I'm sure the liberal Deficit hawks will be all over thisFollow

Yes. You're using a false equivalence to make your argument appear stronger than it is.

Good enough?


Hint: Spending increases and tax cuts are not the same thing. Only someone who looks at the economy purely from the perspective of government revenue would make this mistake. Of course, that's exactly how you do look at things. In your world, there is zero value to private citizens holding money in their own hands, so their rights and freedoms in this regard are irrelevant.


The private economy does not exist to fund the government. The government exits (in part) to help protect the private economy. The rest of your mistakes flow from this incorrect premise.

And if this deficit were say a third or less of it's size, you'd have a point. The problem is that in the pursuit of consumer confidence, they're destroying the "real" economic foundation we need. Confidence is great. But, as you said, it's just a psychological factor. Convince people that the future is bright, and they'll go out and buy stuff and revenue will flow. But that does no good if the cost of building that confidence ensures that the future will not be bright. All those confident people will go out and spend spend spend, and in a few years, the industries will still be struggling and the consumers will have no more money to spend. The government will have to keep taking from industry to give money to consumers to convince them that things are ok.

It's a feedback loop that eats itself along the way. The government does not add value to those dollars, thus it cannot possibly "fix" anything. You're correct that this sort of action can bolster confidence in the short run, but if the problem is systemic, this sort of spending will make things worse in the long run.


We're back in the 1970s, where government kept acting to fix the symptoms of various economic problems. Each time appearing to "solve" the immediate problem, but bringing up another a few years later. And each problem was worse than the last. This time though, we're doing it at a much more accelerated rate. It's not going to take most of a decade to go from "sluggish" to double digit unemployment, inflation, and interest rates.


All the confidence in the world doesn't help if the real situation hasn't improved. And the "problem" here is that we wrote checks for social spending that we couldn't cash. We laundered said social spending through out financial institutions and they collapsed. Yet, not learning our lesson, the Obama administration and the Dems in Congress are embarking on yet another round of massive social spending programs. These as well they are promising wont really cost us anything in the long run. Why on earth believe them again?

Never mind, I started this post hours ago before the discussion got started and it looks rather silly now.

Edited, May 11th 2009 11:39pm by Debalic

And if this deficit were say a third or less of it's size, you'd have a point. The problem is that in the pursuit of consumer confidence, they're destroying the "real" economic foundation we need. Confidence is great. But, as you said, it's just a psychological factor. Convince people that the future is bright, and they'll go out and buy stuff and revenue will flow. But that does no good if the cost of building that confidence ensures that the future will not be bright.

Sure. This is nowhere even vaguely close to that tipping point. No one seriously argues this is the case.

A more apt analogy is this. A farmer just had a couple of his tractors/harvesters die. It's a pretty big disaster for him. What does he do? Well one option is to see if the plants harvest themselves. The other option would be to take on a massive amount of debt to buy new tractors to continue farming

For throwing money at the credit markets, yes. For other stimulus spending, not really. I don't think anyone's really arguing against the credit market bailout in a meaningful way at this point. The political blood is splashed far and wide on that. The whole "Democrats made banks loan $500,000 to welfare mothers" thing has gotten zero traction from anyone but true believers, regardless of how many times the lie is repeated. The Obama communications team has taken exactly the right tact of just laughing at it for what it really is, naked partisan hackery that's not even vaguely true.

I'm asking you which of these things "predictably" caused the current economic problems and how? Cause just because you disagree with some economic policy doesn't mean that it's to blame for the financial mess we're in.

Does the fact that I explained what would happen, then it happened add to the predictability aspect of it? I'm not sure what you're asking for here, legitimately.


If we accept that the sub-prime crisis was the triggering point for the current economic crisis

I don't. It's not. Move on. There's no serious economic argument to this being the case, only a political one. It's the easy human interest story. Explaining how flawed Linear Gaussian risk assessment that was *obviously wrong* was passed off as valid quantitative analysis doesn't sell soap. I've said this before, and I'm sure it appears to you to be some sort of diversionary tactic, but: I cannot explain the causes of something if you *literally* can't understand them. You can decide on faith to "believe" or not "believe" people who tell you the math was good or bad, but I looked at the equations used for the risk side of the proposition years ago, completely understood them and said "that's not right."

Everyone I talked to either had the same response or had the response of "well, it's making us money now, if it really has this giant hole then we'll all go down together. Meanwhile I have a mortgage to pay." See, in capitalism the salesmen make the decisions, the math guys get paid to make the salesmen happy.

Not sure how many more ways I can phrase this at your level of understanding, but the problem was that the extreme downside risk scenarios were ignored, which led to systemic risk, which led to the credit market freeze *specifically because all of the quants at every firm KNEW this was eventually going to happen and the sales people thought "hey, you know what, no I'm not going to float to you $7B overnight on this stuff anymore."

I'm not arguing the GSEs were run by better people or not as complicit as any other investment agency in that aspect, but this failure happens if they don't exist, it happens if there's a bubble in corn futures instead of real estate. It was GURANTEED to happen.

The option which was originally proposed and then hijacked by the Dems in congress last October in a flurry of campaign rhetoric was for the government, not to buy the companies, but just to buy the assets which were "toxic" at the time. Specifically, buy up the held mortgage assets which were effectively worth "zero" because no one would buy them. Simply exchanging those assets for cash equal to what the assets were purchased for would have almost *instantly* reversed the entire economic problem.

This would have cost over $20 Trillion. Can you see why it wasn't really a viable option to spend in excess of an entire year of GDP without a pricing mechanism?

