Rightists, Property Rights, and Guaranteeing Bank Deposits..

A few quick thoughts!

Rightists despise government intervention to save investors etc

Rightists demand that governments protect their "property rights"

Surely investments are property?

While a rightist might make a case that the profits of an investment need not be guaranteed, the principal should be...

A rightist might say that by investing, one accepts a degree of risk; surely that is the same with ANY purchase of property? One buys a cellphone; one risks that being stolen. A rightist would demand government intervention in the form of a police action to guarantee those rights. And surely ANY act of purchase is an implicit acceptance of risk (be it crime, weather, accident...)

Why is it any different?

While my thoughts are as yet only partly formed... I think I've hit upon an inherent contradiction in rightist thinking :>

government intervention imposes control and regulation which in turn warps the free market which is what they despise

their private property is thus subject to outside decision making which negates their power

the right to fail is inherent in the right to pursue success

Surely government intervention in the form of police warps the free market of forceful repossession of goods and services?

explain more

The way I see it is that risk must be rewarded otherwise no one will take any.
So if there is no risk involved in the use of your capital then there will be no return (above the benchmark rate). We dont need deposit insurance because if you want no risk you put it in a govt bond or note. Govt bonds are always considered the benchmark for no risk (even tho technically a govt can a/ fail eg anarchy or revolution or b/ inflate (print money) in both cases your investment with them is reduced to either a/ nothing or b/ less than you expected to get back (in terms of purchasing power)

So I would expect to get a higher return in a trading bank as I am taking some (albeit small) risk giving it to them instead of the govt.

It just doesnt add up to have no risk in a capitalist society because there will no incentive for a/ me to choose a bank carefully, or b/ for it to behave prudently.

I strongly believe guaranteeing deposits creates a form of moral hazard in that a bank has no incentive to behave prudently and then sell itself on that basis and attract more depositors because of it.
That said right now I dont think desposit insurance is a bad thing as anything bolstering confidence is very useful in this climate. But later when things recover it will disincentivise prudency amongst bankers just like it has in America and England

Its nationalising the retail banking industry to some extent. Maybe thats not a bad thing but lets be clear about where we are heading on this path.

Risk?

So, should the police guarantee my property rights if I buy some brand new Nikes and walk around Otara as much as if I buy some solid No 1 Shoe Warehouse black leather laceups and keep them at home?

as usual your point is obscure vadz


Risk??



while I dont there think there is very much risk - lets be clear again, there is some. Effectively our govt just added 150bn to the money supply sure its not M3 yet but its there somewhere in the financial books.

Deflation or inflation - the jury is STILL out. Tho it certainly looks like deflation with all the falling asset prices if we do recover with all these bailouts and guarantees then there is the risk of all those fiat currencies being quite worthless.

he's trying to lead the witness

Erm isn't it more about making sure there isn't a run on the banks rather than protecting individuals wealth?

Things have changed, we no longer get paid cash and 'save' in the bank; we use banks as a wallet. Having peoples money in the bank is a benefit to the govt, not to mention it is the govts job to provide some sense of confidence in the financial system.

I have no particular problem with this overall as long as the requirements for banks to maintain high safety margins are kept.

I dont think anyone here supports pure capitalism and i dont particularly enjoy all or nothing type arguments.

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10537163

Actually i dont necessarily agree with it for deposits in finance companies except as a short term measure.

I don't get the point here

everyone, including "rightists" accept that wherever there is property of any kind, there is also risk

insurance is used to minimise risk - this is simply a form of insurance

for the govt or depositors?

Why should the government intervene to prevent one sort of risk-loss (theft), but not another sort (investment failure)?

And don't say "because one is illegal" as that's tautologous.

Not obscure at all.

Rightists believe in property rights.
Rightists, however, believe that risky investments should not be bailed out.

Now, it seems to me that ANY purchase of property involves an element of risk. Rightists somehow define "theft" as a type of risk that should be protected against, but investment failure shouldn't be.

By your logic/train of thought 'rightists' shouldnt believe in police, judiciary (and perhaps laws?). Which is of course taking it too far.

Again this is a benefit to society as a whole, the govt (doing its job to provide stability), the corporations and the individuals who have wealth stored in banks.

Then why not all of the retired people who invested their money into (was were touted as) low risk investment portfolios?

R

There's a possible answer: consent - we consent to giving our money to an investor, cognisant of the fact we might lose it.

HOWEVER - we also consent to buying goods cognisant of the fact we might lose them.

In neither the investment nor the theft case do we consent to the actual ACT OF LOSS (the failure of the bank, the physical theft) - we only consent to the owning of the property.

It's a tough issue... it seems counter-intuitive to me but I can't beat my own logic.

Not necessarily - but are property rights absolute or not?

really it's a question of state intervention

perhaps by rightists vads means libertarian extremists??

most rightists believe in the necessity of the state, and in times of crises and emergencies, the need for state intervention

there may be a degree of hypocrisy there, depending how you argue it

Libertarians are the firmest believers in property rights and police stopping theft though!!

the Republicans did try to reject the bailout plan but I assume caved in through both pragmatism and of course self-interest.

