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.
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.
Did you honestly read what TanGeng wrote?
No actually, I had not however, your general statements applied a lot to me, A person with no background or understand on a more-than basic level. sure I passed economics in high school, like 7 years ago, and i hated politics then... I suppose, my Edit on that post is a more meatier description of my point, and after reading TanGeng's post, your post makes a lot more sense.
I can understand your frustration certainly, but these topics are sometimes pretty ambiguous and different "experts" will tell you different things. ^ ^
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.....
You create liquidity literally by just printing more money, which is exactly what the Fed did in this situation. Then the Fed tries to keep inflation under control through monetary tools like T-bill auctions. You often see inflation following lock in step with how well bond auctions go. They're a barometer of demand/confidence in a currency. The Fed literally can create liquidity out of thin air, at least in the short-term. Which is one of the many reasons I think the Fed is a terrible institution.
The liquidity that WAS in the markets got destroyed long ago. If you look up at my earlier post where I explained the factors involved in the collapse it explains a great deal of it but a short version would be:
We had high liquidity due to low interest rates. This is because the Fed's interest rate roughly equals the cost of money for banks. The lower the cost of money, the more banks will lend to people. The amount banks are willing to lend to people are what is termed liquidity.
Once the liquidity was out there, the banks went to town. It's like throwing a meaty bone in front of starving dogs. Then basically all the financial groups were FORCED to take advantage of this free money.
Why were they forced?
Because if they didn't use it up, their competitor down the street was going to use it. And for the first few years it netted them HUGE profits. Any bank/investment group that didn't get in on the action would basically have been bankrupted due to being unable to compete. If you and another guy both know a stock is good but you only have $10 to buy with and he he as $10 mil, guess who's going to be making more money? Finance is that kind of game. The guy with more money usually wins because a lot of the good investments are clear to see. Yes, there are a lot of risky flips too but those aren't the bread and butter of financial groups.
So basically, you have banks and investment groups grabbing up every scrap of liquidity and then repackaging it to sell to other people over and over again until you have a single dollar strung out and lent out to seven different people.
Then what happens is five of those people come back and say "Yo, I can't pay you back that dollar. I spent it on a TV that my wife broke when she found out I cheated on her."
The money is gone. The liquidity is gone. The PAPER wealth that the company had recorded ended up being bullshit. All those "accounts receivable" turned into write offs as losses.
And that's why the bubble popped.
We didn't prevent it because well, most of our politicians either don't understand finance or are paid off by the investment groups. The people who did warn of impending failure were treated as laughingstocks and loonies. (I switched my major FROM finance because of this crisis. I saw it coming in 2006.) Most people in the industry were busy trying to grab shit while it was hot and talking about cashing out when they made their fortune. A lot of people thought they could ride the gravy train another year. And you know the rest.
Far better of a response than I would have expected
Very education post for me. It's pretty plain and easy to see that the bailout was pretty important for the short term.
The bailout doesn't seem like any sort of solution, and from what I'm gathering, isn't intended to be.
After reading most of this thread, watching a few Peter Schiff speeches, and acknowledging thing like the US Wars, Budget, National Debt, That a large percentage of tax payers get their money back, The whole import/export deficit...
What are we doing to ensure that the bailout wasn't just flipping the hourglass over and saying go go go go win this time boys!
and more so, even if the market turns around and stabilizes with our trade deficit, national debt, ect (all of our problems) aren't we still going to be facing a serious issue again in the future if we don't turn our system around. A lot of these issues have been around since the creation of the FED or post-WW2...
To me this reminds of someone who owns a Beach House, but instead of getting flood insurance, they just make the stilts holding their house off the ground taller, but failed to realize that wood rots, or that water can still get that high. Meh horrible analogy, my apolagies, but hopefully i'm being clear.
This is a peter Schiff thread so:
same thing as the first vid in OP, but better imo.
"Wealth is only going up in terms of the depreciating dollar." YES. Thank you Peter Schiff. He's basically saying exactly what I was talking about in terms of printing money and leveraging the value of the US currency as a way to generate wealth. That is the guiding principle of a debt-based economy.
See, all I can really say about Peter Schiff is that I admire him and at the same time feel sorry as fuck for him. Here is a guy who understands what is wrong with the system, and actually has the fortitude to stay in it. Hell, I couldn't make it out of college stomaching the shit they tried to feed me. Finance really isn't a difficult field when you put the time and effort into understanding it (history and politics help a ton too), the problem is that once you understand it it's so morally repugnant that you don't want to go near it with a ten foot pole. Yet, it's one of the most influential factors in our lives. (Which was the original reason I wanted to study finance). A quandary to be sure.
