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Read the rules in the OP before posting, please. In order to ensure that this thread continues to meet TL standards and follows the proper guidelines, we will be enforcing the rules in the OP more strictly. Be sure to give them a re-read to refresh your memory! The vast majority of you are contributing in a healthy way, keep it up! NOTE: When providing a source, explain why you feel it is relevant and what purpose it adds to the discussion if it's not obvious. Also take note that unsubstantiated tweets/posts meant only to rekindle old arguments can result in a mod action. | ||
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Nyxisto
Germany6287 Posts
On May 24 2014 08:40 JonnyBNoHo wrote: You have a source for the Tokyo real estate value? That sounds hard to believe. I don't remember where I picked up the number, maybe I'll find it later. ![[image loading]](http://www.thebubblebubble.com/wp-content/uploads/2012/05/Japan-Real-Estate-Prices.jpg) | ||
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{CC}StealthBlue
United States41117 Posts
Sen. Ted Cruz (R-TX) said Thursday that Democrats are making moves to repeal First Amendment rights to free speech and religious liberty. Cruz was speaking to pastors at a Family Research Council conference when he warned that Democrats were moving to quash political speech and "muzzle" pastors and their communities, according to video of a portion of Cruz's speech posted online by Right Wing Watch. “I'm telling you, I'm not making this up," he said as the audience offscreen gasped. "Sen. Chuck Schumer [D-N.Y.] has announced the Senate Democrats are scheduling a vote on a constitutional amendment to give Congress the plenary power, the unlimited authority to regulate political speech. Because elected officials have decided they don’t like it when the citizenry has the temerity to criticize what they’ve done." Source | ||
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GreenHorizons
United States24505 Posts
Credit cycles don't normally cause a financial crisis. Nor does a boom and bust in a particular industry (read: housing) normally cause a financial crisis. For example, the bust of the 2000's dot com bubble didn't cause a financial crisis. Prior to the crisis the housing boom was re-balancing, largely with growing exports. It sounded off so I asked, Then you responded with that, so I had to look more deeply into what you are claiming. Where are you getting this idea from? Even the pieces I've found giving the MMF's and the run/s you were talking about a significant role in the financial crisis don't come close to claiming it was the beginning or 'the main reason'? In fact they seem to paint a radically different picture than you seem to be doing? Do you have a source to support your claim? The Federal Reserve Pushing the Federal Funds Rate below 3% was probably the most significant cause of The Great Credit Crunch. On October 2, 2001 the Greenspan Fed cut the funds rate 50 basis points to 2.5% and continued cutting the rate to 1.0% on June 25, 2003 on fears of Deflation. Instead the Fed caused the Housing Bubble and began the bubbles we are still suffering from in the commodities markets. A year later the Fed began to raise the funds rate at 25 basis points in each of the next seventeen meetings to 5.25% on June 29, 2006, which was the straw that broke the back of the Housing Bubble. Source It's similar to a bank run. Investors fear that they won't get their money back and pull funds. In the case of money markets there is a maturity transformation involved between people who put money into the fund and those who borrow from it. Same as with traditional banks. And like traditional banks, the money market funds had no way to raise funds fast enough to prevent a run. Well that didn't happen overnight for no reason right? What do you think motivated/caused them to want to make a run? The Fed offers liquidity to banks. Money market mutual funds are not banks. Why do you think The Fed offered liquidity to banks but didn't to MMF's (pre-crisis)? Arsonists deliberately try to set things on fire. I don't think the relevant story is that people purposely set the financial system on fire. I agree with that. Reckless children playing with fire without adult supervision would be more accurate but not as comedic. | ||
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oneofthem
Cayman Islands24199 Posts
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Crushinator
Netherlands2138 Posts
On May 24 2014 10:15 GreenHorizons wrote: It sounded off so I asked, Then you responded with that, so I had to look more deeply into what you are claiming. Where are you getting this idea from? Even the pieces I've found giving the MMF's and the run/s you were talking about a significant role in the financial crisis don't come close to claiming it was the beginning or 'the main reason'? In fact they seem to paint a radically different picture than you seem to be doing? Do you have a source to support your claim? Source Well that didn't happen overnight for no reason right? What do you think motivated/caused them to want to make a run? Why do you think The Fed offered liquidity to banks but didn't to MMF's (pre-crisis)? I agree with that. Reckless children playing with fire without adult supervision would be more accurate but not as comedic. Blaming the crisis on the actions of the Fed is monetarist reductionism. Most economists these days do not think monetary policy errors have very much at all to do with crises. If the crisis can be attributed to any one cause it would be the thought that housing prices always go up, the same thought that caused the majority of financial crises in history and will continue to do so in the future in a cyclical pattern. All the other factors just enhanced the severity of the crisis. Stories of investors scrambling to achieve liquidity above all else is indeed not very helpful, it is simply a description of what a crisis is, not a cause. | ||
