NationStates Jolt Archive

I honestly believe a cheaper AND more "Stimulating" approach would have been giving every American citizen 1 million in US Dollars...

So what do you do when every US citizen has 1 million and you are afraid of hyperinflation???

You freeze enterprise for only a few years. You could solve todays housing market problem in only a hand full of months!!!! To stimulate our enconomy... all you need to do is have people spend spend spend... When everyone is given 1 million to spend as they see fit... They will go out and pay off the loans to their houses... bringing the foreclosure rate to a huge minimum. People would go out and buy cars and the car makers wont have to worry anymore about failing. People would have money... to guess what... PUT IN BANKS!!!!! Once their vaults are full of customer dollars they will no longer have to worry about failing either. As far as unemployment... That problem would be fixed as well... People would be able cover the payroll for more employees.

See the pattern here? a lot of the issues would be delt with

...that would cost 300 trillion dollars. For reference, in 2008 the US federal budget was a mere 2.979 trillion dollars. Are you suggesting that we handle shortfalls the way Mugabe did?

And, for the record, they tried giving (IIRC) $2000 survival money to Katrina victims. Yes, some of them spent it on food and other vital stuff, but others spent it on jewelry, expensive clothes, etc.

You don't find the international monetary system odd in the slightest?
The current international monetary system is extremely odd, which is why it should be abolished. The concept of money isn't odd at all.

Doesn't, for example, the fact that (to put it simplistically) a company can sharply devalue because people think it might sharply devalue seem a tad bizarre?

That's not odd at all. An object/table/lamp/company's value only comes from the value people are willing to assign it.

Doesn't, for example, the fact that (to put it simplistically) a company can sharply devalue because people think it might sharply devalue seem a tad bizarre?

That's a little simplistic, but it's not that odd, value is largely (if not fully) subjective.

...that would cost 300 trillion dollars. For reference, in 2008 the US federal budget was a mere 2.979 trillion dollars. Are you suggesting that we handle shortfalls the way Mugabe did?

And, for the record, they tried giving (IIRC) $2000 survival money to Katrina victims. Yes, some of them spent it on food and other vital stuff, but others spent it on jewelry, expensive clothes, etc.

I think the poster was being sarcastic.

Why will the new stimulus bill succeed where others have always failed?

Flying machines have never worked. Why will this new device from the Wright brothers work where others have always failed?

Flying machines have never worked. Why will this new device from the Wright brothers work where others have always failed?

A stimulus bill and its effects on the economy are infinitely more complex than a flying machine. Maybe a stimulus bill designed by a yet-to-be invented supercomputer will work. But time and time again the same mortal humans waste their time with inherently inept stimulus bills, which do not improve things but actually make things worse.

But time and time again the same mortal humans waste their time with inherently inept stimulus bills, which do not improve things but actually make things worse.
Thus far (perhaps).

Thus far (perhaps).

We shall meet again in a few months and years and survey the results of this current stimulus bill designed by the so called best and brightest.

We shall meet again in a few months and years and survey the results of this current stimulus bill designed by the so called best and brightest.
Hear, hear.

Flying machines have never worked. Why will this new device from the Wright brothers work where others have always failed?

A stimulus bill and its effects on the economy are infinitely more complex than a flying machine. Maybe a stimulus bill designed by a yet-to-be invented supercomputer will work. But time and time again the same mortal humans waste their time with inherently inept stimulus bills, which do not improve things but actually make things worse.

Men will never walk on the moon.

Men will never walk on the moon.

You might get your idea about how the economy works from playing a computer game. But in truth the economy is infinitely more complex than any of these petty endeavors, including sending a man on the moon. It's literally impossible for a central planning committee to make a useful stimulus bill with positive results for the economy. The likelihood that the stimulus bill will not only provide no benefit, but make things worse, is certain.

Flying machines have never worked. Why will this new device from the Wright brothers work where others have always failed?

because they were sent the right sized engine?

It's literally impossible for a central planning committee to make a useful stimulus bill with positive results for the economy. The likelihood that the stimulus bill will not only provide no benefit, but make things worse, is certain.
And these two claims are proven by...?

US 1930s, Japan 1990s

The Soviet Union was one big stimulus package

okay you've provided examples.
could we have some analysis? That would help a lot.
What were these packages what were their net affect ?
What was the cause of the depression/recession they were trying to treat?
If you don't construct an argument it is a waste of time.
Maybe gets some published professors who back you.


arguments need to be thought out and sourced.

Thanks for fighting with Jolt. I've found that if the browser doesn't completely crash, I can, sometimes, go back a page and recover the "Reply to Topic" screen. But you probably know that, too.

It didn't take me three days to write this, just one day to read it and two days to get back to it.

I guess the Chinese food industry doesn't feel obligated to attribute quotes. I thought the money vs idea thing sounded familiar -- It's attributed to Robert H. Schuller, yep, the TV minister. I started looking at other quotes by Schuller and I particularly like "You can often measure a person by the size of his dream," which is also very appropriate.

I'm not sure that our problems can be traced back to business. For years upon years, business has existed to make profits for the owners. At the risk of sounding dogmatic, that's been business's sole purpose since trading began. I don't believe that the upper echelons of today's businesses are any different than their counterparts from bygone days. Arguably, the J.P. Morgan's and Andrew Carnegie's of the past were far more ambitious and self-serving than the captains of today's industries.
I disagree. I believe that the "robber barons" of today are no different and certainly not better than their forebears. In fact, I'd say they are arguably worse, considering that back in Morgan's and Carnegie's and Rockefeller's and Vanderbilt's day, after they went home with their bags of money, they left behind things like railroads and highways and steel mills and bridges and banks, etc.

What do we have to show for the careers of the current barons? Not a fucking thing but them begging for money at our doors, hat in hand.

I also take issue with your statement that the reason business exists was always to generate profit for the owners. I assert that this reflects a shallow and inaccurate understanding of (a) capitalism and (b) what modern big business actually does.

The real key to capitalism is NOT that the capitalist GETS money. The real key to capitalism is that the capitalist MAKES money.

You don't need to be a capitalist to GET money. Any criminal can do that. Even communists can do that.

Capitalism is not a system for getting money. It's a system for MAKING money. A successful capitalist is not judged by how much money he has, but by what he USES that money for. Because the point of capitalism is that money is supposed to be USED to make more money in an expanding spiral of wealth (and buying power) generation, that means that businesses will NOT always generate profit. There will be times when breaking even, or even realizing a temporary loss, will be better than gaining profit, if it happens as a result of managing the business for maximum long-term growth.

But nowadays, there is no long-term growth planning. Nowadays it is actually illegal for corporations to do anything that does not maximize profits. And those profits are measured from quarter to quarter. Nowadays, it is considered better to destroy a company in order to meet profit projections for the current year than to sacrifice $XX profit next quarter in order to build the company up to generate $XXXX profit for the next 10 years.

This is the current model of big business: Go in; squeeze as much money as possible out of the business as quickly as possible, by any means possible; and when it gets to the place where you'd have to spend money to make money, dump the company.

Anyone who cannot see how such an approach just cannot be sustained enough to run an economy either has serious cognitive problems or has bought into the so-called "free market" ideology.

What of the need to clean house for industry? Sure, there are folks that should leave. Every felon should be arrested and prosecuted. Every incompetent should be sent packing by the Board of Directors. And it does happen. For every Enron and Ken Lay, there are a hundred business that are run well and honestly. For every HP and Carly Fiorina, there are a hundred other CEOs that run their companies well. Those multi-million dollar severance packages are very counter to common sense, but if that's the deal, it needs to be honored.

That doesn't mean the way compensation is determined shouldn't be reconsidered. A number of boards and compensation committees are 'cross-pollinated', i.e. they have members that serve a number of different companies. I wouldn't mind seeing some SEC involvement to make sure that a compensation committee only represented the interests of the one corporation. But I wouldn't ever presume to limit their decisions about the amount of compensation -- just make sure they are fairly representing the shareholders. Is this fodder for anti-trust actions? I don't know, but I don't think what's going on in the compensation of upper echelon executives is anything more than a good ol' boy system that looks out for one another. Carl Icahn really took Jack Welch to task over this same issue. It's a good read...http://www.washingtonpost.com/wp-dyn/content/article/2009/02/15/AR2009021501256_pf.html. So's the Welch OP-ED that Icahn links in. If you don't want to read them, fine. The summary is that shareholders are poorly represented, if at all, in most boardrooms.

Private companies need no such protections and should be able to deal with employees in any manner that they see fit -- barring illegal activity, of course.
I have absolutely no problem with any given individual being able to make as much as they can manage to convince someone to pay them for their jobs.

However, when I compare what many CEOs do to what they earn -- if I was a shareholder, I'd be bitching about that. No foul to the CEOs if they could negotiate those packages, but shame on the boards of directors who pay one person so much while getting so little for it, compared to what other employees do.

I also happen to agree with what The Economist used to say about executive compensation packages back in the 90s -- that they are corrupt deals to allow high ranking executives to, essentially, loot companies even as they run them into the ground. A person may have the right to earn whatever they can get legally, but a corrupt enterprise is still a corrupt enterprise.

As to the incestuousness of boardroom relations, I agree, the overlap of executive/director personnel across corporate entities should be abolished, absolutely. You should only get to captain one ship at a time. To me, this is just another example of corporate corruption.

It is my opinion that the current economic crisis is the direct result of the ways of running big businesses that have dominated the corporate world, unregulated, since Reagan. Those ways are corrupt and unethical. They are dependent on executives and directors violating their responsibilities to their companies. They encourage the exploitation and destruction of companies more than the sound management of them. I see no reason not to question the wisdom of them.

Let me take a chance now and explain how I view complex decisions. This is a good transition into what the government should(not) do to assist business. I like numbers and they are particularly appropriate to what's going on right now. <snip>
I really did not need the What Capitalism is All About 101 seminar. I knew what your approach to this is. Businesspeople are not monks (except for when they are Trappists).

To try and direct even one of those producers to do things the way we want is folly. For example, let's make me the oatmeal czar. We may have a car czar, so why not? I need to direct the planting, harvest and distribution of oats. I need to manage the containers -- envelopes, boxes, round cardboard containers. I need to organize the resources needed for farming oats, for shipping oats -- tractors and semis. There are eight big elements here. Oops, there are those pesky gazillion relationships that I have to worry about, too! Better to just let the oatmeal companies do what they do best and stay out of the way.
What the czare needs to do is get a good set of instructions from the president as to what the desired outcome is, and then facilitate organizing existing resources to produce that result. Existing resources can include farmers, harvesters, shippers, processors, inspectors, unions, etc, etc, which already exist. It can also include people with new ideas about how to accomplish the goal.

If the goal is to reinstate and ratchet up regulation on business so as to clean out the corruption that exists, a czar charged with that job has all the resources he needs to do it.

If the goal is to expand incentives and support to business in certain select areas -- like green energy development, for example -- that does not mean that a czar would have to invent green energy tech. It only means he would have to make sure the energy plans that get supported actually are green, and if that means that the old guard of energy companies lose out to newer companies that are greener, then that's what it means.

So now, what do to about helping business? Do we make decisions that force a direction for future businesses?
I would say this is one of the few things the government can do similarly to the way individuals do it. You make businesses change direction by stopping buying what they have in stock now and demanding something new. If we want to favor "green", as you say, then we put our funding and incentives into green. The big corporations step up with the green, or they fail and make way for new companies that are already working on green. Adapt or die, it's how we roll.

You don't have to force anything. You create the opportunity, and those who are able will take advantage of it. Those who are not able, won't.