Now, the reason why Peter Schiff looks like a fool pessimist is because year to year, they always trot the man out and ask him on his predictions. And the thing is, he's wrong for 5 years and then right for 2 years.
Why is that? It's because Peter's sitting here and looking at the fundamentals of the markets and he's like this shit doesn't make sense. It's got to come crashing down soon. And it does come crashing down. The problem is that the government, due to political pressure, is constantly hemming and hawing and trying to find new monetary tricks to avoid a recession. You can basically call everything since Reagan came to power by this name. It's not Republicans bad. It's both parties. Clinton and Obama are engaging in the same shenanigans.
So, we've basically had a recession that's 20+ years overdue. We've had some hits and such in the late eighties and late nineties and now in the late 00's. You seeing the trend here?
Now what each generation has done is build a bubble based on leveraging US currency, making their fortune, and then passing the buck on to the next generation. The problem is that the well is running dry. By the time it's gotten to us, there is not much left in that well. And yet, we're the generation weaned on the tit of consumerism for the longest time. It's a shitty position to be in.
But Peter Schiff is right. The solution is to return to an economy based on savings NOT debt. People need to live within their means and save money for the sake of investing or starting a business of their own. Money is supposed to be spent to IMPROVE a person's capacity to generate wealth.
Think of it this way. Imagine if I was playing a game of SC and I was 3 gas protoss. 3 gas protoss is pretty fucking cool. That's a lot of eco. OK, but after I went 3 gas protoss I proceeded to build 100 gateways. By then, that 3 gas eco is not looking so hot. Would the solution at this point be to build probes and expand or build MORE gateways? Should be a pretty easy answer. The sad thing is the USA continues to build more gateways.
And they call it wealth because they're like look dude, we've built 20 gateways in these last ten years. How can you not call that progress? Peter Schiff says well uh great, but when you don't have the eco to support those gateways it don't really mean shit. And the other analysts are like fuck you talking about man? Look at this shit we're pumping zeals and DTs and everythang. And Peter looks over at the depleted vespene geyser and just shakes his head.
On January 09 2010 09:56 Newbistic wrote: Didn't watch the first video, but his logic is faulty in the second video.
Schiff didn't prove that loans caused increased tuition, he simply stated that a correlation exists between the arrival of government loans and increases in tuition. Correlation does not mean causation.
Also, logic states that with all the new technology, education should be more expensive, not cheaper because more money would need to be spent to acquire the new technology. Technology did not change that fast back in the day, neither did progression in academics. Nowadays more knowledge is produced and at a faster rate, so universities need more resources to acquire newer, costlier ways of producing knowledge.
Of course, there are other reasons why tuition costs more today exclusive of the need to acquire more technology, but it still doesn't mean he's necessarily right.
Wrong, you don't understand how business's work.
Colleges can charge anything they want, because the government is guaranteeing that they will be paid that amount. Students don't care because they don't have to rate the loan, and pay it off in the future. If you have a monopoly on a necessary service, you can charge anything you want, and that's what colleges are doing.
Given inflation, the price of college should be proportional to the amount earned, which is why he gave prices back in 1810-1852, and 1874-1918. College costs fifty times as much when adjusting for inflation, when it should cost exactly the same. If students had to actually pay their way through college on a 40 hour work week and couldn't get any student loans, all major colleges would bring down costs to community college levels, or they would have no students, and would have to massively slash spending. But they don't have to, because if you want to go to college, you have to get a massive student loan to pay for it, and you are guaranteed to get the loan.
On January 09 2010 09:56 Newbistic wrote: Didn't watch the first video, but his logic is faulty in the second video.
Schiff didn't prove that loans caused increased tuition, he simply stated that a correlation exists between the arrival of government loans and increases in tuition. Correlation does not mean causation.
Also, logic states that with all the new technology, education should be more expensive, not cheaper because more money would need to be spent to acquire the new technology. Technology did not change that fast back in the day, neither did progression in academics. Nowadays more knowledge is produced and at a faster rate, so universities need more resources to acquire newer, costlier ways of producing knowledge.
Of course, there are other reasons why tuition costs more today exclusive of the need to acquire more technology, but it still doesn't mean he's necessarily right.