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JonnyBNoHo
United States6277 Posts
On May 24 2014 10:15 GreenHorizons wrote: It sounded off so I asked, Then you responded with that, so I had to look more deeply into what you are claiming. Where are you getting this idea from? Even the pieces I've found giving the MMF's and the run/s you were talking about a significant role in the financial crisis don't come close to claiming it was the beginning or 'the main reason'? In fact they seem to paint a radically different picture than you seem to be doing? Do you have a source to support your claim? Source You have to distinguish between a normal business cycle and what we experienced during the crisis. The normal cycle is that the economy is weak, the Fed lower rates, the economy improves and the Fed raises rates. Low rates lead to a big housing expansion and rising rates caused housing to contract. This was '06 - '08, well before the crash. As DeLong pointed out recently (source), the housing contraction was being replaced by a boom in exports. The economy was successfully re-balancing (a good thing), and to the extent that it couldn't re-balance the economy would slow and / or tip into recession. Again though, that's all fairly normal. What wasn't normal this time was the financial crisis. That began with a run in the money markets and spread throughout the system. For a source there are a couple papers from Gorton and Metrick here and here. It also goes along with what Perry Merhling has written / talked about. Well that didn't happen overnight for no reason right? What do you think motivated/caused them to want to make a run? If you put money in a bank you have FDIC insurance that you'll get your money back. Not so with a MMMF and so when loans started going sour (normal credit cycle) investors got skittish, pulled funds, which put more stress on the MMMFs which caused more investors to pull funds, etc. Why do you think The Fed offered liquidity to banks but didn't to MMF's (pre-crisis)? The Fed is only supposed to offer liquidity to banks. The Fed had to rely on obscure language in its charter to do what it's doing: These extraordinary measures were undertaken under section 13(3) of the Federal Reserve Act, a special provision that permits the Fed to lend to individuals, partnerships, and corporations in “unusual and exigent circumstances.” source | ||
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WhiteDog
France8650 Posts
Often time I hear people talking about cycle without mastering the theoric aspect of it (cycles are not basic empiric constatations, in fact most economist thought cycle theory was outdated some years ago). Monetarists never believed in cycle because was not supposed to exist - the fluctuation that economists were witnessing were just the the most optimal way for the market to adjust itself. So you can believe that, or you can believe that the market is unstable to begin with and all that instability result in an overinvestment in housing during slow growth period or economic difficulties as it is one of the most secure placement - meaning that the housing bubbles are birds of bad omen (which I guess is GreenHorizons point ?). Also this explanation about exportation "boom" is off. Of course exports are going to be more important for aggregate demand when intern demand is depressed. It is the case right now in Greece, were they are finally in a positive commercial balance : does it mean the economy is in a better shape ? That it "adjusted" itself ? No, just that they are so poor that their internal consumption has gone down. It's just accounting. And this article is quite sloppy. Delong wrote better piece, his argument that say's law is true in practice is also absurd. Reducing everything to a problem of offer - we don't consume enough because we don't produce enough - is putting aside the key problem of the distribution of the wealth created. | ||
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{CC}StealthBlue
United States41117 Posts
Kentucky won a lawsuit on Friday against the federal government for the right to plant a shipment of hemp seeds that had been impounded. The case underscores what appears to be a comeback for the controversial plant that, despite having much lower THC levels than marijuana, has been classified by the Drug Enforcement Agency as a Schedule 1 drug on par with heroin. Federal legislation outlawed hemp as part of a war on marijuana in 1937. But the farm bill, passed on Feb. 4, contained a provision that allowed colleges and state agencies to grow and conduct research on the plant in states that would allow it. Growing hemp under these circumstances is now legal in Kentucky, along with 15 other states that have removed barriers to hemp production. Though industrial hemp and marijuana come from the same plant — Cannabis Sativa — hemp seeds are bred to produce plants with 0.3-1.5 percent THC, whereas marijuana has between 5-15 percent. THC, the intoxicating ingredient in marijuana that gets people high, is far too low in hemp to have the same effect. Hemp proponents said the plant can be an environementally friendly source of paper, textiles, oils, and even biodegradeable plastics. Source | ||
