[Pants-of-dog]

Oh that's easy. As I have already said, regulations are what enable the existence of Canada's fiat backed central bank combined with very large FRB. A simple bank run will cause the system to halt overnight and no government insurance scheme (if Canada has one) can stop that just like Cyprus couldn't stop it. Although not perfect measures they are close enough to show the magnitude -> as at 30-Nov-2013, M0=$69.3 billion while M1=$718.0 billion. Any regulations/measures implemented to try to prevent the bank run will cause a locking up of the financial system (capital controls), loss of money from the banking system (wealth loss and redistribution), hyperinflation or a mixture of all three. All of which will cause dislocation and consequent economic upheaval just like in the GFC-affected countries.

Please provide evidence that this hypothesis of yours accurately describes Canada's current economic situation. Thank you.

[Voluntarism]

I just did. M1 is ten times M0. A bank run cannot be stopped (except by the measures I mentioned) and they are the bane of the financial system (hence why a free banking system could never have such large FRB - especially system wide rather than a few individual banks).

[Pants-of-dog]

By evidence, I mean links to news articles or studies. In other words, something that verifies that what you are saying is actually happening and real.

[Voluntarism]

What the hell does that mean? My assertion is that it is structurally the same and therefore is subject to exactly the same structural issues as demonstrated throughout history. Yours is that the super-awesome, totally different Canadian regulations that other countries haven't thought of makes it structurally different somehow and can withstand the same hurricane that blew down every other building. I think that the burden of proof is actually on you to prove this.

[Pants-of-dog]

Okay.

My evidence that Canada did not and has not suffered the same fate as other countries during the global financial crisis due to its regulations is here:

http://www.cba.ca/en/media-room/50-back ... -in-canada

During the 2008 global financial crisis, unlike banks in many other countries, no Canadian banks were bailed out or in danger of failing.
This crisis has resulted in a series of significant regulatory changes for the international banking sector. The ongoing volume and pace of these changes mark this as the most profound period of regulatory reform in recent banking history.
The World Economic Forum has ranked Canada’s banks as the most sound in the world for six years in a row1 – a ranking that highlights the fact that banks in Canada are well capitalized, well managed and well regulated.

and here: http://www.irpp.org/en/po/the-fault-lin ... om-canada/

While Canada was hit by the worldwide recession, the Canadian financial system weathered the global financial cri- sis relatively well. Canadian financial institutions were not unscathed by the financial crisis, but none was excessively impacted by toxic assets, no public funds were injected into financial institutions, Canadian banks remained profitable and dividend-paying and, importantly, they continued to lend. Interestingly, in the halcyon years before the financial crisis, Canadian practices were often criticized in New York and London as being too conservative, too prudent and too unwelcoming of the new financial innovations sweeping global balance sheets.

...

On the regulatory side, Canada has integrated regula- tion of banks, insurance companies and large invest- ment dealers. The Office of the Superintendent of Financial Institutions (OSFI), Canada’s regulator, meets regularly with the management of the largest financial institutions and their boards of directors to ensure that they are governed to be sound and stable. In the banking sector, Canada allows securities firms to be bank-owned (and the largest are), and the OSFI regulates the banks on a consolidated basis (retail, commercial, investment and wealth activities) worldwide, in contrast to the regulatory silos of the United States. The Canadian regulatory approach is both prescriptive and principles-based. This combination put the onus on a financial institution to assure itself that it has met the intent of the legislature in addition to what is explicitly prescribed.

...

With respect to how they use their balance sheets, Canadian financial institutions were less highly leveraged than their international peers in the precrisis period. This reflected the fact that Canada has a regulatory cap on leverage at an asset-to-capital ratio of 20 to 1. As a result, major Canadian banks had an average asset-to-capital multiple of 18 in 2008, while the com- parable figure for many US banks was over 25, and numerous European banks were well over 30.

...

and here: http://business.financialpost.com/2012/ ... or-crisis/

Terry Campbell, president of the Canadian Bankers Association, said there are many reasons why banks in this country “largely avoided the problems that have plagued banks elsewhere.”

“Our banks are well-capitalized, well-managed and well-regulated,” he said. “Canada’s banks are well-diversified organizations with investment banks anchored by solid deposit-taking institutions.”

Now, are you going to provide evidence for your claim? Or do you want to accept that Canada's regulatory system was and is responsible for its financial stability?

[Voluntarism]

Not having significant exposure to "toxic" assets. "Toxic" assets only became "toxic" when they failed. Bit of a leap to say that Canadian banks do not have the potential for large amounts of exposure to "toxic" assets in the future. It just means they didn't have the as much exposure to the assets that the US and European banks had.

"Well-capitalised" at 18:1. That's "better" capitalised but what it really means is that they have a very large time risk profile inherent in their structure. That's the point. Even a moderate bank run will kill them. Solvency is the issue and the Canadian banking system is basically just as (legally) insolvent as the rest.

[Eran]

What I think will be harder to gather is the income side information (consumption side is a doddle) that the government uses for taxation purposes.

