Socialism Is Always Doomed to Fail

[coloradoatheist]

You mean that they build those cities knowing that they will be ghost cities in order to make it look like the economy is growing?
It should be obvious that the ghost cities in question are a stain in China's image. If they know they won't be used, there probably another reason for them to act in that fashion, such as getting money for themselves from companies that make them (i.e., corruption), or something else.


I'm not sure, but if that is the case, that's good evidence they do not believe it's an illusion. Else, why would they do that? Xi surely wants to be remembered as a great leader, not someone who ran China's economy into the ground.

China is worried about major social unrest if the house of cards comes down. Hence they keep on doing it--it's an exercise in kicking the can.

Theoritically they shouldn't be able to kick it down the road forever, just like we couldn't keep the housing bubble going.

 

[Loren Pechtel]

You mean that they build those cities knowing that they will be ghost cities in order to make it look like the economy is growing?
It should be obvious that the ghost cities in question are a stain in China's image. If they know they won't be used, there probably another reason for them to act in that fashion, such as getting money for themselves from companies that make them (i.e., corruption), or something else.


I'm not sure, but if that is the case, that's good evidence they do not believe it's an illusion. Else, why would they do that? Xi surely wants to be remembered as a great leader, not someone who ran China's economy into the ground.

China is worried about major social unrest if the house of cards comes down. Hence they keep on doing it--it's an exercise in kicking the can.

Theoritically they shouldn't be able to kick it down the road forever, just like we couldn't keep the housing bubble going.

Agreed. It's their version of the housing bubble and they are reacting the same as Bush did.

 

[arkirk]

Theoritically they shouldn't be able to kick it down the road forever, just like we couldn't keep the housing bubble going.

Agreed. It's their version of the housing bubble and they are reacting the same as Bush did.

You guys seem always to miss the point when it comes to our environment. It is like it doesn't exist. So, in so many people's estimations the consequences of pollution are not worth considering. Human beings have buggered up a lot of things and that usually triggered an exodus from the area screwed up by government or just people seeking wealth. It is the victims of greed we find in refugee migrations. They all flow out of systemic failure...capitalist, socialist, monarchist, etc.
As long as nothing has worked well for us all so far, there is no point in singling our social action and making it the bogey man. What I saw in the Soviet Union and China were mixed systems with oligarchs rebranded dictators for the proletariat. While they were rebranded, their methods did not change and democracy was out the window. They of course were under immense military pressure and trade intrigues and did a poor job of coping with that. Meanwhile as the Trumps and the Kochs and the Buffets amassed a huge amount of personal wealth, we still had shocking poverty, and suffering in many parts of the country. Severe judgments on socialism in our country are entirely premature. It is and would be a system we have to construct that might guarantee a somewhat more egalitarian society. We had a lot of discussion in the past in Morals and Principles of Rawlsian systems of justice. It was not all in vain.

I have little patience with people who just mumble some party line and condemn earnest efforts before they ever get started.

 

[SimpleDon]

[

I also agree that one study doesn't prove or disprove socialism. Human behavior is quite complex and mysterious.
]
But the biggest issue with capitalism is that it's too successful, and those are the issues we have to deal with.

Capitalism is doomed to failure without significant checks and balances. We saw that in 2008.

The real cause of 2008 wasn't capitalism, but rather the government intervening in the market.

No, the meltdown occurred because the failure of the market to self-regulate when the Bush administration failed to police the market to prevent the bad behavior that they knew was going on.

The Bush administration told the world that they were not going to enforce the regulations covering banks as a measure to reduce "red tape." Google "cutting red tape with a chainsaw." High in the hits should be this article by a journalist who covers the housing market. And this coverage of the testimony of Alan Greenspan, the chairman of the Fed, saying that they failed to act because they thought that the market would self-regulate, "a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and failed to anticipate the self-destructive power of wanton mortgage lending."

You have been pointed to these many times and yet you persist in making incorrect and unsupported statements as you have here.

The financial markets are inherently unstable because they can make money in unstable markets. People panic sell resulting in bargains in equities and in overpriced bonds.

The bankers knew the loans were shit, but so long as the government would keep buying them up they were happy to make and sell them.

