When and How Will the Pendulum Swing Back?

[samclem]

Deposit insurance is a corruption of the free market

Absolutely true, and I would be happy if we didn't have it. But we do have it, and because we do, there are numerous responsibilities. Government must regulate the banks (to assure adequate reserves, monitor the quality of the loans banks make, etc). In this responsibility, the government has failed (partly by negligence, partly by design. There's no need to re-hash the disgrace of Fannie, Freddy, and the Community Reinvestment Act, all of which contributed significantly to the present mortgage meltdown).

Priced into the product? At what price? Didn't I just get a $150K increase in my insurance without doing anything or paying for that?

Again, I wouldn't have been in favor of the increase in FDIC deposit coverage. Still, the government assessed a fee to banks for the coverage, and those fees will rise along with the new cap. To the degree there are shortfalls, all taxpayers will foot the bill. This part isn't priced into the product, but at least it is keeping faith with the iron-clad guarantee made to depositors by the government. In many of these discussions people reference depositors, stockholders, bondholders, and "the financial institutions" as all being somehow equally deserving of a government safety net--I resist this notion.

You also mean we consumers really have a choice to go to an uninsured institution for deposits;

"Institution" was your term, not mine. Investors have hundreds of choices as to where to put their money. Does commercial paper generally pay more or less interest than an FDIC insured bank account? And the reason the FDIC account can pay less is because of the government guarantee.

It is clear that "Too Big To Fail" is just shorthand for: "We don't want to think about it or even discuss it. No. Don't even consider it. Must preserve. Really. No matter what the cost. Only idiots talk about folding this tent. I'm serious. We're bigger than God. Put down the telephone."

The truth is, if a failing institution really IS so big that it's failure would demand immediate government propping up in perpetuity, then that is, in itself, sufficient reason for the government to nationalize it (because the government is effectively underwriting it anyway) and rapidly splt it up into "not too big to fail" parts as a means of mitigating risk to the entire financial system.

 

[eridanus]

Absolutely true, and I would be happy if we didn't have it.

I assume this means that you'd reject a FDIC payout if your bank failed? That'd be the non-hypocritical thing to do.

 

[ERD50]

I assume this means that you'd reject a FDIC payout if your bank failed? That'd be the non-hypocritical thing to do.

Where is the hypocrisy?

If you put your money in an FDIC insured account, you are paying for the insurance out of the (reduced) interest. So, you should get the coverage.

If you don't have your money in an FDIC insured account, you don't pay, and you don't expect the insurance coverage.


Where is the hypocrisy?

-ERD50

 

[eridanus]

Where is the hypocrisy?

If you put your money in an FDIC insured account, you are paying for the insurance out of the (reduced) interest. So, you should get the coverage.

If you don't have your money in an FDIC insured account, you don't pay, and you don't expect the insurance coverage.


Where is the hypocrisy?

-ERD50

If FDIC insurance is socialism, and goes against your fine Free Market ideologies, you should therefore reject such insurance when it's offered to you in a FDIC take-over or transition. This includes WAMU and Wachovia and Merrill Lynch and all the other former banks that were guaranteed by the government when another bank bought them.

To do anything else would be accepting a form of socialist insurance and, therefore, would be hypocritical. You should immediately turn in your "Free Marketeer" decoder ring.

 

[samclem]

Now, to drag this thread back on track . . .

Texarkandy, thanks for the link to the Campaign for Liberty. Ron Paul has a lot of "I told you so" coming, and his group will be useful in this regard. I don't think he's the dynamic spokesman needed for a widespread counter-revolt. Lots of good ideas.

Likewise, Fred Thompson set up a PAC, and he's good for a short video now and again. But, I don't think he's got the fire needed to lead a revolt.

I think Bobby Jindal hurt himself a lot in his GOP response to the President's plan last week. He can recover, but hopefully that's not as good as he gets.

So, the angst continues to grow, but remains unharnessed . . .

 

[ChrisC]

Where is the hypocrisy?

If you put your money in an FDIC insured account, you are paying for the insurance out of the (reduced) interest. So, you should get the coverage.

If you don't have your money in an FDIC insured account, you don't pay, and you don't expect the insurance coverage.


Where is the hypocrisy?

