Would imposing new/more tarrifs on foriegn goods help the economy?

Started by Brandon, August 11, 2010, 06:59:01 AM

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Brandon

Alright so, I want to get away from the big points in polotics and religious debate for awhile. So I want to talk about something else thats been on my mind for the last few years. For a long time its been next to impossible for small businesses to produce and sell goods while still being able to compete with prices from overseas companies. Now Im no economic expert, far from it, but I wonder if tarrifs would be something to look into to help the economy? I think I would like to take an even bigger step and make it so that any company with 51% or more of its workforce overseas would be charged a tarrif as if they were a foriegn company.

So elliquiy what do you think?

Would these ideas help us get out of the rut were in? Why or why not?
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RubySlippers

I would not actually set a "tariff" rather a "foreign equality provision" one should look at how another nation treats its workers, pays them and provides quality of life then impose a tax between that standard of living and the US.

Say you pay slave wages, work your people 60 hours a week, don't provide for their health and well-being and/or employs child labor than impose an equalizer on imports. Say Nike makes shoes in China and they do these things and the pay is considered subpar for a human to live decently by our standards tax the shoes so it encourages parity with the US. Then we can argue we are just doing this to help those foreign workers if it so happens that they then end up paying more to import them (shipping and the like are not cheap) than making them here is thatour problem?

Then in time making said goods HERE would be cost effective since the differences in wages and the like would be gone either China raises these things or the US fines companies for exploiting cheap labor a violation of several international agreements and accords.

I'm fine if other nations follow us in this comparing us to them for such concerns its likely not going to be as big an issue.

Neroon

You know, that's an interesting idea.  In fact the monies from such a source could all be sent to the UN for it to disperse to the other nations to pay for increasing the standard of living for their citizens.  You could even use it as a means of ensuring that every nation has adequate education and free-at-the-point-of-contact healthcare.
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Vekseid

Quote from: Brandon on August 11, 2010, 06:59:01 AM
Alright so, I want to get away from the big points in polotics and religious debate for awhile. So I want to talk about something else thats been on my mind for the last few years. For a long time its been next to impossible for small businesses to produce and sell goods while still being able to compete with prices from overseas companies. Now Im no economic expert, far from it, but I wonder if tarrifs would be something to look into to help the economy? I think I would like to take an even bigger step and make it so that any company with 51% or more of its workforce overseas would be charged a tarrif as if they were a foriegn company.

So elliquiy what do you think?

Would these ideas help us get out of the rut were in? Why or why not?

Tariffs on non-finished goods are generally not a good idea, except to help maintain a sliver of industry for national security purposes.

If you want to encourage local ownership, change up the property tax code. This will have the nice side effect of fucking up banks and other financial institutions that are gobbling up real estate. Give people a generous homestead exemption they can split between properties, charge everyone else a premium.

We're in a liquidity crisis. Tariffs alone aren't really going to do enough, you need to get money directly in the hands of people who will spend it locally. This means things like small business aid, cheap credit for small banks, something like a new works progress administration, etc. Right now, with such high levels of wealth concentration, and no incentive for corporations to spend their immense cash reserves, or the ultra wealthy to spend, we're teetering on the edge of deflation at this point.

Lithos

Quote from: Neroon on August 11, 2010, 12:52:10 PM
You know, that's an interesting idea.  In fact the monies from such a source could all be sent to the UN for it to disperse to the other nations to pay for increasing the standard of living for their citizens.  You could even use it as a means of ensuring that every nation has adequate education and free-at-the-point-of-contact healthcare.

I agree, and nations where these things are better taken care of would get higher than normal prices for their products to bolster their economy and higher employee / education costs.
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RubySlippers

Actually I support microlending and I see no reason it can't be used here. One thing they could do is what Hong Kong does have very light paperwork to start a business that takes a half a day, a bit more for a food vendor. Then tax them a flat 15% if a small end small businesswith one form needed annually.

It works I've been there there is huge microbusiness going on across the city.