You may well be right in suggesting that effective work-arounds can be found. The income side, btw, is only difficult because today people have much interest in hiding or obfuscating their income sources. Recording consumption isn't necessarily easy of producers and retails aren't required to keep and share standardised accounting records.

Btw, have you noticed quite how much legal complications such as formation of companies, etc., are motivated exclusively by tax considerations?

Set aside the injustice and waste associated with taxes. Can anybody even start to grasp how much taxes complicate our lives? [perhaps not so much if you are a salaried employee; but think about being a small business owner]

[Voluntarism]

Btw, have you noticed quite how much legal complications such as formation of companies, etc., are motivated exclusively by tax considerations?

Set aside the injustice and waste associated with taxes. Can anybody even start to grasp how much taxes complicate our lives? [perhaps not so much if you are a salaried employee; but think about being a small business owner]

Tell me about it. I'm still behind on our personal tax returns because there's so much paperwork involved and the damn rules keep changing (especially when the pollies are in tax grab mode due to their ridiculous deficits). Thankfully our CFO keeps the business ones up to date even when his workload more than doubled after our recent merger.

[ingliz]

a free banking system could never have such large FRB

Why? A private banking system without a central bank can just as easily increase the money supply.

[Voluntarism]

Individual institutions will try (as they did in the past), but the power of the bank run prevents a system wide occurrence (as in the past). It is in the interest of competitor banks to encourage bank runs even. That's the beauty - any such fraud will not be as extensive as it cannot survive long in the market

[Nunt]

Individual institutions will try (as they did in the past), but the power of the bank run prevents a system wide occurrence (as in the past). It is in the interest of competitor banks to encourage bank runs even. That's the beauty - any such fraud will not be as extensive as it cannot survive long in the market

Also, we need to frame the past experience of bank runs. So even if it is true that 150 years ago banks increased the money supply, had a run on the bank and failed, this does not mean that we will simply stupidly repeat the mistakes of the past. When free banking just started this was a whole new industry. Nobody knew anything about it, not of the possibilities and not of the dangers. The failures of the past did teach us some lessons. So it would be logical to assume that in order for people to trust banks with their money, banks would need to give some guarantees that those failures would not happen again.

[mum]

You may well be right in suggesting that effective work-arounds can be found. The income side, btw, is only difficult because today people have much interest in hiding or obfuscating their income sources. Recording consumption isn't necessarily easy of producers and retails aren't required to keep and share standardised accounting records.

Btw, have you noticed quite how much legal complications such as formation of companies, etc., are motivated exclusively by tax considerations?

Set aside the injustice and waste associated with taxes. Can anybody even start to grasp how much taxes complicate our lives? [perhaps not so much if you are a salaried employee; but think about being a small business owner]

I was just having this conversation with someone the other day.

I cannot even begin to imagine the extent of absolute waste that tax legislation creates.
Even if you set aside the terrible waste of govt spending of tax revenue, and the lost opportunities individuals and companies have as a result of paying the tax; just think of all the time and effort and money spent JUST on navigating the minefield of tax legislation. The effort required to simply work out how much tax you have to pay, how to get deductions and how to protect yourself from auditors.
Every year at tax time and every quarter for businesses a monumental amount of man hours goes in to simply navigating tax legislation !!

[Pants-of-dog]

:lol: Not having significant exposure to "toxic" assets. "Toxic" assets only became "toxic" when they failed. Bit of a leap to say that Canadian banks do not have the potential for large amounts of exposure to "toxic" assets in the future. It just means they didn't have the as much exposure to the assets that the US and European banks had.

"Well-capitalised" at 18:1. That's "better" capitalised but what it really means is that they have a very large time risk profile inherent in their structure. That's the point. Even a moderate bank run will kill them. Solvency is the issue and the Canadian banking system is basically just as (legally) insolvent as the rest.

I made the claim that regulations led to Canada's financial stability during the GFC. I have provided evidence to support this claim.

You have made some predictions that have not happened and cannot be verified in the foreseeable future, and you have not provided any evidence to support your claims.

------------------

As for the data collection issue, I think there may be problems in that the data will not be collected in the same way. I am not involved in data collection at all, so I may be incorrect, but this has been my understanding from reading about the debate here in Canada as the Conservatives are destroying gov't databases and data collection systems.

[Unthinking Majority]

If there is a flaw in libertarianism it isn't in the economics.

Libertarians wish to transfer a lot of the power government has and give it to capitalists and the rich. Anyone who wants this is either rich themselves and simply want to profit from free markets, or they are naive and/or completely ignorant of the history of capitalism. Faith in free markets is ideological blind faith, like a religion, and not based in reality and history.

Somebody on this board one had this quote in his signature, which is true: "Why has government been instituted at all? Because the passions of men will not conform to the dictates of reason and justice, without constraint." - Alexander Hamilton

[Voluntarism]

Libertarians wish to transfer a lot of the power government has and give it to capitalists and the rich.

