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On January 30 2009 06:42 Savio wrote:Regarding the Fed, I agree with Ahrara. Despite whatever shortcomings it may have, it has a pretty dang good track record (especially in post WW2 time). I would worry much more about fiscal policy--that has not performed as well as monetary policy has. Here you can see our growth rates and observe the severity of recessions post WWII and before.
That is almost exactly the graph I was looking for. The severity of post-war recessions is incomparable to the pre-war ones, with the difference being losing the gold standard, although a faster clip of technological development helped as well.
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On January 30 2009 00:01 MoltkeWarding wrote:Show nested quote +
This is irrelevant when banks aren't lending. I'm actually not sure how these numbers are related, but there is plenty of evidence that companies are having tremendous difficulty rolling over debt. Drying up credit can also be caused by pessimistic short term expectations that have nothing to do with the fundamentals of the economy. People do not invest according to the productive capacity of an economy, but on its actual rate of production. It seems to me that supply side theories largely dismiss the psychological factor. In fact, what the US is suffering from right now is a self-fulfilling speculative attack whose effects are very real, even if the basis of its growth has been largely unaffected. The market can't be counted on to recover on its own because these expectations seem to usher in a new mindset that functionally lowers the equilibrium point. So long as these expectations persist, credit will remain slow. Savings are useless if banks aren't willing to lend in the first place. While I believe such a policy is appropriate where business confidence is high and the only restriction to growth is limited capital, in this instance, a resurgence in demand must occur first if we want to move those savings where it's needed most.
There is a psychological side to the market, but it was invested in all the undue optimism of the past few decades. Short-term expectations are of greater consequence in a bull market than a bear market, due to our natural tendency to avoid thinking about bad things, rather than avoiding hope. It was this psychological bubble that maintained housing and stock prices, which was itself in turn caused by easy money and overlending.
I don't think you understand what I'm saying. First, the recent growth in the economy isn't fueled by speculation alone. That's just a ridiculous statement -- there was plenty of sustainable growth. My argument is that we are current suffering from a speculation driven recession, an anti-bubble if you will. The equilibrium point for growth has been reset to a lower point as a result of distorted expectations.
You want investors and lenders to be seized with a certain sense of caution, and fear of the consequences of bad decisions. This is incidentally one area where no natural check is placed on government spending and investment. The money the government invests is simply taken out of the hands of individual investors, with the added handicap of a distorted benefit-cost assessment, lobbyist influence and lack of legal checks against corruption and waste.
Right, but these are problems in the long run. I will agree with you in that a balanced budget is important and that as much as possible of the stimulus spending should a.) not be locked in b.) should be placed in private hands. But in the short run, it is important that we pop the "anti-bubble" that's developed in order to restore growth. Without stimulus, all that currency in circulation will remain in the hands of the banks and won't be doing anything productive. The long run effects of a prolonged recession are considerably worse than the long run effects of expanding our deficit. In other words, your argument seems to be that government intervention has artificially elevated the rate of growth of the economy, and the recession represents a correction. What I am saying is that the economy is overshooting and because of the speculative environment, will not return to its "natural" rate of growth without government intervention. Only this time, we must be more prudent.
Maintaining an unrestricted credit flow when the natural mechanisms of overpriced markets force them to contract has the consequence of propping up the bubbles which cannot be maintained in the first price. We want credit to dry up, so prices can come down, unprofitable enterprises forced into bankrupcy and resources freed up for new investsments.
This is exactly what's happening now. It is important that we correct from the bubble, but it is also important to remember that it takes time to recover from this correction. During this time, even businesses that have every fundamental reason to remain profitable will be forced into bankruptcy because they can't rollover their debts. Remember, when the housing bubble first crashed, it wasn't just the subprime borrowers who were forced into foreclosure, but borrowers with otherwise excellent credit.
If you think that the American economy has sufficient productive capacity to make long-term profits on psychologically-induced low prices, then get yourself a broker and buy up all these underpriced assets. If you've figured out something that the market hasn't, take advantage of it and get rich. Otherwise, the value isn't there.
Right now is an excellent time to invest primarily because the value of many assets are artificially depressed. Speculation is a real factor, but I highly doubt that the speculation of the last several years was enough to drive the stock market up 75% over its real value.
