patrick.net

bob2356 says

thunderlips11 says

What you're advocating is Socialism for the Wealthy.

It's only called welfare if government money is going to poor people. If government money goes to rich people it's called investment. They would never blow it on mansions, yachts, and lobbying for more government money.

Yep.

And fucking up on such a Global scale to a huge degree, then demanding to be completely sheltered from all ill effects and make everybody pay (no matter what the cost to themselves) to make you whole again, even steven to where you were before, simply because "I'm so special and irreplacable" is not a deeply-entrenched sense of entitlement.

darlag says

indigenous says

The solution is NO bailouts to mark to market, and let the market figure it out.

"Indeed, a major source of objection to a free economy is precisely

that... it gives people what they want instead of what a particular

group thinks they ought to want. Underlying most arguments against

the free market is a lack of belief in freedom itself."

-Milton Friedman

Good old uncle Miltie... Ooops wrong one! But he may as well be the comedian, because it's not quite clear how he gets taken seriously...

indigenous says

The banking industry is problematic because of the centralization that has taken place since the 80s. Of which of course the CRA was a contributing factor.

This is all part of my, no thread without a mention of the CRA, policy

It was the banking industry and their political hacks that lobbied for deregulation. Robert Rubin, Larry Summers pushed for the passage of the Gramm Leach Bliley Act that effectively lessened the regulations and allowed banks to become TBTF. The CRA was a little chunk that they conceded on due to pressure on Clinton from Jesse Jackson.

Diva24 says

indigenous says

The banking industry is problematic because of the centralization that has taken place since the 80s. Of which of course the CRA was a contributing factor.

This is all part of my, no thread without a mention of the CRA, policy

It was the banking industry and their political hacks that lobbied for deregulation. Robert Rubin, Larry Summers pushed for the passage of the Gramm Leach Bliley Act that effectively lessened the regulations and allowed banks to become TBTF. The CRA was a little chunk that they conceded on due to pressure on Clinton from Jesse Jackson.

Irrelevant to what I'm talking about. The CRA part was a joke for the most part, even though it did contribute to bad loans above the sub prime.

The overarching problem is the centralizing of banking and the bullshit Fed approval process. That has been going on since the 80s.

One big giveaway to the 'wealthy' is letting them dig up this nation's nonrenewable natural resources and then sell all that to us.

Actually, bigger than that is all the land titles the government handed out, especially all that land in the 19th century that concentrated in so very few hands.

And bigger than rural land holdings is urban housing empires; the expense renters pay these days is not primarily the cost of the sticks and bricks (or management thereof), it is the cost of keeping the 2nd bidder from taking over the tenancy.

Imagine if we had to pay the man for every breath of air we took. The land market isn't any different, millions of rich people getting something for nothing via their land monopoly.

"Nobody gets this." -- Perhaps it's best if they didn't, LOL

real annual per-capita housing expense

thunderlips11 says

You don't blame the cough symptom (home flippers) for the lung cancer (housing bubble), but the smoking (banker-pushed deregulation and weakening of oversight).

Who was corrupting politicians: Realtors, Builders, Banksters, Flippers, Voters who like their home equity... i.e. a majority of people. Politicians also do things if they see a short term interest, a short term boost in economic activity, which they did. Bottom-line everyone contributed to the problem at their own level and it's just a tiny bit too convenient to say "the bankster made me signed this no interest stated income loan" and encouraged me to lie.

thunderlips11 says

Regional banks that weren't run like shit would be the beneficaries of picking up good assets at low prices, pumping them up to National or International status. There would have been a lousy few quarters of hardship, and that would have been it. 35% Unemployment? No way.

No offense but it's a bit naive. One big bank fails and the financial system would be wiped out. Credit would freeze everywhere: money markets, intra bank lending, day to day lending to companies, etc... Most banks would fail and those remaining would be so suspicious that they would make loans only to people sitting on golden collaterals. The lack of lending would mean economic devastation. Companies would fail everywhere. There would absolutely be 35% unemployment in a country like Spain that had 18% unemployment in 1995 BEFORE the euro.

