Greed, financial crises and regulation

When greed. irrational exuberance or willful misconduct within the financial industry are seen to cause a financial crisis, then we start hearing calls for more regulation as if regulation can control unacceptable human behaviors.

Here’s a theory to explain it all.

Business people, especially financiers,  don’t  like competition and call upon governments to pass legislation which restricts competition.  This allows profits on top of wages and a return on investment.  It also provides opportunities for exploitation.  When the exploitation gets out of hand and becomes obvious or when there is a financial crisis caused by the way in which money is created, then we get calls for more regulation.

The best way to deal with greed and willful misconduct is probably to increase competition by repealing legislation which restricts competition.  The way to deal with financial crises is to change the way in which we create money.

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Long-gone cedar trees

 

We’ve been on holidays for a few days and I was determined and mostly successful to not think about economics.  The exception was that there were a number of old cedar trunks around our campsite on Arrow Lake in the British Columbia interior.

I took these as a reminder of how we are using up our resources.

I know little about trees but stumps like these and often larger are found throughout the wetter parts of British Columbia.  The average lifespan of Western Red Cedars is between 600 and 900 years.  These may not have been that old but it is likely going to take into the hundreds of years to replace them.

Here in British Columbia we are lucky that one of our major resources can grow again even if it takes a long time.  We also have fish, minerals and gas.  We may be able to restore our fish but once depleted the other two will be gone.

 

Dealing with financial greed

Wall Street greed is one of many explanations being offered for the economic crisis.  To the extent that greed is a part of the problem I think it is the greed of most of us that counts.

Most of us have wanted the highest possible returns on our savings and at least as many mechanical and/or electronic toys as our neighbors.  In this respect the 99 per cent are little different from the one percent.

On top of this so many people appear to be ignorant about financial matters and feel they have no option but to trust an expert such as a financial adviser or a bank manager.

Greed plus ignorance makes one the ideal victim for a scam.

Having said all that I would draw your attention to this column from the Washington Post titled “10 inviolable rules for dealing with the sharks on Wall Street”

The column was directed at people with firms or organizations dealing with Wall Street.  But it seems like good advice for any one dealing with the financial industry at any level either as a borrower or a lender.

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