Jump to content
Sign in to follow this  
silatix

economy in crisis..

Recommended Posts

govinda:

The Ferguson article first appeared in the LA times last year. When started reading it I had similar reaction, but I read on and ended up filing it in the "waiting for more data" drawer. Then I read the Fed's paper and it made revisit Ferguson, as much as I hate to admit it. That paper clearly points out that there's no multiplier effect in the post war era, and that the introduction of money and credit into growth cycle theory is a problem.

 

What apparently happened with this crisis that caused much of it was that private actors created credit (such as standby letters of credit, which are off balance sheet items) on a massive scale and that very same private sector, which dwarfs the central banks, is now cutting back credit on a massive scale. Which is not to be confused with Krugman's "desired saving exceeds the amount businesses are willing to invest." Willing being the operative word here.

 

The private sector got itself into a precarious situation in which even the tiniest of moves adverse to its positions could be devastating. So it's not that they're not "willing" to invest, it's that they're forced to reduce their positions in order to stay alive. It's hard to invest when you're on the verge of insolvency. While Krugman is right in saying that the cut back in money flow is the problem, he fails to indicate that this not the same as Asian countries building up cash reserves. I like Krugman but he's writing for the NYT, a publication that like most of the American media, thought that liquity was the problem.

 

One fact that Ferguson has overlooked is that it's not Keynes, but Tobin who's providing the model. It's not just money, but how it relates to unemployment. Both Keynes and Tobin share similar views when it came to the government's role in that respect. The $800billion is not just a capital injection, there's plenty of incentives that are directed to specific areas that should translate into jobs. You mentioned how it is the states themselves that will recieve a big chunk of it. A fully employed labor force is a good recipe for GNP inflation, which in term will make US debt highly desirable. Jindall and Co. don't quite get it. Employment, not cash, is king.

 

One thing is absolutely sure, the savings rate has just skyrocketed. Maybe the banks don't need rescuing after all. Yeah right!

 

http://www.bea.gov/newsreleases/national/p...newsrelease.htm

 

http://www.icharts.net/portal//app?service...age=Chartdetail

 

Don't mean to leave on a sour note, but this is very interesting stuff from a sophisticated investors:

http://nymag.com/daily/intel/2009/02/we_ar...ltures_now.html

Share this post


Link to post
Share on other sites

Simply setting up public works programs by handing money over to states is not going to generate the kind of employment that is going to help solve this crisis. The basic premise of diverting and redistributing money is a flawed one at best and immoral at worst. The government doesn't have any money of its own so ANY money it spends is a redistribution of money extracted from some segment of its populace. Simply fabricating a job digging a ditch or laying some cable does not a strong economy make. Working to build America's infrastructure, while nice for the state projects, does nothing to increase or even address the wealth and savings of the nation. For each person that is hired to one of these projects there is someone else that already has work that is unable to build up their savings or get out of debt because their earnings is being diverted to the first individual. Much like a snake eating its own tail.

Share this post


Link to post
Share on other sites
Simply setting up public works programs by handing money over to states is not going to generate the kind of employment that is going to help solve this crisis. The basic premise of diverting and redistributing money is a flawed one at best and immoral at worst. The government doesn't have any money of its own so ANY money it spends is a redistribution of money extracted from some segment of its populace. Simply fabricating a job digging a ditch or laying some cable does not a strong economy make. Working to build America's infrastructure, while nice for the state projects, does nothing to increase or even address the wealth and savings of the nation. For each person that is hired to one of these projects there is someone else that already has work that is unable to build up their savings or get out of debt because their earnings is being diverted to the first individual. Much like a snake eating its own tail.

 

So what you're saying is that we should abolish paying taxes. That's realistic. Even if you slash the tax rate by half and put all those tax savings to pay off your debt, sounds like a good idea but there's a downside. The extra savings are not invested in machinery or production, so GDP would suffer as a result.

 

There's no proof that "redistribution" of money is flawed, it works. That's all a market economy is, a giant money redistribution system, if it were flawed the whole system would have collapsed ages ago. Government projects have paid tremendous dividends in the past. Was NASA a flawed idea? Is the Tennessee Valley Authority an immoral project? You're stuck on tactics while you should be taking a look at strategy. And were not talking about infrastructure as the only solution, it's just a cog in the wheel.

