Bernanke has done several interviews recently where he said as much. Watch the 60 minutes interview krypt. I believe he says quite clearly that he will not let another company go down like he did with Lehman..that he is committed to preventing this no matter the cost. Geitner repeated this idea also during his recent testimony. These men don't have faith in the market system and their policies should be all the proof you need.

And pk, do you have a link to the page where my ass was handed to me? I believe I answered all points in our recent debates here and oc and I ended up agreeing on things in the end. I've noticed that you however contribute very little (if anything) to most discussions in PDD. Why don't you participate occasionally instead of sniping from the sidelines with little 1-sentence replies every day? Please wow us with your intellect.

Last edited by Capitalizt on Mar-30-2009 at 09:00

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Originally posted by Capitalizt Bernanke has done several interviews recently where he said as much. Watch the 60 minutes interview krypt. I believe he says quite clearly that he will not let another company go down like he did with Lehman..that he is committed to preventing this no matter the cost. Geitner repeated this idea also during his recent testimony. These men don't have faith in the market system and their policies should be all the proof you need.

Do you know why we can't have another Lehman Brothers!? When Lehman declared bankruptcy, capital markets SHUT DOWN! Liquidity, ZERO, NIL, NUL, NADA. No inter-bank lending. Do you know how catastrophic that is? When banks don't lend to each other...I guess we should just let it all come crumbling down right? Suffer through at a decade of depression so your extremist laissez-fairism can be a reality. All I have to say is, thank god your view is in the extreme minority.

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And pk, do you have a link to the page where my ass was handed to me? I believe I answered all points in our recent debates here and oc and I ended up agreeing on things in the end. I've noticed that you however contribute very little (if anything) to most discussions in PDD. Why don't you participate occasionally instead of sniping from the sidelines with little 1-sentence replies every day? Please wow us with your intellect.

http://www.tranceaddict.com/forums/...66&pagenumber=6
http://www.tranceaddict.com/forums/...66&pagenumber=7
http://www.tranceaddict.com/forums/...66&pagenumber=8

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Originally posted by occrider So when I reference modern economic data you say that it's meaningless as per the above rationale. When I ask you to substitute this "tainted" data with other data from our robust history of economic data of booms and busts prior to the Federal Reserve you state that that data is unreliable. Look I'm not an idiot, I can recognize a catch-22 when I see one. Any hard statistics I reference based on ANY data from ANY time period will be dismissed in the face of broad based platitudes that are simply not mathematically cogent. It is not without some amusement that I see you continue to mix and match economic data in your arguments whilst completely disregarding the economic data that I reference in mine. However, the same reasons that make my economic references irrelevant, according to your logic, also apply to you.

Well krypt I disagree that the system would completely fall apart if we allowed failed companies to go bankrupt. Citi's collapse would undoubtedly cause a painful correction as the losses are finally realized..but this is a necessary process if you want an economy based on savings, sound profits and sound growth rather than credit expansion and illusory prosperity. The crisis was caused by excessive credit and overleveraging. A sharp contraction after things went to such an extreme should be expected. In any case, it's very likely that Citi would have been bought out at JPM at the right price. Everything in a market economy is a function of price, and C wasn't cheap enough to justify the risk at $1. At .50 or .25 however, hell yes you can bet they would have been saved and restructured by a stronger firm..but instead of allowing this process to take place we are mugging the taxpayers of future generations, propping up failure, and prolonging the corrective process.

Would the credit contraction worsen if Citi went down? No doubt..but a bottom would be reached one way or another and the ultimate cost to America would be far less than what we are taking on now.. Look at the past 12 months krypt. Fannie Mae, Freddie Mac, Bear Stearns, AIG, Citigroup, GM, Chrysler, and dozens of other nameless companies are being propped up and even BOUGHT outright by the government and the fed. This is America krypt..AMERICA.. If you have studied history properly you should be alarmed and appalled at the direction things are moving today. Government involvement on this scale is maiming the foundations of the market economy..and you know full well that major government institutions and programs of this type form a parasitic growth.. They will be around forever. The treasury is now a permanent player and won't be removed once the current crisis is past. The debt being accrued in this process is simply monstrous. We are delaying a painful contraction now by putting trillions in obligations on the backs of future taxpayers. Will we prevent the depression of 2009? YES!..but the cost in both freedom and treasure is simply not worth it.