Do we favor 'green' Maybe. Maybe we need to provide some reason to explore new technology. I'm kinda disappointed that there is no funding for hydrogen fuel cells in the stimulus bill. I'm sure that a sharp enterprenuer, or several, would be able to pull the existing technology together and make fuel cells manufacturable. But I'm getting off the point. Maybe there are some ways that we can direct the flow of business without causing too many ripples in these gazillion relationships. We need to be very deliberate and careful in our decisions, though. I'm sure that for every good path there are a hundred paths that will cause all sorts of unforeseen consequences. Kind of like when the farmers in the midwest started selling produce to make ethanol for gasohol. The food prices in January 2008 for corn, wheat, and soybeans hit all time high prices and that rippled through the economy during those months where oil and gas prices were so high. Anyhow, it's just one example of how unintended consequences can strike a move in what seems to be a good direction.
I hate to break it to you, but those gazillion relationships are getting hit with big mofo tsunami ripples right now. It's called the economic crisis.

You are not going to avoid massive and shocking upheavals. That option is not open to us. I agree with Jefferson that sometimes a little revolution is good for the soul. I believe we should be grabbing this crisis and using it to make some real changes. Since we are going to get hit with upheavals and destruction anyway, I say we may as well go for it. Not much point in not rocking the boat, when the boat is sinking.

When it comes to innovation, there's nothing to compare to small business. The best thing would be to have a small business organization with big business resources. <snip>
This paragraph sounds very nice in theory, but in reality, you are just talking about everybody still doing things the same way we've been doing them, which ended up with us in the current crisis. You are also talking about government basically giving out corporate welfare. Where's your new business model then, eh? It would be just more of the same old bloated bullshit. You want the market to decide this (as you say below)? Then let those companies that get the incentives be those that are strong enough to put them to good use. The less support a company needs, the better it will be. So I will stick to my strictly limited micro-finance idea. We'll see who has the brains to solve that puzzle.

But the basic difference I see is that I would like the market to decide what direction to take us --
The only problem with this in the short term is that there really is no "market" any more. Nobody is buying anything. I mean, by the gods, BEER sales are at a sudden and all-time low. BEER, MAN!! There is no "market" to decide anything. This is what people mean when they say the government is the spender of last resort. There is no one else who can buy or invest in anything right now.

We can prattle on forever about what we would like to see happen, but right now, THE BOAT IS SINKING! Government has to prop up work. That's the bottom line, end of the story. What would be GOOD, would be if the government did that in a way that would encourage new competition in industrial fields that have promise for LONG TERM growth, and discourage the old corrupt habits that got us where we are now.

I don't mind recompeting contracts on a regular basis and I think law enforcement is critical, but I don't think the government has the foresight to know where to direct the economy. The numerous agencies that make up the government know what they want from year to year -- maybe we should just expand the SBIR program to make sure those needs are met. But the idea that government can see the economic future is not well supported by history. Better they wait for people with good ideas to come to them and then be fairly neutral in the way they give support.
I agree with the above paragraph.

One last bit about health care. My family and I spent 20 years as a victim of rationed health care, i.e. the USMC/USN hospital system. <snip>
The USMC/USN system. That's an American government system. The government that doesn't believe in nationalized health care. The government that is notorious for failing in its obligations to its military personnel. Hm.

Maybe, instead of comparing the US system to another US system, you should try comparing the US system to an actual national health care system, such as Canada's.

I'm not going to engage you on the rest of your details about health care, because it reads like "let's keep doing what we have been doing, because in theory, it works" and when I compare that to reality, I get very, very angry.

And these two claims are proven by...?

History, and unfolding events.

It's not like Obama is the new Wright Brothers building a new airplane. This stimulus bill is the same old, shopworn Soviet-style "build it and they will come" mentality. It's pretty absurd that the US wants to expand its infrastructure when in fact demand for infrastructure (especially road and rail traffic) is declining.

History, and unfolding events.
I don't see how unfolding events prove anything, as they are... unfolding. Moreover, it has already been shown to you that appealing to history does little good.

Nothing is proven.

I don't see how unfolding events prove anything, as they are... unfolding. Moreover, it has already been shown to you that appealing to history does little good.

Nothing is proven.

Everything is proven. Fiscal stimulus did not end the 1930s depression. Fiscal stimulus did not end the Japan recession (which continues and accelerates to this day).

By contrast, in instances (ex. 1921, 1980 in the US) when government stepped aside and allowed liquidation, the economy swiftly recovered.

Everything is proven. Fiscal stimulus did not end the 1930s depression. Fiscal stimulus did not end the Japan recession (which continues and accelerates to this day).

By contrast, in instances (ex. 1921, 1980 in the US) when government stepped aside and allowed liquidation, the economy swiftly recovered.

you need more detail then that. explain things like inflation. interest rates and so on. you haven't even formed a decent argument.
And then back these up with some people with PHDs.
you really haven't even formed a coherent thesis.

You might get your idea about how the economy works from playing a computer game. But in truth the economy is infinitely more complex than any of these petty endeavors, including sending a man on the moon. It's literally impossible for a central planning committee to make a useful stimulus bill with positive results for the economy. The likelihood that the stimulus bill will not only provide no benefit, but make things worse, is certain.

If it's certain, you can show me absolutely certain proof. I want to see certainty. Show me.

Because anybody who thinks that fixing the economy requires a greater degree of virtual perfection of millions of mechanisms, people, materials and calculations necessary to send men to the moon on 40 year old technology must be able to provide me with with absolute certainty of his certainty.

you need more detail then that. explain things like inflation. interest rates and so on. you haven't even formed a decent argument.
And then back these up with some people with PHDs.
you really haven't even formed a coherent thesis.

I'm a more "react"-type poster. If someone brings up something about inflation, interest rates and so on vis a vis the events of 1930s, 90s etc then I'll offer a detailed response.

I'm a more "react"-type poster. If someone brings up something about inflation, interest rates and so on vis a vis the events of 1930s, 90s etc then I'll offer a detailed response.

you started a thread your expected to bring something to the table.

Because anybody who thinks that fixing the economy requires a greater degree of virtual perfection of millions of mechanisms, people, materials and calculations necessary to send men to the moon on 40 year old technology must be able to provide me with with absolute certainty of his certainty.
A screw generally can't change its mind about things. Economic agents can.

If it's certain, you can show me absolutely certain proof. I want to see certainty. Show me.

Because anybody who thinks that fixing the economy requires a greater degree of virtual perfection of millions of mechanisms, people, materials and calculations necessary to send men to the moon on 40 year old technology must be able to provide me with with absolute certainty of his certainty.

Jesus Christ. The economy is a lot more complex than millions of mechanisms, people, materials, and calculations. An economy is an infinitude of mechanisms, interactions, instantaneous cost-price calculations, individual decisions, etc. Stimulus packages and government action are only disturb the economy's natural momentum to reach a sustainable equilibrium, creating inevitably tragic and unforeseen results (like the real estate bubble we just witnessed).

you started a thread your expected to bring something to the table.

Well my style of threads is different from your expected threads and I bring something to the table in other ways.

A screw generally can't change its mind about things. Economic agents can.

*gasp!!!* :eek: Are you suggesting that revitalizing the American Economy might require a plan that evolves, discovering what does and doesn't work and shaping it as time goes by?

Because if there's one thing that I've learned from Former President George W. Bush it's that real Presidents get everything perfect on the first try. :)

*gasp!!!* :eek: Are you suggesting that revitalizing the American Economy might require a plan that evolves, discovering what does and doesn't work and shaping it as time goes by?

Because if there's one thing that I've learned from Former President George W. Bush it's that real Presidents get everything perfect on the first try. :)
What's even funnier is that the current president is expanding the same exact things that George W Bush tried to such disastrous effect: expanding government spending, deficit spending, and worst of all, price-fixing the credit market.

It's like George W. Bush drank a small bottle of poison, and Obama decides to drink the same bottle of poison, except Obama will drink 10 bottles.

Everything is proven.
I don't see how.

Nor do I see how you can hold that "[a] stimulus bill and its effects on the economy are infinitely more complex than a flying machine" or that "the economy is infinitely more complex than... sending a man on the moon", and make bold claims such as:

Fiscal stimulus did not end the 1930s depression. Fiscal stimulus did not end the Japan recession (which continues and accelerates to this day).

By contrast, in instances (ex. 1921, 1980 in the US) when government stepped aside and allowed liquidation, the economy swiftly recovered.

If the economy is so complex, beyond that of human ken, then how are you able to make such statements?

What's even funnier is that the current president is expanding the same exact things that George W Bush tried to such disastrous effect: expanding government spending, deficit spending, and worst of all, price-fixing the credit market.

It's like George W. Bush drank a small bottle of poison, and Obama decides to drink the same bottle of poison, except Obama will drink 10 bottles.

W. didn't expand government spending. He flushed our money down a giant bottomless toilet called the 'War on Terror'. If he actually expanded government spending, we might actually have something to show for it.

*gasp!!!* :eek: Are you suggesting that revitalizing the American Economy might require a plan that evolves, discovering what does and doesn't work and shaping it as time goes by?
Well, in this case it's more a matter of a stimulus package just not being the right tool for the problem the US is facing. To use a rapidly tiring metaphor, the collapse in the finance industry is like a heart attack.

Stopping mortgage defaults is like cleaning out the arteries, a stimulus package is like delivering fresh blood to the organs to keep them alive.

But that only works for so long until things start rotting permanently. Hence why the stimulus package really isn't all that important compared to the banking rescue, which is, and I quote (http://financialstability.gov/): "coming soon".

I don't see how.

Nor do I see how you can hold that "[a] stimulus bill and its effects on the economy are infinitely more complex than a flying machine" or that "the economy is infinitely more complex than... sending a man on the moon", and make bold claims such as:



If the economy is so complex, beyond that of human ken, then how are you able to make such statements?

It's quite easy to understand that natural market mechanisms will allow the economy to reach sustainable levels. The mechanisms themselves are unfathomably complex.

Well, in this case it's more a matter of a stimulus package just not being the right tool for the problem the US is facing. To use a rapidly tiring metaphor, the collapse in the finance industry is like a heart attack.

Stopping mortgage defaults is like cleaning out the arteries, a stimulus package is like delivering fresh blood to the organs to keep them alive.

But that only works for so long until things start rotting permanently. Hence why the stimulus package really isn't all that important compared to the banking rescue, which is, and I quote (http://financialstability.gov/): "coming soon".

As soon as the bankers stop running around in circles waving their arms in the air screaming "DOOOM!!!! DOOOOOOM!!!"

W. didn't expand government spending. He flushed our money down a giant bottomless toilet called the 'War on Terror'. If he actually expanded government spending, we might actually have something to show for it.
You're making uninformed statements. Of course George W. Bush (and the governors of the American states) have vastly expanded domestic government spending. The number of government employees have drastically increased in the past 8 years, government spending as a share of the economy increased, etc.

Also, you are aware that the giant bottomless toilet isn't going away any time soon?

Well my style of threads is different from your expected threads and I bring something to the table in other ways.

Oh, we're all too familiar with, "Nuh uh" and "Is so" and "trust me" style threads and their contributors. I don't know that you can actually dress them up as something brought to the table, however. But you're right, we do tend to expect people to contribute more, especially if they go about insisting on creating their own thread on a topic already under discussion.

It's quite easy to understand that natural market mechanisms will allow the economy to reach sustainable levels. The mechanisms themselves are unfathomably complex.
EDIT: Scratch that, read your 'that' as a 'the'.

Well, in this case it's more a matter of a stimulus package just not being the right tool for the problem the US is facing. To use a rapidly tiring metaphor, the collapse in the finance industry is like a heart attack.

Stopping mortgage defaults is like cleaning out the arteries, a stimulus package is like delivering fresh blood to the organs to keep them alive.

But that only works for so long until things start rotting permanently. Hence why the stimulus package really isn't all that important compared to the banking rescue, which is, and I quote (http://financialstability.gov/): "coming soon".

Bad debt, bad loans, and overextended credit are the clog in the arteries. Those mortgage defaults are very necessary to clean out the arteries as the analogy goes. Things will start rotting permanently once the banking rescue goes into effect. All these bailouts and "rescues" just perpetuate the systematic problems and inefficiencies of the economy's capital structure.

Oh, we're all too familiar with, "Nuh uh" and "Is so" and "trust me" style threads and their contributors. I don't know that you can actually dress them up as something brought to the table, however. But you're right, we do tend to expect people to contribute more, especially if they go about insisting on creating their own thread on a topic already under discussion.

