Keynesian economics may lead Japan to default..

How did I know it was Riversider?

Did you read the review of Ayn Rand in the Times?

Here's the key: "Credit default swaps (CDS) on five-year Japanese debt have risen from 35 to 63 basis points since early September."

Maybe the problem isn't Japan, but CDS's: illiquid, opaque, taking out insurance on something you don't even have an interest in.

They should be illegal.

And so should supply-side economics.

b u y
g o l d

Agree on Gold. The Ayn Rand piece in the times was trash, author felt need to go beyond a review to include his/ own feelings on the topic, which didn't quite belong in the piece.(my own opinion). For the record , I don't agree with everything Rand says, but she is highly provcative.

She's boring. Her book should be called, "Atlas Snored."

Self-regulating markets are a myth. Neoclassical economics (Friedman) don't work except in extreme cases. Even Keynes didn't espouse marginal tax rates in excess of 25%.

What in g-d's name is gold good for? Nothing. Dentists don't even use it anymore b/c it's too expensive. Too many ETF's artificially driving up the price.

Big Reason financial regulation is necesary is because we have a few large banks in cohoots with FED..

But of course the regulators we appoint need to mind the store..

"is because we have a few large banks in cohoots with FED"

Ridiculous. In the late 80's we had thousands of banks and S&L's fail because they were too small to survive, or to compete, and they were overexposed to the risk of operating within state limits. That's why that part of Glass Steagal was changed.

"the regulators we appoint need to mind the store"

You mean Alan Greenspan, devotee of Milton and Rand, who thought the markets would be self-regulating?

I think, RS, if you ever sat down and closely examined your economic philosophy, you would find it not only wanting, but self-contradictory. Which is why Larry Kudlow makes such an ass of himself every night.

You are entitled..

I do believe I'm consistent.
* the government creates an asymetric risk profile for the banks(heads bank wins, tails tax payer loses
* when a few large banks monopolize they wind up controlling the fed

That said, in the 1980's and again recently we had large scale control frauds, and there the regulators dropped the ball big time.

"I do believe I'm consistent."

I know you do. That's what's so funny about it. But Rand's economic philosophy is internally inconsistent. One can't - as you do - simultaneously believe that markets are self-regulating AND complain that the regulators aren't doing their job. In a self-regulating market, regulators are unnecessary.

And we see what happens when they "drop the ball."

I was a bank auditor in the 1980's, during all of that. The problem wasn't so much fraud as it was over-concentration of risk. Banks & S&L's being limited to operating within a single state proliferated the number of banks, while at the same time restricting what they could do with their deposits. And the collapse of Long-Term Capital SHOULD have been the end of efficient markets theory and modern portfolio theory, but it wasn't.

It's too easy to believe that maths can solve it all. Yet every time we revert to this model, the same thing happens all over again.

Well BASEL II created incentives. AAA mbs = 0 risk weighting. Isn't that your over concentration?

And if we had exchanges and margins for derivatives(i.e. swaps) LTCM may not have happened. An opaque market promotes mis-pricing. And the margin issue. don't get me started..

You really have to wonder too, what the risk committees do at these large hedge funds and banks. The problem starts there.

Agree that the current CDS system is a problem, disagree that CDS should be illegal. Supply side economics and a strong regulatory environment are not incompatible.

Did you expect the NY Times to have a positive view of Ayn Rand?

"Supply side economics and a strong regulatory environment are not incompatible."

Really? Ask Dick Armey & Alan Greenspan.

"And if we had exchanges...."

And if we had exchanges!

Yea, heard all about Greenspan's conundrum about being a regulator and not believing in regulation. He will not be remembered well. Add to that his Fed testimony speeces which he prided on making unintelligible.

Another instance of ignorance by LICC: "Supply side economics and a strong regulatory environment are not incompatible."

The very philosophical basis of supply-side economics is to unfetter the supply side - producers - from regulation. They will then act in their own self-interest which will make markets efficient, as efficiency will make them profitable, and that is the primary interest of the supply side.

It is neoclassical because it is based fundamentally on Adam Smith's "invisible hand," which in the real world doesn't exist and never had: viz. Tulips.

Another fundamental error of the neoclassical model is anchoring currencies to physical assets: gold, silver, pig iron, doesn't matter. Fiat currencies actually work better, as the gold standard collapses in difficult economic times as the money supply can't be expanded beyond the gold reserves. Inflation is not merely a function of the size of the money supply, but also of its velocity. That is what went wrong in Japan: plenty of money, but no spending.

All this noise on the Right makes me laugh: if it weren't for the stimulus, deficit, and loose money, we would be living a disaster right now.

look, there is a strong argument that removing the laws and regulations that were in place after the Depression has been destabalizing to say the least. Big reason why Reed, Volcker and many others want to bring back elements of Glass Stegal. And the market that caused the biggest mess(CDS) was a 100% unregulated market, than you very much Mr. Summers, Mr. Rubin, Mr. Greenspan(remember the photo?)

steve, you have been one of the most consistently illiterate when it comes to economics on this board. You show a lack of understanding of even basic concepts (opportunity costs, marginal v. effective rates, etc.) and you have problems applying even basic theories. It is like you learned enough in college to know the terms but you lack a true understanding of them.

