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Originally posted by occrider 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.

while that's likely true, the fed is going to have a hell of a time shrinking the money supply considering it has entered the business of purchasing liabilities of private companies.

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Originally posted by occrider 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:

i'm not entirely sure where i stand; i have some slight reservations. Even so, I know the pain that would be felt if a too-big-to-fail institution went down. I'm not saying we would be better off in the near term. Far from it, i think our economy would go through an enormous near term contraction. If you read some of my previous posts about the bailout I say it is necessary. Nevertheless, I believe it presents an enormous moral hazard. That said, I'm about 80/20 in favor of a supporting the financial institutions (most of the 20 percent derives from the fact that it provides the wrong incentives).

I also think that if an institution is too-big-to-fail it's probably just TOO BIG. In the long term (> 5 year), it would probably be good to allow these institutions to fail and have the good assets purchased by others. This would also be good in the Darwinian sense, and it would provide the right incentives. I think the near term harm would be unbearable for most (probably including myself), and would certainly be a career ending move by any politician.

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Originally posted by occrider 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'm not. I don't disapprove of anything being done by the fed.

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Originally posted by occrider 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.

I'm not sure if any of that was directed at me or if that was more general, but I have never said I opposed any financial support for our banks. To the contrary, as i said before, I think it is necessary. To reiterate, my only reservations are (i) moral hazards of bailing out institutions that caused the mess in the first place (which i can get over), (ii) if an institution is too big to fail, it is simply too big (something i can't easily get over - where was the DOJ when these institutions were getting so big?), and (iii) aligning incentives properly.

I only entered this discussion (or intended to enter this discussion) because i think obama's stimulus is garbage (i don't disapprove of the idea of a stimulus, but i don't agree with the allocation of funds). Less money should be allocated to temporary tax cuts, refundable tax credits for poor people, and projects that don't sustain long term growth. I would have liked to see far more than 20% of the stimulus allocated to education and energy. Those are the two areas that are most important for future growth. This was perhaps the best opportunity to absolutely transform american education. I think we let that opportunity pass without taking full advantage of it. Hopefully the educational spending is focused on math and sciences. I would also like to see some of that stimulus money go to URBAN development initiatives (i.e., mass transit and other smart growth initiatives) - but this is merely a personal preference, not necessarily something i think would be more stimulating for the economy.

I don't disapprove of any measures taken by the treasury or the fed. I absolutely appreciate the crucial role of the banks in our economy.

FYI - i agree with most of that article.

Last edited by jerZ07002 on Mar-11-2009 at 06:13

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Originally posted by Lebezniatnikov Now you're starting to get annoying. Is that your only line? That people who don't watch the same regurgitated news as you are somehow deluded? That people who base their opinions on macroeconomics and actual policy instead of gut feeling are kidding themselves? "Drinking the Kool-aid" is probably the most disingenuous and adolescent comeback I've ever heard in a political discussion. GOOD ONE, YOU'VE SURE CONVINCED ME I WAS WRONG!!!11

this is not about being wrong or right. NOBODY KNOWS WHAT IS WRONG OR RIGHT, right now. we have absolutely no idea. we are playing roulette. lets see how things are in a few years. I hope the damn you can tell me "told ya so".

if america had currency like zimbabwe it would make bailouts a lot easier

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Originally posted by delobbo ...I made a valid point...

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Originally posted by Lebezniatnikov Now you're starting to get annoying. Is that your only line? That people who don't watch the same regurgitated news as you are somehow deluded? That people who base their opinions on macroeconomics and actual policy instead of gut feeling are kidding themselves? "Drinking the Kool-aid" is probably the most disingenuous and adolescent comeback I've ever heard in a political discussion. GOOD ONE, YOU'VE SURE CONVINCED ME I WAS WRONG!!!11

The best part about it is that the person using it is almost invariably the one neck deep in red cherry.

