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Topic: "Stimulus"

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  1. #1

    "Stimulus"

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    Okay, so now with the new "stimulus", combined with Federal Reserve load programs, the tab of the "bailouts" is not expected to total $9.7 trillion... TRILLION!!!!

    Is it just me, or does spending 71% of our GDP just in bailouts seem particularly insane? This is beyond unprecedented. This dwarfs the scale of anything before it by a factor of many thousands. To get an idea of the scale, check out this chilling video:
    http://www.garynorth.com/public/4527.cfm

    In that out-of-date video, the Fed figure is still at only a little over half a trillion. We are now talking about multiple trillions! Nothing even close to this has ever been done in America. We are in uncharted territory. Though in a sense, we have trod this path before, and bad things resulted. But this time, we are going MUCH farther down the path than we ever went before.

    We have to stop this. I don't care what you think of Obama, this "plan" is a recipe for disaster.

  2. #2

    Re: "Stimulus"

    Deregulation was a recipe for disaster. The supply-side bubble was a recipe for disaster. What's new?

    Now, we have risk if we spend (spiraling debt), as well as if we don't (spiraling unemployment and capital in vapor-lock, potentially bringing the economy below hysteresis.)

    Hey, it's not like the $10T in debt happened overnight. It doubled over the past eight years. What's another ten percent going to hurt?

    It looks like the Republican strategy of borrowing (tax cuts for the rich) and spending (two endless wars) as a way of strangling government when the Democrats arrive won't work this time around. The Democrats have enough power to call Bush's bluff.

    I think the plan will be to spend ourselves out of the ditch (hopefully), and in a year or two, reduce military spending, raise taxes on the wealthy, and close the wealth-tilted loopholes. The Wall Street speculation and Pentagon economies will slow, and the real economy, real jobs, and useful services will grow. The starved demand-side of the equation will be restored.

    If you look at the deficit vs. GDP under Clinton, it grew during his first term. There was no jumping off the deficit horse while it was at a Reagan-Bush gallop. Over time, it slowed, and the deficit in Clinton's last year was near zero.

    It's possible that we will see a similar thing in coming years. But this is a hell of a time for the hypocritical Republicans Congress-critters to become deficit hawks.

    If you don't have the fortitude to build a surplus during good times, you can't expect to avoid debt during bad.

  3. #3

    Re: "Stimulus"

    I'm going to have to clear up several misconceptions here:

    First, the $9.7 TRILLION isn't referring to the national debt. It is referring to bailouts alone! So that is IN ADDITION TO our national debt.
    http://www.bloomberg.com/apps/news?p...d=aGq2B3XeGKok

    Deregulation was a recipe for disaster.
    Except that this isn't from deregulation. The myth is that Bush deregulated all over the market. That is simply a myth. In fact, regulations were INCREASED, not the least of which was Sarbanes-Oxley. But beyond that, ever since 1913, our economy has been essentially a regulated, centrally-planned one via the Federal Reserve Bank. The Austrian school economists predicted this long ago.

    This crisis is a combination of:
    1) federal mandates requiring lending institutions to loan to people and entities they otherwise would not (due to low credit ratings)

    2) federal loan guarantees and GSEs (Government-Sponsored Enterprises) such as Fannie Mae and Freddie Mac which force the US tax payer to soak up bad loans, thereby removing much, if not all, of the risk in making bad loans,

    3) The Federal Reserve keeping interest rates artificially low (below what the free market would have set them) thereby encouraging even more bad lending practices.

    I warned of this in this very forum 4 years ago, and the Austrian school folks foresaw this much further back than that. But is anyone listening to them? No, instead, they're taking their lead from some of the same jokers who got us into this mess, and their solution is to further reincentivize the bad behavior that created this mess, and to further extend government's interference in the ability of the market to find its own level.

    Now, we have risk if we spend (spiraling debt), as well as if we don't (spiraling unemployment and capital in vapor-lock, potentially bringing the economy below hysteresis.)
    Actually, if we spend we are CERTAIN to fail. If we don't, if we leave it alone, the market will be allowed to adjust. A recession is actually the cure - it means that the market has finally figured out that capital has been misallocated to unproductive uses. At the bottom of a recession, the economy is primed to recover because capital has been reallocated properly. It's what is called a "market correction". When that corrective process is interfered with through bailouts, more regulations, public works projects, etc, it delays and prevents the reallocation of capital to productive uses, prolonging the crisis. This is precisely what happened with the Great Depression. The only reason it was a "great" depression, rather than a recession, is because of FDR's interventions. And indeed, the recession that started it all was a result of Hoover's own interventionist policies (no, he wasn't the laissez-faire President he's made out to be by some). I could go on with historical examples of similar recessions a decade or so before which subsided quickly thanks to government keeping its hands off, but I don't want to make this any longer than necessary.

