Some believe that the free operation of market forces results in the most efficient distribution of scarce resources whereas others hold that the government is in the best position to oversee and control the economy. Where do you stand and why?
The problem with the free market is that justice is never taken into account. If we just let the market operate freely, our society will be very unjust.
Wen is right. Capitalism is about greed, not justice. Only govt intervention can protect minorities, refugees and other disadvantaged groups. The free market (which is only free for some) only seeks to exploit them.
Power to the millions, not the millionaires!
Capitalism has brought so much propsperity to our world… it has lifted the standards of living of so many people and it still continues to do so (e.g. China, India).
What has socialism done for the world? Poverty and dictatorships… (e.g. Cuba and North Korea)
I’m with Sean. Socialism has failed. Just accept it and move on, comrades.
I think a right balance between Free Markets and Government Intervention is necessary.
During the 1980s many developing countries implemented neoliberal, free market policies. They promoted deregulation and greater integration with the global economy. However this only made them more prone to global economic crises (like the Asian Financial Crisis and the Latin American Banking Crisis).
Free Market Economics will only make markets more prone to investor behaviour and sometimes even the market can be wrong. Take for example the DotCom Bubble and Housing Bubble caused by overconfident speculation by investors.
On the other hand, having too much government intervention (like in Keynesian regimes) is no good because it ties up investors with a lot of regulations, filing requirements and red tape. Keynesian regimes may run into the problem of being too protectionist and too restrictive. So a right balance must be struck between Neoliberal and Keynesian Market Economics.
I like your levelheaded approach, Sean.
We must be careful, however, not to think that the underlying causes that lead to market failure miraculously disappear merely because we let the government take charge. To use your example of irrational investor behaviour, it is true that investors sometimes act irrationally. But let us not forget that so do politicians and bureaucrats. Replacing market investors with government bureaucrats doesn’t mean we have solved the problem of irrationality. If anything we have made it worse because the government is more able more likely than the market to misprice goods and services, thus creating perverse incentives.
Still, I don’t doubt your central point that a balance has to be struck.
Market failure is socialist nonsense.
I think the question really comes down to whether or not you’re a faggot or a freedom loving patriot.
pure free market obviously doesn’t work, nor does pure planned economies or anywhere near planned economies. theres a complete disincentive to work in socialist economies because why should a lawyer even bother when hes going to get paid the same amount as some other guy flipping burgers. free market encourages people to excel and while some people are naturally unable to perform as well, then they should receive some form of benefits from the government. so in essence, mostly free market with small degree of government influence. from the track record its obvious those economies that are based more on a free market work far better, what happened to russia?
Well said, Ling. I think few people would disagree with you these days. The question is, though, how much government assistance you would give to those who are “naturally unable to perform as well” and how broadly you construe this condition.
For example, should a person who is unemployed but without a disability be entitled to government benefits? Is he “naturally unable to perform as well”?
Should people who have lost their jobs due to their own negligence or misconduct be entitled to government assistance?
Should government assistance be eternal (i.e. you keep getting government benefits no matter how long you remain unemployed)?
These are difficult questions. In Australia, as well as most developed countries, they’re all answered in the affirmative.
Click here to find out why Dennis Shanahan of The Australian (8/8/08) believes that the Rudd Government’s new GROCERYchoice website is “as sad, empty and useless as an old shopping trolley dumped in a stormwater drain.” He goes on:
“It’s actually worse than that because the same shoppers who are outraged at the gimcrack gimmickry of a website that doesn’t tell you real prices for individual items on the day you shop and where you shop, have to pay taxes to fund the scheme. They’d be better off if the money spent on the website were returned to them for spending on groceries.”
Do you agree with Shanahan’s judgment?
I should point out that unlike its more powerful counterpart, FuelWatch, GroceryChoice probably does not constitute “central planning” because in this case the government doesn’t regulate prices. Still, I decided to post it here because GROCERYchoice can be considered a manifestation of the “nanny state”.
