Jeff  Carter

Last night in the debate, John Huntsman talked about banks being the “right size”. That’s a normative economic statement. What is the right size? How can one person, agency or legislation determine the right size for a bank?

Why not let the market determine the right size? If they have a growing customer base that they service competitively, let them be as big as they want.

When you start to examine things, it’s better to use “positive” statements that can be scientifically proven and replicated. For example, “A higher minimum wage will cause higher levels of unemployement.”, can be scientifically proven and replicated in both theory and practice.

Megan McArdle writes about a similar theme today in the Atlantic. What’s fair?

Then we had our own financial crisis and it became suddenly, vividly clear: democratic governments cannot do even obvious right things if the public will not tolerate it. Even dictators have interest groups whose support they must buy.

It’s a subjective question just like “How much money is enough?”. Is there a pat answer? No, it’s totally dependent on a lot of variables.

The important thing is to get the regulation and law written correctly. They need to be written in such a way that the market is hyper competitive, transparent, and the checks and balances that come with markets can act. When companies fail, like the banks did in 2008 and GM/Chrysler did, we let them tumble.

Capitalism and free markets cannot work without creative destruction.

Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.