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Thread: PlumberKhan

  1. #1
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    PlumberKhan

    Just wanted to give you the response you asked for. In the earlier thread, I stated that I was frightened by the lack of understanding some posters have of basic economics. I still believe that. Some things that have been written are very misguided and it is difficult to have a rational discussion when basic understandings aren't agreed upon.

    Ill do my best here to state what I think are misguided or misunderstood positions by some posters on a variety of positions. Please be forewarned that I have not had the time (nor will I) to fact check every stat I provide. This is going mostly on memory and will be in the general ballpark. It is more to illustrate the point. also, don't take what I say as gospel because I am often wrong. Also, understand I am tired, long week at work and writing this over a few Becks, so I may not be as clear as Id like so if you would like clarification, ask. I may take a bit to get back because I plan on spending the next 3 days celebrating St Pats!

    The first thing I will start with is the concept of a recession. Recessions, while never pleasant or easy to deal with at the time, are a necessary and essential part of the economic cycle. I don't usually find any good in finding a party to blame for a recession. What causes a recession is that there is overcapacity in certain areas of the economy. Too many resources are being directed to an area of the economy that has diminishing productivity. Quite simply, too many people are chasing the same buck.

    How does this happen? Lets take for instance the current housing market. How many people left there careers in 2003 because they saw others cashing in on the housing boom? Iím sure you know of many personally, and some probably did very well for a period. People left other fields to enter the housing filed, weather as a mortgage broker, housing broker, house flipper, construction etc. Well, as more people see the easy money being made here, the more people direct (and as seen now misdirect productive) resources to the housing resource. Eventually this will lead to an oversupply that needs to be worked off, and thatís how the recession starts.

    There are a lot of factors that determine how prolonged and deep a recession will be. How much inventory has been built? How quick industry is to accept that lower prices for the inventory? How quick workers realize that industry is more productive and leave the industry? How quick workers can gain the necessary skills to find productive work?

    Ultimately, recession are needed because it takes workers and resources away from unproductive or less productive industries and directs the workers and resources to more productive industries. IMO, it is not a good idea to try to avoid a recession with a debasing of a currency. And here is where I will start the segway to my next point.

    Lets look at the recent history of Japan (this is obviously an oversimplification and ignoring its dumb government policies and again population problem which are also factors.) Over the past 10+ years, Japans economy has grown at an anemic pace after growing gangbusters for most of the 80's. Instead of facing a recession and letting the natural business cycle take its place, Japan pursued a policy of negative real interest rates, which is basically a printing press of money (Ill explain that more later.) What this allowed was companies that had no real right surviving to be able to. This allowed a situation where valuable resources were being directed inefficiently. Now this may not sound bad, but its to everyoneís detriment.

    You many retort, "whatís bad about this, people are working staying in business" etc. But these are businesses that shouldnít be in business and are hurting the overall economy BECAUSE THEY EXIST AT TEH EXPENSE OF THEIR COMPETITORS. In addition, their resources are being wasted when if the natural course would be allowed to take its course, these resources would find productive work and bring real GDP growth!

    I have now started the topic of monetary policy. In the US, this is independent of fiscal policy and is conducted by the Federal Reserve, better known as the Fed. I won't go into the basics of monetary policy, but I am very concerned by the US monetary policy over the past 10 years or so.

    I think we can all agree that a government is run best when it has a balanced budget in the LONG run and has a stable monetary policy. Milton Friedman suggested that monetary policy growth should grow with what is to be believed the long run GDP growth rate (3% in the US.)

    If we look throughout history, the fall of most governments coincides with the debasing of a currency. In Nero's Rome, the gold coin went form being about 100% pure in the time of Augustus to less than 1% pure while Rome was burning. This story is similar for the confederate states, pre-communist china and a host of other civilizations if I had the energy I could look up

    What we have done over the past 5 years or so is grow M3 at a ridiculous pace of about 10-15%. That is absurd. The dollar has traded from about .88euro/usd to 1.55. IMO, this has all been cause by perverse monetary policy. I can not understand for the life of me why the fed fund rate were kept for so long under Greenspan at 1%?

    Why is this bad? Its bad because as you print more money, it inherently becomes worth less. It isnít bad during times of growth, when wealth is being created (an example of wealth being created is lets say I sell a widget for $1 and it costs me .75 to make. If I find a way to create it for .50, I have created wealth of a quarter.) and real GDP is growing. But in the situation that we are facing now (low, no or negative GDP growth,) the dollar becomes worth less and people donít want to hold it. You see people putting there money into other assets. Some are the old ones like gold and silver. Others find it other stores of value like land, oil etc. We now have a situation that there are so many dollars that its going into all sorts of commodities. Since there is a limited amount of commodities , the price is driven up and it causes inflation.

