I hate to change the subj here, but I was reading a news story and this conversation popped into my mind... the line
"At the other end of the scale, you could look at a country like Japan, where there's an almost pathological work ethic, and their economy's been in the crapper for, what, nearly 10 years now?"
That line came to mind when I read :
TOKYO — Japan's economy slid into a recession for the first time since 2001, the government said Monday, as companies sharply cut back on spending in the third quarter amid the unfolding global financial crisis.
The world's second-largest economy contracted at an annual pace of 0.4 percent in the July-September period after a declining an annualized 3.7 percent in the second quarter. That means Japan, along with the 15-nation euro-zone, is now technically in a recession, defined as two straight quarters of contraction.
That hardly sounds like and economy that has been in the crapper for the past 10 years... First recession since 2001 and they are the 2nd largest economy in the world... Not bad for a little island we nuked the living *** out of! haha
Well, they've been one of the largest economies for several decades now, and even large economies can go in the crapper for a long time, so, to borrow a phrase, size doesn't matter (to my argument).
As for my dates on when their economy was in the crapper, mea culpa. I got my decades mixed up (wait till you get to be my age). They crashed in the early 90s and didn't recover until 2001.
Sure, but my point in even mentioning the Japanese recession in the first place was that a strong work ethic and relatively free markets do not guarantee a strong economy. The same would apply to the US, though our work ethic isn't quite what the Japanese's seems to be.
true. but every free market economy, nay, EVERY economy has its ups and downs. The free market system can correct itself. It does not need a government agency to correct it.
and just by the way goods/services work nobody nor any government can correct an economy. only the people can do that. If people dont wanna buy stuff then they dont wanna buy stuff. An outside entity holding up a company is just tossing money into the money hole. it creates artificial supply, demand, or an artificially high or low price. All of these things can do more harm than good.
true. but every free market economy, nay, EVERY economy has its ups and downs. The free market system can correct itself. It does not need a government agency to correct it.
I don't think you'll find many histories of the Great Depression, written by professional economists, that agree with that statement. The problem presented by the GD was precisely what was previously thought to not be possible in a market economy: a persistent equilibrium at high unemployment.
kuzi16:
and just by the way goods/services work nobody nor any government can correct an economy. only the people can do that. If people dont wanna buy stuff then they dont wanna buy stuff. An outside entity holding up a company is just tossing money into the money hole. it creates artificial supply, demand, or an artificially high or low price. All of these things can do more harm than good.
I'm not sure what that first sentence says. The rest I generally agree with. That doesn't always mean there aren't other valid reasons for holding up a company, at least temporarily, from time to time.
true. but every free market economy, nay, EVERY economy has its ups and downs. The free market system can correct itself. It does not need a government agency to correct it.
I don't think you'll find many histories of the Great Depression, written by professional economists, that agree with that statement. The problem presented by the GD was precisely what was previously thought to not be possible in a market economy: a persistent equilibrium at high unemployment.
it was an artificial equilibrium. the government was "holding up" the country via social programs. the great depression lasted longer in the US while in other countries it didnt last as long. part of the reason this happened is because other countries cut taxes and the US raised them to "help the little guy" we got out of the great depression because people went back to work to support the war machine.
i have heard many economists make this claim on the radio. I would love to site sources but being that it was a while ago i am currently unable to do so. If i find some ill get back to you.
and just by the way goods/services work nobody nor any government can correct an economy.
I'm not sure what that first sentence says.
the manner that goods are traded; how the markets are; the existence of goods and services have a nature. that nature is to find a price that people are willing to pay for them. the government cant set a price on gold because that will great a false high price or false low price. a government is an ineffective way to control the economy.