-ERD50

The hypocrisy is there as Eridanus points out and it is further amplified by the several occasions in which Samclem has called out people in precisely the same manner as called out by Eridanus; see Post 27 of this thread. http://www.early-retirement.org/for...deficit-to-533-billion-by-2013-a-42655-2.html.

Nonetheless, I think your point about deposit insurance and the depositor "paying for it" with reduced interest is a stretch. The depositor does not really "pay" for the insurance (the banks do and they gladly pay for the insurance notwithstanding the angst some community banks are having about the special assessment all the banks will be paying in the near future). A depositor can chase higher rates at other places such as money market fund accounts that were previously uninsured (but in another dose of socialism money market fund accounts have now been guaranteed since September of last year under the Bush Administration). However, it does not seem accurate to say the depositor is paying for the reduced rate any more to say that you're paying for the Full Faith and Credit guarantee of the United States when you purchase Treasury securities. You're trading safety for yield but you're not paying for that.

 

[REWahoo]

This particular section of our Community Rules seems to have lost something in the translation:

"Challenge others' points of view and opinions, but do so respectfully and thoughtfully."

You kids behave yourselves...

 

[samclem]

The hypocrisy is there as Eridanus points out and it is further amplified by the several occasions in which Samclem has called out people in precisely the same manner as called out by Eridanus; see Post 27 of this thread. http://www.early-retirement.org/for...deficit-to-533-billion-by-2013-a-42655-2.html.

No, very different. When someone says "I think I should pay more to the federal government and would be happy to do it," then that individual can clearly achieve his objective by simply paying more money to the government. To do otherwise is to say one thing but do another--the definition of hypocrisy.

When I say "I believe the government should not insure savings accounts," it would be hypocritical of me to write a letter to my Congressman urging higher limits for FDIC insurance. It is not hypocritical of me to live with the laws as they are written. If I said "People should not take advantage of FDIC insured accounts" and then opened such an account, that would be hypocritical.

I oppose the "stimulus" plan, but I feel everyone should take full advantage of the shower of money DC is going to pump out, even modifying their financial arrangements to get more if this is feasible. That's not hypocritical.

Nonetheless, I think your point about deposit insurance and the depositor "paying for it" with reduced interest is a stretch. The depositor does not really "pay" for the insurance (the banks do and they gladly pay for the insurance notwithstanding the angst some community banks are having about the special assessment all the banks will be paying in the near future). However, it does not seem accurate to say the depositor is paying for the reduced rate any more to say that you're paying for the Full Faith and Credit guarantee of the United States when you purchase Treasury securities. You're trading safety for yield but you're not paying for that.

Well, then we truly have a unique situation here. When other businesses incur a cost, it is passed on to customers--bundled into the price. But, somehow, the fees paid by banks to the government for FDIC insurance are NOT passed on to customers. Instead, the bank absorbs these costs, apparently out of a spirit of goodwill and patriotism.

Next, I expect we'll hear that employers really pay 1/2 of the payroll tax for their employees. I love that one.

 

[ChrisC]

No, very different. When someone says "I think I should pay more to the federal government and would be happy to do it," then that individual can clearly achieve his objective by simply paying more money to the government. To do otherwise is to say one thing but do another--the definition of hypocrisy.

When I say "I believe the government should not insure savings accounts," it would be hypocritical of me to write a letter to my Congressman urging higher limits for FDIC insurance. It is not hypocritical of me to live with the laws as they are written. If I said "People should not take advantage of FDIC insured accounts" and then opened such an account, that would be hypocritical.

I oppose the "stimulus" plan, but I feel everyone should take full advantage of the shower of money DC is going to pump out, even modifying their financial arrangements to get more if this is feasible. That's not hypocritical.

Somehow I don't see the difference or distinction you make; it appears to me to be a bit contrived. If you don't believe with conviction a particular practice, then you should not accept the practice or its benefits. It would be hypocritical, in my mind, to state that you abhor the Food Stamp Program and think it's a waste of taxpayer money or government resources, and then apply for Food Stamps when you need them; makes no difference to me that the law or program permits you to take advantage of the program -- the point is that it's hypocritical or two-faced for someone to rant against a Government program and then have his hand out for payment under the program. I think it's imprudent to turn down Government benefits that are available to you, but I also think its hyprocritical to take advantage of a program you dislike! So you should not have your savings in insured accounts, or obtain a payment for your deposit from the FDIC if the insured bank failed.

