Zesty Wrote: ------------------------------------------------------- > This is a incomplete argument going on behind the > econo-wonks on this board. Any conversation that > relates to economics but fails to take into > account behavior and psychology is lacking. The > additional question we need to be asking is this: > > 1. What could have been done to fundamentally > change the psychological perceptions of consumers > and businesses such that consumers would start > spending again and businesses would believe that > future growth is eminent? > > This is where I think Chinese propaganda really > comes in handy, lol. Zesty I actually agree with you for once haha. “Animal spirits” are a huge part of the problem and some sort of growth propaganda might actually get people to open their wallets again. That’s from an economics and social planning perspective though - from a moral and ethical standpoint it would be sub-optimal. I’m all for “free” and “open” markets to the extent that they can work.
mar350 Wrote: ------------------------------------------------------- > there are a lot of good people out there who are > eager and ready to work who are simply waiting for > the govt to get out of the way. Worst post of the day. Ha, yeah, seriously it’s government policies that are preventing people from going back to work. That’s a knee slapper.
NakedPuts Wrote: ------------------------------------------------------- > > Worst post of the day. Ha, yeah, seriously it’s > government policies that are preventing people > from going back to work. That’s a knee slapper. I think one thing the great recession taught us is that there were a lot of people in unnecessary jobs. Companies cut staff to reduce costs while demand was down and they have discovered that they are able to meet renewed demand without hiring back a lot of those folks. Unfortunately, that means that unemployment will stay high for a long time.
Yes, I think higgimond is right. It was easy to employ people when it was easy to get people to go into debt to fund consumption. In that environment, the fastest way to short term profits is to increase turnover, and so productivity took a back seat. Now we can’t fund consumption that way, and so a lot of those people turn out to be unnecessary.
NakedPuts Wrote: ------------------------------------------------------- > mar350 Wrote: > -------------------------------------------------- > ----- > > there are a lot of good people out there who > are > > eager and ready to work who are simply waiting > for > > the govt to get out of the way. > > Worst post of the day. Ha, yeah, seriously it’s > government policies that are preventing people > from going back to work. That’s a knee slapper. Actually he is right in some regard. Govt. is crowding out business in many sectors.
bchadwick Wrote: ------------------------------------------------------- > Now we can’t fund consumption that way, and so a > lot of those people turn out to be unnecessary. just like post office employees funny how that worked out, NakedPuts. they can’t figure out how to keep people employed on either side of the fence.
CFABLACKBELT Wrote: ------------------------------------------------------- > NakedPuts Wrote: > -------------------------------------------------- > ----- > > mar350 Wrote: > > > -------------------------------------------------- > > > ----- > > > there are a lot of good people out there who > > are > > > eager and ready to work who are simply > waiting > > for > > > the govt to get out of the way. > > > > Worst post of the day. Ha, yeah, seriously > it’s > > government policies that are preventing people > > from going back to work. That’s a knee > slapper. > > Actually he is right in some regard. Govt. is > crowding out business in many sectors. I’m not sure I follow you. Which sectors are you talking about?
CFABLACKBELT Wrote: ------------------------------------------------------- > NakedPuts Wrote: > -------------------------------------------------- > ----- > > mar350 Wrote: > > > -------------------------------------------------- > > > ----- > > > there are a lot of good people out there who > > are > > > eager and ready to work who are simply > waiting > > for > > > the govt to get out of the way. > > > > Worst post of the day. Ha, yeah, seriously > it’s > > government policies that are preventing people > > from going back to work. That’s a knee > slapper. > > Actually he is right in some regard. Govt. is > crowding out business in many sectors. Total government employment (federal + state + local) is down 500,000 since Obama came into office. The only thing the government is crowding out is other unemployed people.
