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Amen

So banks don't seem to be able to exist in the private space without significant backing and strict regulation by the government. But this seems to carry with it its own, perhaps larger set of problems - the public's pile of cash is salivated over by every huckster in the system, and regulation can have unintended consequences due to this greed, among other things.

This arrangement repeatedly demonstrates how fundamentally flawed it is, but for some reason we choose the definition of insanity (doing the same thing over and over with the expectation of a different outcome) rather than the obvious solution of getting rid of the expensive middleman - which is somehow a nuclear option? We'd all be starving in the streets if some guys on Wall Street weren't writing programs that automatically bet on stocks at the speed of light? Can't they take their systems to Vegas or the dog track and leave my monetary system alone? I suppose their systems wouldn't work without odds constantly in their favor.

I've worked for several companies (one quite large) and in multiple capacities. If my experience can be generalized in the least I'd say the private sector doesn't have any monopoly on efficiency. All human organizations are plagued with pretty much the same issues, and privatization is no panacea.

I guess you have to be specific about who the expensive middleman is and in which scenario. Barring barriers to entry, there's no such thing as an expensive middleman--of course the SEC does provide some barriers to entry that raise the costs (thanks government!). Banks basically compete on price and are generally much cheaper than direct financing options for the things they do. Though for small projects there is a market on prosper.com and similar sites. Sadly, it's illegal in my state (thanks, government!).

The high frequency traders you mention have nothing to do with banks. They are investors like you and me, just more robotic. Their contribution to society is that they make the market more efficient, stable, and liquid (if you sell some stock, most likely one of them is buying it). They are replacing the old specialists/broker-dealers. Like short-sellers, they are a group of traders that tends to maintain the market and keep it healthy, but constantly gets blamed as if they were the cause of market volatility.

Some banks have proprietary trading desks that do this type of thing, though the government is on its way to making that illegal as well (they sometimes take big risks, which we have established is not what you want banks doing). If a bank has a prop desk, though, it really has nothing to do with the main operations or function of the bank. You could think of the prop desk as a separate company--probably some day they will be.

None of the above has anything to do with the money supply, of course.

I know, but (right or wrong) the stock market is used as a direct indicator of economic health in the media. Maybe I'm way off base (IANAE - I am not an economist) but I don't like anything that volatile anywhere near my money supply. Sometimes individuals who claim to be Wall Street coders comment over at slashdot, the ones I've read are hair-raisingly, recklessly gonzo.

Typical HF traders are separate from banks and don't affect the money supply.

However, banks do collectively affect the money supply when they choose how much to lend out (at present, it's not much). So there are a number of a good arguments for them not having prop desks. I'm not sure there's a relationship between how much banks lend out and their prop operations, though.

Prop desks have not yet been a significant source of financial calamity. Doesn't mean they are a good idea, though.

By the way, about cutting out the middleman. I didn't mean to suggest that that's a nuclear option. Putting the government in charge would be. However, using direct financing where possible is kind of the American way. As a red-blooded American I'm in favor of that. Unfortunately, there are many situations where it's not cost-effective to do so. But over time it's becoming cheaper and cheaper. For example, google's (almost successful) IPO was an attempt to reduce the role of the middleman. If they had been a little smarter about it, it might have worked out.

I simply posted the youtube video, the content of which speaks for itself.

That she was, as you say, "a lone voice in Parliament", does not detract from the historical truth nor poignancy of her observations. After all, it only takes one courageous voice standing up to the corrosive effect of group think or false piety to make a point. "The Truth" is often found in an inverse relationship to the number of rich, elite, white, yes-men covering their behinds and nodding their heads in unison like so many of those bobbing-head dog dolls one used to see in the back dash of car windows.

For example, the dramatic levels of endemic corruption and the brazen cover-up of war crimes exposed by the US diplomatic cables being made public are not made any less true or relevant by the simple fact that there was allegedly only one brave whistle-blowing patriot, Bradley Manning, who put the whole stinking mess out to air.

