# I'd rather a coup by a capitalist than a socialist for whatever country I lived in. **URL:** \ **Category:** Great Debates\ **Created:** [June 22, 2010, 2:29pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123 "2010-06-22T14:29:25Z")\ **Posts on this page:** 20\ **Page:** 7
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [June 26, 2010, 9:35pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/121 "2010-06-26T21:35:24Z")
The problem is an election system run on money. Corporations pay for elections and other corporations make money off them, like Tv stations who make mega millions running ads. As long as the wealthy can afford to donate ,they will have special relationships with the politicians. The bankers got the financial regulations remover through Gramm and the dismantling of Glass-Steagal. They were putting a lot of pressure on politicians to do it. They also had Greenspan, Geithner and a lot of other so called financial pros sold on a Libertarian ,unregulated market as a good idea. The good of the American people is not on the top of a politicians list. They are in the business of getting re-elected. That is easier done with big money. They have to deliver to continue getting the cash. Some dems were caught in the mantra of unregulated markets being self correcting. It was just plain stupid. The repubs adopted it as a political commandment. Reagan told them regulation was killing American business. All Repub presidents have swallowed it and pushed it. The dems should have known better. But it was a Republican philosophy since Reagan. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [June 27, 2010, 1:25am UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/122 "2010-06-27T01:25:13Z")
The financial crash that affected the whole world was a capitalistic nightmare. They were greedy bastards selling swaps that were worth more than the entire worlds money supply. They were selling instruments that they knew they could not back. That is flat out dishonesty. They should be in jail. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [June 30, 2010, 8:43pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/123 "2010-06-30T20:43:06Z")
I thought it was interesting that CNBC just posted an article: [Why Canada’s Housing Market Didn’t Crash](http://www.cnbc.com/id/38017232) Short on facts, long on opinion, essentially saying cultural behavior from both Canadian banks and Canadian home buyers played a huge roll. And also that regulator factors shaped the environment to keep it stable. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 1, 2010, 6:18am UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/124 "2010-07-01T06:18:43Z")
That article said pretty much exactly what I said. And it’s not even clear that Canada’s banks are more highly regulated. This is an interesting blog post, as are the comments: [Worthwhile Canadian Initiative](http://worthwhile.typepad.com/worthwhile_canadian_initi/2009/04/canadian-vs-us-bank-regulation.html). If the sources are correct, than Canada’s bank regulation is just different. Americans pass a lot of detailed laws, and then banks have to figure out how to work with them (or get around them). In Canada, our regulators are more like government-hired accountants who work with the banks as partners. Instead of being rules-based, we’re principle-based. Apparently. I’ve never worked in a bank. So yes, it’s a cultural thing. Canadian banking has a very conservative history, and has built up a traditional culture of ethics and principles and practices. The banks are very old, very large institutions. There is one regulation that may have had a large effect: In Canada, you must have at least 25% down to buy a house. But you can also buy mortgage insurance from the Canada Mortgage and Housing Corporation which will allow you to buy a house with as little as 5% down. It costs a few thousand dollars, which they just add to your mortgage. But that has the effect of making insured housing more expensive, which helps keep down demand. So we had very few subprime mortgages, which was a big factor. And in the U.S., you do the opposite - you subsidize home buying through the mortgage interest tax deduction. So you pushed up demand in many ways, some of it encouraged by government. Your policies helped inflate your bubble, and ours helped slow the rate of inflation. It wasn’t just bank regulations that were the problem. ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [July 1, 2010, 11:03am UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/125 "2010-07-01T11:03:58Z")
> [@Sam\_Stone](#): > > That article said pretty much exactly what I said. > > And it’s not even clear that Canada’s banks are more highly regulated. This is an interesting blog post, as are the comments: [Worthwhile Canadian Initiative](http://worthwhile.typepad.com/worthwhile_canadian_initi/2009/04/canadian-vs-us-bank-regulation.html). If the sources are correct, than Canada’s bank regulation is just different. Americans pass a lot of detailed laws, and then banks have to figure out how to work with them (or get around them). In Canada, our regulators are more like government-hired accountants who work with the banks as partners. Instead of being rules-based, we’re principle-based. Apparently. I’ve never worked in a bank. > > So yes, it’s a cultural thing. You can make the argument that culture was a factor. You can’t make the argument that it was “a cultural thing” to the exclusion of regulatory differences. It was “a regulation thing”, too. For starters, the choice of a rules-based or