Half Sigma’s post has face validity, but I am aware of my lack of knowledge of how the financial system works. Â So instead of agreeing with it, I will ask for comments so I can learn more.
Government run industries tend not to be very innovative, but the only useful innovation to come out of the banking industry in the last century is the ATM machine. Otherwise, when banks innovate, thatâ€™s when itâ€™s time to hold on tight to your wallet. Bank innovation tends to fall into two categories: (1) sneakier ways to trick people into getting into more credit card debt and pay more outrageous credit card fees; and (2) complicated financial products like mortgaged backed securities and derivatives which have led to the recent financial collapse which not only ruined that banking industry but took down the whole economy with it.
via Half Sigma: What’s wrong with nationalized banks?.
Courtesy of Economist’s View, this Tom Tomorrow piece on what happens when you let exotic new instruments grow rapidly: unexpected consequences.
While Tom Tomorrow is a Leftist, here he is making a conservative case: what happens when we create a new institution and rapidly expand it? What are the social consequences.
Of course, we “do not know” until a disaster occurs. Then we know to well.
There was a conservative case to be made against the rapid expansion of mortage-backed securities. Likewise, there is a conservative case to be made against things such as homosexual marriage laws. These are new things we do not know the consequences of.
On one side are libertarians, who say, “You can only stop these contracts through violence, and the first rule of civilized society is never to initiate violence.”
On the other side are conservatives, who say, “The state exists to protect against against the chaos of nature. We are at war with uncertainty, becauese bad choices can lead lost lives of innocent people who were caught up in your innovations.”