 

You dig a ditch to lay cable so a large communication companies can have a backbone and can lease access to a smaller ISP so it can provide internet services to thousands of customers. Digging ditches gives you the means to provide business a competitive platform to operate on, that's a way to strengthen an economy. That ISP needs to service its customers, the network needs to be maintained, and so on.

 

Earnings are pooled so that it can be spent on projects that require more resources than a private company is able or willing to dedicate. It work the same way as group insurance. It's not about spending money, but rather incentives and management. And given the current corporate situation, I can't say that the private sector is any better at managing its resources than the public sector.

 

The government has a regular income, thanks to all of us. So as a result the government has money.

Edited by robot0

Share this post


Link to post
Share on other sites

Nah, SaintEfan, it really is as simple as 'just spend.' When you inject money into the system, if people behave as you expect, they spend. That reinflates consumer demand. National economies are basically C+I+G-NE=GDP. Consumer Demand plus Investment (Savings) plus Government spending minus Net Exports equals Gross Domestic Product. Our economy is overwhelmingly made up of the C (Consumption). Right now, nobody is consuming. They're saving, hoarding against a possible storm. That displaces the way we've traditionally set up our economy, from WalMart to Crate & Barrel, and all the people employed in consumer products are basically fecked, as are the people who make those products. So if you employ a lot of people making a MagLev train from Anaheim to Vegas, those construction workers buy shit. The net result is you get an asset, a railroad, that serves a public good, because LV and LA are major metropolitan centers completely eligible for high speed rail.

 

Long-term, it'd be nice to be more I (Investment) based, like Singapore, China or Japan, but any quick change to get us that way would leave our institutions, from government to banking, in risk of collapse. We need to get back on our feet, and that means re-building the C. Keynes knew the way, and his tools are all we have right now. The Chicago school had a lot to say, but they went too far, and now we're back to John Maynard and his General Theory, only with better math than he had at his employ.

 

(Or basically picking up from where Robot0 ended.)

Share this post


Link to post
Share on other sites

@robot0 - When I referred to wealth, and resource, redistribution I meant to make a distinction between the "market economy" and top down state intervention. I agree that a market is a massive distribution mechanism. In a truly free market that is a healthy and expected function. A government program, package, plan, or scheme is not the same as the free market and its version of redistribution is not normal, healthy, or welcomed as compared to the free market. Trying to top down manage an economy is a fool's errand.

Based on what I said I don't think it's fair to attribute to me the view that we should just stop paying taxes all at once. You are right, however, to assume that I have some fundamental philosophical and constitutional concerns regarding taxation as we know it.

I never accused a specific public works program of being immoral, that's taking what I said a bit out of context. But I do see a basic flaw and, yes immorality, in diverting resources from productive sectors to unproductive ones simply to try to maintain a status quo that the market has clearly deemed unproductive and broken.

I think that the idea, the assumption, that the state has an implied claim to its citizens' earnings that it can choose to "pool" for what it deems as being the common good is one of the most immoral, unconstitutional, and outrageous concepts. I don't know what facet of the private sector you're referring to being less efficient than the public sector, but i it's the banks and the real estate markets then I think you need to take a closer look at just how "private" those were/are.

It's not hard to see why a public program has no motivation to be efficient. There is no such thing as profit to measure efficiency or productivity. There are usually no quantifiable criteria drawn-up to measure productivity. Without these measure in place budgets are inevitably going to be spent (even if it means waste) in order to ensure that the program will be given at least as much money in the next cycle. The fundamental difference is that in the private sector a program is rewarded for coming in under budget while the public sector programs are only rewarded with additional funding if they go over or completely spend their alloted budgets.

 

@Govinda - I really appreciate the clarity with which you explain your points. While I may not agree with you on some things I am always able to understand and trace the logic you're using in your posts. Thank you. I think that where we diverge on the economics of this situation is in the Keynes vs. Austrian schools of thought. I know that Keynes' approach is the most widely taught in and adhered to by contemporary economists, but I don't think that makes the theories, models, or tools that it proposes the right ones. The Austrian school of economic thought predicted this situation and is continuing to be predictive and informative. If the Keynsian tools and methods were as valid as proposed then we would have seen this situation coming and made the necessary Keynsian adjustments sooner.