Amazingly, doing nothing often seems to be the correct response. The Depressions of 1907 and 1920 were both over within a year, even though the Federal government did virtually nothing in response.
had the same inaction been taken in the US during the great depression it could have been shorter.
and a bit further up in the article:
However, as economist Arnold Kling explains while reviewing Randall E. Parker's Reflections on the Great Depression, a collection of interviews of economists who lived through the Great Depression: A number of myths that are popular in conventional histories of the Depression are punctured in Parker's book. For example, the Wikipedia echoes many textbooks in saying, "A fundamental misdistribution of purchasing power, the greatly unequal distribution of wealth throughout the 1920s, was a factor contributing to the depression." None of the economists interviewed by Parker cites this so-called causal factor.
I think the focal word in your first quote, kuz, is "often." I don't think anybody disagrees that "often" doing nothing is the best response. Even "usually." Business cycles are business cycles.
But "often" is decidedly not "always," which seemed to be what you were arguing previously. "Often" agrees with me: sometimes markets fail and have to be fixed.
Your second quote isn't really on point. The author is making a point specifically about an argument that wealth misdistribution was a major factor in causing the Great Depression. I don't think anybody here is making that argument.
As for arguments you're hearing on the radio, I can't really comment on them. I don't know who the people are or what they're saying. I will say this, though: there is a cottage industry these days in revisionist histories of the Depression and the New Deal among people who have a priori commitments to certain conclusions. Amity Shlaes is probably the best known of them.
the manner that goods are traded; how the markets are; the existence of goods and services have a nature. that nature is to find a price that people are willing to pay for them. the government cant set a price on gold because that will great a false high price or false low price. a government is an ineffective way to control the economy.
Sure. But sometimes markets overshoot the bottom or top. We're seeing a case of the latter right now with the housing bubble. These events create unpleasant externalities that are appropriate for governments to address. One way to address them is try to put rules in place that make overshooting less likely. These overshoots can also create huge transaction costs (inefficiencies) that are bad for the economy in the long-term. Governments have a legitimate interest in trying to prevent these, as well.
it was an artificial equilibrium. the government was "holding up" the country via social programs.
The Depression started in 1929. President Hoover did pretty much nothing in response; he certainly wasn't holding up the country via social programs. By the time he left office at the end of 1932, unemployment had shot up to almost 25% and was still rising. The same was true all over Europe, as their governments followed the same non-interventionist policies. That level of unemployment for that long was already something that previous laissez-faire economic theory didn't think could ever happen.
kuzi16:
the great depression lasted longer in the US while in other countries it didnt last as long. part of the reason this happened is because other countries cut taxes and the US raised them to "help the little guy" we got out of the great depression because people went back to work to support the war machine.
Other countries got out of the Depression earlier than we did because they entered WWII earlier than we did (or in Germany's case, started mass production of war materiel in preparation for WWII). I'm not sure why people seem to think WWII wasn't a massive gov't spending program that interfered in a huge way with all kinds of markets.
I'm not sure why people seem to think WWII wasn't a massive gov't spending program that interfered in a huge way with all kinds of markets.
Because it involved guns... lots and lots of guns... and they're really cool. It isn't really socialist if they're taxing the bejeezus out of everybody to buy lots of guns.
Anyway, direct violence will soon become obsolete as the weapon of choice in war. This, in my opinion, is the reason we should quit directing our defense budget towards more refined means of killing people. The downfall of our great empire will come from a spectacular direct attack very different from those which are so vivid in our memories and our history books.
Anyway, direct violence will soon become obsolete as the weapon of choice in war. This, in my opinion, is the reason we should quit directing our defense budget towards more refined means of killing people. The downfall of our great empire will come from a spectacular direct attack very different from those which are so vivid in our memories and our history books.
the manner that goods are traded; how the markets are; the existence of goods and services have a nature. that nature is to find a price that people are willing to pay for them. the government cant set a price on gold because that will great a false high price or false low price. a government is an ineffective way to control the economy.