principles-based system isn’t just cultural. They are _different regulatory systems_. And as I must point out, yet again, the Canadian system is more streamlined. It is the [Agriculture Committee](http://www.nytimes.com/2010/04/20/business/20derivatives.html), of all things, that oversees US financial derivatives regulation. You can’t possibly tell me that Canada has anything like that, where a bunch of people who are supposed to know about farming also oversee parts of banking regulations. That’s not just a cultural difference. It’s a sign of a fundamentally flawed regulatory structure in the US, where each set of regulators has their own little fiefdom and banks get to pick and choose and throw money at the kindest overseers. As I said to you before: It’s not about more or less regulation–it’s about good and bad. And what we have right now is oh-so-very bad. That is true regardless of whatever cultural differences you’d like to point out. > [@Sam\_Stone](#): > > It wasn’t just bank regulations that were the problem. This is correct. It wasn’t just regulations. It was practically everything, _including_ poor bank regulations. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [July 1, 2010, 1:29pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/126 "2010-07-01T13:29:06Z")
> [@Sam\_Stone](#): > > That article said pretty much exactly what I said. > > And it’s not even clear that Canada’s banks are more highly regulated. This is an interesting blog post, as are the comments: [Worthwhile Canadian Initiative](http://worthwhile.typepad.com/worthwhile_canadian_initi/2009/04/canadian-vs-us-bank-regulation.html). If the sources are correct, than Canada’s bank regulation is just different. Americans pass a lot of detailed laws, and then banks have to figure out how to work with them (or get around them). In Canada, our regulators are more like government-hired accountants who work with the banks as partners. Instead of being rules-based, we’re principle-based. Apparently. I’ve never worked in a bank. > > So yes, it’s a cultural thing. Canadian banking has a very conservative history, and has built up a traditional culture of ethics and principles and practices. The banks are very old, very large institutions. > > There is one regulation that may have had a large effect: In Canada, you must have at least 25% down to buy a house. But you can also buy mortgage insurance from the Canada Mortgage and Housing Corporation which will allow you to buy a house with as little as 5% down. It costs a few thousand dollars, which they just add to your mortgage. But that has the effect of making insured housing more expensive, which helps keep down demand. > > So we had very few subprime mortgages, which was a big factor. > > And in the U.S., you do the opposite - you subsidize home buying through the mortgage interest tax deduction. So you pushed up demand in many ways, some of it encouraged by government. Your policies helped inflate your bubble, and ours helped slow the rate of inflation. It wasn’t just bank regulations that were the problem. One note of correction: the US also requires mortgage insurance on mortgages below 20% down. An odd point in the article was that it seemed to suggest more Canadian mortgages had insurance, which would imply that more Canadian mortgages were blow the 25% down payment. You also mentioned that, “[Canadian] banks are very old, very large institutions.” Have you ever wondered why we only have 6 (?) banks in Canada? I currently live in a US city of about 22,206 and I’m pretty sure it alone has more than 6 banks. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [July 1, 2010, 2:07pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/127 "2010-07-01T14:07:38Z")
One thing about the mortgage melt down that I don’t really understand is the role of insurance: When getting a mortgage last year, we were told loans with down payments less than 20% required private mortgage insurance. I would have expected that insurance to kick in, and cover the failed loans, and avoid the crisis. Which is why PMI was required in the first place during the Depression. I think the answer to this is that it’s possible to avoid the PMI by getting a second loan to cover the 20%. If this is the case, it’s a pretty clear example of a completely failed policy/regulation. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [July 1, 2010, 5:26pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/128 "2010-07-01T17:26:14Z")
> [@Hellestal](#): > > You can’t just blame the Republicans for this. > > The move to deregulate financial services was largely bipartisan. The final repeal of Glass-Steagal was in part ceremonial, because it had already been shot so full of holes, but the death blow passed [with overwhelming majorities in both House and Senate](http://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act#Legislative_history), and was signed by President Clinton. The general push toward deregulation was favored by both parties. W and his followers deserve special blame not for the financial crisis itself, which had many parents, but for their fiscally irresponsible spending in a time of economic expansion which has limited our ability to respond to the aftermath of the crisis. That by itself is plenty guilt enough that they carry. The drive for derergulation may have been bipartisan but the drive for reregulation was not. And its not simply the repeal of glass-steagal, it was the reluctance to regulate new financial products like credit default swaps. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [July 1, 2010, 5:29pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/129 "2010-07-01T17:29:00Z")