Having too many potential voices can even result in less action or no action being taken. As we know from the Kitty Genovese effect, in real life if there are any number of people watching a violent rape, there is always the risk that no one at all takes action. Similar to what has happened in the UK and the US on a much larger and dramatic scale during the past 30 some years.

Lol. British parliament cracks me up. So much heckling! I guess it has to do with the fact that they speak in place without mics so we hear everyone grumbling when they don't agree.

I don't know much about British politics (we are seeing in this thread that Americans are talking about America, Europeans are talking about Europe). Doesn't seem like there was any content in her video, though. Just rhetoric. Certainly she has strong feelings, but feelings aren't facts. Maybe you guys were around back when library books had to be held together with spit and wallpaper, everyone slept in stores or in the street, and human kindness wasn't a thing, so this makes more sense to you. To me it sounds like the kind of thing anyone can say about any place at any time because they aren't facts that people can check.

It is the nature of humans to get emotional about agenda of the party, tribe, or whatever with which they identify. Great book (politically neutral, btw) on this subject: The Righteous Mind, by Jonathan Haidt. Everyone believes not only that they are right, but that their group is morally superior, but any arguments they have to support this feeling are ad hoc justifications, not universal truths.

I'm actually surprised someone living in the Netherlands has strong feelings (or even first-hand information) about a UK prime minister from the 80's, though. Have you spent more time in the UK than EssBrace, just as you have spent more time in the US than I have?

Just as markets aren't a remedy for all ills, government isn't a universal source of them. Government should theoretically be able to do anything. Sans profit it should be able to do it less expensively, more altruistically, and more responsibly. SS and Medicare are good examples of how this works well IMO.

If we firmly believe our government is too incompetent to handle anything serious, the people we pick to be in charge of things too inept or too crooked to trust, then something is fundamentally wrong with the way we organize and choose these people, and not necessarily with government per se running things.

Shrinking the government to get it off your back is like the term limits solution to ejecting lifers: it doesn't address the fundamental problem so it's not surprising when it doesn't work as expected or backfires.

Yikes! Just because nothing gets classed as "profit" doesn't mean the processes is cheap or responsible. SS and Medicare are unbelievably wasteful. The amount of wealth going into these programs is far larger than the benefit coming out. Medicare is a good example to talk about because there is another program that is similar but administered by the states: Medicaid. Medicare spends far, far more per medical problem than medicaid does because they don't try and negotiate good prices or good healthcare practices and the hospitals take crazy advantage of them. Everyone gets brand name drugs instead of the generic (identical) version, so pharma marks up the prices on the brand name version many times over and bleeds the government dry. Medicare is actually the poster child for why government is a wasteful and expensive way to do things. The government would save untold billions just by running it the same way they run Medicaid, which isn't exactly efficient either. But there's a problem: old people benefit from Medicare and old people are an unstoppable voting block. Poor people, not so much.



There are certain things only the government can do reasonably. National defense. Enforcement of contracts (i.e., the legal system). Police. Local roads. That kind of thing. Government solves a lot of problems, even if it does them inefficiently. It's just that over time we have added more and more things to the list of what the government is in charge of--things that we can do for ourselves much better--and so just about anything on the margin (that we are considering adding or removing) is likely to be something that should be removed.

Government likes to grow--it gives politicians and bureaucrats more power--so in order to maintain equilibrium, the people need to be constantly pressuring elected officials to leave them alone and stop consuming the GDP on projects that have alternative solutions or aren't worth the cost of solving. If we don't, what has happened over the last few decades happens: the government grows continually and entangles everything it touches until ultimately you are completely mired in a socialism.

