according to you, there is no benefit gained from having margin accounts or insuring bank accounts; that its been sheer luck that we have managed to not experience the booms and busts that took place between 1850 and the 1930s.
I don't know about Tim, but:
a. Nobody is forced to buy on margin. Buying on margin is one of those intersections between greed and stupidity. If people want to be greedy and stupid, that's their right, and I don't see why it's the government's obligation to prevent them from being greedy and stupid. Some people could make lots of money borrowing very heavily on margin who are now prevented from making those fortunes. So we punish the capable to protect the stupid. That's a good way to build a society of mediocrity, which we have, but a lousy way to build a dynamic society where those with the most capability, rather than the largest starting pot, can rise to the top.
2. Federal insurance, which is compelled insurance, also rewards stupidity and punishes competence. Without insurance, investors would have to investigate the places they put their money, but they would get higher rewards for it because the banks wouldn't have to pay those forced insurance premiums. The free market would step in and offer private insurance to insure your savings; those who wanted the safety belt at a cost could buy it, those who preferred the higher risk and higher reward of uninsured deposits could make that choice. Yet another move toward treating adults as children needing mommy to protect them, instead of treating them as adults who have the right to make mistakes and learn from them.
It's really a question of whether government should be a parent or a referee. I prefer a referee, and let me worry about my parenting. |
