The 99 percent

Glass-Steagall meant that investment banks had to entice investors to put their money into the system. The repeal allowed investment banks to raid and leverage depositors accounts. This introduces systemic risk because depositors unlike investors view their savings as a demand account and receive little interest because of that. Their money is basically cheap for the banks to get and the depositors always expect that money to be there. Investors expect a return that justifies the risk that they are entering into together with the investment bank/brokerage. Their money is relatively expensive to banks to get because the investor knows that money could disappear. Once banks could treat all those deposits as levergable funds for risky investments they didn't have to entice the expensive investment money or use caution in their investments (FDIC will pick up the losses). So with the repeal of G-S, brokerages suddenly had access to huge piles of FDIC insured money and all that money needed some place to go... and we've coincidentally had 2 major bubbles since. First the dotcoms, then mbs's and other related cdo's and now Treasuries. Break up the banks, make the investment houses have to make sensible bets (not 50:1 levers) that return better returns for investors and force banks to make terribly boring investments to return terribly boring rates to depositors and we have the beginnings of the return of sanity in banking. Without that, we will continue to inflate bubbles, pay bonuses and then bailout losses after the unavoidable asset deflation.

Here is another, more informed than me, argument for reinstatement http://moneywatch.bnet.com/economic-news/blog/maximum-utilit... "However, whether the elimination of the Glass-Steagall act caused the present crisis is the wrong question to ask. To determine the value of reinstating a similar rule, the question is whether the elimination of the Glass-Steagall act made the system more vulnerable to crashes. When the question is phrased in this way, it’s clear that it has made the system more vulnerable for the reasons outlined above.

Hyperbole? Maybe a little, but too many people sleepwalk into agreeing with this type of idea without thinking through the full consequences.

Sure, they wouldn't start out that way, they never do. But as businesses fail, they need support or nationalisation. Which brings in more planning. National Socialism took over 10 years to get to it's full zenith, this doesn't happen overnight, but there is no reason to even begin down the path that leads to that. You can dance around it all you like, but the only way to make this sort of rubbish work is by overarching state power over the individual. You can't try and whitewash the misery of millions caused by planned economies just because it is a cliche to do so.

It saddens me that people still think this way after a century of misery from trying to command and plan economies. And on HN of all places, which is supposed to be about startups and technology. You mightn't like my way of putting things, well, that's the way I talk and write.

Re savings rate : we are in agreement. People are using disposable income to pay down debt, which means it goes into neither consumption or new investment. Which causes the slump. This has to be worked through before things will improve.

As I said - what are you going to do, lock them up if they work 40 hours?

How about we just leave things alone with regard to minimum wages and let people work as much as they want?

Yes, there are already minimum wages, and we know that this already causes unemployment. If you increase the minimum wage by 20%, there will be a resulting hike in prices of things by some value. Now you've just made everything more expensive, and you've increased unemployment.

Yes, it's probably a strong reaction, but I just hate the thought of any of this type of 'solution' ever getting traction. It just seems so naive after these ideas have been tried and failed time and time again.

Anyone who is here and is interested in startups needs to understand how jobs are created. Jobs are created by the process of value being created, whereby the work of a person adds more value than it costs, and other people are willing to exchange something of value for it.

If I were president, I could dictate 100% employment tomorrow by enlisting everyone as air raid wardens or terrorist spotters and paying them a salary. But would we be better off? No. It doesn't work at any level. Sure, you can borrow a billion dollars and employ people to dig holes in the ground and fill them back in again, but then you've just made society a billion dollars poorer, and all that potential labor to do something with has been wasted.

Bottom line : people should stop trying to impose price controls on things, including labor. It has never worked, will never work and it frustrates me to see it being discussed.

Either way, there is no justification for a tax on buying and selling things like houses and cars. Why you would want to disincentivise transactions between people I will never know.

Everytime someones says there's "only one way", that person turned out to be:

* Dogmatic

and

* Wrong

There's certainly not a single reason behind the current situation, and certainly not one single answer to it.