The Soul of Davos: Oxymoron?

It would have been far better had Davos held meetings on what's wrong with mainstream economics. There is no evidence whatsoever that the world financial crises resulted from a failure of morality. Mainstream economic theory teaches that crises are random events, in other words, they have no definitive cause.

However, there is a minority school of economics with a theory of crises that goes back centuries called the monetary theory of business cycles. The theory's best known proponent was the Nobelist F.A. Hayek. Most financial pros hold to this theory as well. The gist of the theory is that central banks pump vast amounts of new credit into the economy in order to recover from a depression or to simply make the economy grow faster. But credit expansion on that scale causes an unsustainable boom that always busts and results in depressions and sometimes financial crises, the greater the credit expansion, the worst the bust. High levels of debt and speculation are possible only with vast credit expansion by the central bank.

There is immorality involved in the monetary theory: central bank manipulation of money and credit is immoral. As the Church has always taught, just prices are found only in free markets. Central bank control of credit is not a free market, but a state-controlled market that dishonestly and unfairly manipulates coerces the credit markets for the benefit of large investment banks. The result is crises similar to what we have been through.

Where to buy the discount True Religion Jeans and Seven Jeans with free&Fast shipping and cheap price.Huge selection for the desiner jeans here.Buy Seven for mankind jeans with unbelievable price.

First I said that the CDS and derivatives market were the unregulated market. This is a fact.... Phil Gramm help make the CDS market the largest unregulated market in history of man (68 trillion at its peak).
and this is the market responsible for 90% of the loses. (ask yourself why AIG was one of the first big players damaged, even though they did not buy or sell mortgages)

And you are right it did surprise Alan Greenspan when the predictable crash happened, he was stunned. Quote:

Referring to his free-market ideology, Mr. Greenspan added: "I have found a flaw. I don't know how significant or permanent it is. But I have been very distressed by that fact."

Mr. Waxman pressed the former Fed chair to clarify his words. "In other words, you found that your view of the world, your ideology, was not right, it was not working," Mr. Waxman said.

"Absolutely, precisely," Mr. Greenspan replied. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well."

When this history of the economic period is written, many students will ask why, after the Great Depression, did the US again allow banks to wildly speculate. The only answer will be the sin of Greed.

"So we have to ask why housing prices collapsed in order to know what caused the crisis. They collapsed because they had reached unsustainable heights as a result of credit expansion by the central bank."

Or a better question, why have past housing bubble bursts like the S and L loans in early 90s never did nearly a tenth of damage of this one (the only other exception is the real estate bubble of late '20s). What is the difference between the different real estate bubbles? Oh, yes in the case of the Great Depression and the Great Recession ('29 and '08 respectably) Banks were allowed to speculate wildly. Lesson to learn, keep banks boring and not allow them to speculate wildly.

Finally, "Just curious, but how do you have the confidence to proclaim an economy theory wrong without even learning a thing about it first?"

Simply, Both the Chicago and Austrian schools have had free reign in the last 20-30 years and I am familiar with both. I think both fail in the assumption about humans be rational first and foremost. The behaviorists have that on them. So do Christians in understand humans as sinners needing redemption.

So, is the love of money the root of all evil? Is it easier for a camel to go through the eye of a needle than for a rich man to enter heaven? Please, none of the creative exegesis from you capitalist fundamentalists that that you condemn when it comes from liberals.

It would have been far better had Davos held meetings on what's wrong with mainstream economics. There is no evidence whatsoever that the world financial crises resulted from a failure of morality. Mainstream economic theory teaches that crises are random events, in other words, they have no definitive cause.

However, there is a minority school of economics with a theory of crises that goes back centuries called the monetary theory of business cycles. The theory's best known proponent was the Nobelist F.A. Hayek. Most financial pros hold to this theory as well. The gist of the theory is that central banks pump vast amounts of new credit into the economy in order to recover from a depression or to simply make the economy grow faster. But credit expansion on that scale causes an unsustainable boom that always busts and results in depressions and sometimes financial crises, the greater the credit expansion, the worst the bust. High levels of debt and speculation are possible only with vast credit expansion by the central bank.