"I know about the stimulus, I watch the news"

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Originally posted by ******** Seplling don't demonstrate intelligence and educatoin - knowing does.

yes. my thought is totally baseless and unfounded.

oh shaite.. there i go with that fucking boring sarcasm again. darnit.

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Originally posted by jerZ07002 while that's likely true, the fed is going to have a hell of a time shrinking the money supply considering it has entered the business of purchasing liabilities of private companies. This is very true, however, inflation is only a threat if the currency experiences sharp devaluations (not likely given the current global flight to monetary security) or we start seeing dramatic increases in wage growth (even less likely given this economy). [quote] i'm not entirely sure where i stand; i have some slight reservations. Even so, I know the pain that would be felt if a too-big-to-fail institution went down. I'm not saying we would be better off in the near term. Far from it, i think our economy would go through an enormous near term contraction. If you read some of my previous posts about the bailout I say it is necessary. Nevertheless, I believe it presents an enormous moral hazard. That said, I'm about 80/20 in favor of a supporting the financial institutions (most of the 20 percent derives from the fact that it provides the wrong incentives).

I somewhat agree with you and that manifests itself in my push for nationalization. That doesn't equate with socialism mind you. Nationalization would still entail wiping out the shareholders.

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I also think that if an institution is too-big-to-fail it's probably just TOO BIG. In the long term (> 5 year), it would probably be good to allow these institutions to fail and have the good assets purchased by others. This would also be good in the Darwinian sense, and it would provide the right incentives. I think the near term harm would be unbearable for most (probably including myself), and would certainly be a career ending move by any politician.

Agreed. No institution should be "too big to fail." This is clearly a failure in deregulation.

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I'm not sure if any of that was directed at me or if that was more general, but I have never said I opposed any financial support for our banks. To the contrary, as i said before, I think it is absolutely necessary. To reiterate, my only reservations are (i) moral hazards of bailing out institutions that caused the mess in the first place (which i can get over), (ii) if an institution is too big to fail, it is simply too big (something i can't easily get over - where was the DOJ when these institutions were getting so big?), and (iii) aligning incentives properly. I only entered this discussion (or intended to enter this discussion) because i think obama's stimulus is garbage. I don't disapprove of any measures taken by the treasury or the fed. I absolutely appreciate the crucial role of the banks in our economy. FYI - i agree with most of that article.

Sorry it was not directed at you ... it was more or less a diatribe I had. I disagree in the viewpoint that the stimulus package is garbage. I think it needed to be comprehensive in the sense that it consisted of spending for infrastructure, tax cuts, and so called "welfare" components ("automatic stabilizers" in conventional economic thought). I think it should have been tweaked to have more fiscal stimulus and that it should have been about half a trillion dollars more but not everyone will agree with me.

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Originally posted by occrider Sorry it was not directed at you ... it was more or less a diatribe I had. I disagree in the viewpoint that the stimulus package is garbage. I think it needed to be comprehensive in the sense that it consisted of spending for infrastructure, tax cuts, and so called "welfare" components ("automatic stabilizers" in conventional economic thought). I think it should have been tweaked to have more fiscal stimulus and that it should have been about half a trillion dollars more but not everyone will agree with me.

i edited my post to explain my position on why it is garbage. i think a stimulus is probably necessary, i just don't like the form.

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Originally posted by sean5 if america had currency like zimbabwe it would make bailouts a lot easier

I was in Zimbabwe 3 weeks ago. A $100 trillion zimbabwe note cost me 50 cents and a bar of soap.

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Originally posted by MisterOpus1 Exactly my point, thank you. Looking at the picture of Obama being the culprit of all the doom and destruction of the markets as the Wingnutters and mouthpieces want to portray does exactly that - leaving out the relevant information that led us to this point, much in the same way that I did above.

of course.

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Originally posted by occrider http://www.tnr.com/story_print.html...36-a3b2f54243ec

great article.

capitalizt, you should read it. every day.

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