea for the government to micromanage the economy. If you want to do that, then say so.

[Rust]

Thank you, you're helping me prove my point. Government has to many things on its mind to be trusted with micromanagement of the economy and deciding who gets a loan. But banks are concerned with only 1 thing: profit. As we've seen in this financial crisis, the economy suffers if banks aren't making big profits. So doesn't it make sense to leave those decisions up to the people who are concerned with only 1 thing: making money for the banks.

That helped proved nothing but that you were wrong in that childish accusation you made. This helps you get nowhere closer to your claim since: you haven't proven the government ever micromanaged who gets a loan and you haven't proven it ever will.

So as of now we have you crying that "government doesn't care about bank profits11!11!" and then trying to twist that into something that supports your case when it doesn't.


Of course the government is concerned with the profit margin of banks now, why else would they have passed TARP? (which I should not was a bad idea). But can you honestly tell me that the government is all that concerned wit the banks making money when the economy was booming? No, of course they weren't. They were concerned with poor people getting loans.

Yes, I can tell you they were concerned because continued economic health pretty much depends on them making a profit. You are again making the same childish accusation and trying to support it with shoddy logic. The fact that they cared about lower income families getting a loan does not preclude them also caring about bank profits.

Of course it restricts who they can loan to. That's the definition of regulation. But what I keep on stressing is that this is different than other types of legislation.

And I keep stressing that you're stressing something nobody questioned. Yes there are slight differences. Nobody questioned that.

This is bullshit. Again, when John Maynard Keynes first came up with his theories they weren't quantified. That didn't at all detract from their validity.


No, it's not bullshit. That you have nothing to actually support what you said - just numbers you pulled out of your ass - does in fact detract from what you're saying.

Are you honestly suggesting that between two people, one providing a theory supported by no experimentation, and one providing a theory supported by experimentation that the two are equal? Please. You know full well one has earned more merit than the other. Can the one with no actual experimentation or numbers be valid? Of course! But it's still not a good thing to lack actual figures to substantiate it.


You said it was a "good reason not to trust" it. Sounds a lot to me like saying its not valid.


No, it sounds like I'm skeptical of people pulling "theories" out of their ass. That does not mean it's not valid, it means it hasn't provided anything meaningful to substantiate it thus I'm reasonably skeptical of it.

Actually, there was some math behind it. I looked at the current M1 money supply, which includes currency plus credit (among other things, which is why this is an approximate). The current M1 supply is 1562.3 billion dollars. About 700 billion of which is currency, meaning that around 850 billion of that is credit (and again, other stuff too). Then I looked at the same date for the early 1990's, when there was no credit bubble. The difference wasn't huge, around 15%. However I went with 10% because like I said, the M1 money supply contains a lot of money that isn't just credit.


No offense, but calling that "math" as if it meant something is a stretch. That has to be the biggest simplification of such a complex subject I've ever seen. You're not an economist, true, but that doesn't mean I have to accept bad math, and big assumptions as a good argument...



Here's how it would prevent a credit bubble: first of all it would decrease the amount of credit that can be created by banks. That alone puts an upward limit on how big the credit bubble can become. As a result of that, banks will have to be more selective about who they loan to. This prevents them from giving out too many loans to people who default on them, which causes a pop. Even if the economy starts booming again, credit standards can never become so relaxed as to start the formation of another credit bubble.

... Or more banks are created to pick up the slack, and to cater to the risky but potentially very profitable niche of riskier loans. So no, limiting the amount a bank can lend does not automatically mean that you're limiting how large the bubble can get. It does, however, create liquidity problems for those banks.

Moreover, you're not able to tie in any of those claims to the 10% figure you threw out!

[Could you provide a source for your claim that "banks are required to have 25% of their capital on hand at any given time"? I'm not claiming it's necessarily false, just want to see more actual information on U.S. Banks]


First of all, I wasn't talking about the CRA.
Second of all, it could happen very easily with a new democratic super majority in the senate (and a large minority in the house).
Third of all, we're not debating whether or not it's a good idea for the government to micromanage the economy. If you want to do that, then say so.

1. Irrelevant. I mentioned it because you had already made your belief that the government had forced banks to give out loans through the CRA in another thread.

2. Which is a nice allegation you get to pull out of your ass

3. You're debating that this would be a better alternative, so yes we are debating that indirectly.

[patton]

That helped proved nothing but that you were wrong in that childish accusation you made. This helps you get nowhere closer to your claim since: you haven't proven the government ever micromanaged who gets a loan and you haven't proven it ever will.

So as of now we have you crying that "government doesn't care about bank profits11!11!" and then trying to twist that into something that supports your case when it doesn't.

But the claim that the government micromanaged the economy is totally fucking irrelevant. That's not the original claim I made, that claim has nothing to do with this theory. So shut the fuck up. We can either debate the claim, or this theory, but they can't be done simultaneously because that claim has nothing to do with this theory.

Yes, I can tell you they were concerned because continued economic health pretty much depends on them making a profit. You are again making the same childish accusation and trying to support it with shoddy logic. The fact that they cared about lower income families getting a loan does not preclude them also caring about bank profits.

They should[B] be concerned with the profit margins of banks, but it's not like they always are. Like you said, they have too many other things on their hands to be concerned with only the profit margins of banks, bankers don't.
If it were just up to banks, and not congress, the CRA never would have been passed.

That's it. That's my whole point. I really don't give a shit about what else you try to say, unless you think the banks would have passed the CRA by themselves, then this argument is over.

And I keep stressing that [b]you're stressing something nobody questioned. Yes there are slight differences. Nobody questioned that.

And I acknowledge that it does limit who banks can lend to, but you wouldn't shut up abut that.
I'm trying to explain to you that the differences are relevant.

No, it's not bullshit. That you have nothing to actually support what you said - just numbers you pulled out of your ass - does in fact detract from what you're saying.

Are you honestly suggesting that between two people, one providing a theory supported by no experimentation, and one providing a theory supported by experimentation that the two are equal? Please. You know full well one has earned more merit than the other. Can the one with no actual experimentation or numbers be valid? Of course! But it's still not a good thing to lack actual figures to substantiate it.

That's not what I was suggesting, dumbass. But do you see any other theory here, in particular one with experimentation and quantification?
And how the hell can I support a new theory with experimentation?
Keyne's theory had no experimentation either, the theories of classical economists did. So should we have gone with those?

No, it sounds like I'm skeptical of people pulling "theories" out of their ass. That does not mean it's not valid, it means it hasn't provided anything meaningful to substantiate it thus I'm reasonably skeptical of it.

Then tell me what's wrong with it. Don't tell me about the CRA, because that's different.

No offense, but calling that "math" as if it meant something is a stretch. That has to be the biggest simplification of such a complex subject I've ever seen. You're not an economist, true, but that doesn't mean I have to accept bad math, and big assumptions as a good argument...

Yes, it is an oversimplification. An oversimplification that I made for two reasons: first of all you were the one who was pressing me for a number. So I crunched the numbers as quick as I could to come up with an estimate. Second of all, I don't have time to do all the calculations, I'm still a student with a lot of work to do. But if you want me to take a week or two and amass all the data I can and then run it through all the proper equations, I'd be happy to do so.

But that math isn't all that shoddy, because if you take the current M1 and subtract the amount of that which is currency (around 800 billion), you get around 700 billion. Guess why the TARP fund was 700 billion: because that was the treasury department's estimate of how much money needed to be injected into credit markets to get them flowing.



... Or more banks are created to pick up the slack, and to cater to the risky but potentially very profitable niche of riskier loans. So no, limiting the amount a bank can lend does not automatically mean that you're limiting how large the bubble can get. It does, however, create liquidity problems for those banks.

Moreover, you're not able to tie in any of those claims to the 10% figure you threw out!