The only argument here is that it would indeed solve the problem, and the rebound would be fast. Of course retired people with pensions wiped out would go hungry but that's an other problem.

thunderlips11 says

What you're advocating is Socialism for the Wealthy.

Nobody is talking about punishing the banks, simply allowing capitalism to take it's course,

I'm not advocating it, I'm just explaining what "capitalism taking it's course" means for the people. You can't let banks fail and hope "the little people" would be helped by that. They are, in a very practical sense, in the same boat as banks.

thunderlips11 says

Austerity kicks Demand in the balls then steals all the money in his Wallet.

You cannot say that of a country that spends more than it produces. There, it should be obvious, demand is not the problem.

You could say there is austerity in China. Indeed it saves 50% of what it produces. That's what you should complain about.

Heraclitusstudent says

You could say there is austerity in China. Indeed it saves 50% of what it produces. That's what you should complain about.

Heraclitusstudent says

thunderlips11 says

Austerity kicks Demand in the balls then steals all the money in his Wallet.

You cannot say that of a country that spends more than it produces. There, it should be obvious, demand is not the problem.

You could say there is austerity in China. Indeed it saves 50% of what it produces. That's what you should complain about.

That saving is done by the government at the expense of the citizens. IOW if you devalue your currency that is great for getting commerce to your country, but it also devalues the buying power of the citizens. Ergo no real economic growth for the domestic economy.

Heraclitusstudent says

You could say there is austerity in China. Indeed it saves 50% of what it produces

No it prints and saves that.

AFAIK China still runs a trade surplus by taking the USD its exporters receive and prints up the yuan for them in exchange.

shows China's NIIP has been flat for a while

Heraclitusstudent says

No offense but it's a bit naive. One big bank fails and the financial system would be wiped out.

Then we better take steps to prevent TBTF and embark on policies that encourage many small banks instead of a handful of large ones.

Heraclitusstudent says

Credit would freeze everywhere: money markets, intra bank lending, day to day lending to companies, etc... Most banks would fail and those remaining would be so suspicious that they would make loans only to people sitting on golden collaterals

Keynes and FDR solved this problem almost a century ago. Banks are not the only source of cash infusions into the economy.

Also, of course, there are massive social effects from hypocrisy of elite driven events.

Heraclitusstudent says

You cannot say that of a country that spends more than it produces. There, it should be obvious, demand is not the problem.

That's the Triffin Dilemma, and it's fueled by a combination of world reserve currency status and bank-friendly goods production-hostile strong currency policies..

Heraclitusstudent says

You could say there is austerity in China. Indeed it saves 50% of what it produces. That's what you should complain about.

Not at all. China is aflush not only with Ghost City construction, but Airports, Railroads, Subways, Highways. More than half of Chinese work at SEOs. It is greatly expanding it's military capacity with expensive modern vehicles and weapon systems. It's funding a huge space program that will probably continue to a moon shot in the next 15 years.

thunderlips11 says

Heraclitusstudent says

No offense but it's a bit naive. One big bank fails and the financial system would be wiped out.

Then we better take steps to prevent TBTF and embark on policies that encourage many small banks instead of a handful of large ones.

The real problem is banking oversight. It is trough the Fed and a bank getting approval for expansion through citizen groups to "prove the bank is a good citizen". Canada for instance has far fewer banking problems because the oversight is by appointed officials who don't have an ax to grind and make non political decisions. Over a comparable time frame the US has had IIRC 14 banking crises compared to Canada's ZERO over the same time period. A banking crises is defined as involving 1% or more of the GDP.

The solution would be to re regulate banking and get politics the fuck out of it.

Keynes and FDR created infinitely more trouble than they fixed.

thunderlips11 says

Not at all. China is aflush not only with Ghost City construction, but Airports, Railroads, Subways, Highways. More than half of Chinese work at SEOs.

Obviously an economy based on building ghost cities is not an economy based on consumption. The saving numbers are there.

Bottom line if you are going to claim austerity is depriving the world economy from demand, you can't apply this argument to Greece or France. This is an argument that should be applied to the countries that are actually saving.

thunderlips11 says

Then we better take steps to prevent TBTF and embark on policies that encourage many small banks instead of a handful of large ones.