I take some issue with the concept that what our economy has become now is the way America's economy has "traditionally" been. What we have now reflects an economy driven by, as you point out, spending and consumption. This spending and consumption, in order to keep going, must be fueled by debt because it's simply out paced anyone's earning ability. The attempt to keep this system afloat and to try to maintain prices on goods (ie houses) at the levels they are now is unrealistic and a stubborn denial of the market forces. Is it really such an awful thing to see housing prices return to reasonable levels? A house was never meant to be an investment, it is a place to live and that's it. As demand decreases then so to will prices. You're right that it will mean a squeeze on consumption based businesses like WalMart and Crate & Barrel, but in the end the market will shift, readjust, and those displaced from that sector will be acquired by another. It's not a pretty or easy process and it's not 'fair' in the sense that those people, individually, did anything wrong, but it's a necessary readjustment. It's unreasonable to think that every person who loses a job in an unproductive sector will spend the rest of their days jobless. The thing that will keep the job pool from shifting is government sponsored jobs-for-jobs-sake programs.

Edited by SaintEfan

Share this post


Link to post
Share on other sites
Right now, nobody is consuming. They're saving, hoarding against a possible storm.

 

Duh! You have an administration promising to enable the courts to write down the principal on troubled mortgages, but then beating up on the banks for not lending. You have an brain trust that promises to socialize healthcare, so that industry puckers in fear of impending price controls and who-knows-what regulations (where will the Canadians go for decent health care?). You have money thrown at ACORN described as creating jobs. Small businesses are targeted, with administration spokespeople saying "they don't create jobs." You have the first American Idol President using his cult of personality not to cheerlead the recovery, but to talk down the economy and foment even more doubt and uncertainty. Is it any wonder people are using what resources they have left to batten down the hatches, so to speak?

 

This whole thing is being so mismanaged that one could make the case that the Obamatons want to burn the whole thing to the ground, starting over with their liberal utopia. They have yet to do or say anything constructive that could contribute to a recovery. As Rahm Emanuel said, they can't "let a good crisis go to waste." It seems more like they want to push the yoke forward and get as much of their radical social re-engineering plan accomplished during the panic as possible, so they can change the nation irreversibly.

 

Cf

Share this post


Link to post
Share on other sites
Duh! You have an administration promising to enable the courts to write down the principal on troubled mortgages, but then beating up on the banks for not lending. You have an brain trust that promises to socialize healthcare, so that industry puckers in fear of impending price controls and who-knows-what regulations (where will the Canadians go for decent health care?). You have money thrown at ACORN described as creating jobs. Small businesses are targeted, with administration spokespeople saying "they don't create jobs." You have the first American Idol President using his cult of personality not to cheerlead the recovery, but to talk down the economy and foment even more doubt and uncertainty. Is it any wonder people are using what resources they have left to batten down the hatches, so to speak?

 

This whole thing is being so mismanaged that one could make the case that the Obamatons want to burn the whole thing to the ground, starting over with their liberal utopia. They have yet to do or say anything constructive that could contribute to a recovery. As Rahm Emanuel said, they can't "let a good crisis go to waste." It seems more like they want to push the yoke forward and get as much of their radical social re-engineering plan accomplished during the panic as possible, so they can change the nation irreversibly.

 

Cf

 

Here's the thing... in my mind there's an actual intellectual and rational discussion to be had over whether we can spend our way out of this mess or if we should let the system organically work itself out no matter how painful. But, once the argument includes words like "American Idol President" (that's a new one for me), "Obamatons", "liberal utopia", and of course the ever condescending "they"... it ceases to be a rational intellectual discussion and devolves into the kind of bullshit that works great on television but fails to really say anything of worth. If you can keep cable news politics out of it, there's actually a discussion to be had.