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Cayman Islands24199 Posts
On January 30 2009 07:26 Savio wrote:
You have any evidence that the US labor force is unskilled?
that is not what i said. my claim is that a shift towards a service economy demands a workforce with specialized skills and these skills need investment in education. thus investing in the education and health of your workers is investing in the economy. of course americans are more skilled than immigrant mexicans, but a large segment of the population, especially those working traditional manufacturing jobs, are not equipped to be professionals.
http://en.wikipedia.org/wiki/Educational_attainment_in_the_United_States#Social_class_and_education
the US workforce shifted to higher skill set--meaning more American's were skilled as opposed to unskilled--and that created a shortage of unskilled labor which was filled by illegal immigrants. that is true only in metro areas, and even in new york city immigrant labor is not so hot. when we are talking about areas that will be hit hardest by a transitioning economy, these are invariably blue collar areas with inadequate education systems.
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On January 30 2009 07:26 Savio wrote:Show nested quote +On January 30 2009 07:20 oneofthem wrote:On January 30 2009 05:41 gchan wrote:On January 30 2009 05:04 oneofthem wrote:
investing in your population is obviously investing in the economy especially given the importance of skilled workers. education and healthcare are not "baww the poor are jacking our moneys" projects. they help keep your workforce ready.
besides, the basic point of the economy is to provide a living for people. the govt should look out for the economic future of the lower middle class. If the government is trying to look out for the economic future of the lower middle class, they should stop inefficiently spending money now. The money they spend now is at the cost of future growth. no. the problem is that a large segment of the us population is not equipped with skills to get growth jobs. real wage for these people will not rise, and their traditional sources of employment are not doing well. you have to invest in education, and guarantee an income level that is sufficient to justify getting their kids to go to school instead of having them enter the work force early and unprepared. I don't think that is right. You didn't provide any evidence for it and the only paper I have read that dealt with that was an academic Journal article on illegal immigration which showed that part of the reason for the recent rise in illegal immigration is that the US workforce shifted to higher skill set--meaning more American's were skilled as opposed to unskilled--and that created a shortage of unskilled labor which was filled by illegal immigrants. You have any evidence that the US labor force is unskilled?
Though I don't think the US labor force is unskilled, I do think that a large part of what we're going through is a dramatic shift in the specialized skills required.
The trend towards a technology and service based economy has made people's skills more and more specialized. No longer are general skills useful, you have be a specialist in your particular field or area.
One of the problems comes when there's a large, sudden shift in the structure of the economy. The sudden change in risk preference has led to a huge reduction in demand for specialists in finance and banking, a sector that grew much too large during the housing boom. Now one of our problems is that we have to shift resources from finance to other areas; the financiers definitely aren't unskilled, it's just that a fundamental change has taken place in the economy that renders their skills somewhat obsolete, at least at the numbers that we have.
Normally these structural shifts happen gradually and their impact on unemployment is simply taken into the "natural unemployment" that always exists. But this time it was sudden, fast, and unexpected for the majority of those workers.
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So essentially what you (oneofthem) are saying is that in the long run, we would benefit from subsidizing education more. That may be true, but for the short term (getting out of the current recession, which is what this is all about), I think that you will not see effects from higher education spending. Bush doubled the federal government spending on education and that had no measurable positive effect.
What I say is that we should be clear about what bills the government is passing. If we want to just set up a long term education infrastructure, then lets do it, but don't call that a stimulus bill that will get us out of the current recession. Pass a stimulus bill that makes jobs NOW, and then when things have calmed down, and government revenues are rising again due to economic growth, then lets build the long term infrastructure. Or you could do it earlier, but keep the bills separate so the American people know what they are getting.
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Right now is an excellent time to invest primarily because the value of many assets are artificially depressed. Speculation is a real factor, but I highly doubt that the speculation of the last several years
was enough to drive the stock market up 75% over its real value.
I'm not going to argue in a situation where correct forecasts are self-rewarding. If you think that US stocks are now undervalued, you would take appropriate action, although the very DOW projections for 2009's dividend yields http://www.indexarb.com/dividendYieldSorteddj.html suggest that prices are still too high, and above equilibrium.