    Oil today is no longer just a supply and demand equation on how much is being used. People are demanding it as a store of value since confidence is lost in the dollar. The same thing is happening all over the place. Hell, some metal I have never heard of before Bismuth is trading at an all time high!!
    Inflation is the worst outcome IMO because it is a hidden an cruel tax that the average person cannot prepare for.

    What is the solution? IMO, we need to raise interest rates very soon. The dollar is spiraling out of control. Raising rates will be terrible for the banks, may cause a panic in the short run and some pain, but we have to deal with this eventually.

    As an aside, I do not see an end in sight for the stock market fall until 3 things happen. The panic selling(which may have occurred today but I would have like to see the vix higher than 33,) the 2 and 5 year note prices retreating and the yields increasing and the dollar stabilizing


    Hope that was somewhat helpful, im drunk, exhausted and going to bed after a very long week

  2. #2
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    [QUOTE=Lawyers, Guns and Money;2433228]Just wanted to give you the response you asked for. In the earlier thread, I stated that I was frightened by the lack of understanding some posters have of basic economics. I still believe that. Some things that have been written are very misguided and it is difficult to have a rational discussion when basic understandings aren't agreed upon.

    Ill do my best here to state what I think are misguided or misunderstood positions by some posters on a variety of positions. Please be forewarned that I have not had the time (nor will I) to fact check every stat I provide. This is going mostly on memory and will be in the general ballpark. It is more to illustrate the point. also, don't take what I say as gospel because I am often wrong. Also, understand I am tired, long week at work and writing this over a few Becks, so I may not be as clear as Id like so if you would like clarification, ask. I may take a bit to get back because I plan on spending the next 3 days celebrating St Pats!

    The first thing I will start with is the concept of a recession. Recessions, while never pleasant or easy to deal with at the time, are a necessary and essential part of the economic cycle. I don't usually find any good in finding a party to blame for a recession. What causes a recession is that there is overcapacity in certain areas of the economy. Too many resources are being directed to an area of the economy that has diminishing productivity. Quite simply, too many people are chasing the same buck.

    How does this happen? Lets take for instance the current housing market. How many people left there careers in 2003 because they saw others cashing in on the housing boom? Iím sure you know of many personally, and some probably did very well for a period. People left other fields to enter the housing filed, weather as a mortgage broker, housing broker, house flipper, construction etc. Well, as more people see the easy money being made here, the more people direct (and as seen now misdirect productive) resources to the housing resource. Eventually this will lead to an oversupply that needs to be worked off, and thatís how the recession starts.

    There are a lot of factors that determine how prolonged and deep a recession will be. How much inventory has been built? How quick industry is to accept that lower prices for the inventory? How quick workers realize that industry is more productive and leave the industry? How quick workers can gain the necessary skills to find productive work?

    Ultimately, recession are needed because it takes workers and resources away from unproductive or less productive industries and directs the workers and resources to more productive industries. IMO, it is not a good idea to try to avoid a recession with a debasing of a currency. And here is where I will start the segway to my next point.

    Lets look at the recent history of Japan (this is obviously an oversimplification and ignoring its dumb government policies and again population problem which are also factors.) Over the past 10+ years, Japans economy has grown at an anemic pace after growing gangbusters for most of the 80's. Instead of facing a recession and letting the natural business cycle take its place, Japan pursued a policy of negative real interest rates, which is basically a printing press of money (Ill explain that more later.) What this allowed was companies that had no real right surviving to be able to. This allowed a situation where valuable resources were being directed inefficiently. Now this may not sound bad, but its to everyoneís detriment.

    You many retort, "whatís bad about this, people are working staying in business" etc. But these are businesses that shouldnít be in business and are hurting the overall economy BECAUSE THEY EXIST AT TEH EXPENSE OF THEIR COMPETITORS. In addition, their resources are being wasted when if the natural course would be allowed to take its course, these resources would find productive work and bring real GDP growth!

    I have now started the topic of monetary policy. In the US, this is independent of fiscal policy and is conducted by the Federal Reserve, better known as the Fed. I won't go into the basics of monetary policy, but I am very concerned by the US monetary policy over the past 10 years or so.

    I think we can all agree that a government is run best when it has a balanced budget in the LONG run and has a stable monetary policy. Milton Friedman suggested that monetary policy growth should grow with what is to be believed the long run GDP growth rate (3% in the US.)

    If we look throughout history, the fall of most governments coincides with the debasing of a currency. In Nero's Rome, the gold coin went form being about 100% pure in the time of Augustus to less than 1% pure while Rome was burning. This story is similar for the confederate states, pre-communist china and a host of other civilizations if I had the energy I could look up

    What we have done over the past 5 years or so is grow M3 at a ridiculous pace of about 10-15%. That is absurd. The dollar has traded from about .88euro/usd to 1.55. IMO, this has all been cause by perverse monetary policy. I can not understand for the life of me why the fed fund rate were kept for so long under Greenspan at 1%?

