Berkeley CSUA MOTD:2009:February:11 Wednesday <Tuesday, Thursday>
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2009/2/11-18 [Finance/Banking, Finance/Investment] UID:52555 Activity:high
2/10    Why tax cuts are a bad way to stimulate demand in a deflationary
        environment:
        http://tinyurl.com/ccatun
        (Freakonomics Blog at NYT)
        \_ Oh sure, you can't trust people with their own money.
           http://www.youtube.com/watch?v=zISKoQegbxM
           \_ No, you can't, when the collective interest is
              diametrically opposed to the individual's interest.
              We, collectively, need the economy stimulated.
              However, we, individually, don't want to spend our
              However, we, individually, want to save our money
              money to maximize our personal financial security.
              So, right now, you can't trust people with their
              own money.
              \_ Is this why the fed has racked up debts that work out to
                 over $30,000 per capita?
                 \_ How large are the debts that the private sector has
                    racked up?
              \_ People know what they need and don't.  We've been living in a
                 mode where people spend way beyond their capacity.  Retreating
                 from that is normal.  Deflation is good.  We have tons of
                 immigrants and an inefficient culture of buying tons of
                 cheap crap.
                 "Deficient aggregate demand" isn't a problem.  We still have
                 a huge trade imbalance so there are plenty of jobs we could
                 theoretically be doing instead of importing all that shit.
                 But the only way that would happen is if we let conditions
                 move towards equilibrium instead of borrowing trillions to
                 prop up the status quo.
                 \_ You almost make some sense.  Good thing you aren't running
                    the Republican party or I'd have to vote for you.
                \_ Do you think that people knew what they needed and what
                   they didn't need when they decided to leverage up buying
                   McMansions, flipping houses and buying SUVs? How about when
                   they bought all those exotic financial instruments which
                   bet on the housing bubble? Do you know what a deflationary
                   trap is? What you are advocating would put us in one,
                   the same as Japan post-bubble, and would give us our
                   own "lost decade" or two.
                   \_ People did that because it was what makes sense to do
                      given abundant cheap credit.  The government's policies
                      steered the market towards cheap imports and housing
                      instead of real industry -- not only our direct
                      policies but how we allowed e.g. China to manipulate our
                      own economy.  See:
    http://blogs.cfr.org/setser/2009/02/02/it-wasnt-just-the-market/#more-4618
                      Of course long-term deflation is not good.  But if it
                      wants to happen there's no point going around trying to
                      ignore the laws of gravity.  We should look for ways to
                      cushion the fall and set things up for long term success.
                      The previous economy (dot com then crazy mortgage bubble)
                      was based on a tremendous amount of imaginary wealth.
                      To keep on pretending just prolongs and exacerbates.
                      The ideas you're talking about is the thinking that lead
                      us to where we are.
                      \_ No, it was a deliberate decision by the GOP to
                         deregulate the financial sector which led to the blow-
                         up in available credit, more than anything. There were
                         certainly other contributing factors, but that was
                         number one. To lower the Debt/GDP ratio, you can try
                         to lower debt or raise GDP. Your plan would try and
                         lower debt, but probably lower GDP even more - that
                         is what has happened in the past when debt bubbles
                         have been allowed to pop without any attempt to
                         clean up the mess afterwards. There is a chance that
                         by reallocating capital to more effective uses, we can
                         grow GDP and reduce overall debt that way. Most of
                         the increase in govt debt recently has just been a
                         shift from private to public hands, so has not
                         increased the overall debt burden to the US economy.
                         This is not guaranteed of course, a lot of it depends
                         on how good a job govt does in allocating capital to
                         productive uses. It is hard to imagine that they would
                         do a worse job than the private sector has over the
                         last decade, but anything is possible.
                         \- you can blame the GOP for some crazy tax policies
                            gutting enforcement funding or "capturing"
                            regulatory agencies and most of deregulation, but
                            there is a lot of blame to go around on dereg
                            and mkt fundamentalism. i'd be ok chaining
                            robert rubin and phil gramm together and sending
                            them off into interstellar space.