Share this post


Link to post
Share on other sites

Ok, Fred...I'll give you that. But strip aside any incendiary language, and my point remains that pumping federal dollars into a system where enough people fear the next federal policy, nationalization, tax increase, or whatever will NOT bring about recovery. Until we become a dictatorship you can't MAKE people spend their money. And until there is consumer and business confidence in the system and the government by which it's regulated, there will be no recovery. With that in mind, the motives and/or methods of the current administration start to look suspect.

 

Cf

 

(added) PS: I don't have cable :)

Edited by VelocityVideo

Share this post


Link to post
Share on other sites

this still remains my go-to thread every day on mograph.net

 

Who knew we had so many budding economists, and all sides are represented, even. should we just break off and form our own well rounded country? United State Of Amerigraph?

Share this post


Link to post
Share on other sites

SaintEfan,

Currently, the private sector is unable to finance itself because the model that fueled the growth of the last 15 years has, as Volcker put it, "failed the test of the market." The net return the most efficient finance system ever devised is red, and could be blood red if not careful.

 

The system under which the markets operate is broken. According to you, government should not try to help fix it and should let it collapse. Well, congress thought so too, and in a matter of hours 401k's got reduced to rubble and the credit crisis manifested itself. They forgot that financial markets where directly responsible for economic growth, to let markets collapse would mean to let the economy collapse.

 

Why should profit be the focus when dealing with peoples lives? Is money more important that the well being of human beings? How is that a moral stance? Money is a tool, not a way of life.

 

How are banks public sector entities? Tax monies do not fund their operating budgets.

 

Our healthcare system is extremely inefficient, it's one of the most wasteful on earth. The power grid is also outdated. There's more fiber optic cable buried than there's need for. There's plenty of examples that point out that the notion that private = efficient and better managed is a myth. There's a lot of incentives for private entities to be efficient, but that doesn't give them defacto efficiency. Good and poor management can very well exist in the public sphere as much as it does in the private one.

 

I'm sure you would agree that levying of taxes is a necessity, and the constitution grants such powers. In a representative republic administrative powers are granted when a representative is elected. By virtue of such powers elected officials, as a whole, have an inherent administrative claim to tax revenue. It maybe the citizen's money and therefore the country's, but the actual distribution of those fund is delegated to the representatives. I'm not sure where the unconstitutionality of it lies. Is it flawed? Sure it is. Can citizens benefit from it? You betcha.

 

Let's take a look at another example of tax money redistribution for the public good. In the case of higher education, tax dollars are being redistributed to public institutions, they in turn provide training to a larger segment of the population than private institutions are able to. Grants are awarded to fund r&d projects, some are joint projects with either specific companies or business sector consortia. In the end citizens are able to reap the benefits of such redistribution, and the private sector gets an elite labor force and a competitive edge.

 

You may have a disdain for the idea of your tax dollars being pooled and spent for the common good, but you cannot deny that the idea pays dividends and furthers society.

 

No one is talking about experimenting with a command economy. Simply using government resources as a stabilizing force when the private sector has clearly lost control of the situation. In an oversimplified way, it's much like ABS brake systems in cars, it only comes on when you locked up your wheels and lost control of your vehicle. At no point does the brake assist takes total control of your vehicle, it's purpose is to help you regain traction.

Share this post


Link to post
Share on other sites

I swear, Krugman is reading mograph.net. His quick hitter today explains a lot:

 

http://krugman.blogs.nytimes.com/2009/03/0...sion-economics/

 

What he means by 't's the zero lower bound, stupid' is that there's no room to drop that Treasury rate, which would be a good stimulant if it was possible. It's not. The rate is very close to zero. That's the bullet Greenspan shot earlier in the decade, as said earlier in this thread. There are no more bullets in that gun, so the only weapon left is for the government to spend. The focus on this mograph.net page we're on right now is, 'will that tool work?' Undoubtedly, yes, to some degree, but even though some jobs are starting to come around now (60 jobs yesterday, hold the phone!), the spending / stimulus takes 18 months to have full effect, so there's a lot of pain until then.

 

If you're not feeling the pain like you thought you might, it's because this recession is different. It's a blue-collar recession. Other recessions had white-collar professionals losing their jobs...people like us in other words.