Comparing the two rapidly developing nations, china and india, we see the challenges faced by both market and planned economies. China which is now labeled as a “transitional” economy (which means that they can live the oxymoron of having toll roads and censoring)have realised like the rest of the world that perfectly planned economies don’t work, how ever they retain autonomy over their exchange rate, over personal freedom and infrastructure. This is partly why they are growing decisively faster than india. India on the other hand is a 50 year old democracy that is struggling to make huge infrastructure decisions. Largely because those in charge cant order coffee without taking a vote. If a provincial official in china wants a freeway, it’ll be finished in 2 years.
In my opinion the more centrally planned economy is great for china right now, its great for pulling millions out of poverty and giving hope to the world economy in this global economic uncertainty. But in the next generation i want the economic superpower to be a democracy run under the supreme control of the market.
talking about grocery prices…In a perfect theoretical market where the price of the goods are set by the demand and supply at a particular instant you must assume a few things. That suppliers are selling homogeneous goods, that no matter where you are you have perfect mobility and perfect knowledge of the prices in the market. There is no doubt that we are not in a perfect market however creating a system where consumers can have access to the prices of competitors brings us one step closer to a perfect market.
Market failure? According to who? Governments who can never represent every member of every one of these “minorities”? A free market will allow individuals to pursue what’s important to that person, nothing more and nothing less.
Guys, Check out Robert Skidelsky:
I think he is absolutely genius on this matter.
Making a new comment look at the banks in the US. It surely is the end of the laissez faire system?
It’s a bit more complicated than that, Vish.
As this video and this article by professor John Lott show, regulatory intervention had quite a lot to do with the emergence of the unsustainable subprime market that caused this crisis. Not to mention the fact that the big culprits, Fannie Mae and Freddie Mac, are both GSEs - government sponsored enterprises.
Its ironic that America is using what could be described as communist or socialist economic methods to address such a prominently capitalist crisis. They might want to ask China for advice on how to organise and run state owned businesses.
Im not a free market fundamentalism who in delusion thinks the market is perfect. I think these people are as idealistic and wrong as communists.
But of course im also not a communist who forgets that humans are inherently greedy.
The only workable solution is a combination of both economic systems. Governments must know their place, but be ready and willing to intervene when the need arises. America’s federal reserve and treasury have done well so far.
But no, sub prime will not be the end of the laissez faire system in my opinion.
But Vish, you raise a good area of discussion. We are seeing economic history in motion at the moment. This is one of those rare moments where you can actually see long held theories being blown away by the power of the markets.
I just read a quote from James McGlew that, “This is the greatest economic shock that has happened to capitalism.”
Its probably a measured comment to make that considerable changes will be made to how countries approach economic management in the future.
That said, it is notoriously hard to make accurate predictions in the heat of a crisis.
SCAGWWATCVD,
Your last statement deserves particular attention - and praise. It is indeed hard to make accurate predictions in the heat of a crisis. Consequently, it is even harder to make the right decisions in the midst of a crisis.
I believe that the issue here is not the perpetual ideological battle about whether we need more or less regulation. We need the right regulation. It’s not quantity that matters, it’s quality.
This crisis was provoked by spectacularly bad (if well-intentioned) regulation by the US Congress (amendents to the Community Reinvestment Act in the 1990’s, designed to make housing more affordable to the poor by forcing banks to relax lending standards). Regulatory bodies failed to arrest the escalation of the crisis, fuelled and veiled by the housing boom. They had the power (and arguably knowledge) but lacked the will.
The social democracies of Europe, that initially indulged in schadenfreude about American capitalism, now find that their regulatory regimes have also failed. Their banks are collapsing one after the other and have been bailed out by the taxpayer.
This is not about more or less regulation. Only the most romantic dreamers now fantasise about the fall of “capitalist greed”. Regulation has to some extent brought this about and regulation failed to stop it. It’s about getting the regulation right.
