[DEFEATED] Repeal: Stock Exchanges and Foreign Investment

[United Federated States of Omega]

The second, and more important, consideration is that GA #401 actually isn't harmless, it's bad economics. Its author didn't just wake up one morning thinking it would be great if stock exchanges were accessible to foreign investors.

Well, I wouldn't say one morning. It was more after a midday nap and after three hours I had draft number 1.

[Uan aa Boa]

My point is, I don't think that this is dangerous, harmful or likely to ruin my country, and even though I have been here for five minutes (relatively speaking) I am already sick of seeing proposals enacted in to law and repealed less than a gnat's willy later. So, unless a resolution is going to cause a civil war the likes of which The Goddess has never seen, there is going to have to be a very, very good reason for it to be repealed.

I'd suggest you look as a sort of "check and balance" arrangement. Many of the thousands of nations that vote on each proposal only read the proposal itself and don't hear the opposing argument or spot the flaws. That's why some resolutions are passed despite serious shortcomings. If the Assembly can be persuaded to vote for the repeal of the very resolution it has only recently approved then that suggests a weak resolution. Think of the repeal phase as being the part of the process in which the case for the opposition is presented. It is a little strange this case is only formally presented after the vote, but that's the quality control system we have. Letting a resolution stand because it's new is like stopping the match at half time.

[Covenstone]

My point is, I don't think that this is dangerous, harmful or likely to ruin my country, and even though I have been here for five minutes (relatively speaking) I am already sick of seeing proposals enacted in to law and repealed less than a gnat's willy later. So, unless a resolution is going to cause a civil war the likes of which The Goddess has never seen, there is going to have to be a very, very good reason for it to be repealed.

I'd suggest you look as a sort of "check and balance" arrangement. Many of the thousands of nations that vote on each proposal only read the proposal itself and don't hear the opposing argument or spot the flaws. That's why some resolutions are passed despite serious shortcomings. If the Assembly can be persuaded to vote for the repeal of the very resolution it has only recently approved then that suggests a weak resolution. Think of the repeal phase as being the part of the process in which the case for the opposition is presented. It is a little strange this case is only formally presented after the vote, but that's the quality control system we have. Letting a resolution stand because it's new is like stopping the match at half time.

I have had that theory explained to me several times already, and frankly I still think it is bollocks (said with all due respect, of course.) And even if I didn't think it was bollocks, I am still not going to support something that I don't believe in just so that it can come to a vote. For much the same reason I don't go to The First Church of Covenstone every Thursday : I think it would be hypocritical and the world has enough hypocrites in it already without me adding one more.

[Uan aa Boa]

OK, fourth draft up featuring numbered sections and the removal of one of the less central points. I note that United Christian's repeal proposal has been submitted, so I'll aim to continue polishing mine up while we wait to see whether it reaches quorum.

I have had that theory explained to me several times already, and frankly I still think it is bollocks (said with all due respect, of course.) And even if I didn't think it was bollocks, I am still not going to support something that I don't believe in just so that it can come to a vote. For much the same reason I don't go to The First Church of Covenstone every Thursday : I think it would be hypocritical and the world has enough hypocrites in it already without me adding one more.

Fair enough. Thanks again for your input, it was helpful.

The second, and more important, consideration is that GA #401 actually isn't harmless, it's bad economics. Its author didn't just wake up one morning thinking it would be great if stock exchanges were accessible to foreign investors.

Well, I wouldn't say one morning. It was more after a midday nap and after three hours I had draft number 1.

Whatever time of day inspiration struck, do you want to make any response to the economic arguments?

[United Federated States of Omega]

OK, fourth draft up featuring numbered sections and the removal of one of the less central points. I note that United Christian's repeal proposal has been submitted, so I'll aim to continue polishing mine up while we wait to see whether it reaches quorum.

I have had that theory explained to me several times already, and frankly I still think it is bollocks (said with all due respect, of course.) And even if I didn't think it was bollocks, I am still not going to support something that I don't believe in just so that it can come to a vote. For much the same reason I don't go to The First Church of Covenstone every Thursday : I think it would be hypocritical and the world has enough hypocrites in it already without me adding one more.