Thanks for that. I'll be more careful with OPs in the future.

You're making uninformed statements. Of course George W. Bush (and the governors of the American states) have vastly expanded domestic government spending. The number of government employees have drastically increased in the past 8 years, government spending as a share of the economy increased, etc.

Also, you are aware that the giant bottomless toilet isn't going away any time soon?

DOmestic government spending on what? Name one thing that the government spent more on than it did before 2000 that didn't go into that toilet.

These statements contradict one another.

What are you trying to say?

These statements aren't contradictory. I'm simply pointing out that the economy is infinitely complex and only the "voluntary economic agents" themselves will resolve the problems with the economy. A top-down, information-starved approach will inevitably lead to disaster.

Oh, we're all too familiar with, "Nuh uh" and "Is so" and "trust me" style threads and their contributors. I don't know that you can actually dress them up as something brought to the table, however. But you're right, we do tend to expect people to contribute more, especially if they go about insisting on creating their own thread on a topic already under discussion.

I did post the dancing lock on page 1, you know. ;)

As soon as the bankers stop running around in circles waving their arms in the air screaming "DOOOM!!!! DOOOOOOM!!!"
There are some banks that are still screaming of course, but the majority of them either has started to buckle down and do what they have to do, or will be getting to it shortly.

It's a balance sheet issue, really. They had assets, and they have liabilities which they took on against those. Now with the collapse all these assets are worth much less, many of them won't be worth anything for many years if ever. That means they need to rebalance their position by raising new assets (ie get cash from wherever they can) and reducing their liabilities. Since no one trusts anyone or wants to take a risk with their money, raising cash is a difficult and slow process, while getting out of liabilities is also more difficult now. All in all, they will be sponges sucking up all the capital they can for many years from here on in.

Unfortunate side effect thereof is of course that they won't be lending money to anyone or anything except at ridiculous rates and with lots of covenants. At the same time, people have stopped borrowing themselves, because many if not most families and businesses are going through the same process of reducing liabilities compared to assets. So in essence, the economy has gone into shock and will stay there because no one spends money if they can help it, and certainly doesn't invest it in job creation or the like.

It's not new, we've seen it all before. Japan still hasn't made it out of the same process. Sweden on the other hand was very quick, radical and decisive when the same thing happened there and the damage was minor, and certainly a lot less lengthy, compared to the Japanese experience.

So the question for the Obama administration and Bernanke is: Japan or Sweden? So far they've taken the former path, and with all the distractions about stimulus packages and pay caps, nobody is calling them on it.

DOmestic government spending on what? Name one thing that the government spent more on than it did before 2000 that didn't go into that toilet.
Could not easily find data pre-2000, but I found this link from 2000.

Dept of Interior spent 8.3 billion in 2000, 10.6 billion in 2008.

http://www.doi.gov/budget/2001/01Hilites/overview.pdf

There are some banks that are still screaming of course, but the majority of them either has started to buckle down and do what they have to do, or will be getting to it shortly.

It's a balance sheet issue, really. They had assets, and they have liabilities which they took on against those. Now with the collapse all these assets are worth much less, many of them won't be worth anything for many years if ever. That means they need to rebalance their position by raising new assets (ie get cash from wherever they can) and reducing their liabilities. Since no one trusts anyone or wants to take a risk with their money, raising cash is a difficult and slow process, while getting out of liabilities is also more difficult now. All in all, they will be sponges sucking up all the capital they can for many years from here on in.

Unfortunate side effect thereof is of course that they won't be lending money to anyone or anything except at ridiculous rates and with lots of covenants. At the same time, people have stopped borrowing themselves, because many if not most families and businesses are going through the same process of reducing liabilities compared to assets. So in essence, the economy has gone into shock and will stay there because no one spends money if they can help it, and certainly doesn't invest it in job creation or the like.

It's not new, we've seen it all before. Japan still hasn't made it out of the same process. Sweden on the other hand was very quick, radical and decisive when the same thing happened there and the damage was minor, and certainly a lot less lengthy, compared to the Japanese experience.

So the question for the Obama administration and Bernanke is: Japan or Sweden? So far they've taken the former path, and with all the distractions about stimulus packages and pay caps, nobody is calling them on it.

Sweden's economic recovery benefited from double-digit interest rates during the 90s crisis, which buried dead the monetary excesses from their pre-crisis bubble. Besides the banks, a huge proportion of government entitlement and discretionary spending was liquidated. All these "radical and decisive" policies you speak of are irrelevant. Allowing the Swedish banks to fail would've resulted in an even sounder capital structure when the crisis was over. The lesson to be learned from Sweden is to liquidate and liquidate. The Fed should not try to reinflate the property bubble as you propose- that was the road Japan took.

There are some banks that are still screaming of course, but the majority of them either has started to buckle down and do what they have to do, or will be getting to it shortly.

It's a balance sheet issue, really. They had assets, and they have liabilities which they took on against those. Now with the collapse all these assets are worth much less, many of them won't be worth anything for many years if ever. That means they need to rebalance their position by raising new assets (ie get cash from wherever they can) and reducing their liabilities. Since no one trusts anyone or wants to take a risk with their money, raising cash is a difficult and slow process, while getting out of liabilities is also more difficult now. All in all, they will be sponges sucking up all the capital they can for many years from here on in.

Unfortunate side effect thereof is of course that they won't be lending money to anyone or anything except at ridiculous rates and with lots of covenants. At the same time, people have stopped borrowing themselves, because many if not most families and businesses are going through the same process of reducing liabilities compared to assets. So in essence, the economy has gone into shock and will stay there because no one spends money if they can help it, and certainly doesn't invest it in job creation or the like.

It's not new, we've seen it all before. Japan still hasn't made it out of the same process. Sweden on the other hand was very quick, radical and decisive when the same thing happened there and the damage was minor, and certainly a lot less lengthy, compared to the Japanese experience.

So the question for the Obama administration and Bernanke is: Japan or Sweden? So far they've taken the former path, and with all the distractions about stimulus packages and pay caps, nobody is calling them on it.

Interesting term; distractions. Very interesting.

Sweden's economic recovery benefited from double-digit interest rates during the 90s crisis, which buried dead the monetary excesses from their pre-crisis bubble. All these "radical and decisive" policies you speak of are irrelevant. Allowing the Swedish banks to fail would've resulted in an even sounder capital structure when the crisis was over. The lesson to be learned from Sweden is to liquidate and liquidate. The Fed should not try to reinflate the property bubble as you propose- that was the road Japan took.
You're big on statements and small on evidence, as always.

You're big on statements and small on evidence, as always.

Here's a nice article on the Swedish crisis, and it's from a Socialist website. I like this particular article because the socialist author emphasizes the downsizing of Sweden's famed entitlements programs during the 90s crisis.

This quote from the article is particularly interesting: "500,000 public sector employees and 150,000 in the private sector met with full or part time redundancies at their workplaces"

Interesting how more public sector than private sector employees lost their jobs during the acute phase of the Swedish crisis.

http://socialistworld.net/eng/2008/10/17worlda.html

Hold on; let me find the historical interest rates data for the Swedish crisis.

Could not easily find data pre-2000, but I found this link from 2000.

Dept of Interior spent 8.3 billion in 2000, 10.6 billion in 2008.

http://www.doi.gov/budget/2001/01Hilites/overview.pdf

Interesting. I wonder what they did with it. Ski trips, probably.

Under the Administration of U.S. President George W. Bush, the Interior Department's maintenance backlog climbed from $5 billion to $8.7 billion, despite Bush's campaignpledges to eliminate it completely. Of the agency under under Bush's leadership, Interior Department Inspector General Earl Devaney has cited a "culture of fear" and of "ethical failure." Devaney has also said, "Simply stated, short of a crime, anything goes at the highest levels of the Department of Interior."[3]

Gale Norton, Interior Secretary under George W. Bush from 2001-2006, resigned due to connections with the Jack Abramoff lobbying scandal. Julie A. MacDonald, deputy assistant secretary at the Interior Department appointed by Norton in 2002, also resigned after an internal review found that she had violated federal rules by giving government documents to lobbyists for industry.[4][5] On 20 July, 2007, MacDonald's "inappropriate influence" led H. Dale Hall, director of the US Fish and Wildlife Service, to order a review of eight endangered species decisions in which the former deputy assistant secretary was involved. Hall has called MacDonald's disputed decisions a "a blemish on the scientific integrity of the Fish and Wildlife Service and the Department of the Interior."[6] On 17 September 2008, the US Fish and Wildlife Service proposed to more than triple the habitat of the California red-legged frog, citing political manipulation by Julie MacDonald.[7] In a government report released in December 2008,[8] Inspector General Devaney called MacDonald's management "abrupt and abrasive, if not abusive,"[9] and U.S. Senator Ron Wyden, who commissioned the report, attributed the "untold waste of hundreds of thousands of taxpayers' dollars" to MacDonald's actions.[10]

On September 10, 2008, Inspector General Devaney found wrongdoing by a dozen current and former employees of the Minerals Management Service. In a cover memo, Devaney wrote “A culture of ethical failure” pervades the agency. According to the report, eight officials accepted gifts from energy companies whose value exceeded limits set by ethics rules — including golf, ski, and paintball outings, meals, drinks, and tickets to a Toby Keith concert, a Houston Texans football game, and a Colorado Rockies baseball game. The investigation also concluded that several of the officials “frequently consumed alcohol at industry functions, had used cocaine and marijuana, and had sexual relationships with oil and gas company representatives.” According to the New York Times, "The reports portray a dysfunctional organization that has been riddled with conflicts of interest, unprofessional behavior and a free-for-all atmosphere for much of the Bush administration’s watch."
The previous Secretary of the Interior Dirk Kempthorne has been criticized for not placing any plants or animals on the federal endangered species list since his confirmation on May 26, 2006 until September 2007. As of that date, Kempthorne held the record for protecting fewer species over his tenure than any Interior Secretary in United States history, a record previously held by James G. Watt for over 20 years.[21]

On December 16, 2008, the Center for Biological Diversity announced intent to sue the Interior Department under Kempthorne for introducing "regulations...that would eviscerate our nation’s most successful wildlife law by exempting thousands of federal activities, including those that generate greenhouse gases, from review under the Endangered Species Act." The lawsuit, which is critical of policy advocated by Kempthorne and President George W. Bush, was filed in the Northern District of California by the CBD, Greenpeace and Defenders of Wildlife. According to the CBD, "The lawsuit argues that the regulations violate the Endangered Species Act and did not go through the required public review process. The regulations, first proposed on August 11th, were rushed by the Bush administration through an abbreviated process in which more than 300,000 comments from the public were reviewed in 2-3 weeks, and environmental impacts were analyzed in a short and cursory environmental assessment, rather than a fuller environmental impact statement."

You're big on statements and small on evidence, as always.

This article indicates the central bank tried a currency defense scheme by jacking up interest rates: http://www.iht.com/articles/1992/09/17/perc.php

It appears in the end Sweden paid for its years of excess by currency devaluation.

Your proposal of stopping mortgage defaults and propping up the bubble is a folly. The US will have to wash out the asset bubble one way or another- high interest rates or currency devaluation. There's no way around it, and the Fed's painful and exotic triangulations only make the financial system more opaque and prolong the economic crisis.

Interesting. I wonder what they did with it. Ski trips, probably.

What is your data supposed to indicate? That Obama will spend the money "more wisely"?

Furthermore, who's to say DoI spending money to protect some endangered species stimulates the economy more than some corrupt DoI administrator spending public money on football tickets, meals, and drinks? The only way to know is by cutting all this spending and letting taxpayers spend the money the way they want.

It's quite easy to understand that natural market mechanisms will allow the economy to reach sustainable levels. The mechanisms themselves are unfathomably complex.

That's faith, not reason. It sounds to me like a bit of market worshipping going on here.

Sort of like saying god works in mysterious ways but if we leave things to the bloke in the sky everything will be hunky dory in the end. What? People suffer? We just don't understand god's purposes.

