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Sanya12364 Posts
On January 09 2010 11:27 Caller wrote:Show nested quote +On January 09 2010 11:21 Motiva wrote:On January 09 2010 11:12 Caller wrote:On January 09 2010 10:57 Shizuru~ wrote:On January 09 2010 10:53 Caller wrote:On January 09 2010 10:23 ArmChairCritic wrote:On January 09 2010 10:14 Caller wrote:On January 09 2010 09:42 7Strife wrote:On January 09 2010 09:31 iamho wrote:
this guy was in the times or the economist a few months ago. but honestly, it doesnt take a genius to spout government is evil libertarian doomsday crap Actually it is pretty difficult and he clearly demonstrates why with the resistance he receives from people like you. It would be nice if you mentioned a view of Libertarianism that is "doomsday bull crap." It would help! Since you wish me to evoke telekinesis may I start by asking you why it is a good idea for a government to give peoples money to save nonperforming failing companies? Is it so perhaps its CEOs and directors can buy a plane or their children a Ferrari (what deep thinkers like you call stimulating the economy)? That would seem like a really stupid idea. It would seem like it is a better idea to let performing companies survive and prosper to take their place. Isn't that the whole damn point to a free market; a certain evolution of the economy. I might have to agree with you that this stuff is easy after all! you guys clearly do not understand the idea of cash flow im not saying that we should be bailing out companies but at this point we really had no choice. consider this: I have 1 brillion dollars in assets. Most of these assets are in the form of money that I have loaned or invested into many different things. For instance, I may have 500 million in the form of a CD, or certificate of deposit, or something with a similar policy (i.e. I can't touch the money without penalties before the due date) Let's say I borrowed some money to make an investment (which is necessary in this day and age for tax reasons) and I thought that it was good and would be a safe investment. Say... 300 million dollars. I use leverage, which means that I can invest 100 million to make an investment worth 1 brillion. Therefore, a gain of 10% in the investment will profit me 100 million dollars. Similarly, a loss of 10% would make me lose 100 million dollars, or would wipe out the initial investment. Now let's say this investment was flawed, because people were lying about the actual securities and nobody (especially Fannie and Freddie) knew what was going on. So I take a 40% loss on my investment. Now I'm out 400 million. I don't have enough in liquid money to pay back the 400 million, so I'm forced to call in my assets (such as the loans from other companies) at a steep discount rate to pay it back. By discount rate, I mean since I'm calling back loans before they are due, I forfeit interest on my loan, etc. so I may sell 500 billion in assets and end up with 350 million instead. So not only do I lose money from the initial investment, but I lose money in selling assets to pay it back. So in the end, I'm actually down 550 million from a 10% loss. The second thing it does is it causes money to be taken from other people who are using the money. If I am a company that borrowed 100 million from the bank above, and they call back their loan, sure, I may save money by not paying interest. But I don't have 100 million in cash on me. Therefore, I need to sell off my assets to get this 100 million, which in turn means that I either have to take a loss or call in outstanding loans/credit, which continues the chain of recognized losses. Without the bailout, we would have taken at least a 40% hit immediately. I'm not saying it was a good thing, however-it was basically extortion. Consider this, how is it morally justfiable to use taxpayers money to speculate in a failing firm? If you have bad cash flow, take a loan but is itsn't the goverments business at all. i didn't say it was morally justifiable to use taxpayers money, i said it was extortion. like i said, the problem with such a big fucking bank is that it tend to give tons of loans to many many companies. The collapse of such a large bank like Goldman Sachs would completely cripple monetary flow for a much larger area that just financial services-many companies would be forced to call in loans and sell assets, which begins a massive chain reaction that severely destabilizes our economy. In that sense, to protect the rest of America from the collapse of a bank, they had to bail them out. Consider the following situation: a scientist accidentally releases a culture of a supervirus that could kill millions. The only ones that are able to deal with the virus are the very group that released it. The government would thus give them money and funding to contain the virus, even if it was their fault that they released it. ur example given is valid in justifying the government's action/intervention in ur example, but sadly u can't compare a viral outbreak with an economic bubble bursting, its like comparing a apple to an orange... What the hell are you guys on, crack? I used to think just like you guys in that the bailout is the stupidest thing ever. I still think it's the stupidest thing ever. But it was also unfortunately necessary. The economic damage done by both a viral outbreak and the massive collapse of the economic bubble would be roughly equivalent. Sure, some people may value human lives as being virtually infinite in value, but in terms of just sheer destruction the "collapse of the economic bubble" and a viral outbreak would be virtually similar. Millions, while they may still be alive, will lose everything they have, and will roam the streets preventing their kids from starving. I think people would be far more concerned about being unable to deal with something that they know they could rather than dealing with a virus that they have no control over. the largest issue i have w/ your analogy is that for it to be more accurate would be to acknowledge that you cannot ever be sure if the company that created it can really resolve it how they say that can, and also, you can never really be that sure that they are the only method for resolution... EDIT: Especially if that company has been operating in the negative for all of it's recent history, and has given you no reason to believe them. valid argument but i was thinking of something off the top of my head. the very idea of a metaphor is that there will be some inherent flaws with it. Still you're nitpicking here.
Not quite though right? Because a viral outbreak and collapse of the economic bubble would have far worse short term effects on those heavily invested the bubble which is just about everyone. But it impacts people to a different degree. The worst part of the bailout isn't what it prevented in the short term but the precedent that it sets in the long term.
The bailout is essentially the socialisation of downside risks and sets a precedent that investors have a safety (at least politically connected investors) for engaging in idiotically risky investments. In the long run it is also rewarding Wall Street by giving them the booms and smoothing out the busts.
It's a bad way to motivate the market to make wise investment decisions.
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So people actually don't just watch fox for comedy? Where is this world going! :/
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On January 09 2010 09:18 7Strife wrote:Show nested quote +On January 09 2010 08:56 StorkHwaiting wrote:
Peter Schill laid down the fucking law. I don't know enough about him to say more than that. The other guy was a fucking moron though. That other guy is the exact reason I got out of finance. Paper wealth is such a disgusting concept, money multiplier, the entire method of market valuation, just fucking ugh. It makes me so mad to think about it again.
Yeah, the price of something should be whatever people are willing to pay at that point. That makes a LOT of sense. NOT.
AKA, during some kind of shortage panic, you see prices shoot through the roof without government intervention. People are willing to pay it because they're freaking out. It's fear based inflation. Is the product really worth that? No. Half the time, panics are induced by suppliers to drive prices through the roof, then they pocket the profit and calm things back down. ie Enron.
I feel bad for the guy. Those other scumbags on the show laughing at him are deep in the pockets of the private interests that built these bubbles in the first place. Morons who either don't understand what's going on, or DO understand and are complicit in the deceit.
The problem with it though, is that government intervention in market prices is absolutely critical. A capitalist market has never said that there should be zero government intervention. Look at all the requirements for a perfect capitalism. No society in the world meets those and it has nothing to do with government intervention. It has a lot more to do with the fact that consumers are NOT always well-informed and people are NOT always acting on perfect information. This is why the free-market principles can only take an economy so far. Government must intervene to put price ceilings and floors into the market at times to prevent damaging volatility. I do agree about paper currency and really wish to see the day of true digital currency. I think that then any organization or even third party can develop to hold currency offering a competitive aspect to its existence. I don't really understand what you meant by price ceilings and floors. Why do you think those are necessary? (Some specific instances.)