This article by John Steele Gordon in the Wall Street Journal (10/10/08) provides an insight into the history of the banking system in the United States and the crucial difference between good and bad regulation, rather than the quantity thereof.
I’d agree that an improvement in the quality of regulation is what is needed most. But to add to that, the US financial system was and is remarkably backwards, huge reforms would probably be beneficial. Strangely enough Australia has become the envy of the financial world. We have a very solid system.
The question of regulation is an interesting one, because it addresses the fact that the market has a glaring weakness. Greed is one of the engines that fuels the fires of economic progress in capitalist nations. Over and over again the market uses greed and incentive to miraculously aligns human selfishness with communal prosperity. Greed and incentive produce progress. This is a brilliant engine. But the engine does not have a conscience, and sometimes it crashes. I would disagree with Gordon Gecko’s statement that greed is good. In its greator form, greed is quite evil… but it usually works. It makes people work hard, it makes entrepreneurs start businesses, it makes businesses strive for greater profit and it makes families invest their money for the benefit of these businesses. This makes countries develop. But periodically this greed and incentive, that is so essential to progress, results in corruption, rampant speculation and a lack of attention to risk management. Regulation wouldnt be neccesary if capitalism was perfect. It wouldn’t be neccesary if humanity truly cared about our fellow man. But human faults shine brightly every day in the commercial world. Regulation is an attempt to address our own human weaknesses.
Communism failed because it didn’t use greed enough. I wonder if someday capitalism may be replaced because it uses greed too much.
They are just some crazy opinions I have that you are welcome to disagree with Liron. I’m certainly not proposing any better system for the moment, or better engine to stay with the metaphor.
These opinions are not crazy at all, if you ask me. Au contraire…
I will, however, point out (and not by way of refutation because you’re not arguing it) that when we denounce excessive greed, we tend to find convenient and stereotypical scapegoats like bloated bankers. We often forget, in our righteous indignation, that it takes two to tango. If a bank makes an irresponsible loan at a usurious interest rate, it means there is a borrower who has irresponsibly taken a loan he can’t repay. Arguably, that’s morally worse than making the loan because at least the lender is gambling its own money (unless, as in the case of Fannie and Freddie, the dodgy loans are backed by the government). The borrower, on the other hand, sacrifices somebody else’s cash - which he’s supposed to pay back. This, too, is greed. Instead of settling for a smaller house you can afford, you buy a bigger house you can’t afford in the hope prices willl keep rising. When the housing bubble bursts and foreclosures sprout like mushrooms, we blame the bankers for being so damn greedy and giving us all these loans. Well, true, but borrowers were greedy too.
Michael Stutchbury in the Australian (14/10/08) makes this point in a local context:
“Australia did not display the extremes of the US debt and housing boom. With a smaller underclass, we did not have the same excess of sub-prime mortgage lending.
Yet, as Minack points out, Australia looks more vulnerable to a household debt correction than the US on a number of measures. While we did not overbuild to the same extent as the US, our house prices inflated much more, even though the Reserve Bank checked their rise in the early 2000s. And Australians borrowed much more against this apparent increased wealth. Australians used to carry much less debt than Americans. On latest figures we now carry much more: 182 per cent of annual gross household income, compared with 134 per cent.
…
The debt purge makes mincemeat of Rudd’s depiction of the global financial crisis as the fault of a small number of obscenely rewarded, greed-is-good Gordon Gekko villains. Can an Australian prime minister ‘fess up that the real weight of greed was driven by Australian working families who went too far into debt; that they mortgaged their increased home equity into consumer spending; that this wealth has now disappeared; and that now it’s their shout, mate? Can an Australian political leader tell voters that they can’t keep being more spendthrift than Americans?”
There is a lot of blame to go around and, in my opinion, this greed everyone is now denouncing extends beyond the banks.
