Hmm -perhaps find out if the individual losers in economic downturns are considered collateral damage 1st. There are wonderful, loving folks follow that path to some degree; my dad was one of those people.

You can also find out if your friend feels that the government should have some role in serving its citizens who are in danger of falling through the cracks when big businesses cause the earthquake.

Wish I could help you more. I might even be overstepping my bounds by posting in this entry, since you did summon the smart folks.

My response to your Lehman Bros. friend is that a market without "regulation" doesn't and shouldn't exist.

Money is created by bankers in any financial system - fiat or otherwise. No bankers have in their vaults the funds to back up their loans. The money they create by making loans in excess of what they have on deposit is accepted throughout our financial system as exchangeable with money printed in a government mint. Hence, bankers are granted to privilege of creating the nation's money - almost all of it. To give a charter to a bank - a government seal of approval to operate - without regulating the manner in which they do business is to surrender the sovereignty of the nation - which derives from the will of the people - to the bank. Maybe your friend is a nice guy and all - but no thanks.

Tim is right on, but I would add that the economy as a whole has larger problems then just "cycles"

The upper class invests in anything that will make a profit and most companies send on anything that will make immediate profits and put off long term investments. The wealthy can survive a crisis with a few less yachts but average people and the US government starve, so its in our best interest to regulate to avoid "cycles".

But bubble and burst cycles create recession and growth, not depression.

I would argue that depression is caused by mass devaluation of capitol. For instance a world driven by steam and cheap northern labor shifting all its production to an economy driven by petrol and cheap labor in the south and now an economy based on petrol and cheap labor in the third world shifting to Solar, wind, and local production around the world.

Business will ride out their investments till the end like a game of chicken rather then invest in future technologies slowly over time.

I think this summers oil prices scared everyone into thinging the end is soon and its time to get your money out before a crash. I don't we will see a full financail recovery until we see profits in a non carbon based economy.

Thanks so much for your help on this. I was talking with the same buddy again the other day and used both Tim's retort and a version of RedSeven's that regulation did indeed encourage the auto industry to make more fuel efficient cars in the 1980's.

I also asserted that even Greenspan has realized the error of his ways.

Even the example of my own sister, a lawyer with perfect credit who is married to a guy who does IT at a major pharmaceutical research company and how they were struggling to get by before and now she has been laid off bringing into question their stability, their house payments and even their plans to start a family.

Didn't do a lick of good in changing his views (or maybe he just doesn't want to admit as much in a debate with an art school drop out. That would be hard to take if I were in his shoes).

He is still a good person at heart, I just think his view of the world may be unchangable without actual life experience. He grew up in wealthy New Jersey, went to Ivy League college and now works in investment banking. I grew up in poor rural America, lived in the ghettos of NYC, traveled to third world nations with no infrastructure and worked bottom of the barrel jobs.

We just have different views of the world. Sadly, people with the sheltered view are more often than not the ones calling the shots for the rest of us.

I have a strange opinion for you to consider: I oppose government interference BECAUSE of a humanitarian position, not despite it.

Example: My mother is fucked. She's fucked so bad I've already accepted that I'm going to have to step in and take care of her because she's out of options. 6 years away from retirement, she just lost 40% of her nest egg. Worse still- these trillions of phantom bailout money are about to cause a stagflation unseen since the 1970's. In layman's terms: not only can my mother not afford to retire, her cost of living is about to explode, just s she prepares to transition to a fixed income.

In my experience, this is the norm among my friend's parents- stuck in houses and jobs they hate, slaves to a system that has utterly betrayed them.

I'm angry on two levels: firstly, that's my momma, and messing with her is a good way to piss me off. Just as important: as a 28-year-old, the burden falls to my shoulders. This $10T deficit, and nation of aging Boomers, is very quickly appearing for the monster it is. After years of mockery, it becomes self-evident that Perot's prophecy in 1992 proved 110% correct- regarding deficit spending, NAFTA, job loss, immigration, and the social security system.

And, as Paul is assigned to a footnote of the 2008 election, I bang my head against the wall. Current events make a better argument for fiscal conservatism than any sound bite I might quote. Don't take my word for it, face reality: President-elect Obama voted to give away a trillion dollars; less than a month later, these institutions have the audacity to report outlandish bonuses, and the markets remain in the shitter, as a recession sets in, and the once promising XMAS season appears at the doorstep.

And my friends, the progressives, appear to be falling into lock step, repeating the "neocon unified front" theory verbatim. They talk of raising taxes while losing jobs. They talk about forced investment in infrastructure, with a $10T national debt. They justify expanding war into Afghanistan, despite the asinine money wasted so far on this ill-fated war.

Believe me or not, I am not fueled by idealism. I am very eager to be proven wrong by an Obama administration. But what I have seen so far only confirms my original opinion: Ron Paul was our last chance to avoid a new depression. At this point, the only thing left for me to do is protect the people I love.

Buy guns and gold, friends. Laugh at me all you like, but follow suit anyway. The time will soon come when you'll be glad you did. The USD is strong right now, and Gold is cheap. But the opportunity is quickly waning.

