Wrong; monopolies, duopolies, oligopolies, can only exist through government intervention. Who said anything about no regulation?antman said:
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IMPORTANT // Please look after your loved ones, yourself and be kind to others. If you are feeling that the world is too hard to handle there is always help - I implore you not to hesitate in contacting one of these wonderful organisations Lifeline and Beyond Blue ... and I'm sure reaching out to our PRE community we will find a way to help. T.
Banks - GRRRRRRRRRRRRRRRRRRRRRRR
- Thread starter tiggytam
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Giardiasis said:
Monopolies and the other types mentioned can form through such intervention - like Telecom was for example - or can evolve naturally, eg by being the only supplier of a new technology/service that no-one else can produce- or by mergers/acquisitions.
You and other libertarians weaken your case by taking a polemical position which is not supported by economic theory, historical or contemporary evidence.
Those sorts of monopolies can't maintain their grip for long, other players will come in to develop similar technologies/services. Companies can only maintain their grip through government intervention.antman said:
Your last sentence is ironically false.
Gia, merely repeating the phrase "only government intervention creates monopolies" over and over again doesn't make it correct.
There are many barriers to entry for new players in oligopoly situations (like the banking sector), only some of which are regulatory - economies of scale, access to technology, patenting, defensive/aggressive behaviour of firms to protect a situation of oligopoly. Just one example of a naturally evolving monopoly Standard Oil, grew and and absorbed all competition despite state anti-trust legislation - Rockefeller was able to through shrewd organisation and secret deals between players to consistently beat the system until finally the Sherman Anti-trust legislation forced a breakup of the company and its affiliates.
There was plenty of room for new players in the oil refining and distribution industry but Standard Oil acted aggressively to undercut and then buy out all other players. Their dominant market position allowed them to do this.
Now the typical libertarian response to the Standard Oil case is "yeah sure the thing we said can't happen happened but in fact Standard Oil lowered prices for the consumer so it was all good". That may have been so but it flies in the face of the standard libertarian mantra of "only governments can create monopolies".
The truth is always more complex than a simple "one size fits all" philosophy can account for.
There are many barriers to entry for new players in oligopoly situations (like the banking sector), only some of which are regulatory - economies of scale, access to technology, patenting, defensive/aggressive behaviour of firms to protect a situation of oligopoly. Just one example of a naturally evolving monopoly Standard Oil, grew and and absorbed all competition despite state anti-trust legislation - Rockefeller was able to through shrewd organisation and secret deals between players to consistently beat the system until finally the Sherman Anti-trust legislation forced a breakup of the company and its affiliates.
There was plenty of room for new players in the oil refining and distribution industry but Standard Oil acted aggressively to undercut and then buy out all other players. Their dominant market position allowed them to do this.
Now the typical libertarian response to the Standard Oil case is "yeah sure the thing we said can't happen happened but in fact Standard Oil lowered prices for the consumer so it was all good". That may have been so but it flies in the face of the standard libertarian mantra of "only governments can create monopolies".
The truth is always more complex than a simple "one size fits all" philosophy can account for.
antman said:
Agree more or less with you Antman.
Regulation helps maintain a pluralistic market and prevents the big boys from swallowing opposition.
This is much of what Galbraith wrote about 50 years ago, in respect to checking big corporations.
During the 70s, pre-deregulation of many markets, we had:
Banking - CBC, NBA, SSB, CBA, ANZ, ES&A, BoNSW, and some others.
Grocery, just in Victoria - Coles, Woolworths, and separately Safeway Australia, Payless, Jewel, Foodland, Composite Buyers, and more interstate. Then, Coles / Woolworths shared about 40% of the market.
(Keating should never have allowed Woolworths / Safeway to merge.)
In the 70s, the Liberals stood for small, family-owned businesses; clearly not now.
Labour loved big business as it allowed for the unionization of employees.
Banks making profits is good.
Banks making super-profits, at the expense of other economic segments, is bad.