Fair enough. Thanks again for your input, it was helpful.

Well, I wouldn't say one morning. It was more after a midday nap and after three hours I had draft number 1.

Whatever time of day inspiration struck, do you want to make any response to the economic arguments?

I would love to. The economic ideas represented are based on rl history and economics. For example one of the things that makes the NYSE one of the best SE's in the world is the sheer number of people who trade on it, allowing corporations to raise a lot more capital. The same goes for bonds. US Treasury Bonds are bought by people all over the world which allow the US gov't to get the capital needed to help its people.
My claim that nations that trade together are less likely to go to war is seen by the current relationship between the US and China. The two countries need each other to keep functioning because they are both heavily invested in each other. One of the first things nations do before going to war is institute an embargo or economic sanctions to cripple their adversary.
Yes, I recognize that borrowing more money can be risky but this does not ignore the free market. When markets believe someone can no longer be trusted to borrow money they will stop lending them money. Yes, this allows for more risk, but it in no way ignores the invisible hand of the market. The market will stop lending to you if they believe you can't be trusted with the money. For every Greece that collapses there is also an America and a Germany which know their limits and succeed.

[Uan aa Boa]

I would love to. The economic ideas represented are based on rl history and economics. For example one of the things that makes the NYSE one of the best SE's in the world is the sheer number of people who trade on it, allowing corporations to raise a lot more capital. The same goes for bonds. US Treasury Bonds are bought by people all over the world which allow the US gov't to get the capital needed to help its people.
My claim that nations that trade together are less likely to go to war is seen by the current relationship between the US and China. The two countries need each other to keep functioning because they are both heavily invested in each other. One of the first things nations do before going to war is institute an embargo or economic sanctions to cripple their adversary.
Yes, I recognize that borrowing more money can be risky but this does not ignore the free market. When markets believe someone can no longer be trusted to borrow money they will stop lending them money. Yes, this allows for more risk, but it in no way ignores the invisible hand of the market. The market will stop lending to you if they believe you can't be trusted with the money. For every Greece that collapses there is also an America and a Germany which know their limits and succeed.

1. I would love to believe that the market would stop lending money when lending has become unwise, but history suggests otherwise. Remember the dot com bubble? The start-up companies referred to the speed with which they were pouring money down the drain as the burn rate, and as far as investors were concerned the bigger that rate was the better. The investments poured in, despite the fact that to match the forecasts the companies would have had to become at least an order of magnitude more profitable than any enterprise in human history. Or how about the sub-prime housing bubble that caused the 2008 crash? Money couldn't be lent fast enough to those who couldn't afford it because the "invisible hand" was concerned mainly with the short term rise in the stock values of the banks doing the lending. GA #401 has the same tone of "borrow as much as you can, it'll be fine." As the draft says, the WA can't and shouldn't seek to use legislation to force the market to its will.

2. Having done some reading in the light of your post I retract some of what I said about the non-involvement of governments in buying bonds. It turns out that China owns about 10% of the USA national debt, with the bonds of powerful economies popular as part of government reserves in many countries. Yet in 2008 the USA felt the need to commission research into whether this situation could be "weaponised" - if China dumped all those bonds onto the market at once the price would go into free fall, seriously affecting the government's ability to borrow. Although the risk was judged to be small at the time, China has since done something very similar in flooding the market with cheap steel it sells at a loss in order to damage the steel industries of other countries. Losing the ability to control who you owe your debt to can have far reaching consequences and is not the unmitigated good GA #401 portrays it as.

3. The beneficiaries of the advice contained in GA #401 are those governments and corporations that find their demand for (safely raised) capital exceeds the supply of capital available on the domestic stock exchange. We're talking about a nation that has a lot of economic activity and profitable corporations that can afford to borrow, but whose citizens aren't, for whatever reason, investing in the pensions and savings scheme that can lend. This is quite a specific set of circumstances, and if the economy is managing to enrich the nation's citizens it won't arise. An economy that has this problem has a lot of problems. I believe a blanket recommendation to all WA member nations is not the best way to address this. Every economy needs to consider its situation on its own merits.

