Conspiracy or State's preparing for the worst?

[reboog]

Poggle: you left out the words "very" and "severe."

The financial sector is deleveraging at a huge rate, no credit is coming out, so no one is spending. Nobody would anyway, because debt accumulated is so high that they would save to try to cover that.

Juggleblood: I read some of your posts earlier about how the stimulus bill is on the right track. I think the idea of the stimulus bill is comforting, but both the idea and the execution are flawed. I'm posting this to you because you are not a racist like Yasik and not a partisan hack like Weasel.

I'm not going to touch into this, but the stimulus bill is part tax cut (but not really tax cut, I explained a post earlier), part stimulus to be spent slowly on infrastructure, and part... investment!? This is bad.

When the government invests, you have to ask what both the benefits and the costs are. It crowds out private sector. It increases deficit.

How do you offset this? Well, maybe government is more efficient than private sector. Maybe the money we get back is more than we put in (Keynes' idea of a multiplier... you put in $1.00, you get back $1.50 of output.) These are pretty easy to consider.

So... is government spending efficient? I think they have proved that the answer is no. 700 billion TARP (REPEATED financial bailouts, about to repeat an auto industry bailout), moratorium on foreclosures, loan modifications (homeowner re-default rate is high, as expected).

Is the multiplier good? Planned production by government has rarely (if ever, I don't know), proved to be good. Billions in subsidies are going into cellulosic ethanol, an alternative green fuel source. These research firms are a financial black hole, and they are nowhere to solving the problem, even with billions of free (taxpayer) dollars from Congress. Japan also suffered from planned production, and there was something here domestically about investment in DRAM. I don't know the specifics, but I know that they didn't work.

If you assume that government spending is efficient, and that it is better than private sector, then yes, the stimulus... I mean, investment, is good.

I fear this post is getting too long for people to read, so I'll stop here.

[jezer]

[quote="reboog":c4ilvih7]Juggleblood: I read some of your posts earlier about how the stimulus bill is on the right track. I think the idea of the stimulus bill is comforting, but both the idea and the execution are flawed. I'm posting this to you because you are not a racist like Yasik and not a partisan hack like Weasel.[/quote:c4ilvih7]

I didn't get a mention.

[reboog]

On the infrastructure part (ala FDR):

Here are some questions. We had a housing bubble. Oversupply of construction workers. We are sending them back to work. Is that really what we want, a continuation of construction? How are we going to ensure that all these dollars help the currently unemployed, and not currently employed? (7% unemployment means 93% employment.) Also, half of wall street is laid off. How does this create new jobs for them?

When the holes are dug and filled, what jobs are they going to do?

Is getting 100% employment the ideal goal? I can achieve 100% employment. Get rid of machinery. Hire manual labor. Is this good?

[Medios]

I am proud to see this thread turn into a serious debate. I will add more after work. It is good to have real discussions and not mud slinging.

[*juggleblood*]

I don't know wut deleveraged means, but assuming you are correct and we won't experience inflation, whats the harm in government spending that stimulates demand?

I don't believe that we are as taxed as Tap says we are. A good portion of the population gets all their income tax dollars back. Even when you add in all the extra fees and hidden taxes we pay, those numbers look too high.

Getting mad about pork seems unnecessary if you consider that government stimulus is pretty much pork by definition.

I don't know that the free market model is even the paradigm of success anymore. The countries that are expanding the fastest have centralized control over the economy and poor regulation is exactly what got us in this mess to begin with.

[Weasel]

[quote="reboog":1eoxk0u7]I'm posting this to you because you are not a racist like Yasik and not a partisan hack like Weasel.[/quote:1eoxk0u7]
LOL.. always the same. Because I didn't support Obama, I must be a partisan hack. Do you know what that statement makes you? A partisan hack. Ironic isn't it.
[color=black:1eoxk0u7].[/color:1eoxk0u7]

[Poggle]

Say you have a million bucks and you are in the business of lending money. You could loan out your million dollars to a few responsible borrowers and expect to make a decent return.

However, you could also use your million bucks to borrow ten million, and then loan that out to a bunch of borrowers. Now you're making way more than you could with your piddly million. Congratulations, now you are leveraged.

Leverage is great. It stimulates economy and production to an amazing degree. However, it is also risky, and if it is used irresponsibly, people tend to go bankrupt.