Well, then we truly have a unique situation here. When other businesses incur a cost, it is passed on to customers--bundled into the price. But, somehow, the fees paid by banks to the government for FDIC insurance are NOT passed on to customers. Instead, the bank absorbs these costs, apparently out of a spirit of goodwill and patriotism.

Next, I expect we'll hear that employers really pay 1/2 of the payroll tax for their employees. I love that one.

I'm not sure it's so unique; it's now an ingrained cost of business, sort of like a cost to enter the trade or industry that is simply not absorbed by the consumer. It absorbs these costs because quite frankly it can't pass them to the consumer; not a question of goodwill or patriotism. Aren't there many other sunken costs of doing business that can't really be transferred to the consumer?

 

[samclem]

Somehow I don't see the difference or distinction you make; it appears to me to be a bit contrived.

I don't think I can explain it in yet a different way that will make it clear to you.

Aren't there many other sunken costs of doing business that can't really be transferred to the consumer?

This isn't a "sunken cost." When we say that a "cost was passed on to the customer" we are really skipping over a few steps, but in the end (after an equilibrium is reached between competitors) in normal markets the final price paid by the customer will be higher by the same amount as any increased costs incurred by producers. Whether we are talking about fuel costs paid by airlines or FDIC insurance costs paid by banks, it is the same.

 

[ChrisC]

This isn't a "sunken cost." When we say that a "cost was passed on to the customer" we are really skipping over a few steps, but in the end (after an equilibrium is reached between competitors) in normal markets the final price paid by the customer will be higher by the same amount as any increased costs incurred by producers. Whether we are talking about fuel costs paid by airlines or FDIC insurance costs paid by banks, it is the same.

I think we're a bit off track here; let's get back to deposit insurance and take a look at the steps there. The bank pays for deposit insurance from the Government, which depository banks must have to do business in virtually every jurisdiction that I know these days. Some would equate this as a tax on the business of banking. (The days of uninsured depository banks have been long gone since the fiascos of the 1980's in Ohio, Maryland and Rhode Island where state chartered banks in those states were once permitted to operate without FDIC insurance.)

Traditionally, banks raise most of their funding for assets by their deposit base. They primarily attract this funding by the FDIC logo on the bank, the interest rates offered on the deposit accounts, and the transactional convenience offered by the bank. The depositor is essentially a creditor, lending money to the bank. I don't see how the cost of deposit insurance is passed onto the depositor, which was the original point made before? Just like the bricks and mortar of the bank building, there appears to me to be some costs that can't simply be passed onto a "creditor" of the bank, in this case, a depositor.

The asset-liability spread of the bank, in simple terms, gives the bank its profit or earnings; higher funding/liability costs (including deposit insurance) mean that the bank's earnings may be diminished unless it correspondingly receives a greater return on its assets (through higher interest rates, for example, on borrowers). Perhaps this is the point you're making about the cost of deposit insurance, but to me it does not appear correct to say that the "depositor" is paying for the insurance by reduced interest rates or in some other fashion!

 

[ERD50]

I think we're a bit off track here; let's get back to deposit insurance and take a look at the steps there.

I don't see how the cost of deposit insurance is passed onto the depositor, which was the original point made before?

Just like the bricks and mortar of the bank building, there appears to me to be some costs that can't simply be passed onto a "creditor" of the bank, in this case, a depositor.

I mean this seriously & respectfully ChrisC, but if you really don't see how those costs are passed onto the customer, I don't think we can have a discussion on this, or on any other matter of economics. It's basic and fundamental. I certainly wouldn't put you on an ignore list for this, but I might make a note - don't bother to engage in economic debate with this poster, there is a gulf in understanding too wide to overcome.

The customer ultimately pays the price of any and all costs. How can it be otherwise? The only other one to "pay" is the business, and if they can't get enough income, they go out of business, or move their capital and energy to another business where they can make a profit. Where does the income come from? The price of the products.

