Many people do not understand the moral hazard created by having FDIC insurance. Those lovers of big government never look at the unintended consequences, only those seen. We should never be saying thank goodness we had FDIC insurance in the first place. We need to look at the cause of failing banks. A typical response would be something like a fellow reader wrote.
The Federal Deposit Insurance Corporation: Implemented in 1933 under the Glass-Steagall Act, this federal program put and end to Depression era ‘runs’ on banks. Today, people don’t have to worry about losing everything because a bank fails. Pretty handy considering the fact that hundreds of banks have failed since the 2008 economic meltdown.
The reason FDIC should be abolished is the distortion in the banking industry it creates. For those who are not aware of what FDIC is it is Federal Deposit Insurance Corporation. It is a government backed insurance policy which guarantees bank account deposits up to 250k. If the bank goes bust, the insurance policy kicks in pays backs the money. In theory, it prevents runs on banks.
Having FDIC sounds good in theory, however what it actually does is punishes good banks and rewards bad banks. The first glaring issue is basically the premium which banks have to pay is from what I understand, uniform. If one bank decides to take depositors money and gamble it, they still pay the same fee as the conservative bank. This forces conservative banks to pay for bad behavior.
The second issue comes from the fact because it covers risk of loss; depositors have no care in the world how risky a bank is operating. Often the opposite of logic happens and bad banks actually offer far higher yields to deposit money with them. This forces good money out of the good banks and pushes over to bad banks again. Again rewarding the bad and punishing the good.
The final bad side effect of FDIC is low yields paid to depositors. Because the risk is now considered very low since Uncle Sam is backing the account, banks do not have to pay depositors for using their money. This is why you get .000001% when you deposit money in a checking account. This punishes savers and gives huge rewards to the banks.
Overall FDIC distorts the banking sector, allows Fractional Reserve Lending to lend out of control. The taxpayer gets the downside, depositors get zero interest. The only winner is the big bankers.
It is time we finally have a discussion about getting rid of minimum wage laws. With each increase in minimum wage, it is becoming harder and harder for small businesses to start up and grow, and is creating a generation of kids with no work history.
Minimum wage laws are a jewel of the left and labor unions. To the average person it seems like a decent idea, force employers to pay at least $7.85 per hour. That number only represents $16,328 a year. Surely anyone working deserves at a minimum a living wage. I used to think this myself, until I dug deeper and realized how minimum wage hurts our country and does nothing for those it intends to help.
The first glaring reason to abolish the Minimum Wage Law is because most people do not earn minimum wage. In 2005, only 1.5% of people worked for minimum wage. This is a very small group. This means that 98.5% already earn more money than minimum wage. The market decides what people are able to justify for income, and most people have skills which warrant far more.
So now doubters are saying, you just do not care about that 1.5% percent that would get a raise. This is actually not true. First of all, a large portion of that percentage is paid minimum wage because they receive extra money through tips. They are bartenders, barbers, waiters, and waitresses. These individuals earn far more than minimum wage, yet are paid cash so they show up as being affected.
Also in those numbers of minimum wage were over half of them are young workers under 25. The most important thing for a young person is getting experience. They understand that putting in a tough year of low paying work will lead to better opportunities. The higher minimum wage laws have created spoiled zombies out of our younger generation. Most teenagers will go until after college ever having any sort of real job. Unemployment at the younger ages is a huge problem, abolishing the minimum wage law would allow for more of our entry level workers gain those important skills.
This leaves the final group that actually gets paid minimum wage. I know, what about them. Well I say they already benefit other ways. If you make minimum wage, most likely you are on government housing, food stamps, Medicaid, fuel assistance and all the other government goodies. My point is if this is the group you are worried about, you shouldn’t. That is the point of this countries welfare system. This is where the Liberals want to have their cake and eat it to. Get rid of welfare and its massive costs if you want higher wage laws, get rid of welfare.
This would be a boon to small business since they would be able to hire low cost workers to help them grow from a very small company into a much larger one. They need to be able to lower the start up costs of opening a new location. By abolishing the wage laws, we will take the pressure off of small business. Make it easier and cheaper to hire. And lastly, give our young a chance to get those skills.
Matt
http://talkofliberty.com
I have been watching the country get driven into socialism and crushed further into debt. So now on TV they (conservatives) are saying it is going to be up to the Republicans to get voted in and save us all from socialism this November. My question is what has a Republican done to shrink government? I do not believe in Republicans anymore, they have failed me.
