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OK Free-Market Economists, Help Me Out Here (pg. 2)
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| jerZ07002 |
| quote: | Originally posted by MisterOpus1
As much as I love pinpointing on Bush as often as my little bleeding librul heart can muster, I realize this financial scenario doesn't fall squarely on his shoulders.
But I do tend to wonder with his "ownership society" speech and philosophical views a few years back, right when we began borrowing the out of everything for home purchases, that it might have played a wee speck of a role in this mess.
Any thoughts on that? |
this ownership society philosophy has been ingrained in american society for as long as we have been a country. from the homestead act, to the mortgage interest deduction and the deduction for real property taxes, the government provides more benefits to purchasing than to leasing. the mortgage interest deduction itself is a huge reason many people purchase homes instead of renting. depending on your income and the size of your loan, you can save thousands of dollars a year by purchasing a home. This is a major factor in housing prices because sellers have been valuing their home prices on the amount of mortgage payments a potential purchaser could make instead of valuing the property based on the rental value of the property (which is the correct base for valuing real property). When you include the beneficial tax deductions you get from the mortgage interest and the real property tax deduction, the purchaser can then take out a greater loan because the borrower has more cash flow. Residential property values are severely inflated by these benefits. Now that people can't afford the mortgage payments (because of interest resets), they can't sell their houses for what they paid. If they based the price of their house on the amount they could have rented the house, then selling the house would be much easier (or they could just rent the house to cover the costs).
but to specifically answer your question, bush had nothing to do with this mess. even though i don't like bush, this has everything to do with uninformed consumers being mislead by predatory lenders who took on little liability for bad loans because they were selling the loans. These lenders were telling people they could afford loans they simply couldn't afford, and that was propping up property values. It's a combination of bad business practices and stupid consumers living beyond their means. |
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| pkcRAISTLIN |
| quote: | Originally posted by MisterOpus1
But I do tend to wonder with his "ownership society" speech and philosophical views a few years back, right when we began borrowing the out of everything for home purchases, that it might have played a wee speck of a role in this mess.
Any thoughts on that? |
oh come on. the mess was created by people borrowing beyond their means, pure and simple. you cant blame a central bank or a government for stupid people.
and as for all the capitalists whining and bitching about government intervention (my heart bleeds) its just another example of government stepping up to the plate during perceived market failure. that's how our economies work. private industry cant come together to organise anything for the good of the country (funny how they can get together to collude or insider trade though) so its the role of the govt to try and rectify the problem(s). the pragmatists among us realise that a mixed economy and government intervention is the only way to help alleviate the very real problems with free markets.
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ultimately the economy is centrally planned |
i suggest you do some research on the USSR before you start calling the US a planned economy. |
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| Krypton |
| quote: | Originally posted by pkcRAISTLIN
i suggest you do some research on the USSR before you start calling the US a planned economy. |
Taking on the mission of "price stability", I think you need to plan a monetary policy, essntially central planning, but with a capitalist twist. |
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| jerZ07002 |
| quote: | Originally posted by Krypton
Taking on the mission of "price stability", I think you need to plan a monetary policy, essntially central planning, but with a capitalist twist. |
you can't have a policy without a central plan. there's no such thing as an unplanned policy, and you can't expect various private players to come up with a central policy. In fact, if that happened, it would be collusion, an anti free market concept. |
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| pkcRAISTLIN |
| quote: | Originally posted by Krypton
Taking on the mission of "price stability", I think you need to plan a monetary policy, essntially central planning, but with a capitalist twist. |
yeah, but a "planned economy" is defined by government control of production, prices, distribution etc of goods and services. monetary policy isn't the same thing as a controlled or planned economy. though im happy to be shown otherwise :) |
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| Krypton |
| quote: | Originally posted by jerZ07002
you can't have a policy without a central plan. there's no such thing as an unplanned policy. |
Exactly, so if we go back to Mr. Opus's concern about Fed intervention, the central plan (monetary policy) is the reason for the boom, bust, recovery business cycles. As I said before, the Fed's aggressive intervention this year is damage control from the previous Greenspan management. Shakka posted an interest read on Greenspan not being the main reason for the housing bubble, but I still disagree. Yes, there was demand for subprime financial products, but, these did not become widely available until the interest rates were lowered to 1%.. |
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| Krypton |
| quote: | Originally posted by pkcRAISTLIN
yeah, but a "planned economy" is defined by government control of production, prices, distribution etc of goods and services. monetary policy isn't the same thing as a controlled or planned economy. though im happy to be shown otherwise :) |
This is a better definition...
"A planned economy is an economic system in which the state or government manages the economy." - Alec Nove (1987), "planned economy," The New Palgrave: A Dictionary of Economics, v. 3, pp. 879-80.