[Could you provide a source for your claim that "banks are required to have 25% of their capital on hand at any given time"? I'm not claiming it's necessarily false, just want to see more actual information on U.S. Banks]


More banks being created can't increase the credit bubble because there's only a limited amount of currency which can be used to create credit.
You are correct however that there could be some banks that open up purposefully to try and capitalize on sub-prime mortgages and high risk loans. However, there are a few things that neutralize that. First of all, I'm hoping that people will learn their lesson from this experience. Second of all, it was mostly big banks who also had lower risk loans on their books that tried to capitalize on the sub-prime mortgages, so I'm not so worried about new smaller banks popping up just to try and get rich quick on high risk loans. Third of all, I don't think a lot of people would put their money in banks who specialize in doing so. And finally, even thought it could still happen, that would only cause a bubble to pop. But the first part of my theory (that it puts an upward limit on how big the credit bubble could grow) still holds up here. Banks taking chances on high risk loans is an easy way to pop an already formed bubble, however it's not going to form a huge bubble.

1. Irrelevant. I mentioned it because you had already made your belief that the government had forced banks to give out loans through the CRA in another thread.

2. Which is a nice allegation you get to pull out of your ass

3. You're debating that this would be a better alternative, so yes we are debating that indirectly.

1. That doesn't make the CRA relevant here.

2. How is saying that the democrats having a majority in congress means there's a higher chance of democratic legislation being passed something I pulled out of my ass?

3. We're still not debating that. This thread was simply supposed to be about my theory, not the CRA or anything else.

[Wither]

So, anyway; what I was getting at earlier about letting the banks decide the rate (which would end up being decided by the consumers, really) was for more moral reasons than pragmatic ones. If the stakes do get raised, it's because that'ss the way the market went. Like I said before, if two parties agree, what right does a third have to forcefully stop them. <insert other generic libertarian reasons, you get the picture>

No, they won't. I'm all for letting people ruin themselves for being idiots, but they'd be ruining other people too.

First of all, I'm hoping that people will learn their lesson from this experience.

Third of all, I don't think a lot of people would put their money in banks who specialize in doing so.

You say this, yet earlier you said people won't learn, and we need to force banks to do these things ?:confused:

[patton]

When I said "people" in the first quote, I was referring to bankers.
I don't think the general populous is educated enough to understand how the amount of capital his/her banks keeps in reserve effects their investment/deposit, however I expect bankers to fully understand it.

And also we're talking about two different things here: people might be smart enough not to keep their money with small banks who specialize in risky loans, while they won't be smart enough to not keep their money in banks with a lower reserve rate.

And to Rust: I'm sorry, I actually made a mistake before: it's not 25%.
That figure was given to me by my history teacher at high school who also teaches AP us gov. So I trusted him. But after doing a little research I found that the actual rate (other than for time deposits such as CD's) is currently 10%, which can be seen on the wiki page for "reserve ratio."

[Rust]

But the claim that the government micromanaged the economy is totally fucking irrelevant. That's not the original claim I made, that claim has nothing to do with this theory. So shut the fuck up. We can either debate the claim, or this theory, but they can't be done simultaneously because that claim has nothing to do with this theory.

Then you should heed your own advice and not talk about it! Do you not even remember what you said a minute ago? "Thank you, you're helping me prove my point. Government has to many things on its mind to be trusted with micromanagement of the economy and deciding who gets a loan"

That's you claiming the government is inept at micromanagement! You just admitted that was a point of yours. That it wasn't your main point is unimportant. You don't get to say 2+2 = 7 and then flee when that's refuted through the excuse "that wasn't my main point".

They [B]should[B] be concerned with the profit margins of banks, but it's not like they always are. Like you said, they have too many other things on their hands to be concerned with only the profit margins of banks, bankers don't.
If it were just up to banks, and not congress, the CRA never would have been passed.

That's it. That's my whole point. I really don't give a shit about what else you try to say, unless you think the banks would have passed the CRA by themselves, then this argument is over.

That's what you want your point to be now that what you actually said was utterly refuted. The fact of the matter is you did not say "If it were up to banks the CRA wouldn't have passed"; I wouldn't had had a problem with your statements if that's what you said. You said something else. Don't blame me for your fuck ups.

And I acknowledge that it does limit who banks can lend to, but you wouldn't shut up abut that.
I'm trying to explain to you that the differences are relevant.

Go read the discussion again and you'll see that this developed because you insisted, among other things, that the decision would be 100% up to the banks (that's a direct quote by the way). That was demonstrably false, and thus I was there to demonstrate that to you. After I did, you came back with saying that there were some differences, something I had already acknowledged in the process of explaining to you how the decision wasn't 100% up to the banks.

That's not what I was suggesting, dumbass. But do you see any other theory here, in particular one with experimentation and quantification?
And how the hell can I support a new theory with experimentation?
Keyne's theory had no experimentation either, the theories of classical economists did. So should we have gone with those?

I know that's not what you're suggesting, which is preciesly what makes my point! Ironic that you call me a dumbass...

It's because it would be ridiculous to suggest that the two have equal merit that I am correct in saying that you not having anything other than theory is a point against your idea. That there aren't other theories here in this particular thread doesn't magically absolve the problems in yours.

Then tell me what's wrong with it. Don't tell me about the CRA, because that's different.

I already have and I also explained why I talked about the CRA.


Yes, it is an oversimplification. An oversimplification that I made for two reasons: first of all you were the one who was pressing me for a number. So I crunched the numbers as quick as I could to come up with an estimate. Second of all, I don't have time to do all the calculations, I'm still a student with a lot of work to do. But if you want me to take a week or two and amass all the data I can and then run it through all the proper equations, I'd be happy to do so.

But that math isn't all that shoddy, because if you take the current M1 and subtract the amount of that which is currency (around 800 billion), you get around 700 billion. Guess why the TARP fund was 700 billion: because that was the treasury department's estimate of how much money needed to be injected into credit markets to get them flowing.

Like I said, your excuses, no matter how good or bad they might be, don't mean I have to accept shitty research as a good argument. You're in a tough situation having to juggle schoolwork. Yes. Then take your time. Until then, your "theory" is full of shoddy math, and terrible assumptions.

Guess why the Treasury Department got so much flack for those figures they've been using: because economists know they are essentially pulling those figures out of their ass!


More banks being created can't increase the credit bubble because there's only a limited amount of currency which can be used to create credit.
You are correct however that there could be some banks that open up purposefully to try and capitalize on sub-prime mortgages and high risk loans. However, there are a few things that neutralize that. First of all, I'm hoping that people will learn their lesson from this experience. Second of all, it was mostly big banks who also had lower risk loans on their books that tried to capitalize on the sub-prime mortgages, so I'm not so worried about new smaller banks popping up just to try and get rich quick on high risk loans. Third of all, I don't think a lot of people would put their money in banks who specialize in doing so. And finally, even thought it could still happen, that would only cause a bubble to pop. But the first part of my theory (that it puts an upward limit on how big the credit bubble could grow) still holds up here. Banks taking chances on high risk loans is an easy way to pop an already formed bubble, however it's not going to form a huge bubble.

1. Banks being created can increase the bubble, at the very least, up to current levels - the very levels you don't want it to reach.

2a. Your hope, while noble, isn't really an argument.

2b. Actually, if you go ahead and look at the data I provided you during our CRA debate, the bigger banks were insured with Federal Insurance and the research showed that they were less liekly to fall into those high risk loans. So you got it backwards.

2c. They don't really have to "specialize", though I realize I was the one that first used the word. They just have to delve. To assume that people would be so concsious about who their bank is lending to when they weren't this time around, and when many people clearly didn't even bother checking/caring if their bank had Fed insurance, is rather naive.