In times of panic, like during a hurricane or during a famine, the government needs to step in and regulate prices to avoid needless volatility and damage caused by wild swings in market prices.
Even in ancient times there were cases like this. The Chinese government in the Tang dynasty already had a system of large granaries. When there was a famine, they would sell grain to everyone at a lower price and mandate that all merchants meet their price. This way, the people stayed fed and there was no rioting or other kinds of damage/chaos that would only increase the economic loss caused by the original famine.
If you left these kinds of issues up to the market, what would happen is the suppliers doing a rampant amount of price gouging, leading to desperate measures by the consumers, and thereby costing everyone more money in the long run. I don't think it should be something like a constant floor or ceiling being put in place, but there are definitely times when a pure free market would be very dangerous.
And, personally, on the issue of currency I'm a strong believer in money backed by some real good. Be it gold, oil, whatever. There need to be reserves that the currency can be redeemed for. Fiat currency is artificial and that's why it can be manipulated so heavily. It has no basis in reality.
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On January 09 2010 11:43 Vedic wrote:Show nested quote +On January 09 2010 11:34 InToTheWannaB wrote:On January 09 2010 11:12 Caller wrote:On January 09 2010 10:57 Shizuru~ wrote:On January 09 2010 10:53 Caller wrote:On January 09 2010 10:23 ArmChairCritic wrote:On January 09 2010 10:14 Caller wrote:On January 09 2010 09:42 7Strife wrote:On January 09 2010 09:31 iamho wrote:
this guy was in the times or the economist a few months ago. but honestly, it doesnt take a genius to spout government is evil libertarian doomsday crap Actually it is pretty difficult and he clearly demonstrates why with the resistance he receives from people like you. It would be nice if you mentioned a view of Libertarianism that is "doomsday bull crap." It would help! Since you wish me to evoke telekinesis may I start by asking you why it is a good idea for a government to give peoples money to save nonperforming failing companies? Is it so perhaps its CEOs and directors can buy a plane or their children a Ferrari (what deep thinkers like you call stimulating the economy)? That would seem like a really stupid idea. It would seem like it is a better idea to let performing companies survive and prosper to take their place. Isn't that the whole damn point to a free market; a certain evolution of the economy. I might have to agree with you that this stuff is easy after all! you guys clearly do not understand the idea of cash flow im not saying that we should be bailing out companies but at this point we really had no choice. consider this: I have 1 brillion dollars in assets. Most of these assets are in the form of money that I have loaned or invested into many different things. For instance, I may have 500 million in the form of a CD, or certificate of deposit, or something with a similar policy (i.e. I can't touch the money without penalties before the due date) Let's say I borrowed some money to make an investment (which is necessary in this day and age for tax reasons) and I thought that it was good and would be a safe investment. Say... 300 million dollars. I use leverage, which means that I can invest 100 million to make an investment worth 1 brillion. Therefore, a gain of 10% in the investment will profit me 100 million dollars. Similarly, a loss of 10% would make me lose 100 million dollars, or would wipe out the initial investment. Now let's say this investment was flawed, because people were lying about the actual securities and nobody (especially Fannie and Freddie) knew what was going on. So I take a 40% loss on my investment. Now I'm out 400 million. I don't have enough in liquid money to pay back the 400 million, so I'm forced to call in my assets (such as the loans from other companies) at a steep discount rate to pay it back. By discount rate, I mean since I'm calling back loans before they are due, I forfeit interest on my loan, etc. so I may sell 500 billion in assets and end up with 350 million instead. So not only do I lose money from the initial investment, but I lose money in selling assets to pay it back. So in the end, I'm actually down 550 million from a 10% loss. The second thing it does is it causes money to be taken from other people who are using the money. If I am a company that borrowed 100 million from the bank above, and they call back their loan, sure, I may save money by not paying interest. But I don't have 100 million in cash on me. Therefore, I need to sell off my assets to get this 100 million, which in turn means that I either have to take a loss or call in outstanding loans/credit, which continues the chain of recognized losses. Without the bailout, we would have taken at least a 40% hit immediately. I'm not saying it was a good thing, however-it was basically extortion. Consider this, how is it morally justfiable to use taxpayers money to speculate in a failing firm? If you have bad cash flow, take a loan but is itsn't the goverments business at all. i didn't say it was morally justifiable to use taxpayers money, i said it was extortion. like i said, the problem with such a big fucking bank is that it tend to give tons of loans to many many companies. The collapse of such a large bank like Goldman Sachs would completely cripple monetary flow for a much larger area that just financial services-many companies would be forced to call in loans and sell assets, which begins a massive chain reaction that severely destabilizes our economy. In that sense, to protect the rest of America from the collapse of a bank, they had to bail them out. Consider the following situation: a scientist accidentally releases a culture of a supervirus that could kill millions. The only ones that are able to deal with the virus are the very group that released it. The government would thus give them money and funding to contain the virus, even if it was their fault that they released it. ur example given is valid in justifying the government's action/intervention in ur example, but sadly u can't compare a viral outbreak with an economic bubble bursting, its like comparing a apple to an orange... What the hell are you guys on, crack? I used to think just like you guys in that the bailout is the stupidest thing ever. I still think it's the stupidest thing ever. But it was also unfortunately necessary. The economic damage done by both a viral outbreak and the massive collapse of the economic bubble would be roughly equivalent. Sure, some people may value human lives as being virtually infinite in value, but in terms of just sheer destruction the "collapse of the economic bubble" and a viral outbreak would be virtually similar. Millions, while they may still be alive, will lose everything they have, and will roam the streets preventing their kids from starving. I think people would be far more concerned about being unable to deal with something that they know they could rather than dealing with a virus that they have no control over. Caller I have one request and one question because I know your a ecomonics major . First Say "God of war" Second does a bailout really cure this collapse, or just delay it it in your oppinion? Because it seems like the bad practices that got us into this mess are just being renewed by the bailouts and delaying the inevitable "outbreak" The bailout did only delay it, but the whole idea was only marginally more stupid than giving each man, woman, and child, a few thousand dollars. (which, they could have done) At least in that situation, people could have made the individual choice to pay off some debt and stop supporting the corrupt companies, but we are unwilling investors at this point.
Absolutely, it simply delayed the inevitable. The problem is an individual gets a mortgage loan from a broker and then the broker sells the mortgage to a bank, which in its turn again sells the mortgage but this time to an investment firm on Wall Street. Those firms collect thousands of mortgages in one big pile. This in fact represents thousands of mortgage checks coming every month, a monthly income that was supposed to continue for the life of the mortgages. Then the firm in its turn sells shares of that income to investors who are willing to buy. The problem is the investors were making a wrong decision and making a bad investment. Agencies blessed most of the mortgage backed securities with AAA rating. When everything went ka-poot it simply is the free market system in the working. Now the market will evolve and the same mistake will not be made again, through pain and suffering. That is how capitalism works: trial and error.