Wrong, you don't understand how business's work.
Colleges can charge anything they want, because the government is guaranteeing that they will be paid that amount. Students don't care because they don't have to rate the loan, and pay it off in the future. If you have a monopoly on a necessary service, you can charge anything you want, and that's what colleges are doing.
Given inflation, the price of college should be proportional to the amount earned, which is why he gave prices back in 1810-1852, and 1874-1918. College costs fifty times as much when adjusting for inflation, when it should cost exactly the same. If students had to actually pay their way through college on a 40 hour work week and couldn't get any student loans, all major colleges would bring down costs to community college levels, or they would have no students, and would have to massively slash spending. But they don't have to, because if you want to go to college, you have to get a massive student loan to pay for it, and you are guaranteed to get the loan.
Everything he said is completely accurate.
This is something I disagree with Peter on. Universities are incubators for talent. Yes, I know, it sounds funny because there are tons of slacker kids that get through uni, but it's true. Universities are research centers and pretty much THE driving force of intellectualism in the USA.
Most public universities are constantly forced to pinch pennies. This is with the tuition and all that at current levels AND subsidization by the government. It's one of the few places that money should be invested by the gov't.
You can't have a university run itself like a business. It doesn't work that way in academia. Someone may have a really great thesis on the differences in Roman and Greek naval warfare. That's not going to make money in the marketplace. A business-like university is not going to take on this student and support his masters/PhD. But his material is really valuable from an intellectual standpoint. You don't know what effects his intellectual research/material is going to have down the road. This kind of intangible benefit would be lost if you switched universities over to a business operation.
Many other types of intellectual arts would also be lost this way. Performing arts would not be able to get funding. etc etc. Most universities do not waste their money on crappy stuff. Most of them try to amass library collections, or fund research on nanotechnology, or buy a new MRI for their med students, etc etc. It's one of the few places where the money is generally well spent.
Football stadiums and things of that nature MAKE money for a university. They don't get funding for that shit, college football probably funds all the sports and a department on its own. I don't know, I've been through large state universities and for the most part, they are short on money, and they spend what they have in the right places.
Just wanted to say this has been a very educational read so far, especially Storkhwaiting's post on fiat money. Very interesting and told in a way I could actually follow. It doesn't help that economics/finance is one of the most confusing topics but I felt a sense of purpose to that post. Props.
I'd just like to thank many of the educators on TL for giving us less knowledgeable people a chance to experience topics we would otherwise not have touched with a ten foot pole.
However, I'm not sure whether its the videos of ignorant TV hosts or whether its the doomsayers, but I'm seriously scared for my future and the future of the U.S.
I've known for a while now about the rampant consumerism and the raging debt and how "fortunate" we've been for the past couple of decades, but I will be graduating this summer and will hopefully enter the white collar labor market soon after, and my actual life will begin, so to speak. I would like to fatten my savings and raise a family in fashion similar to how I was raised when my parents moved here, but I suspect that won't be the case. It all seems like everything I will do in the future will not save me in the slightest from the ill-management of the Fed, and thus from an imminent collapse of society as we know it. Should I be scared?
There are far more ways of restoring the availability of credit than the bailout as it happened. I don't see why everybody is assuming that this was the only solution.
On January 09 2010 16:51 StorkHwaiting wrote: This is something I disagree with Peter on. Universities are incubators for talent. Yes, I know, it sounds funny because there are tons of slacker kids that get through uni, but it's true. Universities are research centers and pretty much THE driving force of intellectualism in the USA.
Most public universities are constantly forced to pinch pennies. This is with the tuition and all that at current levels AND subsidization by the government. It's one of the few places that money should be invested by the gov't.
I have a question then, Universities used to be able to provide eduction to students at the worth of a months labor (using Peter's Yale numbers), why can they not, or are they not, able to do the same thing today (adjusting for inflation)?
You can't have a university run itself like a business. It doesn't work that way in academia. Someone may have a really great thesis on the differences in Roman and Greek naval warfare. That's not going to make money in the marketplace. A business-like university is not going to take on this student and support his masters/PhD. But his material is really valuable from an intellectual standpoint. You don't know what effects his intellectual research/material is going to have down the road. This kind of intangible benefit would be lost if you switched universities over to a business operation.
Many other types of intellectual arts would also be lost this way. Performing arts would not be able to get funding. etc etc. Most universities do not waste their money on crappy stuff. Most of them try to amass library collections, or fund research on nanotechnology, or buy a new MRI for their med students, etc etc. It's one of the few places where the money is generally well spent.