                            \_ Please see the Commodity Futures Modernization
                               Act of 2000.
                         \_ Even given the deregulated system,
                            there were clear lapses on the part of the
                            regulatory systems that did still exist.  And
                            failures on the part of private regulators like
                            S&P.  I believe part of that is simply a lack
                            of competition -- the need for government
                            oversight is directly related to market health.
                              Markets don't know what's productive, they just
                            tend to maximize utility in terms of profit.  If
                            the environment is skewed the result is skewed.
                              It's like when "kind" people put out food for
                            animals; the animals will base their "economy" on
                            maximizing this free benefit.  They don't
                            understand why there is free food, so they can't
                            understand that it might go away, or that the
                            humans might round them up and gas them.
                            Low interest rates, perpetual borrowing, and
                            China's market manipulations are our free food.
                            Even now China keeps investing in overcapacity and
                            trade surplus.
                              The deregulated financial industry made mistakes,
                            but basically it was drunk on the free shit.
                            Cheap credit was influenced by the trade deficit.
                            The Fed also maintained relatively very low
                            interest rates even while the housing bubble was
                            growing insanely fast.  Greenspan denied that there
                            was a bubble.  The government was basically telling
                            people that housing was the place to be.
                            \_ Look, you ideological nitwit; the housing bubble
                               is *not* the cause of our financial crisis.
                               \_ I rather think it is. If housing recovers
                                  then all of these problems instantly go
                                  away. Loose credit and low interest rates
                                  combined with fraudulent mortgage lending
                                  practices and dishonest borrowers are at
                                  the heart of the problem. If you want to
                                  know where most of the $$$ went, it went to
                                  anyone who sold a property in the last 5
                                  years that they had owned more than 5
                                  years prior. Some of it when to speculators
                                  and some of it went to people like you
                                  and me whose house value doubled in a few
                                  years. When salaries and real estate prices
                                  match more closely then this will all blow
                                  over but not until then. Leverage just
                                  made things worse by wiping out capital,
                                  but those speculators had a good run prior to
                                  that so some should weather this. Some won't.
                                  C'est la vie.
                                  \_ We have had credit bubbles that did not
                                     involve housing and we have had housing
                                     cycles (bubbles?) that did not bring down
                                     the financial sector. Unregulated and
                                     overly risky speculation is what brought
                                     down the financial sector, mostly the IBs
                                     and hedge funds leveraging 30:1 on their
                                     bets.
                                     the financial sector.
                                     \_ S&L crisis?
                                        This isn't the first time Citi has
                                        borrowed from the gov't either.
                                        Was 1991 the last time?
                                        This crisis is more severe because
                                        the bubble was bigger, partly
                                        because interest rates were lower
                                        and other instruments were
                                        underperforming or viewed as
                                        risky. That's all. CA has had housing
                                        bubbles that popped, but this is new
                                        to most of the country.
                               Financial institutions leveraging themselves
                               ridiculously is the cause of our financial
                               crisis.  Oh, if only the government didn't
                               exist, the invisible hand would have made sure
                               that the banks acted safely!
                               Here's a news flash: The financial crisis
                               *IS* THE FUCKING INVISIBLE HAND.  The free
                               market is perfectly happy to drive off a cliff
                               and destroy a society.  Government's job is
                               to make sure that doesn't happen.  -tom
                               \_ Leveraging wasn't THE cause; misclassifying
                                  risk was the cause, and is directly
                                  related to the housing bubble.  And the
                                  mother of all the leveraging is the fed's
                                  low interest rates.
                                  The financial crisis is not the invisible
                                  hand because government was riding
                                  shotgun the entire way. Or more accurately,
                                  the government was building a bridge to
                                  the promised land out from the cliff, but
                                  actually it went into thin air.
                                  In any case you are arguing a strawman: I
                                  am not arguing that gov't regulation is
                                  unnecessary. I'm saying it didn't do its
                                  job.