Unlike the last two recessions — earlier this decade and in the early 1990s — this one is causing much more job loss among the less educated than among college graduates. Those earlier recessions introduced the country to the concept of mass white-collar layoffs. The brunt of the layoffs in this recession is falling on construction workers, hotel workers, retail workers and others without a four-year degree.

http://www.nytimes.com/2009/03/04/business/04leonhardt.html

Yeah, that makes me feel better—a lot better, but you have to feel for those people worst-hit. At least for now they're the worst-hit.

Share this post


Link to post
Share on other sites

To say that the private sector is unable to finance itself is a bit of a distortion. What we're talking about here is not a complete failure of the entire private sector and the free market. We're talking about a specific area of the private sphere. An area, historically, fraught with heavy government participation. I'm not denying the fact that businesses can be run poorly and inefficiently. What I take issue with is the concept that said inefficient, poorly run, business cannot be allowed to fail. If a bank fails is there going to be large problems? Yes there are. WIll people lose money? Yes they will. Will the world as we know it come to an end? No. If a business, no matter ho large fails, then there will be problems but ultimately, with time, the market will absorb that loss and keep moving forward. To try desperately to prop up a dead or dying business is an invitation to failure and a waste of resources.

 

The credit crisis did not manifest itself because of congress' unwillingness to meddle. The credit crisis has been an inevitability for quite some time and the real estate bubble/crisis was formed precisely BECAUSE of the federal governments interventions.

 

I don't recall saying that profit was the focus when dealing with people's lives. If that was the inference you made then I think you misunderstood what I was saying. Or perhaps that wasn't directed at me? What I did say about profit is that it is a good indicator by which a private enterprise can measure it's success. A non-for-profit is a distinction that we make because actual businesses use this as a measure. In contrast I was pointing out that the public sector lacks many of the quantifiable tools to measure the relative success or failures of its programs.

I also don't recall saying that money was more important than human beings and I think that your tone and implications on this point are rather unfair.

You seem rather hung-up on my use of the words moral, immoral, and morality. I applied those terms to very specific things, but I will avoid the morality issue in the future as it seems to causing both confusion and consternation.

 

When I was referring to banks being not entirely private what I was referring to was their relationships with the Federal Reserve, Freddie Mac, and Fannie May. Despite the fact that the Federal reserve is un-auditable by congress, and by extension the American people, it is still a public organization. I don't know of any other supposedly private business that can borrow money, have loans guaranteed by, or generally deal so closely with a federal organization like the banks can. People often point to the bank/mortgage fiasco and say that it is "a failure of capitalism" or "a failure of the free market" while entirely ignoring the governments guilty role in the whole mess. The banks did not do this on their own.

 

I'm glad you mention the healthcare system. HMOs are another fantastic example of the federal government's wonderful track record with setting up efficient and productive additions to, what was once, a private sector. Energy distribution is yet another example of a supposedly "private" enterprise with strong government support for their monopolies.

 

I agree that in order to fund government programs taxes must be extracted. That's just logical regardless of my opinions on the matter. No money no programs. I do not concede that the constitution itself grants such authority, however. What I take serious issue with is the implication that my government owns me and the fruits of my labors. There was a time, before fairly serious tax revolts, that taxes were being assessed on individual pieces of property within a house (ie furniture). It sounds ridiculous to us today, but what caused it was a broke government. If we accept that the government has an inherent claim to our money and personal property then we accept that when it gets desperate, due to mismanagement and flaws, it can take from us whatever it claims is necessary for the common good.

It's a slippery slope.

 

A command economy is exactly what I'm hearing from our government's plans. Bandying about ideas like buying up private businesses' toxic assets or becoming a part owner of a business or entirely running a business is not ABS that is taking complete command.

Once we were over the hump they would, at the very least, leave behind an occupying, peacekeeping, force to make sure things continued to run smoothly. ;)

Edited by SaintEfan

Share this post


Link to post
Share on other sites

I just wanted to thank everyone on Mograph.net for providing a place to have such intelligent and respectful discussion about everything from motion design to economics. I'm continually impressed by the calibre of people involved in this community.

