Why fight against (financial) speculation?

Regulation is being discussed strongly in the US and EU countries. There was talk of regulation in Davos and regulation began. The EC is talking about regulation. Everyone is talking about the regulation of toxic casino capitalism, only some Mr. Topolánek from the rowers of Monte Argentaria pulls the year 1948. Bolshevism blue party is funny, but unfortunately also extremely dangerous for the whole EU.

- Lukáš Kraus

Regulation - whether it is various "speculations" and others - is bad. Bad, bad, bad. It restricts not only our freedom but also ours radius of action.

Many people today like to kick those nasty speculators. People who invest, buy, sell for profit. It is they who are responsible for the crisis. It is they who are responsible for the public finance deficits. They are said to be the ones to blame for almost everything bad in the world. Here you can see that someone chose their scapegoat. But it's easy - speculator is actually everyone, but none at the same time. So it is so easy to seduce all evil into such a shallow concept as it is speculator.

I think it's more complicated… There is a lot of talk about regulation in the West, but not much will be done in practice, while in the Czech Republic it is not even talked about. Such a Stiglitz, for example, claims that Obama's proposals are insufficient. There has not yet been a restoration of the situation, say around 1950. And most importantly, it was supposed to be regulated at the international level, where large investors had already fled in the mid-70s, and this is practically not the case at all.

So we can complain about ideological blindness in the Czech Republic and (mostly) empty phrases abroad. I am convinced that financial speculation does not bring anything positive to anyone in society, and we should get somewhere where banking and finance were before the Chicago School, etc. This means separating banks and savings banks from speculation, clearly and uncompromisingly. As the legislation begins to talk about flexibility, there is usually an effort to blur all clear distinctions and allow for some dubious backstage games.

- Karel Dolejší

Mr Dolejší's approach is - to say the least. All you speculation they are so overwhelmingly socially useless that they are the ones who bring profits from various private pension funds or life insurance. Proceeds from all possible speculation They are so terrible that even they pay taxes that many financial consulting firms do well speculation they live, cooperate and support many public benefit organizations. Just one reason next to another to fight speculation.

Many opponents of speculation also point to the US and the local devaluation of deposits in various pension and other funds. Along with this, he constantly maintains several dogmas:

  • Speculating with pensions, health, education is obscene!
  • The state had to spend a lot of money on public bailouts of many speculators - they are speculators who are to blame for the debts of governments!
  • It could work without regulation, but such a system creates public debt!
  • There is no fair value for proceeds from speculation!
  • If we do not regulate, crises will be even worse in the future!

Now get individual arguments proponents of regulation, let us take it point by point.

Speculating on pensions, health and education is obscene!

Nasty? But Goddess, surely the proponents of regulation agree that the state is immoralwhen the control (regulation) of pension systems, health care and education speculates with the future (pension, health and education) of each of us! After all, when the industry is controlled by the state, the state is automatically a huge speculator. It is precisely the state that wants to function effectively in the given areas, that wants to gain something from the funds spent. It is the state that sells, buys and expects some profit from it. The state must be in the eyes of supporters of regulation such a terrible speculator! Whether the state manages to function effectively and benefit from its monopoly in certain areas - this is a question. In my opinion, this is the case is not (see label regulation).

By the way, who the money voluntarily he entrusted to them disgusting speculators with the vision of a beautiful pension, secured health care and more? They stood for you damn speculators with guns at the heads of those people and forced them to invest? No. In each investment is the risk, the degree of risk is usually directly proportional to the amount of the possible maximum return. Simply put, the greater the return (profit), the greater the risk we must take. Risk is the price for possible future profit. However, the question is whether those people who saved for their retirement in a lot of hedge funds wanted to hear this. The question is whether people have asked about it somewhere. The question is whether people kept at least free advise from an ordinary financial advisor. I think the answer is simple - people didn't ask, people didn't get information, people believed in ads, even if they didn't even understand them.

So current losses are a mistake speculators, or people?

Speculators are to blame for the debts of governments!

The state had to spend a lot of money on public bailouts of many speculators - they are speculators who are to blame for the debts of governments! Oh God - how many articles I've written on this subject, how many times have I criticized rehabilitation of the private sector from the statehow many times I have criticized nationalization!

Here, however, the problem of understanding and logical reasoning is re-established - state manages public finances. This administrator He decided to pay the private sector debts to himself assumes risk and liabilities. He decided alone and freely. Is it a bad decision of the state or a mistake of the private sector?

Of course it is state error!

Stand alone and freely He decided invest to failing businesses! The state itself has decided speculate with the future of the market by distorting the market!

