Could Wall Street have become large without government insurance of securities(government tinkering in the free-market).
I actually agree with some of what you have to say and appreciate you elaborating on your views elimc. So are you suggesting that if the government abstains from "tinkering in the free market" that the financial sector will shrink in size to pre-deregulation levels--or at least to a size where they will not be a parasite of the real economy? If not, what's the point of hypothesizing about how things could have been or about how things could now become? There are nearly 2 million businesses created each year illustrating the need for bank loans, considering only a fraction of these start-up business secure venture capital. So I won't argue against the fact that most businesses rely on bank loans. However, I still can't understand why the financial sector can be allowed to command 40 percent of all profits in the U.S. economy for simply lending out money and moving it around. Aren't banks supposed to be the middle men and not the masters of the universe? And if Washington is truly a Wall Street government as some would testify to, then isn't the government simply doing the bidding of Wall Street--which essentially makes the financial sector a relative free-market?
The financial sector is concerned with making a dollar out of 15 cents. They are no different from you or me.
But how can anyone justify financialization during times of economic crisis and profiting off of the misfortune of the same people that the financial sector misled/cheated? Why should CEOs who work in finance receive record high salaries and bonuses at a time when the real economy is stagnant? This 'neoliberal parodox' has been clearly evident immediately following the housing market meltdown as the financial markets' demand for higher income and growing stock prices occurred during the exact same time when economic growth ground to a halt and increased market competition made it extremely difficult to earn profits in the manufacturing sector. Thus it should come as no surprise that when you look at profits as a percent of GDP, profits in the manufacturing sector dropped sharply over the past decade and have not recovered even until now, while the profits of the financial sector has increased steadily over the same period. The crises caused by financialization hurt the majority of the population. For example, non-financial corporations responded by cutting wages and benefits or by moving into financial operations to increase profits while large benefits accrue to finance.
Dean Baker(2006) of the Center For Economic Policy Research(CEPR) has argued that neoliberal policies such as anti-unionism, profiteering in the health industry(e.g., corporate takeover of the health care during the Clinton administration in the form of HMO), and anti-inflationary bias, is the driving force behind the rising inequality in the U.S. Ben Zipperer and John Schmitt(2006), also of the CEPR, have added their expertise on this topic, "The U.S. economic and social model is associated with substantial levels of social exclusion, including high levels of income inequality, high relative and absolute poverty rates of crime and incarceration." John Schmitt adds, ".... the U.S. economy consistently affords a lower level of economic mobility than all the continental European countries for which data is available."
So how could there exist such inequality in times when the economy was booming--especially at the peak of the housing market bubble(2005) if deregulation is the answer to our economic woes? I can just imagine what researchers from CEPR are saying about the exploitation that is going on as we speak. More recently, economists Howell and Diallo(2007) mention how 30% of U.S. workers earn low wages--35% of the labor force is underemployed--40% of the working class population is adequately employed. It's no wonder then why few Americans can afford homes despite the housing market correction and low interest rates.
The irony in this scenario is that neoliberalism cannot deliver the liberty that is supposed to be one of its strengths. I also find it amusing that supporters of neoliberal policies who adhere by the "Washington Consensus" sometimes pick and choose what proposals they wish to apply. For example, under the Washington Consensus, the government is not supposed to run up huge deficits. Yet the catch-22 in this case is how else can global capitalism be hegemonic without government intervention--namely massive military interventionism--in the trillions of dollars--needed in order to protect the interests of multinational corporations? There is also supposed to be a reduction in public spending subsidies--yet how can that be with the trillions of dollars that were spent to bail out Wall Street, General Motors and the agricultural industry? Trade liberalization is supposed to encourage relatively uniform trade and tariffs--yet how can this be conceivable after the signing of international trade agreements such as "normalization" of trade with China? Instead of Tax reform, we see several of America's largest corporations evade federal taxes. Deregulation, under the Washington Consensus, is supposed to abolish regulations that restrict competition or impede market entry. Supporters hail privatization, claiming it will promote competition and efficiency, which lead to lower cost--when the fact of the matter is GMOs--due to profiteering--are increasingly becoming out of reach to middle-class Americans--prompting talks of government run universal health care. And finally, speaking of the liberty that these policies are supposed to guarantee--how can this be the case when 1 in 37 adult Americans are incarcerated? Shockingly, some even argue that our overcrowded prisons are partly due to efforts to lower unemployment statistics, stimulate the economy through prison construction and maintenance, coupled with military policing of the U.S. prison system.