I assume that you mean the mortgage repurchasers, Fannie Mae and Freddie Mac. They are corporations with their own stockholders chartered by the Federal government to provide liquidity to the mortgage market. They sell bonds and buy mortgages from the originating banks to provide the banks with money to lend out again. They are a bank to banks.

The charters of these private corporations severely limit the number of sub-prime loans that they can buy. They both violated the limits in their charters at the urging of their stockholders who wanted the repurchasers to reap what turned out to be the imaginary profits of turning subprime mortgages into securities with no chance of losing money because everyone knows that home prices never go down.

I don't know how you construe this statement of fact about these repurchasers into the government did it. If it is because the government chartered the corporation, the government charters the private banks, too.

The repurchasers purchase mortgages with "warranties and representations" that the bank did their due diligence that the borrowers would be able to pay back the loans and that the home is worth the value that the mortgage is based on. If this turns out to not be the case the repurchaser can force the bank that originated the mortgage to buy back the loan.

The volume of the problem in 2008 and the number of bad banks and bad mortgages meant that they would have bankrupted almost every bank in the country if they had exercised this option. So then the only entity that could do it, the federal government, stepped in and then bought the bad mortgages. If this is what you meant by the government did it I ask, at that time what was the option?

The reason that the government bailed out the banks and the repurchasers and a large number of wealthy CDS investors is that we need a stable banking system. It is required for an economy, especially a capitalistic one. The alternative to having a private banking system is to have a publicly owned banking system. I don't think that you want that.

Logically we would separate consumer and business banking from investment banking. This is how the system was until some free market idiots deregulated the system, allowing investment banks to own consumer banks where they could create money.

Bankers believe that their job is to make as much profit as they can. It isn't. Banks create money out of thin air when they make loans, money the economy needs to operate.

The only other entity that can create money out of thin air is the Federal government, when they run a budget deficit, like now, the aim of running the deficit being to further fill the pockets of the already wealthy, a goal that you heartily endorse.

Reason would dictate that the banks would be heavily regulated because the power to create money coupled with the desire to make as much profit as possible is a dangerous mix. And there are many regulations that limit what banks can do with this power to create money. But there is a flaw in this system of regulation. The regulations have to be enforced. No one foresaw that we wouldn't enforce the regulations, but that is what happened.

There are deluded people who believe that the banks and the financial sector, in general, would self-regulate in their quest for profits, that they would voluntarily give up profits in the name of maintaining a stable banking and financial system. These deluded people were elected into office and appointed like-minded deluded people to enforce the banking regulations. Not too surprising they didn't enforce the regulations. They went further and announced to the world that they wouldn't enforce the regulations which they termed to be useless red tape.

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[Angra Mainyu]

China is worried about major social unrest if the house of cards comes down. Hence they keep on doing it--it's an exercise in kicking the can.

How is making ghost towns going to make things look better?
Ghost towns do not look good for China. They look bad. The Chinese people can see that those are ghost towns.
And how is that going to prevent a house of cards from coming down?

Perhaps you mean they want to prevent unemployment, giving people jobs, even if they're not building anything good?
I'm not sure why they wouldn't make things like roads, which would be used at least a little bit. Ghost towns do not seem to have an advantage, and they have plenty of disadvantages (e.g., old and ill-maintained roads in the future would be less of a problem than old, ill-maintained towns). It seems more likely due to poor planning (i.e., someone actually believed the cities would be used) or corruption (someone getting paid on the side).

 

[SimpleDon]

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Phase 1 was the Community Reinvestment Act. It didn't do what they wanted because it takes a lot of pressure to get the bankers to write crap when they're going to be left holding the bag.

Phase 2 was changing the underwriting standards for the government loan programs. Now they had pressure and little downside, not to mention plenty of profit to be made off the additional business.

Then as we saw things getting farther and farther out of hand Bush didn't try to address the issue because the bankers wouldn't have liked that.

The CRA had little to nothing to do with the meltdown in 2008. It is an act that required a bank in a low-income area to loan out at least one-half of the deposits it holds from the people in the area back into the area. It doesn't require banks to loan money to people who can't pay the loan back. It doesn't require banks to reduce their underwriting standards. The act was sold as a civil rights act, but it really wasn't one. Many of the banks impacted by the act were owned by minorities.

