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| quote: | Originally posted by jerZ07002
With all that said, the future inflationary pressure is going to kill those who obama is trying to help most (the poor). The poor are the class of people who are hurt the most by inflation because their wages are least likely to keep pace with inflation. My wages (scratch that - my salary) should keep pace, so I'll likely benefit from inflation (reducing the real dollar cost of loans, and considering i don't have substantial savings at this early point in my life). It's too bad people are so short-sighted. |
I don't really see it being a problem anytime soon. Right now the Fed is more worried about deflation being a bigger problem and rightfully so. Not only is deflation evident in economic data but I've experienced it first hand. My company just went through 10% pay decreases in senior management and pay freezes for everyone at the manager level and above.
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I spent a good part of a year reading milton friedman.
Generally, I believe free markets will always have the right answer (with the caveat that there is sufficient transparency in the market); the relevant question is whether we, as a society, are willing to go through the pain that free markets can impose during a period of correction. It's probably the healthiest in the long term to allow free market corrections, however, people are very short-sighted and considering many people live pay-check to pay-check it can be quite difficult to expect the general population to by into the idea that free market corrections are better than government intervention. As a human being, I am sypathetic to the general welfare needs of people who aren't as fortunate as myself. So, I am willing to accept government intervention (if for no other reason than to prevent people from resorting to crime to feed their families). |
First, let me ask you the same question I asked Shakka ... do you believe that Citi or BOA should be allowed to fail as a "free market correction"? Second, non-government intervention is not what Friedman really advocated. Friedman is not a laissez-faire economist in any sense of the imagination ... the distinction between him and a lot of other economists before his time is that he's a monetarist as opposed to a keynesian economist. He emphasized using monetary policy as being a more effective tool ... this is something I myself agree with because I am a monetarist. However, monetary policy is still very much government intervention ... as a matter of fact, if you read Freidman's analysis of the Great Depression in his and Anna Schwartz's A Monetary History of the United States 1863-1960, Friedman stated it was the federal reserve's laissez faire attitudes that contributed to the great depression. Bernanke summarized Friedman and Schwartz's stance in a speech several years ago:
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It was in large part to improve the management of banking panics that the Federal Reserve was created in 1913. However, as Friedman and Schwartz discuss in some detail, in the early 1930s the Federal Reserve did not serve that function. The problem within the Fed was largely doctrinal: Fed officials appeared to subscribe to Treasury Secretary Andrew Mellon's infamous 'liquidationist' thesis, that weeding out "weak" banks was a harsh but necessary prerequisite to the recovery of the banking system. Moreover, most of the failing banks were small banks (as opposed to what we would now call money-center banks) and not members of the Federal Reserve System. Thus the Fed saw no particular need to try to stem the panics. At the same time, the large banks--which would have intervened before the founding of the Fed--felt that protecting their smaller brethren was no longer their responsibility. Indeed, since the large banks felt confident that the Fed would protect them if necessary, the weeding out of small competitors was a positive good, from their point of view.
http://www.federalreserve.gov/BOARD...108/default.htm
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If you are a firm monetarist let me ask you something else ... what monetarist policies would you advocate now? The federal funds rate is at zero ... the only other policies the fed can adopt now is qualitative easing aka printing money. It stands to reason that in these rare situations fiscal stimuli are required. The concept of the efficacy of Keynesian economics is really nothing new: http://www.tnr.com/story_print.html...36-a3b2f54243ec What kind of proof is needed?
I've been reading a lot of garbage about Republicans, libertarians, and some democrats opposing fiscal stimulus, allowing the Citi's, BOAs and AIG's to fail, and all the other populist bullshit that is being pandered back and forth and it blows my mind. Back in mid 2008, when tarp was being debated, people couldnt comprehend that shit that hits wallstreet rolls down to mainstreet HARDCORE ... now that mainstreet is getting killed from JUST Lehman going under and people STILL don't understand that fundamental concept is incomprehensible.