Supply side economics calls for less regulation of production and capital allocation, that is correct. But we are talking about banking regulation. Supply side is not inconsistent with having anti-fraud and smart banking regulations.

Why don't you try to learn and understand things before you comment on them?

"Supply side economics calls for less regulation of production and capital allocation. But we are talking about banking regulation."

Oh, LICC, funny, funny you! At this point not using an ad hominem is very difficult.

"Capital allocation": what do you think the function of banks is in an economy? Might it be - uhm - CAPITAL ALLOCATION?!

It is not - NOT - possible to call for "less regulation of [...] capital allocation" while at the same time saying "Supply side is not inconsistent [...] smart banking regulations."

That's the first point. Second is: "Supply side is not inconsistent with having anti-fraud [...] regulations."

"Fraud" is no a matter of bank regulation. Fraud is a criminal and civil matter. Bank regulators do not LOOK for fraud, per se, nor do internal or external auditors. Though they may find fraud, their primary function is control and compliance.

Audit 101.

How do I know? Because it used to be my job.

You are truly, truly a f**l.

steve, stick to auditing and leave economics to those who understand it. Friedman was not an opponent of proper government regulation. Anti-fraud regulations are key provisions of our securities regulatory framework. Different supply-siders have different views, and you obviously don't really understand any of them.

LICC: "Anti-fraud regulations are key provisions of our securities regulatory framework"

Alas, LICC, bank fraud is a criminal or civil matter, not an administrative one:

http://www.fdic.gov/regulations/laws/rules/8000-1250.html

Those are the pertinent portions of the USC that govern bank fraud. If an agency finds fraud, it reports it to the proper authorities. It can file civil action in the courts for civil fraud, but it does not regulate civil fraud.

"Friedman was not an opponent of proper government regulation."

The only thing that Friedman ever said about bank regulators was that they should have closed failed institutions faster during the Depression. That's it.

Unless you can find me something to support your baseless claim.

I am, LICC, as you may know, an economist by training. I don't know what you do (not much of anything, that I can ascertain) but you know NOTHING about what you're attempting to say.

"Different supply-siders have different views."

You, apparently, are of the view that banks don't allocate capital.

F**l.

back at ya!

LIC, working on finding those Friedman quotes, are you?

RS: what?

ignore, thought you were responding to me.

No. I don't think you're consistent in your theories - though you are consistent in your positions - but I don't think you're a f**l.

LICC, on the other hand, with the nonsense he spews....

Well of course steve calls it nonsense when I consistently show how clearly illogical, foolish and mistaken his theories and analyses are.

Friedman wrote about the potential benefits of moderate, smart government regulation. He, like all monetarists and supply-siders, was against excessive regulation and bureaucratic stifling of business.

You are the one who mention "market" regulation. That includes the securities markets, of which anti-fraud and anti-conflict provisions are a major basis of the regulatory framework.

"economist by training"? You were an accountant.

Go on steve, backpedal some more now . . .

LICC, I was never an accountant. I worked a lot in accounting, but I was never an accountant. Ever. Find the place where I ever said such a thing.

"steve calls it nonsense when I consistently show how clearly illogical, foolish and mistaken his theories and analyses are"

Hmm.

LICC: "Supply side economics calls for less regulation of [...] capital allocation."

Fact: Banks allocate capital.

LICC's Conclusion: "Supply side is not inconsistent with having [...] banking regulations."

Hmm.

"Friedman [...] was against excessive regulation and bureaucratic stifling of business."

So is everyone. The question is, what is "excessive"?

"You are the one who mention "market" regulation."

If not "market" regulation, then what are you regulating?

"anti-fraud and anti-conflict provisions are a major basis of the regulatory framework"

First, I pointed out where anti-fraud provisions are codified into US law. You've never even seen a bank regulator, so how would you know? I worked with them all the time, all over the world, to the point of making presentations to the head of the UK's Financial Service Authority.

What is an "anti-conflict provision"? A peace treaty?

Please.

Steve - I mostly agree with you on this. I just wanted to clarify one thing and that is that internal audit departments have changed a bit since you left. Fraud audit is an established piece of the internal audit departments these days...and more of a real value-add and not just the window-dressing that it was 10-15 years ago.

That said, I am for more regulation, not less. History seems to show that the industry will constantly push the limits and this often leads to stepping (or leaping in some cases) over the line. More regulation will also create jobs, although supply-siders will say that regulation kills job-creation. I just file that under the whole "trickle-down economics works" myth and move on.