Worshipping the market got us in the hole we are in.

That's faith, not reason. It sounds to me like a bit of market worshipping going on here.

Sort of like saying god works in mysterious ways but if we leave things to the bloke in the sky everything will be hunky dory in the end. What? People suffer? We just don't understand god's purposes.

Worshipping the market got us in the hole we are in.
No, worshipping government got us in the hole we are in. All this human dislocation and suffering was caused because we left things to government technocrats, who themselves don't understand economics. The root cause of our current financial crisis was governments around the world price-fixing interest rates which resulted in unprecedented asset bubbles.

Throughout the 90s and 2000s, central banks did exactly what you proposed - reduce interest rates and "increase liquidity" whenever there was a need for a liquidation scenario, causing temporary and superficial relief, but only masking and perpetuating serious problems with the capital structure and summing little, often regional, bubbles into one gigantic and global bubble never before seen in history.

Had market mechanisms been free of government intervention in the 1990s and 2000s, interest rates would never have been so unnaturally and unsustainably low for so long, and the asset bubble and economic crisis would never have occurred.

Oh dear. All the poor free marketeers who couldn't help themselves borrowing and borrowing and borrowing because of artificially low interest rates.

"Don't blame me. The devil made me do it."

Exactly, the eliminate the devil and people wouldn't do such foolish things. Interest rates set by the free market would be far too high for these speculative asset bubbles to exist in the first place. It's government intervention that removes free market self-regulations and imparts bad habits into people.

Exactly, the eliminate the devil and people wouldn't do such foolish things. Interest rates set by the free market would be far too high for these speculative asset bubbles to exist in the first place. It's government intervention that removes free market self-regulations and imparts bad habits into people.

That's what you believe. I understand that. Now, convince me it's true.

That's what you believe. I understand that. Now, convince me it's true.

Convince you of which part?

That, free from government intervention, the free market would've set a higher interest rate in 1994 or 1998 or 2001 or 2008?
That a higher interest rate would have prevented an asset bubble from forming?
That people would not have gone into a drunken borrowing binge had interest rates been so high?

Convince you of which part?...

That an unfettered free market would make the world a better place. Which is what I think you are implying in all your posts.

That an unfettered free market would make the world a better place. Which is what I think you are implying in all your posts.
Well I'll work from the small to the large in a stepwise process. I initially intended simply to demonstrate to you the folly of your faith in government distortion of interest rates.

Well I'll work from the small to the large in a stepwise process. I initially intended simply to demonstrate to you the folly of your faith in government distortion of interest rates.

No, no, no. Be brave. Convince me of your beliefs.

No, no, no. Be brave. Convince me of your beliefs.

Well first you have to let me know if you've been convinced that government tampering with interest rates led to the famous recent asset bubbles. Then we'll see where to go next.

Well first you have to let me know if you've been convinced that government tampering with interest rates led to the famous recent asset bubbles. Then we'll see where to go next.

For fucks sake, dude, just present your fucking case. Seven pages of this nonsense...get on with it.

For fucks sake, dude, just present your fucking case. Seven pages of this nonsense...get on with it.

For your sake, just ignore any and all ancappy related posts. Focus on this particular issue first, central bank involvement in the credit market. Exposition of case studies is a more effective way to convey economics than simply laying down big and heavy "economic laws". It's time consuming but that's unavoidable.

Flying machines have never worked. Why will this new device from the Wright brothers work where others have always failed?

Sorcery.

Put eight monkeys in a room. In the middle of the room is a ladder, leading to a bunch of bananas hanging from a hook on the ceiling.

Each time a monkey tries to climb the ladder, all the monkeys are sprayed with ice water, which makes them miserable. Soon enough, whenever a monkey attempts to climb the ladder, all of the other monkeys, not wanting to be sprayed, set upon him and beat him up. Soon, none of the eight monkeys ever attempts to climb the ladder.

One of the original monkeys is then removed, and a new monkey is put in the room. Seeing the bananas and the ladder, he wonders why none of the other monkeys are doing the obvious. But undaunted, he immediately begins to climb the ladder.

All the other monkeys fall upon him and beat him silly. He has no idea why.

However, he no longer attempts to climb the ladder.

A second original monkey is removed and replaced. The newcomer again attempts to climb the ladder, but all the other monkeys hammer the crap out of him.

This includes the previous new monkey, who, grateful that he's not on the receiving end this time, participates in the beating because all the other monkeys are doing it. However, he has no idea why he's attacking the new monkey.

One by one, all the original monkeys are replaced. Eight new monkeys are now in the room. None of them have ever been sprayed by ice water. None of them attempt to climb the ladder. All of them will enthusiastically beat up any new monkey who tries, without having any idea why.

This is how the stimulus package got passed.

Disclaimer: I did not write this, it was passed to me in an e-mail and for once, I thought it was funny. This seemed like the perfect place to share this.

Put eight monkeys in a room. In the middle of the room is a ladder, leading to a bunch of bananas hanging from a hook on the ceiling.

Each time a monkey tries to climb the ladder, all the monkeys are sprayed with ice water, which makes them miserable. Soon enough, whenever a monkey attempts to climb the ladder, all of the other monkeys, not wanting to be sprayed, set upon him and beat him up. Soon, none of the eight monkeys ever attempts to climb the ladder.

One of the original monkeys is then removed, and a new monkey is put in the room. Seeing the bananas and the ladder, he wonders why none of the other monkeys are doing the obvious. But undaunted, he immediately begins to climb the ladder.

All the other monkeys fall upon him and beat him silly. He has no idea why.

However, he no longer attempts to climb the ladder.

A second original monkey is removed and replaced. The newcomer again attempts to climb the ladder, but all the other monkeys hammer the crap out of him.

This includes the previous new monkey, who, grateful that he's not on the receiving end this time, participates in the beating because all the other monkeys are doing it. However, he has no idea why he's attacking the new monkey.

One by one, all the original monkeys are replaced. Eight new monkeys are now in the room. None of them have ever been sprayed by ice water. None of them attempt to climb the ladder. All of them will enthusiastically beat up any new monkey who tries, without having any idea why.

This is how the stimulus package got passed...

No, no. That's how the sub-prime crisis turned into an international recession. We have to thank the free-market monkeys.

No, no. That's how the sub-prime crisis turned into an international recession. We have to thank the free-market monkeys.

I personally see it as a model for how politics work.. period.

Here is my honest opinion; all the politicans and central bank governors are concentrating on one side of what caused the Great Depression, and that was the lack of spending and hike in interest rates. The danger is that they are repeating the one item that turned the Panic of 1929 into the Great Depression and that is

PROTECTIONISM

We are seeing nations become far more protectionist. Now is the time for us to rip down trade barriers; rip up those tariffs, scrap those quotas, cut those subsidies and float those currencies. That, more than anything, will help the world regain balance.

What did Japan "need"? What "areas" do you think should've been targeted? Not even Japanese economists can answer you that question, even in retrospect. Japan certainly didn't need more spending, because the economy was already overleveraged.
The massive difference is that Japan's economy was, and still is, based upon manufacturing. The whole bubble going boom was the result of the yen suddenly appreciating in value after the fixes were taken off and Japan found itself rich, but unable to sell what it made. Given that during the years after the war, the Japanese government did its absolute best to keep the Japanese saving everything that they could, Japan couldn't make the transition that the US had from a manufacturing economy to a consumer economy. The Japanese still save too much, which is why the stimulus bills were too little, too late, and not well targeted because they ended up just working on encouraging spending in local areas without thinking about getting the whole of the economy to change over.

BTW, it should be noted that Japan has been in a recession since last year, but it HAS been growing before that. The lost decade of Japan was not a decade long recession, but one of weak growth. Since you keep referring to Japan has having been in a recession, I'm starting to wonder just how much you actually know about it.

This has nothing to do with political systems. This has to do with the problem of overspending and credit overexpansion, which caused bubbles in Japan and the US. Credit overexpansion can never be cleaned up with more spending, more stimulus. What you're proposing is like taking even more poison with the intent of curing the effects of poison.
It has EVERYTHING to do with the political process in Japan because it was due to that process that those bills passed the Diet and where they were targeted. Given how the LDP operated, the rigged bids, the wacky way in which Japan allocates seats in the Diet (Based upon the actual physical size of an area, meaning my home prefecture has more representation that the largest bloody city on the planet), the LDP factions and how they play a part in elections, how tax money from gas and toll money collected from the expressways has to be used, AND how construction companies act as vote getting machines for the LDP... yeah, it had a very, very large to do with what happened in Japan. Ignoring the political situation in Japan is stupid, very stupid. You cannot understand what happened without it.

Finally, I noted that you never responded to my point that over half of economic historians disagree with you about the New Deal prolonging the Great Depression. Given that you keep going on with your claim that it didn't work, I will remind you again. Time for you to back up your words.

Love that they put the Buy American stuff back in. Shades of Smoot-Hawley.

If the world suddenly goes all protectionist, and as a result we go into a depression greater than any in history, Obama will go down in history as being more stupid than Hoover.

Yay! Fusion complete! Better late than never. :)

We have the Hoover Dam because of a stimulus package. Was that a bad stimulus investment?

Love that they put the Buy American stuff back in. Shades of Smoot-Hawley.

If the world suddenly goes all protectionist, and as a result we go into a depression greater than any in history, Obama will go down in history as being more stupid than Hoover.

And that could give the Republicans a good few decades of power :D

No, no. That's how the sub-prime crisis turned into an international recession. We have to thank the free-market monkeys.
Are people still going on about trying to link the crisis to the free market? I thought that issue was settled when for four weeks straight I asked anyone who would listen to make a case, and no one did.

Oh dear. All the poor free marketeers who couldn't help themselves borrowing and borrowing and borrowing because of artificially low interest rates.


erm...

Are people still going on about trying to link the crisis to the free market? I thought that issue was settled when for four weeks straight I asked anyone who would listen to make a case, and no one did.

What do you think caused the crisis then?

Love that they put the Buy American stuff back in. Shades of Smoot-Hawley.

If the world suddenly goes all protectionist, and as a result we go into a depression greater than any in history, Obama will go down in history as being more stupid than Hoover.

*total screw up by me* Hoover did not veto the bill

if they indeed put it back i just pray Europe is kind enough to take this up through the WTO rather then simply return the favor.

Are people still going on about trying to link the crisis to the free market? I thought that issue was settled when for four weeks straight I asked anyone who would listen to make a case, and no one did.

Though, to put it very simply, it depends on what approach you take - if you take the controversial approach that the government forced these bad loans, then obviously the free market was not to blame. If you take the approach that the banks themselves were at fault (without outside pressure) for pushing these loans, then presumably regulatory agencies to stop these loans is what could have prevented this crisis. The lack of these agencies could be considered, at least in laymen's terms, a market that is 'too free'.

What do you think caused the crisis then?
Well, the trivial answer would be "too much leverage". But then you have to ask what caused too much leverage, and I don't think "interest rates are too low" is any less trivial in this case. We can all be mad at Greenspan, but the fact of the matter is that the process that has led to this has been going on for longer than that, and Greenspan's policy was ultimately a reaction function too.

I really don't think we can point to some single, exogenous influence that caused this. There are endogenous mechanisms within the system itself that can cause bubbles to develop, I think. And once they do, it becomes a rational choice for the individuals involved to play along.

I think that's where the next paradigm shift in macroeconomics is laying in waiting. But the point to remember is that whatever form of modeling we come up with, or whatever new ways of looking at things we develop, the idea that the government could come and save everyone from it is just stupid. Whatever it is, it obviously involves a lot of asymmetric information and a lot of psychology. Governments are just organisations of, usually underqualified, people, subject to the same imperfect access to information and the same psychological traps. It's not like those who pushed deregulation for the financial sector actually thought it would be acceptable for a crisis like this to occur - they just thought it couldn't, for the same silly reasons that the bankers did. A tougher law wouldn't change that in the least.