I suppose it depends on who you read regarding these things. Re Medicare, the Heritage Foundation will tell you the end is near, but centrists like Ezra Kline aren't exactly jumping up and down:

http://voices.washingtonpost.com/ezra-klein/2009/07/administrative_costs_in_health.html

Not surprisingly, administrations costs seem to mostly come down to how large the insured pool is. And if Canada can control them, we can too.

My wife and I are privately insured at the moment and we're getting raked over the coals. I'm pretty sure all heck will break loose if we actually need to use any of the benefits we're paying so dearly for. I never thought I'd be in a position of actually wanting to be old and decrepit, but here I am.

No argument here. Private health insurance is at least as broken as medicare/medicaid in the US at the moment. If we can't go all the way to the right and allow some reasonable competition in the space, I'd prefer to be all the way socialized on health care. We may end up paying more for it and we would miss out on some of the high-end care and have longer waits, but at least we wouldn't have to put up with the insane crap private insurers give us in their attempts to not pay for stuff.

I would never hold up Social Security as an example of successful government. It's a shell game ... one that we're forced to play, and to lose.

I've paid over $250,000 into this program, and I expect to pay an additional $50,000 by the time I retire. And for that I can expect to receive $29,000 per year. Based on life expectancy, I'll get out what I put in.

Wow! Such a deal. I put in valuable money over a span of forty years, and I get the same quantity of deflated dollars thereafter. This is my worst "investment" ever. It's only possible value would be a small benefit to my wife had I died young. But I already had that in the form of life insurance ... at much lower cost.

Why must I endure such affliction at the hands of my own government? Social Security is a misnomer. And it should be eliminated.

And for that I can expect to receive $29,000 per year. Based on life expectancy, I'll get out what I put in.

I'm sorry to hear to hear this government program did not work out for you. Since you obviously don't need that money, you could simply reinvest it ... or donate it to charity. You are not taxed on your Social Security benefits.

I really wish my fellow Americans would travel a tad more. Social Security tax is a 6.2 percent I believe. Americans in general pay considerably less in taxes and yet always seem to complain the most.

I was in Denmark on vacation four years ago and the sales tax on every day items was 25 percent. The price of gasoline here in Europe is always more than twice what Americans pay, but to listen to my fellow Americans discuss taxes, you'd think they pay more than anyone ... thus my suggestion to travel a tad more to have a more accurate perspective.

Social Security, a socialized program ... God forbid, is a cash cow for the US government. It's only a shell game in that the money borrowed from Social Security will never be paid back. It is a cash cow.

You know I grew up in the 1960's and those of us who criticized our government's foreign policy were advised to 'love it or leave it'. Funny how I almost feel like spewing that same narrow minded bromide now.

Actually you are taxed on social security benefits. The thing is that social security is kept alive because it's pitched as a retirement plan (it would be the worst such plan ever). In practice it is a form of welfare. But it's a very inefficient one because it gives money to rich people too. It was earlier described as a Ponzi scheme...a way for the "greatest generation" to steal from their children without calling it debt. They all retired with SS, real pensions, and also possibly 401k's without having contributed much to social security and are now spending it on cruises. Rational young Americans can expect to pay it their whole working lives but not have it available in a meaningful sense by the time we retire. It's pretty evil. Like most such programs it was started with a very myopic justification: to get people of a particular generation to retire earlier so the young generation would have jobs.

As I mentioned in an earlier post, we can't just modify or stop this or other benefits that accrue to the elderly now because the elderly are an unstoppable voting block. Even if most of them don't need it, they aren't about to vote to stop social security (or even the payments that go to the rich) just to benefit the young.



6.2 percent is only what we pay after our paycheck is cut, not the part deducted from our paycheck before we ever see how much we actually earn. Nor does it include the special tax to pay for medicare/medicaid, nor regular federal taxes, nor state taxes, nor local taxes, nor self-employment tax (if we are self-employed), sales tax, gas tax, property tax. There are tons of special taxes hidden all over too. Even then our tax burden may not be as high as some other countries but remember: we get very little in return. Government inefficiency increases with size, so our trillions of dollars don't produce a whole lot.