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On January 09 2010 11:12 Caller wrote:Show nested quote +On January 09 2010 10:57 Shizuru~ wrote:On January 09 2010 10:53 Caller wrote:On January 09 2010 10:23 ArmChairCritic wrote:On January 09 2010 10:14 Caller wrote:On January 09 2010 09:42 7Strife wrote:On January 09 2010 09:31 iamho wrote:
this guy was in the times or the economist a few months ago. but honestly, it doesnt take a genius to spout government is evil libertarian doomsday crap Actually it is pretty difficult and he clearly demonstrates why with the resistance he receives from people like you. It would be nice if you mentioned a view of Libertarianism that is "doomsday bull crap." It would help! Since you wish me to evoke telekinesis may I start by asking you why it is a good idea for a government to give peoples money to save nonperforming failing companies? Is it so perhaps its CEOs and directors can buy a plane or their children a Ferrari (what deep thinkers like you call stimulating the economy)? That would seem like a really stupid idea. It would seem like it is a better idea to let performing companies survive and prosper to take their place. Isn't that the whole damn point to a free market; a certain evolution of the economy. I might have to agree with you that this stuff is easy after all! you guys clearly do not understand the idea of cash flow im not saying that we should be bailing out companies but at this point we really had no choice. consider this: I have 1 brillion dollars in assets. Most of these assets are in the form of money that I have loaned or invested into many different things. For instance, I may have 500 million in the form of a CD, or certificate of deposit, or something with a similar policy (i.e. I can't touch the money without penalties before the due date) Let's say I borrowed some money to make an investment (which is necessary in this day and age for tax reasons) and I thought that it was good and would be a safe investment. Say... 300 million dollars. I use leverage, which means that I can invest 100 million to make an investment worth 1 brillion. Therefore, a gain of 10% in the investment will profit me 100 million dollars. Similarly, a loss of 10% would make me lose 100 million dollars, or would wipe out the initial investment. Now let's say this investment was flawed, because people were lying about the actual securities and nobody (especially Fannie and Freddie) knew what was going on. So I take a 40% loss on my investment. Now I'm out 400 million. I don't have enough in liquid money to pay back the 400 million, so I'm forced to call in my assets (such as the loans from other companies) at a steep discount rate to pay it back. By discount rate, I mean since I'm calling back loans before they are due, I forfeit interest on my loan, etc. so I may sell 500 billion in assets and end up with 350 million instead. So not only do I lose money from the initial investment, but I lose money in selling assets to pay it back. So in the end, I'm actually down 550 million from a 10% loss. The second thing it does is it causes money to be taken from other people who are using the money. If I am a company that borrowed 100 million from the bank above, and they call back their loan, sure, I may save money by not paying interest. But I don't have 100 million in cash on me. Therefore, I need to sell off my assets to get this 100 million, which in turn means that I either have to take a loss or call in outstanding loans/credit, which continues the chain of recognized losses. Without the bailout, we would have taken at least a 40% hit immediately. I'm not saying it was a good thing, however-it was basically extortion. Consider this, how is it morally justfiable to use taxpayers money to speculate in a failing firm? If you have bad cash flow, take a loan but is itsn't the goverments business at all. i didn't say it was morally justifiable to use taxpayers money, i said it was extortion. like i said, the problem with such a big fucking bank is that it tend to give tons of loans to many many companies. The collapse of such a large bank like Goldman Sachs would completely cripple monetary flow for a much larger area that just financial services-many companies would be forced to call in loans and sell assets, which begins a massive chain reaction that severely destabilizes our economy. In that sense, to protect the rest of America from the collapse of a bank, they had to bail them out. Consider the following situation: a scientist accidentally releases a culture of a supervirus that could kill millions. The only ones that are able to deal with the virus are the very group that released it. The government would thus give them money and funding to contain the virus, even if it was their fault that they released it. ur example given is valid in justifying the government's action/intervention in ur example, but sadly u can't compare a viral outbreak with an economic bubble bursting, its like comparing a apple to an orange... What the hell are you guys on, crack? I used to think just like you guys in that the bailout is the stupidest thing ever. I still think it's the stupidest thing ever. But it was also unfortunately necessary. The economic damage done by both a viral outbreak and the massive collapse of the economic bubble would be roughly equivalent. Sure, some people may value human lives as being virtually infinite in value, but in terms of just sheer destruction the "collapse of the economic bubble" and a viral outbreak would be virtually similar. Millions, while they may still be alive, will lose everything they have, and will roam the streets preventing their kids from starving. I think people would be far more concerned about being unable to deal with something that they know they could rather than dealing with a virus that they have no control over.
On behalf of the economic major inside of me, thank you for posting in these kind of threads Caller. It's nice to actually read some posts about economics that actually make sense.
On January 09 2010 09:13 synapse wrote:
Essentially, Schiff supports free market yet the free market is what caused the housing market collapse, and without government intervention our nation would be even more fucked.
I would like to reiterate this. Though the reasons behind the recession are numerous, the free-market, turn-a-blind-eye to the ill-advised loaning system of the banks is one of the main causes. + Show Spoiler +Man, winter break sure does put my brain on hold.
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The funny thing with a lot of this debate is that the bailout is a tiny, tiny issue when it comes to US economics. It literally is nothing more than a political football, meant to divert the US populace from the true issues.
In fact, the true issues with the US economy and why it's fucked up are never even up for discussion (for quite obvious reasons). The US economy started to go fubar when the gold standard was dissolved and the banking system was centralized with the Fed. When you then gave an institution the power to create currency with ZERO actual requirement of backing that currency with anything, you automatically changed the USA to a debt based economy.
How many people realize that the greenback is nothing but a debt coupon? It's literally an IOU from the Fed. A promissory note. OK, when you have a promissory note, it needs to promise something right? What does the greenback promise? Nothing! There's nothing backing it! All you can trade your greenback for is another greenback or another fiat currency. The world is playing with monopoly money here.
When the USA is in debt, what do we do? We just print fucking money. I sure wish if I was starving I could just print out some PB&J sandwiches. But that's not how life works. And that's why the US economy and much of the world economy since the end of WW2 is so fubar. It is all running on a concept of debt-based currencies that have no value other than what they're being traded for.
The USA gets in debt, they print a ton of new money to pay for it, then to keep the value of their currency high, they just package government bonds and sell them to China. What this effectively does is increase the demand for the greenback. There was X amount of demand before the Fed printed Y amount of money. OK, now that they've printed money we have Y amount of inflation. But, if China buys Y amount of bonds then demand increases to meet supply. Therefore price is stabilized and inflation is averted.
The problem with this is it's wholly artificial. The dollars I have are actually worth much less than they were before. It's just that the US gets other countries to pretend to have a demand for US currency to keep this economic ball rolling. It's a fucked up process and there's no good way of stepping back from it. What are you going to do? Reduce fiscal spending to the point where you can start buying back bonds to reduce the money supply? The way the USA is going, that's not going to happen for another thirty years.
Do you guys really think the demand for US currency will remain high? Well, let's see. What are the factors for US bond demand? Petrodollars, AKA everyone needs to hold onto US currency just to buy oil. So we've got a built in threshold of demand from that. OK, since everyone's already holding a ton of US currency, we then have a dollar hegemony that makes US currency very stable. This means many countries will hold US reserves solely to anchor the value of their own currencies. (AKA they say their currency will redeem for X amount of US dollars if traded, and they can honor this promise with their reserve of US currency).
So again, we have a higher threshold of demand for US currency. On top of that, you have the general demand caused by needing to buy products from the USA. This should be the ONLY incentive for holding US currency. Yet it's probably the LEAST percentage of actual demand for US currency, as evidenced by our ridiculous trade deficit.