But I still think a global system where nations that ,lets be frank, exploit workers to see cheap goods to more egalitarian nations when said goods are imported is a good idea. And would work inside of many concords and treaties we are signees to or at least support in principle with some reservations. I see no reason not to expect China to set fair labor laws, a minimum wage that matters and provide for their employed people or get hit with a tax penalty in any importer that does the opposite. All they have to do is raise wages reasonably say to start $20 a day plus health care, social security of some sort and workplace safety with fair hours. I figure with the cost to ship goods this would counter the advantages then of sending jobs overseas. And there are people trying to get a gloabl minimum wage of $20 a day working an eight hour shift on average that is a fair $2.50 a day. You know that most big corps could afford this if they had to pay it, how much do Nikes sell for $150 or more a pair?

Lithos

The problem is big companies outsourcing their production to cheap countries. Some tax to companies doing that globally might be good solution. If you look at most any product in market today, majority of parts are produced with very cheap labor very far away. What comes to mind is Apple Ipads and Iphone4:s which are produced in some chinese place with 10+ employee suicides a month or so. Only problem then is - either we need to arrange much more income so that people can afford more expensive products, or to be able to decrease pay rates dramatically in our own countries. Neither is exactly easy.

Additional problem is that the slave driving in some production plants is what gives big companies money for their high profile jobs in our own countries, and that is huge amount of jobs and wealth as well, in that respect as nations we are actually benefiting the sub par conditions at some production places already. I still think that it is good suggestion, in the end it might not give anything economically but it would ensure that people might get better working conditions where the parts are produced.
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Synecdoche17

Quote from: Brandon on August 11, 2010, 06:59:01 AM
Now Im no economic expert, far from it, but I wonder if tarrifs would be something to look into to help the economy?

Would these ideas help us get out of the rut were in? Why or why not?
Google the Smoot-Hawley Tariff Act. It was a huge part of what made the Great Depression so abjectly horrible.

To summarize, Smoot-Hawley raised tariffs tremendously in an effort to protect American industry during the depression. In retaliation, European nations raised *their* tariffs, because they didn't want to lose their industries to America. BAM! World trade fell apart nearly instantly, deepening the crisis. Today's effects would be even worse, because modern Western society depends so heavily on intricately global trade networks that it would make the Great Depression look like a joke.

What we need is a domestic-employment program like the New Deal, plus some forgiving of mortgage home debt. Once we get out of the recession, then we can start talking about tariffs.
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OldSchoolGamer

Quote from: Synecdoche17 on August 11, 2010, 08:55:28 PM
What we need is a domestic-employment program like the New Deal, plus some forgiving of mortgage home debt. Once we get out of the recession, then we can start talking about tariffs.

I think circumstances are different today.  Back in the 1930s, free trade actually worked for America's benefit.  Now, it's just a race to the bottom as we have to "compete" with one slave-labor Third World sweatshop after another.

There's nothing wrong with competition, but competitions have rules.  It's not "anything goes."  America competing against cheap labor currency manipulators is like a game of football where the other team is allowed two extra men on the field and only has to get the ball to your 20-yard line to score a touchdown that they get 8 points for rather than 6.  (Or, if we're talking association football, where the other guys get those two extra men, the field is inclined five degrees toward your goal, and your goal is a meter higher and wider than the other team's.) 

Goods from these countries should be tariffed to make up the unfair advantage that they have.  When China wants to float the yuan, allow workers to form unions, and observe environmental safeguards, then the tariffs get phased out.

In order to recover, we have to bring industry back to America.

Asuras

Quote from: RubySlippersI would not actually set a "tariff" rather a "foreign equality provision" one should look at how another nation treats its workers, pays them and provides quality of life then impose a tax between that standard of living and the US.

Say you pay slave wages, work your people 60 hours a week, don't provide for their health and well-being and/or employs child labor than impose an equalizer on imports. Say Nike makes shoes in China and they do these things and the pay is considered subpar for a human to live decently by our standards tax the shoes so it encourages parity with the US. Then we can argue we are just doing this to help those foreign workers if it so happens that they then end up paying more to import them (shipping and the like are not cheap) than making them here is thatour problem?

Then in time making said goods HERE would be cost effective since the differences in wages and the like would be gone either China raises these things or the US fines companies for exploiting cheap labor a violation of several international agreements and accords.

I'm fine if other nations follow us in this comparing us to them for such concerns its likely not going to be as big an issue.

The Chinese would have to be paid five times as much (at least) in order to be as well paid as Americans. No one would buy shoes from them if they had to pay for that.