Though, to put it very simply, it depends on what approach you take - if you take the controversial approach that the government forced these bad loans, then obviously the free market was not to blame. If you take the approach that the banks themselves were at fault (without outside pressure) for pushing these loans, then presumably regulatory agencies to stop these loans is what could have prevented this crisis. The lack of these agencies could be considered, at least in laymen's terms, a market that is 'too free'.
What would they have prevented though? They didn't know in advance what would set things off, and the actual problem is system-wide leverage, for private households in aggregate. How do you make a law against that?

It's all so easy to say "if we'd had a regulation against X, we'd be better off". But the fact of the matter is that X is either an unknown still, or something so general as to require the entire system of private resource allocation to be thrown out the window.

For your sake, just ignore any and all ancappy related posts. Focus on this particular issue first, central bank involvement in the credit market. Exposition of case studies is a more effective way to convey economics than simply laying down big and heavy "economic laws". It's time consuming but that's unavoidable.

Sweet mary crap are you tedious.

Oh dear. All the poor free marketeers who couldn't help themselves borrowing and borrowing and borrowing because of artificially low interest rates.

"Don't blame me. The devil made me do it."

erm...

There you go. I concede you win the rhetorical point. All the same, Pissarro hasn't made a case why an unfettered free market will make the world a better place.

We have the Hoover Dam because of a stimulus package. Was that a bad stimulus investment?

so your saying the Great depression was caused by a lack of Dams??

so your saying the Great depression was caused by a lack of Dams??

What sort of weird logic is that?

What sort of weird logic is that?

well we could have used to money to address the cause of the depression.
would that not have been a better investment?

well we could have used to money to address the cause of the depression.
would that not have been a better investment?

The Hoover Dam was a government job stimulus program and is creating a profit over 75 years later still.

The Hoover Dam was a government job stimulus program and is creating a profit over 75 years later still.

when compared to fixing the depression earlier the "profit" looks like a pittance.

when compared to fixing the depression earlier the "profit" looks like a pittance.

So how would the cost of the dam helped solve the depression if it was not built?

So how would the cost of the dam helped solve the depression if it was not built?

at the time? restore world trade. A long term loan in gold to France UK and Germany to restore them to a gold standard would have been very beneficial.

at the time? restore world trade. A long term loan in gold to France UK and Germany to restore them to a gold standard would have been very beneficial.

Eh? Are you suggesting that would have kept Hitler from power?

In the middle of the depression? Nobody would have done that......

Eh? Are you suggesting that would have kept Hitler from power?

YES, Considering the American loans made the Beer Hall Putsch so laughable the German government couldn't even execute him for treason.
Its normally impossible to over throw a government when the economy is good.

In the middle of the depression? Nobody would have done that......

why not ? its not like we were using the gold (US had 80% of the worlds gold reserves at this time) for anything.
And if you really want to be technical the hoover dam wasn't a New Deal Program to begin with it was approved in 1928. with construction starting in 1931 a full 2 years before FDR was even in office.

YES, Considering the American loans made the Beer Hall Putsch so laughable the German government couldn't even execute him for treason.
Its normally impossible to over throw a government when the economy is good.


why not ? its not like we were using the gold (US had 80% of the worlds gold reserves at this time) for anything.
And if you really want to be technical the hoover dam wasn't a New Deal Program to begin with it was approved in 1928. with construction starting in 1931 a full 2 years before FDR was even in office.
Here's an idea: You invent a time machine and go back there and get it all sorted out, and then when the past is exactly the way you'd like it to be, we'll go back to talking about the present, how's that?

I disagree with you, but my disagreement is just as irrelevant as your argument, because

1) This is not the Great Depression.

2) The world's economy is not structured now the way it was back then.

3) Obama is not FDR, nor are his polices the same as the New Deal.

For all of those reasons, all this bullshit arguing about FDR and the New Deal, pro and con, is off topic (in the real world, too, not just NSG).

snip

you want to deal with things now ?
Institute a soft gold standard. when gold prices go up raise the interest rate, when gold prices go up lower them. this stabilizes currency and exchange rates. This makes hedging against the dollar unprofitable and keeps money in the economy rather then gold/other commodities. It also minimizing hedging against currencies with other currencies since the exchange rate is stable further puts money back in the economy. Last if not unifying the banking system create by treaty a common set of rules for world banks.

Hoover had the common sense to VETO Smoot-Hawley.

What? He didn't veto the bill, although a thousand economists signed a petition for Hoover to veto the bill, and the CEO of JP Morgan almost went down on his knees and begged Hoover to veto the bill.

http://en.wikipedia.org/wiki/Smoot_Hawley_Tariff_Act

Like I said before, all the countries of the world are at risk of repeating the same mistake that was made in the 1930s, and protectionism, more than anything, turned the Panic of 1929 into the Great Depression. What we need now is the destruction of trade barriers; that will almost certainly jump start the world economy and we can start off by getting the Chinese to float the Yuan and the Europeans to ditch their excessive subsidies.

What? He didn't veto the bill, although a thousand economists signed a petition for Hoover to veto the bill, and the CEO of JP Morgan almost went down on his knees and begged Hoover to veto the bill.

http://en.wikipedia.org/wiki/Smoot_Hawley_Tariff_Act

Like I said before, all the countries of the world are at risk of repeating the same mistake that was made in the 1930s, and protectionism, more than anything, turned the Panic of 1929 into the Great Depression. What we need now is the destruction of trade barriers; that will almost certainly jump start the world economy and we can start off by getting the Chinese to float the Yuan and the Europeans to ditch their excessive subsidies.
your right i cant believe i screwed that one up. the society of historians is bound to come lynch me now. HIDE ME HIDE ME.

your right i cant believe i screwed that one up. the society of historians is bound to come lynch me now. HIDE ME HIDE ME.

I wouldn't be fussed, you admitted your error, and hey look, we all make mistakes.

I wouldn't be fussed, you admitted your error, and hey look, we all make mistakes.

you don't know how dangerous being a history major is !!!
The society of historians is perhaps the most powerful in the world. They control the Jews and the oil countries.

you want to deal with things now ?
Institute a soft gold standard. when gold prices go up raise the interest rate, when gold prices go up lower them. this stabilizes currency and exchange rates. This makes hedging against the dollar unprofitable and keeps money in the economy rather then gold/other commodities. It also minimizing hedging against currencies with other currencies since the exchange rate is stable further puts money back in the economy. Last if not unifying the banking system create by treaty a common set of rules for world banks.
Oh, is that all? Well, I guess we'll get right on that. That international banking treaty should be a snap, especially.

You present those suggestions as if they are both self-evident in how they would work and self-evidently simple. Precisely how will this "soft gold standard" affect the international currency trading market? Why? What effect do you envision that having? Specifically, not just "Bing! It's fixed!" Precisely what kind of international banking treaty do you envision? What countries should sign onto it? Why should they sign it? Would it be a UN treaty, or a treaty between select nations? What happens if some countries don't want to sign onto it? How would it affect private banking as opposed to nationalized banking? How would it be enforced? Etc, etc, etc.

For a history major, you seem more short on fact than on theory. You have big ideas that you present as if they were small, and without any historical examples of your ideas working to show the sense of them. Come on, surely you can present a better argument than this.

so your saying the Great depression was caused by a lack of Dams??

Indeed. Dams flood Depressions with water, rendering them useless at depressing the landscape.

Oh, is that all? Well, I guess we'll get right on that. That international banking treaty should be a snap, especially. not easy, but far easier now then when everything looked swell.

You present those suggestions as if they are both self-evident in how they would work and self-evidently simple. Precisely how will this "soft gold standard" affect the international currency trading market? Why? What effect do you envision that having? first it creates a stabilization in the value of gold. then a slow decline in the price of gold. Last seen in the 1980's. Several economic historians attribute the recovery of the 80's not to Reagan's Tax policies but to the federal reserve adopting the policy unofficially or at least by chance following even if there was no adoption of the policy. Gold investment requires that the value of gold increases, if it is stable then it is not an investment. Currency on the other hand can be an investment while stable(you can start business make loans etc). The stability of gold to currency will then cause investors to leave gold and go to currency, this puts more money in the economy which equates to more investment and jobs.
Other countries adopting a similar approach would have stable price relations to gold and to other currencies on a soft standard. This encourages trade, In that I know I can build cars in Germany for X amount of Euros, sell them in the US for Y amount of dollars and make Z amount of profit in Euros. Where as if the exchange rate is unstable the price of the price needed to sell the finished product for a profit. You see this in 2000's where the Euro climbed against the dollar and the Japanese Yen maintained a policy of stability with the Dollar. You see the Japanese take a larger market share of Automobiles produced and sold in the world then Germany. (a position the Japanese still hold today.)
Stability also the US to utilize senorial(sp? i think something like lord's right in French) privilege, where by the demand for the currency allows a economy to maintain success based off of the currency being properly managed. you notice this post WWII. Whenever the US economy is at its strongest the trade deficit is at its largest. The reason is because what is wanted in trade is the money. You also see this in the Italian city states, they ran a trade deficit for over 500 years with the Muslim traders, but became fabulously wealthy doing it. You see how it can go wrong with Spain, They simply brought in all the gold and silver they could carry and printed as they could. They inflated their currency and it went from being the standard of Europe to something you melted down whenever possible.


Specifically, not just "Bing! It's fixed!" Precisely what kind of international banking treaty do you envision? What countries should sign onto it? Why should they sign it? Would it be a UN treaty, or a treaty between select nations? What happens if some countries don't want to sign onto it? How would it affect private banking as opposed to nationalized banking? How would it be enforced? Etc, etc, etc.

your making it too complicated.
1st establish an international bank charter.
It doesn't matter if it is a private bank or a state bank, they meet the charter then they are an international bank.
2nd. loan money, sell loans/mortgages on an international market you have to be a internationally chartered bank.
3rd establishment of ways to avoid tax shelters etc.
4th a body and means to pick out said body that will adjust the requirements of an international charter as needed.
the treaty would likely be a WTO or a world bank treaty. The UN is a laughing stock and no sane man would trust the UN with their money.
Countries involved in major trade and international banking should sign the treaty. They should sign it because a common set of rules in international banking will prevent the current economic situation from happening again and it will increase revenues of those countries as it makes it easier to catch people trying to use off shores banks as tax shelters. This also makes Ponzi schemes harder and produces a standard for mortgages sold internationally.
This is more unexplored territory, you can see this comparing pre Civil war banking to post civil war banking with in the US. prior to the Civil war after the end of the 2nd bank of the US, banks were all done under state charters. Southern banks were by and large held to low standards and often defaulted. they would also sell their loans North. Often times it was a plantation owner who had exhausted his land would take a rather large loan with his land as collateral, He would then default and let the bank seize his worthless land and use the loan to buy productive land farther west. The New York banking system almost collapsed just after Texas was admitted as a state as people used the trick to move them and their slaves to Texas. It is one of the main reasons bankers in the north wanted emancipation, because as long as slave holders in the south kept most of their wealth in bondsmen they would keep scamming the north on loans with land as collateral.
As for any country who doesn't want to join oh well. they will have a hard time playing in international banking and attracting investment but that's there choice. I suspect some will try to make alternatives like Chavez's bank (which is likely just a Ponzi scheme to fund his revolution). But if the US and EU sign it most other countries will also sign it, the banking clout still rest in those two spheres of influence. And even those who don't can still have an internationally chartered bank, unless the country moves to stop it.

For a history major, you seem more short on fact than on theory. You have big ideas that you present as if they were small, and without any historical examples of your ideas working to show the sense of them. Come on, surely you can present a better argument than this.

You were the one who requested less history talk as I recall.

The massive difference is that Japan's economy was, and still is, based upon manufacturing. The whole bubble going boom was the result of the yen suddenly appreciating in value after the fixes were taken off and Japan found itself rich, but unable to sell what it made.
Absolutely false, as Japan's export industry consistently grew as a percentage of GDP during the lost decade.

Given that during the years after the war, the Japanese government did its absolute best to keep the Japanese saving everything that they could, Japan couldn't make the transition that the US had from a manufacturing economy to a consumer economy.
That's not correct... spending by the private sector was excessively high throughout the 80s, which directly caused the bubble. Overspending is what caused that small cramped apartment in midtown Tokyo to go for millions of $.