Not that it's without flaws...but found it interesting that Rahm Emanuel is proposing small busineses exemption from Sarbanes Oxley and the reasons are purely political.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aBW9kFW3_RP0&pos=9

The administration may be seeking the delay, which investor advocates oppose, to help Democrats retain control of Congress, said James Cox, a law professor at Duke University in Durham, North Carolina. Unemployment climbed to a 26-year high of 9.8 percent in September, putting pressure on the Obama administration to bring it down before the 2010 elections.

“The Democrats are getting clobbered over the unemployment rate,” he said. “In a recovery, a vastly disproportionate number of new hires are made by small businesses. The White doesn’t want to be perceived as doing things that hurt those companies.”

RS - The smaller companies specifically have been complaining for several years about the costs associated with SOX. I hear both sides of it. It is expensive for a smaller-cap company to handle. OTOH, it was their choice to go/remain a public company so regulations have to be followed. Also, you have to look at this in some instances and wonder if the companies are using this a way to get rid of SOX, as opposed to it being as big of a deal for all of them...just a thought.

The burdens of Sarbanes Oxley on small businesses far outweigh the benefits.

oh my god---i agree with you.

having had to deal with it from a smaller business perspective, it is nothing but extra overhead.

Agreed Sarbanes oxley is very onerous, especially on small business, but the action does send a regulatory message.

Crazy thread turn:

To the extent Japan is perceived as an increasing default risk after a few lost decades and we are at the onset of our first lost decade, why do we continue with the same broken pattern? Would it not be much more sensible to recognize the pain all at once, get it over with and then build from there?

I just don't see how a country can borrow their way to prosperity. Is there a book I should be reading to understand how more debt and loose spending is the cure for a debt and loose spending problem? Please let me know as this truly has me baffled. Oh of course, just like housing, the value of America only goes up....

send me a copy too. thanks.

Lecker, There is good debt & bad debt or shall I say prudent use of....
In the last century we borrowed to invest in infrastructure, today we borrow for consumption. Big difference. Even today, Government spendulous/stimulus package is targeting consumption and asset prices, and China is investing in infrastructure.

waverly, there was always the possibility of finding fraud, but fraud almost always involved collusion, or a breakdown (or the nonexistence) of the control environment. Once that is found there are usually more tests done. Auditors NEVER say they look for fraud because the chances of finding it are slim, and and they don't and there is they open themselves up to lawsuits.

"Is there a book I should be reading to understand how more debt and loose spending is the cure for a debt and loose spending problem?"

No, because you're asking the wrong question. The right question is, "Is there a book I should be reading to tell me how, other than government spending and debt, we can save the world economy from collapse faced with the collapse of the financial system."

The answer to that is a resounding NO. Supply-side economics say merely to increase the money supply - Japan tried that, it didn't work because of lack of velocity. Unfortunately, where we are now we're stuck with the only solution available. Fixing the deficit MUST come next.

The problem started with George II, cutting tax revenue then borrowing to start a war. The government needs to be countercyclical: when times are good, save. When times are bad, spend. George II did the opposite.

"The burdens of Sarbanes Oxley on small businesses far outweigh the benefits."

Once again LICC comments on something he knows nothing about. How many audits have you been involved in, LICC?

steve, you obviously have no knowledge of regulatory audits. Let me explain to you what a control is. It is a risk mitigation activity. The risks being mitigated regarding anti-fraud and anti-conflict regulations are risks of fraud and other harmful activity. Again, try to learn a little before you comment.

Japan employed massive government spending and it did nothing to help them. I see your economic understanding is stuck in the 1930s.

So you favor Sarbanes Oxley for small businesses? I can't wait to hear your ridiculous, mistake-filled theory how the benefits of Sarbanes Oxley outweighs the massive costs and burdens it imposes on small companies, and the U.S. loss to overseas markets of these public issues because of these burdens.

William Black has provided some interesting insights on the topic of Fraud and regulation.

"steve, you obviously have no knowledge of regulatory audits."

Obviously not, LICC, because I worked for Arthur Young (Ernst & Young today), Price Waterhouse (PriceWaterhouseCoopers today), and Bank of America, as a ... wait ... wait ... wait ... an AUDITOR!

How do you like that?! My main clients were Bank of America when I worked there, Barclays, Lloyds, UBS, Credit Suisse, Banesto, Amro....

Basically, the biggest banks in the world at the time. Looking for - among other thing - REGULATORY COMPLIANCE!

How do you like that!

"The risks being mitigated regarding anti-fraud [...] regulations are risks of fraud [...]."

That is the most intelligent statement you have ever made, LICC.

"how the benefits of Sarbanes Oxley outweighs the massive costs and burdens it imposes on small companies"

Because it mandates statistically valid tests for audits, which was always one of their weaknesses: auditor could issue opinions based on no facts whatsoever, and get away with it.