2d. I never denied that this might lessen the bubble. I said you hadn't shown how it would stop one from forming. So apparently you agree I am correct.



1. That doesn't make the CRA relevant here.

2. How is saying that the democrats having a majority in congress means there's a higher chance of democratic legislation being passed something I pulled out of my ass?

3. We're still not debating that. This thread was simply supposed to be about my theory, not the CRA or anything else.

1. It makes it relevant in that it's an example of what you think should be avoided.

2. Because you don't have any evidence that they want legislation that will micromanage who gets loans in the first place. It's like me suggesting that if there's a Republican Majority, that it's more likely that they will make the U.S. a theocracy.

3. Like I said, you claimed your theory was a better alternative. It's entirely relevant to judge whether that would be the case.

And to Rust: I'm sorry, I actually made a mistake before: it's not 25%.
That figure was given to me by my history teacher at high school who also teaches AP us gov. So I trusted him. But after doing a little research I found that the actual rate (other than for time deposits such as CD's) is currently 10%, which can be seen on the wiki page for "reserve ratio

A great example of how shoddy the research is in this thread.

[patton]

Then you should heed your own advice and not talk about it! Do you not even remember what you said a minute ago? "Thank you, you're helping me prove my point. Government has to many things on its mind to be trusted with micromanagement of the economy and deciding who gets a loan"

That's you claiming the government is inept at micromanagement! You just admitted that was a point of yours. That it wasn't your main point is unimportant. You don't get to say 2+2 = 7 and then flee when that's refuted through the excuse "that wasn't my main point".

I only had to debate that because you brought it up. Whether or not the government is inept at micromanaging the economy has nothing to do with the effectiveness of my theory.
So as I said, tell me what you want to debate: whether or not the government should micromanage the economy or whether or not my theory would be effective. Because it's two different things and you're trying to intermingle them.

That's what you want your point to be now that what you actually said was utterly refuted. The fact of the matter is you did not say "If it were up to banks the CRA wouldn't have passed"; I wouldn't had had a problem with your statements if that's what you said. You said something else. Don't blame me for your fuck ups.

That's the same idea that I've kept trying to express this whole time, I just put it in different words this time.
Sorry I decided to come up with new wording.
The reason banks would not have passed the CRA if it were up to them is because obviously that isn't the best thing for their profit margins, it may be important for other reasons but it is not the best thing for banks. So obviously government isn't as concerned about banks making a profit as banks are. Therefore, it shouldn't be up to the government who gets a loan.
That's been my argument this entire time. Why don't you just concede with some dignity?

Go read the discussion again and you'll see that this developed because you insisted, among other things, that the decision would be 100% up to the banks (that's a direct quote by the way). That was demonstrably false, and thus I was there to demonstrate that to you. After I did, you came back with saying that there were some differences, something I had already acknowledged in the process of explaining to you how the decision wasn't 100% up to the banks.

The decision on which of the applicants for a loan gets one is still up to the banks. Granted they have less capital to lend out, but they are the ones deciding who gets the loan.
That's what I meant when I said the decision was 100% up to them.
But I acknowledged the whole time that it limited the amount of capital they loan out, which indirectly limits who they can loan to.
That's the definition of regulation, and that word is in the title of the thread.
So don't tell me that I never acknowledged that.

I know that's not what you're suggesting, which is preciesly what makes my point! Ironic that you call me a dumbass...

It's because it would be ridiculous to suggest that the two have equal merit that I am correct in saying that you not having anything other than theory is a point against your idea. That there aren't other theories here in this particular thread doesn't magically absolve the problems in yours.

Still, the fact that I haven't really quantified anything here doesn't detract from what is a good theory.
Like I've repeatedly said, Keynes' theories weren't quantified at first, but that didn't detract from them.



Like I said, your excuses, no matter how good or bad they might be, don't mean I have to accept shitty research as a good argument. You're in a tough situation having to juggle schoolwork. Yes. Then take your time. Until then, your "theory" is full of shoddy math, and terrible assumptions.

Guess why the Treasury Department got so much flack for those figures they've been using: because economists know they are essentially pulling those figures out of their ass!

It's not shitty research, it's an approximation.
But it's a pretty damn close approximation, since I was looking at the correct figures.
M1-currency= approximately the amount of credit.
Current amount of credit-amount of credit when there was no credit bubble= amount of money the credit bubble encompassed.
Again, I acknowledge that it's an approximation, but it's pretty close.
I could take more time to do things like account for growth rate, amount of new banks, amount of money creation, and inflation. But since I'm only looking at a ten year period these things aren't going to make a profound difference.
If you really want me to do that, then yes I will take the time to give you a more exact number.
However since I haven't been able to find the data from the fed on M1 money supply from the 1990's, I will never be able to give you an exact number, sorry but you're going to have to deal with an extremely close approximation.

And to tell you the truth, if that kind of math is good enough for the top paid economists at the treasury department. Then it's good enough for me, seeing as how this is an internet forum and I'm a high school freshman.

1. Banks being created can increase the bubble, at the very least, up to current levels - the very levels you don't want it to reach.

2a. Your hope, while noble, isn't really an argument.

2b. Actually, if you go ahead and look at the data I provided you during our CRA debate, the bigger banks were insured with Federal Insurance and the research showed that they were less liekly to fall into those high risk loans. So you got it backwards.

2c. They don't really have to "specialize", though I realize I was the one that first used the word. They just have to delve. To assume that people would be so concsious about who their bank is lending to when they weren't this time around, and when many people clearly didn't even bother checking/caring if their bank had Fed insurance, is rather naive.

2d. I never denied that this might lessen the bubble. I said you hadn't shown how it would stop one from forming. So apparently you agree I am correct.

1. Not really, there would have to be an increase in currency that's being deposited in banks for the amount of credit to be increased. That's why as the economy booms the M1, or credit supply, is increased. Because more people have money, which means more people deposit this money in banks, which means banks can lend out a lot more money.
Also, newer smaller banks are much less likely to increase the credit bubble than larger banks. This is because larger banks are going to have a lot more time deposits (such as CD's) than smaller banks. So they're going to have a lot more capital that has no reserve limit on it. Banks can lend out 100% of the money that they get from a CD, and they do.
So even though a bank like citi bank can lend out the same percentage of money from a regular deposit as a smaller bank, they can actually lend out much more because they have so much money from long term time deposits.
That's something you just pulled out of your ass.

2a. Maybe it's not a great argument, but it's sort of a secondary part of my larger argument. Which is simply that with higher reserve ratios there will be less credit available, and the standards for credit will increase aggregately.

2b. Again, this isn't about the CRA. The CRA is even less relevant here than it was before. This is because you simply said "specialize" in "the profitable niche of riskier loans."
You're the one who called them risky original, I just kept going with what you said. You can't turn that around on me.

2c. I highly doubt bankers will get themselves into this type of fiasco again. Yes larger banks may start to delve into the region of riskier loans again, but certainly not to the extent that they did. Therefore, the credit bubble wouldn't be as likely to become as large again, or be popped.

2d. If you read my response to wither in the beginning of this thread, you will see that I too admit this can't permanently stop a bubble from forming.
In a capitalist credit based economy it is inevitable that you are going to have bubbles, and bubbles will always pop. So no this doesn't totally solve an unsolvable problem, but it would sure help a lot.

1. It makes it relevant in that it's an example of what you think should be avoided.

2. Because you don't have any evidence that they want legislation that will micromanage who gets loans in the first place. It's like me suggesting that if there's a Republican Majority, that it's more likely that they will make the U.S. a theocracy.

3. Like I said, you claimed your theory was a better alternative. It's entirely relevant to judge whether that would be the case.

1. Yes it is an example of what I would like to avoid. But your argument was never about why we shouldn't be trying to avoid that.
Like I've said numerous times, if you want to debate the effectiveness of government micromanagement of the economy, then tell me and we'll do that.

