Bad Apple Economics

re: Bad Apple Economics

Alby — Tue, 11 Nov 2008 14:36:55 GMT

Thanks for the comments.

I believe that the government is certainly part of the mess. Overall, excessive regulation ends up breeding more creative seekers of excess. It does become a matter of "do what we can while we can" mentality.

re: Bad Apple Economics

MrMacboo — Mon, 10 Nov 2008 20:22:02 GMT

I must think to myself. Could it be regulation that spoils the apples in the first place? Could there be something in our legal system that encourages short-term minded administration of business? Something that says, get as big as you can as quick as you can? Following the freemarket; it only works on level ground. The orchard with hill and a ditch floods and shades half the orchard.

This bailout only favors the favored. That is the true moral hazard.

re: Bad Apple Economics

PeterWellington — Thu, 06 Nov 2008 22:34:06 GMT

I hate to be the bearer of bad news, but one bad apple can actually spoil the bunch (scientifically speaking). The bad apple releases a gas that accelerates the rotting of the other apples. And I think a few bad apples did spoil the bunch in this case, but I'm talking about the apples of the government.

The stock market is made up of corporations. The corporation is an entity created by the government, one we might not see in a free market, as it essentially forces people to treat a company as a person and removes a degree of personal liability. This is a moral hazard.

We also have artificial over-investment in the stock market, in large part due to the preferential tax treatment the government gives to retirement accounts.

I won't even get into the way various regulations and campaign contributions distort the market.

That's not to say that there aren't bad apples on Wall Street as well; and a lot of people made bad decisions for sure. But don't let government off the hook, they're right in the middle of the whole mess.

re: Bad Apple Economics

Alby — Thu, 06 Nov 2008 21:34:52 GMT

It's hard because companies can't get debt or equity financing right now. Booth the banks and investors are pulling back. I think we'll see more private equity and they will be looking for larger percentages of ownership than usual. The thing is so much money is parked on Wall Street the pension funds of those that think they have no concerns with the market.

re: Bad Apple Economics

seanirvana — Thu, 06 Nov 2008 21:23:29 GMT

What if we ditched Wall Street investing altogether? If IPOs are practically non-existant and many larger companies buying back their own shares?

What would that do to US economics?