Football stadiums and things of that nature MAKE money for a university. They don't get funding for that shit, college football probably funds all the sports and a department on its own. I don't know, I've been through large state universities and for the most part, they are short on money, and they spend what they have in the right places.
All universities are businesses. If you don't think so, you're wrong. They have management, the president, managers, the dean of a specific area, and employees, teachers. They sell services, a degree that meets the standards set by the government that specifies that anyone who has earned the degree is of a certain intellectual and factual knowledge. Intellectual property is property, just like food or a house is. Do you think colleges are just educating people out of the goodness of their hearts? That teachers work to exactly pay for their needs? Entirely false.
What you are stating is that colleges are very poorly run businesses. What happens if you can't afford to supply a product, at a profit, that consumers are willing to purchase? You go out of business. What you are also talking about is investments. A company that makes fine fur coats could invest in PETA if they wanted. The only thing that matters is if they make a profit, so where a company invests money is irrelevant. Colleges are not teaching students for free, you may be confusing their profit margin in terms of gross money made. I could make 50% on a dollar or 10% on 10 dollars, the asset turnover ratio depends on industry and location along other factors.
On January 09 2010 15:40 StorkHwaiting wrote: You create liquidity literally by just printing more money, which is exactly what the Fed did in this situation. Then the Fed tries to keep inflation under control through monetary tools like T-bill auctions. You often see inflation following lock in step with how well bond auctions go. They're a barometer of demand/confidence in a currency. The Fed literally can create liquidity out of thin air, at least in the short-term. Which is one of the many reasons I think the Fed is a terrible institution.
The liquidity that WAS in the markets got destroyed long ago. If you look up at my earlier post where I explained the factors involved in the collapse it explains a great deal of it but a short version would be:
We had high liquidity due to low interest rates. This is because the Fed's interest rate roughly equals the cost of money for banks. The lower the cost of money, the more banks will lend to people. The amount banks are willing to lend to people are what is termed liquidity.
Once the liquidity was out there, the banks went to town. It's like throwing a meaty bone in front of starving dogs. Then basically all the financial groups were FORCED to take advantage of this free money.
Why were they forced?
Because if they didn't use it up, their competitor down the street was going to use it. And for the first few years it netted them HUGE profits. Any bank/investment group that didn't get in on the action would basically have been bankrupted due to being unable to compete. If you and another guy both know a stock is good but you only have $10 to buy with and he he as $10 mil, guess who's going to be making more money? Finance is that kind of game. The guy with more money usually wins because a lot of the good investments are clear to see. Yes, there are a lot of risky flips too but those aren't the bread and butter of financial groups.
So basically, you have banks and investment groups grabbing up every scrap of liquidity and then repackaging it to sell to other people over and over again until you have a single dollar strung out and lent out to seven different people.
Then what happens is five of those people come back and say "Yo, I can't pay you back that dollar. I spent it on a TV that my wife broke when she found out I cheated on her."
The money is gone. The liquidity is gone. The PAPER wealth that the company had recorded ended up being bullshit. All those "accounts receivable" turned into write offs as losses.
And that's why the bubble popped.
We didn't prevent it because well, most of our politicians either don't understand finance or are paid off by the investment groups. The people who did warn of impending failure were treated as laughingstocks and loonies. (I switched my major FROM finance because of this crisis. I saw it coming in 2006.) Most people in the industry were busy trying to grab shit while it was hot and talking about cashing out when they made their fortune. A lot of people thought they could ride the gravy train another year. And you know the rest.
I highly doubt you know what you're talking about, because every time you used the term liquidity, you use it as if liquidity is something you can touch, or feel, or that liquidity actually has a value. It doesn't. Liquidity is how you value, it doesn't have a value, and it can't add value to anything.
Liquidity: the ability or ease with which assets can be converted into cash.
LOL ECONOMICS ADVISOR TO REAGAN reagonomics does not work.
The problem with many economists is that they consider economics to be a science, like chemistry or physics, and that the models and the theories they have created are all correct. Unregulated free markets don't work, except to make a tiny minority rich and to push everyone else into poverty. This happened around the world in countries like China, Russia, Brazil, Chile, Argentina, South Africa, etc.