Nonetheless, your private actions are one thing, and public action is another. Your argument that government should step in and replace the private investor in the market, apart from all attendant hazards legal, economic and moral, assumes that the government can more rationally determine the value of assets than public. It's therefore all the more ironic that someone who begins a thread with the hope of stimulating public awareness, advocates its supersession when they fail to reach the same conclusions.
P.S. The projected average dividend yields in a nutshell for all three major US indices.
http://www.indexarb.com/dividendAnalysis.html
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Don't wanna derail, but I got a new quote 
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Cayman Islands24199 Posts
that is not a stimulus bill in content, the part about unemployment insurance etc anyway, just in name. it is a recession coverage bill, and there is nothing wrong with that.
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On January 30 2009 08:52 oneofthem wrote:
that is not a stimulus bill in content, just in name. it is a recession coverage bill, and there is nothing wrong with that.
I don't know what you're defining a stimulus and "recession coverage" bill to be, but I'm betting that I think it's neither.
It's almost more of an attempt by Democrats to shift responsibility and %GDP from the private sector to the public sector, and an attempt to shift responsibility for funding (and therefore control) from states to the federal government. Stimulus should be timely, targeted, and temporary, as Larry Summers said. Much of this bill is not even one of those things, and few aspects satisfy all three. Even more of the provisions don't come anywhere close to even pretending to be useful stimulus (the overlap between construction/finance and alternative energy/education workers tends to be non-existent) and instead are just parts of the Democratic agenda.
Some of it's decent, some of it could be done better, a lot of it is trash and politics.
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United States22883 Posts
On January 30 2009 07:26 Savio wrote:Show nested quote +On January 30 2009 07:20 oneofthem wrote:On January 30 2009 05:41 gchan wrote:On January 30 2009 05:04 oneofthem wrote:
investing in your population is obviously investing in the economy especially given the importance of skilled workers. education and healthcare are not "baww the poor are jacking our moneys" projects. they help keep your workforce ready.
besides, the basic point of the economy is to provide a living for people. the govt should look out for the economic future of the lower middle class. If the government is trying to look out for the economic future of the lower middle class, they should stop inefficiently spending money now. The money they spend now is at the cost of future growth. no. the problem is that a large segment of the us population is not equipped with skills to get growth jobs. real wage for these people will not rise, and their traditional sources of employment are not doing well. you have to invest in education, and guarantee an income level that is sufficient to justify getting their kids to go to school instead of having them enter the work force early and unprepared. I don't think that is right. You didn't provide any evidence for it and the only paper I have read that dealt with that was an academic Journal article on illegal immigration which showed that part of the reason for the recent rise in illegal immigration is that the US workforce shifted to higher skill set--meaning more American's were skilled as opposed to unskilled--and that created a shortage of unskilled labor which was filled by illegal immigrants. You have any evidence that the US labor force is unskilled?
That's part of it, there's also immigration policies which have made illegal immigration more permanent.
Savio, do you own your own house? I assume you're too young to, but when you do, or when you decide to buy a hybrid car, there will be all sorts of tax breaks and ways for you to get a government check for heat insulating windows and so on. Or hell, even the next time you get a Stafford loan. The welfare state already exists, and it's directed towards the middle/upper-middle class because that's what supposedly keeps things stable. It bugs me when the middle class complains about food stamps, etc. when they're the largest beneficiaries of government support without even knowing it.
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United States22883 Posts
On January 30 2009 08:20 Savio wrote:Don't wanna derail, but I got a new quote
Reagan was the king of bureaucracy.
BTW, the stimulus package is going to cost a lot more than what they're proposing right now. There's no way they can accomplish what they're trying to on that amount of money.
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On January 30 2009 03:18 Savio wrote:
I was sort of neutral about the stimulus before, but now it is becoming apparent that it is not so much an "economic stimulus bill" as it is a "stimulus for the democratic party".
This is clearly the most effective way to stimulate the economy. No one spends money faster and saves less than the poor. Even the Bush administration increased welfare payments temporarily as a component of fiscal stimulus because they know the empirical fact welfare is the most direct and effective form of economic stimulus available.