Of course property involves risk , "if you aint got nuthin, you aint got nuthin to lose".

Theft of outrightly owned property is not comparable to investment failure unless there is fraud involved.

http://www.businessday.co.nz/industries/finance_banking/4725718

it would seem that Hanover (but not Bridgecorp) will be eligible for this guarantee. Inequity right there... but not only that, what about the inequity for all the people who accepted a lower return for the sake of security. They may as well have gone for broke with any of these failed companies St Lawrence, Strategic, United, North South and Dorchester.

so of the 150 bn on guarantee that we were told wouldnt be needed suddenly a couple has been touched.

As we've seen before the problem with state meddling is that things get complex and its not easy to iron out the detail.

Why not though?

What is the principle?

I WANT to be proven wrong, damnit

one is a tangible asset and one is not for starters

Money isn't a tangible asset?

no

simply because one operates within the law and the other doesnt.

unless that investment failure is fraudulently obtained

I think its already been answered above for you by the others but you did request an answer from me that did not involve consent so this is my position on it.



Yes, as in the right for individuals to own the deeds to private property and inherit implicit control of and responsibility for (within reason) how it is to be utilized. Whether that be strictly for ones own self enjoyment or employment towards producing or offering any potential goods or services to the public, which can be derived from its use.



This is where your argument becomes problematic, for two different reasons: 1. this is an area where people on the right can differ in opinion (usually this depends on the circumstances surrounding why the investment has diminished in value or failed to meet its expectations), meaning you can’t classify all ‘rightists’ as the being the same in regards to this. Also: 2. please realize that the right to own the property (in this case the risky investment) is still being supported and upheld regardless of its loss in value.

So there is some confusion here, because the right to private property and the right to compensate the property due to it loosing its value are two very different things. Not to mention if risky investments are bailed out due to loss of value, there are obvious implications surrounding that which interferes with capitalism. 1. It creates market distortions. 2. It can promote moral hazard, and 3. Reward ‘malinvestment’, which is the misallocation and inefficient use of resource.

That's tautologous. I was asking WHY one is regarded as moral and the other isn't; in other words, why is one legal and one illegal?

Don't get me wrong, I don't agree with what I'm saying, but it appears logically strong.

I think this is actually the answer; the property is the investment itself, the value of which is fluid... so, in this case the property is still held by the "owner", but the value of said property has reduced (one might equate it with depreciation).

Cheers dude. Good answer.

Anybody else got an opinion? It's not a 100% answer but nothing ever is, and it's set my mind at rest.

ongoing credit supply (which is the life blood of the economy) is the main motivator for this bailout/ deposit insurance but it is still less than certain that this is the remedy

I have to admit Vads, your tests are always interesting.

They're not tests

Any dang fool can burn down a barn - destroy someone else's theories/constructions - I like to construct theories for or against X or Y and then see how well made they are.

yes Rivals answer is good but it doesnt add any understanding to this situation for me anyway. Its just stating the obvious really.
This thread is a bit confused because its talking about bailouts and deposit insurance , tho they may be working towards the same thing - confidence - they're not the same thing. One is charity for the rich, the other is reassurance for savers.

Anecdotally what I find hilarious about this deposit insurance is that none of my friends/colleagues care about it much because they are all debtors with no cash to speak of. There must be some savers out there I suppose and now when there cash becomes more valuable than ever the govts start printing it on a massive scale...

their cash

the deposit insurance must surely be to stop a run on the banks is it not?

as to printing more money this must surely be where the trillions are to come from so yeah the value of the currency must take a hit as a consequence - if it gets too bad vadinho will find just how liquid cash is; he might as well be holding water in his hands

the ewer is crack'd

yes its to stop a bank run like Northern Rock in the UK... tho there are other means to do that... I remember a run on a bank here in NZ and the way they stopped it was to give everybody their money...

See this morning in the Herald Bollard is confessing about the risks and the uncertainties about detail and the Aussie banks are complaining that this is a tax to shore up dodgey finance companies. They're right. But its also a tax on ordinary people too - ordinary people who didnt make risky investments.

I am happy to see it has a limited time frame tho - the guarantee only extends to 2010.

hence the republican retards venting their spleen on the people who would not otherwise have qualified for housing loans, misdirected as it was of course

as to the socialisation/nationalisation of the banking sector it is the final irony that a rightist government should be the one to achieve this acting under duress of its own making largely

the other irony is that this banking crisis is entirely first world sourced and funded unlike the previous one that arose from the level of third world debt to first world banks

we owe it to ourselves

This is what the deposit insurance is all about, its to stop everyone panicking and performing banking runs.

It should be a short term measure only until the world is out of the crisis.

thank you. good spelling is essential, even in a recession

But it has existed for yonks in the US and UK (at least)
gee surprise surprise it made people lazy and complacent, and others reckless.

^^I didn't know this and I suppose thats what it will do for us, if we end up keeping it too.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10537565

bankers saying money will fly from quality to riskless rubbish. it would after all be the rational action.

quite

a pity we have an election looming

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10538181