So, basically, the only fundamentally sound reason for why people should want US currency (which determines the dollar's value) is the least consequential in the actual operation of US currency valuation.
What we have here is the US profiting off their massive advantage gained by being the winners and primary investors in the reconstruction of WW2 and the Cold War. But even with this ridiculous advantage, we have managed to fuck things up badly enough that our currency needs MORE demand to maintain its value.
And the problem with that is the factors for demand are DECREASING as time goes by, not increasing. You see several countries trying to move away from the petrodollar. Russia has emerged as a major player in the energy industry. They tried to propose the ruble as an alternative currency to use for trading oil. It got shot down, for now, but who knows when Russia will make another bid. You have OPEC who would LOVE to move away from the dollar. You have China who used to hold only US currency but are gradually changing to a larger basket of currencies due to US blundering in diplomacy and the general volatility of the US market of late.
We are also losing a lot of our credibility as the world's most stable currency. Especially after this latest fiasco. It sure is good that the EU and Japan are fucking inept when it comes to finance because God forbid somebody else is actually able to step up to bat. The US would be royally fucked if another currency debuted on the international market that matches them in stability (an increasingly likely prospect with how shit we're managing our monetary policy with constant bubbling and ridiculously low interest rates. LOL yeah I'm sure people would love to buy bonds with a what 4% return? I'm too lazy to look at the T-bills right now but they have to look hideous.
Yo, there's a reason gold is holding value. It's REAL. When everything else is BS, Gold stays real. That's why you see gold's value keep climbing when shit goes south. Gold never really loses except when it's coming down off a speculated high. The DOW? fucking flatline over the last 10 years.
I don't know. Maybe I've talked to much and this isn't a finance forum so doubt a lot of people are interested. But fuck, I get pissed off hearing all this dumbass shit about education and health and the bailout. All of this shit is paid for with monopoly money. Stop acting like any of it has a gain/loss. It's all ephemeral. The big game is being played with fiat currency and the centralized banking structure which embodies modern finance.
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oh, so fiat currency is killing the economy
thanks for explaining that
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I think a lot of you are misunderstanding what I'm saying here.
In nowhere am I saying that this is a good thing. I am not saying that it is good to bail out failing companies that made bad decisions and misjudged risks. I am not saying that it is good to bailout companies that will possibly be unable to fix their problems and become a giant money sink. I am not saying it is good to make the American taxpayer pay for someone else's mistake.
What I am saying is that the bailout was absolutely necessary to prevent the collapse of credit. It was extortion. In these situations, it's best to give in than to fight it out. It's perfectly natural and fine for those who make bad decisions to fail. However, if we let Atlas (holding up the world) get sick and die, the rest of us will pay for their failure. It's better to get him better than to fall down.
However, it is entirely possible that all the bailout will do is create bad incentives and delay the collapse for a bit longer. But that's exactly what will be helpful-time. With time, people will be able to pay off the loans and make plans for debt consolidation ahead of time than immediately on the spot. They will be able to make the right moves without having to take huge losses by liquidizing as much of their assets as possible.
I believe the free-market is the greatest thing to revolutionize society. I take economics at one of the most die-hard free-market bastions in the entire world, and I love it. I think that the federal government (not local) is just an organization devoted to turning energy into solid waste and we would be better off without one.
I also know that the free-market isn't here right now, because we have asymmetric information. And when we have things like that, which cause market failure, there needs to be external intervention to correct it. Once we fix all of the sources of market failure, then we may see the rise of a true free-market, instead of the mixed economy we have today.
This entire thing is the result of asymmetric information. There was a massive disconnect between the loaners to the local bankers, the local bankers to the securities people, the securities people to the quants, the quants to upper management in the banks, and everybody to the government, and the government to Fannie and Freddie, and Fannie and Freddie to the banks. All of those people fucked up, not because they're bad at what they do, nor because they are corrupt, but simply because nobody knew what the fuck was going on because there was just so much shit there.
And for those of you that blame the crisis on "laissez-faire" policies, I would just like to point out that the problems really began when Fannie Mae and Freddie Mac (government organizations) were buying up as much of the trash securities as they could. So figure how this bit of government intervention turned out.
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On January 09 2010 12:54 Comeh wrote:Show nested quote +On January 09 2010 11:12 Caller wrote:On January 09 2010 10:57 Shizuru~ wrote:On January 09 2010 10:53 Caller wrote:On January 09 2010 10:23 ArmChairCritic wrote:On January 09 2010 10:14 Caller wrote:On January 09 2010 09:42 7Strife wrote:On January 09 2010 09:31 iamho wrote:
this guy was in the times or the economist a few months ago. but honestly, it doesnt take a genius to spout government is evil libertarian doomsday crap Actually it is pretty difficult and he clearly demonstrates why with the resistance he receives from people like you. It would be nice if you mentioned a view of Libertarianism that is "doomsday bull crap." It would help! Since you wish me to evoke telekinesis may I start by asking you why it is a good idea for a government to give peoples money to save nonperforming failing companies? Is it so perhaps its CEOs and directors can buy a plane or their children a Ferrari (what deep thinkers like you call stimulating the economy)? That would seem like a really stupid idea. It would seem like it is a better idea to let performing companies survive and prosper to take their place. Isn't that the whole damn point to a free market; a certain evolution of the economy. I might have to agree with you that this stuff is easy after all! you guys clearly do not understand the idea of cash flow im not saying that we should be bailing out companies but at this point we really had no choice. consider this: I have 1 brillion dollars in assets. Most of these assets are in the form of money that I have loaned or invested into many different things. For instance, I may have 500 million in the form of a CD, or certificate of deposit, or something with a similar policy (i.e. I can't touch the money without penalties before the due date) Let's say I borrowed some money to make an investment (which is necessary in this day and age for tax reasons) and I thought that it was good and would be a safe investment. Say... 300 million dollars. I use leverage, which means that I can invest 100 million to make an investment worth 1 brillion. Therefore, a gain of 10% in the investment will profit me 100 million dollars. Similarly, a loss of 10% would make me lose 100 million dollars, or would wipe out the initial investment. Now let's say this investment was flawed, because people were lying about the actual securities and nobody (especially Fannie and Freddie) knew what was going on. So I take a 40% loss on my investment. Now I'm out 400 million. I don't have enough in liquid money to pay back the 400 million, so I'm forced to call in my assets (such as the loans from other companies) at a steep discount rate to pay it back. By discount rate, I mean since I'm calling back loans before they are due, I forfeit interest on my loan, etc. so I may sell 500 billion in assets and end up with 350 million instead. So not only do I lose money from the initial investment, but I lose money in selling assets to pay it back. So in the end, I'm actually down 550 million from a 10% loss. The second thing it does is it causes money to be taken from other people who are using the money. If I am a company that borrowed 100 million from the bank above, and they call back their loan, sure, I may save money by not paying interest. But I don't have 100 million in cash on me. Therefore, I need to sell off my assets to get this 100 million, which in turn means that I either have to take a loss or call in outstanding loans/credit, which continues the chain of recognized losses. Without the bailout, we would have taken at least a 40% hit immediately. I'm not saying it was a good thing, however-it was basically extortion. Consider this, how is it morally justfiable to use taxpayers money to speculate in a failing firm? If you have bad cash flow, take a loan but is itsn't the goverments business at all. i didn't say it was morally justifiable to use taxpayers money, i said it was extortion. like i said, the problem with such a big fucking bank is that it tend to give tons of loans to many many companies. The collapse of such a large bank like Goldman Sachs would completely cripple monetary flow for a much larger area that just financial services-many companies would be forced to call in loans and sell assets, which begins a massive chain reaction that severely destabilizes our economy. In that sense, to protect the rest of America from the collapse of a bank, they had to bail them out. Consider the following situation: a scientist accidentally releases a culture of a supervirus that could kill millions. The only ones that are able to deal with the virus are the very group that released it. The government would thus give them money and funding to contain the virus, even if it was their fault that they released it. ur example given is valid in justifying the government's action/intervention in ur example, but sadly u can't compare a viral outbreak with an economic bubble bursting, its like comparing a apple to an orange... What the hell are you guys on, crack? I used to think just like you guys in that the bailout is the stupidest thing ever. I still think it's the stupidest thing ever. But it was also unfortunately necessary. The economic damage done by both a viral outbreak and the massive collapse of the economic bubble would be roughly equivalent. Sure, some people may value human lives as being virtually infinite in value, but in terms of just sheer destruction the "collapse of the economic bubble" and a viral outbreak would be virtually similar. Millions, while they may still be alive, will lose everything they have, and will roam the streets preventing their kids from starving. I think people would be far more concerned about being unable to deal with something that they know they could rather than dealing with a virus that they have no control over. On behalf of the economic major inside of me, thank you for posting in these kind of threads Caller. It's nice to actually read some posts about economics that actually make sense. Show nested quote +On January 09 2010 09:13 synapse wrote:
Essentially, Schiff supports free market yet the free market is what caused the housing market collapse, and without government intervention our nation would be even more fucked. I would like to reiterate this. Though the reasons behind the recession are numerous, the free-market, turn-a-blind-eye to the ill-advised loaning system of the banks is one of the main causes. + Show Spoiler +Man, winter break sure does put my brain on hold.