Hopefully I have explained my position as to why I'm in no rush to embrace the neoclassical school of thought and ideological paradigms that are behind many of today's economic policies which have led to labor exploitation, systemic corruption, and environmental degradation. I consider myself as being an open-minded individual open to suggestions that, in this case, benefit the majority of Americans.
I don't want to come across as condescending.
I only felt that when you said I have trouble understanding how money works, LOL. Admittedly, I'm not an expert on financial matters--I sucked eggs in my college Economics class--perhaps due to the fact that I'm not particularly fond of reading or doing homework. However, I am in love with movies. If it weren't for documentaries such as
Inside Job, Too Big To Fail, Food Inc. and The Corporation, my knowledge of monetary policy and systemic corporate corruption would be next to zilch. And besides, it doesn't take a Nobel Prize winning economist or a John Bates Clark medalist to recognize the world of hurt that deregulation has caused to millions of working class Americans.
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elimc184
13 years ago
So are you suggesting that if the government abstains from "tinkering in the free market" that the financial sector will shrink in size to pre-deregulation levels--or at least to a size where they will not be a parasite of the real economy?
Yep!
Furthermore, the smartest guys on Wall Street would be forced to move somewhere where they can garner a better return. They would have to start developing " productivity innovations" instead of "financial innovations" in order to make lots of money. This would help America.
Aren't banks supposed to be the middle men and not the masters of the universe?
Yep.
And if Washington is truly a Wall Street government as some would testify to, then isn't the government simply doing the bidding of Wall Street--which essentially makes the financial sector a relative free-market?
The government subsidizes the buying of real estate in the secondary market. By definition, this means it is not a free-market.
But how can anyone justify financialization during times of economic crisis and profiting off of the misfortune of the same people that the financial sector misled/cheated?
You might have a point if Wall Street was the only benefactor. The truth is that anyone could have profited from the bubble, and many people did. My parents received a low interest loan to buy a house in the early nineties. If it weren't for Wall Street, what kind of interest do you think they would they have to pay? It would have been much higher.
For many years, Americans received low-interest loans to buy houses. And we didn't question where this free money was coming from.
Similarly, some people on Wall Street did not do well when the crisis hit. In fact, Lehman Bros went completely bankrupt.
It's no wonder then why few Americans can afford homes despite the housing market correction and low interest rates.
I would say that too many Americans were able to afford homes. You should look at home ownership statistics before the FHA was created!
If it weren't for documentaries such as Inside Job, Too Big To Fail, Food Inc. and The Corporation, my knowledge of monetary policy and systemic corporate corruption would be next to zilch. And besides, it doesn't take a Nobel Prize winning economist or a John Bates Clark medalist to recognize the world of hurt that deregulation has caused to millions of working class Americans.
Instead of watching documentaries or reading papers by people who have never run a business, I encourage you to go set up your own business. The fee is fairly low. In the state of Texas, you can set up a corporation for around $300. If you set up an LLC with your name, I think the cost can even be much lower.
You will realize very quickly how regulation affects businesses!
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LLOwens
13 years ago
Similarly, some people on Wall Street did not do well when the crisis hit. In fact, Lehman Bros went completely bankrupt.
I wouldn't quite let Lehman Brothers off the hook when it comes to Wall Street execs who were engaged in profiteering. Richard Fuld, a.k.a. the "Gorilla of Wall Street," received approximately $22 million in severance packages and earned $354 million during his final 4 years as CEO. And if this wasn't enough of a golden parachute, Fuld sold approximately $490 million worth of LEH stock before it collapsed.
As far as Lehman's bankruptcy goes, Fuld chose not to accept merger deals nor did he accept capital injection offered by financiers such as Warren Buffet, in order to strengthen its balance sheets--moves which could have spared Lehman from going under.
I would say that too many Americans were able to afford homes.
In 1965, the cost of an average single-family home was approximately $21,000. During the peak of the housing bubble, the average single-family home was almost 10 times the price--an 850 percent increase! So in other words, too many Americans were able to afford homes because too many government insured/predatory loans were handed out.