    Why is this bad? Its bad because as you print more money, it inherently becomes worth less. It isnít bad during times of growth, when wealth is being created (an example of wealth being created is lets say I sell a widget for $1 and it costs me .75 to make. If I find a way to create it for .50, I have created wealth of a quarter.) and real GDP is growing. But in the situation that we are facing now (low, no or negative GDP growth,) the dollar becomes worth less and people donít want to hold it. You see people putting there money into other assets. Some are the old ones like gold and silver. Others find it other stores of value like land, oil etc. We now have a situation that there are so many dollars that its going into all sorts of commodities. Since there is a limited amount of commodities , the price is driven up and it causes inflation.

    Oil today is no longer just a supply and demand equation on how much is being used. People are demanding it as a store of value since confidence is lost in the dollar. The same thing is happening all over the place. Hell, some metal I have never heard of before Bismuth is trading at an all time high!!
    Inflation is the worst outcome IMO because it is a hidden an cruel tax that the average person cannot prepare for.

    What is the solution? IMO, we need to raise interest rates very soon. The dollar is spiraling out of control. Raising rates will be terrible for the banks, may cause a panic in the short run and some pain, but we have to deal with this eventually.

    As an aside, I do not see an end in sight for the stock market fall until 3 things happen. The panic selling(which may have occurred today but I would have like to see the vix higher than 33,) the 2 and 5 year note prices retreating and the yields increasing and the dollar stabilizing


    Hope that was somewhat helpful, im drunk, exhausted and going to bed after a very long week[/QUOTE]

    That was a superb post. Although I don't agree on every point you have a very good grasp on where things are at economically and also marketwise in the United States.

    This post reminds me, because you have directed it at one poster, that I have to get back to Asusa at some stage. Unfortunately it is going to take a post of similar length to yours to reply and at the moment I am really very pressed for time.

    Anyway, great posting - hope to see more quality posting like that from you in future. In terms of 'politics and world events', which is what these threads are dedicated to, a lot of that boils down for me to 'it's about the economy'. I think as America tastes the bitter fruit of a recession, necessary or otherwise, that will become more apparent to everyone.

  3. #3
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    Good thread. I was having a conversation with someone today about the slowing economy, subprime mess and specifically, the Fed and JPM Chase stepping in to help Bear Stearns in its current liquidity problem. I shocked the guy when I said this could be the best recession we've had in a while. He kinda looked at me strangely and I had to explain to him why sometimes it is okay and necessary to have a recession. Sometimes you spend so much time, energy and money trying to stave off a recession when the best thing to do is simply let the economy run its natural course. Recessions often purge the excesses and problems created by a variety of factors whether it is poor policy, excessive risk taking or structural problems in the economy. This "creative destruction" is good. It weeds out the inefficiencies and problems in our economy and allocated resources better. The dotcom collapse is a perfect example. It was a mania that had good money chasing after bad. Did we really need 37 startups all trying to let you order groceries online to be delivered to your house??? Watching those companies evaporate may have been painful for some (I was one who felt the pain) but it's positive for the economy in the long run. It is Darwin at his best and often leaves us better when we come out of it.

    We should let those who took undue risk like real estate speculators get driven from the market. We should let the firms that took bad mortgages, clouded them with other instruments with higher ratings and then securitized them feel the pain when people finally realize the CDO is really just poop with a nice wrapper around it. If the Federal government and others bail out people who take on excessive risk then those mistakes will be repeated again. If I bet $1000 on a team to win the Super Bowl and they lose, I shouldn't expect a government program to cover some of my losses. What needs to be done now is to improve the structure, oversight and regulations related to the processes that failed. Take a look at why we're in this mess and figure out how to fix it so it doesn't happen again. Don't put bandaids on the broken leg.....X-ray it and fix it right. Improve transparency and disclosures, fine and punish those who take advantage of or con mortgagees, improve the processes by which creditworthiness is determined, etc.

    So many bad habits have been encouraged during this mortgage mess that it's ridiculous. You have people that took out 105% mortgages and now they simply walk away from their homes and allow their houses to be foreclosed upon. The homeowner didn't put a penny of his own money into the house and doesn't feel like paying a monthly mortgage on a depreciating asset....I don't blame him. He may be playing by the rules as the bank allowed them but now that mortgage that is getting defaulted on is owned, through a CDO, by some school district in middle America and is taking a loss because they thought they had a safe, high-yielding security (note: securities that are sold as both "safe investments" AND are high-yielding should be a warning sign because there is no such thing). The bottom line is that we need do need to punish those who do illegal things like predatory lending or not disclosing all the facts and risks associated with both a loan to a homeowner as well as to the buyer of mortgage-backed security or other CDO. But we don't need to bail out people who were too lazy to read loan documents or those who, in efforts to "keep up with the Joneses", bought much more house than they could afford. Some lessons are tough to learn. I got hurt in the dotcom burst of 2000 but I didn't expect Uncle Sam to come make me whole on the investments I lost money on....I took my lumps and learned some valuable lessons. Our economy needs to do the same now.
    Last edited by jetstream23; 03-15-2008 at 12:42 AM.