The free market is not what caused the housing market collapse. What caused the housing market collapse was Greenspan's bullshit low interest rate driving economic growth monetary policy. Sure, there was economic growth, and it was fueled by the massive liquidity allowed by the Fed's unjustifiably low rates, that were held there for YEARS. When you put free money on someone's doorstep, they might be suspicious for a day or two. But they're gonna start using that shit when you leave it out there for years.
Basically, what we saw were people purchasing outside of their means and doing so through a variety of exotic loans developed solely to offer people low monthly rates. Except, when the Fed turned off the spigot, those ARMs started to crank the fuck up because ARMs are basically rubber hoses connected to the spigot which is the Fed lending rate. With the easy flow of capital shut off, you started seeing a shit ton of people default.
When people started to default, they did so in a fucking daisy chain because all this shit is connected to the same spigot. Then you saw the financial firms panic because suddenly all those derivatives they had on the balance sheet turned into a pile of dog shit. When the balance sheets went ass up, suddenly you saw liquidity vanish. Why? Because it was never there in the first place. Even with how ridiculously loose the Fed had been playing it, every fucking cent of it had been leveraged for maximum gain by the financial firms. Why did they do that? Because they HAD to. If they weren't going to leverage to the max, the guy next door sure as hell would. In the finance game, the guy with a billion dollars ALWAYS beats the guy with a million.
So basically everyone had to join in this system, because if they didn't, they'd have to shut their doors. So you have maximum exposure of literally the entire finance industry. Greenspan pushed shit up quarter after quarter because he was scared of inflation and boom, you end up with what we have now. Which is a giant bubble burst.
Every company was leveraging on the understanding that liquidity was at a certain level. But what happened was none of these companies calculated the fact that everyone else was leveraging balls deep. Therefore, a whole ton of these companies got caught with their dicks hanging out. The government's response was to cherry pick which companies they wanted to save and started throwing money at them. Like I said before, in the finance game, the guy with more money wins. The government PICKED the winners, and they consolidated. Which is the semi-salvaged market you're seeing today.
TL:DR version: It is the fault of government AND free market.
It is the government's fault for pushing a horribly irresponsible monetary policy.
It is the free market's fault because of the nature of free markets. If you don't take advantage of something right away, the next guy will. Therefore you are forced to take this short term advantage, which leads your competitors to do the same, which causes rampant overexposure for the market as a whole.
This is a classic example of perfect responsiveness in the market leading to long term ownage for all. It is not always best to be a 100% efficient reactionary market. And in this case, the Fed's ridiculously long period of interest rates passed the buffer system in the free market that accounts for short term fluctuations.
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On January 09 2010 13:08 Caller wrote:
I think a lot of you are misunderstanding what I'm saying here.
In nowhere am I saying that this is a good thing. I am not saying that it is good to bail out failing companies that made bad decisions and misjudged risks. I am not saying that it is good to bailout companies that will possibly be unable to fix their problems and become a giant money sink. I am not saying it is good to make the American taxpayer pay for someone else's mistake.
What I am saying is that the bailout was absolutely necessary to prevent the collapse of credit. It was extortion. In these situations, it's best to give in than to fight it out. It's perfectly natural and fine for those who make bad decisions to fail. However, if we let Atlas (holding up the world) get sick and die, the rest of us will pay for their failure. It's better to get him better than to fall down.
However, it is entirely possible that all the bailout will do is create bad incentives and delay the collapse for a bit longer. But that's exactly what will be helpful-time. With time, people will be able to pay off the loans and make plans for debt consolidation ahead of time than immediately on the spot. They will be able to make the right moves without having to take huge losses by liquidizing as much of their assets as possible.
I believe the free-market is the greatest thing to revolutionize society. I take economics at one of the most die-hard free-market bastions in the entire world, and I love it. I think that the federal government (not local) is just an organization devoted to turning energy into solid waste and we would be better off without one.
I also know that the free-market isn't here right now, because we have asymmetric information. And when we have things like that, which cause market failure, there needs to be external intervention to correct it. Once we fix all of the sources of market failure, then we may see the rise of a true free-market, instead of the mixed economy we have today.
This entire thing is the result of asymmetric information. There was a massive disconnect between the loaners to the local bankers, the local bankers to the securities people, the securities people to the quants, the quants to upper management in the banks, and everybody to the government, and the government to Fannie and Freddie, and Fannie and Freddie to the banks. All of those people fucked up, not because they're bad at what they do, nor because they are corrupt, but simply because nobody knew what the fuck was going on because there was just so much shit there.
And for those of you that blame the crisis on "laissez-faire" policies, I would just like to point out that the problems really began when Fannie Mae and Freddie Mac (government organizations) were buying up as much of the trash securities as they could. So figure how this bit of government intervention turned out.
Fannie and Freddie were buying them up because doing so made money at the time. Hooray for bundling white paper and selling it to foreign countries that have a glut in capital from trade surpluses and don't have the domestic infrastructure to absorb the liquidity. AKA The Middle East and China.
That's not Fannie and Freddie acting as an arm of the gov't. That was them acting like the private sector while being gov't entities. There's a distinction there that I don't think should be forgotten.
I still don't think a free market is possible until we abolish fiat currencies as a system, AND abolish the centralized banking system.
How can you possibly have a free market when you have a system of valuation that's flawed and a supply/demand relationship that is in the hands of a few entities?