So all those jobs the Chinese have now would disappear. Some of them would come back to the US, but, if you have to pay five times as much for shoes see what the effect on demand and the US standard of living is.

But for the Chinese...not so good. They work at factories because it pays better (often times a lot better) than the existing alternatives. That's how poor the rest of the world is, and there are countries far worse off (say, India) than China.

So this is not about "foreign equality," this is about sending foreigners back to the gripping poverty that they were in thirty or forty years ago.

Quote from: OldSchoolGamerAmerica competing against cheap labor currency manipulators is like a game of football where the other team is allowed two extra men on the field and only has to get the ball to your 20-yard line to score a touchdown that they get 8 points for rather than 6. 

"Currency manipulation" is when the Chinese print yuan and buy dollars with them. If you think that's manipulative and cheating and unfair, then why do you suppose the US doesn't do it right back at them? Or why shouldn't we?

In other words (sticking with your metaphor), if the other team is putting extra players on the field, why don't we? I think it's because something is wrong with the metaphor.

Serephino

I've often thought that those tax breaks that encourage outsourcing should be gotten rid of, and instead, taxed more.  Industry does need to be brought back here.  The jobs are badly needed.  Then hopefully a lower unemployment rate would mean less foreclosures and such, and more money being spent.   

And I'm sorry to say I don't much care what happens to those Chinese workers.  It may sound callous, but we need to take care of our own country before we worry about others.  There are thousands of Americans living in poverty.  If you have a broken leg you don't ignore it to fix someone else's dislocated shoulder.  I'm all for giving aid in disasters and stuff, but let the Chinese government worry about the Chinese people.   

RubySlippers

What did I mention for a global minimum wage, countirescould go higher - $2.50 an hour working an 8 hour day? Add in some standards for worker safety, retirement and benefits that might be $5.00 an hour. In the US most of these jobs would haveto pay more but would benefit from not needing to ship these goods thousands of miles by cargo ship. Wasn't this covered in the landmark Declaration of Human Rights in the UN we signed to provide every human with work andsafety and fair wages? Its not a bad way to force China to comply with civilized nations.

So if all importers demanded these things or tax these goods to take the horrible treatment of workers into accountthe exporters would have to comply. And is it unfair to expect the worlds leading nations to put words they said and wrote down into action?


Lithos

How it goes in really big plants is, you get about 200$ a month basic wage with 8 hour days six days a week, and you can do overtime to maximum for 12 hours a day six or seven days a week for grand total of 400 - 500$ a month. And in bulk the shipping costs really are not huge so when it comes to labour cost, it is very hard to get workers in our own countries for same sums. Here that pay would not even cover rent, and i suspect living is not cheap at US either.

I suppose realistic would be 3-4 times more pay, 1.5 times more employees to keep overtime in some limits of legality and 1.5 - 2.5 times higher product prices. 600 - 800 a month and 1500 - 2000 with full overtime should be enough. If people could keep sales figures up with more expensive prices that should be manageable then. The problem is, how many companies are willing to take that if, and invest what is needed to get those huge factories to their own countries.
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Arhys

Quote from: Serephino on August 11, 2010, 10:20:03 PM
I've often thought that those tax breaks that encourage outsourcing should be gotten rid of, and instead, taxed more.  Industry does need to be brought back here.  The jobs are badly needed.  Then hopefully a lower unemployment rate would mean less foreclosures and such, and more money being spent.   

And I'm sorry to say I don't much care what happens to those Chinese workers.  It may sound callous, but we need to take care of our own country before we worry about others. 

You're definitely right on eliminating the tax breaks that encourage outsourcing, but the problem with focusing on a political solution in one country, the U.S. or not, is that the problem is multinational.  The large corporations have money, power, and influence cross borders and any unilateral step taken by one country will more likely than not only result in a more rapid and complete transfer of operations to a more friendly business climate.  Simply put--MNC's cross borders, the solutions need to cross borders.

Even where there are laws to protect workers it is easy to get around..how many Americans are given jobs at 30 or 35 hours a week to avoid pension, retirement, health insurance issues?