  4. #4
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    [QUOTE=Lawyers, Guns and Money;2433228]Just wanted to give you the response you asked for. In the earlier thread, I stated that I was frightened by the lack of understanding some posters have of basic economics. I still believe that. Some things that have been written are very misguided and it is difficult to have a rational discussion when basic understandings aren't agreed upon.

    Ill do my best here to state what I think are misguided or misunderstood positions by some posters on a variety of positions. Please be forewarned that I have not had the time (nor will I) to fact check every stat I provide. This is going mostly on memory and will be in the general ballpark. It is more to illustrate the point. also, don't take what I say as gospel because I am often wrong. Also, understand I am tired, long week at work and writing this over a few Becks, so I may not be as clear as Id like so if you would like clarification, ask. I may take a bit to get back because I plan on spending the next 3 days celebrating St Pats!

    The first thing I will start with is the concept of a recession. Recessions, while never pleasant or easy to deal with at the time, are a necessary and essential part of the economic cycle. I don't usually find any good in finding a party to blame for a recession. What causes a recession is that there is overcapacity in certain areas of the economy. Too many resources are being directed to an area of the economy that has diminishing productivity. Quite simply, too many people are chasing the same buck.

    How does this happen? Lets take for instance the current housing market. How many people left there careers in 2003 because they saw others cashing in on the housing boom? Iím sure you know of many personally, and some probably did very well for a period. People left other fields to enter the housing filed, weather as a mortgage broker, housing broker, house flipper, construction etc. Well, as more people see the easy money being made here, the more people direct (and as seen now misdirect productive) resources to the housing resource. Eventually this will lead to an oversupply that needs to be worked off, and thatís how the recession starts.

    There are a lot of factors that determine how prolonged and deep a recession will be. How much inventory has been built? How quick industry is to accept that lower prices for the inventory? How quick workers realize that industry is more productive and leave the industry? How quick workers can gain the necessary skills to find productive work?

    Ultimately, recession are needed because it takes workers and resources away from unproductive or less productive industries and directs the workers and resources to more productive industries. IMO, it is not a good idea to try to avoid a recession with a debasing of a currency. And here is where I will start the segway to my next point.

    Lets look at the recent history of Japan (this is obviously an oversimplification and ignoring its dumb government policies and again population problem which are also factors.) Over the past 10+ years, Japans economy has grown at an anemic pace after growing gangbusters for most of the 80's. Instead of facing a recession and letting the natural business cycle take its place, Japan pursued a policy of negative real interest rates, which is basically a printing press of money (Ill explain that more later.) What this allowed was companies that had no real right surviving to be able to. This allowed a situation where valuable resources were being directed inefficiently. Now this may not sound bad, but its to everyoneís detriment.

    You many retort, "whatís bad about this, people are working staying in business" etc. But these are businesses that shouldnít be in business and are hurting the overall economy BECAUSE THEY EXIST AT TEH EXPENSE OF THEIR COMPETITORS. In addition, their resources are being wasted when if the natural course would be allowed to take its course, these resources would find productive work and bring real GDP growth!

    I have now started the topic of monetary policy. In the US, this is independent of fiscal policy and is conducted by the Federal Reserve, better known as the Fed. I won't go into the basics of monetary policy, but I am very concerned by the US monetary policy over the past 10 years or so.

    I think we can all agree that a government is run best when it has a balanced budget in the LONG run and has a stable monetary policy. Milton Friedman suggested that monetary policy growth should grow with what is to be believed the long run GDP growth rate (3% in the US.)

    If we look throughout history, the fall of most governments coincides with the debasing of a currency. In Nero's Rome, the gold coin went form being about 100% pure in the time of Augustus to less than 1% pure while Rome was burning. This story is similar for the confederate states, pre-communist china and a host of other civilizations if I had the energy I could look up

    What we have done over the past 5 years or so is grow M3 at a ridiculous pace of about 10-15%. That is absurd. The dollar has traded from about .88euro/usd to 1.55. IMO, this has all been cause by perverse monetary policy. I can not understand for the life of me why the fed fund rate were kept for so long under Greenspan at 1%?

