Comments on: Fixing ‘too-big-to-fail’ http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/ Thu, 21 Jul 2016 07:57:19 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: TomJeff1776 http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/#comment-73045 Mon, 03 Jun 2013 15:54:13 +0000 http://blogs.reuters.com/great-debate/?p=17539#comment-73045 I dont think that there should be such thing as “To Big to Fail” but more government is not the solution. The only way to make sure the bad businesses fail is to let them be at the mercy of the Free Market. What RMS wants is to let the government control the corporations and making sure no business grows big, even if that’s the will of the Free Market.

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By: UnoNoOo http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/#comment-70708 Sat, 09 Feb 2013 00:02:01 +0000 http://blogs.reuters.com/great-debate/?p=17539#comment-70708 I don’t see this as the best approach. The debt ratios should be regulated. Large companies should only be allowed small debt ratios (ie GM), while small companies should be allowed large debt ratios. There could be 5 levels of maximum debt ratios, from small to big. Small companies could borrow big & many would fail but as the ones that succeed grow bigger, they would need to become less leveraged. The largest companies would be the least in debt & if they did begin to require more debt they would then have to consider breaking up, before they became over leveraged & too big to fail.

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By: fred_jb http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/#comment-70648 Tue, 05 Feb 2013 19:15:00 +0000 http://blogs.reuters.com/great-debate/?p=17539#comment-70648 The problem with this suggestion is that size alone, regardless of how you measure it, is a poor criterion for how potentially harmful a business may be to the global economic system. Some companies grow large through designing and making stuff that people need or want, providing jobs and advancing technological progress in the process. Others, like many financial institutions have moved away from their roots in providing essential services to our economy and instead have essentially developed casino operations which dwarf their legitimate business activities, but are fatally intertwined with them.

By dint of churning massive volumes of various financial instruments with millisecond precision through the global financial system, far more than is needed to support genuine economic activity, and using the best brains and equipment money can buy to maintain marginal advantages over other so-called investors, obscene profits can be made, though largely it must be said through taking money out of one investor’s pockets to put into another’s. This inevitably leads to instability with the parasite in danger of killing the host, necessitating the massive rescues we have all had to fund.

My solution would be far simpler, and as such unlike a complex company tax regime, could stand some chance of the global implementation needed for any such scheme. I suspect that the main reason for the massive growth in unproductive and risky trading is the ability to trade assets within milliseconds of some price threshold being reached. This may reduce risk to the institutions providing such “investment” services, but promotes instability and short-termism which is the opposite of what is required to support the real economy.

I would therefore suggest that governments just agree to give all financial institutions one years notice that from a certain date no financial asset or instrument could be held by any individual or organisation for less than 24 hours. This minimum holding period should be increased by 1 day per year thereafter, for say 30 years, or until such time as trading volumes move back into line with what is actually required to operate the real economy.

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By: sumludus http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/#comment-70647 Tue, 05 Feb 2013 18:19:46 +0000 http://blogs.reuters.com/great-debate/?p=17539#comment-70647 A good equation to use for this could be 1-(M/X)^(1/C) where X is the gross revenues of a company, M is the minimum amount of gross revenue a company needs to earn in order to be taxed, and C is an arbitrary tax constant meant to give the function an appropriate curve.

I’ve tested this for personal incomes with success, though I don’t know how well it would apply to businesses since they take in much more money. the behavior of this function as it approaches extreme values is a tendency toward 100% taxation, but I’m sure the right values for M and C could be chosen in order to ensure such an event does not happen without ludicrous amount of income.

Personally I’d prefer to see a system which is dependent on profits as well as gross income. Profit is what corporations’ primary objective is, it’s a responsibility they have as publicly traded companies to their shareholders. Not including this pivotal variable is ignoring a major part of what make a corporation what it is. Something along the lines of sqrt(Gross Income)/Profit = tax percentage, which gives businesses incentive to maximize profits while remaining manageable sizes, plays to the nature of the beast.