Peter Schiff sounds like a very knowledgeable man. I can't believe that douchebag was laughing at him when he was talking about house prices falling. Although we can see in hindsight that he was correct, his ideas were sound. How could people have been so ridiculously short-sighted? Was it not obvious that we were overextending ourselves? Home prices were ridiculously inflated. "Sub-prime is a tiny blip" LOL
Although it may have been necessary, the bailout just increases moral hazard. We basically allowed for companies to be "too big to fail". The economy would have been damaged by their collapse, but it's what capitalism is all about. I can't believe that the bankers took all those risks and the taxpayers had to shoulder the burden. Certainly some of the big banks paid back, but there should be more regulation and the breaking up of these giants to prevent this kind of thing from happening again. Glass-Steagall should be re-implemented and there should be at least some kind of punitive measure taken. They're back to their old ways already and not lending out money to small business owners and entrepreneurs, despite the fact that that's what the money was supposed to be for.
On January 09 2010 21:59 ghostWriter wrote: LOL ECONOMICS ADVISOR TO REAGAN reagonomics does not work.
The problem with many economists is that they consider economics to be a science, like chemistry or physics, and that the models and the theories they have created are all correct. Unregulated free markets don't work, except to make a tiny minority rich and to push everyone else into poverty. This happened around the world in countries like China, Russia, Brazil, Chile, Argentina, South Africa, etc.
Peter Schiff sounds like a very knowledgeable man. I can't believe that douchebag was laughing at him when he was talking about house prices falling. Although we can see in hindsight that he was correct, his ideas were sound. How could people have been so ridiculously short-sighted? Was it not obvious that we were overextending ourselves? Home prices were ridiculously inflated. "Sub-prime is a tiny blip" LOL
Although it may have been necessary, the bailout just increases moral hazard. We basically allowed for companies to be "too big to fail". The economy would have been damaged by their collapse, but it's what capitalism is all about. I can't believe that the bankers took all those risks and the taxpayers had to shoulder the burden. Certainly some of the big banks paid back, but there should be more regulation and the breaking up of these giants to prevent this kind of thing from happening again. Glass-Steagall should be re-implemented and there should be at least some kind of punitive measure taken. They're back to their old ways already and not lending out money to small business owners and entrepreneurs, despite the fact that that's what the money was supposed to be for.
While I respect your many other contributions, your first paragraph reveals a precocious complete misunderstanding of economics. Economics IS a science. It's even far more of a science than psychology because economics doesn't routinely suffer from inherent statistical biases in its practice. It uses the scientific method, and I will assure you, very rigorous when it comes to math. To most people (i.e. non-econ majors) economics seems to be abstract and a load of crap, which is true if you look at it without understanding the mathematical background that supports it. Basically, if you accept that the following assumptions are true:
Firstly, that somebody wants to buy stuff and somebody wants to sell stuff Secondly, that the amount of stuff people buy and sell depends on the price Thirdly, we can collectivize everybody's demand at a certain price (i.e. aggregating it)
You have no choice but to conclude that there is an optimal point where as many people can buy and sell (or participate in the market).
Of course, models don't work all the time. That's why economics is still here, otherwise we wouldn't need it. The purpose is to ask the question, why are people not responding to incentives properly? The answer, of course, is that almost all of the time, there is a certain factor (government interventions, asymmetric information, monopoly/monopsony, externalities) that is preventing the market from exerting its natural pressures.
Your entire argument for economics sounds like one of the crackpots' arguments for why evolution doesn't exist (i.e. it's too complex to be true)
I'm an economics minor, but I haven't progressed that far with the math, I admit. I am familiar with the basic precepts though. But, I misspoke. I didn't mean "not a science". I meant "not a hard science" like Chemistry or Physics. Psychology also fails in this regard. Chemists and Physicists use empirical data to create hypothesis and use experiments and observations to try to disprove a theory. It's a fact that a hydrogen atom has 1 proton and that water has 2 hydrogen atoms and 1 oxygen atom. It can be observed and it can be proven. In economics or psychology, research depends on observations that necessarily rely on conjecture and the analysis of the data. Two researchers with different backgrounds, for example, a Keynesian or a Friedmanian (not sure if this is the right description. Friendmanist? I suppose I will just go with the Chicago School) can look at the same data and one may say that we need more government regulation and the other will claim that we need less.
Also, in economics, you cannot have a perfect experimental setting, therefore, the models must be based on real-life situations which are inherently flawed. Nothing can be proved or claimed to be absolute fact. It's impossible to have a perfect free-market economy, especially in a democratic country since democracy and free market economies are intrinsically opposed to one another. It's been shown time and time again that a perfectly free economy does not work without a huge amount of repression and vast inequalities between the poor and the rich. Just take a look at China, Russia, Brazil, Argentina, Chile, etc.