higgmond Wrote: ------------------------------------------------------- > I think one thing the great recession taught us is > that there were a lot of people in unnecessary > jobs. Companies cut staff to reduce costs while > demand was down and they have discovered that they > are able to meet renewed demand without hiring > back a lot of those folks. Unfortunately, that > means that unemployment will stay high for a long > time. How are you defining an “unnecessary job”? At an extreme, all jobs are unnecessary as the world would undoubtedly go on without us if we went back to subsistence farming with no engineers, doctors, economists, lawyers, etc. Whether a job/project/item is or creates value or not is determined by whether someone is willing to spend marginal dollars on it. When no one is spending in a recession/credit crunch there is no way to determine what additional activities could be added to the economy that create value. So many small businesses go under that would otherwise survive in a “normal” environment. Productivity improvement is in general a good thing, but we need economic growth to come at the margin from productivity improvements, rather than from a starting point of already having excess capacity. Right now the benefits of productivity improvements are going to companies and shareholders through higher profit margins (a bigger slice of the pie goes to the wealthy) rather than to society at large through higher wages and better standards of living (the overall pie gets bigger). You can argue whether this is a good or bad thing from a distribution of wealth standpoint, but from a capitalistic standpoint I personally think it is unequivocally bad as it encourages “rent-seeking” behavior rather than fostering market competition.
the show NY Wrote: ------------------------------------------------------- > looking for serious answers please Seriously. Did it succeed? Yes, in some area, such as prevented some sharp economic pains. Did it fail? Sure, we spent so much money but the unemployment is still so high and the housing market is still in limbo. These type of government’s intervention in the economy is fundamentally flawed in two folds: 1) It creates an unnecessary uncertainty factor for business decision makers. E.g. instead of forecasting supply and demand, a business owner has to consider if his healthcare cost will go up 2 years from now due to the healthcare reform or his payroll tax break won’t be renewed next year. etc. 2) It also creates a huge moral hazard among economic/market participants. Take Lehman for example. It had such an impact to the marketplace because most people expected government/fed will rescue via some deal it as they did to Bear Stearns. Had the government let Bear Stearns fail, the impact by Lehman may be much smaller. It may never even file BK. Again, please don’t put a joke in the subject line next time, please.
AlphaSeeker Wrote: ------------------------------------------------------- > Had the government let Bear Stearns fail, the > impact by Lehman may be much smaller. It may never > even file BK. Trying to wrap my head around this. I’m assuming you’ve got at least a somewhat plausible reason why a BSC BK wouldn’t have produced the same type of(likely worse, because we wouldn’t have been ready for it) contagion as compared to the LEH BK.
^ For a couple reasons; 1) Bear was about $390bn assets at the time of sale, LEH was $700bn. LEH is much intertwined with other parts of the economy than BSC. 2) More importantly Bear was somewhat rescued at $10/share. Moral hazard led most peple to think it’s impossible to let LEH fail when the govenment rescued a firm alomost 1/2 of its size 6 months earlier. These are well documented or commented on. If you read Hank Paulson’s book, he even said pretty much #2 above. The market was not prepared for LEH at all.
So if I understand you correctly you are saying that letting both Bear Sterns and Lehman fail would have been better than either 1) letting only Lehman fail or 2) rescuing both? I think we tried that approach in the 1930s and the banking system collapsed and we had a depression right? Also, would not letting Bear Sterns fail have caused a run on other financial institutions and resulted in Lehman failing faster? I’m definitely struggling with this concept. No disagreement that moral hazard is a problem but is the best solution really pushing the “reset” button on modern society and letting contagion take hold?
Dwight Wrote: ------------------------------------------------------- > So if I understand you correctly you are saying > that letting both Bear Sterns and Lehman fail > would have been better than either 1) letting only > Lehman fail or 2) rescuing both? If we let Bear fail, Lehman may never fail because people would have aggressively dialed back their expectation and lowered their moral hazard Keep in mind, Lehman is only a $700bn firm at failing. But global capital markets lost $10+ trilion value at one point. It’s the shocking surprise that caught people off guard. why were they surprised? Because they thought the Fed/gov will somehow resecue LEH after they have rescue a firm 1/2 its size a few months earlier. Furthermore, if the market didn’t anticipate any government rescue on any financial firms to begin with, people would taken much less risk with Bear, Lehman, etc. We may never have a Bear Sterns probelm. It goes back to LTCM, Savings and Loans before that… etc. Moral hazard has been around for a long time. The funny part is that the rescuers (the governements) are pretty much in trouble now. Who is going to rescue them?
please excuse my typos. I generally don’t spell check or proof read my writing here.