    Why is this bad? Its bad because as you print more money, it inherently becomes worth less. It isnít bad during times of growth, when wealth is being created (an example of wealth being created is lets say I sell a widget for $1 and it costs me .75 to make. If I find a way to create it for .50, I have created wealth of a quarter.) and real GDP is growing. But in the situation that we are facing now (low, no or negative GDP growth,) the dollar becomes worth less and people donít want to hold it. You see people putting there money into other assets. Some are the old ones like gold and silver. Others find it other stores of value like land, oil etc. We now have a situation that there are so many dollars that its going into all sorts of commodities. Since there is a limited amount of commodities , the price is driven up and it causes inflation.

    Oil today is no longer just a supply and demand equation on how much is being used. People are demanding it as a store of value since confidence is lost in the dollar. The same thing is happening all over the place. Hell, some metal I have never heard of before Bismuth is trading at an all time high!!
    Inflation is the worst outcome IMO because it is a hidden an cruel tax that the average person cannot prepare for.

    What is the solution? IMO, we need to raise interest rates very soon. The dollar is spiraling out of control. Raising rates will be terrible for the banks, may cause a panic in the short run and some pain, but we have to deal with this eventually.

    As an aside, I do not see an end in sight for the stock market fall until 3 things happen. The panic selling(which may have occurred today but I would have like to see the vix higher than 33,) the 2 and 5 year note prices retreating and the yields increasing and the dollar stabilizing


    Hope that was somewhat helpful, im drunk, exhausted and going to bed after a very long week[/QUOTE]

    I agree on the monetary policy point. We're approaching a negative real rate and it looks like the probability of a 75 basis point move is already priced in at 100%. Instead of raising rates as you suggest, big Ben is going to continue lowering rates. But I think the reason he is doing this isn't to fight off recession as much as it is to ease the credit markets and provide liquidity. Things have seized up out there, Bear is a perfect example. Just a rumor of a liquidity problem for them the other day caused counterparties to stop dealing with them. The got stuck in the mud and the Fed had to intervene. This is not good. Lower prices is one thing but an illiquid market is a major problem. I think if there weren't all these dislocations and imbalances in the credit market where people don't even know how to price things we would see a less aggressive Fed. I don't know but I'm thinking that the Fed is sacrificing the Dollar a whole lot more than they normally would not as much because of recession as it is a fear of markets for securities failing. They have other mechanisms at their disposal, some of which they've used, to help the markets but they still seem bent on pushing the Fed Funds rate substantially lower as well.

  5. #5
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    Dude...you wrote that drunk? :P

    Great post...I was actually able to understand. My overall understanding of economics is so basic that I really don't have much of a response. I never heard too many people talking about a recession like it was good for the overall health of the economy(I think save for maybe one or two posters here)...but it certainly makes sense that the natural ebb and flow isn't something that should be tampered with by the government and should be allowed to run it's natural course.

    It kinda makes me wonder why a supposedly conservative government would do things like send people tax checks to attempt to avoid recession and bail out failing airline industries. It cost the govt. $41,000,000 just to let us know that they are going to be sending us checks for $600. What an unbelievable waste of our money.

    Do you have any suggestions of a few basic books on economics that would round out my understanding? If I'm gonna be on this forum claiming that all corporations are evil, the least I can do is misinterpret some real facts to back up my rantings...:D

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    Thanks for the substantial thread. There are very very few on this forum that qualify as more than ill-informed ideological ranting based on emotional reasoning. Many times when I read thread responses here, I am reminded of that little Stephen Crane poem, "I saw a man chasing the horizon." When the man is challenged, he replies: "You lie," and ran on." My own experience in studying history in some depth is that the more you learn the more grey, nuanced and complex the decision-making becomes. The natural tendency for the average person is to try to distill everything down to a simple black-and-white position ("big government bad" "all corporations evil" "personal liberty good" "entitlements bad" etc.). This sort of neanderthal grunt is then supported by some anecdotal data that convinces the believer that he must be right. He never stops to consider that he is engaged in very selective attention, ignoring all the data that muddies his opinion. In the end, he feels secure having a belief, any belief, and holding on to it for dear life, because uncertainty is a bi*ch. That's how political forums go to hell....

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    [QUOTE=PlumberKhan;2433536]Dude...you wrote that drunk? :P

    Great post...I was actually able to understand. My overall understanding of economics is so basic that I really don't have much of a response. I never heard too many people talking about a recession like it was good for the overall health of the economy(I think save for maybe one or two posters here)...but it certainly makes sense that the natural ebb and flow isn't something that should be tampered with by the government and should be allowed to run it's natural course.

    [B]It kinda makes me wonder why a supposedly conservative government would do things like send people tax checks to attempt to avoid recession and bail out failing airline industries. It cost the govt. $41,000,000 just to let us know that they are going to be sending us checks for $600. What an unbelievable waste of our money.[/B]

    Do you have any suggestions of a few basic books on economics that would round out my understanding? If I'm gonna be on this forum claiming that all corporations are evil, the least I can do is misinterpret some real facts to back up my rantings...:D[/QUOTE]
    That, unfortunately, is the dangerous cross section of politics and economics..