For a long time, banks have been leveraging way way up, huge leverage. This is awesome, but they have also been making really shitty loans, which is not awesome. Now people are defaulting, and banks getting screwed from every direction (like they deserve).

So they ask for bailouts (which they don't deserve).

But what do they do with their bailouts? Sit on it, pretty much. Pay off their debts. And it makes sense. They don't want to repeat themselves by making a bunch more shitty loans.

So you have a bunch of banks which should be bankrupt (just like anyone should be if they make bad investments while leveraging). Congress continues to funnel money into the banks, which continue to deleverage.

Eventually the banks will leverage up again, which might be a crazy crazy time.

[reboog]

Juggleblood: Poggle described leveraging.

Tap is (probably) making up numbers. Tap, if you work in finance and know that this is what's going to happen, I apologize. You probably know more about the crisis than I do, then. But what I described about the tax rebate + marginal tax rate increase is true. It's written in the bill.

I've argued why I think the investment part of the stimulus bill (lol) is stupid, and why the tax cut is non-existent, so the only question that remains is whether or not the actual stimulus part of the stimulus is good.

It's directly tied to the questions I posed in the last post.

[quote:28mqsfeu]LOL.. always the same. Because I didn't support Obama, I must be a partisan hack. Do you know what that statement makes you? A partisan hack. Ironic isn't it. [/quote:28mqsfeu]
Weasel: http://en.wikipedia.org/wiki/Straw_man

[reboog]

[quote="Poggle":3s1q2n11]But what do they do with their bailouts? Sit on it, pretty much. Pay off their debts. And it makes sense. They don't want to repeat themselves by making a bunch more shitty loans.
[/quote:3s1q2n11]

We would also have accepted "pay themselves bonuses," "implode their balance sheets to ask for more bailouts," and "continue acting irresponsibly because the government has shown that they will bail us out."

[Weasel]

[quote="reboog":3uun4568][quote:3uun4568]LOL.. always the same. Because I didn't support Obama, I must be a partisan hack. Do you know what that statement makes you? A partisan hack. Ironic isn't it. [/quote:3uun4568]
Weasel: http://en.wikipedia.org/wiki/Straw_man[/quote:3uun4568]
LOL.. you [i:3uun4568]do[/i:3uun4568] realize you just did it yourself, don't you?
[color=black:3uun4568].[/color:3uun4568]

[reboog]

[quote="juggleblood":34ya7f3z]I don't know that the free market model is even the paradigm of success anymore. The countries that are expanding the fastest have centralized control over the economy and poor regulation is exactly what got us in this mess to begin with.[/quote:34ya7f3z]

I'm not sure what countries you're talking about. China is extremely capitalist, even if they don't want to admit it.

No country is healthy now economically. The Euro is crashing, Europe's banks are insolvent, US's banks are insolvent, Japan is spiraling into depression, and China is directly pegged to the US.

Also, communism/fascism doesn't work. Despite all the failures of free market, the alternatives are worse.

[Medios]

[quote="reboog":2r9ag6ue][quote="juggleblood":2r9ag6ue]I don't know that the free market model is even the paradigm of success anymore. The countries that are expanding the fastest have centralized control over the economy and poor regulation is exactly what got us in this mess to begin with.[/quote:2r9ag6ue]

I'm not sure what countries you're talking about. China is extremely capitalist, even if they don't want to admit it.

No country is healthy now economically. The Euro is crashing, Europe's banks are insolvent, US's banks are insolvent, Japan is spiraling into depression, and China is directly pegged to the US.

Also, communism/fascism doesn't work. Despite all the failures of free market, the alternatives are worse.[/quote:2r9ag6ue]

Rep

[*juggleblood*]

The 'capitalist' nature of China is debatable given that 90 percent of investment assets are held by state banks. They are moving towards privatizing it, but to me it seems obvious that the success of their economy is due to good government planning rather than 'the invisible hand of the market'. Capitalism there flourishes within the confines of state control over the economy. This seems to be the direction we headed under Bush when the government bought out the banks. Same deal with the government trying to rescue the auto industry. If the auto industry is allowed to die, it's not going to come back without serious government intervention.