A business might be able to play a shell game, and rob from Peter to pay Paul, or do some short term covering of costs. But in the long run it has to average out.

Profit = Income minus Expenses. There is no place to hide.

Brick & Mortar? It was an expense, possibly amortized over time by a mortgage, but undoubtedly that cost was passed onto the customer along the way. If not, I suspect that all business building would be gold-gilded architectural wonders of the modern world, rather than cube farms.

On Hypocrisy: Let's try a non-political example.

You are on a bus trip in a group of 30. The driver says there are two places to stop for lunch on the way, and he only has time for one stop. A Pizza place and a Taco place. They take a vote, you vote for pizza, 29 other people vote for Taco. They stop at the Taco place. Now, are you a hypocrite for ordering a Taco? No, you were outvoted, and now you adapt to the new reality. And you decide to enjoy your Taco, though you would have preferred Pizza.

Get it?

-ERD50

 

[Rustic23]

Erd,
The same argument, IMO, applies to Taxes. At the heart of most business is RISK. Depending on the risk, the owner/investor will want a certain return on their investment. Expenses, taxes, insurance and all other expenses will be passed on to the customer to the max extent possible. In the situation where all banks pay the FDIC Ins. fee, then it is easier for them to pass it along. If some paid and some did not then the bank might either have to eat it, or make it up in some other area, like increased fees. At any rate, if the return on investments fall below their risk comfort level, they will either take action to raise the rate of return, or find another place to invest their time and money.

 

[ChrisC]

I mean this seriously & respectfully ChrisC, but if you really don't see how those costs are passed onto the customer, I don't think we can have a discussion on this, or on any other matter of economics. It's basic and fundamental. I certainly wouldn't put you on an ignore list for this, but I might make a note - don't bother to engage in economic debate with this poster, there is a gulf in understanding too wide to overcome.

The customer ultimately pays the price of any and all costs. How can it be otherwise? The only other one to "pay" is the business, and if they can't get enough income, they go out of business, or move their capital and energy to another business where they can make a profit. Where does the income come from? The price of the products.

A business might be able to play a shell game, and rob from Peter to pay Paul, or do some short term covering of costs. But in the long run it has to average out.

Profit = Income minus Expenses. There is no place to hide.

Brick & Mortar? It was an expense, possibly amortized over time by a mortgage, but undoubtedly that cost was passed onto the customer along the way. If not, I suspect that all business building would be gold-gilded architectural wonders of the modern world, rather than cube farms.

I guess there must be a serious defect in my understanding of basic finance; kind of odd to me that the supplier of credit/funds, a depositor (a lender supplying the service, i.e. money), is "paying" for insurance that the bank must have to do business -- call me dense I suppose. Since I might just be too stupid (or as you charitably put it have "a gulf in understanding") to understand your points, you should ban me to your ignore list -- I can handle it.

On Hypocrisy: Let's try a non-political example.

You are on a bus trip in a group of 30. The driver says there are two places to stop for lunch on the way, and he only has time for one stop. A Pizza place and a Taco place. They take a vote, you vote for pizza, 29 other people vote for Taco. They stop at the Taco place. Now, are you a hypocrite for ordering a Taco? No, you were outvoted, and now you adapt to the new reality. And you decide to enjoy your Taco, though you would have preferred Pizza.

Get it?

-ERD50

This is a very flawed example. It's not hypocritcal to go along with a consensus vote on something even though you're in the minority. But it's two-faced and hypocritical for someone to say, for example, I don't believe in the Government providing welfare assistance to anyone and then applying for welfare at the first instance you need it -- without any other considerations, seems plainly hypocritical to me.

I don't begrudge anyone who disagrees with some program or benefit and then decides to take advantage of it for human survival purposes. But simply saying that it's not hypocritical to take advantage of a program you despise merely because the program or benefit is available for the taking, well that does sound hypocritical to me.

 

[ziggy29]

This is a very flawed example. It's not hypocritcal to go along with a consensus vote on something even though you're in the minority. But it's two-faced and hypocritical for someone to say, for example, I don't believe in the Government providing welfare assistance to anyone and then applying for welfare at the first instance you need it -- without any other considerations, seems plainly hypocritical to me.