The act was passed in 1977 and according to you it only caused problems thirty years after it was passed. This should have told you to be cautious about adopting this idea into your belief system of how the world works.

The banks didn't write mortgages in the low-income areas because they were racists or because they discriminated against the poor, but because the home prices in low-income areas are low and the mortgages written for the homes were for lower amounts. It costs the same to service a thirty thousand dollar mortgage as it does to service a three hundred thousand dollar mortgage, but there is only 10% of the profit on the lower mortgage. So even the minority-owned banks put their depositors' money into the suburbs to finance the more expensive homes instead of writing mortgages in the low-income areas where their depositors lived.

But you can prove that the act did contribute to the meltdown by providing proof of the following that would have happened if you are right. If the CRA had contributed to meltdown the following would have to have been true:

• home sales in the CRA areas would have to lead the nation in numbers.
• home prices in CRA areas would have risen faster than home prices in non-CRA areas.
• after the crash homes in the CRA areas would have gone into foreclosure at a higher rate than in non-CRA areas.
• there should be a huge amount of evidence of how CRA mandated loans defaulted at a much higher rate than non-CRA loans.
• banks covered by the CRA would have failed at a much higher rate than banks not covered by the CRA.
• the distressed sales of CRA homes would have been much greater than the national average.
• the Bush administration would have been deluged with the complaints before the meltdown of the CRA banks for forcing them to write bad loans.
• after the meltdown the bankers would have produced these statistics above to prove that the CRA forced them to make these bad loans when they testified before Congress.

None of these are true.

There is no objective reason to believe that the CRA had much to do with the financial meltdown of 2008. What little it had to do with the meltdown is that it is one of the many constraints that banks were forced to operate under that they thought that they could avoid by using third-party mortgage brokers to initiate the mortgages and then to buy the mortgages from the brokers.

This turned out to be one of the major factors in why so many bad mortgages were written, because the third party brokers were paid by the amount of the mortgage with a premium fee for the subprime mortgages because these were the most popular trances when sliced up in the securities market because they had the highest returns with no risk because everyone knows that home prices never go down. For the third party mortgage brokers, there was no downside to writing a risky loan, there was no penalty, there was only more profit.

The financial meltdown had many different causes. The Fed lowered interest rates to help Bush 43 be re-elected by boosting the economy so that Bush could claim that it was his tax cuts for the already wealthy that spurred the economy. The Fed raised interest rates after the election through to 2008 but with little effect, the bubble was out of control. The Fed failed to rein in the use of third-party brokers and to regulate them. The Fed saw the same behavior that, on a much smaller scale produced the savings and loan deregulation disaster and did nothing. The Fed didn't address the so-called shadow banking network that created highly leveraged, unregulated derivatives, especially the mortgage-backed ones. Another gift of deregulation given to the financial sector by idiots in Congress, of both parties, who were infused with the gospel of market self-regulation.

But certainly the beliefs that combining subprime mortgages with prime ones lowered the risk of subprime mortgages to the level of the not subprime mortgages when it actually increased the risk of the not subprime ones, that home prices would never go down, that the banks used third-party brokers to originate loans who had no responsibility for the quality of the loans and that using these third party brokers turned effectively the banks into predatory lenders who purposely loaned money to people who couldn't pay off the loan so that they could foreclose on the home to make a profit on the reselling of the home because everyone knows that home prices never go down, all were the major reason for the meltdown.

Yes, the CRA forced the banks to change their mortgage writing, for a good reason. And yes, every administration pushes homeownership for many good reasons, owners take better care of their property than renters, homeowners stabilize their neighborhood, home ownership provides capital gains that can be taken out to pay for unexpected expenses, etc.

These things have been pointed out to you many times by me and many others here without any objective reasoning from you for why you persist in these beliefs. I understand that you want this to be true that deregulation didn't have anything to do with the causes of the financial meltdown, it threatens your entire belief system. The free market fantasy is an attractive one, I wish that it was true. But it is not. Regulations for businesses, unions, banks, stock markets, corporations, etc., are required just like criminal laws are required in society because there are always people who will cut corners, who will cheat, who will steal to gain an advantage.
.