And this idea that they do not create jobs is a dangerous and perverse misunderstanding of simple economics. These people will take this $250Billion (which would already be in the economy if the Republican hadn't been cutting welfare already, they believe that by giving less money to the poor the poor will get richer ffs.) and spend it virtually instantly. This will immediately create jobs throughout the rest of the economy.
And to the people who say printing money out of thin air does not stimulate the economy you are simply wrong. If you don't spend it well than sure but it is a fact that the FDR stimulus plan created millions of jobs. It lowed the unemployment rate from around 25% down to around 15% the second world war then brought it down to 0% but FDR's plan worked wonders and created a recovery greatly improving the ease of American mobilization.
Policy makers were so impressed with the ability of fiscal policy to stimulate the economy realising they could lower the unemployment rate effectively to whatever level they chose they decided to constantly push unemployment toward 0%, below its natural rate, which created an inflationary crisis. The moral is do not over do it, it was never 'fiscal policy doesn't work'.
If the Democrats had their way sooner the American economy would not be in the state it is today. As you are probably aware Republicans controlled congress during Clinton's administration physically imposing their economic policies onto him (yes the Clinton surplus is because of the Republicans, there so proud of destroying the economy its rather distressing) meaning that America has been run by Republicans with all their small government ideas for 30 years now, the economy gradually getting worse the whole time until it reaches crisis.
The reason for apparent macro stability in recent times is because of the use of monetary policy. We gained stability at the cost of increasing debt and this is clearly not a good idea. Britain is screwed today because Thatcher followed Republican economic policies. Australia is screwed today because Howard followed Republican economic policies and these have achieved the same negative consequences each of these cases.
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On January 30 2009 09:48 Jibba wrote:Show nested quote +On January 30 2009 07:26 Savio wrote:On January 30 2009 07:20 oneofthem wrote:On January 30 2009 05:41 gchan wrote:On January 30 2009 05:04 oneofthem wrote:
investing in your population is obviously investing in the economy especially given the importance of skilled workers. education and healthcare are not "baww the poor are jacking our moneys" projects. they help keep your workforce ready.
besides, the basic point of the economy is to provide a living for people. the govt should look out for the economic future of the lower middle class. If the government is trying to look out for the economic future of the lower middle class, they should stop inefficiently spending money now. The money they spend now is at the cost of future growth. no. the problem is that a large segment of the us population is not equipped with skills to get growth jobs. real wage for these people will not rise, and their traditional sources of employment are not doing well. you have to invest in education, and guarantee an income level that is sufficient to justify getting their kids to go to school instead of having them enter the work force early and unprepared. I don't think that is right. You didn't provide any evidence for it and the only paper I have read that dealt with that was an academic Journal article on illegal immigration which showed that part of the reason for the recent rise in illegal immigration is that the US workforce shifted to higher skill set--meaning more American's were skilled as opposed to unskilled--and that created a shortage of unskilled labor which was filled by illegal immigrants. You have any evidence that the US labor force is unskilled? That's part of it, there's also immigration policies which have made illegal immigration more permanent. Savio, do you own your own house? I assume you're too young to, but when you do, or when you decide to buy a hybrid car, there will be all sorts of tax breaks and ways for you to get a government check for heat insulating windows and so on. Or hell, even the next time you get a Stafford loan. The welfare state already exists, and it's directed towards the middle/upper-middle class because that's what supposedly keeps things stable. It bugs me when the middle class complains about food stamps, etc. when they're the largest beneficiaries of government support without even knowing it.
I am just pointing out that food stamps are inefficient compared to direct $$$ transfers. If you want to help the poor people, you could just give them the money it costs to provide food stamps and they would be definitively better off.
I'm not against helping the poor, but it should not be wasteful and dead weight inefficiency is wasteful because potential benefit essentially disappears and is never regained.
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On January 30 2009 08:20 Savio wrote:Don't wanna derail, but I got a new quote
Wow that quote would be so accurate if you turned it around the other way. The conservatives believe that if you spend less on health care it will improve the health care system. They believe that if you underfund education it will get better. If you give less money to the poor they will grow richer. If you do not invest in infrastructure some nice rich guy will step in even if there is no profit for him. Putting downward pressure on wages strengthen the economy. The dramatic oversimplification and misunderstanding of American conservatives is absolutely mind blowing but they are so indoctrinated they will not see reason even if it is right in front of their face.