There are several types of planned economies, which do not necessarily have to revolve around government control of production. All central bank monetary policy is central planning, as I said, socialist or capitalist, doesn't matter. |
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| pkcRAISTLIN |
| quote: | Originally posted by Krypton
This is a better definition...
"A planned economy is an economic system in which the state or government manages the economy." - Alec Nove (1987), "planned economy," The New Palgrave: A Dictionary of Economics, v. 3, pp. 879-80.
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that's an awful definition. ambiguous and lacking substance! yay for wiki! :p
| quote: | Originally posted by Krypton
There are several types of planned economies, |
see, i didn't know that.
| quote: | Originally posted by Krypton
which do not necessarily have to revolve around government control of production. All central bank monetary policy is central planning, as I said, socialist or capitalist, doesn't matter. |
see, if we continue the wiki paragraph you quoted
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Its most extensive form is referred to as a command economy,[2] centrally planned economy, or command and control economy[3]) In such economies, the state or government controls all major sectors of the economy and formulates all decisions about their use and about the distribution of income,[4] The planners decide what should be produced and direct enterprises to produce those goods.[5] Planned economies are in contrast to unplanned economies, i.e. a market economy, where production, distribution, and pricing decisions are made by the private owners of the factors of production based upon their own and their customers' interests rather than upon furthering some overarching macroeconomic plan. Less extensive forms of planned economies include those that use indicative planning in which the state employs "influence, subsidies, grants, and taxes, but does not compel."[6]
A planned economy may consist of state-owned enterprises, private enterprises directed by the state, or a combination of both. Though "planned economy" and "command economy" are often used as synonyms, some make the distinction that under a command economy, the means of production are publicly owned. That is, a planned economy is "an economic system in which the government controls and regulates production, distribution, prices, etc." [1] but a command economy, while also having this type of regulation, necessarily has substantial public ownership of industry. [2] Therefore, command economies are planned economies, but not necessarily the reverse (example: Nazi Germany's private ownership yet use of the Four Year Plan could construe them as a planned economy in the wide sense, but not necessarily a command economy, while the Soviet Union with public ownership would be a command economy).
Important planned economies that existed in the past include the economy of the Soviet Union, which was for a time the world's second-largest economy, and China during its Great Leap Forward. Beginning in the 1980s and 1990s, many governments presiding over planned economies began deregulating (or as in the Soviet Union, the system collapsed) and moving toward market-based economies by allowing the private sector to make the pricing, production, and distribution decisions. Although most economies today are market economies or mixed economies (which are partially planned), planned economies exist in some countries such as Cuba, North Korea, and Myanmar.[7] |
so, at best, you might have a "partially planned" economy argument. |
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| jerZ07002 |
| quote: | Originally posted by Krypton
There are several types of planned economies, which do not necessarily have to revolve around government control of production. All central bank monetary policy is central planning, as I said, socialist or capitalist, doesn't matter. |
i have to disagree with you on this....monetary policy is not economic planning equivalent to a planned economy. monetary policy is mostly the control of money supply. Controlling money supply may increase or decrease growth, but it doesn't allocate economic resources further than that. a planned economy, as Pkcraistlin quoted, means the government controls the uses and distribution of economic resources. |
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| jerZ07002 |
| quote: | Originally posted by Krypton
Exactly, so if we go back to Mr. Opus's concern about Fed intervention, the central plan (monetary policy) is the reason for the boom, bust, recovery business cycles. As I said before, the Fed's aggressive intervention this year is damage control from the previous Greenspan management. Shakka posted an interest read on Greenspan not being the main reason for the housing bubble, but I still disagree. Yes, there was demand for subprime financial products, but, these did not become widely available until the interest rates were lowered to 1%.. |
i agree with you that greenspan deserves much of the blame for the current situation. |
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| Krypton |
| quote: | Originally posted by pkcRAISTLIN
that's an awful definition. ambiguous and lacking substance! yay for wiki! :p
see, i didn't know that.
see, if we continue the wiki paragraph you quoted
so, at best, you might have a "partially planned" economy argument. |
Wiki, yes, but there were plenty of references. I never quote wikipedia per se, I quote what was quoted from the original source.
| quote: | | i have to disagree with you on this....monetary policy is not economic planning equivalent to a planned economy. monetary policy is mostly the control of money supply. Controlling money supply may increase or decrease growth, but it doesn't allocate economic resources further than that. a planned economy, as Pkcraistlin quoted, means the government controls the uses and distribution of economic resources. |
So what do you call an industry/corporate bailout? |
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| jerZ07002 |
| quote: | Originally posted by Krypton
Wiki, yes, but there were plenty of references. I never quote wikipedia per se, I quote what was quoted from the original source.
So what do you call an industry/corporate bailout? |
an allocation of government resources. You are mistaking government intervention to assist the economy with government control over the economy. |
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