2. Of course we'd be more likely to have a theocracy if Republicans were in power.
It's about a .01% chance with Republicans and about a .0000001% chance with democrats, but it's still a lot more likely to happen with Republicans. That's the definition of likely.

3. We've gone over this many times, I don't need to repeat myself again.

A great example of how shoddy the research is in this thread.

I'm terribly sorry for trusting my teacher, I'll never do that again.

[Agent 008]

How about just letting the banks that have made incorrect/risky decisions take the responsibility and go bankrupt?

[Rust]

I only had to debate that because you brought it up. Whether or not the government is inept at micromanaging the economy has nothing to do with the effectiveness of my theory.
So as I said, tell me what you want to debate: whether or not the government should micromanage the economy or whether or not my theory would be effective. Because it's two different things and you're trying to intermingle them.

Bullshit. Not only did you argument already relate to government micromanagement -in that your claim is that your idea would be better and thus it's entirely relevant to discuss if that would be the case - but also that statement of yours (i.e. ""Thank you, you're helping me prove my point. Government has to many things on its mind to be trusted with micromanagement of the economy and deciding who gets a loan") you made completely voluntarily. If you read the discussion I said this:

And my point is that just because it wasn't designed to help the profit margins of banks - and if it had been, it would still be government intervention -does not mean they don't care about their profits. Government has a lot of things on its mind - a lot of things to juggle - than just the profits of Banks. Which isn't related with micromanagement, but with your claim that government doesn't care about bank profits. You decided to go back to micromanagement using the fact that government also considered different things, to claim that "Government has to many things on its mind to be trusted with micromanagement of the economy and deciding who gets a loan".


As for your silly ultimatum; I'm able to discuss two things at once. It may be a real difficult task for you, but for me it's quite simple. In fact, sometimes I even challenge myself and discuss more than two! Seems impossible, I know, but it can be done...


That's the same idea that I've kept trying to express this whole time, I just put it in different words this time.
Sorry I decided to come up with new wording.
The reason banks would not have passed the CRA if it were up to them is because obviously that isn't the best thing for their profit margins, it may be important for other reasons but it is not the best thing for banks. So obviously government isn't as concerned about banks making a profit as banks are. Therefore, it shouldn't be up to the government who gets a loan.
That's been my argument this entire time. Why don't you just concede with some dignity?

Different wording my ass, it was a completely different claim. Saying "Government doesn't care about bank profits" is nothing close to the same as "If the Banks had gotten to decide, the CRA initiative hadn't passed". Like I already explained to you, you can care about bank profits while still passing the CRA. The only one that has to concede here is you.


The decision on which of the applicants for a loan gets one is still up to the banks. Granted they have less capital to lend out, but they are the ones deciding who gets the loan.
That's what I meant when I said the decision was 100% up to them.
But I acknowledged the whole time that it limited the amount of capital they loan out, which indirectly limits who they can loan to.
That's the definition of regulation, and that word is in the title of the thread.
So don't tell me that I never acknowledged that.

1. The same can be said of other legislation that you have called, at least in other threads, the government forcing banks to give loans to certain people.

2. The subset of people who they can lend to is diminished, and thus it's not just them deciding who gets a loan. I already explained this to you through the car analogy.

3. You acknowledge nothing because you continued to make the claim that it was 100% their decision which is false. It's not 100% their decision because who they can loan to is limited.


Still, the fact that I haven't really quantified anything here doesn't detract from what is a good theory.
Like I've repeatedly said, Keynes' theories weren't quantified at first, but that didn't detract from them.

Yes it does. It detracts it by definition as I already showed. That would would prefer the exact same theory but with quantified and supported figures and statistics is enough to show that the lack of such information isn't a good thing - exactly what I said.

As for you incessantly mentioning Keynes: not only do I have no reason to believe your claim, but that would change nothing if it were true. If what you said were true, Keynes theories would have been better served with actual statistics and figures supporting them.

It's not shitty research, it's an approximation.
But it's a pretty damn close approximation, since I was looking at the correct figures.


You still don't get it. The only reason you're calling it a "pretty damn close approcimation" - which is laughable - is because you're claiming those figures regarding M1 Currency are correct. So what?

If I had decided the % it should have been changed based on the age of my dogs and the amount of hairs I have on my balls, would that be a good number? No. I haven't shown how the age of my dogs and the amount of hairs on my balls relate to a figure that prevents a bubble from forming (or reduces the effect if one does form) and doesn't severely negatively impact the economy!

The analogy is silly, yes, but the point is there: That you're using accurate M1 currency figures is the least of your worries. You're making a huge number of assumptions that put that 10% figure into question, some of which are being discussed below:


1. Not really, there would have to be an increase in currency that's being deposited in banks for the amount of credit to be increased. That's why as the economy booms the M1, or credit supply, is increased. Because more people have money, which means more people deposit this money in banks, which means banks can lend out a lot more money.
Also, newer smaller banks are much less likely to increase the credit bubble than larger banks. This is because larger banks are going to have a lot more time deposits (such as CD's) than smaller banks. So they're going to have a lot more capital that has no reserve limit on it. Banks can lend out 100% of the money that they get from a CD, and they do.
So even though a bank like citi bank can lend out the same percentage of money from a regular deposit as a smaller bank, they can actually lend out much more because they have so much money from long term time deposits.
That's something you just pulled out of your ass.

2a. Maybe it's not a great argument, but it's sort of a secondary part of my larger argument. Which is simply that with higher reserve ratios there will be less credit available, and the standards for credit will increase aggregately.

2b. Again, this isn't about the CRA. The CRA is even less relevant here than it was before. This is because you simply said "specialize" in "the profitable niche of riskier loans."
You're the one who called them risky original, I just kept going with what you said. You can't turn that around on me.

2c. I highly doubt bankers will get themselves into this type of fiasco again. Yes larger banks may start to delve into the region of riskier loans again, but certainly not to the extent that they did. Therefore, the credit bubble wouldn't be as likely to become as large again, or be popped.

2d. If you read my response to wither in the beginning of this thread, you will see that I too admit this can't permanently stop a bubble from forming.
In a capitalist credit based economy it is inevitable that you are going to have bubbles, and bubbles will always pop. So no this doesn't totally solve an unsolvable problem, but it would sure help a lot.


1. False. It's enough for the currency to stay the same for the bubble to reach the same level of this crisis. As for the rest, yes larger banks will have a leg-up on small banks in regards to the amount they have to lend. Momentarily. Small banks don't have to stay small... not to mention that many small banks add up.

2a. I'm glad we agree that portion was a terrible argument.

2b. Read what I said again before you continue with your idiotic phobia of the CRA. I said the information I provided you in that thread dealing with the CRA showed how the larger banks incurred less risky loans. So your claim that "it was mostly big banks who also had lower risk loans on their books that tried to capitalize on the sub-prime mortgages," is unsubstantiated in the sense that the information we do have suggests that on average those banks with Federal insurance - which tend to be bigger banks - practiced safer lending than those without.

2c. Again, that's not an argument. See 2a. What you yourself doubt isn't convincing to anyone but you! Not to mention that we can use the same logic and claim that your idea isn't necessary because "I highly doubt bankers will get themselves into this type of fiasco again"...

2d. Great! I'm glad that we agree that it wouldn't necessarily stop a bubble from forming just like I said. And before you claim you had already admitted that before in response to Wither, that's exactly what I thought until you went ahead and re-claimed that it would prevent bubbles from forming when you where discussing this with me. (See here (http://www.zoklet.net/bbs/showpost.php?p=445619&postcount=26))


1. Yes it is an example of what I would like to avoid. But your argument was never about why we shouldn't be trying to avoid that.
Like I've said numerous times, if you want to debate the effectiveness of government micromanagement of the economy, then tell me and we'll do that.