The Japanese still save too much,
That's a myth... Japanese private sector spent too much during the 80s on leverage (due to screwed up BOJ policies), and Japan's private sector's high current levels of savings are perfectly appropriate, and represent deleveraging of the 80s bubble which is a process that's still going on. The faster the Japanese are allowed to save and withhold consumption, the faster that deleveraging process can end and normal economic development can resume. However, numbskulled LDP policies like bailouts, quantitative easing, and stimulus packages force spending and prevent the completion of bubble deleveraging, which has unnecessarily dragged out Japan's ills for decades.

which is why the stimulus bills were too little, too late, and not well targeted because they ended up just working on encouraging spending in local areas without thinking about getting the whole of the economy to change over.

Local spending was out of control in the 80s. The bubble was the product of excessive spending. That's exactly why the pendulum has swung the other way since the bubble burst, and local saving is now occurring on a mass scale so that the economy can "equilibrate."

BTW, it should be noted that Japan has been in a recession since last year, but it HAS been growing before that. The lost decade of Japan was not a decade long recession, but one of weak growth. Since you keep referring to Japan has having been in a recession, I'm starting to wonder just how much you actually know about it.
Not all growth is equal. Soviet Union's postwar economic growth systemically misallocated even though it produced impressive growth rates on paper. Japan's growth during the lost decade was a product of monetarist manipulation of Yen and the global credit bubble facilitating Japanese exports to the US. These are obviously not the signs of a healthy or sustainable economy, any more than the ever-growing Soviet economy was a healthy or sustainable economy. In reality, Japan's capital structure was rotten to the core, especially in the financial sector. The lost decade solved no problems and only perpetuated the systemic malinvestments and economic distortions that leave Japan more vulnerable to the current global crisis. Had Japan allowed economic liquidation in 1990, the country would be in a far better shape to weather the current global downturn. Instead, the metaphorically zombified Japanese system, whose fundamental unsoundness was masked by the 90s American credit bubble, has today been revealed for the wretched mess it really is, which is why the Japanese economy is contracting at a record pace.

It has EVERYTHING to do with the political process in Japan because it was due to that process that those bills passed the Diet and where they were targeted. Given how the LDP operated, the rigged bids, the wacky way in which Japan allocates seats in the Diet (Based upon the actual physical size of an area, meaning my home prefecture has more representation that the largest bloody city on the planet), the LDP factions and how they play a part in elections, how tax money from gas and toll money collected from the expressways has to be used, AND how construction companies act as vote getting machines for the LDP... yeah, it had a very, very large to do with what happened in Japan. Ignoring the political situation in Japan is stupid, very stupid. You cannot understand what happened without it.
No amount of spending or investment would've done any good, and would (and did) simply perpetuate the economy's problems. The only solution to Japan's aggregate overspending and aggregate overleverage in the 80s is aggregate savings and aggregate withholding of consumption.

Again you keep insisting that Japanese people "spend too little". Of course they HAVE to spend too little now, because aggregate spending was too much during the bubble, and the bubble's debts need to be paid down. LDP is doing its darndest to prevent this saving from happening, thus delaying economic recovery into a 3nd decade.

Finally, I noted that you never responded to my point that over half of economic historians disagree with you about the New Deal prolonging the Great Depression. Given that you keep going on with your claim that it didn't work, I will remind you again. Time for you to back up your words.
Why your blind faith in academia? Not every guy in academia is correct. Those economic historians you refer to are simply wrong, and I would bet a significant proportion of the pro-New Deal economic historians have Marxist leanings and used invalid Marxist analysis. The rest subscribe to the fallacious perpetual motion, "something for nothing" Keynesian school of economics.

Absolutely false, as Japan's export industry consistently grew as a percentage of GDP during the lost decade.


That's not correct... spending by the private sector was excessively high throughout the 80s, which directly caused the bubble. Overspending is what caused that small cramped apartment in midtown Tokyo to go for millions of $.


That's a myth... Japanese private sector spent too much during the 80s on leverage (due to screwed up BOJ policies), and Japan's private sector's high current levels of savings are perfectly appropriate, and represent deleveraging of the 80s bubble which is a process that's still going on. The faster the Japanese are allowed to save and withhold consumption, the faster that deleveraging process can end and normal economic development can resume. However, numbskulled LDP policies like bailouts, quantitative easing, and stimulus packages force spending and prevent the completion of bubble deleveraging, which has unnecessarily dragged out Japan's ills for decades.



Local spending was out of control in the 80s. The bubble was the product of excessive spending. That's exactly why the pendulum has swung the other way since the bubble burst, and local saving is now occurring on a mass scale so that the economy can "equilibrate."


Not all growth is equal. Soviet Union's postwar economic growth systemically misallocated even though it produced impressive growth rates on paper. Japan's growth during the lost decade was a product of monetarist manipulation of Yen and the global credit bubble facilitating Japanese exports to the US. These are obviously not the signs of a healthy or sustainable economy, any more than the ever-growing Soviet economy was a healthy or sustainable economy. In reality, Japan's capital structure was rotten to the core, especially in the financial sector. The lost decade solved no problems and only perpetuated the systemic malinvestments and economic distortions that leave Japan more vulnerable to the current global crisis. Had Japan allowed economic liquidation in 1990, the country would be in a far better shape to weather the current global downturn. Instead, the metaphorically zombified Japanese system, whose fundamental unsoundness was masked by the 90s American credit bubble, has today been revealed for the wretched mess it really is, which is why the Japanese economy is contracting at a record pace.


No amount of spending or investment would've done any good, and would (and did) simply perpetuate the economy's problems. The only solution to Japan's aggregate overspending and aggregate overleverage in the 80s is aggregate savings and aggregate withholding of consumption.

Again you keep insisting that Japanese people "spend too little". Of course they HAVE to spend too little now, because aggregate spending was too much during the bubble, and the bubble's debts need to be paid down. LDP is doing its darndest to prevent this saving from happening, thus delaying economic recovery into a 3nd decade.

I see a lot of assertions and claims of falsehood in this post without any source to back them up, and since NERVUN lives in Japan, Im going to take his word until I see a source.

Why your blind faith in academia? Not every guy in academia is correct. Those economic historians you refer to are simply wrong, and I would bet a significant proportion of the pro-New Deal economic historians have Marxist leanings and used invalid Marxist analysis. The rest subscribe to the fallacious perpetual motion, "something for nothing" Keynesian school of economics.

What a powerful arguement! "All your economists in academia you cite are just wrong yet I, random internet guy, wih no real credentials what so ever am right! And if you disagree with me it must be because youre a marxist!"

Well, the trivial answer would be "too much leverage". But then you have to ask what caused too much leverage, and I don't think "interest rates are too low" is any less trivial in this case.
Why is that trivial though? Wouldn't higher interest rates have helped discourage the excessive leverage?

We can all be mad at Greenspan, but the fact of the matter is that the process that has led to this has been going on for longer than that, and Greenspan's policy was ultimately a reaction function too.

Greenspan's policy of bringing down interest rates during liquidity contraction is completely counterintuitive and fallacious though. When demand for liquidity is high, price of liquidity should be high, not low. This is basic economics 101, supply and demand.

I really don't think we can point to some single, exogenous influence that caused this. There are endogenous mechanisms within the system itself that can cause bubbles to develop, I think.

But without exogenous influences economic growth is sustainable and stable because endogenous mechanisms all balance out. The endogenous mechanisms within the system that prevent bubbles from developing (for example liquidity contractions) are removed by hamfisted exogenous intervention, throwing the whole system wildly out of balance.

What would they have prevented though? They didn't know in advance what would set things off, and the actual problem is system-wide leverage, for private households in aggregate. How do you make a law against that?
Simple, prohibit the central bank from price fixing interest rates.

I was going to write a nice long responce, until I got to this:

Why your blind faith in academia? Not every guy in academia is correct. Those economic historians you refer to are simply wrong, and I would bet a significant proportion of the pro-New Deal economic historians have Marxist leanings and used invalid Marxist analysis. The rest subscribe to the fallacious perpetual motion, "something for nothing" Keynesian school of economics.

Thank you, you have now fully ID'd yourself as someone not worth listening to because your argument will always fall down to 'Nu-uh! It's this way because I said so'. So, in other words, you ARE the weakest link, goodbye!

I see a lot of assertions and claims of falsehood in this post without any source to back them up, and since NERVUN lives in Japan, Im going to take his word until I see a source.

Nervun may live in Japan but he doesn't have his facts and figures for Japan straight.

What a powerful arguement! "All your economics in academia you site are just wrong yet I, random internet guy, wih no real credentials what so ever am right! And if you disagree with me it must be because youre a marxist!"

Where did I say "all your economics in academia you cite are wrong"? Nervun himself is mentioning economists in academia who agree with me. All I'm ever pointing out is that truth isn't determined by majority vote.

Nervun may live in Japan but he doesn't have his facts and figures for Japan straight.

Lets see you prove him wrong then. Because all I have to go off right now is your word. Which I dont find reliable.

Where did I say "all your economics in academia you cite are wrong"? Nervun himself is mentioning economists in academia who agree with me. All I'm ever pointing out is that truth isn't determined by majority vote.

Your arguement was basically "economists who disagree with my view are marxists and are simply wrong because I say so".

As NERVUN said, you are the weakest link. We're done here.

I was going to write a nice long responce, until I got to this:



Thank you, you have now fully ID'd yourself as someone not worth listening to because your argument will always fall down to 'Nu-uh! It's this way because I said so'. So, in other words, you ARE the weakest link, goodbye!

I'm the one who wrote a cogent post, not you. You're argument basically falls down to 'Nu-uh! It's this way because a poll says 51% of economic historians said so' (While 49% of economic historians would differ)

I'm the one who wrote a cogent post, not you. You're argument basically falls down to 'Nu-uh! It's this way because a poll says 51% of economic historians said so' (While 49% of economic historians would differ)
No, only 22% would beg to differ. But, see, I actually cited a source. On this board, we kinda tend to require that rather than saying because I said so. Since you STILL have not sourced one claim of yours or even given us reason to listen to you (and a lot not to), it's pointless to actually debate you.

I'm the one who wrote a cogent post, not you. You're argument basically falls down to 'Nu-uh! It's this way because a poll says 51% of economic historians said so' (While 49% of economic historians would differ)

Except his source said only 22% disagree. See, here we get to that whole citing sources thing.

I think youre full of shit. Show me a source. Prove me wrong.

Except his source said only 22% disagree. See, here we get to that whole citing sources thing.

I think youre full of shit. Show me a source. Prove me wrong.



Nervun's an amateur. His statement "yen suddenly appreciating in value after the fixes were taken off and Japan found itself rich, but unable to sell what it made." is thoroughly false.

As the yen strengthened against the dollar in the firsthalf of the 1990s, many analysts expected that theJapanese trade surplus, and the trade tensions accom-panying it, would diminish. A rising yen, they rea-soned, would make Japanese exports less affordableabroad while making foreign goods more attractive toJapanese consumers. Over time, the downward pres-sure on the demand for Japan’s goods would lead to adecline in the country’s trade surplus.Contrary to expectations, however, Japan’s merchan-dise trade surplus has shown few signs of shrinking. Itrose from $52 billion in 1990 to a record $121 billionin 1994 and moderated only to $112 billion, at anannual rate, over the first three quarters of 1995.Although imports have helped bring the balance down,rising very rapidly in response to sharply lower importprices, this increase has not significantly narrowed thesurplus because export growth has remained high. Thesurprising resilience of exports has prevented theexchange rate shifts of the first half of the 1990s fromsignificantly reducing Japan’s trade surplus.

http://www.newyorkfed.org/research/current_issues/ci2-1.pdf

Nervun's an amateur. His statement "yen suddenly appreciating in value after the fixes were taken off and Japan found itself rich, but unable to sell what it made." is thoroughly false.



http://www.newyorkfed.org/research/current_issues/ci2-1.pdf

That doesnt contradict his statement.