At this point, looking at what it is is crucial system. Many proponents of regulation say that system failed ("Capitalism"), and so the state must correct it. That without the failure of the system, there is no crisis. This is a wrong view.

The system is transcendent, ie the system contains a boom and a recession (depression). The system contains the state, the system contains the private sector. Everything is an integral part of the system and if there is growth, it is clear that a decline may come (and one day will come). So it is growto which we should be far-sighted. It is growth where the state should create reserves, savings, because it is not healthy investment without savings.

Unfortunately, many financial administrators (the state as the administrator of public finances, each individual as the administrator of private finances) with this simple rule (investment covered by savings are cheaper and healthierthan investment covered by debt) does not control. They are in debt, thanks to which they increase their time during the growth (boom) revenues, which, however, do not make a real profit due to debts. This unhealthy investment will manifest itself in the crisis - the crisis is a lesson, The crisis is a chance. Bankruptcies, losses, recessions will bring great lessons to those who have invested badly, who are theirs investment they covered debts that they simply would not have to repay in times of crisis. This lesson can often be so strong that few dare to invest unhealthy. Simply because he will be learned from the past.

The state, through its interventions, eliminates this lesson. It gives people a signal that in times of boom (growth) they can do whatever they want, because the state will pay for them in the future. This approach leads to the growth of the bad investment and the collapse of public finances.

The bad one is the state. It is state, which within a shallow, indeterminate, actually none public interest supports bad investment. And the most bad investment it is supported by the supporters of state intervention in the economy, who largely overlap with the supporters of regulation. How funny.

Governments, voters and nobody else. No speculators. The speculators have become a mere scapegoat here, to which it is those who have created enormous debts in the past who are trying to pass on their mistakes. That's why I will always to defend all those villainous speculators.

At this point, we have clarified the third argument of the proponents of regulation, namely that it could work without regulation, but such a system creates public debt!

There is no fair value for proceeds from speculation!

Let's take a sample as an example speculation - we buy a dollar for 20 CZK. We will sell it for CZK 20,1 in three hours. Our revenue from speculation is 10 pennies. Is there any real value behind these 10 pennies? What caused the appreciation of the dollar against the koruna, what caused the devaluation of the koruna?

Let's start with an explanation (very, really very simplified) of what it is covered (what is behind its value) crown and dollar. The crown and the dollar have not been covered by any precious metal for many decades. They are not covered (directly) by any commodity, ie by something tangible (metal, etc.). The state simply guarantees that you have something for a given currency in a given country you buy.

So it is a kind of trust in the economy of the government and the state that covers the crown and the dollar. If the Czech economy does not succeed, if confidence in it falls, people who trade currencies (those horrible speculators) to sell the Czech koruna and buy, for example, the dollar, because the economy and the state that guarantees the dollar will become more credible. So will rise the price of the dollar (there is more demand for it, people want it more) and will fall crown price. So 1 USD will cost more Czech crowns, because the dollar more expensive. It will increase by 10 pennies, for example.

Those who trade currencies are waiting for this moment. Like us. We used to buy the US dollar for CZK 20, like many others, because we trusted more in the United States economy than in the Czech Republic. In doing so, we have driven the dollar's price up - a signal to society that the US economy is more credible, is in better shape than the Czech one. By driving the price up, we now have the opportunity to sell the dollar to someone else (there is a demand for the dollar, there is less available in the markets, because people were the first to buy it before - for example, us). So we can sell it and get rich. Why not - we sold a dollar to someone else, we got 10 pennies on it.

Please note that the model is very, very simplified! A detailed explanation would take up space for several other articles.

So behind speculation - for example with currencies - is the most real and tangible value that can be found in the world - the whole economy of the area! What is more realistic than the performance of factories, the structure of the economy and the actions of the state?

If we do not regulate, crises will be even worse in the future!

I think I've explained enough in the article. If we think about the content, we find that it's all like Lego - everything fits together. So it is clear that if we regulate, crises will be even worse in the future!

However, if someone does not understand it (there is nothing to be ashamed of), write in the comments. An explanation of this whole article (that is, an explanation of why the last point of the list of arguments of the supporters of regulation is completely wrong and illogical) would really take up a lot of space. It follows from the above, but to be sure, I will add a link to the list of articles in which I also discuss regulation - articles on regulation. Probably the best explanation of how de facto counterproductive this last point is in the article How states intervened. I wish you a nice reading!

The reasoning of supporters of regulation is bad. If someone came to power to put them into practice, they are dangerously. Therefore, let's not be seduced by cheap but good-sounding slogans about cutting the throat of those vicious speculators. Let's think. Speculation is all today, even that you are going to buy a croissant. Our whole life, all our comfort is based on speculation. So why fight against them when they are so beneficial?

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