How to Prevent Future Credit Bubbles?

[Juggernaut Nihilism]

How do you prevent credit bubbles?

You don't. Instead, you learn to absorb and process the pain that comes whenever such things occur, learn and implement the lessons you'll take to make sure it never, ever happens again. Just as critical is to make sure whoever dipped their dirty little mouths blowing the bubble pay, dearly, severely, and bloodily. An ounce of these cures will be worth more than a pound of prevention.

Of course you can't prevent them altogether. But part of making the system more robust and resilient is designing measures to ensure that breakdowns are more frequent, but less severe. I don't anyone signing that legislation any time soon.

[Mr. Perfect]

My pet solution is a progressive transaction tax based on the length of time a security is held.

Example:

Any position held for less than 1 day: 90% tax (eliminates HFT and day trading parasites who add no value... and don't give me any of that debunked lavender about liquidity)
Position held between 1-7 days: 75% tax (with certain exceptions allowed, for example when founders first take a company public, they can unload some stock)
Between 1-4 weeks: 50% tax
1-3 months - 35%
3-12 months - 20%
1-3 years - 10%
>3 years - 0%

(The tax is on capital gains, obviously, and would not affect people who take a loss on a position.)

It would eliminate worthless short-term speculators and wipe out this garbage parlor game where traders don't even know anything about the businesses in which they're "investing", and encourage legitimate investment in viable enterprises. And don't give me any garbage about how the short-term speculators don't need to know the businesses to exploit inefficiencies and that their presence adds information and therefore allows for better price discovery. That is total bullshit and the reason we're even having this conversation: they create inefficiencies and ruin price discovery.

And no, I could give a flying genuflect less if a bunch of useless day traders have to collect unemployment for a time while they get retrained for an actual genuflecting job.

Thanks for the anti-intellectual blather, every time I get a little optimistic about the average intelligence of human beings I can read this and come back down to earth. My guess is you're a big fan of Matt Tabi.

[Juggernaut Nihilism]

My pet solution is a progressive transaction tax based on the length of time a security is held.

Example:

Any position held for less than 1 day: 90% tax (eliminates HFT and day trading parasites who add no value... and don't give me any of that debunked lavender about liquidity)
Position held between 1-7 days: 75% tax (with certain exceptions allowed, for example when founders first take a company public, they can unload some stock)
Between 1-4 weeks: 50% tax
1-3 months - 35%
3-12 months - 20%
1-3 years - 10%
>3 years - 0%

(The tax is on capital gains, obviously, and would not affect people who take a loss on a position.)

It would eliminate worthless short-term speculators and wipe out this garbage parlor game where traders don't even know anything about the businesses in which they're "investing", and encourage legitimate investment in viable enterprises. And don't give me any garbage about how the short-term speculators don't need to know the businesses to exploit inefficiencies and that their presence adds information and therefore allows for better price discovery. That is total bullshit and the reason we're even having this conversation: they create inefficiencies and ruin price discovery.

And no, I could give a flying genuflect less if a bunch of useless day traders have to collect unemployment for a time while they get retrained for an actual genuflecting job.

Thanks for the anti-intellectual blather, every time I get a little optimistic about the average intelligence of human beings I can read this and come back down to earth. My guess is you're a big fan of Matt Tabi.

Yeah, I know you don't like it. I've been open to hearing about why something along these lines is a bad idea for a long time, from you and others, and I've never gotten anything better than "It's not in the party platform!!" I know from your treatment of the war on drugs that you see nothing inherently wrong with threatening with prison people who participate in activities that might be harmful to society, but it has always confused me why Republicans react more violently against using taxation to discourage certain behaviors.

There is a mountain of evidence that the type of speculation I'd like to see curtailed exacerbates problems, and I'm still waiting on the list of boons.

[Mr. Perfect]

Yeah, I know you don't like it. I've been open to hearing about why something along these lines is a bad idea for a long time, from you and others, and I've never gotten anything better than "It's not in the party platform!!"

Well you may not be able to understand any of the answers.

For starters you are putting out a fire that doesn't exist. The Subprime mortgage market collapse had absolutely nothing to with daytrading.

Second from whatever intention this may serve it doesn't even appear to serve that. Say a stock goes from 50 to 100 in 4 days, you are assuming it will stay at 100 for 9 months or whatever, and it of course may go right back down to 50 and if no one cashed in the national balance sheet did not improve.

Trading stocks and cashing in, trading short term is much like Tesla trying to bring down electicity from the ionosphere, it's free wealth, wealth that just flitters around to nothingness if you don't tap it. Successful traders improve the national balance sheet regardless of how long they hold a stock. Don't stop people from improving the national balance sheet.

So you would only severely handicap the ability of our country to form capital, no real downside I guess.

I know from your treatment of the war on drugs that you see nothing inherently wrong with threatening with prison people who participate in activities that might be harmful to society,

No that was never my opinion you bought into the universe of lies. I finally came out, am for all legal drugs in case you missed it. problem being it can no longer be argued from freedom because constitutionally freedom no longer exists so no soup for you.

but it has always confused me why Republicans react more violently against using taxation to discourage certain behaviors.

