Reliance on Free Market Rating Options

[sixfive]

"As a result of the current global financial crisis, the international financial system can no longer rely primarily on the free market. To avoid future financial crises, governments and multilateral agencies will have to assume greater regulatory control over international flows of capital." Do you agree or disagree with this statement?

[firechild]

If the bailouts and federal takeovers go much further, we're leaning closer toward communism.

[sixfive]

I'm going to copy/paste some responses from the discussion board I got this from and put short responses to shame.

[kryogenix]

"As a result of the current global financial crisis, the international financial system can no longer rely primarily on the free market. To avoid future financial crises, governments and multilateral agencies will have to assume greater regulatory control over international flows of capital." Do you agree or disagree with this statement?

Disagree. When was the last time we actually relied on the free market? Between subsidies, random incentives, stupid regulations, oppressive taxes and other bullshittery like the Federal Reserve, the government has far too much influence on the economy. If anything is to blame, it's government intervention, not the free market.

[*reupONtrees*]

LAISSEZ FAIRE BITCH

[sixfive]

I do not believe that more governmental control is a good thing. As mentioned in an earlier response by Quentin Green, "There isn't reason to err on the side of optimism when history and cyclic trends point to the likelihood of another global financial crisis. Just as there is a cycle of the four seasons, there will be cycles of boom and bust. " I think people have a tendency to react rashly to current crises and want quick fixes instead of having faith in a market correcting itself. These rash reactions, in my opinion, can lead to some unwise decisions and ultimately give a short term fix at the cost of long term growth and development.

As far as international regulation goes, I don't think a set of rules could be agreed upon world-wide. Cultural differences and backgrounds bring people up differently in their respective countries, and because of this everyone has a slightly different way of thinking. Some feel more governmental regulation is a good thing and feel it their obligation to serve their country, while some feel that they'll be equally if not more prosperous if given the opportunity to excel and not be held back by their government.

I believe that the market is self correcting given the opportunity to do so and not restricted or hindered by outside forces. This isn't to say that the government should stay completely out, as I believe a little bit of regulation is a good thing, but I believe the market is too big for the government to run efficiently and effectively. There's a lot of criticism of the work ethic of governmental employees, that they're lazy, do what they need to get by, and haven't got much incentive to go above and beyond what they're required to do. This is opposite of the private sector, which I believe should play the largest part in the free market.

[sixfive]

The question I have to ask myself when posed with the question above is; how is the current international financial system structured? The answer is that there is no unilateral structure of regulatory control that is universally accepted across international waters. Our readings describe the situation as anarchical. Basically, to place the health of global financial markets into the hands of a number of sovereign states will not prevent another crisis of similar proportion or greater from happening in the future. This is in part due to the fact that different forms of government with different cultures have different perspectives on how multinational organizations and international flows of capital should regulated and managed.

In the UK for example, the government does not take an active, direct role is the supervision of investments or flows of capital from from companies abroad and domestic. London's financial center is privately owned where banks and are free to invest in other countries however they see fit in comparison to China whose banks are mostly state owned. In China, the government takes a direct role in banking and investments where the international flow of capital is concerned both inbound and out.

Regulation to Wall Street means restriction. In hindsight of the current financial crisis. How was the government supposed to regulate these banks in regards to whom they were extending credit to? What allowed banks to become too highly leveraged was the relaxed standards or "deregulation" on the capital banks had to keep in reserves to cover their deposits and other obligations. You give banks the ability to leverage their money by five to ten times over and what you end up with is lots of loans made to people who couldn't handle the payments and investments made in those bundled securities on the secondary market. How did China and the UK know that Fannie Mae and Freddie Mac were buying loads of poorly written mortgages? That wouldn't be something that international investment capital would be privy to.

Deregulation of the domestic US financial markets allowed for the creation of exotic securities and derivatives that fueled the flame of quick profits in the banking sector. With regulation comes restriction and with restriction comes the constriction of growth. If governments and multilateral agencies are willing to limit growth due to regulation and oversight of the international flow of capital then the risk of another crisis is avoidable. However as history has shown us time and time again, financial crisis are inevitable and this will not be the last because the self-serving interests of sovereign states will always prevail in the global financial market.

[Uronacid]

Disagree. When was the last time we actually relied on the free market? Between subsidies, random incentives, stupid regulations, oppressive taxes and other bullshittery like the Federal Reserve, the government has far too much influence on the economy. If anything is to blame, it's government intervention, not the free market.

I have to say I disagree as well. The government has a lot to do with the current financial crisis. When gov't pushed banks to hand out bad loans. When gov't started using "bailout" money. When gov't started to meddle with the American auto industry. So far all of these have had major negative effects on our economy in the form of inflation, job loss, etc... the gov't has made it very clear that it cannot regulate the economy effectively. I believe that the gov't has certainly over stepped their bounds during the past couple decades, however I do believe that gov't should play some sort of role in regards to dealing with monopolies and other companies that clearly abuse the market.

[sixfive]

ps post #6 is my post on the discussion

this is for a schol thing or something liek that i dont know im dinkning