I agree with most of that. Especially that Australia potentially has a private debt problem
Although I think it deserves mention that the media often overestimates the average financial literacy of an Australian or American borrower. So many people do not understand that risk still exists in the property market. Many people do not understand risk until they are damaged by a crisis. People commit everyday logical errors, where we extrapolate from past trends and can’t see future dangers. They also do not understand their own cash needs (there are many people who do not actually know their own salary!)
i) Such people are extremely vulnerable to a sales pitch (from a bad financial planner, property investment seminar, relative or even bank advisor.)
ii) Similarly they are vulnerable to mis calculation. Sure, they have an obligation to do their research before they enter into a loan. But for so many, understanding finance is just not something they are suited to.
So, I think ignorance has been perhaps as critical as greed for the average borrower. I think if many of those extreme borrowers had been presented with a fair analysis of the risks, then they would have run for the hills. Working in a financial planning office, I am perpetually amazed to see the incredible risks some people take, simply because they do not understand the nature of risk.
I also don’t agree that the average banker is lending his own money. The average banker is lending his banks money, and the average bank is effectively lending its stockholders money. The banker is in the same moral situation as the borrower, he has to be responsible with other peoples assets.
But I agree that the media has disproportionately focused on Wall Street’s greed. Especially in the initial characterisation of the US bail out.
It’s definitely the case that ignorance plays a role as well as greed. Too many people don’t really understand or seek to understand what they get themselves into.
In my view, it comes down to personal responsibility. If a person enters into a bargain, it’s his responsbility to know what he’s doing and protect his interests. It’s all very well to have regulators and watchdogs but at the end of the day, it’s our responsibility to do the right, responsible thing in our personal dealings. We must not give people licence to be fools - or excuse it. It’s not good enough to say, ‘I am an ignoramus’ - even if it’s true - and thereby absolve oneself of all responsibility. The response to that is ‘You should have known better’ or, as they say, caveat emptor.
Still, I agree that ignorance has played a role in the debt crisis. It’s a pity people often have to learn things the hard way.
As for the “banker lending his own money”, this is not very important but just to clarify, I said “lender is gambling its own money”. By ‘lender’, I did not mean a particular banker but the bank as a whole as indicated by the possessive pronoun ‘its’. Still, I can see why lender was an ambiguous term to use.
Is ignorance ever an acceptable excuse? This discussion seems to be becoming somewhat philosophical, something I am neither interested in nor at all knowledgable about unfortunately. Pull me to shreds if you want Liron!
I know the buck stops with the person who sign the contract… But I do find it hard to get angry at those numerous American families who have lost everything because nobody ever explained to them that the property market is not like a term deposit.
Caveat emptor is great. Removing the many investment con-men/over zealous bank employees from the market would be better (if that is possible!)
There are limits to what people can feasably be expected to work out of their own accord.
On a brighter note, a market collapse like this so often seems to set the scene for a prolonged stock market surge. Oh please.
In today’s Australian (17/10/08), Janet Albrechtsen comments on the unintended consequences of the Government’s rescue package. Outspoken former NSW treasurer, Michael Costa, has a few things to get off his chest.
Andrew Bolt addresses some of the points discussed above, particularly greed and bankers, in the Herald Sun (17/10/08).
The Wall Street Journal editorliases about the deregulation myth, now parrotted by (most) politicians and (most of) the media everywhere.
Amid the chaos, it is good to read some good news regarding what some refer to as social justice (The Australian, 24/10/08).
David Burchell (The Australian, 27/10/08) discusses the grilling of Alan Greenspan by Congress and goes back to Adam Smith to explore the role of self-interest in the economy. He offers this prediction:
“Right now the cry on everybody’s lips is: more regulation! And the dim outlines of a new regulatory order are perhaps beginning to take shape: a network of mechanisms designed to restrain collective outbreaks of financial imprudence before they can assume a global scale.