A large problem is also the ease in which capital crosses borders, looking at international finance is important.  Ten or so years ago German banks for example were satisfied with a 3% or so RoI, banks served to lubricate the economy by providing capital, not make tremendous profits for themselves.  With financial deregulation and large investment houses springing up to take advantage of that, many economists say Europe was infected with the Anglo-American disease where requiring far higher percentages of profitability was the de facto norm. 

I do believe in a selective application of tariffs/subsidies to protect vital or culturally significant industries, though it is hard to lay down a blanket statement that works for each industry, which makes discussions like this one incredibly difficult to have because of all the oversimplificationsAn example of what I mean is to compare American agricultural subsidies which generally favor the large agro-businesses, corn subsidies are a mess.  Looking at Italy or Germany for example we see protection of specialty products, actual Parmesan cheese according to the time honored tradition, or milk subsidies for happy cows.


RubySlippers

And Lithos if you offer $2.50 an hour that is $400 a month, add in to that other things I feel workers are entitled to at a minimum decent safety standards and housing and health benefits and some sort of pension system to each worker and employing the disabled which I would insist on the base noted here is likely going to be $800 month total perhaps. Then add in shipping costs of goods and it starts getting less attractive to make things in China.

So I would say figure out at a global level what importers consider a fair minimum standard, enforce a joint tax scheme to punish those nations abusing workers and not trying to make meaningful improvements to that level, and use the taxes to encourage development of a "fairness to workers".

I had another law I would put into place any "box" retailer must offer goods made in the United States at 60% of their inventories or face a tax penalty, I'm sorry but you can't tell me they cannot make a DVD player in the US for $30.00 retail and the maker have a passing profit. And if the Walmarts and Targets etc. had to buy goods here or get taxed more enough to hurt they would usetheir clout to get goods made here. I don't care who owns the factories and production US or foreign just they make the goods HERE.

Jude

As other people have implied, workers in other countries are not necessarily being paid like slaves when they receive wages that are a fraction of ours.  It all goes back to cost of living and lifestyle;  in America the entire middle class practically insists on driving, television, internet, cell phones, much more food (of a higher quality as well) than is necessary for us to survive, plus we have obscene medical costs wrapped into everything, and taxes that consume a significant portion of our GDP.  Americans will never be able to work for the same wages that the third world does without sacrificing heavily our way of life.

In the past, America was able to offer jobs that foreign laborers were technically capable of performing, because they couldn't.  The mechanization, technical sophistication, and shipping potential wasn't there.  Believe it or not, American businesses establishing themselves overseas and exploiting cheap, local labor is nothing new:  it happened as early as the 1920s, it just wasn't as profitable or as necessary because there wasn't real global competition.

That isn't to say the tariff idea couldn't theoretically work (though in practice it will never happen because of all of the treaties we've signed and the way global markets would react), but I don't know if it would work how people want it to or if it would actually be successful.  Instead of taxing foreign goods in such a way that it increases the price to the level American goods, you'd have to increase the prices only partly, enough that the level of purchases stays relatively the same while shifting government revenue in that direction and away from income taxation and such.  If you manage to redirect the tax burden onto reliable purchases of foreign goods, American goods will drop in price because taxation will ease.  It will be far easier to buy American then, and as people do we can slowly ease the tariffs off and eventually take them away entirely.

I don't know if that idea is smart at all, I feel really shaky about it.  One big problem is after that you need to change the tax model again.  I am just honesty having a hard time of thinking of a way we could actually implement tariffs wouldn't shooting ourselves in the foot, and I can't really think of any.

RubySlippers

Well that is why nations ,plural, that import would have to do this together as a UN Convention Treaty that way some could not sign or do so with reservations. I suspect China would oppose this but if its not a resolution they couldn't block it.

And there is nothing that says we can't back out of other treaties a US Convention is often overridding as a superior treaty once we ratify it. And what are we expecting workers get paid $20 a day, medical care and welfare for their safety considered and provisions for their old age like the majority of civilized nations. And the money paid would go to helping nations achieve this. But I'd rather give it to partners like the Grameen Bank and neutral parties to do this not governments that would impose their own agendas. Maybe something like an International Trade Parity Organization (ITPO) with one goal to push for the advancement of worker rights and issues with governments that ask for the help outside of any other interest. They could ,for example, demand companies in nations pay and provide fair compensation and support for local workers. You can't tell me seriously this would kill trade we may have to pay a little more but its Unchristian to me to exploit workers just to line your pockets with extra money, fair labor should provide fair benefits.