That was the whole problem. Not to be redundant, but when the pricing mechanism breaks and you have an illiquid, irrational market, freezes happen because everyone knows that the pricing model was wrong and everyone knows the assets aren't worth nothing, but NO ONE knows what they are actually worth.

Lol. I love how you can consistently just insist that no one believes anything you don't believe in, despite massive evidence to the contrary.

There is no evidence to the contrary. I don't "believe" anything. The math is simple for me, so I'm not required to have faith in a political or philosophical position to figure out what happened. Sorry.

Given that the entire mortgage market in the US was valued at about $3 Trillion just before the bubble, that's pretty clearly a false statement.

We could literally have purchased the back end paper of every single mortgage loan in the country for less than twice the deficit of just this one year. Of course, we wouldn't need to do that though. The government would offer to buy, but only those companies in danger as a result of holding those assets would likely take them up. For exactly the "confidence" reason you mentioned earlier (but applied to a different market). Once it's realized that these are "safe" to hold, most companies wont sell them. The government just has to put a promise to buy at that price floor for X amount of time, and everyone will trade those at that price. The floor is artificial and with a set time frame (presumably), but it'll last long enough for the credit to flow and for the companies holding the assets to re-shift things around so that they aren't at risk based on the value of just those assets.


The government likely would only have needed to pay a small fraction of that $3 Trillion. That was the "smart" way to fix this. Interestingly enough, that was exactly the original "Paulson Plan", which Bush pushed Congress for last Fall. Unfortunately, the one page plan was much bigger and went in a completely different direction by the time the Democrats were done with it.


That's where we got into this mess. That's just another step in a series of *****-ups the Dems did which got us here. Yet, so many people continue to wave their flags and cheer at the false promises of hope and prosperity coming from the very people who are ******** them.



Yes. Unless the government steps in and becomes a buyer in the market. Not a buyer of the companies in distress, but of the asset with the unknown value. If someone with really deep pockets steps in and says "I'll buy that for X dollars", then guess what? The asset is now worth X dollars. Again. At the risk of pointing out the obvious, the government doesn't have to buy that many for this to work.

It was the right course of action. Heck. It's *still* a better course of action then what we're doing. Unfortunately, the problem has expanded beyond just the financial markets, so there are now other issues to deal with, but if you fix the core problem, the rest of the problems will correct themselves.


The Dems are essentially doing everything but fixing that core problem. Most of the companies they've put money into are still holding those same assets, and have been unable to divest themselves of them. They've sold off everything else of value though. It really does look like the objective of the Dems here is to drive them into bankruptcy, but only after they've first accepted bailout money from the government, so that the government can take over when it's all over with. Sure seems to be what's happening with Chrysler, and they're well on the way to stripping the carcase of AIG bare. I guess the government will just go into the pension business as well, right?


Again. Who here honestly doesn't think this is a power grab by the government? They're taking advantage of this crisis to take control of huge sections of the market. Anyone (aside from you of course) actually think this is a good idea?

You're the one making the claim Smash. Not me. Either prove it, or shut up about it.

Search my posts to prove you wrong? For free? No thanks. For $100, sure.

On the other hand you could offer *absolutely any evidence at all* to support your case. You never have, not once. You've offered articles of people making similar arguments, also without evidence, but never, not once, not ever, any shred of evidence at all. I know that's meaningless to you, but to me it makes a difference. I know you just randomly "believe" things based on emotion, I don't.

Poor thing. I'm sure it works out for you in your non evidence non results based career, it wouldn't work for me in any job or enterprise I've been involved in. Maybe that's our core difference. You can function perfectly fine in life not caring what the facts are. I depend on knowing what they are.

Wait! So, borrowing between 150 and 300 billion dollars a year is a guaranteed way to ensure economic collapse, but borrowing 1.8 Trillion dollars a year isn't?

How does that make sense?



I'm asking for his rationale, not specifically whether he made the claim at some point in the past. I'm sure Smash at some point in the past insisted that every problem in the universe would occur as a result of Bush's policies. What I'm looking for is an argument for *why* Bush's policies were so predictably going to cause disaster, yet Obama's somehow aren't.


Just a dollar amount of spending and/or deficit doesn't satisfy Smash's argument. Because if that is truly the case, then he *should* be up in arms about the deficit being run by the Obama administration. Yet, he appears to be perfectly fine about it.

Which was the exact point I was making when I started this thread. Where are all the liberal deficit hawks (like Smash) who argued the dangers of running a deficit for 8 years while Bush was in office. If it's really just about borrowing the money and nothing else, then where are they? Why isn't Smash just as upset about the massive spending going on now as he was about the spending for the Iraq war?


What I'm trying to get people to realize is that the argument that was presented back then was false. It wasn't about the spending, it was about who was spending it and what it was being spent on. Pretending to care about fiscally responsible policy was just a big fat lie...

I never mentioned the word 'guarantee'.

But.

Spending hundreds of billions of dollars a year that you borrowed from asia, on occupying someone elses country makes no sense whatsoever.

Spending hundreds of billions of dollars on your own economy by attempting to prop up businesses and individuals who would otherwise be going to the wall, makes far more sense imo.


Unless of course, you are an Iraqi and/or making a packet out of the occupation.

Wether the second scenario works out or not, I couldnt guess. But if it doesn't at least you'll have some nice new infrastructure to admire in your own country.

Adding infrastructure to the US, propping up businesses onshore, providing jobs to US citizens, etc - that will be much more likely to give the US an eventual return on investment. Attempting to do the same in Iraq has not given us any kind of ROI. At all. Unless you count getting hated on by half the world as ROI . . .