I strongly disagree. If I am forced to pay for something, it's not hypocritical to accept some of the benefits of it. I'm getting what I paid for, even if the payment was coerced.

What would be hypocritical is if you had the ability to opt out, you chose to opt out and then you hit tough times and crawl to the government for help. Too bad -- you opted out of paying for it. No soup for you. But if are forced to pay for something, there's nothing hypocritical about accepting something for it in return.

 

[ChrisC]

I strongly disagree. If I am forced to pay for something, it's not hypocritical to accept some of the benefits of it. I'm getting what I paid for, even if the payment was coerced.

What would be hypocritical is if you had the ability to opt out, you chose to opt out and then you hit tough times and crawl to the government for help. Too bad -- you opted out of paying for it. No soup for you. But if are forced to pay for something, there's nothing hypocritical about accepting something for it in return.

What does coercive taxes have to do with it? You're not forced to accept the benefits of a program you dislike, are you? You're just forced to pay for programs that the consensus has decided should be funded.

 

[armor99]

With all due respect samclem, I see nothing in what you have suggested that would do anything to help address the economic meltdown that we are facing. You've admitted that you basically want govt. to get out of the way, and let the chips fall where they may. That may satisfy your desire for a smaller and less intrusive govt., but it does nothing to constructively address the situation we are facing. It is possible that the current mess we're in would eventually self-correct without govt. intervention, without leading to a major crisis far worse than anything we have now, but I wouldn't want to bet the whole economy on it, as you seem willing to do.

Interesting point of view RAE.... but couldn't the same arguement be made the other way? As in betting the whole economy that we can somehow "BUY" our way out of this situation, and make the economy better? The economy got to where it did (we WERE doing really well till about two years ago and had been for almost a decade... easy to forget that sometimes...) largely because of individual businesses, and individual choices that people made.

Inherently, the govt is the champion of the "one size fits all" solution. I believe that our economy is far too complex to every be "solved" by a govt edict. The govt cannot "force" people to start buying cars again. They cannot "compel" banks to begin lending money again (at least the ones that gave the money back... and I hope more do soon). If you think about it, the govt is dangerously close to going on a totalitarian slant. I am listening closely at this point for statements like... "for the good of the people the govt is forcing you to do XXXX". That will be a very sad day for all of us.

We must accept the fact that for a "free" society to exist, people will make their own choices. And the moment that those personal choices are taken away for the "common good" we cease to be a free society any longer. Something about living a single day on my feet as I choose to, rather than a lifetime on my knees to service a govt master.

 

[armor99]

What does coercive taxes have to do with it? You're not forced to accept the benefits of a program you dislike, are you? You're just forced to pay for programs that the consensus has decided should be funded.

In general, taxes are supposed to be used by things that everyone either has used, will use, or will almost certainly one day use. Things like schools, roads, hospitals, traffic signals, the military, are all examples of things that taxes should go for. All of these things you have either used at some point in you life... like schools, use every day like roads, or will need one day like hospitals.

However, the problem comes in when tax money is used for things that most people will never be able to use in any way, or would not want to. For example.... what percentage of people in the US are on welfare, or have been that way for more than one year? Many people loose their jobs every year and never apply for, and never go on welfare. Yet their tax money (in larger and larger amounts) keeps going to these social type programs. Whereas things like roads and traffic signals are used by pretty much everyone... almost every day.

While I certainly understand that I am not always going to get my way on where my tax dollars are going. This is the benchmark that I would tend to use. If those tax dollars can only help a small group of people... young, old, rich, poor, etc, then it is probably a mis-use of my tax dollars. If that tax money is spent on things that everyone can use equally reguardless of their gender, age, profession, financial status, etc.... then it was probably a good use of those tax dollars. Very rich and very poor still need roads, hospitals, the military, etc.

Hope this helps to clarify and explain my position...

 

[ChrisC]

I understand your position Armor; I just don't agree that when the elected consensus decides to use my tax payments for programs and benefits I don't think are wise that such a "use" entails a misuse of my payments. I don't have a social contract with my Government that comports with your understanding of things.

But it doesn't mean that I have to accept every benefit or program that my tax payments are funding. If I don't believe, for example, in public education, I think it would be hypocritical for me to send my children to public schools simply because I fund the public school system with my taxes, assuming I have a choice in the matter.