Jude

It's a good thing we aren't a Christian nation, then.

Personally, I'm happy with the lifestyle I have and if we do what you are proposing my standard of living is gonna go down.  Your intentions are unquestionably benevolent, I just don't feel that it's the United States' responsibility to care about labor in other countries.  Let them worry about their own social and economic issues as long as we're following the law and being honest.

Vekseid

Quote from: Arhys on August 12, 2010, 06:25:38 AM
You're definitely right on eliminating the tax breaks that encourage outsourcing, but the problem with focusing on a political solution in one country, the U.S. or not, is that the problem is multinational.  The large corporations have money, power, and influence cross borders and any unilateral step taken by one country will more likely than not only result in a more rapid and complete transfer of operations to a more friendly business climate.  Simply put--MNC's cross borders, the solutions need to cross borders.

...

Not really. America is in control of its own currency. If they pack up and leave, we can lend to those who would buy the facilities they leave behind and encourage local development.

Asuras

Quote from: SeraphinoAnd I'm sorry to say I don't much care what happens to those Chinese workers.  It may sound callous, but we need to take care of our own country before we worry about others.  There are thousands of Americans living in poverty.  If you have a broken leg you don't ignore it to fix someone else's dislocated shoulder.

I don't think that the poverty facing rural Chinese (let alone other poorer nations) is even nearly comparable to the poverty facing Americans. We have the dislocated shoulder, they're starving.

Quote from: RubySlippersWhat did I mention for a global minimum wage

You're saying that the US should not  trade with countries which fail to pay their workers a certain minimum standard of living. You are imposing a certain minimum wage+benefits on all US trading partners, so...how are you not imposing a minimum wage on US trading partners?

Quote from: RubySlippersIn the US most of these jobs would haveto pay more but would benefit from not needing to ship these goods thousands of miles by cargo ship.

So why, do you suppose, do US businesses find it profitable to ship these goods thousands of miles by cargo ship? Is it not, perhaps, because of how expensive US workers are, and how much benefits we give them?

Quote from: RubySlippers
So I would say figure out at a global level what importers consider a fair minimum standard, enforce a joint tax scheme to punish those nations abusing workers and not trying to make meaningful improvements to that level, and use the taxes to encourage development of a "fairness to workers".

You will only have tax revenues on this as long as you still have jobs in China. That's kind of an implication of a tariff.

And I would stop to ask yourself what the Europeans think. If the Europeans refused to trade with anyone that didn't adopt their labor standards (with all their vacation and minimum wages), would they buy anything from us? What would happen to US jobs?

Quote from: RubySlipppersI suspect China would oppose this but if its not a resolution they couldn't block it.

What could they not block? They're on the Security Council.

Quote from: RubySlippersAnd what are we expecting workers get paid $20 a day, medical care and welfare for their safety considered and provisions for their old age like the majority of civilized nations. And the money paid would go to helping nations achieve this.

You have two sons and they have two lemonade stands right next to each other. Call them Jiang and Mike. Jiang isn't as good at making lemonade as Mike. Jiang gets annoyed with Mike selling all his lemonade for $1.00 a cup, and he has an idea...he cuts the price from $1.00 to $0.80. Then, Jiang starts making all kinds of money since apparently people really care about the price. You come by and notice that poor Mike isn't making any money since he really doesn't want to make lemonade for $0.80, and so he and Dennis Kucinich start whining to you.

So your solution is to teach Jiang to make lemonade as well as Mike - that way both of your kids can charge just as much and can compete equally in the market for lemonade. But to finance this education and development, you want Jiang to charge as much for lemonade as Mike does. Jiang will, according to you, happily pay $0.20 for every cup of lemonade he makes in order to receive this education in lemonade craftsmanship at Western universities.

