Is the US rapidly becoming a failed state due to its free market policies?

[Robinho]

What cap'n Bob seems to overlook is that fractional reserve banking is exactly the sort of innovation that the free market produces and it's widespread adoption a brilliant example of competition at work. If full reserve banking resulted in a more efficient allocation of resources then it would be widely adopted.

No it isn't. It is government enforced. The government has a monopoly on money, and it grants special powers to banks. How is that free market?

[OwlHoot]

... And what exactly do you find stupid?

Your apparent inability to grasp that free markets don't guarantee permanent pre-eminence to any one country in every respect, any more than to one company or even one family.

[Robinho]

What's abnormal? Banks hold a very small percentage of what they borrow in cash. Free market economies have relied on such principles for decades. Add to that borrowing to low earners and cash hungry businesses feeds the economy as they have a higher propensity to spend. Restrict Banks to lending what they hold and the economy would contract massively.

And you wonder if that is why we are 1.X trillion in debt?

[sasguru]

Your apparent inability to grasp that free markets don't guarantee permanent pre-eminence to any one country in every respect, any more than to one company or even one family.

They certainly don't. That has been my argument all along. Are you on drugs?

[ZARDOZ]

And you wonder if that is why we are 1.X trillion in debt?

We are in debt because of short term emotive thinking which was purely motivated by greed. Short term exceptional profits in exchange for long term catastrophic problems. Banks created Credit Default Swaps in the 90s, goverments left these devices unregualted and unchecked, the economy appeared to be working spiffingly well.

Such things will always happen, hence why unfettered capitalism will never work. But that doesn't matter when the CEOs and senior execs are retired on some Caribean island with several hundred million in the bank while everyone else and their grandchildren pick up the tab. These people are more disgusting than the worst benefit scroungers.

[Robinho]

We are in debt because of short term emotive thinking which was purely motivated by greed. Short term exceptional profits in exchange for long term catastrophic problems. Banks created Credit Default Swaps in the 90s, goverments left these devices unregualted and unchecked, the economy appeared to be working spiffingly well.

Such things will always happen, hence why unfettered capitalism will never work. But that doesn't matter when the CEOs and senior execs are retired on some Caribean island with several hundred million in the bank while everyone else and their grandchildren pick up the tab. These people are more disgusting than the worst benefit scroungers.

But it's not unfettered capitalism because the government has granted the banks a special privilege to create money, and thus they can wildly over-leverage themselves. That is crony capitalism.

You can't prevent greed, and it is hard to know what needs to or doesn't need to be regulated before the world goes to hell, so i don't really accept this solution.

If the fundamentals of the system are sound the market will regulate itself, but that is not the case at the minute.

[doodab]

No it isn't. It is government enforced. The government has a monopoly on money, and it grants special powers to banks. How is that free market?

It didn't start out like that. It evolved from a free market system based on gold as the medium of exchange. If your "sound money system" was instigated then the only way to prevent fractional reserve banking from evolving again would be government intervention to stop it.

BTW the government doesn't "grant special powers to banks" so much as vet the organisations allowed to operate as one, for the simple reason that if you let any tom dick and harry have a go you'd have an even bigger shambles than you have now. You can, if you wish, set up a bank and operate a full reserve system, you can also if you wish introduce your own alternative currency backed by gold. You won't last very long because you'll be outcompeted by organisations that are free to operate differently, in fact the only way you'd survive is if the government made sure the banking market was very unfree indeed.

[Ignis Fatuus]

What cap'n Bob seems to overlook is that fractional reserve banking is exactly the sort of innovation that the free market produces and it's widespread adoption a brilliant example of competition at work. If full reserve banking resulted in a more efficient allocation of resources then it would be widely adopted.

No. If it resulted in more profit for those doing it, it would be widely adopted.

[ZARDOZ]

But it's not unfettered capitalism because the government has granted the banks a special privilege to create money, and thus they can wildly over-leverage themselves. That is crony capitalism.

You can't prevent greed, and it is hard to know what needs to or doesn't need to be regulated before the world goes to hell, so i don't really accept this solution.

If the fundamentals of the system are sound the market will regulate itself, but that is not the case at the minute.

Only a VERY simple system would be able to self regualte satisfactorily. We don't have anything like that in the modern western world. We need laws to avoid chaos when it comes to law and order. Similarly we need to regulate/allow for the human factor as proven time and time again.

[Robinho]

It didn't start out like that. It evolved from a free market system based on gold as the medium of exchange. If your "sound money system" was instigated then the only way to prevent fractional reserve banking from evolving again would be government intervention to stop it.

It is free market if you let banks create their own currencies. But if you say, a bank must use this currency and only it is allowed to create it, then that is government intervention pure and simple.

BTW the government doesn't "grant special powers to banks" so much as vet the organisations allowed to operate as one,

They do have special powers, they are the only line of business that can create money. That is a pretty special power.

for the simple reason that if you let any tom dick and harry have a go you'd have an even bigger shambles than you have now.

That's a great justification. We can only allow these people to create money, so we can only have a massive shambles as supposed to an enormous shambles.