Instead of listening to Rush, Republicans should start listening to Republicans with some intelligence if they ever hope to reclaim the majority (or me) ...
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Taking a Depression Seriously
David Brooks
The G.O.P. leaders have adopted a posture that allows the Democrats to make all the proposals while all the Republicans can say is “no.” They’ve apparently decided that it’s easier to repeat the familiar talking points than actually think through a response to the extraordinary crisis at hand.
If the Republicans wanted to do the country some good, they’d embrace an entirely different approach.
First, they’d take the current economic crisis more seriously than the Democrats. The Obama budget projects that the recession will be mild this year and the economy will come surging back in 2010. Democrats apparently think that dealing with the crisis is a part-time job, which leaves the afternoons free to work on long-range plans to reform education, health care, energy and a dozen smaller things. Democrats are counting on a quick recovery to help pay for these long-term projects.
Republicans could point out that this crisis is not just an opportunity to do other things. It’s a bloomin’ emergency. Robert Barro of Harvard estimates that there is a 30 percent chance of a depression. Warren Buffett says economic activity “has fallen off a cliff” and is not coming back soon.
Stock market declines are destroying $23 trillion in wealth, according to Lawrence Lindsey. Auto production is down by two-thirds since 2005. In China, 20 million migrant laborers have lost their jobs. Investment in developing countries has dropped from $929 billion in 2007 to $165 billion this year. Pension systems are fragile. Household balance sheets are still a wreck.
Republicans could argue that it’s Nero-esque for Democrats to be plotting extensive renovations when the house is on fire. They could point out that history will judge this president harshly if he’s off chasing distant visions while the markets see a void where his banking policy should be.
Second, Republicans could admit that they don’t know what the future holds, and they’re not going to try to make long-range plans based on assumptions that will be obsolete by summer. Unlike the Democrats, they’re not for making trillions of dollars in long-term spending commitments until they know where things stand.
Instead, they’re going to focus obsessively on restoring equilibrium first, and they’re going to understand that there is a sharp distinction between crisis policy-making and noncrisis policy-making. In times like these, you’d do things you would never do normally. When it’s over, we can go back to our regularly scheduled debates.
Third, Republicans could offer the public a realistic appraisal of the health of capitalism. Global capitalism is an innovative force, they could argue, but we have been reminded of its shortcomings. When exogenous forces like the rise of China and a flood of easy money hit the global marketplace, they can throw the entire system of out of whack, leading to a cascade of imbalances: higher debt, a grossly enlarged financial sector and unsustainable bubbles.
If the free market party doesn’t offer the public an honest appraisal of capitalism’s weaknesses, the public will never trust it to address them. Power will inevitably slide over to those who believe this crisis is a repudiation of global capitalism as a whole.
Fourth, Republicans could get out in front of this crisis for once. That would mean being out front with ideas to support the wealth-creating parts of the economy rather than merely propping up the fading parts. That would mean supporting President Obama’s plan for global stimulus coordination, because right now most of the world is free-riding off our expenditures. That would mean eliminating all this populist talk about letting Citigroup fail, because a cascade of insolvency would inevitably lead to full-scale nationalization. It would mean coming up with a bold banking plan, rather than just whining about whatever the Democrats have on offer.
Finally, Republicans could make it clear that that the emergency has to be followed by an era of balance. This crisis was fueled by financial decadence, and public debt could be 80 percent of G.D.P. by the time it’s over. Republicans should be the party of restoring fiscal balance — whatever it takes — not trillion-dollar deficits as far as the eye can see.
If Republicans were to treat this like a genuine emergency, with initiative-grabbing approaches, they may not get their plans enacted, but voters would at least give them another look. Do I expect them to shift course in this manner? Not really.
http://www.nytimes.com/2009/03/10/opinion/10brooks.html?_r=1
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Retro ...
Last edited by occrider on Mar-11-2009 at 05:35
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