[United Federated States of Omega]

I would love to. The economic ideas represented are based on rl history and economics. For example one of the things that makes the NYSE one of the best SE's in the world is the sheer number of people who trade on it, allowing corporations to raise a lot more capital. The same goes for bonds. US Treasury Bonds are bought by people all over the world which allow the US gov't to get the capital needed to help its people.
My claim that nations that trade together are less likely to go to war is seen by the current relationship between the US and China. The two countries need each other to keep functioning because they are both heavily invested in each other. One of the first things nations do before going to war is institute an embargo or economic sanctions to cripple their adversary.
Yes, I recognize that borrowing more money can be risky but this does not ignore the free market. When markets believe someone can no longer be trusted to borrow money they will stop lending them money. Yes, this allows for more risk, but it in no way ignores the invisible hand of the market. The market will stop lending to you if they believe you can't be trusted with the money. For every Greece that collapses there is also an America and a Germany which know their limits and succeed.

1. I would love to believe that the market would stop lending money when lending has become unwise, but history suggests otherwise. Remember the dot com bubble? The start-up companies referred to the speed with which they were pouring money down the drain as the burn rate, and as far as investors were concerned the bigger that rate was the better. The investments poured in, despite the fact that to match the forecasts the companies would have had to become at least an order of magnitude more profitable than any enterprise in human history. Or how about the sub-prime housing bubble that caused the 2008 crash? Money couldn't be lent fast enough to those who couldn't afford it because the "invisible hand" was concerned mainly with the short term rise in the stock values of the banks doing the lending. GA #401 has the same tone of "borrow as much as you can, it'll be fine." As the draft says, the WA can't and shouldn't seek to use legislation to force the market to its will.

2. Having done some reading in the light of your post I retract some of what I said about the non-involvement of governments in buying bonds. It turns out that China owns about 10% of the USA national debt, with the bonds of powerful economies popular as part of government reserves in many countries. Yet in 2008 the USA felt the need to commission research into whether this situation could be "weaponised" - if China dumped all those bonds onto the market at once the price would go into free fall, seriously affecting the government's ability to borrow. Although the risk was judged to be small at the time, China has since done something very similar in flooding the market with cheap steel it sells at a loss in order to damage the steel industries of other countries. Losing the ability to control who you owe your debt to can have far reaching consequences and is not the unmitigated good GA #401 portrays it as.

3. The beneficiaries of the advice contained in GA #401 are those governments and corporations that find their demand for (safely raised) capital exceeds the supply of capital available on the domestic stock exchange. We're talking about a nation that has a lot of economic activity and profitable corporations that can afford to borrow, but whose citizens aren't, for whatever reason, investing in the pensions and savings scheme that can lend. This is quite a specific set of circumstances, and if the economy is managing to enrich the nation's citizens it won't arise. An economy that has this problem has a lot of problems. I believe a blanket recommendation to all WA member nations is not the best way to address this. Every economy needs to consider its situation on its own merits.

1. Remember how South African Bonds were recently made junk bonds by the rating agencies because South Africa can't be trusted to pay back its debt? Remember when interest rates on Greek bonds soared because they were deemed so risky that if interest rates weren't significantly increased on one would buy them? Bubbles are the exception, not the norm. Yes, they happen, but rating agencies are generally good at changing the ratings of bonds when they become risky (stocks do not receive ratings).
2. Funny you mention that. First, off the resolution allows you to restrict who you sell bonds too. In fact, under the resolution, you don't have to even allow foreigners to come in and buy your bonds. Second, off you mention that we looked into if China asking for all of the money back on the bonds could be "weponized". The Pentagon has said that if China did this it would hurt China MORE than it would hurt the US. Yeah, we thought this was a big deal but economists seem to believe it would be worse for China than the US. Also, China has been known to use foreign treasury bonds as a means to prop up it' currency to prevent it from gaining or losing too much value, not to hold leverage over nations (although that sure is a useful side effect).