2. Of course we'd be more likely to have a theocracy if Republicans were in power.
It's about a .01% chance with Republicans and about a .0000001% chance with democrats, but it's still a lot more likely to happen with Republicans. That's the definition of likely.

3. We've gone over this many times, I don't need to repeat myself again.

1. I suggest you stop trying to tell me what my argument was, because you're going to fail miserably. The reason I mentioned the CRA was because you were claiming we should avoid the government forcing banks to give loans to certain people, and I was correcting you if you thought the CRA was such an example - which apparently you do even if you didn't mention it explicitly.

2. Both figures you pulled straight out of your ass. Thank you for proving my point. The only reason you claim it's more likely is a ridiculous stereotype.

3. You shouldn't be repeating yourself because what you have said refutes nothing. So thank you. Again, it's entirely relevant since you claimed your alternative was better.



I'm terribly sorry for trusting my teacher, I'll never do that again.

I know you're being sarcastic, but I'm guessing most of your errors here can be traced to you being too naive and too trusting. For example, trusting a blog post - that consisted of some guy saying he heard from some other guy that a person had said they were threatened with an audit if they didn't take the TARP funds - as evidence.

So yeah, trust your teacher less and actually do some research on your own.

[patton]

Bullshit. Not only did you argument already relate to government micromanagement -in that your claim is that your idea would be better and thus it's entirely relevant to discuss if that would be the case - but also that statement of yours (i.e. ""Thank you, you're helping me prove my point. Government has to many things on its mind to be trusted with micromanagement of the economy and deciding who gets a loan") you made completely voluntarily. If you read the discussion I said this:

And my point is that just because it wasn't designed to help the profit margins of banks - and if it had been, it would still be government intervention -does not mean they don't care about their profits. Government has a lot of things on its mind - a lot of things to juggle - than just the profits of Banks. Which isn't related with micromanagement, but with your claim that government doesn't care about bank profits. You decided to go back to micromanagement using the fact that government also considered different things, to claim that "Government has to many things on its mind to be trusted with micromanagement of the economy and deciding who gets a loan".


As for your silly ultimatum; I'm able to discuss two things at once. It may be a real difficult task for you, but for me it's quite simple. In fact, sometimes I even challenge myself and discuss more than two! Seems impossible, I know, but it can be done...

Government not caring about the profit margin of banks is a reason for why the shouldn't be micromanaging the economy, the two are interrelated.

And okay, we can debate both, but don't try and intertwine them.
Whether or not government micromanagement of the economy is effective doesn't at all matter to the effectiveness of my original idea.
So we can debate the two separately, or just debate one. You choose.

Different wording my ass, it was a completely different claim. Saying "Government doesn't care about bank profits" is nothing close to the same as "If the Banks had gotten to decide, the CRA initiative hadn't passed". Like I already explained to you, you can care about bank profits while still passing the CRA. The only one that has to concede here is you.

It's part of the same idea.
Bankers are the ones who care most about the profit margins of banks. Bankers would not have passed the CRA. The government did pass the CRA. Obviously the government does not have just the banks profits on its mind (a point which you obviously agree with.)
Government might care about bank profits somewhat (but it's really only in times like this where they care), but they're never going to care more than bankers.
As we've seen, if banks aren't making a profit, the economy can falter.
So if we want banks making a profit, why shouldn't it be left up to the bankers? The ones whose only interest is bank profits.
If you can't see how saying that bankers wouldn't have passed the CRA had it been up to them relates to my whole argument, then you must have an IQ of less than 7.

1. The same can be said of other legislation that you have called, at least in other threads, the government forcing banks to give loans to certain people.

2. The subset of people who they can lend to is diminished, and thus it's not just them deciding who gets a loan. I already explained this to you through the car analogy.

3. You acknowledge nothing because you continued to make the claim that it was 100% their decision which is false. It's not 100% their decision because who they can loan to is limited.

1. No, it's not the same thing. There's a difference between telling the banks who to loan to, and just making them loan out less money.
If my parents used to buy me $300 dollars worth of stuff every month, and then they decided to change the system and just give me $250 but let me spend it however I choose, then I am still the one making the decision on how I spend the money.

2. Of course the subset is diminished, but within the subset, who's making the decision?
See above analogy.

3. It is 100% their decision which of the applicants get loans. This is true. They have no one from the government telling them which applicants to give loans to.
They have less money to give out, but they still make the decision.
Again, see above analogy.


As for you incessantly mentioning Keynes: not only do I have no reason to believe your claim, but that would change nothing if it were true. If what you said were true, Keynes theories would have been better served with actual statistics and figures supporting them.

Maybe they would have been better served, but they still caused an entire revolution in macro-economical thought, so I think they were pretty well served by themselves.

You still don't get it. The only reason you're calling it a "pretty damn close approcimation" - which is laughable - is because you're claiming those figures regarding M1 Currency are correct. So what?

If I had decided the % it should have been changed based on the age of my dogs and the amount of hairs I have on my balls, would that be a good number? No. I haven't shown how the age of my dogs and the amount of hairs on my balls relate to a figure that prevents a bubble from forming (or reduces the effect if one does form) and doesn't severely negatively impact the economy!

The analogy is silly, yes, but the point is there: That you're using accurate M1 currency figures is the least of your worries. You're making a huge number of assumptions that put that 10% figure into question, some of which are being discussed below:

You obviously understand very little about economics.
The M1 money supply represents the amount of currency plus the amount of credit.
So as an example: you have 10 $100 bills. This means the currency value is currently $1000. You take your $1000 and deposit it in the bank. The currency value is still at $1000. The bank then loans out $900 dollars of your $1000 dollars, the currency value is still $1000 because there's only $1000 of physical capital in the banks reserves, however the M1 money supply becomes $1900 because now you can go and withdraw (and spend) your $1000 and the person receiving the loan can spend their $900.
(Note: M1 also includes other things, but it is largely comprised of credit values)
Therefore, M1 and currency money supply values are absolutely the correct values to be looking at here.
I've already explained all the other things I could adjust for, and why it still wouldn't make that much of a difference.
Please remember that 10% was always an approximate figure.


1. False. It's enough for the currency to stay the same for the bubble to reach the same level of this crisis. As for the rest, yes larger banks will have a leg-up on small banks in regards to the amount they have to lend. Momentarily. Small banks don't have to stay small... not to mention that many small banks add up.

2a. I'm glad we agree that portion was a terrible argument.

2b. Read what I said again before you continue with your idiotic phobia of the CRA. I said the information I provided you in that thread dealing with the CRA showed how the larger banks incurred less risky loans. So your claim that "it was mostly big banks who also had lower risk loans on their books that tried to capitalize on the sub-prime mortgages," is unsubstantiated in the sense that the information we do have suggests that on average those banks with Federal insurance - which tend to be bigger banks - practiced safer lending than those without.

2c. Again, that's not an argument. See 2a. What you yourself doubt isn't convincing to anyone but you! Not to mention that we can use the same logic and claim that your idea isn't necessary because "I highly doubt bankers will get themselves into this type of fiasco again"...

2d. Great! I'm glad that we agree that it wouldn't necessarily stop a bubble from forming just like I said. And before you claim you had already admitted that before in response to Wither, that's exactly what I thought until you went ahead and re-claimed that it would prevent bubbles from forming when you where discussing this with me. (See here (http://www.zoklet.net/bbs/showpost.php?p=445619&postcount=26))

1. You keep saying that, care to back it up? With a limited amount of currency, there is a limited amount of credit that can be created (due to reserve ratios).
And you're still wrong. Because even though small banks can add up, it's larger banks that have more of these time deposits which have no reserve requirement on them. This means that larger banks will always be able to lend out more than smaller banks.
Smaller banks could grow, yes but that's about the only hole you could poke in my theory. Pretty weak.