In response to your statement, I wasn't referring to past tense in reference to the decrease in a demand for homes, but rather I was speaking of the present. A huge paradigm shift is currently underway--going from strong demand for single-family suburban homes before the housing market meltdown to a strong demand for more economical dwellings such as condos and apartments in today's housing market. Remember when the younger baby boomers bought homes from the older baby boomers--as well as the desire for these younger boomers to buy second homes? Well what we're seeing today is a decrease in net worth for the average young boomer coupled with shrinking generation X demand for suburban homes, which has greatly restricted overall demand for such homes despite the reduction in prices. And it sure appears that generation Y home buyers will be even more skeptical. This will lead to continual downward pricing pressure. Here in Hawai'i, the median condo prices have skyrocketed and have been hoovering around $300,000 because of strong demand from younger baby boomers as well as generation X and Y home buyers who cannot justify or afford paying median single-family home prices of nearly $600,000.
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elimc184
13 years ago
I wouldn't quite let Lehman Brothers off the hook when it comes to Wall Street execs who were engaged in profiteering. Richard Fuld, a.k.a. the "Gorilla of Wall Street," received approximately $22 million in severance packages and earned $354 million during his final 4 years as CEO. And if this wasn't enough of a golden parachute, Fuld sold approximately $490 million worth of LEH stock before it collapsed.
The people at Lehman Bros. suffered, even if the exec. didn't.
Even so, you are missing the critical point, that public capitalism is not as efficient as private capitalism. Lehman Bros. wouldn't have over-leveraged itself if it weren't for gov. insurance in the real estate market. The CEO wouldn't have gotten paid as much.
As far as Lehman's bankruptcy goes, Fuld chose not to accept merger deals nor did he accept capital injection offered by financiers such as Warren Buffet, in order to strengthen its balance sheets--moves which could have spared Lehman from going under.
As I understand it, he was waiting for the government to help out. Sources claim he was pretty shocked and devastated when Lehman went under. I don't think he ever saw it coming. He made a mistake. And he lost his position for it.
In business, sometimes you win and sometimes you lose and sometimes you tie. It happens to everyone.
Judge not lest ye be judged.
This will lead to continual downward pricing pressure. Here in Hawai'i, the median condo prices have skyrocketed and have been hoovering around $300,000 because of strong demand from younger baby boomers as well as generation X and Y home buyers who cannot justify or afford paying median single-family home prices of nearly $600,000.
Yes. Most houses are too expensive. They have been for some time.
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LLOwens
13 years ago
Lehman Bros. wouldn't have over-leveraged itself if it weren't for gov. insurance in the real estate market.
Inside Job touched on this point explaining how financial institutions such as Lehman, whose leverage ratio was 31:1(2007), would become insolvent with just a 3 percent decline in the value of its assets. However, just because Lehman became insolvent didn't necessarily indicate that it would automatically go bankrupt. Because these banks are too big to fail,(i.e., Lehman was the fourth largest bank before the financial collapse of 2008) they have access to the Federal Reserve's discount window--meaning they can borrow money to meet its obligations and can carry on business as usual despite being deemed--technically insolvent. So whether a big bank is allowed to go belly up is largely a judgement call by regulators. It appears that regulators didn't see enough upside to attempt to salvage Lehman's rapidly shrinking book value.
So we both agree that money flows to the least regulated markets primarily because of higher returns. However, I still find it difficult to believe that--taking another excerpt from
Inside Job-- namely, financial innovation has made capital markets much safer--when the very opposite appears to be the case. Case in point: Canadian banks did not need government bailouts despite their financial markets being tightly regulated. While their returns were not as spectacular--especially in the short term--I'd say they made out quite well. However, knock on wood, there is a housing bubble brewing in Canada, so it would be interesting to see how they adjust their monetary policy.
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elimc184
13 years ago
So whether a big bank is allowed to go belly up is largely a judgement call by regulators. It appears that regulators didn't see enough upside to attempt to salvage Lehman's rapidly shrinking book value.
From what I understand, the government tried to save Lehman Bros. From what I understand, over a hectic weekend, Lehman Bros. and the government thought there would be a bailout fairly close to the time when the bank realized it would eventually go bankrupt. This is partly why Fuld was so shocked when he learned his company of 40 years was going under.
So we both agree that money flows to the least regulated markets primarily because of higher returns.
No. Money flows to where it garners the highest return. That's an economic law. Regulations aren't necessarily related. Although, regulations can, and often do, stifle growth and real innovation.
I would have to say there are some exceptions, especially when it comes to regulations that help give consumers information about a product.
financial innovation has made capital markets much safer--when the very opposite appears to be the case.
The reason I put financial "innovations" in quotes is because it is not usually an innovation. A real innovation usually helps mankind achieve more productivity of some kind. Sometimes, financial "innovations" are just a way to shuffle risk and money and time. These three variables are closely related.