But I doubt that many of those presently echoing that fashionable cry have the foggiest idea what a new regulatory framework should do. Their idea seems to be that financial regulation should serve as punishment for the greedy: the global economic equivalent of putting a naughty child to bed without dinner.
These would-be authoritarian parents are bound to be disappointed. My bet is that the new financial architecture won’t aim to stem the wellsprings of avarice, or advance the Christian virtues.
Rather, it will try to restore to its proper place the kind of prudent regard for the affairs of their own businesses and employees that seems to have deserted so many investors.”
Yes, I believe Marxism is clearly the way to go. Only a true revolution where the greedy Americans and Westerners are stripped of their unfair ownership of the “modern slaves” in the world labour market such as China and India.
Poor students like me can never be wealthy, no matter how hard I work I will never be as rich the Bill Gates in this unfair world. Why is that? It’s because the idea of ownership; modern corporation are practicing nothing but an ancient and cruel method of slavery where people like Gates claim ownership to the thousands of people’s labour efforts. The harder I work, the richer they become because my labour is owned by them. I believe the only way we can overcome this problem is to abolish the unfair and unjust law of ownership and establish a fair world based on Marxist ideals. We should first start by abolishing Universities which are nothing but slave labourer’s training camp. Most students are brainwashed in thinking it’s the norm to study hard and then work for a big corporation, little do they know they are exploited by working for the greed of those who have ownership.
as idealistic as i used to be, as active i used to be in the fight for the rights of minorities and the fair dealings with refugees etc… as i got older i have come to realise that whislt i was young and my parents still provided for me i had the opportunity to be as such. however, now im older and support myself it is hard to retain my younger-selfs values. i have to work to provide for myself. yes i consider myself greedy - only to my own needs - but then again how can we help others if we cant help ourselves? i now believe in a market economy but believe that those who have taken so much from the economy should give it back to help the less fortunate. i believe you can be greedy to satisfy your own needs however you cannot be visciously greedy and not have a care in the world about what is happening outside your bubble. basically i believe i have to work and be a lemming in this market economy and after i’ve worked hard enough to be able to support myself i will then look towards supporting others.
The Australian (19/11/08):
“BAD parents will lose control of welfare payments under a radical plan to extend restrictions beyond indigenous communities to dysfunctional white families.
Welfare controls could be introduced across the country next year after the Rudd Government revealed it would adopt a national model from a choice of three systems currently under trial.
Trials of the latest option will begin on Monday in Western Australia, where parents whose children are considered at risk - in white and black families - will have 70 per cent of their welfare payments controlled.”
And it has the support of the federal opposition:
“Opposition families spokesman Tony Abbott said income quarantining should be compulsory for everybody.
“I would support an automatic welfare quarantining,” Mr Abbott said.
“I don’t think it goes nearly far enough, I don’t think they are moving quickly enough.”
Mr Abbott is pushing a more radical approach, which would force every parent - good and bad - on to welfare controls.
“If it’s good enough for remote Northern Territory townships, then it’s good enough for everyone,” Mr Abbott said.”
What do you think of welfare controls? Is it justified? Is it going too far?
I personally don’t think it’s far enough. Why coerce taxpayers to spend hard-earned dollars on others? Since when did people decide that there was an obligation to force people to pay for the addictions of the “less fortunate”?
However, I might support welfare if there was a ban on smoking, alcohol and gambling. That way I know my money isn’t going to waste. Another option I prefer would be school vouchers, food and health stamps. And to the Marxists, equality of opportunity, not of result.
Mirko Bagaric skewers the compulsory superannuation scheme in The Australian (19/1/09):
“IT is repugnant and economically unsound to force adult Australians to place the toils of their labour into financial products that drop in value and that have been misrepresented as safe investments. That’s why the failed experiment that is compulsory superannuation must be scrapped.
…
The experiment is on the verge of collapse, so far as being a tenable retirement tool is concerned. And the worst of it is far from the 20 per cent falls that most funds managers will soon be reporting. The falls are almost certainly much higher.