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On January 09 2010 13:05 Mindcrime wrote:
oh, so fiat currency is killing the economy
thanks for explaining that
lol if you're too dumb to understand how fiat currency is related to the Fed's monetary policy then you are beyond all help. And the Fed's monetary policy was the #1 factor in the cause of this bubble. Without them lowering interest rates, none of this speculation would be possible. GL creating ARMs and selling them to the lower-middle class at 15% interest rates.
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i was totally cereal dude
fed bad
need commodity based currency
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On January 09 2010 13:08 Caller wrote:
I think a lot of you are misunderstanding what I'm saying here.
In nowhere am I saying that this is a good thing. I am not saying that it is good to bail out failing companies that made bad decisions and misjudged risks. I am not saying that it is good to bailout companies that will possibly be unable to fix their problems and become a giant money sink. I am not saying it is good to make the American taxpayer pay for someone else's mistake.
What I am saying is that the bailout was absolutely necessary to prevent the collapse of credit. It was extortion. In these situations, it's best to give in than to fight it out. It's perfectly natural and fine for those who make bad decisions to fail. However, if we let Atlas (holding up the world) get sick and die, the rest of us will pay for their failure. It's better to get him better than to fall down.
However, it is entirely possible that all the bailout will do is create bad incentives and delay the collapse for a bit longer. But that's exactly what will be helpful-time. With time, people will be able to pay off the loans and make plans for debt consolidation ahead of time than immediately on the spot. They will be able to make the right moves without having to take huge losses by liquidizing as much of their assets as possible.
I believe the free-market is the greatest thing to revolutionize society. I take economics at one of the most die-hard free-market bastions in the entire world, and I love it. I think that the federal government (not local) is just an organization devoted to turning energy into solid waste and we would be better off without one.
I also know that the free-market isn't here right now, because we have asymmetric information. And when we have things like that, which cause market failure, there needs to be external intervention to correct it. Once we fix all of the sources of market failure, then we may see the rise of a true free-market, instead of the mixed economy we have today.
This entire thing is the result of asymmetric information. There was a massive disconnect between the loaners to the local bankers, the local bankers to the securities people, the securities people to the quants, the quants to upper management in the banks, and everybody to the government, and the government to Fannie and Freddie, and Fannie and Freddie to the banks. All of those people fucked up, not because they're bad at what they do, nor because they are corrupt, but simply because nobody knew what the fuck was going on because there was just so much shit there.
And for those of you that blame the crisis on "laissez-faire" policies, I would just like to point out that the problems really began when Fannie Mae and Freddie Mac (government organizations) were buying up as much of the trash securities as they could. So figure how this bit of government intervention turned out.
I largely agree with you. Didn't really mean to make it seem otherwise.
This is going to sound silly, but the one thing about everything that you've said that really leaves me confused is the idea that. "The collapse of credit" is a bad thing?
America has been importing far more than it's been exporting for longer than I've been alive. I'm certainly no expert on this, and I certainly have some bias, as I have no assets to really lose in a collapse, but essentially, to me, it just sounds like a collapse is what we need. We need to wake the fuck up and stop trying nonsense bullshit and fix our system. Just curious what your thoughts on that are.
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Sanya12364 Posts
On January 09 2010 13:08 Caller wrote:
I think a lot of you are misunderstanding what I'm saying here.
In nowhere am I saying that this is a good thing. I am not saying that it is good to bail out failing companies that made bad decisions and misjudged risks. I am not saying that it is good to bailout companies that will possibly be unable to fix their problems and become a giant money sink. I am not saying it is good to make the American taxpayer pay for someone else's mistake.
What I am saying is that the bailout was absolutely necessary to prevent the collapse of credit. It was extortion. In these situations, it's best to give in than to fight it out. It's perfectly natural and fine for those who make bad decisions to fail. However, if we let Atlas (holding up the world) get sick and die, the rest of us will pay for their failure. It's better to get him better than to fall down.
However, it is entirely possible that all the bailout will do is create bad incentives and delay the collapse for a bit longer. But that's exactly what will be helpful-time. With time, people will be able to pay off the loans and make plans for debt consolidation ahead of time than immediately on the spot. They will be able to make the right moves without having to take huge losses by liquidizing as much of their assets as possible.
I believe the free-market is the greatest thing to revolutionize society. I take economics at one of the most die-hard free-market bastions in the entire world, and I love it. I think that the federal government (not local) is just an organization devoted to turning energy into solid waste and we would be better off without one.
I also know that the free-market isn't here right now, because we have asymmetric information. And when we have things like that, which cause market failure, there needs to be external intervention to correct it. Once we fix all of the sources of market failure, then we may see the rise of a true free-market, instead of the mixed economy we have today.
This entire thing is the result of asymmetric information. There was a massive disconnect between the loaners to the local bankers, the local bankers to the securities people, the securities people to the quants, the quants to upper management in the banks, and everybody to the government, and the government to Fannie and Freddie, and Fannie and Freddie to the banks. All of those people fucked up, not because they're bad at what they do, nor because they are corrupt, but simply because nobody knew what the fuck was going on because there was just so much shit there.
And for those of you that blame the crisis on "laissez-faire" policies, I would just like to point out that the problems really began when Fannie Mae and Freddie Mac (government organizations) were buying up as much of the trash securities as they could. So figure how this bit of government intervention turned out.
So in this case, the TaxPayers get to be Atlas and shoulder a world of credit. I don't see how the bailout was in anyway equitable to the tax paper. This wasn't just giving into the banker's extortion. This was being shit on by the bankers and then wiping their ass crack for them.
Seriously, how does not knowing stuff about mortgages justify their continued existence? If NOBODY knew what the fuck was going on, that's a failed BUSINESS MODEL. NOBODY should even be in the market place. So why do these companies continue to exist with their old business models??? Isn't that just asking for more pain?
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On January 09 2010 14:17 Motiva wrote:Show nested quote +On January 09 2010 13:08 Caller wrote:
I think a lot of you are misunderstanding what I'm saying here.
In nowhere am I saying that this is a good thing. I am not saying that it is good to bail out failing companies that made bad decisions and misjudged risks. I am not saying that it is good to bailout companies that will possibly be unable to fix their problems and become a giant money sink. I am not saying it is good to make the American taxpayer pay for someone else's mistake.
What I am saying is that the bailout was absolutely necessary to prevent the collapse of credit. It was extortion. In these situations, it's best to give in than to fight it out. It's perfectly natural and fine for those who make bad decisions to fail. However, if we let Atlas (holding up the world) get sick and die, the rest of us will pay for their failure. It's better to get him better than to fall down.
However, it is entirely possible that all the bailout will do is create bad incentives and delay the collapse for a bit longer. But that's exactly what will be helpful-time. With time, people will be able to pay off the loans and make plans for debt consolidation ahead of time than immediately on the spot. They will be able to make the right moves without having to take huge losses by liquidizing as much of their assets as possible.
I believe the free-market is the greatest thing to revolutionize society. I take economics at one of the most die-hard free-market bastions in the entire world, and I love it. I think that the federal government (not local) is just an organization devoted to turning energy into solid waste and we would be better off without one.
I also know that the free-market isn't here right now, because we have asymmetric information. And when we have things like that, which cause market failure, there needs to be external intervention to correct it. Once we fix all of the sources of market failure, then we may see the rise of a true free-market, instead of the mixed economy we have today.