2a. It wasn't. It was just meant to support my main argument, which still holds true.

2b. Bigger banks are mostly the ones that caused the crisis (think citi bank). Bigger banks have vast amount of capital, so they can take the risk on some loans that smaller banks just can't.

2c. Of course it's an argument. Why the hell would bankers start giving out these types of risky loans en masse after what just happened? They're not going to.
Of course I can't prove that they won't, because it's not a hard science.
Just like you can't prove that smaller banks will open up.
But it's logical, and it makes sense.

2d. It would prevent a bubble from forming, but not completely.
There would still be the possibility of a bubble forming, and there always will be as long as we have a credit based economy, but this would sure help an awful lot.


1. I suggest you stop trying to tell me what my argument was, because you're going to fail miserably. The reason I mentioned the CRA was because you were claiming we should avoid the government forcing banks to give loans to certain people, and I was correcting you if you thought the CRA was such an example - which apparently you do even if you didn't mention it explicitly.

2. Both figures you pulled straight out of your ass. Thank you for proving my point. The only reason you claim it's more likely is a ridiculous stereotype.

3. You shouldn't be repeating yourself because what you have said refutes nothing. So thank you. Again, it's entirely relevant since you claimed your alternative was better.


1. I still think the CRA forced the banks to lend to certain people, and I still think we should avoid that. However as I've said numerous times, that's a separate argument from one about effectiveness of my idea. So let's debate them separately, don't try to intermingle the two because they're completely fucking separate.

2. Oh I apologize so much for using numbers there to prove my point. Of course I made them up, that proves nothing. All I'm trying to say is that things that the democrats are more likely to pass legislation that includes government micromanagement of the economy than republicans, and the democrats are in power now.
So it's more likely to happen.



I know you're being sarcastic, but I'm guessing most of your errors here can be traced to you being too naive and too trusting. For example, trusting a blog post - that consisted of some guy saying he heard from some other guy that a person had said they were threatened with an audit if they didn't take the TARP funds - as evidence.

So yeah, trust your teacher less and actually do some research on your own.

My teacher also teaches the US government course at my high school, so I assumed he would have the correct figure. It would be sort of stupid if I felt the need to substantiate everything I was told by my teacher in class.
Assuming that the US gov teacher has the correct number for something like this is not being too trusting.

[Rust]

Government not caring about the profit margin of banks is a reason for why the shouldn't be micromanaging the economy, the two are interrelated.

And okay, we can debate both, but don't try and intertwine them.
Whether or not government micromanagement of the economy is effective doesn't at all matter to the effectiveness of my original idea.
So we can debate the two separately, or just debate one. You choose.

1. Which still doesn't change the fact that it was you, not me, who brought the discussion back to government micromangement. We were talking about whether the government cares about bank profits, and it was you who started connecting that with micromangement, thus sparking that discussion again. Don't blame me.

2. You don't get to tell me what I can or cannot post. I'll post whatever the fuck I want as long as it's within the rules. So I can discuss them seperately, intermingle them, or what have you. I decide what I'm going to post and how it should be formatted.

Whether you want to indulge me or not, is another story.

It's part of the same idea.

....
If you can't see how saying that bankers wouldn't have passed the CRA had it been up to them relates to my whole argument, then you must have an IQ of less than 7.

I can see how it relates just fine, so spare me the ironic insults. That's not the problem, the problem is that you didn't say that initially. That's what you want your argument to be now. You said something completely different at first, and when you thought how fucking stupid it was, you decided to change it. Again: Saying "Government doesn't care about bank profits" is nothing close to the same as saying "If the Banks had gotten to decide, the CRA initiative hadn't passed". Like I already explained to you, you can care about bank profits while still passing the CRA.


1. No, it's not the same thing. There's a difference between telling the banks who to loan to, and just making them loan out less money.
If my parents used to buy me $300 dollars worth of stuff every month, and then they decided to change the system and just give me $250 but let me spend it however I choose, then I am still the one making the decision on how I spend the money.

2. Of course the subset is diminished, but within the subset, who's making the decision?
See above analogy.

3. It is 100% their decision which of the applicants get loans. This is true. They have no one from the government telling them which applicants to give loans to.
They have less money to give out, but they still make the decision.
Again, see above analogy.

1. Except that other legislation didn't tell them specifically who to loan to! They left it up to a vague term of "loan income families". So the situation in both cases would be as such:

In the case of your idea, with less amount to lend they will - according to you - lend money to those with less risk (aka. high income families)

In the case of the CRA, the banks decided (the banks because the CRA was not forced) to lend money to lower income families because the incentive of Federal Insurance was worth it.

In the end, both have the same results: banks lending to a subset of the American public. In one they are lending to the subset of high income families because it would be less risky, and in the other they would be lending to the subset of lower income families because the incentivized of the government made it worth it.

2. The same can be said of the CRA! Within the subset of "low income families" who's making the descisions? The banks! You just made my point.

3. Wrong. You just reiterated your claim while ignoring the glaring fact that diminishing the subset already means their options, and thus their possible decisions, are diminished. A smaller subset means it's not 100%.

Maybe they would have been better served, but they still caused an entire revolution in macro-economical thought, so I think they were pretty well served by themselves.

Irrelevant. I never questioned that a theory could cause a revolution in thought without statistics or figures. I said the lack of them wasn't a good thing. It isn't.

All of this discussion - which was like pulling fucking teeth - just to get you to admit this simple and very reasonable point: not having figures is a bad thing. How fucking pathetic.



Therefore, M1 and currency money supply values are absolutely the correct values to be looking at here.
I've already explained all the other things I could adjust for, and why it still wouldn't make that much of a difference.
Please remember that 10% was always an approximate figure.

Did you even read what I said? At no point in time did I:

1. Not understand what M1 currency means

2. Question the accuracy of M1 currency statistics in your "calculations".

The point I was making, which apparently you didn't understand, is that just people you've used M1 currency data does not mean the number you're pulling out of your ass does what you claim it does (prevent a bubble while still not impacting the economy severely)!


1. You keep saying that, care to back it up? With a limited amount of currency, there is a limited amount of credit that can be created (due to reserve ratios).
And you're still wrong. Because even though small banks can add up, it's larger banks that have more of these time deposits which have no reserve requirement on them. This means that larger banks will always be able to lend out more than smaller banks.
Smaller banks could grow, yes but that's about the only hole you could poke in my theory. Pretty weak.

2a. It wasn't. It was just meant to support my main argument, which still holds true.

2b. Bigger banks are mostly the ones that caused the crisis (think citi bank). Bigger banks have vast amount of capital, so they can take the risk on some loans that smaller banks just can't.

2c. Of course it's an argument. Why the hell would bankers start giving out these types of risky loans en masse after what just happened? They're not going to.
Of course I can't prove that they won't, because it's not a hard science.
Just like you can't prove that smaller banks will open up.
But it's logical, and it makes sense.

2d. It would prevent a bubble from forming, but not completely.
There would still be the possibility of a bubble forming, and there always will be as long as we have a credit based economy, but this would sure help an awful lot.

1. Yes, there's a limited amout of credit that can be created, and the level is the level we have now (at the very least) because that currency doesn't magically disappear! Changing the reserve ration means that the amount available to lend by a certain specific bank has changed, however it does not mean that it can't reach the same amount by changes in the market (e.g. new banks).

And now, it's not "pretty weak", it proves that your suggestion can indeed allow bubbles to form of the same magnitude depending on how the Market reacts to these changes.

2a. It was as it "supports" your argument as much as me hoping for the oppossite would support mine, which is to say not at all. Personal hope is just that, personal, it doesn't support a single thing.