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GreenHorizons
United States24505 Posts
What wasn't normal this time was the financial crisis. That began with a run in the money markets and spread throughout the system. Following this reasoning that suggests the financial crisis was 'started' by the run on MMMF's, what is it you are suggesting started the run and, why did the run matter? Investments go sour every day, why do you believe these investments going sour was enough to trigger such catastrophe? The Fed is only supposed to offer liquidity to banks. The Fed had to rely on obscure language in its charter to do what it's doing: Why wouldn't (we want)/The Fed want to offer liquidity to MMMF's? You suggested you wanted The Fed to provide this liquidity recently, do you want it to stop? If so, when? Either way, what do you think is preventing all this or worse from happening again? Based on your interpretation of what went wrong (which is still unclear), what do you see as heading toward a solution? | ||
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GreenHorizons
United States24505 Posts
About damn time for this. Now they just need to prove the obvious before it can be legal in all 50 states. | ||
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Crushinator
Netherlands2138 Posts
On May 27 2014 05:32 GreenHorizons wrote: Following this reasoning that suggests the financial crisis was 'started' by the run on MMMF's, what is it you are suggesting started the run and, why did the run matter? Investments go sour every day, why do you believe these investments going sour was enough to trigger such catastrophe? Why wouldn't (we want)/The Fed want to offer liquidity to MMMF's? You suggested you wanted The Fed to provide this liquidity recently, do you want it to stop? If so, when? Either way, what do you think is preventing all this or worse from happening again? Based on your interpretation of what went wrong (which is still unclear), what do you see as heading toward a solution? A crisis is not started by a run, that is just a symptom. The real cause of any crisis is found in the boom period that precedes it, which is always a massive expansion of credit because money is cheap and optimism high, and everyone tries to get in the door. In this case dergulation etcetc cause expansion in mortgage debt. The proximate cause is the bursting of some bubble that was created in the boom because of some shock, in this case foreclosure rates were published which were higher than expected, which caused investors to re-evaluate asset values. Everyone then tries to get out the door, because they all expect everyone else will do the same. Every crisis is pretty much the same except in the details. The key to stopping crises from happening is probably to temper booms, which nobody is actually willing to do because politics, so its all fairly pointless. | ||
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{CC}StealthBlue
United States41117 Posts
Washington (CNN) -- Some conservatives unhappy with House Speaker John Boehner's leadership are looking for a replacement, and recent moves by Texas Republican Jeb Hensarling are fueling speculation he wants Boehner's job in the next Congress. Hensarling, who was part of Boehner's leadership team two years ago but left to chair the House Financial Services Committee, gave an expansive speech last week hosted by Heritage Action for America, a group that frequently and publicly clashes with Boehner. Asked afterward if he was interested in running for speaker, Hensarling initially said he was "flattered," and said, "It's not something I've aspired to. It's not something I'm thinking about." But then he left the door open, saying, "No, I haven't been Shermanesque, again I'm not sure there's any opportunity I want to foreclose." While Heritage Action's Chief Executive Officer Michael Needham told CNN that his group doesn't get involved in leadership races, the conservative group gave Hensarling a high-profile platform to outline his own conservative philosophy for governing. Needham said there is a "real need to take on sacred cows in Washington at time when the party too often looks after K Street," a reference to the downtown D.C. address for corporate lobbyists. He said, "Jeb Hensarling is a great spokesman and fighter for conservative values." Source | ||
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JonnyBNoHo
United States6277 Posts