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LLOwens
13 years ago
This is partly why Fuld was so shocked when he learned his company of 40 years was going under.
Rather than believe rhetoric--I bottom-line action. Didn't Fuld sell all of his stock shares before Lehman went belly up?
Although, regulations can, and often do, stifle growth and real innovation.
I am a strong believer that corporations in the non-financial sectors should receive as little regulation as possible. However, I think it has been proven that if corporations in the financial sector are allowed to self-regulate--this will lead to disastrous results primarily due to their failure to regulate derivatives. As has been discussed in
Inside Job, government agencies such as the Commodity Futures Trading Commission sought to initiate regulation of derivatives prior to the financial meltdown--yet received opposition from the Fed--namely Greenspan.
We must also be cognizant of the fact that virtually all fiscal and monetary policy decisions when enacted become a two-edged sword. For example, loosening monetary policy by lowering interest rates will promote growth. However, there is a direct correlation between lower interest rates and higher home values and commodity prices which can lead to excessive asset inflation. Case in point: The Asian financial crisis and the fueling of the
Dot.com bubble. On the flip side, tightening monetary policy by raising interest rates too high, too fast, will greatly contribute to lowering home values, and was a triggering factor in the 2007 subprime mortgage crisis. So obviously, taking an extreme position on monetary or fiscal policy isn't the answer.
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elimc184
13 years ago
Rather than believe rhetoric--I bottom-line action. Didn't Fuld sell all of his stock shares before Lehman went belly up?
Who cares?
I am a strong believer that corporations in the non-financial sectors should receive as little regulation as possible. However, I think it has been proven that if corporations in the financial sector are allowed to self-regulate--this will lead to disastrous results primarily due to their failure to regulate derivatives. As has been discussed in Inside Job, government agencies such as the Commodity Futures Trading Commission sought to initiate regulation of derivatives prior to the financial meltdown--yet received opposition from the Fed--namely Greenspan.
I can't agree that external regulation will prevent financial crises better than a free-market, but that's ok. As long as I can get people thinking about how money works, and how money is not really that complicated, I feel like that's a good thing.
Half of money is just understanding the concept of risk.
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LLOwens
13 years ago
I can't agree that external regulation will prevent financial crises better than a free-market, but that's ok.
Perhaps I should have worded it as I believe:
1.Keynesian macroeconomic theory should be applied more forcefully to the financial sector.
2.Classical macroeconomic theory should be applied to non-financial sectors during normal business cycles.
However, even I would admit that this would be discriminatory. I should also admit that it would be illogical to call one school of thought as totally false while the other absolutely true. Like is true with most anything else, the best results usually come when we avoid extremes and take a balanced approach.
As long as I can get people thinking about how money works, and how money is not really complicated, I feel like that's a good thing.
Half of money is just understanding the concept of risk.
If we return to a gold standard, than understanding the risks involved would be much simpler. Fiat currency has allowed the federal government to spend more than the tax revenue that they receive since all they need to do is print more money or raise taxes. Fiat currency has also allowed the largest financial corporations to turn Wall Street into what amounts to a global casino where the house always wins. It has also allowed the average citizen to live way beyond his means and the consequences of his decisions usually doesn't hit him until his home is in foreclosure or when he is forced to file for personal bankruptcy protection.
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paloma54
13 years ago
Keynesian macroeconomic theory? Oh really? Isn't that exactly where we are now?
After deficit stimulus spending designed to put money back into the coffers from which campaign fund contributions to the next Obama presidential campaign will flow? It seems to me that as long as we are on the current path, the U.S. will simply continue to slide into 3rd world nation status.
Instead, how about some transparency? How about we stop referring to the system we've had in place for the past 40 years as "free market capitalism", which it definitely is NOT. How about we educate kids about the realities of economics, instead of the varieties of sexual expression? How about honest pricing, full disclosure, and the cessation of all campaign donations except for those from individuals, and stop limiting those? How about we start believing in private property again, instead of allowing federal and state bureaucracies to tell us how we can use our property, what products we can buy, etc.? Why don't we explain to people how great it is to protect private property, since individuals who own stuff take better care of it than those who merely appropriate it to themselves? (Guess which houses are in better shape--those who have renters living in them, or those inhabited by the owners?)
How about we stop spending money that isn't there, which is another, much more insidious form of taxation, where rather than having to actually go down for passing tax increases, politicians simply steal the buying power of our money by elaborate vote-buying government programs for which there are no actual funds? Why don't we start explaining how the U.S. dollar is worth about 20% of what it used to be worth in terms of buying power?