Thanks for a thoughtful reply.

And, I agree with your analogy as Wall St as a dark alley in need of some cops to keep innocent old ladies from getting mugged.

Here's my beef: the cops seem the most crooked of all. Lest I remind you: Paulson is a government employee; the Fed is a REGULATORY agency.

I see the problem akin to Chicago or NYC, two cities I love dearly. Most cities have suffered major crime waves, and in both cases, it was later discovered that crooked cops played a major factor. Simply "adding more cops" couldn't fix things; it required major police investigations in both cities before things even started to get better.

So if we are talking about regulation with these same crooked cops, I am simply pessimistic. If new regulation comes along with a major reevaluation of our financial systems- ESPECIALLY the crooks running them, then I will be happy to march by your side in this cause.

"Taking the burden on yourself is commendable"

What alternative do I have?

Do you really think social security will afford me a quality retirement in 2030? It can't afford my mother a quality retirement NOW.

"The best we can do is work toward educating people on self-reliance while weaning people off this corrupt system."

I agree with you 100%, and accept the Paulian approach is far too radical to be take seriously. However, I don't see us taking baby step towards a Paulian system; I see us running head first back to the same failed ideology that got us here.

I concede, and reject the notion of a 100% FREE market; I accept that there have always been taxes and tariffs and other forms of government interference. However, despite all my socially liberal opinions, I remain a rather hardcore fiscal conservative, for the same reasons that you and I manage our own bank accounts the way we do: because it works.

If you or I ran our household budgets the way the Federal government handles its budget, we would be homeless in a few short years. We both know this to be 100% true. And yet, some people are tempted to pretend that if extracted to a Federal level, these laws of finance somehow change. I don't buy it.

The reality is, whether we have more bailouts or not, massive job losses are headed our way. And as jobs go, so too go the revenues from the income tax. At this point we have a choice to make: either we increase taxes from the already fragile investors (capital gains), or begin cutting spending at an enormous rate. Either the Feds must collect more, or spend less. No third option exists- delusions of Reaganomics debt-based growth not withstanding.

"At the same time though, we need protection from the vultures."

If you'd like to go arrest Bernanke and Paulson, and then a plethora of crooked CEOs, I'll be all too happy to join you. Failing that, like I said, gold and guns.

(cue banjo solo)

Also to be clear: I favor MASSIVE budget cuts for two reasons: a) you can't get blood from a stone and b) I think I can get a better ROI from non-government services.

Let's start by slashing the hell out of the military and ending the wars. Consider this: compared to Paul, President-elect Obama is a hawk.

Of course, in practice, the military has become a major source of "work-fare" in this country, to cut military spending now would only increase the pain of job loss.

So, I'm suggesting some rather bitter medicine. A history-altering transition that will rival the Great Depression. I am not surprised that the older a person is, the more opposed they are to this idea.

But what alternative do we have? My honest opinion is that the no-bullshit Boomer plan is this: "keep the scam going 'til I die, then let the kids deal with it".

I represent those kids, and I'm trying to deal with it. Simply stated: as far as the Boomers go, either hurry up and die, or accept this is your problem too.

And, the ultimate irony: I end up paying for the retirement of aging boomers no matter what you do. The only X factor is how much of my income will be taken by the Feds, and how much will be taken by my mother's medical bills?

I do not oppose all regulations, but until we see some accountability from Paulson and Bernanke, I stick by my "crooked cop" analogy.

Who is watching the watchers?

We both agree that the late Ken Lay of Enron should not represent the types of people legislating the regulation of energy. The Enron example proves as a great "worst case scenario" of deregulation gone wild.

On the other hand, I fear Paulson and Bernanke represent the opposite side of the coin: bureaucrats spoiled by all the same conflicts of interest that plagued Ken Lay, but wrapped-up in the flag as if to provide some veneer of ill-deserved integrity.

Either in government, or in private sector, the corruption of power is self-evident. The question to me is: who is doing the most damage?

Enron's collapse caused billions of dollars of damage to our economy.

Paulson and Bernanke just created a $4.28 TRILLION bailout http://www.cnbc.com/id/27719011 note: this does not include the pending bailout for the auto makers (which I am sure is inevitable).

To put that ridiculous number into perspective: that's nearly 1/3rd of our total GDP. Insanity!

Environmental and safety regulations, a la Ralph Nader are a-ok with me. And so I lose any credibility as a hard core Libertarian. But I remain a lowercase-l libertarian, and ardent opponent to these regulatory agencies like the Fed Reserve who, in my view, are far more dangerous than the criminals they seek to protect me from.

Kill or cure?

Libertarianism is often criticized as "all theory, no practice". I might say the same for the advocates of the new New Deal. Obama's got the ball, and he might just have a 60-40 majority in his court. I look forward to some hard data. If this new strategy succeeds, I will have been proven wrong, and will welcome the correction.

But my inner voice is screaming in terror.

1/3rd of our total GDP- in 1 month.

33%

Amazing.