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Home Publications Blogs Beat the Press Neanderthal Protectionists on Wall Street

Neanderthal Protectionists on Wall Street

Wednesday, 21 April 2010 04:14

NPR had a piece on regulating derivatives this morning in which it presented the industry view that effective regulation will cause the industry to move offshore. The show should have brought on an economist to denounce this protectionist view and the harm that it implies for the economy.

There is no more reason for people in the United States to be concerned about buying derivatives abroad than we are about buying shoes and clothes from abroad. If other countries choose to attract trade in derivatives with a more poorly regulated financial system -- implicitly having their taxpayers assume the risk of a meltdown (e.g. Iceland) -- then there is no reason that we should not simply buy our derivatives from these countries and concentrate our production on areas in which we enjoy a comparative advantage. NPR should have included the economist's position in this segment.



Comments (2)Add Comment
written by izzatzo, April 21, 2010 6:06
Any economist knows that derivative trading is based in capitalist comparative advantage and not socialist absolutist advantage. When regulation kills the incentive to derive, it kills the incentive to trade and reduces exports of US derivatives superior in comparison to derivatives made in other countries.

Eventually producers of derivatives are forced offshore and US consumers are not only forced to purchase derivatives in WalMart along with shoes and clothes, but they are no longer employed in derivative manufacturing, working in places like WalMart where they can't even afford what they sell.

Stupid liberals.
Doomed to repeat the mistakes of the past
written by skeptonomist, April 21, 2010 9:47
Offshoring the finance industry has some attractions, but is not without dangers and costs. The Icelandic banks attracted money from all over Europe, and not just from big-time speculators - they offered high rates on deposits and short-term instruments. Iceland provides a good illustration of why such things were not allowed before the deregulation era. Once again financiers - and economists - deliberately forgot the lessons of the past.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.