As for the links you posted, I suggest you finish reading them. OC and I actually agree on the big picture and I made it quite clear that I have no disagreement with him on his charts. Data is data...It doesn't lie, but people can draw different logical inferences from some of the data.

Also, I have yet to hear a satisfactory response from you or any other big government apologist for the cluster of errors argument I made on page 7 there. If you can give me an alternative explanation for the increasingly disruptive and damaging boom/bust cycle we've been experiencing over the past few decades, I'd be glad to change my view on interventionism. Please enlighten me.

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Originally posted by Capitalizt Well krypt I disagree that the system would completely fall apart if we allowed failed companies to go bankrupt. Citi's collapse would undoubtedly cause a painful correction as the losses are finally realized..but this is a necessary process if you want an economy based on savings, sound profits and sound growth rather than credit expansion and illusory prosperity. The crisis was caused by excessive credit and overleveraging. A sharp contraction after things went to such an extreme should be expected. In any case, it's very likely that Citi would have been bought out at JPM at the right price. Everything in a market economy is a function of price, and C wasn't cheap enough to justify the risk at $1. At .50 or .25 however, hell yes you can bet they would have been saved and restructured by a stronger firm..but instead of allowing this process to take place we are mugging the taxpayers of future generations, propping up failure, and prolonging the corrective process.

Right. Having bank runs and systemic financial collapse of the economy is great for us all! You say losses need to be realized, the correction needs to happen, etc. etc. All that stuff is happening even with government intervention which is very much needed. Taxpayers are being mugged? Uh huh...they would be mugged either way. Government intervention would happen inevitably as the people would demand something be done about the inevitable system economic collapse which you so dearly want to see. Nobody is just going to sit around and reassure themselves, "The market will take care of all this by itself. I should just sit back while my bank implodes, I lose my job, and trust the very market which caused this recession in the first place!" Riiiiight...

You conveniently ignored what happened when Lehman Brothers, a rather minor firm, went bankrupt. Liquidity froze. Inter-bank lending froze. Capital markets shut down. And here you are saying you'd rather see Citigroup, a vastly larger firm, go down. That's not rational logic.

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Would the credit contraction worsen if Citi went down? No doubt..but a bottom would be reached one way or another and the ultimate cost to America would be far less than what we are taking on now.. Look at the past 12 months krypt. Fannie Mae, Freddie Mac, Bear Stearns, AIG, Citigroup, GM, Chrysler, and dozens of other nameless companies are being propped up and even BOUGHT outright by the government and the fed. This is America krypt..AMERICA.. If you have studied history properly you should be alarmed and appalled at the direction things are moving today. Government involvement on this scale is maiming the foundations of the market economy..and you know full well that major government institutions and programs of this type form a parasitic growth.. They will be around forever. The treasury is now a permanent player and won't be removed once the current crisis is past. The debt being accrued in this process is simply monstrous. We are delaying a painful contraction now by putting trillions in obligations on the backs of future taxpayers. Will we prevent the depression of 2009? YES!..but the cost in both freedom and treasure is simply not worth it.

Actually, the cost to America would be much larger without government intervention. How many more would lose their jobs? Bank runs anyone? Inter-bank lending frozen. Credit non-existant. Deflationary spiral almost inevitable. But, oddly, you like deflation. I seriously have to question your macro-economics, which can hardly be called that. No economists in their right mind would say deflation is a good thing, but you do. You would also learn in any econ 101 class that our economy is a "mixed economy". So this "foundations of a market economy" which you speak of. Well, it includes government! And has since 1913.

Government intervention is not "parasitic growth". That's complete nonsense. You know full well the government will eventually re-privatize most if not all of these firms. The government isn't in the business of running fortune 500 companies and certainly they get blow back if they do not at least break even on these bailouts. You'v also completely discounted the fact that many of these "bailouts", the government is probably going to get a positive return on their investments.

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As for the links you posted, I suggest you finish reading them. OC and I actually agree on the big picture and I made it quite clear that I have no disagreement with him on his charts. Data is data...It doesn't lie, but people can draw different logical inferences from some of the data.