Now, nearly everyone is a drone of some sort. Even key executives, and certain "business entity" owners are merely "glorified" drones.
I stopped at my big local Woolworths the other day. They had one person on check-outs, forcing everyone to self-check their groceries.
Do you see how corporations are trying to make humans completely redundant?
I stayed in the check-out chicks queue anyway because I wanted her to have her job just a little longer.
Meh, I'm too old to worry about it now.
And both sides of politics are equally responsible for this "deregulation".
Hey, Gillard & Swann swooned at placing a special tax on Mining Industry super-profits.
Why not the same on bank super-profits?
Phantom said:
I know what you mean but I have an in-principle problem with banks. They began as service providers, they are now dividend providers who tax their customers to bolster their dividends to shareholders, they've lost their base as a service provider IMO. I was a teller when they started introducing fees for existing services. Those fees now make up a significant portion of their profits, but they haven't increased the level of service and have reduced staffing levels considerably. I too try to use the check-out in a silent protest against doing the job for them (without a discount in my grocery bill? Huh? I do the job of a check-out but pay the same? I don't get it?) Maybe we really are sheeple?
Liverpool said:
i dont think they should make any profit. once they make a dollar they will want more and more. its a slippery slope.
Whilst the net interest margin (difference between cash rate and loan interest rates) for banks is still very low historically, I suppose people will always want it lower. One of the reasons cuts to loan interest rates aren't passed on fully is because cuts to high interest savings accounts aren't being passed on fully either, due to the current highly competitive market for savings (especially with the rapidly growing amount of money from self managed super funds looking for a low risk home).
I suppose borrowers would prefer that the savers were shafted, and the savers vice-versa.
I suppose borrowers would prefer that the savers were shafted, and the savers vice-versa.
Disco08 said:
Bank's need to keep their strong credit rating so they can borrow off shore at the lowest possible price. If banks make lower profits and have worse credit ratings the cost of funds will be higher and the rate we all pay would be approx the same. The net interest margin will be lower for the banks and the offshore investors will get a greater return. So that is only a negative for Australia.
Also a large part of our super funds have Bank shares and we need the returns and growth to fund our retirements.
Billions of profit is fair enough as we are talking trillion dollar business. As a return on investment banks profits are very low.
MB78 said:
On top of the pension? Do they own their own home? Have they installed solar panels? Do they have a vegie garden and some chooks?
MB78 said:
Just because their profits drop a little won't automatically mean their credit rating will drop. Why would it?
Super funds are effected by much more than ust bank shares. Again, drops in profit that still leave the banks making massive profits won't harm them in the slightest. Add to this the fact that capped rates would mean families own their homes far earlier and people should be quite safe in retirement.
Disco what return should investors get on their money if borrowing rates are capped at 3%?
How does the reserve bank slow down the economy if rates are capped at 3%?
In regards to credit ratings the profit the bank makes is very important as the bank operates in a high risk industry with high regulation and Moody's among other's have warned the banks if their profits dip they will face downgrades as Australia relies on too much overseas funding. And if an investor only gets a return of say 2% (as borrowing rates are capped at 3%) there will even less incentive to save and we will be even more reliant on overseas funds. So your proposed changes would have a double whammy on a bank's credit rating.
How does the reserve bank slow down the economy if rates are capped at 3%?
In regards to credit ratings the profit the bank makes is very important as the bank operates in a high risk industry with high regulation and Moody's among other's have warned the banks if their profits dip they will face downgrades as Australia relies on too much overseas funding. And if an investor only gets a return of say 2% (as borrowing rates are capped at 3%) there will even less incentive to save and we will be even more reliant on overseas funds. So your proposed changes would have a double whammy on a bank's credit rating.
3% of every dollar lent to home buyers is still a massive amount of money, not to mention all the other income streams they have. Other countries have managed with similar rates so I don't see why this country, with its abundance of resources and supposed high standard of living should be blighted by an undercurrent of discontent brought about by the average family no longer being able to afford the basic standard of living.
