NationStates Jolt Archive

It turns out that there are more different answers to this question than I thought. In fact, it seems like everyone has a slightly different answer. However, when considering actions to take at the moment one can't get around thinking about just what one wants to come out at the end of it. So I decided to ask a few questions of NSG.

1. Which of the following do you consider necessary roles of the financial system?
Storing people's wealth safely
Earning a (relatively) riskless return (eg deposit interest) on people's wealth
Earning a risky, higher return on people's wealth if they choose
Distributing capital to those who need it
Distributing capital efficiently (ie to those who will use it to earn the greatest return)
Earning a return to shareholders
Earning a (market-determined) income for bankers
Facilitating corporate strategies (eg acquisitions, restructurings etc)
Helping people legally minimise their tax bill
2. Which of those things above do you consider not necessary but valid/acceptable/tolerable roles of the financial system?

3. On a scale from 1 = safest and 5 = riskiest, where do you stand on the trade-off between greater potential economic long-term growth* and greater risk of occasional financial collapses?

4. Would you prefer banks to be large (eg national or global) or small and local?

5. What do you think about the fact that banks have to be highly leveraged, that is they lend out money that their depositors have given them for safe-keeping? If you disagree with this practice, how else would you organise lending?

6. Should the entire financial system be centrally run by the government? Should the entire system be completely decentralised with no government involvement whatsoever?

7. What purpose does the trading of equity and debt serve? Is either necessary?

8. What purpose do investment banks serve? Are they necessary?

9. What purpose do hedge funds serve? Are they necessary?

10. What purpose do private equity firms serve? Are they necessary?

*I mean the way in which saving is allocated into investment into the capital stock, thereby determining growth rates over long periods, ie decades or more. That is to distinguish it from the movements through a particular business cycle.

You give me your money, I spend it.

1. Which of the following do you consider necessary roles of the financial system?

* Storing people's wealth safely
* Earning a return to shareholders
* Earning a (market-determined) income for bankers
* Facilitating corporate strategies (eg acquisitions, restructurings etc)
* Helping people legally minimise their tax bill



2. Which of those things above do you consider not necessary but valid/acceptable/tolerable roles of the financial system?
Earning a (relatively) riskless return (eg deposit interest) on people's wealth

3. On a scale from 1 = safest and 5 = riskiest, where do you stand on the trade-off between greater potential economic long-term growth* and greater risk of occasional financial collapses?
5

4. Would you prefer banks to be large (eg national or global) or small and local?
Large, National but not nationalized

5. What do you think about the fact that banks have to be highly leveraged, that is they lend out money that their depositors have given them for safe-keeping? If you disagree with this practice, how else would you organise lending?
It's the way things work. I can't think of a better way, although this isn' the greatest.

6. Should the entire financial system be centrally run by the government? Should the entire system be completely decentralised with no government involvement whatsoever?
Neither. Minor regulation, not totally free, but fairly so.

7. What purpose does the trading of equity and debt serve? Is either necessary?
Mmm. Not really informed enough.

1. Which of the following do you consider necessary roles of the financial system?
[list] Storing people's wealth safely

Necessary.


Earning a (relatively) riskless return (eg deposit interest) on people's wealth

Valid.


Earning a risky, higher return on people's wealth if they choose

Necessary.


Distributing capital to those who need it

Necessary.


Distributing capital efficiently (ie to those who will use it to earn the greatest return)

Depends on what exactly is being distributed. But valid.


Earning a return to shareholders

Necessary.


Earning a (market-determined) income for bankers

Doesn't bother me.


Facilitating corporate strategies (eg acquisitions, restructurings etc)

Necessary.


Helping people legally minimise their tax bill

Doesn't bother me.



Probably 2

[QUOTE]
4. Would you prefer banks to be large (eg national or global) or small and local?


Both


5. What do you think about the fact that banks have to be highly leveraged, that is they lend out money that their depositors have given them for safe-keeping? If you disagree with this practice, how else would you organise lending?


Don't disagree with this.


6. Should the entire financial system be centrally run by the government? Should the entire system be completely decentralised with no government involvement whatsoever?

Monetary policy should be initiated by a central bank but would probably be better if it was nationalized. Government should initiate some fiscal policies where appropriate. Banks should have their transfers over sighted for illegal activity, and large ones especially should have a limit to how high risks on certain assets and loans should be.


7. What purpose does the trading of equity and debt serve? Is either necessary?

No opinion


8. What purpose do investment banks serve? Are they necessary?


They help create or facilitate growth, they distribute funds efficiently to firms.


9. What purpose do hedge funds serve? Are they necessary?


No opinion.


10. What purpose do private equity firms serve? Are they necessary?


Also create growth, increase injections etc...

1. Which of the following do you consider necessary roles of the financial system?
[list] Storing people's wealth safely
Earning a (relatively) riskless return (eg deposit interest) on people's wealth
Earning a risky, higher return on people's wealth if they choose
Earning a return to shareholders
Earning a (market-determined) income for bankers

2. Which of those things above do you consider not necessary but valid/acceptable/tolerable roles of the financial system?
all but:

Distributing capital to those who need it

3. On a scale from 1 = safest and 5 = riskiest, where do you stand on the trade-off between greater potential economic long-term growth* and greater risk of occasional financial collapses?