Oh I read them. Seemed to me like OCC debunked your arguments, point by point, and all you had to say is, "we both interpret the same data differently." That's hardly an argument. But that's not even it. Whoever taught you economics, if anyone every taught you economics (which I assume you'v never taken any university level economics courses), should be fired immediately. I don't know how I can argue any further when you lack knowledge in just basic levels of economic operations such as how the Federal Reserve works. Even a paper by one of the world's top economists, Bernanke, written in the early 1980's when he was a professor, you just totally blew off because it didn't fit a radical libertarian doctrine. While OCC references some of the best sources possible, you reference almost none. Absolutely no response to Bernanke's paper other than, "He's a government hound."

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Also, I have yet to hear a satisfactory response from you or any other big government apologist for the cluster of errors argument I made on page 7 there. If you can give me an alternative explanation for the increasingly disruptive and damaging boom/bust cycle we've been experiencing over the past few decades, I'd be glad to change my view on interventionism. Please enlighten me.

You mean your last response to me on page 7? One can only debate so much without going around in circles, of which I'm frankly not going to do for a million pages. I'v made my points and I'm not going to repeat them over and over and over again, even though I'm doing it in this thread, yet again.

Additionally, booms and busts happen in every type of economy. We'r going back to just the basic level of education in economics. This is econ 101. Booms and busts. It's unavoidable. Whether we'r on a gold/silver standard, on fiat money, capitalist, communist, booms and busts, AND INFLATION, are a normal function of all economies. *SIGH*..............

^^^See how we'r going in circles. I'v had to correct you on this I don't know how many times.

This is exactly what we need, and this is exactly what we'r seeing happen. Good work Bernanke!

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Bernanke Doctrine The seven steps that the Federal Reserve needs to take are: 1) Increase the money supply (M1] and M2). "The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost." "Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation." 2) Ensure liquidity makes its way into the financial system through a variety of measures. "The U.S. government is not going to print money and distribute it willy-nilly ..."although there are policies that approximate this behaviour." 3) Lower interest rates - all the way down to 0 per cent. Bernanke observed that people have traditionally thought that, when the funds rate hits zero, the Federal Reserve will have run out of ammunition. However, by imposing yields paid by long-term Treasury bills, "a central bank should always be able to generate inflation, even when the short-term nominal interest rate is zero ...[this] more direct method, which I personally prefer, would be for the Fed to announce ceilings for yields on all longer-maturity Treasury debt." He noted that Fed had successfully engaged in "bond-price pegging" following the Second World War. 4) Control the yield on corporate bonds and other privately issued securities. Although the Federal Reserve can't legally buy these securities (thereby determining the yields); it can, however, simulate the necessary authority by lending dollars to banks at a fixed term of 0 per cent, taking back from the banks corporate bonds as collateral. 5) Depreciate the U.S. dollar. Referring to U.S Monetary Policy in the 1930's under Franklin Roosevelt, he states that: "This devaluation and the rapid increase in money supply ... ended the U.S. deflation remarkably quickly." 6) Execute a de facto depreciation by buying foreign currencies on a massive scale. "The Fed has the authority to buy foreign government debt ... [t]his class of assets offers huge scope for Fed operations because the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt." 7) Buy industries throughout the U.S. economy with "newly created money" In essence, the Federal Reserve acquires equity stakes in banks and financial institutions. In this "private-asset option," the Treasury could issue trillions in debt and the Fed would acquire it - still using newly created money.

Way to go guys... turn a thread about something cool like bloody revolution into an economics debate...

Nerds.

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Originally posted by Joss Weatherby Way to go guys... turn a thread about something cool like bloody revolution into an economics debate... Nerds.

lol the thread is about economics to begin with.

Lets keep going in circles krypt..it's fun!

First, Citigroup's failure does not mean global apocalypse. You disagree. Fine. Moving on..

You think the financial cost of recession would is larger than the cost of the intervention. Bernanke agrees with you and is trying to cure temporary deflation with term inflation. I believe the amount of inflation in the pipeline will do much more damage than a 2-3 year deflationary recession (which was by far the worse case scenario among major economists). So basically I think the intervention will end up costing more. We disagree. Time will tell if you are right. Moving on..