I´ll contribute with the scariest movie I´ve ever seen. It´s in 22 parts and explains how the FED got in control and how FED came to rule the economy of the US. Bottom line in all this - FED is a private bank, with private stockholders and run purely for their private profit.
"The powers of financial capitalism had a far-reaching plan, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole...Their secret is that they have annexed from governments, monarchies, and republics the power to create the world's money..." THE MONEY MASTERS is a 3 1/2 hour non-fiction, historical documentary that traces the origins of the political power structure that rules our nation and the world today. The modern political power structure has its roots in the hidden manipulation and accumulation of gold and other forms of money. The development of fractional reserve banking practices in the 17th century brought to a cunning sophistication the secret techniques initially used by goldsmiths fraudulently to accumulate wealth. With the formation of the privately-owned Bank of England in 1694, the yoke of economic slavery to a privately-owned "central" bank was first forced upon the backs of an entire nation, not removed but only made heavier with the passing of the three centuries to our day. Nation after nation, including America, has fallen prey to this cabal of international central bankers."
On January 09 2010 23:30 ghostWriter wrote: I'm an economics minor, but I haven't progressed that far with the math, I admit. I am familiar with the basic precepts though. But, I misspoke. I didn't mean "not a science". I meant "not a hard science" like Chemistry or Physics. Psychology also fails in this regard. Chemists and Physicists use empirical data to create hypothesis and use experiments and observations to try to disprove a theory. It's a fact that a hydrogen atom has 1 proton and that water has 2 hydrogen atoms and 1 oxygen atom. It can be observed and it can be proven. In economics or psychology, research depends on observations that necessarily rely on conjecture and the analysis of the data. Two researchers with different backgrounds, for example, a Keynesian or a Friedmanian (not sure if this is the right description. Friendmanist? I suppose I will just go with the Chicago School) can look at the same data and one may say that we need more government regulation and the other will claim that we need less.
Also, in economics, you cannot have a perfect experimental setting, therefore, the models must be based on real-life situations which are inherently flawed. Nothing can be proved or claimed to be absolute fact. It's impossible to have a perfect free-market economy, especially in a democratic country since democracy and free market economies are intrinsically opposed to one another. It's been shown time and time again that a perfectly free economy does not work without a huge amount of repression and vast inequalities between the poor and the rich. Just take a look at China, Russia, Brazil, Argentina, Chile, etc.
While you're right in some of what you're saying, the countries you used as examples of free market are rather hilarious. Most of them have state-owned energy industries, ie Russia/Argentina. While China heavily subsidizes and continues to subsidize major export corporations. They also manipulate their currency to keep their goods at lower prices to squeeze out the competition. They're some of the furthest things from a free market economy.
On January 09 2010 23:30 ghostWriter wrote: I'm an economics minor, but I haven't progressed that far with the math, I admit. I am familiar with the basic precepts though. But, I misspoke. I didn't mean "not a science". I meant "not a hard science" like Chemistry or Physics. Psychology also fails in this regard. Chemists and Physicists use empirical data to create hypothesis and use experiments and observations to try to disprove a theory. It's a fact that a hydrogen atom has 1 proton and that water has 2 hydrogen atoms and 1 oxygen atom. It can be observed and it can be proven. In economics or psychology, research depends on observations that necessarily rely on conjecture and the analysis of the data. Two researchers with different backgrounds, for example, a Keynesian or a Friedmanian (not sure if this is the right description. Friendmanist? I suppose I will just go with the Chicago School) can look at the same data and one may say that we need more government regulation and the other will claim that we need less.
Also, in economics, you cannot have a perfect experimental setting, therefore, the models must be based on real-life situations which are inherently flawed. Nothing can be proved or claimed to be absolute fact. It's impossible to have a perfect free-market economy, especially in a democratic country since democracy and free market economies are intrinsically opposed to one another. It's been shown time and time again that a perfectly free economy does not work without a huge amount of repression and vast inequalities between the poor and the rich. Just take a look at China, Russia, Brazil, Argentina, Chile, etc.