 

[Frugality_of_Apathy]

I understand your position Armor; I just don't agree that when the elected consensus decides to use my tax payments for programs and benefits I don't think are wise that such a "use" entails a misuse of my payments. I don't have a social contract with my Government that comports with your understanding of things.

But it doesn't mean that I have to accept every benefit or program that my tax payments are funding. If I don't believe, for example, in public education, I think it would be hypocritical for me to send my children to public schools simply because I fund the public school system with my taxes, assuming I have a choice in the matter.

That's not hypocritical. If you're paying for a service against your will it would be idiotic to not use that service. Hypocritical is telling people they should ride their bikes instead of drive to cut down on pollution and then taking your fleet of SUVs to your private jet.

I may have enough money saved that I would need welfare if I lost my job, and I believe the whole system is a killing our economy but that doesn't mean I'm not going to squeeze every last penny out of the welfare office they'll give me if I lose my job.

If a guy mugs you in the street but decides to just keep the cash and give you back your license and credit cards, do you tell him to keep it because you don't think you should have been mugged in the first place?

 

[ChrisC]

That's not hypocritical. If you're paying for a service against your will it would be idiotic to not use that service. Hypocritical is telling people they should ride their bikes instead of drive to cut down on pollution and then taking your fleet of SUVs to your private jet.

I may have enough money saved that I would need welfare if I lost my job, and I believe the whole system is a killing our economy but that doesn't mean I'm not going to squeeze every last penny out of the welfare office they'll give me if I lose my job.

I'm sorry but I don't understand why you think it's not hypocritical to believe that a program sucks and yet take advantage of that messed up program; if it's your heartfelt conviction that "welfare" is an abominable program, I just don't see how you can have your hand out for the program and not have your convictions undermined -- you're saying one thing but doing another thing, isn't that the hallmark of being two-faced?

In another thread it was mentioned that it's hypocritical to say you support being taxed at a higher level and then not voluntarily make additional tax payments to the IRS. Assuming you agree with that proposition, I fail to see why it's not equally hypocritical to say you detest the Government's efforts at encouraging homeownership and yet accept the mortgage interest deduction on your tax return filing.

Maybe I need a refresher course in logic (and perhaps basic economics too), but I'm just puzzled by this view that the hypocrisy is purged because you've paid for something.

You point out other acts of hypocrisy, but they still don't undermine, in my view, the basic point I'm making.

 

[samclem]

I'm sorry but I don't understand why you think it's not hypocritical to believe that a program sucks and yet take advantage of that messed up program.

Four different people have explained it in several clear ways. (I personally like ERD 50's Pizza and Tacos scenario). You are either pulling our leg or there is another problem.

Similarly, it is hard to believe you think the expenses that go into making a product (in a mature, highly efficient and competitive market) are not reflected in the price of that product. Again--I think you are pulling our leg.

I think we're a bit off track here; let's get back to . . .

the topic of this thread:

- - What do you think will serve as the trigger event that will cause the great mass of "I'm fed up with the big-buck government takeover of everything" people to finally take action?
- - Is there any leader (maybe not a political leader) with the charisma, standing, and ability to harness the outrage?
- - Is there a grass-roots group that shows signs of gaining some traction to reverse the trend?

 

[HFWR]

- - What do you think will serve as the trigger event that will cause the great mass of "I'm fed up with the big-buck government takeover of everything" people to finally take action?

It's probably worth noting that the electorate is pretty evenly divided between blue and red, if you will. So, the blue part was more energized this last election, I suppose because they were fed up with whatever it was they were fed up with. If the economy doesn't pick up soon, I expect the pendulum will swing back the other way, as early as 2010. The electorate is fickle...

 

[ERD50]

You are on a bus trip in a group of 30. The driver says there are two places to stop for lunch on the way, and he only has time for one stop. A Pizza place and a Taco place. They take a vote, you vote for pizza, 29 other people vote for Taco. They stop at the Taco place. Now, are you a hypocrite for ordering a Taco? No, you were outvoted, and now you adapt to the new reality. And you decide to enjoy your Taco, though you would have preferred Pizza.

