Papa John's and Obamacare

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I have absolutely no sympathy for the banks. They are responsible for denying loans to those who are unlikely to repay the loans. It is their money at stake -- if they want to throw it away, they should expect to lose it and not to be compensated for it from everyone else.



No.

The government created the bubble, not the banks. They created enormous amounts of money and handed it out to the big banks in great quantities. The big banks naturally looked around for where they could put it to draw high returns and the vast majority of it ended up chasing mortgages.

The big Wall Street banks are a very homogenous group. Each bank is likely to see things pretty much like any other bank. So whatever promises a good return is going to look good to all of them and their prices are going to rise as a result. It's simple economics. The more money you shove at an investment, the more costly that investment is going to become.



Nope. It was simple economics.

If all that money had been directed to a very wide, non-homogenous group, for example if it had been given out in the same total quantities to the citizens of the country as a whole, we would have seen a general inflation because different people would have used the money differently. Some would have bought houses. Some would have bought cars. Some would have paid for their educations. Some would have bought race horses. Some would have bought ranches. Some would have bought drugs. Some would have bought hookers. The available money would have driven up the prices of everyone by roughly he same amounts.

But the money went to one homogenous group. They started to put it into an investment that looked good. And that pushed the price of the investment up. So that drew more investment which pushed it up higher. Instead of general inflation, we saw a bubble in the investment that they were pushing higher and higher with the money being given to them by the Federal Reserve.

If you want to read an excellent explanation of this, check out http://mises.org/journals/scholar/Thornton13.pdf, The Economics of Housing Bubbles.



Quite the contrary. A Free Market would create competition and push the prices down.

For example, suppose you have a simple cold. Do you really need a doctor to tell you what medicine to take? Right now, you do -- not for the doctor's expertise, but because the doctor has a monopoly and you are not permitted to go to someone else for medical treatment.

What does economics tell you happens when a product is scarce? The product becomes much more expensive. Do you think that gold is expensive because it is such a pretty yellow color? Of course not -- gold is expensive because it is relatively scarce. It is hard to find. If gold was as common as aluminum, it would have prices similar to aluminum. If there were millions of paintings by Vincent van Gogh, you could probably buy one for a few dollars, but since there are such limited numbers of paintings by Vincent van Gogh and because they are in such high demand, the prices are sky high.

The same goes for medical care. There aren't that many doctors and so their prices go up. The medicines are in limited supply and so their prices go up. Prescription medicines are higher still because of their limited availability.

Take away that monopoly and prices would go down.



Making it deductible for everyone who buys their own would not reduce the incentive one little bit.



We need a Free Market in health care to bring prices down.

Wow, I'm done taking you seriously. The banks are not responsible because the fed gave them money so they are justified in being reckless and stupid? Really? What happened to rational self interest?

Can you spell moral hazard? Sure you can.

Lead us not into temptation.

ruveyn

All I see here is a bunch of people that blindly believe that businessmen are evil, and really don't care if there evidence to the contrary.


Fact of the matter is if you look at the case that the Papa John's ceo and others are making, they are right, and you guys are supporting a man whose policies are killing jobs left and right.

They don't take in enough money to afford the cost of Obamacare, it's basic math. This is what you get when you have government taking over healthcare and they pass something without bothering to read it.

For what it's worth, the Housing Bubble was not a failure of Capitalism. Like the Dot Com Bubble, it was a creation by the government, specifically by the Federal Reserve as they manipulated the economy for the benefit of their wealthy and influential friends on Wall Street.

When you create massive amounts of money out of thin air, one of two things are going to happen -- you are going to see a generalized inflation if the money is spread around widely or you are going to see the creation of a bubble if the money is shoveled into the pockets of a homogenous group. Activities like that have nothing to do with Capitalism even if many people are under the great misunderstanding that anything involving money is, by definition, Capitalism.

Can you spell too big to fail?