> [@emacknight](#): > > It wasn’t Republicans, or Democrats, it was Alan Fucking Greenspan and all the morons that believed the free market would regulate itself; believed that a situation like this could NEVER happen because banks would never let it; that banks would act in their own self interest; that regulating the banking industry would be bad for the economy. They were wrong. You’re right, I overgeneralized but in much teh same way that you can use the Republican party as a proxy for racists, the religious right and rich people, I used the Republican party as a proxy for free-market fundamentalists. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [July 1, 2010, 5:39pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/130 "2010-07-01T17:39:03Z")
> [@Sam\_Stone](#): > > It wasn’t just bank regulations that were the problem. No problem this big is the result of any one single thing. There were multiple market failures but the thing they all had in common was that all these failures were driven by unfettered greed. From the greed of the most sophisticated securitization experts on Wall Street down to the greed of the guy who wanted to live in a better house than he could afford. between the two, it is easier to regulate the few hundred or so institutions on Wall Street than to regulate every goy who wants something better. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [July 1, 2010, 5:48pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/131 "2010-07-01T17:48:53Z")
> [@emacknight](#): > > One thing about the mortgage melt down that I don’t really understand is the role of insurance: > > When getting a mortgage last year, we were told loans with down payments less than 20% required private mortgage insurance. > > I would have expected that insurance to kick in, and cover the failed loans, and avoid the crisis. Which is why PMI was required in the first place during the Depression. > > I think the answer to this is that it’s possible to avoid the PMI by getting a second loan to cover the 20%. If this is the case, it’s a pretty clear example of a completely failed policy/regulation. Well it might help you understand if you knew where the mortgage insurance money went. The mortgage insurance money usually went to the lender, who pooled all the insurance premiums and used it as a reserve against mortgage defaults. They frequently bought credit default swaps with that money from people like AIG. This would work out find if the entire market didn’t all default at once, in which case even the largest insurance company in the world did not have the reserves to cover the nut. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 1, 2010, 7:52pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/132 "2010-07-01T19:52:52Z")
> [@Hellestal](#): > > You can make the argument that culture was a factor. You can’t make the argument that it was “a cultural thing” to the exclusion of regulatory differences. It was “a regulation thing”, too. I never claimed otherwise. > [@](#): > > For starters, the choice of a rules-based or principles-based system isn’t just cultural. They are _different regulatory systems_. Which is why I said, “…Canada’s bank regulation is just different. Americans pass a lot of detailed laws, and then banks have to figure out how to work with them (or get around them). In Canada, our regulators are more like government-hired accountants who work with the banks as partners. Instead of being rules-based, we’re principle-based.” I’m not sure if you’re arguing with me or what. It’s clear from my initial message and my follow-up that there’s no simple answer to why Canada fared better than the U.S. It’s not as simple as, “They’re more regulated!” There are a host of regulatory, cultural, geographic and cultural differences that caused Canada to have a different outcome. It’s not even clear that we’re more regulated. We’re regulated differently. Maybe more effectively. Our whole style of regulation is different. ---
**Author:** ![Aji\_de\_Gallina](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/aji_de_gallina/32/260_2.png) [@Aji\_de\_Gallina](https://boards.straightdope.com/u/Aji_de_Gallina)\ **Post date:** [July 1, 2010, 8:15pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/133 "2010-07-01T20:15:04Z")
> [@emacknight](#): > > I think if you look at this quote again: > "I’d rather a coup by a capitalist than a socialist for whatever country I lived in. " > > So much of it depends on where you view your personal status in life. I find as a Canadian, growing up in an upper middle class home, I tend to under represent myself. > > For me, a capitalist coup would give power to the rich (those with capital) at the expense of those without.