"the U.S. loss to overseas markets of these public issues because of these burdens"

Any stock, including ADR's, must comply with US GAAP and audit standards to be listed on a US exchange. It's a moot point.

RS, show us the link.

So 15 years ago when steve was an auditor, he didn't audit controls that mitigated risks of fraudulent activity. I guess he audited how many soda bottles BofA kept in its vending machines, or other important things like that.

You don't realize the burdens and costs that Sarbanes places on companies over and above complying with GAAP audit standards? I keep telling you to learn about things before you comment, but you refuse to listen.

How many ridiculous things can you come up with, over and over again?

steve: "fraud almost always involved collusion, or a breakdown (or the nonexistence) of the control environment. Once that is found there are usually more tests done."

LICC: "[steve] didn't audit controls that mitigated risks of fraudulent activity."

LICC, what planet do you live on?

"I guess he audited how many soda bottles BofA kept in its vending machines"

Close. I audited payment systems and funds transfer systems, clearance and settlement systems, trading systems, and computer network security, among other things. Would you care to share your expertise on these with us all?

"You don't realize the burdens and costs that Sarbanes places on companies over and above complying with GAAP audit standards?"

I couldn't possibly, as GAAP has nothing to do with "audit standards". Find me one GAAP norm related to audit.

You can't - they don't exist. Indeed, every audit report ever written clearly says "for adherence to generally-accepted account principles" and "using generally accepted audit principles," or something similar.

You are truly ignorant.

steve: '"Fraud" is no a matter of bank regulation.'
But now steve is saying he audited fraud controls. There he is backpedaling again . . .

Ok steve - correction: GAAP AND audit standards. You got me on a typo. Now that we are clear, the point still stands that you do not know what you are talking about.

LICC: "'"Fraud" is no a matter of bank regulation.'"

LMAO. Fraud is not covered by bank regulations, as I stated. It is a matter of law. Regulations and the law are two different things. Bank regulators do not have the authority to prosecute criminal fraud. They have cause of action for civil fraud matters, but again, civil fraud is a legal matter, not an administrative one.

LICC: "But now steve is saying he audited fraud controls."

No, I never said that. I said that control systems were audited. No one ever "looks" for fraud.

"You got me on a typo."

LMFAO. You don't know what you're talking about (obviously) and it's MY FAULT!

HAHAHAHAHAHAHA!

Since you know so much about regulatory audits, LICC, here's a test: if you were the SEC, what would your most significant audit findings be, and what tests would you recommend be performed?

Ready, set, go...!

steve: Regulations and the law are two different things."

This is really getting to be a waste of time now. The "law" can involve statutes, rules, regulations or common law (case law). I am not going to sit here and give you a lesson on legal frameworks.

A rule of thumb on these boards - the more steve speaks on a topic, the dumber he gets.

"I am not going to sit here and give you a lesson on legal frameworks."

Oh, Impatient Guru! Teach me more! Tell me how regulations are the law! Please, please, please, Guru, teach me!

HAHAHAHAHAHAHA!

"No one ever "looks" for fraud"

Steve, that is precisely what fraud auditors in investment firms and banks do as part of their job. These roles have changed a lot since you left the industry, and especially over the past 8-10 years.

waverly, I am aware of that:

http://www.journalofaccountancy.com/Issues/2003/Jan/AuditorsResponsibilityForFraudDetection.htm

But it is not really a material change from what was done in the past - it's a CYA thing. As I said above, you start at the highest level - control environment - and work down. If you find a control lacking, THEN you investigate if there is a possibility for fraud. For instance, the answer the LICC could not give on Bernie Madoff:

If the same entity or person is responsible for executing trades, clearing them, and holding custody of the securities, you have a HUGE potential for fraud and you would investigate it for such. But first you have to ascertain what controls are built in.

Although I'm no longer actively involved in doing the audit work, I am actively involved in international bank fraud investigations by translating the documents & reports related to them. I see clearly what they are doing and why.

My point was, when you undertake an audit your purpose is not to find fraud - it is a very difficult thing to do in some circumstances. I have in the past found fraud precisely because there were missing bank controls. Look up what happened to the board of directors at Banesto in 1993. I was the senior audit manager in charge of that account, and identified the problem and reported it to senior management at Price Waterhouse. The partners decided not to take it any further. I quit - lots of people went to jail.

The issue of Fraud & Control Fraud is one that William Black discusses at lenght. Speaks to Keating S&L mess. When you look at the incentive structure of some banks ,rating agencies etc, you realize this is very much an issue.

steve says auditors do not look for fraud, but then says he audited controls designed to prevent fraud, and if a control was lacking, would look for fraud.

My theory that the more he speaks, the dumber his comments, still holds.

steve, please tell how regulations, passed by government agencies pursuant to statutes passed by Congress, are not "the law." I want to see your response so I can see how dumber your comments can get.

RS, give us the link. Would be interested in seeing it.

