Topic: David Friedman and Bitcoin - page 2. (Read 8004 times)

It's okay for us to have a difference of opinion. We can just call each other liars and be on our respective ways.

The CRA was not a static piece of legislation. It evolved over the years from a relatively hands-off law focused on process into one that focused on outcomes. Regulators, beginning in the mid-nineties, began to hold banks accountable in serious ways. Banks responded to this new accountability by increasing the CRA loans they made, a move that entailed relaxing their lending standards.

Throughout the nineties banks, as banks lowered their mortgage standards, mortgage rates remained high. The laxity was spreading but the incentives for borrowers to re-finance even under relaxed standards remained low. New buyers often still didn’t know that some of the loosey-goosey mortgages existed. Speculators had an internet bubble, so they weren’t yet attracted to real-estate. Treasury rates were not yet so low that investors seeking yield would pour into mortgage backed securities. Securitization levels were low enough that banks weren’t yet willing to fully embrace the loose standards. The historical data on default and loss rates from the lax lending were not yet available, so they weren’t embraced by banks or the broader market.

But as the years went by, these factors changed. The Fed pushed interest rates down. This made refinancing more attractive, and created an investor demand for yield. Fannie and Freddie popularized low-income securitization. Low defaults and loss rates from lax loans made them seem not as risky as previously expected.  A shrinking consumer asset base thanks to the dot com bust created a demand for home-equity loans and high loan-to-value loans, as consumers exchanged high-interest credit card debt for low interest home debt. Speculators seeking higher returns and ordinary home buyers became aware that lax lending standards would allow them to buy bigger homes with little or no money down.

In short, the lax lending standards created in response to the CRA had dug a pit that was waiting to get filled when the circumstances were right.

People who think anarchism will somehow break out and become a major political force are deluding themselves. It will be crushed brutally by the ruling elites and by people who are very good at violence and suppression. In the unlikely event that a government does not exist its more likely to return to feudalism than anything else. I think humans have a gene that predisposes them to slavery and its been well conditioned. If you look around the war has already been lost and the market demands slavery and oppression.

This doesnt make me a statist it makes me a realist.

Not true at all. That bubble happened precisely because of regulation. Banks were practically forced to lower lending standards by Freddie and Fannie, not to mention the FED key interest rate affected mortgage rates to get artificially low enabling many to borrow who couldn't afford it. All Wall Street did was feed upon this circle and meet a demand that was created by the government and no one else. It's called moral hazard, look it up.

I have no problem with people paying a fee for someone else to be responsible for them. I've even suggested that services like this will eventually exist for Bitcoin. One beauty of Bitcoin is that if I choose to be responsible for my own actions, I can avoid the middleman and his fees.

Everyone looks at what happened and what factors affected it, then apply their worldview to the situation. And we all know, of course, that every person on Earth believes the exact same thing.

Thank you, came here to say exactly that.

More generally, when you look back at things after you have knowledge of failures and having pondered about how to fix them, it's natural to dream about a force that would execute those actions to result in a better now. If only someone had taken control and did this and that... This creates false trust in regulatory systems, and the fact that they don't work just leads to a snowball effect. In the end, you still have the same problems plus a bunch of side-effects caused by the newly invented rules you have to live by.

What astounds me most about the whole property bubble and subsequent credit crisis and 'stepping in' of the authorities leading to the mess we're in today is that people looking at the same facts can come to such diametrically opposed opinions as to its underlying causes.

It had more to do with risky and (quite frankly) idiotic investment practices due to deregulation in commercial and investment banking through the eighties and nineties (Graham-Leach-Bliley, MCA, and Garn-St. Germain in particular). Banks were lending to people who should not have been eligible for borrowing, and their mortgages were combined and shifted around into so many different convoluted securities and investments that no one truly knew the extent of what they were investing in.

The banks setting lower standards weren't doing it because they were victims. They were doing it to get what they could out of the loans before they passed it off to be someone else's problem. There's only so far you can pass the buck before it crumbles.

Exactly how is regulation at fault for the massive scamming and lack of restitution in bitcoin ?

Well.. read "The Machinery of Freedom" for starters.. it has a full chapter on transition called "How to get there from here". The book is available for free online.

No, I just dont see any solution to get from where we are to a better place. All I hear on this forum is extremism with no answers to the transition.

People advocating removing everything all at once dont see how disastrous it would be.

I'm sorry.. are you worried about corruption or fraud? They are two different things.

To corrupt or bribe a politician, they need to have power. They need to be able to decide over other people's money. Take away the power and you reduce the incentive to corrupt and the possibility to be corrupted. By definition.


As for "private corruption" (ie: bribing an executive to decide against the best interests of his own company) there are powerful ways, both positive and negative, to fight it, as well as strong incentives to do so... as companies where corruption is rife tend to be a bad investment.

Fraud and scams are a completely different issue and there are a number of answers, none perfect, but many arguably better than "let's put someone in charge who will punish the wrongdoers" precisely because that "person in charge" immediately becomes the perfect target for corruption.

That you have never even heard about these probably marks you as a victim of government brainwashing aka "education".

Exactly how does having complete anarchy  deal with corruption ?

Exactly how does having complete anarchy  deal with corruption ? For that is the real issue that neither full regulation or anarchy can deal with in any way. Telling people that removing all rules will sort out the mess is the thinking of a retarded child.

If there was any effective measures in place the corrupt would be in jail right now but that hasn't happened. Just as with bitcoin you can scam and get away scott free so I dont see complete unregulation as the answer either.

Unlike our heavily over-regulated fiat trash based financial markets.  Oh wait, S&L crisis, dotcom bubble/crash, housing bubble/crash, bond bubble/crash.  

And Madoff, plus MF Global and LIBOR, etc. etc. etc.

Can't you go be a blithering statist in some other thread?  

He wrote this:
http://daviddfriedman.blogspot.com.es/2011/06/bitcoins-considered-as-virtual-gold.html

some time ago, but his thinking has evolved a lot since, as he has learned more about bitcoin.

The other disadvantage of a commodity money is that someone has to produce the commodity. Labor and capital are expended in locating and mining gold, a real cost. David Ricardo, writing about two hundred years ago, pointed out that a tax on gold mines whose output was used entirely as money in the taxing country and provided all of its money was a burden-free tax—not only did it impose no excess burden (cost to taxpayers above receipts to government), it imposed no burden at all. A smaller amount of gold was mined but the value per ounce was greater, resulting in the same total value of gold money at a lower production cost—and it is the value, not the weight, of money that mostly determines its usefulness. Fiat money represents the limiting case, where "production cost" is in effect all tax.