2b. Except the statistics we have shows that those Banks with Federal Insurance incurred less risky loans on average. Unless you're suggesting that the most popular banks (i.e. the bigger banks) did not have Federal Insurance, then you're quite simply mistaken.

2c. I understand that it might seem reasonable, the difference - and you convininetly ignored this - is that I just didn't dismiss the argument but also pointed out how if we take it as valid a similar case can be made against your own overall argument: "Why would banks start making these risky loans? They wouldn't ergo we don't need any regulation, not even yours"

For your idea/theory to be even be necessary, you have to suppose that these risky practices will occur in the future.

2d. "There would still be a possibility that a bubble" forms means it doesn't really prevent a bubble from forming. It might reduce the chances, but not prevent them from happening completely.


1. I still think the CRA forced the banks to lend to certain people, and I still think we should avoid that. However as I've said numerous times, that's a separate argument from one about effectiveness of my idea. So let's debate them separately, don't try to intermingle the two because they're completely fucking separate.

2. Oh I apologize so much for using numbers there to prove my point. Of course I made them up, that proves nothing. All I'm trying to say is that things that the democrats are more likely to pass legislation that includes government micromanagement of the economy than republicans, and the democrats are in power now.
So it's more likely to happen.


1. I understand that whether or not the CRA forced banks - something that was already complete refuted yet you refuse to accept because of your utter dishonesty - doesn't change the effectiveness of your idea, however you claimed that it was irrelevant to the discussion and had nothing to do with it which is false. It does have something to do with what you said. It's relevant.

2. Yes, and all I said is that that is something you pulled right out of your ass. Your only evidence for that is "Because I said so". That's it. That's not an argument. If that were a good argument then I could just say the oppossite and we would get nowhere.


My teacher also teaches the US government course at my high school, so I assumed he would have the correct figure. It would be sort of stupid if I felt the need to substantiate everything I was told by my teacher in class.
Assuming that the US gov teacher has the correct number for something like this is not being too trusting.

All unimportant: The fact remains that you were wrong and if you're going to come here and make the claim that your theory is supported by the facts you should double check the facts.

[patton]

You don't get to tell me what I can or cannot post. I'll post whatever the fuck I want as long as it's within the rules. So I can discuss them seperately, intermingle them, or what have you. I decide what I'm going to post and how it should be formatted.

Whether you want to indulge me or not, is another story.


Well if you don't understand that the ideas are not meant to be intermingled then you are an idiot.


I can see how it relates just fine, so spare me the ironic insults. That's not the problem, the problem is that you didn't say that initially. That's what you want your argument to be now. You said something completely different at first, and when you thought how fucking stupid it was, you decided to change it. Again: Saying "Government doesn't care about bank profits" is nothing close to the same as saying "If the Banks had gotten to decide, the CRA initiative hadn't passed". Like I already explained to you, you can care about bank profits while still passing the CRA.


No, those two statements are part of one larger idea. They go together.
Everything bankers do is for higher profits. Bankers obviously wouldn't have felt that the CRA would bring higher profits.
Yet, the government still passed the CRA.
So obviously bankers care more about profits than the government. Therefore it should be bankers who are making the decisions.
Government may be able to care about bank profits somewhat, but bankers will always care more.

1. Except that other legislation didn't tell them specifically who to loan to! They left it up to a vague term of "loan income families". So the situation in both cases would be as such:

In the case of your idea, with less amount to lend they will - according to you - lend money to those with less risk (aka. high income families)

In the case of the CRA, the banks decided (the banks because the CRA was not forced) to lend money to lower income families because the incentive of Federal Insurance was worth it.

In the end, both have the same results: banks lending to a subset of the American public. In one they are lending to the subset of high income families because it would be less risky, and in the other they would be lending to the subset of lower income families because the incentivized of the government made it worth it.

2. The same can be said of the CRA! Within the subset of "low income families" who's making the descisions? The banks! You just made my point.

3. Wrong. You just reiterated your claim while ignoring the glaring fact that diminishing the subset already means their options, and thus their possible decisions, are diminished. A smaller subset means it's not 100%.


1/2. The difference though, is that forcing banks to lend to people who are high risks, people they wouldn't normally loan to can lead to bigger problems that not letting them lend to as many people as they could. This is because if you just limit the number of people they can loan to, their profits may not be as astronomically high, but they're going to have very few people defaulting on loans. So almost all of the loans they provide will give them higher returns.
But forcing banks to lend to people who they normally wouldn't loan to can cause banks to go bankrupt because these are the people who default on their loans.

3. But they aren't being forced to loan to people.


Did you even read what I said? At no point in time did I:

1. Not understand what M1 currency means

2. Question the accuracy of M1 currency statistics in your "calculations".

The point I was making, which apparently you didn't understand, is that just people you've used M1 currency data does not mean the number you're pulling out of your ass does what you claim it does (prevent a bubble while still not impacting the economy severely)!

Well you just keep calling it "shoddy math" and not explaining why.
I've told you everything I did, and everything that I could have but chose not to account for, and the reason why.
And it represented about as much math as I feel willing to do for some internet forum, yet still represented a good approximation of how large the credit bubble was, and how much we should decrease the amount of credit by to get rid of the credit bubble.

1. Yes, there's a limited amout of credit that can be created, and the level is the level we have now (at the very least) because that currency doesn't magically disappear! Changing the reserve ration means that the amount available to lend by a certain specific bank has changed, however it does not mean that it can't reach the same amount by changes in the market (e.g. new banks).

And now, it's not "pretty weak", it proves that your suggestion can indeed allow bubbles to form of the same magnitude depending on how the Market reacts to these changes.

2a. It was as it "supports" your argument as much as me hoping for the oppossite would support mine, which is to say not at all. Personal hope is just that, personal, it doesn't support a single thing.

2b. Except the statistics we have shows that those Banks with Federal Insurance incurred less risky loans on average. Unless you're suggesting that the most popular banks (i.e. the bigger banks) did not have Federal Insurance, then you're quite simply mistaken.

2c. I understand that it might seem reasonable, the difference - and you convininetly ignored this - is that I just didn't dismiss the argument but also pointed out how if we take it as valid a similar case can be made against your own overall argument: "Why would banks start making these risky loans? They wouldn't ergo we don't need any regulation, not even yours"

For your idea/theory to be even be necessary, you have to suppose that these risky practices will occur in the future.

2d. "There would still be a possibility that a bubble" forms means it doesn't really prevent a bubble from forming. It might reduce the chances, but not prevent them from happening completely.

1. But where do you propose that the new banks would get their money from? The answer is obviously that people would have to withdraw it from the larger banks and then choose to deposit it in smaller banks.
The amount of banks that exists doesn't matter at all, it's the amount of currency that is in banks and the reserve ratio that determines how much credit can be created.
Here's an example: let's say there's is a total of $100 in the whole economy. $50 dollars is deposited in bank A, and $50 is deposited in bank B. With the current reserve ratio (10%), bank A can lend out $45 and bank B can lend out $45. So there is a total of $190 in what would be the M1 money supply.
Now say more banks are created (with the same reserve ratio). So there are 10 banks and each has $10. This means that each can lend out $9. Again, there is a total of $190 in the M1 money supply.
Now let's look at the same 2 scenarios but with a higher reserve ratio.
Say the government raised the reserve rate to 50%. So if we stayed with scenario A, there would be 2 banks with $50 each. These 2 banks can each lend out $25. So there is a total of $150 in the M1.
But let's say more banks pop up due to the change in the reserve ratio. So now there are 10 banks with $10 each and a 50% reserve ratio. Each bank can lend out $5. But there's still the exact same amount of money in the M1.
Unless the amount of currency was increased, creating more banks would do absolutely nothing.