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Savio, this seems very ignorant..... Food stamps (in most states) are given in the form of credit on an EBT card. The only difference from direct deposit cash is you cannot buy non-food items including alcohol or cigarettes. This is an efficient way to moderate an economic slump (recession) from going into a worse trend and engulfing black markets with pure cash.
It is not good for the welfare of economy when people spend their welfare checks on pushing coke and not buying any food. This is incentive for them to eat and get their shit together someday, as opposed to spending all their money on alcohol and worsening the well-being of a state governments people.
All in all though, I don't get your point as far as cheaper to just give cash? I'm rather at a loss there....
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United States22883 Posts
On January 30 2009 11:01 Savio wrote:Show nested quote +On January 30 2009 09:48 Jibba wrote:On January 30 2009 07:26 Savio wrote:On January 30 2009 07:20 oneofthem wrote:On January 30 2009 05:41 gchan wrote:On January 30 2009 05:04 oneofthem wrote:
investing in your population is obviously investing in the economy especially given the importance of skilled workers. education and healthcare are not "baww the poor are jacking our moneys" projects. they help keep your workforce ready.
besides, the basic point of the economy is to provide a living for people. the govt should look out for the economic future of the lower middle class. If the government is trying to look out for the economic future of the lower middle class, they should stop inefficiently spending money now. The money they spend now is at the cost of future growth. no. the problem is that a large segment of the us population is not equipped with skills to get growth jobs. real wage for these people will not rise, and their traditional sources of employment are not doing well. you have to invest in education, and guarantee an income level that is sufficient to justify getting their kids to go to school instead of having them enter the work force early and unprepared. I don't think that is right. You didn't provide any evidence for it and the only paper I have read that dealt with that was an academic Journal article on illegal immigration which showed that part of the reason for the recent rise in illegal immigration is that the US workforce shifted to higher skill set--meaning more American's were skilled as opposed to unskilled--and that created a shortage of unskilled labor which was filled by illegal immigrants. You have any evidence that the US labor force is unskilled? That's part of it, there's also immigration policies which have made illegal immigration more permanent. Savio, do you own your own house? I assume you're too young to, but when you do, or when you decide to buy a hybrid car, there will be all sorts of tax breaks and ways for you to get a government check for heat insulating windows and so on. Or hell, even the next time you get a Stafford loan. The welfare state already exists, and it's directed towards the middle/upper-middle class because that's what supposedly keeps things stable. It bugs me when the middle class complains about food stamps, etc. when they're the largest beneficiaries of government support without even knowing it. I am just pointing out that food stamps are inefficient compared to direct $$$ transfers. If you want to help the poor people, you could just give them the money it costs to provide food stamps and they would be definitively better off. I'm not against helping the poor, but it should not be wasteful and dead weight inefficiency is wasteful because potential benefit essentially disappears and is never regained. Well we could fill 10 new threads on wasteful aid, but there hasn't been enough effort to fix it since the 1970s.
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On January 30 2009 07:53 Savio wrote:
So essentially what you (oneofthem) are saying is that in the long run, we would benefit from subsidizing education more. That may be true, but for the short term (getting out of the current recession, which is what this is all about), I think that you will not see effects from higher education spending.
No but you will feel the expansionary effects of hiring more teachers and increasing teachers pay. This is one of the best ways of dealing with the current crisis because it not only creates the short term stimulus to deal with the immediate problem it creates long term benefits to permanently strengthen the economy, until republicans get elected and cut education spending again that is. :\
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On January 30 2009 07:53 Savio wrote:
So essentially what you (oneofthem) are saying is that in the long run, we would benefit from subsidizing education more. That may be true, but for the short term (getting out of the current recession, which is what this is all about), I think that you will not see effects from higher education spending. Bush doubled the federal government spending on education and that had no measurable positive effect.
What I say is that we should be clear about what bills the government is passing. If we want to just set up a long term education infrastructure, then lets do it, but don't call that a stimulus bill that will get us out of the current recession. Pass a stimulus bill that makes jobs NOW, and then when things have calmed down, and government revenues are rising again due to economic growth, then lets build the long term infrastructure. Or you could do it earlier, but keep the bills separate so the American people know what they are getting.