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Government intervention is not "parasitic growth". That's complete nonsense. You know full well the government will eventually re-privatize most if not all of these firms.

Right, the same way social security was supposed to be a temporary program.. The same way 1000+ government agencies that have been created since the new deal are still in existence. You seem to have stronger faith on less evidence that even our man alex in the other thread. K, moving on..

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The government isn't in the business of running fortune 500 companies and certainly they get blow back if they do not at least break even on these bailouts. You'v also completely discounted the fact that many of these "bailouts", the government is probably going to get a positive return on their investments.

Correction: The government WASN'T in the business of running fortune 500 companies but it seems that responsibility is being forced on us. It's a shame you can't see what a radical departure this is from our entire history and what a bad precedent it sets for the future. And "break even" on the bailouts? Are you shitting me krypt? Since when has the government ever made a wise investor? Hundreds of billions have been sent down a black hole at AIG and others and they are still bankrupt. I don't consider zombifying corporations a great success. Better to let them die and be reborn from bankruptcy.

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I don't know how I can argue any further when you lack knowledge in just basic levels of economic operations such as how the Federal Reserve works. Even a paper by one of the world's top economists, Bernanke, written in the early 1980's when he was a professor, you just totally blew off because it didn't fit a radical libertarian doctrine. While OCC references some of the best sources possible, you reference almost none. Absolutely no response to Bernanke's paper other than, "He's a government hound."

I know exactly how the fed works bud..and once upon a time I believe you glimpsed the truth too. The fed inflates the economy to excess..then when the excess pops and starts to shrink to normality, they inflate some more to cover up the malinvestment and keep the cycle rolling. It's been the same trend for nearly 70 straight years and the bubble being blown today is the MOAB.

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You mean your last response to me on page 7? One can only debate so much without going around in circles, of which I'm frankly not going to do for a million pages. I'v made my points and I'm not going to repeat them over and over and over again, even though I'm doing it in this thread, yet again. Additionally, booms and busts happen in every type of economy. We'r going back to just the basic level of education in economics. This is econ 101. Booms and busts. It's unavoidable. Whether we'r on a gold/silver standard, on fiat money, capitalist, communist, booms and busts, AND INFLATION, are a normal function of all economies. *SIGH*..............

I actually meant my response to oc, and I don't blame you if you can't find a counter explanation because there isn't one as far as I can tell.

Yes bubbles can happen at a small scale on free market economies but as I pointed out to oc (and as his own examples prove), most panics and bubbles in history were preceded by some form of government intervention..some tampering with the marketplace at the federal level. Krypt...I know you have a good brain. Kindly put aside your bitter feelings for my crazy "laissez faire" attitude and use your reason to tell me where I'm wrong here..

Let's step back and look at the big picture of the market system..

Entrepreneurs in a free market are in the business of forecasting..and those who have the best judgement and take the most far-sighted approach tend to make the most profits, while those fail in forecasting go bankrupt. Capitalism has a kind of natural selection mechanism in this way. Because it weeds out inefficiencies and rewards the best forecasters, you aren't likely to see many firms taking simultaneous losses unless price signals are being distorted in some way by an outside force.

The economy started to crater in late 2007.. Many industries felt the slowdown simultaneously..the service industry, banking, transportation, manufactuuring, technology, etc. That is when the recession officially began. Now, is it likely that there just happened to be a spontaneous failure across a variety of market sectors..that all of these bright professionals across a variety of industries failed dismally at their work?..or could there have been something else at work influencing those markets? Could expansionary monetary policy have been responsible for sending false price signals through the economy that led to the cluster of errors? Do you at least acknowledge it can have this negative effect?

I obviously believe excessive credit expansion was the culprit here. It is the only reasonable explanation for the enormous amount of malinvestment and lack of foresight across a variety of unrelated sectors that preceded the current bust. Do I have a perfect solution? No..but finding one requires that we correctly identify the problem first.

European socialism works. Show me examples of how it negatively affects the populations of the countries that have implemented socialist policies and I will then maybe think about how it could be bad in the US.

All these arguments about banks and what not, its total crap.