LICC, regulations are not the work of the legislature and do not have the effect of law in theory. In practice, however, because of the intricacies of judicial review of administrative actions, regulations can have an important effect in determining the outcome of cases involving regulatory activity.

Is that clear?

An "audit" is the systematic inspection of accounting records involving analyses, tests, and confirmations. Its purpose is to make a judgment on material accuracy of the financial statements taken as a whole.

A control environment is reviewed and analyzed to ascertain the degree of reliance that can be placed on the accounting records themselves. The better the control environment, the fewer tests and confirmations will have to be performed.

Where did I say that I "audited controls designed to prevent fraud"? That is not the purpose of controls. The purpose of controls is to ensure the material accuracy of the financial statements taken as a whole. The financial statements may be 100% accurate even in a poor control environment. However, if you find a poor control environment you address the audit in a different way.

Any comments?

LMAO.

http://www.youtube.com/watch?v=Rz1b__MdtHY

It's been a while.. But I think this is it..

Don't have time to watch it now, but I will. The guy has a vested interest - his own antifraud business!

steve, just admit when you are wrong. Agency regulations passed pursuant to statutory authorization are law. In your bizarro world, whole fields of tort law are not "law" since it is not the work of "the legislature."

Controls are risk mitigating activities, including fraud risks.

Financial statements audits are not the only audits done on banks and securities firms.

Is this sinking in yet? Go ahead, try to come up with some new BS argument . . .

The guy has a vested interest - his own antifraud business!
http://www.law.umkc.edu/faculty/black.htm

Bill Black is an Associate Professor of Economics and Law at the University of Missouri – Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

He was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and General Counsel of the Federal Home Loan Bank of San Francisco, and Senior Deputy Chief Counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. His regulatory career is profiled in Chapter 2 of Professor Riccucci's book Unsung Heroes (Georgetown U. Press: 1995), Chapter 4 (“The Consummate Professional: Creating Leadership”) of Professor Bowman, et al’s book The Professional Edge (M.E. Sharpe 2004), and Joseph M. Tonon’s article: “The Costs of Speaking Truth to Power: How Professionalism Facilitates Credible Communication” Journal of Public Administration Research and Theory 2008 18(2):275-295.

Glad you fell for the bait, LICC: both the definition of "regulation" and of "audit" are transcribed LITERALLY from Black's Law Dictionary.

LITERALLY.

You are such a fool.

Don't even start me on "torts".

RS, he wrote a book and consults. I'm not saying that what he has to say isn't worthwhile, but he IS selling something.

Yes, he hawks his book and I'm sure gets paid for speaking engagements. Not a bad gig.

steve, you really aren't smart enough to understand the Chevron standards, but to keep it simple, under the U.S. Supreme Court interpretations, agency regulations that are consistent with their statutory authorizations are law.

In your idiotic bizarro world, administrative law just doesn't exist, and the entire Code of Federal Regulations are just fiction.

Please keep posting such dumb comments, I'm getting a kick out this.

LICC, LICC, LICC - stretch it some more!

LMAO.

"Not a bad gig."

I'm sure he has a very lucrative consulting practice. Most professors do.

http://www.law.umkc.edu/faculty/profiles/Black/black_cv.pdf

What's the point?

If I ever worked with an auditor who said they would not review fraud controls, I would laugh them out of the room.

"If I ever worked with an auditor who said they would not review fraud controls, I would laugh them out of the room."

Fortunately, you're not smart enough to be in the same room as an auditor.

BTW the "Chevron standards," as you call them, are completely unrelated to what you're trying to prove. All the Chevron standard says is that when an administrative agency is given the authority to interpret its own regulations, as long as those regulations are consistent with the underlying law then broad deference should be given to the interpretation made by the administrative agency, as it is the one with the most expertise and experience in the matter.

NOTHING TO DO with what you were trying to talk about.

Which is NONSENSE.

You are really dumb.

"as long as those regulations" = "as long as those regulations and interpretations"

Ooops! The crackberry went off!

steve clearly would have failed Business Law 101.

The direct quote from the U.S. Supreme Court opinion: If Congress has explicitly left a gap for the agency to fill, there is an express delegation [467 U.S. 837, 844] of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.

Controlling weight - that means the regulations are law.

Of course, in steve's bizarro world, he knows more about the law than the U.S. Supreme Court.

steve is wrong, again and again and again . . .

No it doesn't mean that they are "the law," fool. "Controlling weight" means that the court must grant them deference in the COURT's interpretation of the statute. Courts don't write law; they interpret it.

steve, you have no idea what you are talking about. Quit while you are behind. You badly lost the argument again. You can make up some other word instead of "law" that you can call regulations in your backward world, but in the real world, regulations are law. I guess you do not think statutes are law since they are not provisions of the U.S. Constitution.

Wow you are obtuse.

LICC: "In the real world, regulations are law."

Black's law dictionary: "regulations are not the work of the legislature and do not have the effect of law."