Except his source said only 22% disagree. See, here we get to that whole citing sources thing.

I think youre full of shit. Show me a source. Prove me wrong.

His own source says 49%.

Anyways, arguing over polls is silly. we're debating "a topic" and we're not debating "what other people think of the topic."

That doesnt contradict his statement.

How doesn't it contradict his statement? The link I gave just showed that Japan was in fact wildly successful in selling what it made and not "unable to sell what it made" as Nervun bewilderingly claimed.

Nervun's an amateur.
pot meet kettle, kettle,pot

not easy, but far easier now then when everything looked swell. <snip for length>

your making it too complicated.
<snip for length>

You were the one who requested less history talk as I recall.
I read your full post twice, but it made no sense to me. I mean, I could see the same general idea you floated the first time around, but I still saw no REAL sense of how to do it or why you think it would work. I saw a lot of theory. I saw a lot of references to historic events. However I did not see an explanatory connection drawn between those events and your theories. I did not see you explaining how your interpretation of those events, which would make them support your theory, is the correct interpretation. I did not see a connection or similarity drawn between those historic events and present events and conditions. Instead, I saw some assertions that expressed an ideological bias, but without any reference to real world conditions that would explain why your bias is reasonable and realistic.

Also, I find it ironic that you tell me I'm the one making this too complicated, considering what your simple explanation was like.

And finally, what I requested was less IRRELEVANT talk, not less historical talk. Sadly, I'm afraid because of the connections you failed to make clear, all of your historical talk is irrelevant. I'm sorry but I am left still thinking that you have invented some idea that is based on a biased reading of history and filled in the blanks with unsupported assumptions about things you may not have a lot of understanding about (how much time do your history studies leave you for figuring out the intricacies of currency markets and international banking protocols?). I am still of the opinion that your suggestions are simplistic and not really well thought out.

pot meet kettle, kettle,pot

Touche :tongue:

Nervun's an amateur. His statement "yen suddenly appreciating in value after the fixes were taken off and Japan found itself rich, but unable to sell what it made." is thoroughly false.
The Japanese government disagrees with you, given that manufacturing jobs have moved out of Japan to China, following the pattern established by the US.

As for savings, before the bubble, Japan's savings rates was 10%, it currently is 2%, after two decades of so-so growth that forced many to taps those reserves and, of course, the rapidly aging population/lost generation.

The Japanese government disagrees with you, given that manufacturing jobs have moved out of Japan to China, following the pattern established by the US.

As for savings, before the bubble, Japan's savings rates was 10%, it currently is 2%, after two decades of so-so growth that forced many to taps those reserves and, of course, the rapidly aging population/lost generation.

Nu-uh.

Nu-uh.

Meh you are way out of your depth here... this is not the thread for you...

Meh you are way out of your depth here... this is not the thread for you...

How cute.


Tell you what, you cite any of your claims, and Ill engage in debate with you, hmmm?

The Japanese government disagrees with you, I've given you a source. Can you give me a source from the Japanese government that confirms your statement "Japan found itself rich, but unable to sell what it made"?

given that manufacturing jobs have moved out of Japan to China, following the pattern established by the US.

How does that refute the fact there was a huge acceleration in Japan's trade exports?

As for savings, before the bubble, Japan's savings rates was 10%, it currently is 2%, after two decades of so-so growth that forced many to taps those reserves and, of course, the rapidly aging population/lost generation.


Japan's private sector net savings declined in the 1980s and has increased since then. Debt to Gross Domestic Expenditure ratio went from 277% in 1977 to 458% at the height of the bubble. Today's Japanese private sector's savings is increasing from deleveraging. But overall Japan's aggregate savings is still declining due to government stimulus packages.

The private financial sector's debt-to-GDP ratio increased from 57 percent in 1979 to 144 percent in 1989. After the bubble burst it remained flat, illustrating that most of Japan's post-bubble debt was created by the government. Government debt, 60 percent of GDP in 1990, tripled to 180 percent by 2007. In contrast, non-financial companies saw their debt fall from 150 percent of GDP in 1995 to 91 percent in 2007. Household debt, which had peaked in 1999 at 71 percent of GDP, fell to 63 percent in 2007, as households too tightened their purse-strings.

http://www.entrepreneur.com/tradejournals/article/191646705.html

None of your claims that postwar Japanese "saved too much" make any sense, given that private and aggregate debt levels ballooned (and is now rightfully in the process of being paid down by Japanese people despite LDP's misguided efforts to get them into more debt).

How cute.


Tell you what, you cite any of your claims, and Ill engage in debate with you, hmmm?

^Have fun with my citations. I assume you're just as out of the loop on Japan as Nervun is.

This is a spending bill, not a stimulus plan. Obama even knows this. His goal is not to fix the economy. His goal is to rid this country of the greedy capitalist system. He just has a small problem to fix, The Constitution. A major depression (not greatly worsened by this monstrosity of a spending bill of course) is a great way to convince the sheep that voted for him that we need socialism.

This is a spending bill, not a stimulus plan. Obama even knows this. His goal is not to fix the economy. His goal is to rid this country of the greedy capitalist system. He just has a small problem to fix, The Constitution. A major depression (not greatly worsened by this monstrosity of a spending bill of course) is a great way to convince the sheep that voted for him that we need socialism.

Wow.

I'm just going to say one thing - government spending is economic stimulus. I don't have the time or wherewithall to go over everything else wrong you said.

Wow.

I'm just going to say one thing - government spending is economic stimulus. I don't have the time or wherewithall to go over everything else wrong you said.
Don't bother. That post is so divorced from reality, the word "wrong" doesn't even apply, because it suggests there could ever be any way to correct it to be right. Perhaps that guy has been listening to Alan Keyes, a notorious liar and crazy person.

http://www.youtube.com/watch?v=lqkMfToY9Pk

Stability also the US to utilize senorial(sp? i think something like lord's right in French) privilege, where by the demand for the currency allows a economy to maintain success based off of the currency being properly managed. you notice this post WWII. Whenever the US economy is at its strongest the trade deficit is at its largest.
What's your definition of "strongest"?

The reason is because what is wanted in trade is the money. You also see this in the Italian city states, they ran a trade deficit for over 500 years with the Muslim traders, but became fabulously wealthy doing it.
What was the balance of trade between Italian city states and other European countries, and what was the Italian city states' net balance of trade?

You see how it can go wrong with Spain, They simply brought in all the gold and silver they could carry and printed as they could. They inflated their currency and it went from being the standard of Europe to something you melted down whenever possible.
Would you say the US' segnorage policy over the past 50 years is more analogous to the Italian city states' or Spain's you're citing?

I'm not necessarily questioning your assertions since I don't yet understand the ramifications of all that you're saying and it will require more contemplating on my part. Just asking for clarification.

Why is that trivial though? Wouldn't higher interest rates have helped discourage the excessive leverage?
Not necessarily. That's the point - interest payments are the cost of bringing consumption or investment forward, yes, but the perceived benefit of doing so is not necessarily a function of interest rates at all.

If I go and put money into an instrument or physical investment that promises me a return of 20% a year (which did exist, and indeed were achieved for some time, even for things as simple as people's private real estate investments), then an interest rate of 5% as opposed to 1.5% is not going to be changing my decision a whole lot.

You can now go ahead and say "but those returns were only made possible by these low rates", but rational investors would be able to understand that these were never going to stay around.

No, there is something else at work here, and it has to do with the perceived future returns of investments and their expected volatility. If successful monetary policy for example actually reduces this expected volatility and facilitates higher returns, then at the same time it facilitates the growth of bubbles even if it doesn't keep rates at an artificial level but responds reasonably and in such a way as to not fuel the business cycle. Or, to take it out of the picture entirely, if an economy without monetary policy was in fact less prone to wild swings (as you appear to claim), this would in turn inflate people's expectations about the return they can earn for a given amount of risk.

Greenspan's policy of bringing down interest rates during liquidity contraction is completely counterintuitive and fallacious though. When demand for liquidity is high, price of liquidity should be high, not low. This is basic economics 101, supply and demand.
Except that we're not talking 101 here, but the real world.

And indeed, what the Fed is trying to do is not actually against supply and demand at all. Liquidity is in demand, the Fed is a principal supplier of it and hence it expands output. It does have an ulterior motive, namely to try and prevent a complete collapse of the entire system, but it's not acting against a market any more than someone supplying a bunch of starving people with food is. And futhermore, the Fed is in fact charging a price for the liquidity it is providing.

But without exogenous influences economic growth is sustainable and stable because endogenous mechanisms all balance out.
That assumes that there is no such thing as a rational, self-reinforcing negative spiral. But it's not exactly difficult to come up with such a thing - Akerlof's Lemons, Deflation Expectations, etc.

The endogenous mechanisms within the system that prevent bubbles from developing (for example liquidity contractions) are removed by hamfisted exogenous intervention, throwing the whole system wildly out of balance.
You haven't actually demonstrated how liquidity contractions would come about, and how they would serve to prevent bubbles.

Simple, prohibit the central bank from price fixing interest rates.
It doesn't (http://en.wikipedia.org/wiki/LIBOR). Which part of monetary policy don't you understand?

Look, the questions you ask are valid. Most people in this thread have not spent the time thinking about these things to answer them, and they can't be expected to since they do in fact have lives. But the answers you seem to propose, and the rationale for them (and indeed for asking the questions in the first place) are just 50 years behind the actual state of economics as a science. And that's why people know immediately that you're repeating talking points of random websites and blogs instead of actually trying to engage in a meaningful discussion (ie one producing a result).

What's your definition of "strongest"?

strongest in relative to its self. the trade deficit currently has been shrieking, but the economy has gotten worse. The trade deficit during the 80's, 90's, and during the 50's(well started positive because we were the only country with unbombed out industry after the war. )

What was the balance of trade between Italian city states and other European countries, and what was the Italian city states' net balance of trade?

depends on the country in Europe. just like today the US likely has a few positive trade balances but that does not counter out the aggregate. One of the reasons the the prices for the goods the Italians got through the Arabs was so high for the rest of Europe, was because they didn't produce anything the Italians wanted and most of the goods the Italians bought stayed in Italy.

Would you say the US' segnorage policy over the past 50 years is more analogous to the Italian city states' or Spain's you're citing?

Depends both of those shifted and the 500 years of proper currency management is really a stylized fact. the Same with the US. if you look at currency management during Eisenhower's and Reagen's time it is very close to the Italian city states. If you look at late Clinton and the entirety of Bushes time the currency has been managed closer to Spain's system.

I'm not necessarily questioning your assertions since I don't yet understand the ramifications of all that you're saying and it will require more contemplating on my part. Just asking for clarification.
the basic ramification is that a trade deficit is not bad to the US, in essence the export product becomes Dollars. These dollars are used to enumerate debt and for large foreign transactions. In essence its a demand for dollars. Currently we have seen the dollar stabilize and get stronger I suspect this is partly the everyone is paying their debts in dollars, I also suspect this has to do with China, Russia, Japan, and Germany trying to save the worlds economy by stabilizing the dollar.

Not necessarily. That's the point - interest payments are the cost of bringing consumption or investment forward, yes, but the perceived benefit of doing so is not necessarily a function of interest rates at all.

If I go and put money into an instrument or physical investment that promises me a return of 20% a year (which did exist, and indeed were achieved for some time, even for things as simple as people's private real estate investments), then an interest rate of 5% as opposed to 1.5% is not going to be changing my decision a whole lot.

You can now go ahead and say "but those returns were only made possible by these low rates", but rational investors would be able to understand that these were never going to stay around.
The bubble occurred due to immense multiplication of credit through fractional reserve lending in the low interest environment. When you say "rational investors would be able to understand that these were never going to stay around" that's not even relevant. First of all, threat of bank runs would prevent the undue credit expansion and prevent these 20% type returns. Also in our example 5% is compared to 1.5% but interest rates would have certainly been even higher given the explosive growth in money supply in the 2000s.