Sure. But sometimes markets overshoot the bottom or top. We're seeing a case of the latter right now with the housing bubble. These events create unpleasant externalities that are appropriate for governments to address. One way to address them is try to put rules in place that make overshooting less likely. These overshoots can also create huge transaction costs (inefficiencies) that are bad for the economy in the long-term. Governments have a legitimate interest in trying to prevent these, as well.
the other way to address this problem is by letting the market fix itself. when houses got too high there was a correction in the market. It was drastic. housing lost value because it was too bullish for too long. the market is correcting it even as we type. home sales in California are now up 60% from this time last year. why? because all the foreclosed houses are on the market now ad a drasticly lower price. this is the correction. I never said it would be pretty, and in fact may hurt people. those people should never have entered those deals and those banks never should have made the loan. its their own fault.
I'm not sure why people seem to think WWII wasn't a massive gov't spending program that interfered in a huge way with all kinds of markets.
Because it involved guns... lots and lots of guns... and they're really cool. It isn't really socialist if they're taxing the bejeezus out of everybody to buy lots of guns.
Anyway, direct violence will soon become obsolete as the weapon of choice in war. This, in my opinion, is the reason we should quit directing our defense budget towards more refined means of killing people. The downfall of our great empire will come from a spectacular direct attack very different from those which are so vivid in our memories and our history books.
when your country is under attack by *** there are few that would argue that fighting them is bad. like i said before, a social system will work only if damn near 100% of the people are for it. in that case, people were for it. Im not saying it wasnt a social program. im saying that it was wanted by everyone, so it worked.
Your second quote isn't really on point. The author is making a point specifically about an argument that wealth misdistribution was a major factor in causing the Great Depression. I don't think anybody here is making that argument.
the other way to address this problem is by letting the market fix itself. when houses got too high there was a correction in the market. It was drastic. housing lost value because it was too bullish for too long. the market is correcting it even as we type. home sales in California are now up 60% from this time last year. why? because all the foreclosed houses are on the market now ad a drasticly lower price. this is the correction. I never said it would be pretty, and in fact may hurt people. those people should never have entered those deals and those banks never should have made the loan. its their own fault.
Again, sure, but what about all the externalities and inefficiencies created by just letting markets skyrocket and crash, willy-nilly?
I absolutely agree that the banks should never have made those loans. Since the loans are not the cause of the scale of our current crisis, however, let me go further and say banks and other financial firms should never have then leveraged the hell out of those mortgages. Those banks and firms deserve to crash and die. Unfortunately, however, their crashing and dying causes huge problems for lots and lots of businesses and people who had nothing to do with those bad decisions. Those folks are in no way at fault, but they're getting crushed anyway, and the overall economy is losing their productivity, skills, products, and services.
Why should that be allowed to happen, just in the name of market purity? It's economically inefficient, morally unjustifiable, and socially destructive.
Damn right they are. I love to go shooting and I have grown up around guns my entire life, I haven't EVER killed anyone and niether have any of my guns.
"An unarmed man makes a good victim." One of my favorite quotes and one of the most true...
when your country is under attack by *** there are few that would argue that fighting them is bad. like i said before, a social system will work only if damn near 100% of the people are for it. in that case, people were for it. Im not saying it wasnt a social program. im saying that it was wanted by everyone, so it worked.
Except that it wasn't. The Republican Party opposed our entry into the war from the time it began until Pearl Harbor. That is, it opposed our entry into the war even while/after Nazi U-boats sank our ships in the North Atlantic. It opposed even helping England, which is why FDR had to sneak the aid through congress under the Lend-Lease Act. Every candidate in the GOP presidential primaries in 1940 opposed our entry into the war. The conservative wing of the party opposed our involvement all the way through to the end.
Regardless, under your economic theory, wouldn't we have been better off to let market forces determine what war materiel got produced, in what quantities, and at what price? Wouldn't we have been better off to let market forces allocate domestic goods and set the prices for them, rather than having rationing and price controls? Wouldn't an unfettered market have met our wartime needs more quickly and efficiently than gov't control did?