…
And still it gets worse. One thing I bet your financial adviser didn’t tell you is that your superannuation is not guaranteed. You could lose the lot or a huge chunk of even the depleting sums that form part of your anti-investment super statements. Due to unrealistic modelling by superannuation trustees concerning how much money their investments would make, the deficit of state and federal superannuation funds as of June 30 last year was $156 billion; no, it’s not a typo. This is a train wreck in the making.
…
This is a hole that not even the Government can afford to fill: it is more than seven times the entire national surplus that took a decade to save, and which the Rudd Government has already blown.
…
A system of forced savings is counter to notions of personal responsibility and offensive to the intellect of citizens. Paternalistic laws are only legitimate where the government can demonstrate it will encourage compliance with fundamental moral norms that affect the wellbeing of others or where they will promote the welfare of each individual. This test has not been satisfied in relation to compulsory superannuation.
…
It’s about time our Government allowed us a say in what we want do with our money. This is a far more principled and responsible option than injecting taxpayers’ money into the market to supposedly liberalise lending.
If the Government wants to maintain its fanatical obsession with compulsory superannuation, it must guarantee returns are no less than the money invested plus consumer price index, minus relevant taxes. It won’t do this because it knows there is a risk that, in the end, your superannuation is a dud investment.”
I recommend reading the article in full. He makes a few good points. What do you think? Scrap compulsory super and let people look after themselves?
Couldnt be bothered reading the whole article. But I still have a strong opinion!
Whoever wrote that is a freak-face.
“The experiment is on the verge of collapse, so far as being a tenable retirement tool is concerned. And the worst of it is far from the 20 per cent falls that most funds managers will soon be reporting. The falls are almost certainly much higher. And still it gets worse. One thing I bet your financial adviser didn’t tell you is that your superannuation is not guaranteed.”
Of course super isnt guaranteed? Does this guy know anything of the risk-return trade off? Effectively guaranteed super is of course available, duh, its called the ultra conservative option. If you haven’t chosen that, then you are looking to make a few bucks, and you have nothing to complain about if you get hit by an accurately modeled one in a hundred year event. By LAW financial advisors must describe to clients the basics of the risk return relationship both in writing and face to face every time they give any advice. So I don’t know what he is talking about with the above quote. But furthermore any idiot that watches the news should know that the market sometimes goes down.
Another thing, that idiot mentions that super funds (I assume he is talking about balanced fund options,) have gone down by 20% in the last year. I’d love it if he included the 5 or 10 year returns instead. It would thoroughly disprove his argument, showing that in the long run balanced super returns have been consistent despite the worst downturn since the depression.
He argues that people deserve financial freedom. Kind of ironically financial freedom was one of many factors that caused this crisis. Borrowers were given the choice of borrowing large amounts of money, they borrowed more than was sensible, and then lost it all. If we took his points about financial freedom seriously, we would have to allow more borrowing freedom as well, good luck with that at the moment.
“Paternalistic laws are only legitimate where the government can demonstrate it will encourage compliance with fundamental moral norms that affect the wellbeing of others or where they will promote the welfare of each individual.” - Ever heard of the ageing population problem! Thats going to hammer our entire society unless people increase retirement savings. Without compulsory savings, this problem would be considerably bigger than it is now. Compulsory savings are our only hope! What planet is this guy on.
I will close with the stupidest, most wastefull proposal ever, clearly an attempt to demonstrate that the author does not possess a brain -
“it must guarantee returns are no less than the money invested plus consumer price index, minus relevant taxes.”
You don’t take that low quality rubbish seriously do you Liron? Only after such a collapse could such uneducated garbage even be given a public voice.
Further to the Bagaric article from The Australian (23/1/09):
“THE global stock market rout has wiped out every cent Australians have put into superannuation in the past three years.”