What do you suppose this would have deteriorated into on cgtalk or the cow?

Share this post


Link to post
Share on other sites
I just wanted to thank everyone on Mograph.net for providing a place to have such intelligent and respectful discussion about everything from motion design to economics. I'm continually impressed by the calibre of people involved in this community.

What do you suppose this would have deteriorated into on cgtalk or the cow?

 

"My mortgage payment just tripled! Help! I don't know how to make my payment! Is there a tutorial online???? Also I saw this really cool place on Cribs last night on Mtv, does anybody know how they pay for that? Is there a free plug-in?"

 

Cf

Share this post


Link to post
Share on other sites
I do not concede that the constitution itself grants such authority

 

The US constitution makes such powers explicit in what is known as the tax and spend clause.

Sect. 8 Clause. 1. "The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States..."

 

The 16th ammendment gives congress the power to levy an income tax.

"The Congress shall have power to lay and collect taxes on income, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

 

Despite the fact that the Federal reserve is un-auditable by congress, and by extension the American people, it is still a public organization

 

In Lewis v The United States (1982) the courts rule that the Federal Reserve is a private institution.

"Federal reserve banks are not federal instrumentalities for purposes of a Federal Tort Claims Act, but are independent, privately owned and locally controlled corporations in light of fact that direct supervision and control of each bank is exercised by board of directors, federal reserve banks, though heavily regulated, are locally controlled by their member banks, banks are listed neither as "wholly owned" government corporations nor as "mixed ownership" corporations; federal reserve banks receive no appropriated funds from Congress and the banks are empowered to sue and be sued in their own names. . . ."

 

To be precise the Federal Reserve is made up of a group of very astute traders in treasuries. They also happen to be the market maker in treasuries thanks in part to their access to inside information(like employment data) and they trade based on that information.

 

The Federal Reserve is unauditable by congress because it receives no funds from congress. Edward Griffin's book Creature from Jeckyll Island gives you a good idea of how the Fed got created.

 

HMOs are another fantastic example of the federal government's wonderful track record with setting up efficient and productive additions to, what was once, a private sector.

 

A private insurance system is inherently ineffective for several reasons, one of which is an asymmetrical information problem or adverse selection. Joseph Stiglitz won the Nobel prize in 2001 for his work on the very subject of health insurance and adverse selection. He shared the award with George Arkalof and Michael Spence. Together the came up with a model that predicts that a private(market based) insurance system would result in partial coverage, inefficiency, and high cost. And that's exactly what we have in this country.

 

Healthcare cost per person in the US is 33% higher that the nearest country(Switzerland) and 2x more than European countries. It is estimated that some 90 million people lack health insurance, that's roughly 1/3 of the population under 65. In Germany that number is .2%. It is also highly beauraucratic, private makes up the bulk of it, with administrative cost around $100,000 per person. That figure includes Taxes, premiums and out of pocket cost.

 

Healthcare is usually bundled with a job, which reduces efficiency of the labor markets. Many people are reluctant to switch job before lining another up, in fear of lost coverage. The high cost of bridging the information gap wastes a lot or resources, and the act of choosing coverage is made by HR personnel that most often than not chooses the coverage that best fits his/her/departmental needs. People don't end up with what they need, coverage or treatment wise, because some else has chosen it for them.

 

These inadequacies are not a result of government action, but a systemic flaw in the information flow. In other words insurance companies find it very difficult, if not impossible, to correctly price an insurance policy based on available information, that creates a coverage gap and diverts a lot of resources to finding out screening information. In the case of health insurance, a market based approach is not the best solution. Free markets expose truths and sometimes that truth is its own limitations.

 

To say that the private sector is unable to finance itself is a bit of a distortion.

 

No it's not. Credit is the most widely use funding instrument in the private sphere. Credit cut backs are massive, the majority of those reliant on credit flow are finding it very hard to access funds through those channels. Most companies credit ratings have also been downgraded, which means that it would be harder for them to issue commercial paper as well. Contraction in credit flow = GDP deflation. That's an inability to finance growth, and no distortion.

 

 

Will the world as we know it come to an end? No.