Sure, and this wouldn't help the question of whether finance is dominating the Greek, the US, or the UK economy.

Finance really goes wild when you have ultra loose monetary policies and regulations meant to promote wide spread lending. This is exactly what countries with a large account deficits, like the US and UK, need.

Finance suffers when you have austerity policies, when a country deleverage.

So there you have it again: being anti-austerity is de-facto being pro-finance. Contrary to what lefties would hope.

I'm not even convinced that smaller banks would avoid the TBTF problem. You can have many small banks fail and still have the same domino effect. What you really need is less debt. You need rebalancing between deficit countries and surplus countries. And this means cutting consumption and increasing productivity in southern europe.

Or you need to stop mindless trade globalization altogether. Trade is the real root of all these issues.

Heraclitusstudent says

I'm not even convinced that smaller banks would avoid the TBTF problem.

The solution to the problem is better regulation. Decentralizing does tend to make the smaller banks more vulnerable as they become dependent on too small of an area. OTOH centralizing the banks contributed to the TBTF.

Again the proof in the pudding is that Canada with non political regulation has had 0 banking crises to IIRC 14 for the US with very political regulations.

The source of this info is the book "Fragile by design"

As to the other the real problem is mercantilism and the reserve currency status of the dollar. The reserve currency status is a liability to the US not an asset.

This article explains why this is the case regarding balancing foreign trade and current accounts.

http://blog.mpettis.com/2014/10/are-we-starting-to-see-why-its-really-the-exorbitant-burden/

That would be the entire bond market.

Heraclitusstudent says

Bottom line if you are going to claim austerity is depriving the world economy from demand, you can't apply this argument to Greece or France. This is an argument that should be applied to the countries that are actually saving.

I think we're using different versions of Austerity here. Austerity has little directly to do with increasing savings, but rather cutting expenditures independent of whether it results in savings or not:

In economics, austerity describes policies used by governments to reduce budget deficits during adverse economic conditions. These policies may include spending cuts, tax increases, or a mixture of the two.[1][2][3] Austerity policies may be attempts to demonstrate governments' fiscal discipline to their creditors and credit rating agencies by bringing revenues closer to expenditures; they may also be politically or ideologically driven.

Austerity involves policies to reduce government spending and or higher taxes in order to try and reduce government budget deficits.

A state of reduced spending and increased frugality in the financial sector. Austerity measures generally refer to the measures taken by governments to reduce expenditures in an attempt to shrink their growing budget deficits.
http://www.investopedia.com/terms/a/austerity.asp

Heraclitusstudent says

Or you need to stop mindless trade globalization altogether. Trade is the real root of all these issues.

Absolutely. The reason China is flush with cash is because other countries demand, and the US runs a multi-hundred billion dollar trade deficit with it.

Heraclitusstudent says

What you really need is less debt. You need rebalancing between deficit countries and surplus countries. And this means cutting consumption and increasing productivity in southern europe.

When you get rid of debt, you also get reduce the money supply. Productivity is hard to sustain if : Somebody makes it better/cheaper than you, they're using the same currency, and that currency is strong - and you have reduced domestic demand due to reduced consumption.

The connection between lower consumption and increased productivity would be difficult to establish, since productivity would have to be jump started by demand, and most producers are going to jump start production based on increasing domestic demand.

Bottom line if you are going to claim austerity is depriving the world economy from demand, you can't apply this argument to Greece or France. This is an argument that should be applied to the countries that are actually saving.

Heraclitusstudent says

Bottom line if you are going to claim austerity is depriving the world economy from demand, you can't apply this argument to Greece or France. This is an argument that should be applied to the countries that are actually saving.

As for Austerity in Europe, the Economist, the Socialist Worker of Neoliberalism, ran this piece:
http://www.economist.com/blogs/freeexchange/2012/05/austerity

As for the "Austerian" Economists, with Reinhard and Rogoff's book leading the charge, their methodology and mistakes were summed up well in this blog:

Reinhart and Rogoff, in case you are wondering, are two economists who wrote a very famous paper purporting to demonstrate that high public debt to GDP ratio leads to negative economic growth. This paper was then cited by Paul Ryan et al. as justification for shredding what remains of our country’s social safety net.

