"just as the American-ness of America's economic system led to our current woes, the European-ness of the Continent's political and business culture is partly to blame for its current pickle."

If that is true then might not governments and their central banks need to take control over decision making from financial institutions and cause them to lend?

I think I just proposed abolishing the market system didn't I? In doing this, wealth is then distibuted though differant mechanics set up by the governments, thereby taking control over decision making and deciding how much to lend and to whom.

Now here's my dilema: how would we manage this on an international level? One thing is certain, the G-7 finance ministers that are meeting not far from me this weekend in Washington, D.C., better maker a good decision.

I'm betting they'll say we need to give the bailouts time to work and possible increase the package instead of accepting failure and moving in the direction I've outlined.

Letting the Fed take control will change little since they are a cohort of bankers and are owned (literally) by the member banks through the intermediary regional banks, which are stock companies owned, as required in the Fed bylaws, by the member banks.

Letting the government itself take control of the banking system would, of course, change a lot. Details would be different in other countries, but that doesn't change our structure.

Of course you're right Phil, from the world's fourth largest economy, California. The travesty is it needn't be that way, nor should it.

I'm betting you weren't taken by surprise, as Alan Greenspan was, to learn there was greed on Wall Street - shocking!

Dear Youngblood Hawk,

It was based on two items:

<link>

Bad government policies and our huge trade deficit, this is what caused it, and it will not correct until we close our trade deficit.

In CA we have teh worst budget in the country, and we are going to start to have to cut back a lot, not a little but a lot.

We have wasted so much money during the last eight years, how many temporary tax increases have we had?

All the states that tax a lot are broke, because once you start just giving something away, people always want more.

God Bless You

Why intermingle the two to begin with? Unless I misinterpreted your post.

To me there's nothing worse than a socialistic government, taking wealth from one person and redistributing it to another. In this regard the government acts as a nanny, protecting us from ourselves. This form of wealth redistribution stems from fear, not good financial sense. Would the government not bail out the banks at all, they would be forced to develop far more conservative (fiscally that is) policies and avoid this altogether. Would the government stay out of banking policy the banks could develop their strategies without outside influences. The government's role is to establish the rules under which they should operate under and those rules must be etched in stone so they are not subject to the whims of the public.

The problem we are faced with today is people wanting their cake and eating it too, to use a tired phrase. They want risky high-gain investments and financial security. They must learn that it doesn't work that way - and the only way to teach them is to let them fall. No matter the consequences.

Thank you for responding to my post Eigenvector. Before I give you my bottom line, I'd remind you global equity markets are destroying value at extremely high rates and the declines, I believe may have, or could, pass historic levels.

You of course understand crisis in the financial system means an economic problem, which will surge (a great word, uh?) instead of decline (a theory from one of my previous professors).

So my point was might we not look at how President Franklin Roosevelt handled the problem, but on a global scale, which I will get back to and touch upon.

I agree a complete socialist approach in not desireable nor was I advocating that. My personal theory is the state, for a time, eliminates risk from the system by abolishing the market and then transfers the wealth from the lender to the taxing authority, which is of course again the state, which redistributes, since right now banks domestically and internationally aren't lending to eachother.

Of course I don't really believe my theory would be accepted, so I come back to what FDR did, except on a global level.

We suspend trading on the equity markets for a few days while solutions are reached. That apparently wasn't accepted or thought of either, because as I understand it, the G-7 are returning to their own countries to work on the problem unilaterally.

Agreed, state run markets are not desireable in the long run, but then again, what have we got now?

I think there are some fundamental differences here that divide us.

1) I don't believe that FDR did us any favors. In fact I somewhat saddle him (or his administration) with our current economic situation. I mean economic as in our wealth redistribution system on a federal and state level as well as our monstrous deficit.

2) I don't consider the current calamity to be a crisis at all, but a natural outcome of the market due to poor financial planning. I in no way believe that legislation we enact will solve the problem in the same way I believe fad diets don't help overweight people lose weight. The situation is a natural outcome of our failing as humans.