    It looks like the Republican strategy of borrowing (tax cuts for the rich)...
    The borrowing isn't in the form of mythical "tax cuts for the rich", it is in the form of selling T-bills to foreign governments, and primarily, through the creation of new money via the Federal Reserve, which causes inflation and robs us all of the value of our savings.

    The Democrats have enough power to call Bush's bluff.
    But they aren't. They're continuing, and amplifying, Bush's own fiscal policies! It was Bush, after all, who plead for the original bailout. This is nothing but bailout part deux.

    If you look at the deficit vs. GDP under Clinton, it grew during his first term. There was no jumping off the deficit horse while it was at a Reagan-Bush gallop. Over time, it slowed, and the deficit in Clinton's last year was near zero.
    I have a theory for this. If you look at the growth of government historically, since the 60's, it has grown slower under a Democratic President compared to a Republican, and slowest under a Democratic President with a Republican-controlled Congress (such as occurred after '94). Why is this? Is it because Democrats are fiscal conservatives? Nope. It is because both Republicans and Democrats, when in power, are spendthrifts. When an R is in the Whitehouse, the budget starts out high, then the Dems fight the Rs over the fact spending isn't even higher in certain areas (such as the medicare expansion under Bush). This pushes the budget upward. And the Rs are certainly not going to quibble with "their guy" in the Whitehouse and try to shrink the budget. Which is why you never heard Rs (except the likes of Ron Paul) complaining about Bush's bloated budgets.

    When a D is in the Whitehouse, Rs revert to their campaign rhetoric and fight the Dems to lower the size of the budget. This leads to a smaller budget over all. This certainly fits the facts we witnessed during the 90's.

    It's possible that we will see a similar thing in coming years. But this is a hell of a time for the hypocritical Republicans Congress-critters to become deficit hawks.
    Well, once again, we're seeing my theory play out. And actually, EVERYONE should be deficit hawks, ALL THE TIME. It's about freakin' time the Rs live up to their rhetoric after 8 years. Heck, these same Republicans voted through Bush's bailout (though with some dissension, thankfully), and now suddenly came to Jesus and oppose them now that the Dems are in control.

  4. #4
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    Re: "Stimulus"

    The SEC are a pile of dog doo - just like the FSA. But then again I also might have mentioned this before over the years.

    I also mentioned and started threads called Debt.

    All that is history now. Good luck with your new socialist government - because ours has outlasted itself over an incredible length of time.

  5. #5

    Re: "Stimulus"

    Right you are, Paul.

    Interestingly, the Dow just fell about 100 more points (about a total of 400 as for today so far) at the news of the passage of the "stimulus" bill in the Senate.

    Obama keeps talking about "jolting" and "shocking" the economy back to life. Shows just how little he understands about economics. Markets don't do well with "shocks" and "jolts". They do best with slow, predictable changes.

  6. #6

  7. #7

    Re: "Stimulus"

    Spending programs are a recipe for disaster?

    I think doing nothing is a recipe for disaster. And so far, that's all that the free-market fundamentalists and Republicans have to offer - aside from more tax cuts for the bubble-creating wealthy.

    They also like to tell us that FDR's policies failed. This chart demonstrates the difference between the do-nothing Hoover government and the active FDR government.

    And guess what? The roads, dams and electrification laid the foundation for our success during and after WWII. That infrastructure didn't come by magic.


  8. #8

    Re: "Stimulus"

    And so far, that's all that the free-market fundamentalists and Republicans have to offer - aside from more tax cuts for the bubble-creating wealthy.
    1. Doing nothing is EXACTLY what is needed right now. For example, the 1921 recession was actually greater than the one that began the Great Depression, but the government did nothing and it was able to correct itself very quickly with very little impact on the average citizen.