2a. Logic is an argument, not everything has a statistic to prove it.

2b. Could it be because larger banks gave out so many more loans in total than smaller banks?

2c. But credit bubbles can still form even without the type of horrible lending practices we've had over the past few decades. Here's how: it starts with banks giving out credit cards and loans to people who completely deserve them. They use this credit to buy things and to help their businesses. As aggregate supply and demand both increase, US GDP increases. As US GDP increase and the economy grows, there is more currency and the currency standards are slightly relaxed due to the booming economy. So more people are able to get loans, which further increases the economy. This cycle continues until eventually everyone is simply using credit, instead of real money to pay for things. As the bubble grows larger and larger, it gets closer to popping. Eventually since the whole economy was based on credit, the shit hits the fan. That's what happened to us.
So I know we've mostly been talking about the CRA and housing loans, but we still had a giant credit bubble outside of the housing market. Since the credit for housing loans and the credit for credit cards (and other loans) comes from the same place however, once the housing loans started to be defaulted on en masse, all other types of credit froze up.
So no, in order to have the formation of a new credit bubble you do not need to have lending practices as stupid as the ones we've seen over the past decades.

2d. Okay, so what's your point?
In the type of economy we have, we will never be able to completely prevent the formation of a bubble. But this is something that would help a great deal.



1. I understand that whether or not the CRA forced banks - something that was already complete refuted yet you refuse to accept because of your utter dishonesty - doesn't change the effectiveness of your idea, however you claimed that it was irrelevant to the discussion and had nothing to do with it which is false. It does have something to do with what you said. It's relevant.



You can say it's relevant in the fact that it somewhat has to do with the same field. However, as I've said to you before, the two topics shouldn't be intermingled.

[Rust]

Well if you don't understand that the ideas are not meant to be intermingled then you are an idiot.

What a simplistic, childish and idiotic position. Your age is showing.

No, those two statements are part of one larger idea. They go together.
Everything bankers do is for higher profits. Bankers obviously wouldn't have felt that the CRA would bring higher profits.
Yet, the government still passed the CRA.
So obviously bankers care more about profits than the government. Therefore it should be bankers who are making the decisions.
Government may be able to care about bank profits somewhat, but bankers will always care more.

Except, for the thousandth time, you did not say that initially. At no point in time did I doubt the banks would care more about their profits than the government. That was never in question because that's not what you said initially. Again: Saying "Government doesn't care about bank profits" is nothing close to the same as saying "If the Banks had gotten to decide, the CRA initiative hadn't passed". Like I already explained to you, you can care about bank profits while still passing the CRA.

1/2. The difference though, is that forcing banks to lend to people who are high risks, people they wouldn't normally loan to can lead to bigger problems that not letting them lend to as many people as they could. This is because if you just limit the number of people they can loan to, their profits may not be as astronomically high, but they're going to have very few people defaulting on loans. So almost all of the loans they provide will give them higher returns.
But forcing banks to lend to people who they normally wouldn't loan to can cause banks to go bankrupt because these are the people who default on their loans.

3. But they aren't being forced to loan to people.


1. So then you've essentially conceded that I was correct in saying that the decisions is not 100% up to the banks, and that within the subset of low income families the banks are still making the decisions just as within the subset of the American public the banks are still making the decisions?

Thank you for conceding that. The rest - i.e. "one is better than the other - is not something I was questioning in these particular paragraphs. I was always questioning your ridiculous claim that their decisions was 100% theirs and your refusal to admit that it wasn't.

2. They aren't being forced to loan to people under the CRA either. The decisions is not 100% up to them when you diminish who they can loan to.



Well you just keep calling it "shoddy math" and not explaining why.
I've told you everything I did, and everything that I could have but chose not to account for, and the reason why.
And it represented about as much math as I feel willing to do for some internet forum, yet still represented a good approximation of how large the credit bubble was, and how much we should decrease the amount of credit by to get rid of the credit bubble.

Yes I did explain why it's shoddy, perhaps you need to read what I said again:

The point I was making, which apparently you didn't understand, is that just [because] you've used M1 currency data does not mean the number you're pulling out of your ass does what you claim it does (prevent a bubble while still not impacting the economy severely)!

There's a difference between using accurate numbers in your math and proving that the math have the effect you claim it does.



1. But where do you propose that the new banks would get their money from? The answer is obviously that people would have to withdraw it from the larger banks and then choose to deposit it in smaller banks.
The amount of banks that exists doesn't matter at all, it's the amount of currency that is in banks and the reserve ratio that determines how much credit can be created.
Here's an example: let's say there's is a total of $100 in the whole economy. $50 dollars is deposited in bank A, and $50 is deposited in bank B. With the current reserve ratio (10%), bank A can lend out $45 and bank B can lend out $45. So there is a total of $190 in what would be the M1 money supply.
Now say more banks are created (with the same reserve ratio). So there are 10 banks and each has $10. This means that each can lend out $9. Again, there is a total of $190 in the M1 money supply.
Now let's look at the same 2 scenarios but with a higher reserve ratio.
Say the government raised the reserve rate to 50%. So if we stayed with scenario A, there would be 2 banks with $50 each. These 2 banks can each lend out $25. So there is a total of $150 in the M1.
But let's say more banks pop up due to the change in the reserve ratio. So now there are 10 banks with $10 each and a 50% reserve ratio. Each bank can lend out $5. But there's still the exact same amount of money in the M1.
Unless the amount of currency was increased, creating more banks would do absolutely nothing.

2a. Logic is an argument, not everything has a statistic to prove it.

2b. Could it be because larger banks gave out so many more loans in total than smaller banks?

2c. But credit bubbles can still form even without the type of horrible lending practices we've had over the past few decades. Here's how: it starts with banks giving out credit cards and loans to people who completely deserve them. They use this credit to buy things and to help their businesses. As aggregate supply and demand both increase, US GDP increases. As US GDP increase and the economy grows, there is more currency and the currency standards are slightly relaxed due to the booming economy. So more people are able to get loans, which further increases the economy. This cycle continues until eventually everyone is simply using credit, instead of real money to pay for things. As the bubble grows larger and larger, it gets closer to popping. Eventually since the whole economy was based on credit, the shit hits the fan. That's what happened to us.
So I know we've mostly been talking about the CRA and housing loans, but we still had a giant credit bubble outside of the housing market. Since the credit for housing loans and the credit for credit cards (and other loans) comes from the same place however, once the housing loans started to be defaulted on en masse, all other types of credit froze up.
So no, in order to have the formation of a new credit bubble you do not need to have lending practices as stupid as the ones we've seen over the past decades.

2d. Okay, so what's your point?
In the type of economy we have, we will never be able to completely prevent the formation of a bubble. But this is something that would help a great deal.


1. Except that overly simplistic scenario doesn't represent real life. Not all money is held in banks, and the amount of currency isn't immutable.


2a. Except that wasn't "logic" or it was the same "logic" that I could use in reverse! You avoided the point: Your "Argument" is a strong as the opposite claim, which renders it pretty fucking useless.


2b. That's a good point, however the fact that it was smaller banks that were riskier on average suggests that smaller banks can still have a huge impact if their numbers increase, which was my point in point 1.

2c. I don't understand your point. I never claimed that there was only one way a bubble could form. My point doesn't depend on that either.. So...

2d. My point should be obvious if you followed the discussion:

I pointed out how your idea didn't prevent bubbles. You claimed it did.


You can say it's relevant in the fact that it somewhat has to do with the same field. However, as I've said to you before, the two topics shouldn't be intermingled.

It has more to do than just being "in the same field", but in any case the only way they were "intermingled" was that they were in the same post. So what? I am a human with the ability to discuss more than one thing in the same post.

This is merely you not wanting to discuss a topic you know has caused you trouble in the past.