Bzzzt. Wrong. Libertarians wish to reduce everyone's power over others. If anything this shifts the power into the hands of the masses via the power of the sovereign consumer.

[Unthinking Majority]

Bzzzt. Wrong. Libertarians wish to reduce everyone's power over others. If anything this shifts the power into the hands of the masses via the power of the sovereign consumer.

And how do Libertarians propose to do this?

[Voluntarism]

And how do Libertarians propose to do this?

Getting rid of privileges.

[Unthinking Majority]

Getting rid of privileges.

Can you be more specific?

How can economic deregulation not give more power to capitalists over workers and consumers etc? Yes there are some areas where government regulation props up certain corporations etc. aka "privileges", but many areas where regulation protects consumers and workers.

[Voluntarism]

Can you be more specific?

How can economic deregulation not give more power to capitalists over workers and consumers etc? Yes there are some areas where government regulation props up certain corporations etc. aka "privileges", but many areas where regulation protects consumers and workers.

A removal of privileges allows you more control over your life, liberty and property. It doesn't move control to someone else. Obtaining these freedoms goes beyond economic deregulation. The abuse and mis-use of privileges attack more of our civil liberties than just those parts whose purported motive is to "protect consumers and workers" (although this is a common justification). As Eran has been discussing at length in the UN thread, regulation specifically for the purposes of protecting consumers and workers already is and can be done by private sector equivalents to any government controlled entity. Where there is a desire that you cannot meet yourself there can be a market. The important distinction is that the private sector equivalents do not rely on the use (and mis-use) of privileges and power over others.


BTW In terms of the term "sovereign consumer", I took it from L.V. Mises book the Anticapitalistic Mentality:

1. THE SOVEREIGN CONSUMER
The characteristic feature of modern capitalism is mass production of goods destined for consumption by the masses. The result is a tendency towards a continuous improvement in the average standard of living, a progressing enrichment of the many. Capitalism deproletarianizes the "common man" and elevates him to the rank of a "bourgeois."

On the market of a capitalistic society the common man is the sovereign consumer whose buying or abstention from buying ultimately determines what should be produced and in what quantity and quality. Those shops and plants which cater exclusively or predominantly to the wealthier citizens' demand for refined luxuries play merely a subordinate role in the economic setting of the market economy. They never attain the size of big business. Big business always serves—directly or indirectly—the masses.

It is this ascension of the multitude in which the radical social change brought about by the Industrial Revolution consists. Those underlings who in all the preceding ages of history had formed the herds of slaves and serfs, of paupers and beggars, became the buying public, for whose favor the businessmen canvass. They are the customers who are "always right," the patrons who have the power to make poor suppliers rich and rich suppliers poor.

There are in the fabric of a market economy not sabotaged by the nostrums of governments and politicians no grandees and squires keeping the populace in submission, collecting tributes and imposts, and gaudily feasting while the villeins must put up with the crumbs. The profit system makes those men prosper who have succeeded in filling the wants of the people in the best possible and cheapest way. Wealth can be acquired only by serving the consumers. The capitalists lose their funds as soon as they fail to invest them in those lines in which they satisfy best the demands of the public. In a daily repeated plebiscite in which every penny gives a right to vote the consumers determine who should own and run the plants, shops and farms. The control of the material means of production is a social function, subject to the confirmation or revocation by the sovereign consumers.

This is what the modern concept of freedom means. Every adult is free to fashion his life according to his own plans. He is not forced to live according to the plan of a planning authority enforcing its unique plan by the police, i.e., the social apparatus of compulsion and coercion. What restricts the individual's freedom is not other people's violence or threat of violence, but the physiological structure of his body and the inescapable nature-given scarcity of the factors of production. It is obvious that man's discretion to shape his fate can never trespass the limits drawn by what are called the laws of nature.

[Pants-of-dog]

As Eran has been discussing at length in the UN thread, regulation specifically for the purposes of protecting consumers and workers already is and can be done by private sector equivalents to any government controlled entity.

No. Eran has put forth the hypothesis that regulation specifically for the purposes of protecting consumers and workers can be done by private sector equivalents, but Eran has not shown that such regulation already is being done by private sector equivalents.

The closest you can get to that, as far as I can tell, are insurance policy requirements like Factory Mutual's. If you want FM to insure your building, you have to meet a certain set of guidelines. Please note that FM does not make any money offsetting these regulations. They do it by selling insurance policies. Moreover, these are not safety regulations.

Underwriter's Laboratory is involved in safety regulations, but they are non-profit, and they don't actually set regulations by themselves. They are often invited to help form regulations by different regulatory bodies due to their long experience testing products for safety. That is what they mostly do: test products to see if they meet the regulations.

Where there is a desire that you cannot meet yourself there can be a market.

No. That is only one of the things you need to have a market. You also need customers who can pay, and you need a gov't stable enough to enforce property law. Starving people in developing nations have a desire they cannot meet themselves: food. However, because they are too poor and there is a civil war going on, the other two conditions are not met.