                                  \_ Yeah, whatever.  How about this: Could
                                     you describe a possible scenario where
                                     the free market, by itself, could cause
                                     a financial crisis?  Or is that
                                     impossible?  -tom
                                     \_ Obviously yes, with banks: bank runs.
                                        Although modern banks are completely
                                        married to the government via the
                                        central bank, and via the laws that
                                        allow them to create money and lend
                                        money that they simultaneously owe
                                        to their depositors.  That's not
                                        really the free market; it's inherently
                                        unstable, and supposedly the govt is
                                        managing this in order to be able to
                                        easily stimulate the economy.
                                        It is theoretically possible to have
                                        banking which is not based on the
                                        current scheme.
                                http://mises.org/Books/mysteryofbanking.pdf
                                        You can't honestly have a free market
                                        without a hard currency and a situation
                                        where actors are held accountable for
                                        their dealings.
                                        A market run on an arbitrary government
                                        fiat currency is inherently not free.
                                        If banks were required to lend money
                                        out of their own capital instead of
                                        their customers, or else enter specific
                                        contracts with customers to lend their
                                        money, you could not have bank runs.
                                        \_ Go sell it at Top Dog.  -tom
                                           \_ The model of modern corporations
                                              is too conducive to disaster.
                                              Responsibility is abdicated onto
                                              a non-person legal entity, and
                                              management transfers between
                                              speculators who individually
                                              do not have full understanding
                                              of the business, but neither
                                              stand very much to lose.  The
                                              executives and employees stand
                                              to profit greatly from short
                                              term schemes which are measured
                                              by quarterly results.
                                              Then you have the abomination of
                                            "government sponsored corporations"
                                              like
                                      http://en.wikipedia.org/wiki/Fannie_mae
                                              How can you say that the fin.
                                              crisis is not directly related
                                              to the actions of this agency
                                              and the govt that created and
                                              controlled it?
                                              \_ Fannie Mae was a drop in the
                                                 bucket (and late) compared to
                                                 the total amount of CDOs
                                                 written. You should have
                                                 stopped at "bank runs have
                                                 happened long before there
                                                 was government regulation of
                                                 banks." Tell us how Tulip
                                                 Mania was big ole' gubmints
                                                 fault.
                                                 \_ Fraud and speculation are
                                                    not limited to the govt,
                                                    no, but the govt allows
                                                    for a special depth of
                                                    scope.  Nothing's wrong
                                                    with a periodic recession.
                                                    But the govt banking scheme
                                                    creates vast money supply
                                                    variances which is what
                                                    creates a crisis.
                                                    \_ Prove it.
"Whether the U.S. had a central bank or not, the banks were  _/
assured that if they inflated together and then got in trouble,
government would bail them out and permit them to suspend
specie payments for years. Such general suspensions of specie
payments occurred in 1819, 1837, 1839, and 1857..."
US banks are on the government's credit teat, and mommy government
always saves them, or at least the vast majority of them.  And it
lets them multiply credit exponentially.
There's no real benefit to all that credit. It just inflates prices
and gives the fed. government a backdoor tax method.

Here, listen to FDR trying to explain away banking fraud.
http://www.fdic.gov/about/history/FDR_Fireside_Chat_Banking_Situation_03-12-33.mp3
Money as debt.
http://video.google.com/videoplay?docid=-9050474362583451279
Mystery of Banking
http://mises.org/Books/mysteryofbanking.pdf
        \_ that's not proof of anything; it's pure assertion.  And it very
           specifically does not address the question, which is whether
           a crisis can be created without government intervention.  (Hint:
           it is completely obvious that a crisis can be created without
           government intervention.)  -tom
           \_ I don't need to prove anything, I'm not your slave and your
              question isn't "the" question.  Hint: all the major crises
              in US history were entangled with the government.  Your Tulip
              example was not a crisis and is anyway half legend.