But SHOCKER!, the paper was wrong! As a UMass grad student recently discovered, Reinhart and Rogoff not only based their conclusions off selectively chosen data, they made a serious coding error in the Excel spreadsheet they were working with.

It’s cool though. They have written a petulant Op Ed in the Times basically explaining why none of us should WORRY about the data and the methodology they used and the Excel spreadsheet — it’s totally FINE and the original premise of their paper (which purported to demonstrate a causal relationship between high deficits and slow growth) remains sound and the best way to get out of our current economic crisis is still austerity, austerity, austerity!

Well, there’s the thing about that “small actual difference” between the critics’ paper and their paper: THEIR paper shows that high deficits lead to a negative growth rate of 0.1%; the critics’ paper shows that the same high deficits (90% ratio of public debt to GDP) are correlated with POSITIVE growth of 2.2%.

But yeah, it’s a small difference, in the grand scheme of things. For example, right now we are making -.1% interest on our checking account, when you factor in all the fees and everything but this is a “small actual difference” from the roughly 2.2% interest we made on our checking account during the heady days before the 2008 crash. Small difference. Potato, potahto.

Read more at http://wonkette.com/513931/famous-austerity-economists-just-because-our-data-is-no-longer-operative-doesnt-mean-we-were-wrong#4SkTyesYgx39aCKI.99

The critic's blog on Oxford University Press' site, talking about their now fully peer reviewed criticism of Reinhardt and Rogoff's errors and methodology. Which the two Austerians attempt to dismiss their serious cherry-picking and calculation errors as a mere "kerfluffle"
http://blog.oup.com/2014/01/public-debt-gdp-growth-austerity-why-reinhart-and-rogoff-are-wrong/

Final comment for now: In 2007, Spain's Debt to GDP was a low 34%. Lower than the US, lower than most European Countries, including Germany.

Spain

http://www.economicshelp.org/blog/5525/economics/spanish-economic-crisis-summary/

In Spain's case at least, The Financial Crisis caused the Debt, not the debt the Financial Crisis.

Germany

thunderlips11 says

productivity would have to be jump started by demand, and most producers are going to jump start production based on increasing domestic demand.

Ass backwards

indigenous says

thunderlips11 says

productivity would have to be jump started by demand, and most producers are going to jump start production based on increasing domestic demand.

Ass backwards

Right, in Austrian land, entrepreneurs and investors usually invest in new firms that produce goods and services for which there is no existing demand.

thunderlips11 says

Right, in Austrian land, entrepreneurs and investors usually invest in new firms that produce goods and services for which there is no existing demand.

Once again the chicken or the egg. I will go all wogster on you, name a product that did not precede the demand.

thunderlips11 says

I think we're using different versions of Austerity here. Austerity has little directly to do with increasing savings, but rather cutting expenditures independent of whether it results in savings or not:

I'm using the only definition of austerity that makes sense.

If someone spends more than they earn, borrowing money every year to spend, you wouldn't call that person 'austere'. You wouldn't say their problem is that they are not consuming enough (generating end-demand).

The same goes for countries policies.

On the other hand if someone spends less then earn, they are de facto saving a lot, and you can say they are not generating enough end-demand, creating a problem in the economy by hoarding money that should be circulating.

This point is the center of understanding what is happening in southern Europe.
If you don't understand this, you don't understand the Greek crisis.

indigenous says

Once again the chicken or the egg. I will go all wogster on you, name a product that did not precede the demand.

Every product every invented? As Bill should have taught you earlier, products don't create demand, they satisfy it.

tatupu70 says

indigenous says

Once again the chicken or the egg. I will go all wogster on you, name a product that did not precede the demand.

Every product every invented? As Bill should have taught you earlier, products don't create demand, they satisfy it.

This is absolutely the stupidest how many angels can dance on the head of a pin discussion I've ever seen. Companies make products, if people want them then they buy them. Some were in demand but the technology didn't exist to make them (airplanes for one) , some were just good ideas that no one had thought of (velcro comes to mind). How fucking simple is that?

bob2356 says

How fucking simple is that?