So what’s up with the Home Affordable Mortgage Program (HAMP)? This is one of the biggest wastes of government (ie, our) money. Hundreds of millions perhaps billions of dollars given to banks and mortgage companies with no oversight. These companies give consumers the runaround before finally denying any assistance and then they foreclose. What’s the point? Where’s the money? Home values continue to drop, new construction is at a standstill because there are too many existing homes at bargain prices. Yet, fewer people can qualify for new mortgages because the requirements are stricter. All in all, this is a bad program with no upside. Something doesn’t make sense and the American people are not getting the whole story.
AlphaSeeker Wrote: ------------------------------------------------------- > Dwight Wrote: > -------------------------------------------------- > ----- > > So if I understand you correctly you are saying > > that letting both Bear Sterns and Lehman fail > > would have been better than either 1) letting > only > > Lehman fail or 2) rescuing both? > > If we let Bear fail, Lehman may never fail because > people would have aggressively dialed back their > expectation and lowered their moral hazard > > Keep in mind, Lehman is only a $700bn firm at > failing. But global capital markets lost $10+ > trilion value at one point. > > It’s the shocking surprise that caught people off > guard. > > why were they surprised? Because they thought the > Fed/gov will somehow resecue LEH after they have > rescue a firm 1/2 its size a few months earlier. > > Furthermore, if the market didn’t anticipate any > government rescue on any financial firms to begin > with, people would taken much less risk with Bear, > Lehman, etc. We may never have a Bear Sterns > probelm. > > It goes back to LTCM, Savings and Loans before > that… etc. > > Moral hazard has been around for a long time. > > The funny part is that the rescuers (the > governements) are pretty much in trouble now. > > Who is going to rescue them? I question your grasp on reality. BSC goes under, the rest of the system goes with it. At the time LEH went under, we had already bailed out Fannie and Freddie. BSC could easily have taken out FNM, FRE, AIG, maybe even MER or MS. BSC may not have been as large, but they were every bit as interconnected. You seem to be in denial that TBTF firms exist. You are free to lament their existence, but you cannot deny their existence. Markets crashed on LEH not because they didn’t expect it (heII Einhorn was on freaking CNBC saying it was going BK months ahead of time, the stock was already down to pocket change) but because of the massive uncertainty created by an event like that. BSC would have been no different.
I don’t think our disucssion are going anywhere as you and like see things from totally different angles. In our own eyes, we both are right ourselves. That said. What do you think of the Aug 2nd deadline? Is it for real? Or someone miscalculated/overstated it?
this discussion is fine, but no one has answered the first question. if you disagree that stimulus spending was the correct course of action in january 2009, what would you as president have advocated for instead?
What could we have done? Well, we could have used 2008 as an opportunity to fix the long term structural problems facing the US. We could have let capitalism run its course and help wind down TBTF institutions instead of making them bigger. We could have elminated Fannie and Freddy, along with the mortage interest tax deduction, allowing housing prices to fall to a natural level. We could have let wildly underfunded DB plans to fail and forced large corporations and local/state/federal programs into the 21st century. We could have actually fixed our Trillion dollar infrastructure problems. Entitlements, defense spending, free trade, blah blah blah. Yes, it would have hurt, almost certainly resulted in much higher unemployment, and a deeper depression. But, we would have come out stronger and perhaps entered into a secular bull market. Instead we stuck our heads in the sand, printed money, wrote new regulations, farked up the housing market even more with a tax credit, and destroyed the dollar. Now we barely tread water and face many of the same problems that got us here and new ones to boot. So, no, I don’t think it worked.