\*\* A socialist coup is just the opposite, the state _re-acquiring_ the wealth, and distributing it to the poor. \*\* > I figure I’m more likely to benefit from socialism since I associate myself with the working class, being the lower 98% of society. It’s only the top 2% of the wealthy that will benefit from the capitalist distribution of resources. > > If it helps, consider the game Monopoly, and imagine the four railroads are initially not for sale. So the game progresses and a couple players dominate while the rest slowly approach bankruptcy. > > To me, a capitalist coup represents those railroads being put up for auction. So naturally the richest player gets the four properties, and with that dominates the game. > > A socialist coup would work in reverse. It would recognize that one player is dominating the game through control of the four railroads. Those properties would then be nationalized, with the revenue being distributed to the poorest of the players. > > I think it says a lot about how an individual views him/herself when deciding what sort of coup to route for. > > If it helps, I think a capitalist coup in the US would involve canceling the public education system (from primary right up through state universities). If that happened, are you prepared to shell out $30k a year for each of your kids? Or do you think you’d do better if suddenly all the private schools became publicly accessible? Your concept of socialist is incredibly naïve. Socialist revolutions, the real ones, have always been about killing lots of people, mostly poor. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 1, 2010, 8:32pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/134 "2010-07-01T20:32:04Z")
And about replacing the owners of property with party apparatchiks. And about decision-making being taken away from ‘the rich’ and the capitalists, and given to the politically powerful and the connected - who are often the same people wearing different hats. Meet the new boss, same as the old boss. ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [July 1, 2010, 10:33pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/135 "2010-07-01T22:33:45Z")
> [@Sam\_Stone](#): > > Which is why I said, “…Canada’s bank regulation is just different. Americans pass a lot of detailed laws, and then banks have to figure out how to work with them (or get around them). In Canada, our regulators are more like government-hired accountants who work with the banks as partners. Instead of being rules-based, we’re principle-based.” > > I’m not sure if you’re arguing with me or what. I was taking special exception to this particular idea in the previous post. > [@Sam\_Stone](#): > > It’s not so much a regulatory thing as it is a cultural thing. Maybe I’m reading more into it than you originally intended, but I wanted to emphasize the regulatory differences above and beyond whatever cultural differences you can point out between the countries. And though I can’t prove it, I do in fact believe these cultural differences (which do exist) over overemphasized. There are a lot of open questions here. What’s Canada’s market share of world financial services? What would happen if Wall Street and London (currently the two biggest financial centers) were regulated into the ground? Who would take over to try to provide those international high finance services? _What would happen to Canadian banking culture if its big banks decided to make a play for the world market and had to compete in this cut-throat business?_ I’m just guessing here, but I think it’s a solid extrapolation to believe that Canadian banking culture would change quite quickly. It’s not just culture that influences how you interact with markets–the markets you interact with can change your culture. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 1, 2010, 10:51pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/136 "2010-07-01T22:51:26Z")
No doubt. But one of the things a Canadian Banker commented on in that thread I linked was that Canada’s ‘principles based’ regulatory style has helped create the conservative banking culture. As the theory goes, American regulators try to write comprehensive rules that are detailed and specific. The reaction by those regulated is to figure out what the exact rule of law is, and how they can skirt around it. That triggers more laws. The regulatory burden goes up, and financial activity increasingly diverts to loopholes in the law. Financial transactions are incredibly complex, and regulators can’t hope to close all the loopholes. So eventually some completely unregulated area crops up, money flows into it, and everyone gets caught napping. In Canada, principles-based regulation puts the burden of accountability on everyone in the bank. The local bank manager has to sit down and really think about what the government (and his superiors) really want, and act accordingly. There are no loopholes - you’ll just get audited, and someone will decide if you’ve been following good banking practices, being careful with your money, etc. The lack of concrete guidelines is scary, so bankers err on the side of caution. You’re going to be evaluated based on someone’s judgment call, not whether you met the literal rules spelled out in legislation. That forces you to use your own good judgment instead of looking for loopholes all the time. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [July 2, 2010, 2:27pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/137 "2010-07-02T14:27:25Z")