There is a mountain of evidence that the type of speculation I'd like to see curtailed exacerbates problems,

There isn't a shred of such evidence. Currently it is not possible to have a credit bubble without gov't, gov't creates regulates and insures money and therefore credit, all without consulting a single daytrader. So you cut your legs off at the gate.

and I'm still waiting on the list of boons.

'
Just modernity.

[Typhoon]

[January 2007 through January 2012]

NANEX | The rise of the HFT machines

[Typhoon]

NANEX | The tighter spreads lie

[Ammianus]

http://news.yahoo.com/doj-not-prosecute ... itics.html

Oh what a surprise. Quite shocking indeed.

The Justice Department has decided it will not prosecute Goldman Sachs or its employees for their role in the financial crisis, following an investigation by senators Carl Levin (D-MI) and Tom Coburn (R-OK). The congressional investigation found problems with the credit rating agencies and poor oversight from regulators, and highlighted abuses by Goldman Sachs and other large investment banks. Senator Levin sent a formal referral to the Justice Department for a criminal investigation in April 2011.
The investigative report by the Senate's Permanent Subcommittee on Investigations, chaired by Levin, found that Goldman Sachs "used net short positions to benefit from the downturn in the mortgage market, and designed, marketed, and sold CDOs in ways that created conflicts of interest with the firm's clients and at times led to the bank's profiting from the same products that caused substantial losses for its clients."
A statement from the Justice Department issued late on Thursday evening noted, "Based on the law and evidence as they exist at this time, there is not a viable basis to bring a criminal prosecution with respect to Goldman Sachs or its employees in regard to the allegations set forth in the report."
"The department and its investigative partners conducted an exhaustive review of the report and its exhibits, independently gathered and scrutinized a large volume of other documents, and tenaciously pursued potential evidentiary leads, including conducting numerous witness interviews," the Justice Department's statement continued. "While the department and investigative agencies ultimately concluded that the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time, we commend the hard work of those involved in preparing the report and thank the Senate's Permanent Subcommittee on Investigations for its cooperation in regard to the criminal investigation."
"We are pleased that this matter is behind us," Goldman Sachs spokesman David Wells said when contacted by ABC News.
The Justice Department statement noted that if additional information emerges, the cases could be prosecuted in the future.
This most recent decision follows other high-profile investigations that Justice decided not to prosecute: There was the collapse of AIG and the role of the top executive at AIG Financial Products division, Joseph Cassano, and former Countrywide CEO Anthony Mozillo, who was fined by the SEC in an insider trading case. Citibank and JP Morgan both had multi-million-dollar settlements with the SEC over collateralized debt obligations, or CDOs, tied to the U.S. housing market, but Justice has not brought any criminal cases. Freddie Mac was subpoenaed in a grand jury investigation in 2008 but the firm disclosed in an Aug. 8, 2011, SEC filing that the Justice investigation was closed.
Attorney General Eric Holder defended the Justice Department's record in pursuing high profile financial fraud cases. "There have been, I guess, 2,100 or so mortgage-related matters that we have brought here at United State Department of Justice. Our state counterparts have done a variety of things. The notion that there has been inactivity over the course of the last three years is belied by a troublesome little thing called facts."

[Typhoon]

On the other hand . . .

Bloomberg | SEC Sues the One Rating Firm Not on Wall Street’s Take

Egan-Jones, founded in 1995, is one of nine ratings companies that the SEC has accredited as “nationally recognized,” allowing the firm to rate the debt of sovereign nations, companies and asset-backed securities, among others. Notably, it is the only one of the nine that gets paid by investors instead of by the issuers of securities.

The bigger and better-known ratings companies -- Standard & Poor’s (owned by McGraw-Hill Cos. (MHP)), Moody’s Corp. (MCO) and Fitch Ratings Ltd. -- are paid by the Wall Street banks that underwrite the debt securities of corporate issuers. That is, the companies are beholden to the sellers of the products they are supposed to pass judgment on, not the buyers. That’s akin to allowing the Hollywood studios to pay the nation’s film critics for their opinions.

[Simple Minded]

On the other hand . . .

Bloomberg | SEC Sues the One Rating Firm Not on Wall Street’s Take

Egan-Jones, founded in 1995, is one of nine ratings companies that the SEC has accredited as “nationally recognized,” allowing the firm to rate the debt of sovereign nations, companies and asset-backed securities, among others. Notably, it is the only one of the nine that gets paid by investors instead of by the issuers of securities.

The bigger and better-known ratings companies -- Standard & Poor’s (owned by McGraw-Hill Cos. (MHP)), Moody’s Corp. (MCO) and Fitch Ratings Ltd. -- are paid by the Wall Street banks that underwrite the debt securities of corporate issuers. That is, the companies are beholden to the sellers of the products they are supposed to pass judgment on, not the buyers. That’s akin to allowing the Hollywood studios to pay the nation’s film critics for their opinions.

Excellent indicator of who was not giving money to whose campaigns..... Tis a damn stupid animal that bites the hand that feeds them......