[Uan aa Boa]

1. Remember how South African Bonds were recently made junk bonds by the rating agencies because South Africa can't be trusted to pay back its debt? Remember when interest rates on Greek bonds soared because they were deemed so risky that if interest rates weren't significantly increased on one would buy them? Bubbles are the exception, not the norm. Yes, they happen, but rating agencies are generally good at changing the ratings of bonds when they become risky (stocks do not receive ratings).
2. Funny you mention that. First, off the resolution allows you to restrict who you sell bonds too. In fact, under the resolution, you don't have to even allow foreigners to come in and buy your bonds. Second, off you mention that we looked into if China asking for all of the money back on the bonds could be "weponized". The Pentagon has said that if China did this it would hurt China MORE than it would hurt the US. Yeah, we thought this was a big deal but economists seem to believe it would be worse for China than the US. Also, China has been known to use foreign treasury bonds as a means to prop up it' currency to prevent it from gaining or losing too much value, not to hold leverage over nations (although that sure is a useful side effect).

You're getting a little confused on the economics again. Regarding bubbles, the recent significant ones in 1987, 2001 and 2008 were caused by stocks and not bonds for which, as you say, there are no credit ratings. The common factor is each of them is debt in excess of liquidity, which is exactly what the "raise as much as you can" ethos of GA #401 feeds. As for globalisation, it baffles me that economies throughout the world are still struggling because some people in the USA were allowed to take out irresponsible mortgages, but that's how it turns out. Free trade isn't an unmitigated good thing.

Secondly, bond holders can't "ask for the money back." Bonds have a built in repayment schedule that can't be varied. The way for China to "weaponise" its bond holding would be to sell them all once. From the point of view of the US government, borrowing only take place when a new bond is issued. If the bond is sold on later that affects who the US government has to make the repayment to but it makes no other difference. An abundance for sale of any commodity drives down the price of that commodity. In that situation, anyone in the world who wants to acquire US bonds picks them up cheaply on the market rather than buying new ones directly from the US, so the US either can't borrow or can only do so on less favourable terms. Yes, this is expensive for China, but any hostile action against another government is expensive. Having weapons is expensive, but nations still have them and maintain credible deterrence because others believe they would use them. As I said, China loses money by dumping cheap steel on the world market, but presumably calculates that this serves its long term interests.

Of course we're having a real life discussion here. The resolution isn't about the relationship between China and the USA, it needs to embrace the whole of the diversity of WA nations. As people have been saying in the Clean Energy Act thread, WA nations are far more diverse than real life nations.

Then of course there's the unexplained bolting on to GA #401 of regulation of currency markets. Can you explain what this has to do with the rest of the resolution? I mean no disrespect, but together with your post above I'm left with the definite impression that you've been legislating without really understanding the differences between bonds, stocks and currencies and the different ways that trade in them functions.

[United Federated States of Omega]

1. Remember how South African Bonds were recently made junk bonds by the rating agencies because South Africa can't be trusted to pay back its debt? Remember when interest rates on Greek bonds soared because they were deemed so risky that if interest rates weren't significantly increased on one would buy them? Bubbles are the exception, not the norm. Yes, they happen, but rating agencies are generally good at changing the ratings of bonds when they become risky (stocks do not receive ratings).
2. Funny you mention that. First, off the resolution allows you to restrict who you sell bonds too. In fact, under the resolution, you don't have to even allow foreigners to come in and buy your bonds. Second, off you mention that we looked into if China asking for all of the money back on the bonds could be "weponized". The Pentagon has said that if China did this it would hurt China MORE than it would hurt the US. Yeah, we thought this was a big deal but economists seem to believe it would be worse for China than the US. Also, China has been known to use foreign treasury bonds as a means to prop up it' currency to prevent it from gaining or losing too much value, not to hold leverage over nations (although that sure is a useful side effect).

You're getting a little confused on the economics again. Regarding bubbles, the recent significant ones in 1987, 2001 and 2008 were caused by stocks and not bonds for which, as you say, there are no credit ratings. The common factor is each of them is debt in excess of liquidity, which is exactly what the "raise as much as you can" ethos of GA #401 feeds. As for globalisation, it baffles me that economies throughout the world are still struggling because some people in the USA were allowed to take out irresponsible mortgages, but that's how it turns out. Free trade isn't an unmitigated good thing.

