Comments on: Nationalization and Democracy

By: jhm

jhm — Wed, 18 Mar 2009 15:54:28 +0000

Perhaps the government should own all businesses for which there in an implicit (and explicit) guarantee from failure provided by said government.

By: Blaming the game « ……random…noise……

Blaming the game « ……random…noise…… — Wed, 18 Mar 2009 02:50:21 +0000

[...] Blaming the game There is quite a remarkable article at The Huffington Post on a subject that I have myself touched upon earlier and even earlier. What makes it remarkable is not so much the fact that it appears on the most popular blog on internet but rather the fact that a topic like this can be a subject of a serious debate and contemplation in America – which is evidenced by a fact that the post in question has already been backlinked by a “serious” economic blog such asBaseline Scenario. [...]

By: John Merryman

John Merryman — Wed, 18 Mar 2009 01:34:31 +0000

Political power was private. It was called monarchy and the monarchists railed against “mob rule.” The way democracy works is that power is pushed down to the lowest and therefore most accountable level. Since the monetary system is already a publicly supported utility, its management will eventually have to be as well. Therefore a public banking system wouldn’t be one huge national bank, but that banks would be an integral function of the various levels of government, so that customers would bank with the systems whose profits helped to fund the services they mostly used. If people understand that money is a public utility, like a road system, then they wouldn’t be inclined to drain value out of their communities and environment to put in a bank. As it currently is, every aspect of life is monetized and it is only to the banking system’s advantage.

By: Lun

Lun — Wed, 18 Mar 2009 00:30:50 +0000

It is good that someone is raising this. Ben Bernanke wants bankers to get back to making safe loans (see the comments under the “Political Will” post). It isn’t going to happen. Even if some Americans and American businesses would be eligible for such loans, they no longer trust lending institutions, and they won’t be seeking credit.

There has been plenty of talk about creating a “Bad Bank” to cordon off all that has gone wrong in the US finance system. What is truly needed is a “Good Bank” – government backed but not run – that ordinary people will trust and do business with. A bank that will lend to creditworthy businesses across the economy, not to speculators. Such “Peoples’ Banks” have been very successful around the world in bringing arrogant privately-run banks to heel. Doubtless this will upset passionate supporters of the free-market, but the alternative is an ugly, protracted stagnation.

By: mufi

mufi — Tue, 17 Mar 2009 19:37:59 +0000

Mr. Kwak, please do explain, because I seem to be in the minority on this one. That's not to suggest that I believe that a profit motive should never determine how investment capital is allocated, but it is far from obvious to me that it is the only, or the even best, way in all cases (i.e. no matter what the real-world consequences).

By: anon

anon — Tue, 17 Mar 2009 18:25:22 +0000

reminds me of this:

“…”You cannot rely on capital providers. The trust is broken. [Private] institutions like ours will have a more important role going forward,” Solomon says. “The world will divide into two: capital providers and people with wits.”…” http://www.iddmagazine.com/issues/2009_10/190851-1.html?partner=dealbook&page=2

By: polit2k

polit2k — Tue, 17 Mar 2009 18:12:37 +0000

It’s a Great Time to Start a Bank (WSJ) I wonder, though, is it too early? Asset values in many cases have yet to correct downward to reflect underlying fundamentals. New banks aren’t weighed down by legacy loans from the frothiest days, sure. But thanks to government lending, there’s still plenty of froth. Loans made today may end up pretty impaired in a few years.

http://online.wsj.com/article/SB123724564069748443.html#mod=testMod

By: Anonymous

Anonymous — Tue, 17 Mar 2009 17:10:58 +0000

In an efficient economy, profits are supposed to go to zero anyway. That means that the previously existing financial system was not efficient. It would make sense that having more non-profit institutions would improve this.

Alternavitely, one could say that being “too big to fail” represents a huge externality of risk, also resulting in inefficiency. As Gupta argues, this destroys the “profit motive” of financial players, as they get paid win or lose.

By: StatsGuy

StatsGuy — Tue, 17 Mar 2009 17:10:48 +0000

Sir, this discussion would be very welcome, and you have touched on it earlier.

In particular, when you do post, perhaps you could discuss the different types of functions that banks provide:

Retail services (check clearing, point-of-sale transactions, etc.)
Gathering capital (deposits)
Allocating capital (loans)

Also, with regard to allocation of capital, perhaps a discussion of _types_ of loans would be helpful. Could it be true that certain types of loans (e.g. basic home mortgages) do not require “financial creativity”?

In other words, the question may not simply be “to privatize or not to privatize?”, but perhaps “which functions (if any) to privatize, and how to link the public and private elements together?”

Also, if govt. were given these powers, how to address the political problem of controlling these new powers?

By: Nemo

Nemo — Tue, 17 Mar 2009 16:01:00 +0000

He makes great points. The government should own all businesses so that we can be sure they are run in the public interest.

It is truly amazing that nobody has thought of this before.