How about we stop using the dishonest Consumer Price Index, which doesn't reflect the important stuff? How about we stop subsidizing college education? That's a huge bubble, in that we have brainwashed people into thinking that higher education will give people better jobs? It has made our college degrees useless, overpaid our professors, whose greed is so well delineated in this documentary, and created generations of young people who begin their work life with staggering college loans to pay off, while working at jobs as baristas and retail shop clerks for minimum wage? Unlike Mr. Ferguson, I do NOT believe that Americans have less education, in terms of degrees. More people than ever have undergrad degrees as well as MBAs, law degrees, masters, etc. Education does NOT produce more affluence, unless it actually contributes to skill sets required by business to enhance productivity.
The loss of buying power of the dollar, and the loss of employment opportunity means a generation of Americans who will live at a much lower level, current generations who will spend their older years with scant medical care while living with reluctant grown children, and possibly compulsory euthanasia.
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elimc184
13 years ago
Well said, Paloma.
Unfortunately, I don't see any positive signs that things are going to change in the next five years. That would require the people to realize that we are still inside an economic bubble and that the recession is not a recession, but a new economic normal. It would require us to actually solve problems -- which would mean facing difficult decisions and decreased job security for politicians.
I may just save up and jump ship. I really don't see how the US will be able to dictate it's own future with our current problems, and I don't feel like investing in entitlement schemes that have no ROI for my generation (social security will not exist).
The people on the titanic have been warned, but they keep drinking and partying. I'm ready to get to the life-raft before before we go totally under. It may be a multi-decade decline, but we are certainly sinking.
One thing that stunned me, was the administration's claim that unemployment would be at 8% by now. I don't expect Obama to understand business, because he was a college law professor, insulated from the reality of capitalism. But his economic team is feeding him baloney. The guys who told him that employment would be better by now are completely delusional. They need to be replaced.
I just don't understand how anyone could think that things would have improved by now. All you have to do is go outdoors, and you realize that there is little reason for corporations to invest long-term in America. Especially with the current guys in charge.
It almost makes you think that the banks should have been allowed to fail and depression allowed to occur. That way, we would have been forced to fix the intrinsic problems of out economy. Instead, we will face hardship over at least the next decade and possibly still face a depression.
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terraplane
13 years ago
And nowhere do I see you addressing the real cause of this crisis.
The investment bankers who were allowed, and indeed encouraged, to make as much money for themselves and their banks - and ultimately people like Richard Fuld, as possible by selling financial products that they knew were useless and ulimately worthless. All of this was done with the tacit approval of politicians who were economically illiterate and therefore in thrall to the financial market men who found it easy to convince them of their expertise by keeping up the pretence that what they were doing was so complicated, only they could understand it.
In short, greed on behalf of the banks and hubris on behalf of the politicians brought down the house.
It was always thus and until governments grow some balls, learn some simple arithmatic and treat their voters with respect instead of contempt, it will always be thus.
Regulation is the only way to stop financiers from destroying economies again.
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Visf1
13 years ago
"Regulation is the only way to stop financiers from destroying economies again. "
That sentence doesn't even mean anything.
What matters is the kind of regulation and even further how it comes about. Competition is the best regulator, which you get by getting government out of the way.
"Tu ne cede malis sed contra audentior ito"
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terraplane
13 years ago
If it means nothing to you I can only assume you don't understand English.
It means what it says.
Banks and financiers have all but destroyed capitalism but then they've been allowed to but compliant governments.
Investment bank departments, ie the risk takers, should never again be allowed to use the money from the retail banking department. This is the simple root cause of what happened. The easy money was too easy for the greed merchants to get their hands on and p1ss up the wall. No control means out of control. That's what happened.
Everything else is just waffle and smoke perpetrated by pretend economists who think the world works on theories rather than reality.
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Visf1
13 years ago
If it means nothing to you I can only assume you don't understand English.
It means what it says.
Banks and financiers have all but destroyed capitalism but then they've been allowed to but compliant governments.
I understand it perfectly, but you're expressing yourself in a way that makes it clear you don't even understand the word.
What kind of regulation? More of it? Less of it? On what? For what purpose? By whom?
I want market regulation, because that actually works. I presume you want regulation by lobbyists (government)?
Capitalism hasn't been around since 1913, half of every transaction is money and that is controlled by a central authority. The US has corporatism, that's the problem. Increasing corporatism wont solve the problem of it. Because corporatism is government power, regulation, taxation. The only remedy for that is free markets.