There is immorality involved in the monetary theory: central bank manipulation of money and credit is immoral. As the Church has always taught, just prices are found only in free markets. Central bank control of credit is not a free market, but a state-controlled market that dishonestly and unfairly manipulates coerces the credit markets for the benefit of large investment banks. The result is crises similar to what we have been through.

PS, you might wonder why President Carter started deregulating industries if it has turned out to be such a bad idea. Some have called Carter a libertarian because he started the deregulation movement and deregulated more industries than any other president. Why? Because the massive regulations from the FDR era has caused the economy to ground to a halt. We had high unemployment and high inflation at the same time, which Keynesian economists thought impossible. Carter's deregulations caused renewed investment and economic growth, though Reagan gets the credit.

"Theses markets are the LARGEST UNREGULATED MARKETS MAN HAS EVER BUILT."

That's simply not true. Investment banking is not as regulated as commercial banking, but it is still highly regulated, mainly by the SEC.

"They transformed investments into gambling."

That would surprise Alan Greenspan, most mainstream economists, the IMF, and many other institutions. All proclaimed the mortgage backed securities as instruments that would reduce risk for banks and investors. As for issuing one instrument and then "betting" against it, the accurate way to describe those transactions is prudent risk management. It's taught in all business classes as proper risk reduction.

Remember that mortgage backed securities and credit default swaps went bad only after the collapse in the price of the underlying asset--house prices. Had housing prices not collapsed, the world would still proclaim the MBSs and CDSs to be brilliant innovations.

So we have to ask why housing prices collapsed in order to know what caused the crisis. They collapsed because they had reached unsustainable heights as a result of credit expansion by the central bank.

Just curious, but how do you have the confidence to proclaim an economy theory wrong without even learning a thing about it first?

First I said that the CDS and derivatives market were the unregulated market. This is a fact.... Phil Gramm help make the CDS market the largest unregulated market in history of man (68 trillion at its peak).
and this is the market responsible for 90% of the loses. (ask yourself why AIG was one of the first big players damaged, even though they did not buy or sell mortgages)

And you are right it did surprise Alan Greenspan when the predictable crash happened, he was stunned. Quote:

Referring to his free-market ideology, Mr. Greenspan added: "I have found a flaw. I don't know how significant or permanent it is. But I have been very distressed by that fact."

Mr. Waxman pressed the former Fed chair to clarify his words. "In other words, you found that your view of the world, your ideology, was not right, it was not working," Mr. Waxman said.

"Absolutely, precisely," Mr. Greenspan replied. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well."

When this history of the economic period is written, many students will ask why, after the Great Depression, did the US again allow banks to wildly speculate. The only answer will be the sin of Greed.

"So we have to ask why housing prices collapsed in order to know what caused the crisis. They collapsed because they had reached unsustainable heights as a result of credit expansion by the central bank."

Or a better question, why have past housing bubble bursts like the S and L loans in early 90s never did nearly a tenth of damage of this one (the only other exception is the real estate bubble of late '20s). What is the difference between the different real estate bubbles? Oh, yes in the case of the Great Depression and the Great Recession ('29 and '08 respectably) Banks were allowed to speculate wildly. Lesson to learn, keep banks boring and not allow them to speculate wildly.

Finally, "Just curious, but how do you have the confidence to proclaim an economy theory wrong without even learning a thing about it first?"

Simply, Both the Chicago and Austrian schools have had free reign in the last 20-30 years and I am familiar with both. I think both fail in the assumption about humans be rational first and foremost. The behaviorists have that on them. So do Christians in understand humans as sinners needing redemption.

"First I said that the CDS and derivatives market were the unregulated market."

They were created by investment banks, not spontaneous generation. And they are highly, highly regulated by the SEC.

"