One problem with fiat banks. You have...
- Privatization of huge Profits.
- Socialization of huge Losses.
Billionaires Go Missing After Losing Everything
- Thread starter The_Krakenite
- Start date
I don't think that's correct. Fiat banks, like othe major corporations with significant influence over sectors of the economy, receive government protection in times of economic disasters (too big to fail) because otherwise their sectoral collapse would accentuate further collapse that could jeopardize the stability of the nation.
In most European nations, the biggest national corporations are either under total or partial government controls. While that's not a guarantee, it minimizes the risk of profit driven financial shenanigans commonly found in the US. And because they are under government oversight, their collapse become government (taxpayer) responsibility. The election process then determines the consequence of poor government management of these corporations.
In the so called free market US economy it would seem inappropriate for government to bail anyone out. But I hope we all know there is no such thing as free market economy, to the dismay of libertarians.
What are you talking about? The US government does not buy mortgage loans.
Most mortgage loans are packaged and sold on the secondary market to another lender or investor--not to the US government or any government agency.
Yes, the government insures some loans against default through the VA, FHA, and USDA programs. But they are not on the hook for the entire amount of the loan, and those loans go through fairly strict underwriting guidelines.
Yes, mortgage loans get packaged into securities like GNMA bonds. But that's not the same as the government buying the loans directly.
Well, at least we can agree on that. The problem in free-markets, is there will always be Monopolies & Oligopolies that will form to manipulate the free-market, so you need to have a government step in to regulate the FREE market, ironically. Even Adam Smith was well aware of this.
Note! I am not mirroring a similar stupid sounding libertarian idea such as 'Censoring free speech (oops, hate speech) in order to maintain free speech. That's a flawed thing to begin with, as free-speech doesn't mean you have to AGREE with what someone else says, just that everyone has a right to their speech. The second you sensor other viewpoints there (label it whatever stupid thing you want... 'anti-hate'), you've already lost the argument for everyone's freedoms right there.
In any case, as is the mixed-economy started by Bismarck has been the best of both worlds (or least evil of all worlds) to date, and is why it's been rapidly copied by just about everyone to date. It may not be perfect, but no one's found a way yet to improve on it.
Yes, you're right. But then when the officials say they will go into the market and buy any bonds at any price, then in a way it is the governments.
Its just like the post above, privatize profits, socialize the losses. So the home builders make their profits, the banks make their profits on the mortgages, then make some more profits on creating these "investments", and in case it all goes bust, the FED steps in to buy all the toxic assets.
The market would look much different if the banks had to hold the loans to maturity and feared having to take possession of the home in case the buyer defaults.
If you search public records at any county courthouse in the USA, and look at foreclosure cases, you will find many, many cases in which the party filing the foreclosure case is one of the large banks or mortgage lenders, such as Chase, or Wells Fargo, or HSBC.
Some of the factoids you mention are certainly true, e.g., during the subprime mortgage crisis, the US government did indeed bail out some banks that were holding toxic packages of low quality loans that were in default or very close to default.
The system certainly has some serious weaknesses. But the idea that all, or even most mortgages are somehow transferred or sold, to the government or to "someone else," and that none of the banks ever gets stuck holding a loan that defaults is just not true. Ordinary mortgage lenders have to file foreclosure cases all the time, and when they do that, they do in fact take ownership of the property, and then they have to sell it to recover what they can from the defaulted loan.
BMK
The 2 trillion losses, till today as the numbers can still go up, in crypto's are far bigger than the "socialization of the huge losses".
Who takes the losses in crypto land? The big players or the herd? The herd (is similar to socialization)
Who takes the huge profits? The happy few on top of the scam/ponzi piramide. Looks like privatization.