Investment bank departments, ie the risk takers, should never again be allowed to use the money from the retail banking department. This is the simple root cause of what happened. The easy money was too easy for the greed merchants to get their hands on and p1ss up the wall. No control means out of control. That's what happened.
Everything else is just waffle and smoke perpetrated by pretend economists who think the world works on theories rather than reality.
You blame the repeal of Glass-Seagall? Well lets check then if that was the cause. Did the problem occur first in banks or investment banks (which you don't seem to understand was unaffected by the regulation), it was the investment bank. So that explanation is stupid.
I agree they shouldn't have removed that regulation, but that wasn't the cause of anything. What caused the crisis was low interest rates fueling lending and F&F first buying into the market from 98 to 2004 creating the bubble and then after that being the largest buyer in the world of securitized mortgages. Just check their and the FED's balance sheet, it's filled with F&F backed financial products.
Same will happen to student loans btw, even though that's far off.
Greed doesn't cause anything. Everyone is always greedy, but they are also cautions.
You don't understand the problem and you clearly don't understand political economy. I'm so bored with the lot of you people who think watching this awful documentary somehow gives you insight into the markets.
But if you're so bright, give me a government regulation that could have been put in place that would solve bubbles. I mean you statists have been in charge for a hundred years now and proven that your system means less growth and more unemployment than free markets, but maybe you know just that one law that is missing that will fix it.
Giving the control to the government, which you and other blind people think is a good idea is ridiculous, they had control and they FAILED. You don't give them more rope to hang everyone with, you let the market handle it. That's the only way to get any sensible regulation. Because the people who are writing the regulations now are the lobbyists! How is that a good idea?! You want more of that?
"Tu ne cede malis sed contra audentior ito"
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LLOwens
13 years ago
But if you're so bright, give me a government regulation that could have been put in place that would solve bubbles.
While financial bubbles will always spring up from time to time in a free market environment, hindsight 20/20 would dictate that the damage these bubbles would cause to the economy could be lessened if the government were to break up the big banks by putting a cap on the amount of assets that banks can hold. When banks have become too large to fail than the government has no choice but to interfere when things go south as in the case of government bailouts. Just think, if the government didn't intervene then the markets would have corrected themselves and the size of the financial sector would have been drastically reduced. So thus was birthed the Dodd-Frank Wall Street bill of 2010 which was designed to prohibit the bailing out of these large financial institutions. Yet in spite of the clear and present dangers that these mammoth banks pose for the economy in the event of a failure, there hasn't been a cap not to mention this bill is riddled with loopholes. Contrary to popular belief, these banks have actually grown much larger than they were in 2008. For example, Bank of America now holds $2.5 trillion in assets--which is equivalent to nearly 18 percent of GDP and affects every facet of Wall Street, from investment banking and Credit Default Swap underwriting to home and auto loans. Investors can see the writing on the wall as BAC share prices have gotten hammered over the past few months, losing nearly 40 percent! What's truly frightening is that if B of A ever goes belly up--failure will not be allowed to happen because of its interconnectedness with the entire economy according to a very recent article on this topic from
Fortune magazine.
I don't claim to be an intellectual--as evidenced by my sometimes ignorant posts--but at least I have the presence of mind to heed the advice of leading economists. When they speak I'm all ears. For example Nobel Laureates James Tobin, Joseph Stiglitz, Paul Krugman and Dennis McFadden are all proponents of Financial Transactions Taxes (FTTs) which would do much to contain financial bubbles. Tobin coined the expression "Tobin Tax" which could be applied in the taxing of foreign exchange transactions. Heck--even current head of the National Economic Council and former Treasury Secretary Lawrence Summers endorsed FTTs which offer the best of both worlds by raising substantial revenue, reducing short-term volume trading without compromising or interfering with long-term market efficiency and allocation of capital.
One of my pet peeves is the morbidly obese nature of the financial sector--namely Wall Street--which commands a hugely disproportionate 51 percent of all profits. Case in point: The top dozen or so hedge fund mangers earned on average $1 billion each! If FFTs were implemented, they could dramatically reduce the sheer size of the financial sector by approximately 30 percent while increasing economy-wide productivity in the "real economy" by 0.8 percent--which would be ten times as effective as most regulations.
However, the regulation that would be most beneficial to America's real economy would be to restore tariffs on imported goods. Another would be to put a cap on how many immigrant workers are allowed to enter the country.
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