 

It won't be the apocalypse, but a collapse of the worlds financial system would lead to social unrest, violent social unrest. Hitler rose to power thanks to a collapse in the German economy. The whole system is tightly interconnected, if one bank goes all of them go. The failure of Lehman resulted in the near failure of AIG. If AIG had been allowed to fail, it would have brought other banks with it, and the whole system would have collapse very very fast. It is the speed factor that is the most damaging to society. The 1930's is a good reminder of why we can't let something of that magnitude happen. There's plenty of fascist pigs out there that would love to take advantage of a similar situation.

 

with time, the market will absorb that loss and keep moving forward.

 

That's quite a reach, outstanding CDS' alone are estimated to be in excess of 58 trillion USD. Big banks own about 150 trillion USD in derivatives, and that just a fraction of what's out there. The GDP of the entire world is around 50 trillion USD. The collective wealth of the world's population is about 100 trillion USD. If banks are allowed to fail, that would trigger a wave of margin calls and insolvencies. The size of the derivatives bubble is mindboggling, to describe it you would need the same math used in astrophysics. How many miles in a million light years? Don't kid yourself, this is not something that markets can just absorb, if this bubble were to burst it would leave a huge black hole that would suck up massive amounts of cash on all directions. This scenario is what is known as the end game, a mad runaway deflationary period. Bernanke is very well aware of this fact, this is what happened during the Great Depression, which is his area of expertise.

 

The credit crisis did not manifest itself because of congress' unwillingness to meddle.

 

Sure it did. The manifestation of the problem doesn't mean it magically appears, it just means that the symtoms become apparent. And it so happens that credit markets froze soon after congress rejected the bail out.

 

It's like an HIV+ person. He/she can lead a perfectly good life being HIV+, but the risk is there. AIDS manifest itself only when that person start to develop symtoms of the illness.

 

In contrast I was pointing out that the public sector lacks many of the quantifiable tools to measure the relative success or failures of its programs.

 

The government is a major consumer of statistics. And that what's use to quantify performance. Public sector works deal with the welfare of the country, and the metrics used deal with the welfare of the citizens. If a drop in dunk driving fatalities/arrest is statistically significant over a period of time, and if that period of time also coincides with a program designed to do exactly that, you could claim that the program is influencing the results in a significant way. There's also other studies conducted in conjunction that would further solidify the claim. My point is that it is possible to quantify public sector success.

Share this post


Link to post
Share on other sites

I will try to stay on topic. Keeping my discussion to the "economy in crisis...". Though many of the other topics that arise naturally are important, related, and especially important to issues of freedom it could sometimes go beyond the strict scope of the "economy" proper.

 

The Federal Reserve is a rather insidious institution. I agree with you that by writ of law the Federal Reserve is considered a private enterprise. However it's actions and its relationship with the federal government is not the type of relationship that one would expect form a supposedly private organization. To begin with the chariman of the Fed is appointed by the president of the United States. The FEDERAL Reserve, despite its status as a private bank, has full control of the United States' money supply, the printing of new currency and the manipulation of interest. Assuming that this is a private organization, as it purports to be, then it, and the state, are guilty of perpetuating a government sponsored monopoly. There is no other private organization that could exist to compete with the Federal Reserve in its role. This isn't even taking into account, yet, the fact that a, quasi, private organization has the power of the printing press!

Article I Section 8:

"The Congress shall have Power...To coin Money, regulate the Value thereof..."

The Federal Reserve is an unconstitutional institution. There is no place in the Constitution that grants Congress, or any other branch of the government, the power to delegate the responsibility of currency to a private organization. If we are to assume that the Federal Reserve is lawful and constitutional then we must assume that A) Congress had the power to delegate this role to the Federal Reserve and that B) the Federal Reserve is thus answerable to Congress which, as you pointed out to me previously, it is not and that C) printing Federal Reserve notes (paper money) is the same thing as coining currency. (Article 1, Section 10 says:

“No State shall, ... make any Thing but gold and silver Coin a Tender in payment of Debts; ...”)

 

I'm not sure I understand your reply in regards to Congresses' role in precipitating the crisis through inaction.