              You're going around calling people idiots making assertions
              but demanding that others "prove" things (hint: no economic
              theories have ever been "proven").  But you have the status
              quo mainstream theories which you accept as gospel even though
              repeatedly they have failed to prevent massive crises.  I
              don't claim that you can't have economic problems, that's not
              a relevant question; an alternative system does not have to
              involve 100% protection from recession for example; in fact
              it's likely that recessions are necessary for healthy economy.
              Only if some fail is competition meaningful.
              \_ I didn't mention tulips.  "All the major crises in US
                 history were entangled with the government" is tautalogical;
                 the US has a government that ideological morons like you
                 blame for everything.  There is no scenario under which
                 you would claim the government was not involved, therefore,
                 the government is always involved, therefore, the goverment
                 is bad.  QED.  Or not.  -tom
        \_ How ironic that you blame government response to financial crises
           as being responsible for creating these crises. Do you blame the
           fire department for fires, too?
           \_ If you weren't an idiot, you'd realize that's not what I said.
2009/2/11-16 [Politics/Domestic/Election] UID:52556 Activity:low
2/10    http://change.gov/agenda/ethics_agenda
        End the Practice of Writing Legislation Behind Closed Doors: As
        president, Barack Obama will restore the American people's trust in
        their government by making government more open and transparent. Obama
        will work to reform congressional rules to require all legislative
        sessions, including committee mark-ups and conference committees, to be
        conducted in public. By making these practices public, the American
        people will be able to hold their leaders accountable for wasteful
        spending and lawmakers won't be able to slip favors for lobbyists into
        bills at the last minute.
        (Compared to what's actually happening:
        http://www.businessandmedia.org/articles/2009/20090211135318.aspx )
        \_ Before: Do shady things in secret.
           Now   : Lie & do shady things in secret.
        \_ Guy gives partisan speech.  This is news?
        \_ Isn't this the same guy who was all in favor of earmarks until
           the Democrats took control of Congress, then suddenly decided
           that they were wasteful (and still continues to take them, while
           loudly complaining about them)?
           http://tinyurl.com/ctuolw
        \_ Links to Malkin?  Check.  Big banner about how we need to fight
           against the return of the fairness doctrine? (Who the fuck decided
           this was a danger?)  Check.  Crazy libritarian slogan?  Check.
           Dude, this site is as crazy as the ChemTrails hippies.
           \_ I admit that that FSA page makes the fairness doctrine sound
              really appealing.  I mean, who doesn't want to shut up Rush
              and Hannity and their ilk who run around embarassing the right.
              but really, you think the Government should mandate equal time
              on the airwaves?  You think that enforcement of that is feasible?
              You think the net effect is positive?  It seems unlikely.
              \_ Of course enforcement is feasible.  They can enforce not
                 saying "fuck," they can enforce not letting right-wing
                 blowhards dominante the public airwaves.  That's right,
                 they're the *public* airwaves; corporations get to use
                 them to the extent that they provide a public service.  -tom
        \_ Good to have you back, jblack.
        \_ Ohh, this is a nice Jan 2007 article about how the economy is
           strong and there is no real estate bubble and the media is just
           out to scare you
           http://www.businessandmedia.org/specialreports/2007
                  mediamyth/RecessionDepression/RecessionDepression.asp
2009/2/11-16 [Health/Dental, Health/Eyes] UID:52557 Activity:nil
2/10    If Neo gives you a choice of a blue pill or a red pill, which one
        would you take and why?
        \_ Which one is which again?  Which one would you take?
        \_ I'd take both and see if it crashes the system.
        \_ Punch Neo, take his bottle of pills and give them to your friends
           and see what happens to them.
        \_ I'd take the blue pill, but only after forcing the red one into
           Schwarzenegger's mouth.
        \_ Neo?  Morpheus was the one pushing the red & blue pills!
            http://www.arrod.co.uk/essays/matrix.php
Berkeley CSUA MOTD:2009:February:11 Wednesday <Tuesday, Thursday>