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By: xcanada2 http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/#comment-70641 Tue, 05 Feb 2013 16:47:09 +0000 http://blogs.reuters.com/great-debate/?p=17539#comment-70641 @AdamSmith:
Regarding your questioning above on my statement:
“The only way to face and control the multinational is through multinational people action, that is, world government.”

I don’t see how a particular nation of people sticking together, Canada for example, could address the issue of corporations taking, for instance, their polluting, global warming means of production to another country that is desperate for the jobs. Clearly you need global regulations to handle global polluters.

This reasoning can readily be applied to any of the means corporations off-load the costs of production on to the people of the world. As another example, corporations who use child labor off-load moral responsibility on to the consumers of the world. Or, corporations abruptly close their factory doors with no warning, leaving their host country to cope with joblessness and ruined careers of the workers. Bribes, as another example. The list of possible corporate international malfeasance, if corporations are not properly controlled, is probably infinite.

Of course, the idea of world government is very scary, but in some sense we already substantially have it, through the multi-national corporations. However, this is international government by a small elite, and is hugely undemocratic. Without the world sticking together, there is no comprehensive control of the corporations.

It seems to me that we (people of the world) need a democratic governing body for all international economic activity. However, the concern is that such a body could take over most of national sovereignty in other spheres of life. Particularly in the US, it is difficult to separate economics from any other part of life.

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By: ZZeitgeist http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/#comment-70634 Tue, 05 Feb 2013 12:00:16 +0000 http://blogs.reuters.com/great-debate/?p=17539#comment-70634 Great idea Stallman. But how do we implement it ? How do we get rid of the old man from the back of Sinbad the sailor ? Tax laws are written by these who are too big to fall. How would you get entrance into the business of writing tax laws ?and, then there are the business men’s own the GOP . How do you get past / around them to make laws which they don’t
Ike ? Therein lies the rub .

But thank you for an open source solution. Bless you , Stallman . One day , that day too will dawn when the writing of tax laws fall into the hands of the govt. of ” we the people ” , hopefully .Thanks Reuters for voicing such original simple solutions to the complex problem of growing too big to fall .

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By: woodscrews http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/#comment-70633 Tue, 05 Feb 2013 11:08:00 +0000 http://blogs.reuters.com/great-debate/?p=17539#comment-70633 stallman should braid his glorious beard like a viking

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By: NotC http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/#comment-70632 Tue, 05 Feb 2013 11:00:45 +0000 http://blogs.reuters.com/great-debate/?p=17539#comment-70632 A progressive tax on gross income……perhaps the stupidest idea I’ve come across in decades.

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By: OneOfTheSheep http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/#comment-70631 Tue, 05 Feb 2013 06:22:23 +0000 http://blogs.reuters.com/great-debate/?p=17539#comment-70631 @AltonDrew,

Mr. Stallman doesn’t need to discuss “…why large is bad…”. We know from the antitrust laws that are on our books, increasingly unenforced.

Fortunately there aren’t many places where it seems the gas stations call each other before changing prices, or a few families control all liquor prices within a state. But there are places where the fox is in charge of the henhouse.

If there were more genuine competition for variety TV, the cable and satellite companies could not force consumers to pay for hundreds of channels they never watch just to get those relative few they do.

In Texas, it appears the energy regulating process is effectively controlled by the energy companies, it’s insurance commission by the insurance industry, it’s funeral “industry” by those providing such services.

Lawyers and judges seem to be accountable to no one but themselves nationwide. With so many of them in politics, I find it hard to deem that CONFLICT OF INTEREST a coincidence.

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By: AdamSmith http://blogs.reuters.com/great-debate/2013/02/04/fixing-too-big-to-fail/#comment-70629 Tue, 05 Feb 2013 04:07:09 +0000 http://blogs.reuters.com/great-debate/?p=17539#comment-70629 Don’t encourage mergers. Mergers almost always result in reduced competition. The resulting firm is more profitable, at the consumer’s expense.

Competition among producers is what benefits the public. We want them competing for customers and competing for labor. Lower prices and higher wages.

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