 

To assume that the entire private sector is unable to fund itself is to assume that all capital and credit are one and the same, that all private enterprises making up the private sector (market) are credit/debt driven and that this is the natural state of a free market rather than the result of an artificial credit bubble.

 

How did we get to a point in history where we genuinely think that borrowed money (debt) is a perfectly healthy form of capital and that this is how it's always been and will always be? If much of the private sector were not dependent on borrowing how could a bubble like this form and how would that be a bad thing?

 

I don't disagree that it's theoretically possible to measure success of a non-profit-driven program. I was trying to point out how, when it comes to public program funding, there is little motivation to run a program under-budget, thus efficiently. Spend every penny or lose it is usually the mantra of public programs (university departments run the same way too, much to their fundraiser's chagrin). With a perspective like this there's almost no conceivable way that a budget can be truly balanced, adhered to, or even slashed.

Edited by SaintEfan

Share this post


Link to post
Share on other sites

Just adding some fuel to the fire here, thought this was an interesting survey:

 

993-1.gif

 

A few things that are interesting to me here:

- Colbert and The Daily Show are pretty darn high

- Hannity & Colmes is near the top, but fox news is near the bottom

- ESPN beat out CNN and Fox

- Local TV, If you're interested in apartment fires and car chases, you're not going to learn much about the rest of the world

 

This survey tries to establish what news organization informs the best, but I think people just flock to different sources based on their level of political interest. I don't think this is in any way an indication of intelligence though. The only source here that doesn't target a 6th grade reading comprehension is The New Yorker.

Share this post


Link to post
Share on other sites
I will try to stay on topic. Keeping my discussion to the "economy in crisis...". Though many of the other topics that arise naturally are important, related, and especially important to issues of freedom it could sometimes go beyond the strict scope of the "economy" proper.

 

The Federal Reserve is a rather insidious institution. I agree with you that by writ of law the Federal Reserve is considered a private enterprise. However it's actions and its relationship with the federal government is not the type of relationship that one would expect form a supposedly private organization. To begin with the chariman of the Fed is appointed by the president of the United States. The FEDERAL Reserve, despite its status as a private bank, has full control of the United States' money supply, the printing of new currency and the manipulation of interest. Assuming that this is a private organization, as it purports to be, then it, and the state, are guilty of perpetuating a government sponsored monopoly. There is no other private organization that could exist to compete with the Federal Reserve in its role. This isn't even taking into account, yet, the fact that a, quasi, private organization has the power of the printing press!

Article I Section 8:

"The Congress shall have Power...To coin Money, regulate the Value thereof..."

The Federal Reserve is an unconstitutional institution. There is no place in the Constitution that grants Congress, or any other branch of the government, the power to delegate the responsibility of currency to a private organization. If we are to assume that the Federal Reserve is lawful and constitutional then we must assume that A) Congress had the power to delegate this role to the Federal Reserve and that B) the Federal Reserve is thus answerable to Congress which, as you pointed out to me previously, it is not and that C) printing Federal Reserve notes (paper money) is the same thing as coining currency. (Article 1, Section 10 says:

“No State shall, ... make any Thing but gold and silver Coin a Tender in payment of Debts; ...”)

 

I'm not sure I understand your reply in regards to Congresses' role in precipitating the crisis through inaction.

 

To assume that the entire private sector is unable to fund itself is to assume that all capital and credit are one and the same, that all private enterprises making up the private sector (market) are credit/debt driven and that this is the natural state of a free market rather than the result of an artificial credit bubble.

 

How did we get to a point in history where we genuinely think that borrowed money (debt) is a perfectly healthy form of capital and that this is how it's always been and will always be? If much of the private sector were not dependent on borrowing how could a bubble like this form and how would that be a bad thing?

 

I don't disagree that it's theoretically possible to measure success of a non-profit-driven program. I was trying to point out how, when it comes to public program funding, there is little motivation to run a program under-budget, thus efficiently. Spend every penny or lose it is usually the mantra of public programs (university departments run the same way too, much to their fundraiser's chagrin). With a perspective like this there's almost no conceivable way that a budget can be truly balanced, adhered to, or even slashed.

 

+100

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  

×
×
  • Create New...