A little thoughtful government intervention could help reintroduce moral hazard which would help reintroduce a bit of moral restraint.

Wow, I'm done taking you seriously. The banks are not responsible because the fed gave them money so they are justified in being reckless and stupid? Really? What happened to rational self interest?

If the government makes heroin legal and gives it to people is the government responsible for all the overdosing junkies?

We do not even live on the same planet.

PS

Regarding free market and medical care...

There is a low point at which no provider is willing to render care. When that low point is still too high for many to pay, we have a problem.

Even in a free market prices are apt to be too high for many people to pay. This brings us back to the old problem of letting poor people die or not. If we do not let them die, someone has to pay for their care. This drives prices up and.... you see where this is going.

There will always be people who cannot pay. The only free market solution is to let them die.

The real problem is this country has been consuming more than it produces, and this is not by choice. Outsourcing allowed American based multinationals to keep their profit margins at the expense of production on the home front. Global Capitalism is not efficient because we have these things called sovereign nation states. In a truly optimal global market, workers would have the complete freedom to move about and sell their labor anywhere in the world. Then we would have true competition. We don't because we have given multinationals the freedom to set up production and sell goods anywhere in the world, while nations do not afford workers the same privilege. The fact that workers are trapped within national borders and can't move freely to seek the highest wages creates an imbalance. Some would call this exploitation, but whatever you call it it isn't sustainable practice in the long run.

I can spell moral hazard. The problem comes from all the innocent/collateral damage that goes along with moral hazard sometimes.

Can you spell too big to fail?

A little thoughtful government intervention could help reintroduce moral hazard which would help reintroduce a bit of moral restraint.

Wow, I'm done taking you seriously. The banks are not responsible because the fed gave them money so they are justified in being reckless and stupid? Really? What happened to rational self interest?

The moral hazard argument is stupid when CEOs and managers who drive a bank into the ground always squirrel away enough to award themselves a golden parachute on the way out should their company collapse. Meanwhile employers and entrepreneurs who need loans to get their businesses off the ground and create jobs are sh** out of luck when the credit market collapses. Also, due to normal ebbs and flows of business, businesses are occasionally low on cash and need temporary loans to keep their workers employed. Without credit what you get is mass firings. The economy can go to sh** but the CEO's and managers who controlled the "too big to fail" banks can just take their bonuses and retire to their 20 million dollar town houses.

Without the creation of so much money, there would have been no Housing Bubble. By creating that money, there had to be a bubble and it just happened to be a Housing Bubble. Under different market conditions, it might have been some other kind of bubble, but still a bubble. It might have been another stock bubble (as in the Dot Com Bubble).

If the Federal Reserve were to give me a few trillion dollars, there would likely be a bubble of some kind since I would be very likely to invest most of it in certain types of investments. If were to invest it in the stock market, investing that much money in the stock market would certain cause it to rise above what it should be. If I were to spend it on land, the price of land would certainly rise. You would definitely see a bubble.

Who's fault would the bubble be? The Federal Reserve for giving me trillions of dollars that I did not earn? Or mine for investing that trillions of dollars given to me that I did not earn?

The Fed doesn't just "give out free money" to banks. The money is loaned out. They are still expected to pay it back. Plus, even without the Fed, banks can expand credit entirely on their own through the multiplier effect. They only loan from the Fed after the fact when they need reserves.

There is no justification for making 125% loans to people with credit scores of 450 on homes that have appreciated 75% in a year.... none.

That is straight up malfeasance or abject stupidity. The fed did not make these poor bankers corrupt or dumb.

I tend to gloss over the fact that it is a loan because it just doesn't matter.

The loans were extremely low interest and the banks needed to invest the money somewhere that paid higher interest. They naturally wanted to find investments so that they could maximize the interest earn.

If the government were to give you hundreds of billions of dollars at very low interest, wouldn't you try to invest it somewhere safe that will pay more than the interest you have to pay?

But they did not do that, now did they?