Fuck them. This is the intangible capital that Marx warned about, its a system of governance of the proletariate through the means of creating capital that only the wealthy can gain and control. That capital, this non-existant, totally theoretical capital then affects everyone, in good ways a lot of the times, but in bad ways when the few that wield it either become too greedy or too stupid.

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Originally posted by Capitalizt First, Citigroup's failure does not mean global apocalypse. You disagree. Fine. Moving on..

I didn't it meant global apocalypse. I said it posed a huge systemic risk to the overall economy. And apparently I was right because the Fed stepped in to prevent their collapse.

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You think the financial cost of recession would is larger than the cost of the intervention. Bernanke agrees with you and is trying to cure temporary deflation with term inflation. I believe the amount of inflation in the pipeline will do much more damage than a 2-3 year deflationary recession (which was by far the worse case scenario among major economists). So basically I think the intervention will end up costing more. We disagree. Time will tell if you are right. Moving on..

Yes, the financial cost of recession is larger than the cost of the intervention. Bank runs, much higher unemployment w/o gov't intervention, inter-bank freeze on lending, little credit even for the credit-worthy, and deflationary spiral. Yes, that is far far more expensive than a government intervention, which if all these events happened, as they inevitably would under your system, the government would be forced to intervene anyways because the people demand it.

And how do you fight deflation? Yes, inflate the currency! Inflation is not inherently bad, and is in fact a normal function of capital markets, something I haven't seen you really understand. Of course everyone can agree too much inflation is bad, but right now, the problem is not inflation, it's deflation. Bernanke is doing a great job fighting it.

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Right, the same way social security was supposed to be a temporary program.. The same way 1000+ government agencies that have been created since the new deal are still in existence. You seem to have stronger faith on less evidence that even our man alex in the other thread. K, moving on..

Wrong, social security was not supposed to be temporary. Do you have a source for this figure of 1000+ government agencies created since the New Deal? No, I base my analysis on sound economics, as taught to me by my economics professors. You base yours on Ron Paul who is a freaking doctor and has absolutely no background in economics whatsoever..

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Correction: The government WASN'T in the business of running fortune 500 companies but it seems that responsibility is being forced on us. It's a shame you can't see what a radical departure this is from our entire history and what a bad precedent it sets for the future. And "break even" on the bailouts? Are you shitting me krypt? Since when has the government ever made a wise investor? Hundreds of billions have been sent down a black hole at AIG and others and they are still bankrupt. I don't consider zombifying corporations a great success. Better to let them die and be reborn from bankruptcy.

That responsibility is being forced on us, but not by the government. The government is obviously forced to intervene to protect the systemic integrity of the economy, yada yada yada...

Yes, break even. The government isn't just throwing money at these firms. They actually are demanding a return. Have you even examined in detail the deals being struck between the government, federal reserve, and bailed out firms? Apparently not.

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I know exactly how the fed works bud..and once upon a time I believe you glimpsed the truth too. The fed inflates the economy to excess..then when the excess pops and starts to shrink to normality, they inflate some more to cover up the malinvestment and keep the cycle rolling. It's been the same trend for nearly 70 straight years and the bubble being blown today is the MOAB.

No you don't. First, you believe deflation is good. Second, you believe the Federal Reserve inflates just for shits n giggles. Third, you'v said on numerous occasions that a gold standard is the best standard, which obviously is false as noted by the Great Depression. Fourth, you believe in a non-standardized currency, which is another fallacy. I could probably go further.

I believed in all that nonsense because I was an uneducated fool. I had never taken an economics course outside of high school, and frankly, didn't know what the fuck I was talking about. 2 years into my finance degree, I'm learning real quick how idiotic pure laissez-faire, Ron Paulesque, extremist economic libertarianism really is.

The Fed does inflates and deflates when it needs to. You know, when they lower and raise interest rates...buy and sell treasury bonds. It's called, trying to maintain price stability, of which, your theoretical system is liable not to do on its own.

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I actually meant my response to oc, and I don't blame you if you can't find a counter explanation because there isn't one as far as I can tell.

One that you'll ever accept no matter how economically logical it is. Probably not.