Again, sure, but what about all the externalities and inefficiencies created by just letting markets skyrocket and crash, willy-nilly?
i wouldnt go so far to say "willy-nilly" but the pure system is designed to teach people a lesson when they make poor decisions. those people (in a purer system) should and would be punished by losing everything. however like described before, this isnt and hasnt been a pure system.
urbino:
I absolutely agree that the banks should never have made those loans. Since the loans are not the cause of the scale of our current crisis, however, let me go further and say banks and other financial firms should never have then leveraged the hell out of those mortgages. Those banks and firms deserve to crash and die. Unfortunately, however, their crashing and dying causes huge problems for lots and lots of businesses and people who had nothing to do with those bad decisions. Those folks are in no way at fault, but they're getting crushed anyway, and the overall economy is losing their productivity, skills, products, and services.
Why should that be allowed to happen, just in the name of market purity? It's economically inefficient, morally unjustifiable, and socially destructive.
the high-ups of those companies should be brought to trial very enron style. (but they wont be because they are all friends of the now president elect ... but thats another argument) they should lose everything. the bail out of their companies shouldnt happen. the government also shouldnt force other banks to take money from the bailout that they dont wanna take. the money should go to the people (if we were to do a bail out) so they can pay off their loans or at least part of them. this influx of money into the system would make any negative externalities less damaging and maybe a bit shorter term. the good banks such as Wells Fargo would then step up to the plate and fill the hole in the industry where the bad banks fell out. again, economic darwinism.
as far as being economically inefficient... is what we are doing now any better? no. just costing the tax payer even more. Morally unjustifiable? how about punishing those who caused the problems? would that help? socially destructive? this i may be able to reach and agree with. people losing their jobs because an industry other than their own wend under is a bit destructive. ...how about the bailout for ONLY those people? i know it wouldnt work but it sounds fun doesnt it?
i wish i could sit around all day and discuss this with everyone here but i need to get goin to work. Urbi, always a pleasure.
when your country is under attack by *** there are few that would argue that fighting them is bad. like i said before, a social system will work only if damn near 100% of the people are for it. in that case, people were for it. Im not saying it wasnt a social program. im saying that it was wanted by everyone, so it worked.
Except that it wasn't. The Republican Party opposed our entry into the war from the time it began until Pearl Harbor. That is, it opposed our entry into the war even while/after Nazi U-boats sank our ships in the North Atlantic. It opposed even helping England, which is why FDR had to sneak the aid through congress under the Lend-Lease Act. Every candidate in the GOP presidential primaries in 1940 opposed our entry into the war. The conservative wing of the party opposed our involvement all the way through to the end.
Regardless, under your economic theory, wouldn't we have been better off to let market forces determine what war materiel got produced, in what quantities, and at what price? Wouldn't we have been better off to let market forces allocate domestic goods and set the prices for them, rather than having rationing and price controls? Wouldn't an unfettered market have met our wartime needs more quickly and efficiently than gov't control did?
awe man ... i wanna comment but i dont have time. ill get back to this if i remember. some good thought in there.
Again, sure, but what about all the externalities and inefficiencies created by just letting markets skyrocket and crash, willy-nilly?
i wouldnt go so far to say "willy-nilly" but the pure system is designed to teach people a lesson when they make poor decisions. those people (in a purer system) should and would be punished by losing everything. however like described before, this isnt and hasnt been a pure system.
This crash is taking a lot more people with it than those who have direct or indirect investments in the matter. The banks have been forced to substantially withdraw from the market with respect to lending. Borrowers are unable to find financing to purchase a home -- even if they feel that the asking price on that home is fair and equitable.
In other words, someone may have purchased a home 10 years ago. They may have financed it with a relatively conservative 15-year fixed rate mortgage. If that person is trying to sell the house today, they may have buyers lined up to pay the asking price, but if none of them can get financing the sale will not occur.
Still, I agree with Kuzi that I don't think we need to be sticking our hands into this mess. They bought their tickets. They knew what they were getting into. I say, let 'em crash!
i wouldnt go so far to say "willy-nilly" but the pure system is designed to teach people a lesson when they make poor decisions. those people (in a purer system) should and would be punished by losing everything.