Here's an easy to understand explanation for you:

http://en.wikipedia.org/wiki/Nondelegation_doctrine

You really are clueless. The cite you posted makes clear the the U.S. Supreme Court has held that Congress has the power to delegate certain regulatory authority.

Why do you always insist on posting things that make you look dumber and dumber? Your inability to admit you are wrong makes you look like even more of a fool because you insist on making your bad arguments even worse.

"Congress has the power to delegate certain regulatory authority"

Exactly right. And here's why:

"All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives."

Which means exactly what I said it did - weight can be given in the opinions of a court to administrative regulations, but those regulations do not have the force of law. There are countries where regulations are issued with force of law, but not the US.

Fool.

U.S. Supreme Court - If Congress has explicitly left a gap for the agency to fill, there is an express delegation [467 U.S. 837, 844] of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.

That is law steve. Controlling weight, meaning courts cannot decide contrary to the regulation.

You must love to lose arguments all the time.

"to elucidate" is not law. It is, according to Oxford: "to make clear; explain."

That is the limit of what a regulation can do. It cannot override a statute, or reinterpret it, or add to or detract from it. It can merely explain it.

"Controlling weight, meaning courts cannot decide contrary to the regulation." Courts can and do overturn regulations all the time. It merely means that if a regulatory agency has elucidated a statute through regulation, that deference is given to it.

Sorry dude. You're out of your league. There must be an office for you to clean somewhere.

steve officially fails his law class.

Courts can overturn expressly authorized regulations if they are arbitrary, capricious or manifestly contrary to the statute. Otherwise, courts cannot overturn them.

Courts can overturn statutes if they are unconstitutional. That does not mean statutes are not laws.

I think a 10 year-old would be able to understand this better than slow-minded steve.

"That does not mean statutes are not laws."

Oh, boy. Statute: "a written law passed by a legislative body."

What a moron.

steve, you can call regulations whatever you want. Call them elucidations in your world. The fact is that regulations must be complied with or else you will be subject to government enforcement action. They are controlling when interpreted by courts. Even though for some crazy reason you refuse to admit they are law, the effect is the same.

No wonder you couldn't last as an auditor.

LICC: "Call them elucidations in your world."

LICC quoting the Supreme Court: "authority to the agency to elucidate a specific provision"

My world, right? HAHAHAHAHAHA!

LICC: "Even though for some crazy reason you refuse to admit they are law, the effect is the same."

Black's law dictionary: "regulations are not the work of the legislature and do not have the effect of law."

No wonder you live in Long Island City, & think you got a deal!

This is an excerpt from a message Elena Kagan sent to Harvard Law alumni shortly before stepping down as Dean of Harvard Law School:

During our intensive curriculum review, . . . we wanted to do more to help students learn to solve—not just identify—problems; to prepare them to operate effectively in a context where statutes AND REGULATION, not just cases, play an increasingly important role; . . .

What students learn during their 1L year goes far in shaping their sense of WHAT LAW IS, and for this reason, we focused much of our attention on this critical first year. Ultimately, we decided to supplement the standard 1L curriculum with three new courses—one focusing on the statutory and REGULATORY ASPECTS OF LAW . . .

Quick steve, call Harvard Law School and tell them their curriculum is wrong!! Tell them that regulations are not law!!! Tell them that you know more about law than Elena Kagan and the administration of Harvard Law School!!

You clown.

No, actually, LICC, Harvard is absolutely correct. You apparently can't read: statutes are one thing, regulations are another.

No one ever said that regulations don't have an effect on the law. They do: they affect its interpretation. But they are not the law. Custom and practice also have an effect on the law, but they are not the law.

You can go fishing as long as you like; you will never find an authority that makes the claim that regulations are the law. They are certain rules of interpretation delegated by Congress to which deference is sometimes given by the courts; they simply can't be the law because only Congress can make laws.

Equity is also an aspect of the law. It is not statutory law, however. You will likely find a course on that at law schools, as well.

steve, you are rambling like an idiot. No one said that regulations were statutes.
It is clear that you have no idea what you are talking about. Just end it already.

LICC: "It is clear that you have no idea what you are talking about."

Just read above, people. The record is there.

LMAO!

Yes, the record. The U.S. Supreme Court and Harvard Law School v. . . . steve.

"The U.S. Supreme Court and Harvard Law School v. . . . steve"

HAHAHAHAHA! That is an amazing projection, LICC, typical of you. "No one said that regulations were statutes." Exactly right. Not even me.

LICC: "That does not mean statutes are not laws."

No it doesn't. Statute: "a written law passed by a legislative body."

Supreme Court: "to ELUCIDATE a SPECIFIC PROVISION of the STATUTE by REGULATION."

LICC: "Regulations are the law."

No they're not. Even your sources say they're not, yet you insist.

Wow!