Extremely, I expect nothing more from you.

The importance of this is that it creates the proper importance. I.E. the Ks spew that consumption is all important and in fact we get 1.5 times the economic activity for every dollar spent by the government.

The fact is though that the government doesn't produce anything, despite the fact that their spending get counted as GDP. This is the VERY reason that the USSR collapsed.

On the other hand if production is rewarded and investment in that production is rewarded we get a thriving economy.

Not only is this point not stupid it is imperative.

bob2356 says

This is absolutely the stupidest how many angels can dance on the head of a pin discussion I've ever seen. Companies make products, if people want them then they buy them. Some were in demand but the technology didn't exist to make them (airplanes for one) , some were just good ideas that no one had thought of (velcro comes to mind). How fucking simple is that?

It is simple, but it's surprising how many people can't grasp it. Your Velcro, for example--there was demand for a cheap, easy, product that would fasten things together. Demand always comes first. Demand exists even if there is no product to satisfy it.

"It is simple, but it's surprising how many people can't grasp it. Your Velcro, for example--there was demand for a cheap, easy, product that would fasten thing together. Demand always comes first. Demand exists even if there is no product to satisfy it."

Yea that is like saying there is demand to survive. What products will aide survival? All of them, therefore all products are demanded previous to there creation. Ok that is useful.

tatupu70 says

Your Velcro, for example--there was demand for a cheap, easy, product that would fasten thing together. Demand always comes first. Demand exists even if there is no product to satisfy it.

Unlike airplaines, which people wanted for centuries, no one knew they wanted velcro. Zippers, shoestrings, and buttons filled the demand quite nicely. Velcro worked better so it displaced other products, but didn't change demand.

bob2356 says

Velcro worked better so it displaced other products, but didn't change demand.

Yep, that's my point. Demand already existed. A new product doesn't change that.

Edit--a product with the same utility at a lower price will increase demand, so I guess it did change the level of demand.

indigenous says

All of the products existed before the demand. Nobody said I want a twin prop beechcraft type airplane, and more importantly there was no product to demand.

That's a new level of dumb. People wanted flying machines since the beginning of time.

tatupu70 says

bob2356 says

Velcro worked better so it displaced other products, but didn't change demand.

Yep, that's my point. Demand already existed. A new product doesn't change that.

Does that apply to hula hoops, astrioids, and pet rocks?

bob2356 says

That's a new level of dumb. People wanted flying machines since the beginning of time

Not with price discovery, Rin wants a 7 of 9 (or similiar) sex robot but until one exists there cannot be an exchange and even then he may not be willing to pay 1 million for it. You can rent a lot of Canadian hookers for 1 million, especially if Canada goes into a recession.

So demand has to be qualified as someone actually paying for the item.

bob2356 says

Keynes may or may not have been a genius. No one has actually tried implementing his ideas yet.

No economic ideology is ever going to be implemented 100%. But Keynes ideas were implemented to greater or lesser extent simply because it was easy to get the politicians in line to spend more money.

If nothing else it is interesting how the people can be fed a meme and think that it is true, despite the fact that it is pure propaganda. Funny we laugh at how ignorant the people in N Korea are kept...

sbh says

And there you are, staring back at yourself. Moron.

The diff being that CIC has something to say.

indigenous says

No economic ideology is ever going to be implemented 100%. But Keynes ideas were implemented to greater or lesser extent simply because it was easy to get the politicians in line to spend more money.

Well that proves beyond the shadow of a doubt you have no idea of any kind what keynes ideas were.

bob2356 says

Well that proves beyond the shadow of a doubt you have no idea of any kind what keynes ideas were.

Bullshit, the practical reality is exactly what I said.

I have not read general theory, but that does not mean I can not empirically see the affects Krugman has on the US economy and the Japanese economy.

Heraclitusstudent says

If someone spends more than they earn, borrowing money every year to spend, you wouldn't call that person 'austere'. You wouldn't say their problem is that they are not consuming enough (generating end-demand).

Organizations spend more than they earn all the time. Almost every large enterprise spends more money than it takes in at some point. Many organizations spend down their entire revenue and then some at times. Why should the government act differently?