Plus as a nation we just haven't bought the whole socialist thing, so having not agreed to it makes a difference in how we feel about paying for it, especially when we reap very few of the benefits socialism has to offer. That's my take.

We would travel more, but it's pretty expensive to get to Europe or anywhere else from here. Not like taking a short train ride or hopping across the channel. I wish foreigners would quit assuming American's don't travel because we don't care. Traveling around America is a big deal, going overseas is a major expense, in many cases without good justification.

Social Security benefits taxed? ... it depends ...



Are Your Social Security Benefits Taxable?

IRS Tax Tip 2011-26, February 07, 2011

The Social Security benefits you received in 2010 may be taxable. You should receive a Form SSA-1099 which will show the total amount of your benefits. The information provided on this statement along with the following seven facts from the IRS will help you determine whether or not your benefits are taxable.

How much – if any – of your Social Security benefits are taxable depends on your total income and marital status.

Generally, if Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return.

If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.


.....

I couldn't respond to your entire post because I had to run out the door ...

Even then our tax burden may not be as high as some other countries but remember: we get very little in return. Government inefficiency increases with size, so our trillions of dollars don't produce a whole lot.

Well, we pay slightly more in taxes here, probably about 10 percent overall, but get much more in return.

I'll include a link to a NY Times article on what it's like to live in the Netherlands and is pretty accurate.

http://www.nytimes.com/2009/05/03/magazine/03european-t.html?pagewanted=1&_r=0

I'll also include what I wrote on my FaceBook page this morning ...

My American conservative friends always state they want a smaller government, less government involvement in their lives.

Here in the Netherlands women over the age of 50 are _invited_ every two years to take part of a breast cancer screening exam. Sacha's results came back yesterday. She's in perfect health.

Is this an example of the unnecessary government intrusion that the conservatives are against? Just wondering.

Boy, who would have thought a bunch of guys who normally talk about weighted keys and triple sensors had so many thoughts on the world?! Bet you didn't see that one coming for your thread, Dave?

I'm surprised this thread hasn't been locked though to be honest almost all the posts have been respectful and thoughtful.

This could also be capitalism at work. Look at the number of views ... and consider that a small percentage might result in advertising clicks (revenue) for Frank.

There isn't a lot of moderation in this forum. I'm not sure I've ever seen a moderator take any action whatsoever. That's fine because for the most part people here are well-behaved.

One hears a lot of things about the Netherlands. There are tons of good things about socialism, as everyone should recognize. There are also very significant downsides. But having the government in control of more and more stuff works less and less well as the government and the country gets larger. We see this all the time when we compare state and national government.

I keep hearing that socialism is so bad and I always think of the following example.

If you own a house you pay some kind of real estate\property\school\whatever tax which is forcibly taken, right? You don't a have a choice in that, you are taxed, period. Your local government then distributes that revenue to your local police department\fire department\library\grounds\whatever department.

Now you may never need nor want those services but they are there just the same for the benefit of your local community. I look at that as socialism, everyone chipping in for the greater benefit of their community.

Also, I don't look at the Netherlands as a socialized state per se. The health care I am forced to purchase (just like the car insurance I am forced to purchase) is purchased from a private company, a private company that is highly regulated by the government. There are many private health care providers here and we can shop around for the best price.

The government determines what is covered in the basic package. If you want more coverage, you pay more, but you must purchase at least the basic package and you can change providers once a year and no provider can refuse you. If you are poor and can't afford the basic package (which I'm guessing is about €120\$150 per month), the government will subsidize part of that monthly premium.

It's all quite civilized and works very well. I know personally one person in the US who has more than $100,000 in debt owed to a hospital. If push came to shove she could be forced to sell her house. That situation could never exist here and my Dutch friends were always amazed when the 'Tea Party' types in the US types protested against universal health care.