    It's good politics to try and prevent a recession..

  8. #8
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    Lawyers, Guns and Money is made of Epic, Win & Uber.:yes:

    You post far too infrequently my friend. Great job here.

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    [QUOTE=PlumberKhan;2433536]Dude...you wrote that drunk? :P

    Great post...I was actually able to understand. My overall understanding of economics is so basic that I really don't have much of a response. I never heard too many people talking about a recession like it was good for the overall health of the economy(I think save for maybe one or two posters here)...but it certainly makes sense that the natural ebb and flow isn't something that should be tampered with by the government and should be allowed to run it's natural course.

    It kinda makes me wonder why a supposedly conservative government would do things like send people tax checks to attempt to avoid recession and bail out failing airline industries. It cost the govt. $41,000,000 just to let us know that they are going to be sending us checks for $600. What an unbelievable waste of our money.

    Do you have any suggestions of a few basic books on economics that would round out my understanding? If I'm gonna be on this forum claiming that all corporations are evil, the least I can do is misinterpret some real facts to back up my rantings...:D[/QUOTE]

    Thanks, Drunk may have been a bit of an exaggeration but I was on my way, had more than a few after work.

    You raise some valid points. And Iím going to answer both pretending to be a 2 handed economist (forget the politician who made the joke about wanting a one handed economist, but was a pretty fun remark.)

    Its really hard to say what to do with the airline industry. The airline industry is going through rough times and may no longer be an economically viable option to run as private companies. I believe Amtrak has the same problem, But, I think the majority of American would be appalled if the airline industry were to disappear. As a free markets guy, I think it could survive with less competition. I think bailouts are letting too many poorly run companies survive, artificially undercutting the prices of good companies to their detriment. I havenít studied the problem enough to give a better answer than that, but if the airline industry were no longer economically viable privately, government intervention is warranted. But consolidation should happen first IMO.

    The check idea, while one I donít love, has some fiscal policy merit. i donít think it allows people to stay in unproductive areas since its a one time check. and it will probably help people that really need it. I donít love it form an economic standpoint, but understand it politically.


    As for books, Thomas Sowell's "Basic Economics" and "Applied Economics: Thinking Past Stage One" are great reads that explain economics in simple terms and free of charts etc. Other books I have really enjoyed are Marc Faber's "Tomorrow's Gold" , Hayek "The Road To Serfdom" and Milton Friendman's 3 following "Capitalism and Freedom", "Free to Choose" and "Money Mischief."

  10. #10
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    LGM-Great post. I would like to ask you why you think we have had two major excesses that were so excessive they were outright bubbles under two different Presidents and two different Fed chiefs. I'm referring to the tech bubble under Clinton and the housing bubble under Bush. Is something so fundamentally out of order that rather than having a cyclical recession dealing with broad excesses built up over long periods of time we seem to be heading toward a boom and bust cycle that is focused on relatively narrow sectors of the economy?

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    [QUOTE=Winstonbiggs;2433615]LGM-Great post. I would like to ask you why you think we have had two major excesses that were so excessive they were outright bubbles under two different Presidents and two different Fed chiefs. I'm referring to the tech bubble under Clinton and the housing bubble under Bush. Is something so fundamentally out of order that rather than having a cyclical recession dealing with broad excesses built up over long periods of time we seem to be heading toward a boom and bust cycle that is focused on relatively narrow sectors of the economy?[/QUOTE]

    Literally running out the door so this will be quicker than it should be, but the reason I think this happened is because Greenspan thought loose monetary policy would allieve all problems, IMO. The tech bubble was help creatd by the Asian currency crisses and the Long Term Capital bailout. The excess money found its way into the TMT bubble where a lot of these companies didnt even have real business models but this capital had to go to work somewhere. Similiarly, excessive monetary policy was used to attemept to prop up the nasdaq, but this excess capital found its way instead into the housing market creating a bubble there and all since the capital was put to work, it found its way into areas where it had no business (exotic loans etc.)

    Greenspan could open the faucet but dcouldnt control where the water went

    Presidental policy had little to do with it IMO

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    [QUOTE=Lawyers, Guns and Money;2433634]Literally running out the door so this will be quicker than it should be, but the reason I think this happened is because Greenspan thought loose monetary policy would allieve all problems, IMO. The tech bubble was help creatd by the Asian currency crisses and the Long Term Capital bailout. The excess money found its way into the TMT bubble where a lot of these companies didnt even have real business models but this capital had to go to work somewhere. Similiarly, excessive monetary policy was used to attemept to prop up the nasdaq, but this excess capital found its way instead into the housing market creating a bubble there and all since the capital was put to work, it found its way into areas where it had no business (exotic loans etc.)