Secondly, bond holders can't "ask for the money back." Bonds have a built in repayment schedule that can't be varied. The way for China to "weaponise" its bond holding would be to sell them all once. From the point of view of the US government, borrowing only take place when a new bond is issued. If the bond is sold on later that affects who the US government has to make the repayment to but it makes no other difference. An abundance for sale of any commodity drives down the price of that commodity. In that situation, anyone in the world who wants to acquire US bonds picks them up cheaply on the market rather than buying new ones directly from the US, so the US either can't borrow or can only do so on less favourable terms. Yes, this is expensive for China, but any hostile action against another government is expensive. Having weapons is expensive, but nations still have them and maintain credible deterrence because others believe they would use them. As I said, China loses money by dumping cheap steel on the world market, but presumably calculates that this serves its long term interests.

Of course we're having a real life discussion here. The resolution isn't about the relationship between China and the USA, it needs to embrace the whole of the diversity of WA nations. As people have been saying in the Clean Energy Act thread, WA nations are far more diverse than real life nations.

Then of course there's the unexplained bolting on to GA #401 of regulation of currency markets. Can you explain what this has to do with the rest of the resolution? I mean no disrespect, but together with your post above I'm left with the definite impression that you've been legislating without really understanding the differences between bonds, stocks and currencies and the different ways that trade in them functions.

The 2008 crash occurred when the securities (which were rated by credit agencies) collapsed because the mortgages they were tied to failed.
I absolutely understand the differences between stocks and bonds and currencies. Yes I understand that stocks are bought on exchanges, bonds are bought on exchanges, and the problem with WA resoultions is that going into spcifics makes it hard for them to apply to all nations, and easy to find loopholes. As such, I kept it extremely generic.
The purpose of the currency exchange regulations was simple: being forced to exchange currencies is one thing that makes it difficult to invest internationally and the fact that it would be easy for an exchange to unfairly change values on an exchange would make it even harder for individuals to invest internationally.
I do feel required to ask this: where were you when we were drafting the resolution?

[Uan aa Boa]

I do feel required to ask this: where were you when we were drafting the resolution?

I'm new to NationStates and I've started getting involved in WA matters even more recently.

[Jarish Inyo]

The purpose of the currency exchange regulations was simple: being forced to exchange currencies is one thing that makes it difficult to invest internationally and the fact that it would be easy for an exchange to unfairly change values on an exchange would make it even harder for individuals to invest internationally.

According to you, the resolution does the following:

actually this resolution doesn't do anything other then establish a committee with no real powers, even the recommendations are already covered by CoCR.

So, just creating a committee that does nothing is a good reason to repeal the resolution.

[United Federated States of Omega]

The purpose of the currency exchange regulations was simple: being forced to exchange currencies is one thing that makes it difficult to invest internationally and the fact that it would be easy for an exchange to unfairly change values on an exchange would make it even harder for individuals to invest internationally.

According to you, the resolution does the following:

actually this resolution doesn't do anything other then establish a committee with no real powers, even the recommendations are already covered by CoCR.

So, just creating a committee that does nothing is a good reason to repeal the resolution.

Umm, I never said that last one. Unless you didn't mean me.

Also Uan, in that case, welcome to the WA.

[Uan aa Boa]

Also Uan, in that case, welcome to the WA.

Thanks! It's worryingly nice to be here. I'm not sure this says good things about my life.

[Uan aa Boa]

Submission looms. Final call for the collective wisdom of the Ambassadors.

[Araraukar]

Final call for the collective wisdom of the Ambassadors.

OOC: Make sure you have your campaign sorted out before you submit.

[Uan aa Boa]

Final call for the collective wisdom of the Ambassadors.

OOC: Make sure you have your campaign sorted out before you submit.

Thanks for the advice. Yes, I'm working on it. Actually, looking at my real life commitments this week it may well be next week before I submit, because I'd like to be active in campaigning.

[United Federated States of Omega]

OOC: Make sure you have your campaign sorted out before you submit.

Thanks for the advice. Yes, I'm working on it. Actually, looking at my real life commitments this week it may well be next week before I submit, because I'd like to be active in campaigning.