    2. The "wealthy" do not create bubbles. Bubbles are part of a business cycle that results from an expansion of the money supply. Artificially low interest rates (below free-market-determined rates) are created by the Federal Reserve, for instance, causing excited investment. But since the rates have been set artificially low, malinvestments of capital result, causing a bubble which must eventually burst when the misallocation of capital comes home to roost as surely as what goes up must come down. In other words, it is an artifact of a centrally-planned economy - not of a free market.

    This chart demonstrates the difference between the do-nothing Hoover government and the active FDR government.
    1. That all depends on how you measure the GDP during that period. Much of this "productivity" was to ends that the government determined were useful, but I and many economists would argue were less so. Doubtless, part of what is counted in that "productivity" includes make-work jobs such as the people who were responsible for forcibly killing farmer's cows, then ruining the beef so that it could not be consumed - all to try and raise food prices. Sorry, though it shows up on employment and productivity statistics, I don't consider destroying wealth to be "production".

    2. It is a complete myth that Hoover had a "do-nothing" policy. For one, Hoover STARTED deficit spending with new creations such as the Reconstruction Finance Corporation which he then tried to make up for later on through tax increases and higher tariffs. Hoover was actually a strong ideological proponent of economic interventionism. Indeed a member of FDR's brain trust, Rexford Guy Tugwell, explained, "we didn't admit it at the time but practically the whole New Deal was extrapolated from programs that Hoover started." The myth that Hoover was a "do-nothing" is just that: a myth.

    3. Unemployment was at 25% when FDR took office. By 1935 it had dropped, as it should have (at least), to about 15%. But it rose again to almost 20% by 1938 (when the depression-within-a-depression occurred - some call this the second Great Depression). Clearly, FDR was doing something wrong that he couldn't even sustain the natural recovery that comes after such high unemployment numbers. Unemployment did not fall below double-digits until 1941 when so much of the nation's able-bodied males suddenly found themselves "employed" as soldiers - not because the economy was actually recovering.

    I really can't believe that, here I am, the guy who reported that this was all going to happen FOUR YEARS AGO in this VERY FORUM, and yet you're listening to the people who DID NOT see this coming just because they are feeding you a line that comports with your ideology. If you look up my post from 4 years ago, I warned you all that when this finally happened, not to believe it when you start hearing claims that this was all a result of an overly-free market, because I had just explained the causes - as it turns out - FOUR YEARS IN ADVANCE. Did you listen to me then? No. Now will you listen to me? No, whatever you do, don't listen to the guy who has actually demonstrated that he actually knows what he's talking about. That would make too much sense.

    What is being done today is not based on any sound science, logic, or history. Indeed, it is being done in contradiction to it, for the sake of ideology. Yet when people like me come forward with facts, reason, and history to back up what we're saying, we're dismissed because it's not what you want to hear. No wonder this country is in a downward spiral...

  9. #9

    Re: "Stimulus"

    Reality about where we are going as a country or reality in general is a hard concept for about 99% of the people in this forum, Brady. What is even more scary, is that they are perfectly comfortable with it. Which is why I am normally absent from here. I think I just read above something about "endless wars" and how horrible Bush was (I agree)...yet the current messiah is eager to go into Afghanistan, etc. etc. etc. etc. etc. etc. etc. etc. etc. Just remember Brady, it's okay for Obama to bomb whomever he wants for whatever reasons he wants, or makes up. But anybody else is a hawk and a warmonger. New boss same as the old boss. What part of "Obama has the same foreign policy (as well as other policies) as Bush and the other Neocons" didn't these people understand when both you and I spoke of it many many months ago?

    What IS real is that most of the people in this forum that criticize the rich ARE incredibly wealthy (and need to be in order to live in California or somewhere close) yet they enjoy criticizing people who are probably no more wealthy than they are. I was quite amused to hear people in here talk about how much they pay in taxes a few weeks ago. Judging by the numbers that were put out, there are some pretty guilty feeling composers around here.
    "They get what they vote for." PaulR

  10. #10

    Re: "Stimulus"

    To give an idea of the severity of this recession, see the following chart.

    And we should do nothing?

    This isn't a theoretical exercise, people. These numbers represent real people losing jobs and homes. My neighbor of twelve years just a job he held for the last twenty.

    The human consequences trump the minority ideology of dog-eat-dog, no matter how vocal.

    In case you didn't notice, Ron Paul didn't win the presidency. He didn't even present a credible challenge for the Republican nomination.

    Libertarianism didn't just lose. It was trounced in the marketplace of public opinion.

    So, why do we need to act? This is why...


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