    Greenspan could open the faucet but dcouldnt control where the water went

    Presidental policy had little to do with it IMO[/QUOTE]
    I've been reading that we may be starting to see a commodities bubble, but I can't decide if this is more the product of a dieing dollar...

    It's funny, because with the fed keeping rates so low, and all this money available, the smart investors are just moving from huge asset class to huge asset class, inflating them and then bailing while the guys late to the party take the hit..Stocks to housing to commodities.

  13. #13
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    Bush smart, Dems dumb

    [url]http://news.yahoo.com/s/ap/20080315/ap_on_go_pr_wh/bush&printer=1[/url]

    [QUOTE] Avoid overcorrecting economy, Bush warns

    By TERENCE HUNT, AP White House Correspondent1 hour, 15 minutes ago

    President Bush on Saturday said the government must guard against going too far in trying to fix the troubled economy, cautioning that "one of the worst things you can do is overcorrect." Democrats said Bush was relying on inaction to solve the problem.

    Bush, in his weekly radio address, said the recently passed program of tax rebates for families and businesses should begin to lift the economy in the second quarter of the year and have an even stronger impact in the third quarter. But he urged caution about doing more, particularly about the crisis in the housing market where prices are tumbling and home foreclosures have soared to an all-time high.

    "If we were to pursue some of the sweeping government solutions that we hear about in Washington, we would make a complicated problem even worse ó and end up hurting far more homeowners than we help," the president said.

    The economy has surpassed the Iraq war as the No. 1 concern among voters in this presidential election year amid big job losses, soaring fuel costs, a credit crisis and turmoil on Wall Street.

    "In the long run, we can be confident that our economy will continue to grow, but in the short run, it is clear that growth has slowed," Bush said. He was spending the weekend at the Camp David presidential retreat in Maryland's Catoctin Mountains after delivering a speech in New York about the economy and helping raise $1.4 million for the national Republican Party.

    Democrats said they would try to strengthen the economy with measures dealing with housing, energy efficiency and renewable energy.
    [B]
    "The president continues to convince himself that inaction is the cure-all for the economic problems hurting hardworking Americans," Senate Majority Leader Harry Reid said in a written statement. "But Democrats know that wait-and-see is not a responsible strategy for an economy that is teetering on the brink of recession."[/B]

    "Wages and home values are down," Reid said, "but prices for everything from health care to tuition to energy are up. Just this week, oil and gas prices reached record highs while the value of the dollar reached historic lows. I hope the president, who has been slow to acknowledge this problem, joins us in recognizing how urgently we need a solution."
    [B]
    Bush said he opposed several measures pending on Capitol Hill to deal with the housing crisis. They included proposals to allocate $400 billion to purchase foreclosed-upon and now-abandoned homes, to change the bankruptcy code to allow judges to adjust mortgage rates and to artificially prop up home prices.[/B]

    "Many young couples trying to buy their first home have been priced out of the market because of inflated prices," the president said. "The market now is in the process of correcting itself, and delaying that correction would only prolong the problem."

    Bush said his administration has offered steps offering flexibility for refinancing to homeowners with good credit histories yet are having trouble paying their mortgage. He cited other measures which he said would streamline the process for refinancing and modify many mortgages.

    He said there were steps Congress could take, as well.

    "As we take decisive action, we will keep this in mind: When you are steering a car in a rough patch, one of the worst things you can do is overcorrect," the president said.

    "That often results in losing control and can end up with the car in a ditch," Bush said. "Steering through a rough patch requires a steady hand on the wheel and your eyes up on the horizon. And that's exactly what we're going to do."[/QUOTE]

  14. #14
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    [QUOTE=long island leprechaun;2433554]The natural tendency for the average person is to try to distill everything down to a simple black-and-white position ("big government bad" "all corporations evil" "personal liberty good" "entitlements bad" etc.). This sort of neanderthal grunt is then supported by some anecdotal data that convinces the believer that he must be right. He never stops to consider that he is engaged in very selective attention, ignoring all the data that muddies his opinion. [/QUOTE]

    You've just described global warming alarmism. :yes:

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    [QUOTE=CTM;2433805]Bush said he opposed several measures pending on Capitol Hill to deal with the housing crisis. They included proposals to allocate $400 billion to purchase foreclosed-upon and now-abandoned homes, to change the bankruptcy code to allow judges to adjust mortgage rates and to artificially prop up home prices.[/QUOTE]

    Well THANK GOD he opposed those. PLEASE tell me why having the Federal Government of the United States become an owner of hundreds of thousands of homes is a good idea?

    Change the Bankruptcy code? ARE YOU KIDDING ME? What idiot on Capitol Hill said to let judges adjust mortgage rates to prop up home prices???? What do you think first-time homebuyers think of the government artificially inflating home prices and keeping them out of the market? What about the banks who made loans based on the credit worthiness of the borrower only to see a judge lower the rate??? My God. What are these people thinking???