Driscoll, I can see that the article infuriated you. I agree that author’s view is unusual and not generally accepted but I’m not sure your fury is completely justified.
Let’s take as an example what you claim is the “stupidest” of his proposals - the guarantee. If you are so certain that funds invested in super will rise in value, why are you so bitterly opposed to the government guaranteeing them?
And if your answer is that some of them might fall in value, then how is this gamble a good solution to the ageing of the population?
Three years is still short term, five or ten years is a fairer reflection. What I was trying to say is that his whole frame of reference is just ludicrous. Considering one year returns, and then using them as a means to attack the super scheme! You cannot attack super on one year returns, five years is an absolute minimum, but ten is fairer. That’s like claiming Roger Federer is bad at tennis because he lost his last match, check out his career! The simple reality is that most people that have invested since the mid 90’s have doubled their money. People who have doubled their money, quite obviously, have nothing to complain about.
I am certainly not certain that super funds will rise in value unless the person has chosen to be in an ultra defensive portfolio (and everyone has that election!) If you have chosen to be in a more aggressive position (such as balanced) then you are hoping for more return, and accepting more risk. Guaranteeing all funds would make all funds ‘ultra conservative,’ and the rates of return would have to be reduced appropriately. Without the ‘miracle of compounding’ on a sufficient scale, few people would accumulate enough retirement savings. Furthermore a guarantee would punish those rational people who believe in sensible long term investing, and accept the fact that not every year will be great. These people would have to receive cash rates of return, instead of sensible long term growth.
The other issue is the time period of the guarantee. No loss over any one year seems to be what this guy is arguing (complaining about negative one year returns for 08.) But that would be an incredible move, and long term super returns would have to drop to just above inflation. A five year or ten year guarantee (no money lost on investing over ten years) would be more practical. But I would ask you to note that five and ten year returns for super are still positive, so even now in this chaos, such a guarantee wouldn’t be exercised. In a real sense, balanced super returns over ten years will never go down (the probability is tiny,) because even though it is slightly conceivable that the sharemarket could have a negative ten years, allocations to cash, property etc would keep the fund moving upwards.
Investing in a balanced option super fund is still an extremely conservative long term move for a younger person. Over a standard forty year career no person could possibly be disadvantaged by such an investment. But it is a LONG TERM INVESTMENT, so it is very foolish and ignorant to appraise it as you would a term deposit. In the long run it will do what it is designed to do, it will be positive, and very positive, probably doubling your retirement savings over what you have contributed. But there will be good and bad years. For someone close to retirement it is sensible that they would choose a conservative or ultra conservative investment, (or put their money into term deposits which the Rudd Government is already guaranteeing, so there you go, if you want you can get guaranteed super, anyone can.)
The guy is a Professor of Law, not a Professor of Finance, or Economics. He really doesn’t seem to know what he is talking about, or the implications of his extreme suggestions.
Driscoll,
I suspect you may have missed the second question in my last post but we get your point all the same. I think he understands it’s a long term investment, having co-authored a paper on the subject, which he mentions in the article. He just doesn’t think it’s a good investment or one that the government should impose on citizens or one that is correctly described by the government.
He doesn’t say that the guarantee should apply to the end of any given year but this is not something worth arguing about.
I’m still a bit concerned about that huge deficit governments seem to have accumulated as of June 2008 (that’s prior to some big market plunges). It really shouldn’t get to this level even when there’s a crisis. There will be crises in the future, too. It indicates a bad method, not a bad year.
Interesting article in Business Week,
http://www.businessweek.com/magazine/content/09_17/b4128026997269_page_2.htm
“Former Fed Chairman Alan Greenspan denied that a national housing bubble was even possible, since housing was not a single national market. He also brushed off the dangers of Wall Street concoctions such as derivatives.”
It seems like all the good economists are being ignored, and labelled as social scientists who don’t understand the theory.
Here’s a different approach to the GFC
Home mortgage must provide guarantees it?
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