This entire thing is the result of asymmetric information. There was a massive disconnect between the loaners to the local bankers, the local bankers to the securities people, the securities people to the quants, the quants to upper management in the banks, and everybody to the government, and the government to Fannie and Freddie, and Fannie and Freddie to the banks. All of those people fucked up, not because they're bad at what they do, nor because they are corrupt, but simply because nobody knew what the fuck was going on because there was just so much shit there.
And for those of you that blame the crisis on "laissez-faire" policies, I would just like to point out that the problems really began when Fannie Mae and Freddie Mac (government organizations) were buying up as much of the trash securities as they could. So figure how this bit of government intervention turned out. I largely agree with you. Didn't really mean to make it seem otherwise. This is going to sound silly, but the one thing about everything that you've said that really leaves me confused is the idea that. "The collapse of credit" is a bad thing? America has been importing far more than it's been exporting for longer than I've been alive. I'm certainly no expert on this, and I certainly have some bias, as I have no assets to really lose in a collapse, but essentially, to me, it just sounds like a collapse is what we need. We need to wake the fuck up and stop trying nonsense bullshit and fix our system. Just curious what your thoughts on that are.
There's a difference between borrowing beyond your means and the loss of credit. Without credit, it will be impossible for people to start a business or buy a home or anything. If you had to front the costs for a house by yourself, you would likely not be living in one. Similarly, if it is impossible to start new investment, people will not have new jobs, and there will also be no incentive to save money. Consider how people like to keep money saved because of interest and investments. Without credit, nobody would be willing to pay interest, so people would spend a lot more because it's better to have something useful than something not (i.e. money that doesn't increase in value).
While we are definitely importing far more than we are exporting, and are in huge amounts of debt, this isn't related to the collapse of credit in our economy. In fact, a credit collapse would only exasperate the issue as China would attempt to liquidate its Treasury bills as a result, which would probably (after many, many events) lead to the end of American civilization as we know it.
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On January 09 2010 14:47 TanGeng wrote:Show nested quote +On January 09 2010 13:08 Caller wrote:
I think a lot of you are misunderstanding what I'm saying here.
In nowhere am I saying that this is a good thing. I am not saying that it is good to bail out failing companies that made bad decisions and misjudged risks. I am not saying that it is good to bailout companies that will possibly be unable to fix their problems and become a giant money sink. I am not saying it is good to make the American taxpayer pay for someone else's mistake.
What I am saying is that the bailout was absolutely necessary to prevent the collapse of credit. It was extortion. In these situations, it's best to give in than to fight it out. It's perfectly natural and fine for those who make bad decisions to fail. However, if we let Atlas (holding up the world) get sick and die, the rest of us will pay for their failure. It's better to get him better than to fall down.
However, it is entirely possible that all the bailout will do is create bad incentives and delay the collapse for a bit longer. But that's exactly what will be helpful-time. With time, people will be able to pay off the loans and make plans for debt consolidation ahead of time than immediately on the spot. They will be able to make the right moves without having to take huge losses by liquidizing as much of their assets as possible.
I believe the free-market is the greatest thing to revolutionize society. I take economics at one of the most die-hard free-market bastions in the entire world, and I love it. I think that the federal government (not local) is just an organization devoted to turning energy into solid waste and we would be better off without one.
I also know that the free-market isn't here right now, because we have asymmetric information. And when we have things like that, which cause market failure, there needs to be external intervention to correct it. Once we fix all of the sources of market failure, then we may see the rise of a true free-market, instead of the mixed economy we have today.
This entire thing is the result of asymmetric information. There was a massive disconnect between the loaners to the local bankers, the local bankers to the securities people, the securities people to the quants, the quants to upper management in the banks, and everybody to the government, and the government to Fannie and Freddie, and Fannie and Freddie to the banks. All of those people fucked up, not because they're bad at what they do, nor because they are corrupt, but simply because nobody knew what the fuck was going on because there was just so much shit there.
And for those of you that blame the crisis on "laissez-faire" policies, I would just like to point out that the problems really began when Fannie Mae and Freddie Mac (government organizations) were buying up as much of the trash securities as they could. So figure how this bit of government intervention turned out. So in this case, the TaxPayers get to be Atlas and shoulder a world of credit. I don't see how the bailout was in anyway equitable to the tax paper. This wasn't just giving into the banker's extortion. This was being shit on by the bankers and then wiping their ass crack for them. Seriously, how does not knowing stuff about mortgages justify their continued existence? If NOBODY knew what the fuck was going on, that's a failed BUSINESS MODEL. NOBODY should even be in the market place. So why do these companies continue to exist with their old business models??? Isn't that just asking for more pain?
it is asking for more pain. But we don't have a choice, the fact of the matter is, until these companies are able to liquidate their shit and other companies can acquire credit from other, more reliable sources. I don't disagree its a failed business model. But we don't have a choice, because if they fall, they will take the rest of America down with them. It's better to take a smaller hit now than a much larger hit down the road. But I'm not condoning the bailout-it was, one may suppose, the lesser of two evils.
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Caller why are you even trying to argue the bailout? If someone doesn't understand why the bailout was necessary, they don't belong in any debate on economics. It's kind of sad for me to see a thread on why the economy is fubar devolve into a debate on whether TARP was necessary. It's such an elementary concept that it doesn't deserve to even be discussed.
Pretty simple situation:
Problem: The markets have no liquidity
Solution: Inject liquidity.
It's like saying someone's dehydrated and the solution is to not give them any water, so they die, and then later on a baby can be born that will one day take this dehydrated person's place and then we won't have a problem with dehydration anymore. Does anyone here think that sounds like a sensible solution?
Stop trying to explain to people in economic terms. They're not going to get it. A guy screaming in all caps that the financial market is a failed business model is a person who doesn't have a clue what economics is.
Now, get off the kiddy shit and debate some real economics. 
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On January 09 2010 14:49 Caller wrote:Show nested quote +On January 09 2010 14:17 Motiva wrote:On January 09 2010 13:08 Caller wrote:
I think a lot of you are misunderstanding what I'm saying here.
In nowhere am I saying that this is a good thing. I am not saying that it is good to bail out failing companies that made bad decisions and misjudged risks. I am not saying that it is good to bailout companies that will possibly be unable to fix their problems and become a giant money sink. I am not saying it is good to make the American taxpayer pay for someone else's mistake.
What I am saying is that the bailout was absolutely necessary to prevent the collapse of credit. It was extortion. In these situations, it's best to give in than to fight it out. It's perfectly natural and fine for those who make bad decisions to fail. However, if we let Atlas (holding up the world) get sick and die, the rest of us will pay for their failure. It's better to get him better than to fall down.
However, it is entirely possible that all the bailout will do is create bad incentives and delay the collapse for a bit longer. But that's exactly what will be helpful-time. With time, people will be able to pay off the loans and make plans for debt consolidation ahead of time than immediately on the spot. They will be able to make the right moves without having to take huge losses by liquidizing as much of their assets as possible.
I believe the free-market is the greatest thing to revolutionize society. I take economics at one of the most die-hard free-market bastions in the entire world, and I love it. I think that the federal government (not local) is just an organization devoted to turning energy into solid waste and we would be better off without one.