 

[none]

yeah but magic jesus

 

[PyramidHead]

You need to pay less attention to the news, and more attention to history.

Everything is awful right now. But nowhere CLOSE to as awful as it has been up until now.

Pick any date more than twenty years in the past, when fewer people were hungry than today; or when there was less death from war and conflict. You can't do it.

You're wrong on both counts, as there were certainly periods of time in which the population of humans was so low that, by definition, there would be fewer total hungry people and fewer total deaths from war. Your sentiment is true in a per capita sense, but it's not at all obvious to me that per capita numbers are indicative of progress when absolute numbers don't tell the same story.

From the perspective of someone who is starving, it makes no difference that there are billions of non-starving people in the world, making his status a statistical rarity. If there are tens of millions of starving people, every one of them is a tragedy, regardless of what proportion of the total they comprise.

Wind the clock back to a time when the total population of humans was far lower than it is today, and perform the same mental exercise. To be a starving person is still a harm and a tragedy, but it is not more of a tragedy because there are fewer non-starving people elsewhere in the population. In fact, if the total number of starving people in such a time is in the tens of thousands or hundreds of thousands, that's arguably better than today's situation, as there are fewer instances of conscious suffering.

Whenever I hear these per capita arguments, I cringe at the prospect of planetary exploration. Suppose we manage to reduce poverty to 1% of the population, but simultaneously we colonize the solar system and increase the number of humans to 10 trillion. Do we pat ourselves on the back because there are only 100 billion humans living in poverty...? I think we should recoil in horror at the idea. Nothing makes that number okay. Moral hazard doesn't scale like that in my book.

Yes, we should pat ourselves on the back, assuming that the lives of the other 9.9 trillion are essentially worth living. If you have a situation with a million lives, where 90% of them are filled with constant suffering and starvation, the goodness of the remaining 10% of lives is not enough to override that (it would probably be better for the species to go extinct if there was no way to improve that going forward), but it would be if 99% of the lives are worth living.

That's where I have to disagree. We should be making more people happy, not more happy people. Reducing total suffering, promoting total well-being. But in that order.

 

[arkirk]

Any system that locks in place dictatorial leadership is looking for an early failure. That appears to be the case today in the U.S., China, Russia, etc. The liability of failure is not so much linked to whether or not the system is socialist as it is linked to the ability of a system to cope with the social needs of its people and the determination of its leaders to be humane. Modern technology has rendered virtually all systems unstable. This can be good as well as bad. It depends on the level of egalitarian thrust in the leadership and the citizens. The system must have the flexibility to deal with radically changing social and physical conditions. The problem with China is that it attempted to venture into Capitalistic enterprise without targeting ends that were sufficiently humane. So it built ghost cities then failed to distribute the product to the people it pretended to be serving. It also fails in a major degree on the environmental front. It is possible they are building an even bigger disaster than the world has ever seen before. Our country is acting the same way with the same type of ignorant leadership.

 

[Loren Pechtel]

Theoritically they shouldn't be able to kick it down the road forever, just like we couldn't keep the housing bubble going.

Agreed. It's their version of the housing bubble and they are reacting the same as Bush did.

You guys seem always to miss the point when it comes to our environment. It is like it doesn't exist. So, in so many people's estimations the consequences of pollution are not worth considering. Human beings have buggered up a lot of things and that usually triggered an exodus from the area screwed up by government or just people seeking wealth. It is the victims of greed we find in refugee migrations. They all flow out of systemic failure...capitalist, socialist, monarchist, etc.

1) Why are you talking about the environment as a rebuttal to what I said?

2) China has a far worse environmental record than we do.

3) Where are refugees fleeing in large numbers from capitalism?

As long as nothing has worked well for us all so far, there is no point in singling our social action and making it the bogey man. What I saw in the Soviet Union and China were mixed systems with oligarchs rebranded dictators for the proletariat. While they were rebranded, their methods did not change and democracy was out the window.

Agreed.

I have little patience with people who just mumble some party line and condemn earnest efforts before they ever get started.

What we see in China probably started out as an earnest effort but now it's waste for the purpose of kicking the can.

 

[Loren Pechtel]

[

The real cause of 2008 wasn't capitalism, but rather the government intervening in the market.