The problem is that his lemonade sucks in the first place. People want cheap lemonade. So if you make him charge $1.00 per lemonade, no one buys it. They'd rather buy it from Mike (who's quite happy with this policy since he's good at making expensive lemonade). So you actually make no money as a parent to pay for Jiang's edification. Jiang, an intelligent boy, has foreseen this, so he'll sell his lemonade to the Russians instead who have no taste whatsoever. (due to excessive consumption of vodka, pelmeni, and borscht)

Quote from: ArhysTen or so years ago German banks for example were satisfied with a 3% or so RoI, banks served to lubricate the economy by providing capital, not make tremendous profits for themselves.

Did they did do this out of the goodness of their banker hearts, or because Frankfurt's deutsche mark rates were low during the 80s and 90s? I seem to recall Germans bitching about joining the euro for something about interest rates and champagne not going very well with Spaten Oktoberfest.

Quote from: ArhysWith financial deregulation and large investment houses springing up to take advantage of that, many economists say Europe was infected with the Anglo-American disease where requiring far higher percentages of profitability was the de facto norm. 

American economists call the infection "Anglo-Saxon" because we're old school.

And I cannot understand why profitability is a bad thing in and of itself. Sure, if a firm sells off its future in order to make short-term profits, it's fucking itself over. But this will be reflected in the short-term in its stock price since it's destroying it's future (and its employees' future).

Vekseid

Quote from: Asuras on August 15, 2010, 06:13:27 AM
I don't think that the poverty facing rural Chinese (let alone other poorer nations) is even nearly comparable to the poverty facing Americans. We have the dislocated shoulder, they're starving.

You've never been to Pine Ridge, have you?

Asuras

Quote from: Vekseid
You've never been to Pine Ridge, have you?

No. I've been to the colonias in South Texas which is pretty jarring for someone who goes in a Republican and comes out a Democrat.

But to describe the situation of America as a whole as anywhere near approaching the...I mean, they have hundreds of millions of people living like that and worse. So one must keep perspective in touch with reality.

Arhys

Quote from: Asuras on August 15, 2010, 06:13:27 AM

Did they did do this out of the goodness of their banker hearts, or because Frankfurt's deutsche mark rates were low during the 80s and 90s? I seem to recall Germans bitching about joining the euro for something about interest rates and champagne not going very well with Spaten Oktoberfest.


No, actually they did it because it was the law, same as it had been in the U.S. for a long-time and the basis of my point that without international financial reform very few steps any country takes individually can be successful.

Asuras

Quote from: ArhysNo, actually they did it because it was the law, same as it had been in the U.S. for a long-time and the basis of my point that without international financial reform very few steps any country takes individually can be successful.

What law was this?

Arhys

In the U.S. Glass-Steagal, in Germany was their original Banking Law and its subsequent amendments (there were four or five), the transition from CEM to EU, and the Erstes, Zweites, und Drittes Finanzmarktforderungsgesetz ('90, '94, and '98) in conjunction with KWG-Novelles amendments. 

-ed.:  I should add that to keep this discussion on topic to the thread, that any hypothetical discussion of micro-policy changes in the U.S. like this thread suggests needs to balance the larger picture if international finance.  The massive complexity of that makes it difficult for discussions like these to be of any value or provide any real basis for forming an opinion based on looking at one or two small policy ideas.

Asuras

Quote from: ArhysIn the U.S. Glass-Steagal,

In the US:

Glass-Steagall did not affect interest rates or ROI, it was about the separation of investment banking from commercial banking. Glass-Steagall was passed in the 1930s and repealed in the late 1990s. Total ROI in America has exceeded 10% from 1945-1990. Chart to demonstrate:



Glass-Steagall was financial reform, sure. And strong financial reform. But I would contend that the effect was to increase ROI, investment, employment, productivity, and the standard of living over the long term. Those things all go together.

Quote from: Arhysin Germany was their original Banking Law and its subsequent amendments (there were four or five), the transition from CEM to EU, and the Erstes, Zweites, und Drittes Finanzmarktforderungsgesetz ('90, '94, and '98) in conjunction with KWG-Novelles amendments.

I know German monetary policy. I don't know German financial law.  That's why I asked what law - why did these laws deter banks from pursuing profitable ventures (i.e, high ROIs). Names of German laws don't mean anything to me. What are these laws, and why are/were they good laws? What could possibly stop a bank from pursuing a profitable venture at the highest ROI (Glass-Steagall after all didn't, nor was it intended to) and why would such a law be a good thing?