3? I guess

4. Would you prefer banks to be large (eg national or global) or small and local?

A mix of both is fine, larger=/=safer. I think they probably both have roles to play.

5. What do you think about the fact that banks have to be highly leveraged, that is they lend out money that their depositors have given them for safe-keeping? If you disagree with this practice, how else would you organise lending?

I don't disagree with it, its expected that you put your money in the bank so they can loan it out and earn you something. Otherwise you could put it under your mattress.

6. Should the entire financial system be centrally run by the government? Should the entire system be completely decentralised with no government involvement whatsoever?

hell no, Hell no.

7. What purpose does the trading of equity and debt serve? Is either necessary?

I guess to keep things fluid, allow people to make new investments, make new loans? I don't think its necessary, but probably beneficial to a point.

8. What purpose do investment banks serve? Are they necessary?

Er, to invest money. See above?

9. What purpose do hedge funds serve? Are they necessary?

not sure.

10. What purpose do private equity firms serve? Are they necessary?

again, not sure what they do.

"One that makes people do quite a fair bit with their money so we can tax it and use it for social welfare and shit, hurrah"

I'd also say that hedge and private equity firms are a necessary evil and are basically propping up what's left of the pensions sector.

I am personally a supporter of a truly deregulated system in which all risks are borne by investors, companies and their stakeholders. I feel this is the most optimal system were it possible to implement without falling prey to the inevitable conflicts of interest. However, in principle I would not be opposed to a strictly regulated system where the government guarantees the liabilities held by banks and which would have no qualms using weapons such as conservatorship and outright nationalization to punish/restructure failed banks.

I believe that economic growth should be encouraged to the fullest extent, but only insomuch as the means to that end is legal and properly regulated (or properly deregulated). This should also be considered in regards to monetary policy; adopting a strict monetary rule is necessary, one that can only be deviated from in the most extraordinary circumstances.

Lastly, I believe there should be no limits on the structure of investments, but at the same time the more exotic the instrument, the greater risk the company should have to bear. I can personally attest that derivatives are a nightmare to account for and that our modern financial reporting system isn't quite ready to handle them in the sense of other, more conventional investments.

All I am going to say is that I do not believe that people understand fully that business is not a social program, but rather a money making enterprise to return a profit to the shareholders. Banks are businesses. Thats all I believe that I need to say..

What is a "good" financial system?

The glorious worker's paradise that is Communism.

All I am going to say is that I do not believe that people understand fully that business is not a social program, but rather a money making enterprise to return a profit to the shareholders. Banks are businesses. Thats all I believe that I need to say..
To an extent, yes. The problem is, especially with the larger banks, when they go boom, they have a rather large effect on everything else.

It turns out that there are more different answers to this question than I thought. In fact, it seems like everyone has a slightly different answer. However, when considering actions to take at the moment one can't get around thinking about just what one wants to come out at the end of it. So I decided to ask a few questions of NSG.

1. Which of the following do you consider necessary roles of the financial system?
Storing people's wealth safely
Earning a (relatively) riskless return (eg deposit interest) on people's wealth
Earning a risky, higher return on people's wealth if they choose
Distributing capital to those who need it
Distributing capital efficiently (ie to those who will use it to earn the greatest return)
Earning a return to shareholders
Earning a (market-determined) income for bankers
Facilitating corporate strategies (eg acquisitions, restructurings etc)
Helping people legally minimise their tax bill

Storing people's wealth safely
Earning a (relatively) riskless return (eg deposit interest) on people's wealth
Earning a risky, higher return on people's wealth if they choose
Distributing capital efficiently (ie to those who will use it to earn the greatest return)
Earning a return to shareholders
Earning a (market-determined) income for bankers
Facilitating corporate strategies (eg acquisitions, restructurings etc)
Helping people legally minimise their tax bill

3. On a scale from 1 = safest and 5 = riskiest, where do you stand on the trade-off between greater potential economic long-term growth* and greater risk of occasional financial collapses?

5, historically the risk takers always have the best long term growth.
the second you try to make an economy safe you have ruined it.

4. Would you prefer banks to be large (eg national or global) or small and local?

Depends they both have their niches. farmer joe might have a hard time getting a loan from big investment bank for a new tractor, but the local bank would be more likely to obliged
5. What do you think about the fact that banks have to be highly leveraged, that is they lend out money that their depositors have given them for safe-keeping? If you disagree with this practice, how else would you organise lending?
that's the only way to do lending really. Don't like it go to a place that forbids usury.
6. Should the entire financial system be centrally run by the government? Should the entire system be completely decentralised with no government involvement whatsoever?

hell no. the governments interference is what has gotten us into this mess.

7. What purpose does the trading of equity and debt serve? Is either necessary?

8. What purpose do investment banks serve? Are they necessary?

9. What purpose do hedge funds serve? Are they necessary?

10. What purpose do private equity firms serve? Are they necessary?

*I mean the way in which saving is allocated into investment into the capital stock, thereby determining growth rates over long periods, ie decades or more. That is to distinguish it from the movements through a particular business cycle.

7,8,9,10
they are all designed to make money. the government is obliged to step back and let people make their money.

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

...too bad it'll never happen. Too many people have a personal stake in keeping the current system on life-support.