I hate to derail the lively banter on this thread with a crazy thread turn, but one more time:

Steve:

No, because you're asking the wrong question. The right question is, "Is there a book I should be reading to tell me how, other than government spending and debt, we can save the world economy from collapse faced with the collapse of the financial system."

The answer to that is a resounding NO. Supply-side economics say merely to increase the money supply - Japan tried that, it didn't work because of lack of velocity. Unfortunately, where we are now we're stuck with the only solution available. Fixing the deficit MUST come next.

The problem started with George II, cutting tax revenue then borrowing to start a war. The government needs to be countercyclical: when times are good, save. When times are bad, spend. George II did the opposite.

I don't mean to be pesky, but I'm not sure if this answer is just too brief for me to understand or if we are saying the same thing or if there are assumptions I need to make to link it all together. There is a bailout issue and a stimulus issue (and probably a host of others). Just looking at the "stimulus" issue for a moment, Mish has an interesting take on this:

http://globaleconomicanalysis.blogspot.com/2009/11/is-debt-deflation-just-beginning.html

This has some agreement with your response, but I interpret it as a very different conclusion. I see him as advocating letting prices drop, let deflation take its course as quick as possible, minimize the pain, then build from there. Otherwise we are turning Japanese..... (I really think so!)

Sorry Lecker, but don't believe "Mish": deflation is NOT the natural state of affairs, and it is a very dangerous thing. A small degree of inflation is necessary and good - 2%, thereabouts - because it basically accounts for something that statistics don't account for: better quality.

Increased productivity won't necessarily make things cheaper, as more productive workers are paid more. Mish's theory seems to be that more productive workers would be paid less - that's where his concept falls apart.

It's not possible to hold anything steady for a long time; it either inflates or deflates. Much like the universe. If people expect LOWER prices tomorrow, then they will not spend TODAY, and therefore deflation occurs much more quickly than inflation, and it is more difficult to reverse.

Just as no one lends in a hyperinflationary environment, not only do people not buy in a deflationary environment, they don't borrow in a deflationary environment, either. Everything collapses.

If you have money with Mish, take it out.

http://www.nytimes.com/2009/11/06/business/06norris.html

It took just five weeks after the WorldCom accounting scandal erupted in 2002 for Congress to pass, and President George W. Bush to sign, the Sarbanes-Oxley Act. That law required public companies to make sure their internal controls against fraud were not full of holes.

Sarbanes-Oxley was passed, almost unanimously, by a Republican-controlled House and a Democratic-controlled Senate. Now a Democratic Congress is gutting it with the apparent approval of the Obama administration.

The House Financial Services Committee this week approved an amendment to the Investor Protection Act of 2009 — a name George Orwell would appreciate — to allow most companies to never comply with the law, and mandating a study to see whether it would be a good idea to exempt additional ones as well.

Some veterans of past reform efforts were left sputtering with rage. “That the Democratic Party is the vehicle for overturning the most pro-investor legislation in the past 25 years is deeply disturbing,” said Arthur Levitt, a Democrat who was chairman of the Securities and Exchange Commission under President Bill Clinton. “Anyone who votes for this will bear the investors’ mark of Cain.”

The Sarbanes-Oxley law also took steps to reinforce the independence of the Financial Accounting Standards Board, which writes accounting rules in the United States. By giving the board a secure source of financing, legislators said they were protecting it from the threats of the companies that had previously made donations to keep the board functioning.

But this Congress has made clear that independence for the accounting rule writers can go too far — particularly if the rules force banks to reveal the horrid mistakes they previously made.

This year, a subcommittee of the House Financial Services Committee held a hearing at which legislators sought no facts but instead threatened dire action if the chairman of the financial accounting board did not promptly make it easier for banks to ignore market values of the toxic securities they owned. The board caved in, which may be one reason why banks are reporting fewer losses these days.

But the board’s retreat was not enough to satisfy the banks. The American Bankers Association is now pushing Congress to give a new systemic risk regulator — either the Federal Reserve or some panel of regulators — the power to override accounting standards. The view of the bankers is that the financial crisis did not stem from the fact that the banks made lots of bad loans and invested in dubious securities; it was caused by accounting rules that required disclosure when the losses began to mount.

asset price deflation is not the same as general wage and price deflation. the latter is not good. lecker, you may enjoy this. i frequently agree with Mish's analysis of where we are now, and why, less frequently with his analysis of what we should be doing going forward.

http://www.interfluidity.com/posts/1256656346.shtml

yes but....

when large groups of consumers use assets to create income for current consumption and then can no longer do so because of the fall in asset values, it would seem that the issue gets pretty muddled.

the issue is very muddled. that's the problem. and that's why there are so few answers that hold up under any sort of real scrutiny. there are no good answers, only some that might be less bad than others.

http://blogs.wsj.com/deals/2009/11/05/michael-milken-sounds-warning-on-sovereign-debt/

Milken noted that while the U.S. financial system nearly imploded, “for the world as a whole, 2008 was the third greatest year in wealth creation in the history of the world. The others being 1999 and 2007. If you look at Eastern Europe, South America and Asia, where countries enjoyed a 100% growth rate in wealth accumulation last year, it isn’t surprising that these countries have a hard time dealing with the headlines coming out of the United States. The U.S. is no longer the sun. We might be Jupiter in an analogy of a solar system

Credit rather than leverage
When I was on Wall Street , I rarely had ratio higher than 3:1 or 4:1, I have never heard of any leverage ratios higher than 10:1. But in the United States of America, there were companies that leveraged 100:1. To me, it is not a business.