While you're right in some of what you're saying, the countries you used as examples of free market are rather hilarious. Most of them have state-owned energy industries, ie Russia/Argentina. While China heavily subsidizes and continues to subsidize major export corporations. They also manipulate their currency to keep their goods at lower prices to squeeze out the competition. They're some of the furthest things from a free market economy.
When I said perfectly free economy, I meant theoretically. Obviously, there's no such thing as a perfectly free economy, but back in the late 20th century, all of the countries I named have experimented with radical free-market policies, such as the privatization of many state-controlled organizations, through the influence of neoliberal economists. Where do you think the Russian Oligarchs or the Chinese Princelings came from? And when I said Russia, I meant the former Soviet Union.
On January 09 2010 16:51 StorkHwaiting wrote: This is something I disagree with Peter on. Universities are incubators for talent. Yes, I know, it sounds funny because there are tons of slacker kids that get through uni, but it's true. Universities are research centers and pretty much THE driving force of intellectualism in the USA.
Most public universities are constantly forced to pinch pennies. This is with the tuition and all that at current levels AND subsidization by the government. It's one of the few places that money should be invested by the gov't.
I have a question then, Universities used to be able to provide eduction to students at the worth of a months labor (using Peter's Yale numbers), why can they not, or are they not, able to do the same thing today (adjusting for inflation)?
You can't have a university run itself like a business. It doesn't work that way in academia. Someone may have a really great thesis on the differences in Roman and Greek naval warfare. That's not going to make money in the marketplace. A business-like university is not going to take on this student and support his masters/PhD. But his material is really valuable from an intellectual standpoint. You don't know what effects his intellectual research/material is going to have down the road. This kind of intangible benefit would be lost if you switched universities over to a business operation.
Many other types of intellectual arts would also be lost this way. Performing arts would not be able to get funding. etc etc. Most universities do not waste their money on crappy stuff. Most of them try to amass library collections, or fund research on nanotechnology, or buy a new MRI for their med students, etc etc. It's one of the few places where the money is generally well spent.
Football stadiums and things of that nature MAKE money for a university. They don't get funding for that shit, college football probably funds all the sports and a department on its own. I don't know, I've been through large state universities and for the most part, they are short on money, and they spend what they have in the right places.
All universities are businesses. If you don't think so, you're wrong. They have management, the president, managers, the dean of a specific area, and employees, teachers. They sell services, a degree that meets the standards set by the government that specifies that anyone who has earned the degree is of a certain intellectual and factual knowledge. Intellectual property is property, just like food or a house is. Do you think colleges are just educating people out of the goodness of their hearts? That teachers work to exactly pay for their needs? Entirely false.
What you are stating is that colleges are very poorly run businesses. What happens if you can't afford to supply a product, at a profit, that consumers are willing to purchase? You go out of business. What you are also talking about is investments. A company that makes fine fur coats could invest in PETA if they wanted. The only thing that matters is if they make a profit, so where a company invests money is irrelevant. Colleges are not teaching students for free, you may be confusing their profit margin in terms of gross money made. I could make 50% on a dollar or 10% on 10 dollars, the asset turnover ratio depends on industry and location along other factors.
On January 09 2010 15:40 StorkHwaiting wrote: You create liquidity literally by just printing more money, which is exactly what the Fed did in this situation. Then the Fed tries to keep inflation under control through monetary tools like T-bill auctions. You often see inflation following lock in step with how well bond auctions go. They're a barometer of demand/confidence in a currency. The Fed literally can create liquidity out of thin air, at least in the short-term. Which is one of the many reasons I think the Fed is a terrible institution.
The liquidity that WAS in the markets got destroyed long ago. If you look up at my earlier post where I explained the factors involved in the collapse it explains a great deal of it but a short version would be:
We had high liquidity due to low interest rates. This is because the Fed's interest rate roughly equals the cost of money for banks. The lower the cost of money, the more banks will lend to people. The amount banks are willing to lend to people are what is termed liquidity.
Once the liquidity was out there, the banks went to town. It's like throwing a meaty bone in front of starving dogs. Then basically all the financial groups were FORCED to take advantage of this free money.
Why were they forced?
Because if they didn't use it up, their competitor down the street was going to use it. And for the first few years it netted them HUGE profits. Any bank/investment group that didn't get in on the action would basically have been bankrupted due to being unable to compete. If you and another guy both know a stock is good but you only have $10 to buy with and he he as $10 mil, guess who's going to be making more money? Finance is that kind of game. The guy with more money usually wins because a lot of the good investments are clear to see. Yes, there are a lot of risky flips too but those aren't the bread and butter of financial groups.