This is a very flawed example. It's not hypocritcal to go along with a consensus vote on something even though you're in the minority. But it's two-faced and hypocritical for someone to say, for example, I don't believe in the Government providing welfare assistance to anyone and then applying for welfare at the first instance you need it -- without any other considerations, seems plainly hypocritical to me.

I see others have tried, I guess I'm still up to this challenge. The difference is, whether you were forced to contribute or not.

OK, so let's turn my Pizza/Taco example around and see if that helps. In the first case, we assume that lunch was part of the cost of the trip, OK? So, now, let's picture another planned trip...

TRIP #2: This time, before they leave, you vote on whether they should provide lunch with the trip. Since we all know, there is no free lunch ( << extra points for using that phrase in context! ), they will charge an additional $10 for lunch.

You decide you'd rather brown bag it than pay $10 for lunch, so you vote no lunch. But 29 people vote for lunch, so lunch it is. Everyone, including you, pays an additional $10 for the included lunch. Now are you trying to tell me that it is hypocritical to eat lunch with everyone else? The lunch that you paid for? Just because you would have preferred that you could bring your own lunch on your own dime? What would you do, skip the lunch you paid for and go hungry? Bring your own lunch even though you paid for a lunch?



And if that still didn't do it, one more trip to demonstrate hypocrisy...

TRIP #3: This time, they decide to leave it up to the individual. You either pay $10 additional for a lunch ticket in advance so they can make sure they have the right amount of food at the stop, or pay nothing additional, and lunch is up to you. You decide to pass on the $10 lunch ticket, figuring you won't be that hungry, you'll just skip lunch.

But you get to the lunch stop, and you ARE hungry, and the meal looks good. So you sneak in line, and just figure that there is enough to go around, and anyhow, those other people could stand to lose some weight.

Not *THAT* is hypocritical. And my work is done here.

--------------------------------------------------------------------

Since I might just be too stupid (or as you charitably put it have "a gulf in understanding") to understand your points, you should ban me to your ignore list -- I can handle it.

Nah, I don't have *anybody* and my ignore list, you certainly would not be the first! Even if I give up on economic topics with you, you might post something else of interest to me, it would be my loss if I had you on ignore.

I'm glad you liked my "a gulf in understanding" phrase, I was pretty proud of that one. It does not infer stupid, more like two people who speak a different language, they simply do not understand each other.

I'm sure we could have a nice conversation over beer and pizza, I mean Tacos, no pizza, no Tacos.... I'll buy the first round.


-ERD50

 

[ChrisC]

Four different people have explained it in several clear ways. (I personally like ERD 50's Pizza and Tacos scenario). You are either pulling our leg or there is another problem.

Similarly, it is hard to believe you think the expenses that go into making a product (in a mature, highly efficient and competitive market) are not reflected in the price of that product. Again--I think you are pulling our leg.

Seriously, I'm not pulling any legs here. The examples are defective, in my view, which is a view that appears to be problemmatic to you. Forced contribution or coercion to support a program does not alter the equation; the hypocrisy is still there as long as there is an element of choice to take advantage of a program you find abhorrent! I'm just surprised that you and others just don't admit it and just say that sometimes it makes no practical sense to be logically consistent about things. It is idiotic to insist on standing on principle when your own self-interest might harmed, correct -- isn't that how we generally roll? I think the examples provided tie up a lot of contrived thinking, perhaps in my jaded or disjointed views about things. There is no moral imperative that you be logically consistent in all things.

Well, Samclem, I never said expenses that go into a product are not reflected in the price of the product. What I said was that a lender/depositor/creditor that provides funding or money to a bank is not paying for the insurance that the bank is taking out to do business. In my case, the depositor is providing a product -- funding. And the bank/debtor is required to have insurance to do business. You and others appear to believe that the lower interest rate that the lender/depositor/creditor obtains from the bank includes that insurance premium, when all I have been saying is that it ain't so. I have no doubt the "insurance premium" is reflected in some other service or product of the bank -- I just don't see how it gets reflected in a reduced interest rate to someone advancing funds to a bank. So, perhaps I have a fundamental problem with basic finance, as I don't see eye-to-eye with you and your esteemed colleagues. I'll go back to school on this one and perhaps cure my educational deficiencies.