No, the meltdown occurred because the failure of the market to self-regulate when the Bush administration failed to police the market to prevent the bad behavior that they knew was going on.

You're not rebutting me.

The bankers knew the loans were shit, but so long as the government would keep buying them up they were happy to make and sell them.

I assume that you mean the mortgage repurchasers, Fannie Mae and Freddie Mac. They are corporations with their own stockholders chartered by the Federal government to provide liquidity to the mortgage market. They sell bonds and buy mortgages from the originating banks to provide the banks with money to lend out again. They are a bank to banks.

The charters of these private corporations severely limit the number of sub-prime loans that they can buy. They both violated the limits in their charters at the urging of their stockholders who wanted the repurchasers to reap what turned out to be the imaginary profits of turning subprime mortgages into securities with no chance of losing money because everyone knows that home prices never go down.

No--they were acting by the wishes of Washington.

 

[Loren Pechtel]

China is worried about major social unrest if the house of cards comes down. Hence they keep on doing it--it's an exercise in kicking the can.

How is making ghost towns going to make things look better?
Ghost towns do not look good for China. They look bad. The Chinese people can see that those are ghost towns.
And how is that going to prevent a house of cards from coming down?

Perhaps you mean they want to prevent unemployment, giving people jobs, even if they're not building anything good?
I'm not sure why they wouldn't make things like roads, which would be used at least a little bit. Ghost towns do not seem to have an advantage, and they have plenty of disadvantages (e.g., old and ill-maintained roads in the future would be less of a problem than old, ill-maintained towns). It seems more likely due to poor planning (i.e., someone actually believed the cities would be used) or corruption (someone getting paid on the side).

Yeah, it's to continue the economic growth and prevent unemployment.

Road would have to be built with government money. The ghost cities are being done privately--because Beijing tells the banks to write the loans, period.

 

[Loren Pechtel]

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Phase 1 was the Community Reinvestment Act. It didn't do what they wanted because it takes a lot of pressure to get the bankers to write crap when they're going to be left holding the bag.

Phase 2 was changing the underwriting standards for the government loan programs. Now they had pressure and little downside, not to mention plenty of profit to be made off the additional business.

Then as we saw things getting farther and farther out of hand Bush didn't try to address the issue because the bankers wouldn't have liked that.

The CRA had little to nothing to do with the meltdown in 2008. It is an act that required a bank in a low-income area to loan out at least one-half of the deposits it holds from the people in the area back into the area. It doesn't require banks to loan money to people who can't pay the loan back. It doesn't require banks to reduce their underwriting standards. The act was sold as a civil rights act, but it really wasn't one. Many of the banks impacted by the act were owned by minorities.

The problem here is that this assumes there are enough qualified borrowers. When there aren't, "one half to those in the area" is black and white, "qualified borrower" isn't.

The act was passed in 1977 and according to you it only caused problems thirty years after it was passed. This should have told you to be cautious about adopting this idea into your belief system of how the world works.

Because it merely set up the conditions--have to write the loans whether you have qualified borrowers or not. Banks could see the situation and weaseled out whenever they could, the harm was minimal other than in outrage at how evil the banks were.

The floodgates opened when the idea of write anyway was pushed on to Fannie Mae and Freddie Mac. Now there was a market for crap, banks loved to write it rather than hated to write it. Meltdown.

 

[coloradoatheist]

Here is an article that talks about some of the issues you brought up SimpleDon. As I said it was like a seven layer cake and the CRA was one layer of it, though decent sized.

http://www.businessinsider.com/the-cra-debate-a-users-guide-2009-6

 

[arkirk]