So basically, you have banks and investment groups grabbing up every scrap of liquidity and then repackaging it to sell to other people over and over again until you have a single dollar strung out and lent out to seven different people.
Then what happens is five of those people come back and say "Yo, I can't pay you back that dollar. I spent it on a TV that my wife broke when she found out I cheated on her."
The money is gone. The liquidity is gone. The PAPER wealth that the company had recorded ended up being bullshit. All those "accounts receivable" turned into write offs as losses.
And that's why the bubble popped.
We didn't prevent it because well, most of our politicians either don't understand finance or are paid off by the investment groups. The people who did warn of impending failure were treated as laughingstocks and loonies. (I switched my major FROM finance because of this crisis. I saw it coming in 2006.) Most people in the industry were busy trying to grab shit while it was hot and talking about cashing out when they made their fortune. A lot of people thought they could ride the gravy train another year. And you know the rest.
I highly doubt you know what you're talking about, because every time you used the term liquidity, you use it as if liquidity is something you can touch, or feel, or that liquidity actually has a value. It doesn't. Liquidity is how you value, it doesn't have a value, and it can't add value to anything.
Liquidity: the ability or ease with which assets can be converted into cash.
I highly doubt you understand how liquidity actually operates in an economy. Otherwise, you probably wouldn't be here quoting basic definitions and expecting them to prove anything.
Liquidity is a measurement of how accessible cash is in the market. The entire point of liquidity is that if there's no freaking cash available, it's going to be pretty hard to trade your assets in for cash. Get it?
It's sort of like me saying a sword is a weapon and then you disagree with me because you think it's only a sharp object.
On January 09 2010 23:30 ghostWriter wrote: I'm an economics minor, but I haven't progressed that far with the math, I admit. I am familiar with the basic precepts though. But, I misspoke. I didn't mean "not a science". I meant "not a hard science" like Chemistry or Physics. Psychology also fails in this regard. Chemists and Physicists use empirical data to create hypothesis and use experiments and observations to try to disprove a theory. It's a fact that a hydrogen atom has 1 proton and that water has 2 hydrogen atoms and 1 oxygen atom. It can be observed and it can be proven. In economics or psychology, research depends on observations that necessarily rely on conjecture and the analysis of the data. Two researchers with different backgrounds, for example, a Keynesian or a Friedmanian (not sure if this is the right description. Friendmanist? I suppose I will just go with the Chicago School) can look at the same data and one may say that we need more government regulation and the other will claim that we need less.
Also, in economics, you cannot have a perfect experimental setting, therefore, the models must be based on real-life situations which are inherently flawed. Nothing can be proved or claimed to be absolute fact. It's impossible to have a perfect free-market economy, especially in a democratic country since democracy and free market economies are intrinsically opposed to one another. It's been shown time and time again that a perfectly free economy does not work without a huge amount of repression and vast inequalities between the poor and the rich. Just take a look at China, Russia, Brazil, Argentina, Chile, etc.
While you're right in some of what you're saying, the countries you used as examples of free market are rather hilarious. Most of them have state-owned energy industries, ie Russia/Argentina. While China heavily subsidizes and continues to subsidize major export corporations. They also manipulate their currency to keep their goods at lower prices to squeeze out the competition. They're some of the furthest things from a free market economy.
When I said perfectly free economy, I meant theoretically. Obviously, there's no such thing as a perfectly free economy, but back in the late 20th century, all of the countries I named have experimented with radical free-market policies, such as the privatization of many state-controlled organizations, through the influence of neoliberal economists. Where do you think the Russian Oligarchs or the Chinese Princelings came from? And when I said Russia, I meant the former Soviet Union.
They experimented with some liberalization of their markets. It is Nowhere near an actual free market. Not even close to halfway free. From everything I know about how heavily manipulated both of these economies are, I find it very difficult to agree with someone claiming China/Russia have more liberalized markets than the USA.
Russian oligarchs and Chinese princelings don't come from a free market. They're just people getting rich from economic growth. Where do you think Middle Eastern oil sheikhs came from? I don't quite get your point. Some people got rich so that means they have a free market economy?
EPT
however, your general statements applied a lot to me, A person with no background or understand on a more-than basic level. sure I passed economics in high school, like 7 years ago, and i hated politics then... I suppose, my Edit on that post is a more meatier description of my point, and after reading TanGeng's post, your post makes a lot more sense.