> [@Sam\_Stone](#): > > No doubt. But one of the things a Canadian Banker commented on in that thread I linked was that Canada’s ‘principles based’ regulatory style has helped create the conservative banking culture. > > As the theory goes, American regulators try to write comprehensive rules that are detailed and specific. The reaction by those regulated is to figure out what the exact rule of law is, and how they can skirt around it. That triggers more laws. The regulatory burden goes up, and financial activity increasingly diverts to loopholes in the law. Financial transactions are incredibly complex, and regulators can’t hope to close all the loopholes. So eventually some completely unregulated area crops up, money flows into it, and everyone gets caught napping. > > In Canada, principles-based regulation puts the burden of accountability on everyone in the bank. The local bank manager has to sit down and really think about what the government (and his superiors) really want, and act accordingly. There are no loopholes - you’ll just get audited, and someone will decide if you’ve been following good banking practices, being careful with your money, etc. The lack of concrete guidelines is scary, so bankers err on the side of caution. You’re going to be evaluated based on someone’s judgment call, not whether you met the literal rules spelled out in legislation. That forces you to use your own good judgment instead of looking for loopholes all the time. Unfortunately principles based reserving in the US just means that the financial institution gets to exercise discretion because the regulators just aren’t scary enough for the financial isntitutions to exercise disxcretion very conservatively. The coming trend in reserving here is a “higher of” principles based and formula based reserving. ---
**Author:** ![emacknight](https://avatars.discourse-cdn.com/v4/letter/e/3ec8ea/32.png) [@emacknight](https://boards.straightdope.com/u/emacknight)\ **Post date:** [July 2, 2010, 2:42pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/138 "2010-07-02T14:42:08Z")
Don’t forget that regulation of the Canadian banking industry means that there are only 6 major banks. The US has had more than 6 banks fail in the month of June alone! [[cite](http://www.fdic.gov/bank/individual/failed/banklist.html)] Regulation lead to the culture as much as culture lead to the regulation. Which should tell us that the regulations in the US need to consider the nature of US banking culture. As I said before, each of the past several bubbles follow the same process. Telling me that the US has a culture that causes bubbles, and therefor needs enough regulation to cause a shift in that culture. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [July 2, 2010, 7:43pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/139 "2010-07-02T19:43:51Z")
Banking regulations or the lack thereof didn’t create the bubble, though. Or at least, they weren’t wholly responsible. There were numerous issues that caused the bubble we just went through. A big one which is not talked about as much is the flood of money that became available due to China’s intentional policy of promoting savings. As the Chinese economy grew, Chinese dollars flooded the financial markets, driving down interest rates and providing easy access to capital. The housing bubble was a global phenomenon, although it was especially acute in America due to unique American policies and culture, such as the mortgage interest rate deduction and American politicians pushing their ‘ownership society’ goals through various mechanisms. The bankers basically just took advantage of the glut of liquidity and created instruments that allowed them to maximize their profit and minimize their risk. This triggered the financial crisis, but even if the banks had been responsible and well regulated, the real estate bubble would eventually have popped, and the existence of all those subprime and alt-A loans would still have triggered waves of foreclosures and a downturn in the economy. The difference would have been that the collapse of the housing bubble wouldn’t have necessarily triggered a liquidity crisis in the economy as a whole. The development of CDOs and other ways of securitizing mortgages was the result of market pressure. There was more money out there looking for good rates of return than there were people who qualified for traditional mortgages. So there was a lot of pressure on banks and government as well to help ‘streamline’ mortgage financing to take advantage of the available capital. This is why I don’t think the government could have regulated this. The evidence we have is that the government was a completely willing partner in helping put more mortgages in the hands of increasingly unqualified people. We can debate how much the government’s involvement through Fannie and Freddie and the CRA and such contributed to the problem, but the existence of these programs indicates that had the government had more regulatory power, they wouldn’t have used it to stop what the banks were doing. Regulators can be just as wrong as bankers. Anyway, even without the financial shenanigans, there probably still would have been a recession, but it wouldn’t have been as severe. Without the financial crisis coming on top of the mortgage meltdown we wouldn’t have had the crises of confidence that the world just went through and which has caused demand to dry up and companies to become more conservative. ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [July 2, 2010, 7:52pm UTC](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123/140 "2010-07-02T19:52:05Z")
> [@Aji\_de\_Gallina](#): > > Your concept of socialist is incredibly naïve. Socialist revolutions, the real ones, have always been about killing lots of people, mostly poor. The [Spanish Revolution](http://en.wikipedia.org/wiki/Spanish_revolution) (as distinct from the Spanish Civil War) was **not** about killing lots of people, mostly poor. Neither was the [Paris Commune.](http://en.wikipedia.org/wiki/Paris_commune) (Granted, neither of those lasted long; but they did not self-destruct, they were crushed by hostile governments.) [Previous page](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123.md?page=6) [Next page](https://boards.straightdope.com/t/id-rather-a-coup-by-a-capitalist-than-a-socialist-for-whatever-country-i-lived-in/544123.md?page=8)