Loren: Try Mexico. The Capitalism they are fleeing is American in origin. The capitalists drive all but themselves and their surrogates out of business in developing countries. The problem is that concentration of wealth strands people who otherwise could have been a part of society (ie. had a job and a useful function in society). Wealth controls the resources and when it is concentrated or exported to other countries, the exploited nation bleeds its people who are attempting to follow the money and take almost any job at almost any wage in order to eat and feed their families. The same applies with Central American countries that are being strip mined or plantationized for bananas. It is an old story and you know about it, Loren. I believe you are a participant in the economic strangulation of the non U.S. world. Try Puerto Rico. There is a reality you assiduously are always trying to cover up. We are armed to the teeth against the world. You can call it "success" or "capitalism" but it really is just a system of economic exploitation of conflicts our leadership projects all over the world. It also is a system that makes many homeless in the aledged homeland. We guard our country's borders so our world wide evil does not come home. When you create the impression that people who are disadvantaged by capitalism are just lazy no-goodnicks, that keeps them in that status and keeps conflict alive...and keeps makers of Kevlar and reaper drones and other weapons making record profits. But we have homeless flooding our streets...and capitalism will not be helping these people. Capitalists in the U.S. and their nanny state protector, support dictators abroad because that maximizes their personal fortunes. You know that. That is why your arguments are all so angular and circular...to maintain the status quo. The status will not be so quo in the future however because the true rulers of this world are physical laws and important balances in the natural world are being tampered with by this gang of capitalistic oil and raw material and cheap labor seekers.

 

[Angra Mainyu]

China is worried about major social unrest if the house of cards comes down. Hence they keep on doing it--it's an exercise in kicking the can.

How is making ghost towns going to make things look better?
Ghost towns do not look good for China. They look bad. The Chinese people can see that those are ghost towns.
And how is that going to prevent a house of cards from coming down?

Perhaps you mean they want to prevent unemployment, giving people jobs, even if they're not building anything good?
I'm not sure why they wouldn't make things like roads, which would be used at least a little bit. Ghost towns do not seem to have an advantage, and they have plenty of disadvantages (e.g., old and ill-maintained roads in the future would be less of a problem than old, ill-maintained towns). It seems more likely due to poor planning (i.e., someone actually believed the cities would be used) or corruption (someone getting paid on the side).

Yeah, it's to continue the economic growth and prevent unemployment.

Road would have to be built with government money. The ghost cities are being done privately--because Beijing tells the banks to write the loans, period.

Why can't they do the same with roads?

 

[Trausti]

 

[Loren Pechtel]

Loren: Try Mexico. The Capitalism they are fleeing is American in origin. The capitalists drive all but themselves and their surrogates out of business in developing countries. The problem is that concentration of wealth strands people who otherwise could have been a part of society (ie. had a job and a useful function in society).

1) Until 2000 they were well into the socialist camp and since they have only slowly been moving towards capitalism.

2) They have major corruption problems due to the drug war.

Wealth controls the resources and when it is concentrated or exported to other countries, the exploited nation bleeds its people who are attempting to follow the money and take almost any job at almost any wage in order to eat and feed their families.

You are simply assuming it's capitalism that makes for the lack of jobs.

The same applies with Central American countries that are being strip mined or plantationized for bananas. It is an old story and you know about it, Loren. I believe you are a participant in the economic strangulation of the non U.S. world.

You think any fucked-up leader is capitalist.

Try Puerto Rico. There is a reality you assiduously are always trying to cover up.

Puerto Rico fucked itself with unsustainable government spending. That's socialist, not capitalist.

It also is a system that makes many homeless in the aledged homeland.

I've been in a lot of countries--the socialist ones have had more poverty than the capitalist ones. And a large chunk of the homeless are that way due to mental illness.

We guard our country's borders so our world wide evil does not come home.

Evil? We don't want to be buried in people coming here for our economy.

The only evil that's trying to come in is the Islamists and they aren't motivated by anything you've talked about.

 

[Loren Pechtel]

Yeah, it's to continue the economic growth and prevent unemployment.

Road would have to be built with government money. The ghost cities are being done privately--because Beijing tells the banks to write the loans, period.

Why can't they do the same with roads?

Note what I said about government vs private money.

Why would private money invest in roads?

 

[Don2 (Don1 Revised)]

Why would private money invest in roads?

A lot of roads are initially developed (which is an investment) by private industry. Various kinds of permits etc are needed to do it. A whole neighborhood may be built up with such new roads or a whole commercial business area with such new roads and then made for sale to various persons. Such venture are often collective by a corporation where multiple owners benefit. Sometimes, the initial property was public property being sold for the purpose and sometimes it's private real estate being sold. The short answer to your question of why such money would be invested in roads by a collective real estate group might be profit, unless they're some other kind of collective, non-profit group interested in building a college or other multi-building, multi-road complex.