Mortgages in real estate are never an investment-grade asset
Real estate values go up 70 years and in certain period of time, it has been going down for five years in a row. If you are an investor that buying real estate assets that are backed by mortgages, assuming the only way to get your money back is hoping the price keeps to go up, then it is hard to understand what the asset category is. The debt depends on the asset value that the company who sells the debt doesn’t guarantee.

Why aren’t other countries having this problem? Because in most countries, people don’t borrow on their homes. The shocking thing for America is that this occurred before. In 1980s, we went through 5-6 painful years that caused failures or mergers of almost every single financial institution in Texas, Colorado, Oklahoma, Louisiana and Arkansas. In Houston, house prices fell 40% in five years.

Ron Paul was talking about the Fed, but what he says is relevant to how we attack the whole debt crisis...

http://latimesblogs.latimes.com/washington/2009/11/ron-paul-to-federal-reserve-open-your-books.html

Critics worry that robbing the Fed of its ability to deliberate in private will result in a weakened central financial structure -- and put Congress in charge of managing the nation's money supply.

But Paul, a physician, argues that a doctor would never hide from a cancer patient the extent of his illness, and that hiding the Fed's books amounts to kidding ourselves about the impact of its policies.

"We're still kidding ourselves," he said. "You have to bite the bullet, you have to admit the truth.... It's sort of like trying to get somebody off drugs.... Keeping them on the drug -- which is easy money, easy spending and huge deficits and all that -- that will kill the patient, and the patient for me is the dollar.... And when you see gold up at $1,100 at ounce, that's a little bit of a warning signal."

Thanks for the additional information on this topic. I don't have a formal background in the topic and find it somewhat fascinating to learn more about it. Aboutready - that link is particularly helpful as it distinguishes different treatment of asset deflation v wage deflation. If I am understanding this correctly, this is the crux of Steve's point on this thread (avoid deflation) relative to his overarching point on these boards (prices of Manhattan RE will fall (deflate)). (feel free to correct me if I am wrong in this)

Still, Aboutready, if I am understanding it correctly, I find some of those premises disturbing. Call me crazy, but I always thought saving was prudent. That blog seems to indicate that borrowing induced spending is the (only?) way to generate growth. Perhaps I need to re-read it.

To someone without a formal background and perhaps a too simple perspective, this all feels like a ponzi scheme. How can this be sustainable?

not sure how SE messed up my last point / let me try again a bit more summarized:

Thanks to all for this information. I don't have a formal background in this and find the topic fascinating. Aboutready: thanks for the link. I don't know if I understand it all, but it helps make the distinction between asset deflation and wage deflation. It helps me reconcile Steve's point on this thread (avoid deflation) relative to his overarching point on these boards (prices of Manhattan RE will fall (deflate)). (feel free to correct me if I am wrong in this)

Still, Aboutready, if I am understanding it correctly, I find some of those premises disturbing. Call me crazy, but I always thought saving was prudent. That blog seems to indicate that borrowing induced spending is the (only?) way to generate growth. Perhaps I need to re-read it.

To someone without a formal background and perhaps a too simple perspective, this all feels like a ponzi scheme. How can this be sustainable?

LOL!
not sure how SE messed up my last 2 point / let me try again a bit more summarized:

[sorry this is not timely - can't always read these boards when I want]

Thanks to all for this information. I don't have a formal background in this and find the topic fascinating. Aboutready: thanks for the link. I don't know if I understand it all, but it helps make the distinction between asset deflation and wage deflation. It helps me reconcile Steve's point on this thread (avoid deflation) relative to his overarching point on these boards (prices of Manhattan RE will fall (deflate)). (feel free to correct me if I am wrong in this)

Still, Aboutready, if I am understanding it correctly, I find some of those premises disturbing. Call me crazy, but I always thought saving was prudent. That blog seems to indicate that borrowing induced spending is the (only?) way to generate growth. Perhaps I need to re-read it.

To someone without a formal background and perhaps a too simple perspective, this all feels like a ponzi scheme. How can this be sustainable?

Success!

Hey, I studied this.
Anyway, I'm watching Cramer (DVR) and he says that if commercial real estate hasn't already crashed, then it won't.
Goldman will go back to its highs as people circle around the winners.
We are in a raging bull.

Interesting, right?