No, there is something else at work here, and it has to do with the perceived future returns of investments and their expected volatility. If successful monetary policy for example actually reduces this expected volatility and facilitates higher returns, then at the same time it facilitates the growth of bubbles even if it doesn't keep rates at an artificial level but responds reasonably and in such a way as to not fuel the business cycle. Or, to take it out of the picture entirely, if an economy without monetary policy was in fact less prone to wild swings (as you appear to claim), this would in turn inflate people's expectations about the return they can earn for a given amount of risk.

In an economy without monetary policy, there's no incentive to invest in (for example) an index-composite ETF over currency since both equity assets and money supply would be consistently proportional to each other and proportional to the economy's activity. Systemic asset bubbles can't develop in this situation. It's precisely due to monetary policy that people's expectations of the stock market (for example) is inflated and assume equities will always outperform cash in the long run. That's the recipe for bubble.


Except that we're not talking 101 here, but the real world.

And indeed, what the Fed is trying to do is not actually against supply and demand at all. Liquidity is in demand, the Fed is a principal supplier of it and hence it expands output. It does have an ulterior motive, namely to try and prevent a complete collapse of the entire system, but it's not acting against a market any more than someone supplying a bunch of starving people with food is. And futhermore, the Fed is in fact charging a price for the liquidity it is providing.
That's exactly my point- the price for the liquidity is not high enough. The Fed should be price gouging right now. That's economics 101, and is why price controls against food merchants in a starvation zone never works and is counterproductive.

That assumes that there is no such thing as a rational, self-reinforcing negative spiral. But it's not exactly difficult to come up with such a thing - Akerlof's Lemons, Deflation Expectations, etc.
Again, more erroneous results from econometrics. Defective econometric models used to "manage the business cycle" predict perpetual self-reinforcing positive spirals through perpetual inflation.

2008: the results are in: self-reinforcing positive spirals don't exist. You're simply relying on the same defective econometric models that predicted perpetual self-reinforcing positive spirals, in order to predict perpetual self-reinforcing negative spirals. Perpetual positive spirals don't exist and perpetual negative spirals don't exist. Something's gotta give, and it's the pseudoscience of macroeconomics.

You haven't actually demonstrated how liquidity contractions would come about, and how they would serve to prevent bubbles.
Threat of bank runs.

It doesn't (http://en.wikipedia.org/wiki/LIBOR). Which part of monetary policy don't you understand?
I'm not being contradicted here.

Look, the questions you ask are valid. Most people in this thread have not spent the time thinking about these things to answer them, and they can't be expected to since they do in fact have lives. But the answers you seem to propose, and the rationale for them (and indeed for asking the questions in the first place) are just 50 years behind the actual state of economics as a science. And that's why people know immediately that you're repeating talking points of random websites and blogs instead of actually trying to engage in a meaningful discussion (ie one producing a result).
The only one who is 50 years behind anything is macroeconomics. Macroeconomics is not science, rather it's a type of voodoo.

All your statistics, "aggregate demand", GDP numbers, etc. are thoroughly misleading. These statistics only indicate the "volume" and not the "quality" of the economy, and inspire monetary policies that further perpetuate and multiply unsound capital structures. These econometric calculations aren't even mathematically sound. Just as an example, the calculation of GDP numbers you rely on is analogous to summing the magnitude of vectors and totally ignoring their directions. The result is incomplete and mathematically invalid information that can't be applied to the real world.

Maybe in 100 years macroeconomics will yield even remotely applicable statistics. Until then, monetary intervention is pretty much all based on unuseable statistical abstractions of very low, crude resolution.

Finally, I make my own talking points. I don't reword or repeat "random websites and blogs."

strongest in relative to its self. the trade deficit currently has been shrieking, but the economy has gotten worse. The trade deficit during the 80's, 90's, and during the 50's(well started positive because we were the only country with unbombed out industry after the war. )

Contrary to popular belief it's erroneous to argue the economy was strong in the 80s/90s though. The time (especially late 90s) was based on an unsound capital structure caused by a credit bubble (directly caused by this seignorage scheme you mentioned). To this day we're still feeling the hangover and washing out the fiscal and monetary toxic waste from the Clinton "golden age".

I'm suspecting the "strong economy"/"seignorage gains" pattern you're postulating is a rather superficial and nonexistent correlation. Actually a stronger and causal relationship might be linking "bubble economy" and "seignorage gains".

depends on the country in Europe. just like today the US likely has a few positive trade balances but that does not counter out the aggregate. One of the reasons the the prices for the goods the Italians got through the Arabs was so high for the rest of Europe, was because they didn't produce anything the Italians wanted and most of the goods the Italians bought stayed in Italy.
Did the Italian city states have an overall positive "aggregate" trade balance, even though they ran deficits with the Muslims? I strongly suspect the Italians did in fact have a net positive "aggregate" balance of payments though I defer to you since I don't have numbers on the late medieval mediterranean on the top of my head.

Depends both of those shifted and the 500 years of proper currency management is really a stylized fact. the Same with the US. if you look at currency management during Eisenhower's and Reagen's time it is very close to the Italian city states. If you look at late Clinton and the entirety of Bushes time the currency has been managed closer to Spain's system.

the basic ramification is that a trade deficit is not bad to the US, in essence the export product becomes Dollars. These dollars are used to enumerate debt and for large foreign transactions. In essence its a demand for dollars.

This is the Spanish model of seignorage though. If I understand you correctly, the Italians did not actually engage in seignorage. Their profits came from doing actual work in demand (moving goods from the east to the west, i.e. basically glorified truck drivers) while by contrast the Spanish pulled cash out of their ass (Bolivia), handed out gobs of cash to the rest of Europe, and expected services in return.

What happened to the Spaniards suggests the American attempt at reproducing the Spanish model may not end well.

If the US tries the Italian model, it would have nothing to do with seignorage, and instead everything to do with producing and accumulating actual work in demand by the rest of the world.

Currently we have seen the dollar stabilize and get stronger I suspect this is partly the everyone is paying their debts in dollars, I also suspect this has to do with China, Russia, Japan, and Germany trying to save the worlds economy by stabilizing the dollar.

Hmm I'll have to look into this issue some more. I don't know if you can call the dollar "stabilized". The dollar certainly is not the only currency that gained in value (against goods and services, commodities, etc) over the last year. All the major currencies gained in value due to the debt-deflation.

The bubble occurred due to immense multiplication of credit through fractional reserve lending in the low interest environment.
Not exclusively. The fact of the matter is that the vast majority of this multiplication occured as a result of the financial system's perceived improved ability to manage risks and recycle money more quickly due to securitisation.

http://2.bp.blogspot.com/_b6CLevEGCD0/SQczctvi_DI/AAAAAAAAA24/XdxBOXtrdJ8/s400/multiplier.JPG

I think it's patently obvious that what we're looking at is that the final phase of the bubble in particular the government-created share of the money supply would have formed a relatively small part of the total increase in the money supply and thus the price people would actually be paying for debt on the ground. In other words: whatever Fed factors there may have been, there was a massively significant factor involving the financial sector's behaviour.

When you say "rational investors would be able to understand that these were never going to stay around" that's not even relevant.
Why not? The fact of the matter is that if you think your house is going to be worth 20% more by the end of the year, interest rates would have to be basically so high that you literally can't get the money at all for you not to borrow it.

People obviously did expect prices to be rising to that extent, despite having all the information to make a decent guess that Fed policy wouldn't stay so easy. So either they made a mistake in predicting Fed behaviour, or they were happy to cop rate increases down the line.

First of all, threat of bank runs would prevent the undue credit expansion and prevent these 20% type returns.
The threat of bank runs doesn't prevent a thing if their probability isn't seen as significant. And the probability was seen as decreasing with every passing week of rising asset prices. There was no FDIC and no Fed in the railroad boom and subsequent bust, but there were plenty of unreasonable risks taken nonetheless thanks to plenty of people thinking 20% returns were entirely normal and, apparently, sustainable.

Also in our example 5% is compared to 1.5% but interest rates would have certainly been even higher given the explosive growth in money supply in the 2000s.
Well, 20%+ rates might have prevented a housing bubble, but what would it have done to business investment? Your market-determined interest rate (still operating on this assumption of yours that the Fed is somehow the be-all and end-all of rates) doesn't take account of different sectors involving different investors with very different expectations of return.

In an economy without monetary policy, there's no incentive to invest in (for example) an index-composite ETF over currency since both equity assets and money supply would be consistently proportional to each other and proportional to the economy's activity. Systemic asset bubbles can't develop in this situation.
It doesn't have to be an index-composite, and it doesn't have to be over extended periods of time. It's certainly possible for a asset class to be perceived to offer sustainably high returns at any rate. People came up with all sorts of rationalisations for why their house values should be shooting up, entirely independent of monetary considerations and the fact of the matter is that people when they invest in bubble assets don't do it because they think money will underperform in comparison, but because they think something fundamental has changed such that these new high prices are the new long-term equilibrium.

It's precisely due to monetary policy that people's expectations of the stock market (for example) is inflated and assume equities will always outperform cash in the long run. That's the recipe for bubble.
That's just not consistent with people's actual behaviour during bubbles. People invested in dot.com shares because they thought there was real value there and they bought houses like crazy because they thought there were supply restrictions and population growth - again real drivers.

That's exactly my point- the price for the liquidity is not high enough. The Fed should be price gouging right now. That's economics 101, and is why price controls against food merchants in a starvation zone never works and is counterproductive.
And the Fed gouging is what it did during the Great Depression. Actually reducing the money supply, or jacking up the price, is hardly the way to get out of a liquidity crunch. Yes, you'll find a new equilibrium - but only by waiting until enough demand has been destroyed. And unfortunately for the economy as a whole, that involves a lot of people's deposits and investment projects.

Again, more erroneous results from econometrics. Defective econometric models used to "manage the business cycle" predict perpetual self-reinforcing positive spirals through perpetual inflation.
Try again. Neither Akerlof's Lemons nor deflation expectations have a shred to do with econometrics. The first one is straight first-year micro (I do suggest you try a course in it some time), the latter is exactly the same logic that says the short- and long-run Phillip's Curves have nothing to do with each other: rational expectations.

I'm not being contradicted here.
You are. The actual cost at which banks have access to liquidity is not dictated by central banks at all. The central banks are just actors within the money markets - important ones, yes, but they don't set the price. Hence why there is such a thing as a spread between LIBOR and cash rates, and it can get out of hand in both directions thanks to the behaviour of private actors in what is essentially a free market.

The only one who is 50 years behind anything is macroeconomics. Macroeconomics is not science, rather it's a type of voodoo.
Wait, so we're about to get into an actual debate and you immediately fall back on your "my 1950s polemic text is right, everyone else is wrong" line?

All your statistics, "aggregate demand", GDP numbers, etc. are thoroughly misleading. These statistics only indicate the "volume" and not the "quality" of the economy, and inspire monetary policies that further perpetuate and multiply unsound capital structures.
What about unemployment? Is that more to your liking?

Anyways, half your argument boils down to: these figures are used in bad policy, therefore they are bad. That's pretty crappy reasoning.

These econometric calculations aren't even mathematically sound.
Ahem...you haven't mentioned a single concept or idea from econometrics. So where does this come from?

Just as an example, the calculation of GDP numbers you rely on is analogous to summing the magnitude of vectors and totally ignoring their directions. The result is incomplete and mathematically invalid information that can't be applied to the real world.
That's a really, really dodgy analogy. It would be more correct to say that it is the sum of all positive and negative (ie the net) j-elements. Which doesn't make it perfect, but a whole lot better than you suggest.

And of course that has nothing to do with econometrics either.

And we are giving this company tens of billions in taxpayer bailout money.

Citibank Sends Nigerian Scammer $27 Million.


http://consumerist.com/5158065/citibank-sends-nigerian-scammer-27-million

Evidently not working yet.

http://biz.yahoo.com/ap/090223/wall_street.html

Apparently, Wall Street has zero confidence in anything that Obama or his team have proposed so far. That much is obvious.

Has anyone heard of Reinhardt?

Has anyone heard of Reinhardt?

My friends uncle? What about him?

what title does he hold in Princeton?