Over-regulation

             

Adverse revelations constantly crop up about the Dodd-Frank Act, which was created by Congress to cure everything that hinted at financial malaise.

                     

The Act has extraordinary regulations, with studies and reports. We still haven’t seen the end of them. More than the ignominious Sarbanes-Oxley legislation, whose negative impact outweighs the positive, that had 16 regulations that helped the exodus of major corporations to flee overseas.

                     

The Law of Unintended Consequences is always overlooked by politicians because it’s convenient to do so when campaigning for office.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Economic Opinions

            

When you listen to economic opinions find out what the politics of the economists are before taking their advice. Political slants color their opinions. Economics is not a true science, so comments can diverge.

                     

Look into track records; many of those lauded by the media have been consistently wrong for decades or merely misinterpreted. John Maynard Keynes’ opinion is an example.

                     

Also, do not be impressed by awards, especially Nobels, as some have been given primarily on the basis of politics.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Stimulus Problems

          

The problem with the usual stimulus is that most are political and have no real economic function other than immediate political. Moreover, they are usually the wrong kind. That is, they are made for action too far into the future. They begin to work after actual economic recovery.

Natural market repairs are much faster than a political stimulus, which is merely a misnamed bait and switch device. The usual stimulus should instead be called what it actually often is, a political slush fund.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Government Economic Meddling

          

Before modern regulatory controls, free financial markets regulated themselves. Severe bubbles were rare, though economic cycles were common, as they still are.

                     

But recessions were self-correcting, because they were market-oriented. An economic downturn was generally brief, self- repaired by inherent market instincts.

                     

There were no strict regulatory powers, with no artificial tinkering and meddling by use of economic theories or any correcting stimulus. Yet, the steeper the downturn, the faster and sharper the recovery in every instance. Despite political alibis.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Poor Government Credit Rules

            

Many politicians rely on government to remedy all the ills of a relatively small population, while imposing more socialistic restrictions in that effort. While the taxpayer/consumer pays dearly for ineffective efforts.

                     

An example: Borrowers who use credit cards, or take out mortgages and loans, often make stupid decisions. Government bureaucrats will tell you we need more regulations. Yet you cannot legislate or regulate against stupidity without consequences. Those merely translate into more costly bureaucracy.

                     

Larger print in consumer contracts will surely help. Along with better schools we already pay for.

                     

What government credit facility efforts actually do is make credit more scarce. And therefore more expensive for those with good and bad credit alike.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Government Promises

    

 Many politicians rely on government to remedy all the ills of what actually is a relatively small percentage of the population. They never fail to use an economic sledge hammer to accomplish a legislative goal.

                     

To cure laments of a small set of the population, they seek remedies that hurt the majority. The result is the same: bigger government. greater advances to the socialist state they insist they are not really for.

                     

Critics feel their sole political intention is merely to create more government and not practical help. Except for attracting uninformed voters.See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Some Examples of Bank Tests

            

Examples of periodic use of Stress Tests are for evaluation of banks’ strength:

                     

1) Publicizing the results as in the past is dangerous to the economy. The term itself is poor because of its psychological implications with regard to the economy and the stock market.

                     

2) Very few among the public, and only a few in the financial community, fully know what each test is supposed to reflect.

                     

3) In an emergency, the amount of capital a bank has can be wiped out because of mark-to-market accounting principles that may be applied.

                     

In the past. these actions caused the very financial emergencies they supposedly were meant to avoid.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)