I also know that the free-market isn't here right now, because we have asymmetric information. And when we have things like that, which cause market failure, there needs to be external intervention to correct it. Once we fix all of the sources of market failure, then we may see the rise of a true free-market, instead of the mixed economy we have today.
This entire thing is the result of asymmetric information. There was a massive disconnect between the loaners to the local bankers, the local bankers to the securities people, the securities people to the quants, the quants to upper management in the banks, and everybody to the government, and the government to Fannie and Freddie, and Fannie and Freddie to the banks. All of those people fucked up, not because they're bad at what they do, nor because they are corrupt, but simply because nobody knew what the fuck was going on because there was just so much shit there.
And for those of you that blame the crisis on "laissez-faire" policies, I would just like to point out that the problems really began when Fannie Mae and Freddie Mac (government organizations) were buying up as much of the trash securities as they could. So figure how this bit of government intervention turned out. I largely agree with you. Didn't really mean to make it seem otherwise. This is going to sound silly, but the one thing about everything that you've said that really leaves me confused is the idea that. "The collapse of credit" is a bad thing? America has been importing far more than it's been exporting for longer than I've been alive. I'm certainly no expert on this, and I certainly have some bias, as I have no assets to really lose in a collapse, but essentially, to me, it just sounds like a collapse is what we need. We need to wake the fuck up and stop trying nonsense bullshit and fix our system. Just curious what your thoughts on that are. There's a difference between borrowing beyond your means and the loss of credit. Without credit, it will be impossible for people to start a business or buy a home or anything. If you had to front the costs for a house by yourself, you would likely not be living in one. Similarly, if it is impossible to start new investment, people will not have new jobs, and there will also be no incentive to save money. Consider how people like to keep money saved because of interest and investments. Without credit, nobody would be willing to pay interest, so people would spend a lot more because it's better to have something useful than something not (i.e. money that doesn't increase in value). While we are definitely importing far more than we are exporting, and are in huge amounts of debt, this isn't related to the collapse of credit in our economy. In fact, a credit collapse would only exasperate the issue as China would attempt to liquidate its Treasury bills as a result, which would probably (after many, many events) lead to the end of American civilization as we know it.
That makes sense.
Either way, aren't we still looking at a collapse of some sort eventually if we don't either start producing more goods to export, stop importing so much, or at the least generate some sort of sustaining income as a nation from foreign interests? I'm also not so sure that the end of American Civilization "as we know it" is necessarily so bad as long as the states can maintain their sovereignty... I'm sure that's pretty radical, and I can certainly understand the bailout in the situation your describing, but it's anything but a solution. What is the solution? We certainly don't have many of those good ol' 1950's factories laying around anymore.
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On January 09 2010 15:04 StorkHwaiting wrote:Caller why are you even trying to argue the bailout? If someone doesn't understand why the bailout was necessary, they don't belong in any debate on economics. It's kind of sad for me to see a thread on why the economy is fubar devolve into a debate on whether TARP was necessary. It's such an elementary concept that it doesn't deserve to even be discussed. Pretty simple situation: Problem: The markets have no liquidity Solution: Inject liquidity. It's like saying someone's dehydrated and the solution is to not give them any water, so they die, and then later on a baby can be born that will one day take this dehydrated person's place and then we won't have a problem with dehydration anymore. Does anyone here think that sounds like a sensible solution? Stop trying to explain to people in economic terms. They're not going to get it. A guy screaming in all caps that the financial market is a failed business model is a person who doesn't have a clue what economics is. Now, get off the kiddy shit and debate some real economics.
Uh, Caller's posts are very productive, Your other posts are quite nice as well. You're above post is no better than the person screaming in all caps however. Someone with an open mind, and intelligent understanding of logic, is fully capable of not understanding why TARP was necessary. You're just being arrogant by thinking that people who aren't educated on the subject aren't interested in the subject.
It's not really any different than me telling you to get the fuck off of a video game forum if you want to discuss politics at all.
It's just foolish. Please be more reasonable.
EDIT: Furthermore, and more on topic, pertaining to your "Solution: Inject Liquidity" I'm left wanting to ask, so if we can just create liquity out of thin air as your solution implies, why didn't we do that a long time ago? Obviously I'm not serious, and the real question is, How do you create Liquidity to inject when the markets are dry? And if the markets are dry, what happened to the liquidity that was in the markets? Why didn't we prevent that? ectectect. But whatever, I didn't bring the bailout up, and really isn't what I was interested in w/ this thread. But Since it was being discussed.....
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On January 09 2010 14:17 Motiva wrote:Show nested quote +On January 09 2010 13:08 Caller wrote:
I think a lot of you are misunderstanding what I'm saying here.
In nowhere am I saying that this is a good thing. I am not saying that it is good to bail out failing companies that made bad decisions and misjudged risks. I am not saying that it is good to bailout companies that will possibly be unable to fix their problems and become a giant money sink. I am not saying it is good to make the American taxpayer pay for someone else's mistake.
What I am saying is that the bailout was absolutely necessary to prevent the collapse of credit. It was extortion. In these situations, it's best to give in than to fight it out. It's perfectly natural and fine for those who make bad decisions to fail. However, if we let Atlas (holding up the world) get sick and die, the rest of us will pay for their failure. It's better to get him better than to fall down.
However, it is entirely possible that all the bailout will do is create bad incentives and delay the collapse for a bit longer. But that's exactly what will be helpful-time. With time, people will be able to pay off the loans and make plans for debt consolidation ahead of time than immediately on the spot. They will be able to make the right moves without having to take huge losses by liquidizing as much of their assets as possible.
I believe the free-market is the greatest thing to revolutionize society. I take economics at one of the most die-hard free-market bastions in the entire world, and I love it. I think that the federal government (not local) is just an organization devoted to turning energy into solid waste and we would be better off without one.
I also know that the free-market isn't here right now, because we have asymmetric information. And when we have things like that, which cause market failure, there needs to be external intervention to correct it. Once we fix all of the sources of market failure, then we may see the rise of a true free-market, instead of the mixed economy we have today.
This entire thing is the result of asymmetric information. There was a massive disconnect between the loaners to the local bankers, the local bankers to the securities people, the securities people to the quants, the quants to upper management in the banks, and everybody to the government, and the government to Fannie and Freddie, and Fannie and Freddie to the banks. All of those people fucked up, not because they're bad at what they do, nor because they are corrupt, but simply because nobody knew what the fuck was going on because there was just so much shit there.
And for those of you that blame the crisis on "laissez-faire" policies, I would just like to point out that the problems really began when Fannie Mae and Freddie Mac (government organizations) were buying up as much of the trash securities as they could. So figure how this bit of government intervention turned out. I largely agree with you. Didn't really mean to make it seem otherwise. This is going to sound silly, but the one thing about everything that you've said that really leaves me confused is the idea that. "The collapse of credit" is a bad thing? America has been importing far more than it's been exporting for longer than I've been alive. I'm certainly no expert on this, and I certainly have some bias, as I have no assets to really lose in a collapse, but essentially, to me, it just sounds like a collapse is what we need. We need to wake the fuck up and stop trying nonsense bullshit and fix our system. Just curious what your thoughts on that are.
Totally agree with this. All the attempts to stop the collapse have been finger band-aids for axe wounds. Sooner or later, we're going to run out of blood.
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EPT