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Yes bubbles can happen at a small scale on free market economies but as I pointed out to oc (and as his own examples prove), most panics and bubbles in history were preceded by some form of government intervention..some tampering with the marketplace at the federal level.

Bubbles on a small scale? No no. A laissez-faire market inevitably moves towards market consolidation (monopolies), and periods of radical price instability which result in financial ruin for whole economies, even if one sector has nothing to do with the cause in the first place.

Oh, most panics and bubbles in history were preceded by some form of government intervention. Do you have a source for that?

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Krypt...I know you have a good brain. Kindly put aside your bitter feelings for my crazy "laissez faire" attitude and use your reason to tell me where I'm wrong here..

I have told you time and again where you are wrong, on multiple levels. But your only response is to repeat the fallacious argument. So I have to repeat my correction/response, thus, continuing this circular waste of time. You'r lucky I have time to waste...

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Entrepreneurs in a free market are in the business of forecasting..and those who have the best judgement and take the most far-sighted approach tend to make the most profits, while those fail in forecasting go bankrupt. Capitalism has a kind of natural selection mechanism in this way. Because it weeds out inefficiencies and rewards the best forecasters, you aren't likely to see many firms taking simultaneous losses unless price signals are being distorted in some way by an outside force.

Essentially, you believe in economic darwinism. Ok, that's fine, to a certain extent. But we'r not talking about wild animals here, we'r talking about people here, with families and livelihoods. You cannot simply allow the free market to run wild and have one sector of the economy drag down everything else.

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The economy started to crater in late 2007.. Many industries felt the slowdown simultaneously..the service industry, banking, transportation, manufactuuring, technology, etc. That is when the recession officially began. Now, is it likely that there just happened to be a spontaneous failure across a variety of market sectors..that all of these bright professionals across a variety of industries failed dismally at their work?..or could there have been something else at work influencing those markets? Could expansionary monetary policy have been responsible for sending false price signals through the economy that led to the cluster of errors? Do you at least acknowledge it can have this negative effect?

No I don't. Deflation was a real threat in 2001-2002 and expansionary monetary policy was the logical solution to curtail such a threat, much like today. The main cause of this financial calamity was lack of regulation or the enforcement thereof, which allowed rampant fraud, leveraging, and false assumptions about real estate values. How you can say inflation is THE cause is beyond me.

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I obviously believe excessive credit expansion was the culprit here. It is the only reasonable explanation for the enormous amount of malinvestment and lack of foresight across a variety of unrelated sectors that preceded the current bust. Do I have a perfect solution? No..but finding one requires that we correctly identify the problem first.

Refer to above posts. Expanding the money supply was not THE cause of this recession. Excessive credit was an effect of the main culprit, but again, that culprit was not the expansion of money supply. Rather, the lack and enforcement of regulation such as leverage limits and mortgage underwriting due diligence just to name a few.

ah krypt isn't it wonderful..I see fallacies all over your posts and you see them in mine How can you miss the patterns buddy? Easy credit and low rates in the 90's led to the tech bubble..Greenspan tightened credit and boom, the bubble pops. You acknowledge that we inflated in the early 2000's to prevent deflation after the crash.. The result? A massive housing bubble. The fed kept the easy money spigot on far too long and was too slow to tighten credit...the result when they did tighten? Boom, financial bubble slows and pops with disastrous results.. The fed has now loosened policy again in light of the crash..not only lowering rates as low as they can possibly go but blatantly inflating the money supply and doubling the monetary base in less than 9 months. How can you possibly expect a different result this time krypt? The cluster of errors that will accrue as a result of these policies are going to make the collapse of 08 look like a pleasant memory when we finally face the music.

All I can do is say is take a peek at the real world friend. Watch the news occasionally. We are witnessing the culmination of 70 years of Keynesiasm and interventionist policy among central banks around the world. Bernanke's philosophy has been completely dominant in the circles of government and academia for many decades now. Where has it gotten us?...global stagnation, record government and personal debt..malinvestment across the board, job loss, systemic failure of industry..major governments approaching 50% of GDP...trillion dollar deficits as far as the eye can see, and coming soon...competitive currency devaluation. If you want to follow this path to hell because your textbook advised it, I wish you luck.