3) The idea of giving the money to government to act as a neutral party for banks scares me. They can't even keep their hands out of the SocSec cookie jar, why should I trust them to leave an even larger cookie jar alone? Heaven forbid the arrangement should resemble something like the UN, potentially one of the most useless and partisan global agencies around. I in fact see your proposal as a way to enable a totalitarian regime to utterly control the money supply. A little perversion in what you suggest would be all it took.

Worded a little harshly, but that's my gist. I actually don't dislike your idea wholesale, but can see too many flaws in the details. Too idealistic for me to swallow, and any government involvement raises my hackles.

A somewhat diametrically opposed viewpoint. My "solution" to this calamity is to do nothing - let it play out as it will and those who followed conservative and sensible policy will come out on top. Those who didn't will be sleeping under the overpass tommorrow. Banks are operated by people who wish to make money, and as such will do their best to resolve the issue on their own as quickly as possible. They're just waiting for the sucker's to drop out first.

Personally I think the best policy would be one where there wasn't any money at all, but I'll be danged if I can figure out how to do that. Perhaps developing extremely cheap and plentiful electricity would be a start?

"To me there's nothing worse than a socialistic government, taking wealth from one person and redistributing it to another."

I believe your interpretation is inaccurate. A socialist government, in equalibrium, does not redistribute wealth; what it does is prevent wealth from being maldistributed in the first place. A transition from a system (such as ours) which has an obvious maldistribution of wealth to one which doesn't will, of course, require a redistribution in order to reach equilibrium. I don't deny that, but please accept that it is the transition between systems (and a transition in the opposite direction would also feature a redistribution of wealth, as happened in Russia and China) which causes the redistribution.

Dear Eigenvector,

It is not socialism I fear it is fascism, that when you have private groups that get all the advantage of ownership as long as they give some money to the right people.

Look at the crisis, we are giving 100B to a company that just had a party that cost 440K, and they did not think it was wrong.

That is our problem, we are not socialist, we are becoming fascist, we have a court that can change any law with a 5-4 to vote.

We have people giving record amounts to our elected leaders, dang we create laws to limit what they can give and they break the laws to give more.

They do this because you can make a great return on your investment, give $2300 and you can get millions back from the government.

Our government is to big, and to powerful, and we are suffering, we need to make our government smaller, and less powerful, so no matter how gets elected it should not really matter as our Constitution can only be changed thru an action that takes forever.

God Bless You

Dear Eigenvector

<link> Please ready this, these are the smart guys, they make money buy starting businesses. It was two reason bad government policy and our huge trade deficit that caused it. We have sent 4T from 2000-2007 overseas due to out trade deficit, and this money came back in the form of investments. These investments provide the money for the asset bubble, and government policy provided that it found it way into home loans. Look at 2003, we had an asset bubble, but the average person was not effected, as it was not one of stuff they normally bought, so it went away very fast. Government policy forced this asset bubble from Wall St to Main St, and that is what we are dealing with. The people running these banks made a killing, and they get to borrow money at 4 percent less than they loan it out, but this was not good enough for them, they wanted to loan money to people with poor credit or no down, as they coudl make 6 percent over cost of funds. This means on paper they are going to make 50 percent more profit, and this means the people running these places are getting millions or hundreds of millions on extra pay. If I gave you 300M in salary over 5 years, would you care what happened year 6? This was not a accident, this was done to make people a lot of money, and now Main street is not paying for not only the bailout we suffered from the deflated bubble also. Every other one of these assets bubble had a huge effect on Wall street, and thru the large amount of money the large donars have given to our elected officials, they were able to get the laws changed to rip off Main street this time, not just Wall street. Understand that the party is for the donors, and they are only forced to do the parties will when they are in complete control of congress. God Bless You

Again, you proceed from the base assumption that the accumulation of wealth is a bad thing.

"which has an obvious maldistribution of wealth to one which doesn't will,"

You view it as bad, I do not. I view it as natural as the accumulation of friends, hobbies, whatever strikes your fancy. I'll speak for you here...You view it as helping those with lesser means by taking from those with greater means. I view it as penalizing me for hard work and giving it to someone who has not earned it. You view it as social duty, I view it as rewarding sloth and fostering a poor work ethic.