On May 27 2014 05:32 GreenHorizons wrote: Following this reasoning that suggests the financial crisis was 'started' by the run on MMMF's, what is it you are suggesting started the run and, why did the run matter? Investments go sour every day, why do you believe these investments going sour was enough to trigger such catastrophe? MMMFs suffered investment losses which put investors at risk for not receiving 100% of their money back. Since you can pull your money from MMMFs quickly, investors did just that. Why that matters is the same reason why a bank run matters. As money is pulled the money supply effectively shrinks, which causes stress elsewhere, which leads to more runs, which causes more stress elsewhere... Essentially runs have a feedback effect to them. If they aren't stopped, they build momentum. Money in MMMFs is treated as safe money. MMMFs are alternatives to bank deposits. You don't put money in them expecting any nominal loss. It is extremely rare for any MMMF to 'break the buck'. Why wouldn't (we want)/The Fed want to offer liquidity to MMMF's? You suggested you wanted The Fed to provide this liquidity recently, do you want it to stop? If so, when? Either way, what do you think is preventing all this or worse from happening again? Based on your interpretation of what went wrong (which is still unclear), what do you see as heading toward a solution? Going forward I think there needs to be some way for the Fed to act as the lender of last resort beyond just traditional banks. | ||
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GreenHorizons
United States24505 Posts
On May 27 2014 10:11 JonnyBNoHo wrote: MMMFs suffered investment losses which put investors at risk for not receiving 100% of their money back. Since you can pull your money from MMMFs quickly, investors did just that. Why that matters is the same reason why a bank run matters. As money is pulled the money supply effectively shrinks, which causes stress elsewhere, which leads to more runs, which causes more stress elsewhere... Essentially runs have a feedback effect to them. If they aren't stopped, they build momentum. Money in MMMFs is treated as safe money. MMMFs are alternatives to bank deposits. You don't put money in them expecting any nominal loss. It is extremely rare for any MMMF to 'break the buck'. Going forward I think there needs to be some way for the Fed to act as the lender of last resort beyond just traditional banks. So people who thought MMMF's were safe money... Why weren't they? What other institutions bad bets would you like to see the American tax payer cover when they go bad? | ||
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JonnyBNoHo
United States6277 Posts
On May 27 2014 10:37 GreenHorizons wrote: So people who thought MMMF's were safe money... Why weren't they? Because they don't invest in perfectly safe assets. What other institutions bad bets would you like to see the American tax payer cover when they go bad? I didn't say that I want tax payers to cover losses. What did you mean by 'free money'? | ||
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GreenHorizons
United States24505 Posts
Money in MMMFs is treated as safe money. MMMFs are alternatives to bank deposits. You don't put money in them expecting any nominal loss. It is extremely rare for any MMMF to 'break the buck' Because they don't invest in perfectly safe assets. So wait... They thought they were 'safe' but they weren't 'perfectly safe'. So did MMMF's (and their investors) know how not 'perfectly safe' the investments they were making were? I didn't say that I want tax payers to cover losses. OK so what other institutions would you like to see The Fed act as a lender of last resort? | ||
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JonnyBNoHo
United States6277 Posts
On May 27 2014 11:04 GreenHorizons wrote: So wait... They thought they were 'safe' but they weren't 'perfectly safe'. So did MMMF's (and their investors) know how not 'perfectly safe' the investments they were making were? I think so. We aren't talking large losses here. Just a couple percent. I think I've answered plenty of your questions at this point. | ||
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ticklishmusic
United States15977 Posts
Here's an interesting bit of news (relevant to me cuz I go to school in Georgia). The Republican incumbent governor is down 7 points against his Democratic challenger according to a poll by Rassmussen, which has had a bias favoring the Republicans the last few elections. | ||
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GreenHorizons
United States24505 Posts
On May 27 2014 11:14 JonnyBNoHo wrote: I think so. We aren't talking large losses here. Just a couple percent. I think I've answered plenty of your questions at this point. Answer as many or as few as you would like, just know you haven't made a very convincing case that the 'start' of the financial crisis was a run on MMMF's. You also haven't made it clear why MMMF's being what you say investors knew they were, and performing less than perfectly, somehow caused a run. | ||
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JonnyBNoHo
United States6277 Posts
On May 27 2014 11:55 GreenHorizons wrote: Answer as many or as few as you would like, just know you haven't made a very convincing case that the 'start' of the financial crisis was a run on MMMF's. You also haven't made it clear why MMMF's being what you say investors knew they were, and performing less than perfectly, somehow caused a run. You haven't made any case whatsoever, either than I'm wrong on a given point or that you have a better explanation. All you've done is ask questions then say "well I'm not convinced" and refuse to answer even one question from me. | ||
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