In my life I have seen bigger government and more spending each every step of the way with Republicans. You have Republicans like Scott Brown who votes for jobs bills spending more Keynesian spending that has never worked in history. How will Republicans cut spending and balance the budget?
Republicans still believe in the Laffer Curve from the Reagan days. The biggest misconception with the Laffer Curve is not that lower taxes are better, instead the Laffer Curve is a tool to figure out what the maximum tax rate the government can get away with. Common sense says a tax rate of 0 would be best economically. Yes I understand we do need government and military, but the point is we need a smaller government not the largest one we can get away with.
Are Republicans willing to balance the budget in 2012 if they win the majority back? Are they willing to cut the military spending in half? Can a single Republican tell me how they will balance the budget and or what they would be willing to cut? I have not found a single one who can. Republicans may be a big winner in November, but unless we get leaders like Governor Chris Christie who is taking the Unions head on and slashing spending, we will continue down the road to serfdom.
I saw Sean Hannity stumped when asked what would he cut from the budget, yet he is the first to say he hates deficits. I am skeptical the Republicans will practice what they preach.
I am going to go with my gut on this one. Everyone is trying to figure out why the heck student loan reform is in this Health Care Bill. I think I know the answer when I had an aha moment. Now stay with me, but I am taking a guess at this one.
Every conversation I have heard about the reconciliation process is it can be used to reduce deficits. Everyone knows that cutting out the middle man was guaranteed to save a lot of money in the student loan process (it will continue to blow a massive education bubble, but that is besides the point). In political terms, I think this is like holding a wild trump card. At some point someone new that reconciliation requires deficit savings. By throwing in this student loan reform, it bumped up the ten year savings by billions.
My question, since I am just a regular guy is, does the 100 billion in deficit reduction over ten years come from student loan savings not Health Care savings? Is the student loan savings what the CBO scored and made this bill able to go through with reconciliation? If left out of the final bill, would this bill save Americans anything?
I think this Health Care Bill doesn’t reduce the deficit at all. They have smoke and mirrors to make sure it happens. Take away the 60 billion I have read student loan reform saves and this 940 billion dollar bill equals over a trillion.
We have been hoodwinked. Well played Pelosi and Reed, and Obama, but I am calling you on it.
This whole thing is very fishy to me, I want to raise this flag first. Can someone answer these questions for me?
Please Digg this story if you think I am on to something.
The CBO has returned with the estimated cost of the next ten years of health care reform. A mere $940,000,000,000.00 dollars for ten years. This is likely to be completely wrong and end up costing far more for Americans since it will destroy even more levels of competition through oppressive new regulations and mandates.
One overlooked fact regarding this comprehensive reform package is how it will basically cost $1 trillion dollars to cover an extra 31 million people. I question the idea that those 31 million do not have coverage since half of them are young in between jobs youth who probably do not even need coverage. Regardless, the average cost per person will be a staggering 3000 dollars per year for ten years to cover them for ten years, but the reality is it will cover them for 6 years meaning it is closer to $5,000 per person. Keep in mind, half of this pool is a low risk pool with little cost to cover.
The second overlooked cost of HC reform is the fact that the trillion is the cost of 31 million extra to be covered. What about the other 200 million people who already have insurance? Democrats state that this will lower the cost of insurance for employers to pay for or individuals to buy. I ask how? This bill changes nothing regarding competition or reducing regulations which drive up prices. The only thing in this bill is more coverage mandates. This will no doubt cost everyone more in the bigger picture over the next ten years. Let’s be extremely gracious to the democrats plan and only assume this bill adds additional costs of $100 dollars a year to everyone else, it would add an additional 2 trillion dollars in cost. This is an additional 2 trillion dollars that will pay for red tape not creating a job or healthier people.
Because there is nothing in this bill that increases competition and it was written by pharmaceutical executives, that means this bill can only lower costs through price controls which have never succeeded and always lead to rationing with less supply than demand. This bill will most likely suck at least another 3 trillion dollars out of our economy and divert it to unproductive areas, lowering the overall capacity of wealth generation in our economy. Small businesses will likely be crushed initially since it will takes months to find loopholes around regulations rather than pay for them.
Most people think economists are always wrong when they try and figure things out, but the reality is just the big government Keynesian crowd always misses the boat. Listen to the Austrian Economics crowd and you will a polar opposite view of how the markets work.
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