It is obvious that with teachers unions with no effect, the lack of choices and incentives for good teachers, the American economy will take forever to come around unless something is done. It all comes down to where the motivation comes from....
Why does America have shitty public schools: Bad incentives for good teachers, bad incentives for schools to get enrollments, and bad incentives for students to do well on the whole.
However, America does have great Universities, as do most countries, but why do they do better? Their incentives to be the best are to be highly accredited professionals and contributors to their subject are a lot higher. Professors make decent money, but This however can make instructors seem distant and too busy to help their students (huge class sizes)
So we are "getting there" but throwing money at a school to not have good education incentives and not giving it to the important people (teachers). Budget isn't a huge concern, but reform in the education system to be more like countries such as Finland and other EU states is what it will end up being about.
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On January 30 2009 11:20 ToSs.Bag wrote:Show nested quote +On January 30 2009 07:53 Savio wrote:
So essentially what you (oneofthem) are saying is that in the long run, we would benefit from subsidizing education more. That may be true, but for the short term (getting out of the current recession, which is what this is all about), I think that you will not see effects from higher education spending. Bush doubled the federal government spending on education and that had no measurable positive effect.
What I say is that we should be clear about what bills the government is passing. If we want to just set up a long term education infrastructure, then lets do it, but don't call that a stimulus bill that will get us out of the current recession. Pass a stimulus bill that makes jobs NOW, and then when things have calmed down, and government revenues are rising again due to economic growth, then lets build the long term infrastructure. Or you could do it earlier, but keep the bills separate so the American people know what they are getting. It is obvious that with teachers unions with no effect, the lack of choices and incentives for good teachers, the American economy will take forever to come around unless something is done. It all comes down to where the motivation comes from.... Why does America have shitty public schools: Bad incentives for good teachers, bad incentives for schools to get enrollments, and bad incentives for students to do well on the whole. However, America does have great Universities, as do most countries, but why do they do better? Their incentives to be the best are to be highly accredited professionals and contributors to their subject are a lot higher. Professors make decent money, but This however can make instructors seem distant and too busy to help their students (huge class sizes) So we are "getting there" but throwing money at a school to not have good education incentives and not giving it to the important people (teachers). Budget isn't a huge concern, but reform in the education system to be more like countries such as Finland and other EU states is what it will end up being about.
I think its as simple as increasing teacher pay and hiring more teachers, something like 50% of teachers quit after their first year because its so hard and they get paid so little. Increase pay to attract and retain quality labor. Paying for the maintenance that is over due would help out alot. And you stimulate the economy as an added bonus.
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On January 30 2009 11:08 ToSs.Bag wrote:
Savio, this seems very ignorant..... Food stamps (in most states) are given in the form of credit on an EBT card. The only difference from direct deposit cash is you cannot buy non-food items including alcohol or cigarettes. This is an efficient way to moderate an economic slump (recession) from going into a worse trend and engulfing black markets with pure cash.
It is not good for the welfare of economy when people spend their welfare checks on pushing coke and not buying any food. This is incentive for them to eat and get their shit together someday, as opposed to spending all their money on alcohol and worsening the well-being of a state governments people.
All in all though, I don't get your point as far as cheaper to just give cash? I'm rather at a loss there....
Come back to this thread after taking some econ classes. The fact that you can't spend it on anything besides food is the source of the inefficiency. Whether it comes as a stamp or card is irrelevant. It is also provable and not something that can be debated against. There is a mathematical proof and graphical representation. Will look to see if I can find it on the web since I can't show you on a blackboard....
Bah, its best found in textbooks. Anyway, I already explained it in an earlier post. Reciepients of food stamps do not value a food stamp dollar at the value of a regular dollar. They value it at something less like 75-85 cents. Thus, the government spends 400 dollars for a family providing food stamps that that family values at $300-$340. If the government had taken that $400 and just given it to the family, they would have recienved $400 worth of benefit. Thus under the foot stamp program, 60-100 dollars of benefit are "lost" to innefficiency. Multiply that by the millions that are on food stamps, and multiply that by 12 to get to total loss in 1 years time.
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EPT![[image loading]](http://www.organissimo.org/forum/uploads/monthly_09_2007/post-353-1188669960.jpg)