    I guess I should have expected the government to artificially raise the price of my Yahoo stock when it lost 60% in 2000?

    Listen to me, everyone - If the government allowed judges or whoever to modify interest rates that banks are charging to mortgage holders you will see a fundamental collapse of the banking system. It is that simple. I don't have time to go into detail but reading this section of that article simply infuriated me. What if you bought a 10 year savings bond that was paying you 6% and I told you that a judge was lowering the rate to 2%? YOU WOULD NEVER buy a savings bond again because you wouldn't know if the dumb government would just come in and change the rate. Same thing with banks, they will never loan anyone money again if someone could arbitrarily change the rate at some point. (I'm done venting :D )

    These guys in Congress really need to think before they speak.
    Last edited by jetstream23; 03-15-2008 at 01:25 PM.

  16. #16
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    LGM - Great post. I think my IQ went up a few points.

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    [QUOTE=Company_Man;2433846]You've just described global warming alarmism. :yes:[/QUOTE]

    Actually, if I added a tendency to form a stance based on cut-and-paste, I would have been describing you. :yes:

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    [QUOTE=jetstream23;2433989]Well THANK GOD he opposed those. PLEASE tell me why having the Federal Government of the United States become an owner of hundreds of thousands of homes is a good idea?

    Change the Bankruptcy code? ARE YOU KIDDING ME? What idiot on Capitol Hill said to let judges adjust mortgage rates to prop up home prices???? What do you think first-time homebuyers think of the government artificially inflating home prices and keeping them out of the market? What about the banks who made loans based on the credit worthiness of the borrower only to see a judge lower the rate??? My God. What are these people thinking???

    I guess I should have expected the government to artificially raise the price of my Yahoo stock when it lost 60% in 2000?

    Listen to me, everyone - If the government allowed judges or whoever to modify interest rates that banks are charging to mortgage holders you will see a fundamental collapse of the banking system. It is that simple. I don't have time to go into detail but reading this section of that article simply infuriated me. What if you bought a 10 year savings bond that was paying you 6% and I told you that a judge was lowering the rate to 2%? YOU WOULD NEVER buy a savings bond again because you wouldn't know if the dumb government would just come in and change the rate. Same thing with banks, they will never loan anyone money again if someone could arbitrarily change the rate at some point. (I'm done venting :D )

    These guys in Congress really need to think before they speak.[/QUOTE]

    Hence my post title. Dems dumb...

    The more full bore liberals I speak to, the more I realize the general lack of knowledge when it comes to economics..

  19. #19
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    [QUOTE=jetstream23;2433989]Well THANK GOD he opposed those. PLEASE tell me why having the Federal Government of the United States become an owner of hundreds of thousands of homes is a good idea?

    Change the Bankruptcy code? ARE YOU KIDDING ME? What idiot on Capitol Hill said to let judges adjust mortgage rates to prop up home prices???? What do you think first-time homebuyers think of the government artificially inflating home prices and keeping them out of the market? What about the banks who made loans based on the credit worthiness of the borrower only to see a judge lower the rate??? My God. What are these people thinking???

    I guess I should have expected the government to artificially raise the price of my Yahoo stock when it lost 60% in 2000?

    Listen to me, everyone - If the government allowed judges or whoever to modify interest rates that banks are charging to mortgage holders you will see a fundamental collapse of the banking system. It is that simple. I don't have time to go into detail but reading this section of that article simply infuriated me. What if you bought a 10 year savings bond that was paying you 6% and I told you that a judge was lowering the rate to 2%? YOU WOULD NEVER buy a savings bond again because you wouldn't know if the dumb government would just come in and change the rate. Same thing with banks, they will never loan anyone money again if someone could arbitrarily change the rate at some point. (I'm done venting :D )

    These guys in Congress really need to think before they speak.[/QUOTE]

    Wait a minute.... but it's okay for the Fed to bail out Bear Stearns and offer loans to banks that allow them to use worthless sub-prime collateral? Ironic, to say the least. But let the little guy get screwed. We wouldn't want to disrupt market forces when your grandma is being booted out of her home, but we sure have to save Bear Stearns and Citigroup... that should infuriate you too...

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    [QUOTE=CTM;2434531]Hence my post title. Dems dumb...

    The more full bore liberals I speak to, the more I realize the general lack of knowledge when it comes to economics..[/QUOTE]

    you are such a jack ass, this isnt a liberal issue, this is a stupidity issue, people bought homes when they couldnt afford it and now they are looking for a hand out

    These people are just as likely to vote Republican if they did something about the problem, and we all know if it was profitable for Republicans in the long run to dump 400 billion dollars to fix it, they would do it

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