Saturday, July 28, 2012

Water: "The Most Mispriced and Misallocated Resource."

A pretty solid discussion by Lauren Lyster with Rick Rule. I wasn't as excited about the comments of Jim Rickards. He wants to bring back Glass-Steegal and seems to blame the financial crisis on the removal of Glass-Steegal, while failing to acknowledge the role of the Federal Reserve money printing in causing the crisis and the moral hazard created by the FDIC which embolden banks to take on greater risk. In short, Rickards failed to understand the primary role played by the government in the crisis and thus in his confusion calls for even more government regulation via a return to Glass-Steegal. In addition, Rickards, comments on LIBIOR occurred from a rather pedestrian legal perspective, rather than an economic perspective, until Rule called him on it.


5 comments:

  1. Should the government insure bank deposits and yet have nothing to say about how those deposits are used? Glass-Steagel created the FDIC. It was not repealed. It was amended. Graham-Bliley amended it to permit commercial banks to engage in more risky activities usually reserved for investment banks, and it allowed investment banks to take deposits and receive FDIC insurance.

    What would any private insurer do in response to increased risk? It would either drop the insured enterprise altogether, demand the risky activities cease, or raise insurance rates to cover the added risk. Why should the government be different? As long as the US is going to insure deposits, they need to set standards for the behavior being insured.

    Of course, the free market solution would be to end the FDIC, but since that isn't going to happen, it is perfectly reasonable to re-visit Graham-Bliley. There may be a better solution that repealing it, but we cannot automatically say that the government shouldn't regulate when taxpayer funds are at risk. Any private insurer would so why shouldn't the government in these circumstances?

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  2. If you've watched or read anything from Mr. Rickards you would know that he understands the Federal Reserves role in creating the crisis and also the problems associated with FDIC insured deposits.

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    1. Well, why didn't he say so on RT?

      He talked about bringing back Glass-Steegal. Duh!

      It means he is a clueless windbag throwing out whatever comes to his head.

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  3. It is true that in the past Jim Rickards has been critical of the Federal Reserve. However, just a few days ago he penned an editorial calling LIBOR “the mother of all scandals.” He is too smart to see LIBOR as a bigger scandal than central banking. Perhaps this is part of the reason “LIeBOR” is being floated so high, to deflect attention from the bigger scams – with Rickards doing his part in the con-game.

    http://bionicmosquito.blogspot.com/2012/07/jim-rickards-and-libor.html

    A couple of months ago, he came out four-square against an audit of the US gold. This from one who states that one day gold will once again be a component of the new monetary system.

    http://bionicmosquito.blogspot.com/2012/06/jim-rickards-and-gold-audit.html

    It always was clear he was part of the allowable dialogue, perhaps playing the role of defining the furthest allowable “free-market” criticism of the current situation. It seems, now that he has made some friends in the almost-hard-money-almost-free-market corner, he is bringing them in closer to the center.

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    1. No where in that piece did Mr. Rickards come out against an audit of the gold. He has stated many times that he prefers an audit, but he doesn't believe in any conspiracy theories about the gold not being there or the gold being replaced with tungsten bars. I will disagree with Mr. Rickards assessment about LIBOR being the biggest scandal ever. The central banks of the world will get that dubious award. But all this doesn't mean that Mr. Rickards is a shill or is playing a "con-game".

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