That's not to say I'm opposed to social services. I believe a system like Soc Sec is necessary, but as it was in the 30's not as it is today. I believe federal medical coverage should be available - but only after the insurance industry has been kneecapped and disbanded. I believe state funded welfare is a good thing - but only at a state level, the Feds are not a place for such things.

But in return for such things I believe that EVERY citizen at age 18 should be compelled to provide 2 years service to the country - doing whatever work is appropriate for their skills and getting no wage for such work (meals and housing provided by the government). Pre-payment for their benefits as it were.

Right now, the ratio of maximum to minimum income in the US, considering only people who "work" full time is about 100,000:1. Do you consider that reasonable? desirable? productive? I don't. 10:1 might be reasonable, and I'm sure that is achievable in a socialist environment too. I think that gambling is a poor excuse for working and that it is detrimental to society as a whole and certainly shouldn't be rewarded. I should also point out that wealth is distributed even more unequally than is income, and that fact is included in my objection.

I don't favor anything being done at the state level because I don't believe there should be states, at least as they are currently constituted. They are nothing but the untidy remnants of an uneven and random history of expansion and conquest. I would favor a national government with a unicameral legislature divided into perhaps 1000 equal area districts which are drawn as hexagons on an equal area projection of the country (separate projections for Hawaii and Alaska, of course). The boundaries would be fixed permanently with the vote in the legislature scaled to the population of each district. I would favor a government service center in each district, as close to the center as is practical. Laws would be national only - no local laws. I know that is a little long as an explanation of my desire to abolish states but I didn't want to leave my viewpoint unexplained.

I believe that, political rhetoric aside, the majority of the population prefers security to risk. I do not think the current system supports what I believe to be the reality.

"Right now, the ratio of maximum to minimum income in the US, considering only people who "work" full time is about 100,000:1. Do you consider that reasonable? "

I'm not entirely sure what you mean there. If you mean top salary to miminum wage then YES I do consider that reasonable. Why not? What's the problem? It's not like those at minimum wage aren't able to earn top salaries, in fact there are tons of people who do that every single year. Hell look at the NBA for Christ's sake! It's what drives them to succeed. Why should I care about working hard if there's no incentive for doing so? I'm not at work for the fun, I'm there to make money.

I broke this into a separate post because it is a strictly political discussion.

As for the states....The states are the roots from which this country grows. What you propose would be an empire, not a federation. Empire's breed corruption because the individual citizen feels that government is too far away and exerts too much control (that's a historical fact, read Chinese and Roman history for a taste). Federations while weaker in purpose, allow the citizen to feel more in control of their fate by moving the government closer to home and less subject to the whims of those not in that person's situation. Empirical governments are also breeding grounds for fascism as the population is tied to a single entity, while federations deflect it by segmenting the population sufficiently while at the same time still making them feel part of the whole.

The corruption that we are experiencing now in this country is a natural outgrowth of population growth, age, and overhead costs inherent in any large endeavor. Nothing we do can eliminate it short of revolution, and indeed historically that has been done time and time again. I would bet it's why most governments rarely last more than 100 to 200 years.

Eigenvector, are you alluding to the 10th Amendment (and the contained Commerce Clause)? A review of that amendment would show certain wording is contained (and originally omitted as well) that allows (and has been upheld by the Supreme Court) that allows congress to preempt the concurrent state powers contained therein, orginally ratified in the Constitution.

What were our founding fathers thinking? Perhaps they foresaw a time in the future, such as the Great Depression that would pose unique economic challanges and require a single and strong central government to maintain a strong national economy.

Uh, oh, I think I brought us back full circle to your response earlier concerning FDR - - at anyrate, the United States has lasted over 200 years already, so there must be some success story somewhere?

I'm afraid, I have to leave the Fray, but I have enjoyed your, and others, discussion on this topic, and I thank you very much and good luck.