To me, it seemed the neoconservatives (Republicans) were pushing classical economic theory, the idea that markets regulate themselves. I think this was/is an outdated notion and we're seeing a return to Keynesian economics which operates from the premise that hat private sector decisions sometimes lead to inefficient macroeconomic outcomes.

This is why we're seeing such an emphasis on stimulating demand. The Republicans are holding their ground and saying that we should just continue cutting taxes because taxes are holding back the potential of the free market. Personally I think they're doing it for political reasons, not because they still believe in outdated economic models.

[reboog]

I don't know enough about China to reply, only that I've heard that they are probably the most capitalist nation in the world. If I have time, I can try to substantiate some of those claims.

I don't like to drag politics into this. Republicans always talk about tax cuts. I don't know what the democratic panacea is, but I suspect it's equally based on belief and political ideology and not on fact. People in politics just stick to what their party says and worry about being popular, not about doing what's right.

[quote:nz74erdl]To me, it seemed the neoconservatives (Republicans) were pushing classical economic theory, the idea that markets regulate themselves. I think this was/is an outdated notion and we're seeing a return to Keynesian economics which operates from the premise that hat private sector decisions sometimes lead to inefficient macroeconomic outcomes. [/quote:nz74erdl]

Now this is a very interesting point. The trigger of the whole crisis was mortgages and their securitization. Government actually had a huge part in this, in promoting home ownership (subprime and alt-A) and lowering interest rates. In a healthy, non government interfered mortgage market, subprime and alt-A should never have left the ground. This topic is huge and should probably be dedicated in another post.

About the Keynesian part, you still have to answer those questions I posed.

[quote:nz74erdl]This is why we're seeing such an emphasis on stimulating demand. The Republicans are holding their ground and saying that we should just continue cutting taxes because taxes are holding back the potential of the free market. Personally I think they're doing it for political reasons, not because they still believe in outdated economic models.[/quote:nz74erdl]

I agree.

[jezer]

Taliban: You have two cows. You load them up with explosives and herd them onto your neighbor's property where you blow them up. Your neighbor dies. You starve to death.

Totalitarianism: You have two cows. The government takes them and denies they ever existed. Milk is banned.

Terrorism: You have two cows. You blow them up.

Socialism: You have two cows. The government takes both, hires you to take care of them, and sells you the milk.

Republican: You have two cows. Your neighbor has none. So what?

Mafia: You have two cows. The Mob kills one, leaves the head under your bedsheets, and makes you pay protection with milk from the other.

Luddits: You have two cows. You milk them by hand.

Fundamentalism: You have two cows. The government kills you for owning cows, confiscates your cows, and then kills everyone who suggests that the government should be killed for owning cows.

Fascism: You have two cows. The government takes the cows, shoot you and sell the milk to your widow.

Dictatorship: You have two cows. The government takes both and shoots you.

Democracy: You have two cows. A vote is held, the cows win.

Communism — Soviet: You have two cows. You count them and realize you have four cows.You drink more Vodka. You count the cows again and realize you have eleventy six cows. You drink even more Vodka. After a while, you realize that eleventy isn't a real number. You count the cows again and have two cows. You open another bottle of Vodka and try to drown the loss of eleventy four cows.

Anarchy: You have two cows. They run away.

Britain: You have two cows. They are crazy. You try to sell them in Europe.

Florida Corporation: You have a black cow and a brown cow. Everyone votes for the best looking one. Some of the people who like the brown one best vote for the black one. Some people vote for both. Some people vote for neither. Some people can't figure out how to vote at all. Finally, a bunch of guys from out-of-state tell you which is the best looking one.

French Corporation: You have two cows. You go on strike because you want three cows.

German Corporation: You have two cows. You reengineer them so they live for 100 years, eat once a month, and milk themselves.

Hong Kong Capitalism: You have two cows. You kill them because of bad feng shui.

Indian Corporation: You have two cows. You worship them.

Japanese: There are two cows left in the world. You kill one for scientific research on how to breed them. You conclude that the first one was rather tasty.

New Zealand: You have two sheep.

Australian Film Industry: Two New Zealand cows star in an award-winning film. They are granted Australian citizenship.

Art: You hire two cows to model nude. You paint a triangle and do an interpretave dance.

[url:nubpsg62]http://everything2.com/e2node/Two%2520cow%2520economics[/url:nubpsg62]