I know this is a repeal of my resolution, however, I would like to wish you the best of luck in this. Of course, I don't want this to pass and for the reasons I have given here and in the original debate thread, I believe I have made my case for keeping GA 401 on the books.

[Uan aa Boa]

I know this is a repeal of my resolution, however, I would like to wish you the best of luck in this. Of course, I don't want this to pass and for the reasons I have given here and in the original debate thread, I believe I have made my case for keeping GA 401 on the books.

Thanks, I'm genuinely touched. Looking back at some slightly tetchy exchanges I've had in the last few days I realise I should more often emulate your spirit of goodwill across political differences.

[Uan aa Boa]

The proposal has been submitted! The OP has been edited to show the final version. Thanks again to everyone who helped with developing the draft.

[Guy]

Er, none of the premises for your proposal are true...

1) Access to foreign capital absolutely increases the amount of capital available. The market doesn't just price bonds or shares using one required rate of return. Foreign investors may have a lower rate as a result of easier access to cash, a desire to diversify their holdings (i.e. hold lower-correlated assets) etc. Looking at it from a really broad macro outlook, their savings/consumption decision might be different.

2) As far as I can tell, currency exchanges are included as currency manipulation affects international markets. Not as a result of their own characteristics.

2a) The claim that currency is immediately delivered, so is not "investment in the same way", is bollocks. First, have you ever heard of currency derivatives? Second, it's still absolutely an investment market.

[Covenstone]

"And they're turning the clock back I can hear me granny say
Yes they're turning the clock back and the working man will pay"

Sometime I do wonder why we bother voting on anything at all.

[Dragonslinding WA Mission]

Ser Aegon Snow rose to address the assembly. His scale type armor only slightly ill fitting as he had put on weight since being assigned to the world assembly, but none the less highly polished.

"Esteemed Colleagues. I rise today against this repeal. Normally this would not be the case as it is the natural inclination of Dragonslinding to be opposed in general to the World Assembly meddling into the affairs of nations. Yes, we've heard that that is the WA's job before so don't bother with that line. Anyway, we feel that this repeal is based on faulty arguments, a general misunderstanding of GAR#401 and could lead to more onerous legislation being passed. As such I urge this body to strike down this repeal. Thank you."

Aegon sit back down and then proceeds to pour himself a tankard of ale.

[Check-o-slow-vakki-uh]

Our main issue with Resolution #401 is with "2. Recommends that all stock exchanges headquartered within a member state be open to the citizens of any World Assembly member state", as it seems to disregard the many communist nations in the WA. In fact, the entire resolution is based on a Capitalist worldview, but this in particular seems to be an attempt to introduce private ownership to communist nations. This is the same issue as with the education proposal that was recently struck down. We have no private markets, so introducing stock trading would upend Our entire economic system. Certainly, there is no language in this resolution that forces Us to allow private trade, but it's still yet another endorsement of capitalism from the WA.

[Dragonslinding WA Mission]

Our main issue with Resolution #401 is with "2. Recommends that all stock exchanges headquartered within a member state be open to the citizens of any World Assembly member state", as it seems to disregard the many communist nations in the WA. In fact, the entire resolution is based on a Capitalist worldview, but this in particular seems to be an attempt to introduce private ownership to communist nations. This is the same issue as with the education proposal that was recently struck down. We have no private markets, so introducing stock trading would upend Our entire economic system. Certainly, there is no language in this resolution that forces Us to allow private trade, but it's still yet another endorsement of capitalism from the WA.

"There is a problem with that hypothesis. GAR#401 does not require member states to have stock markets. It requires those who have them to allow citizens from other WA member nations (with some exceptions) to buy and sell securities on those markets. GAR#401 in no way requires member states to have such markets."

Aegon Snow reviewed the notes he was handed by a page. "Furthermore the fact remains that should this resolution be repealed, it is conceivable that a resolution requiring member nations to have such markets could be passed. It is self-evident that the WA has the ability to legislate on this matter as we are dealing with a repeal of legislation on this matter."

[New Dukaine]

"I will be voting against as this hurts more than helps for the left/far-left, and I generally like the idea of the resolution targeted."

Pama then stamps his "Against" stamp on the ballot and throws it like a frisbee towards the counting gnomes.