Aggregate Demand Theory states that just because somebody produces it, doesn't mean it'll be sold, whatever Austrians might claim. It also observes that in a Recession, there's a propensity to save and not invest, but hold on to the money, further weakening the economy and demand. Therefore, it is stupid to cut government spending in the face of a recession: Not only will the economy struggle with finding new demand to feed the producers, it'll face an onslaught of laid off government employees and less public spending on top of it.

Indigenous' attempt to claim Aggregate Demand Theory doesn't fly and the notion that production precedes demand isn't doing well on this thread.

Furthermore, countries like Greece depend on Tourism and Ag exports, which are already suboptimal due to the high value of the Euro, so it's difficult for them to begin to "produce". Creating something like an R&D or high tech manufacturing hub would require vast outlays of investment and take years (decades, really) to come to fruition. Then they'd have to grow these businesses in the face of already existing concerns within the Eurozone AND abroad, somehow finding customers with less accumulated knowledge to produce cheaply and in quantity.

As discussed on another thread, "Lucky" or "Hard Working" countries like Germany got all kinds of deals the Greeks never got. Cancellation of half their war rebuilding debt in 1953, outright grants, the spending of countless Allied soldiers for years bringing money and demand and thus jobs into the country (how did the Beatles start?) - not to mention local contracts for catering, barracks construction, fuel storage facilities, and so on. Technology Transfers from US and UK Companies, directed investment, directed contracts for the express purpose of building up West German industry AND keeping unemployment low to reduce the appeal of Communism and Socialism.

Germany was allowed to violate Maastricht requirements on deficits and spending to incorporate East Germany.

Greece never got those things. Greece got itself bombed by Churchill until it accepted the same parties that collaborated with the Nazis and brought their widely despised hated King back. Then a military coup a few decades later. Greece got nothing like the German treatment.

Spain went into the recession with the lowest deficit spending in Europe, around 33%, much less than the US or Germany (about half).

indigenous says

I have not read general theory, but that does not mean I can not empirically see the affects Krugman has on the US economy and the Japanese economy.

What official position does Krugman hold in the US Government since the Recession began?

thunderlips11 says

What official position does Krugman hold in the US Government since the Recession began?

He is the official spewer of meme...

thunderlips11 says

Organizations spend more than they earn all the time.

There is a difference between going in debt to invest in new productive endeavors that will bring new revenues in the future, and going in debt to finance your life style: on-going expenses, pensions, etc... Companies that do the later fragilize their positions and will eventually go bankrupt unless they change their ways.

thunderlips11 says

Aggregate Demand Theory states that just because somebody produces it, doesn't mean it'll be sold

The theory is that if you have idle production capacity this can be used if you have more spending, and spending can be created arbitrarily by government spending. This ignores what happens when production capacity is outside the country. You can't simply spend more and hope it will do much good to your economy if you just buy more Chinese stuff. It's not like this would by itself create factory jobs in Greece. It wouldn't. (unless of course quitting global trade).

After a spending boom, when you spent far more than you earned, you need to go back to reality and align what you spend with what you earn. This means an economic contraction, which in the case of Greece was severe, but this is normal and expected. It just highlight how artificial the boom was.

thunderlips11 says

countries like Greece depend on Tourism and Ag exports, which are already suboptimal due to the high value of the Euro, so it's difficult for them to begin to "produce".

The real economy is independent of the currency value. Prices adjust both ways. People adjust how much they ask to align with what they can get.

The key point seldom discussed in the US, it that this is not just about tight government spending. A lot of German requirements are move to modernize the country's economy. If don't even have a tax collection department, then maybe you ought to have one, and people don't like to pay taxes but maybe they should. Maybe they need to take steps to make companies more efficient. A lot of the "pain" in Greece is precisely being forced to change old bad habits. Without it Greece will never be able to prosper.

This is where monetary stimulus is just masking the bad structures. It just allows the country to not change, not adjust to reality, never do anything to become more efficient. It remove all incentives for change. Yes you can print money and spend it. And yes that is "demand" (for the Chinese). But no country ever prospered out of this in the long term. You are far better off by confronting your problems and adjusting to the reality.