Do people need to lose everything, even if it means we have to let all the inefficiencies and externalities happen? Is there not a way to balance the need to have negative consequences for bad decisions with the need to limit the inefficiencies and externalities? Get some of both, but not all of either?
kuzi16:
the high-ups of those companies should be brought to trial very enron style.
You won't get any argument from me. That can be done without letting the economy crash, though.
kuzi16:
(but they wont be because they are all friends of the now president elect ... but thats another argument)
That's a bit of a cheap shot. These guys have got all kinds of well-placed friends on both sides of the aisle. They wouldn't have faced trial ever, no matter who was in the White House (except maybe Jefferson or TR).
kuzi16:
the money should go to the people (if we were to do a bail out) so they can pay off their loans or at least part of them.
I was arguing for that on this board, like, weeks ago. That's still what my gut says. OTOH, I saw a guy testifying to congress the other day. He said they looked at that option, but didn't think it would have as great an effect on the overall economy, or as quickly, as what they've ended up sort of half-way doing after stumbling around for a while. Don't know if that's valid, but I don't know enough about this stuff to say it's not. It's credible, at least.
kuzi16:
as far as being economically inefficient... is what we are doing now any better? no.
Clearly, nobody knows the answer to that question, yet. That's the problem with this kind of macroeconomic stuff. You don't really know what's going to work until you've tried it.
kuzi16:
Morally unjustifiable? how about punishing those who caused the problems? would that help?
Again, I don't think we should look at it as 2 mutually exclusive options. It's not either/or. It's a balancing act. Try to do enough to soften the externalities and inefficiencies, while also letting the people who screwed up feel the pinch of having screwed up. Will they fully get what they deserve? No. Is that better than letting their screw-up damage millions of other peoples' lives? Probably. There isn't a clean option available.
Yeah well all you kids need some adult supervision, don't want things to get out of hand. BTW anyone following the auto industry vs Govt? anyone find it odd that paulson and company (bush admin too) will fork over billions to banks and Iraqi economics but doesn't seem very interested in "loaning" money to an industry that is on the verge of Bankruptsy and where thousands if not millions (considering all the effects of what this will do to people not working in the plants) of jobs?
Comments
As for my dates on when their economy was in the crapper, mea culpa. I got my decades mixed up (wait till you get to be my age). They crashed in the early 90s and didn't recover until 2001.
So, same point, different decade.
... i wouldnt call it a "crash" but it was one of the "downs" in an economy that commonly goes up and down.
and just by the way goods/services work nobody nor any government can correct an economy. only the people can do that. If people dont wanna buy stuff then they dont wanna buy stuff. An outside entity holding up a company is just tossing money into the money hole. it creates artificial supply, demand, or an artificially high or low price. All of these things can do more harm than good.
we got out of the great depression because people went back to work to support the war machine.
i have heard many economists make this claim on the radio. I would love to site sources but being that it was a while ago i am currently unable to do so. If i find some ill get back to you.
last line: had the same inaction been taken in the US during the great depression it could have been shorter.
and a bit further up in the article:
But "often" is decidedly not "always," which seemed to be what you were arguing previously. "Often" agrees with me: sometimes markets fail and have to be fixed.
Your second quote isn't really on point. The author is making a point specifically about an argument that wealth misdistribution was a major factor in causing the Great Depression. I don't think anybody here is making that argument.
As for arguments you're hearing on the radio, I can't really comment on them. I don't know who the people are or what they're saying. I will say this, though: there is a cottage industry these days in revisionist histories of the Depression and the New Deal among people who have a priori commitments to certain conclusions. Amity Shlaes is probably the best known of them.
Anyway, direct violence will soon become obsolete as the weapon of choice in war. This, in my opinion, is the reason we should quit directing our defense budget towards more refined means of killing people. The downfall of our great empire will come from a spectacular direct attack very different from those which are so vivid in our memories and our history books.
I absolutely agree that the banks should never have made those loans. Since the loans are not the cause of the scale of our current crisis, however, let me go further and say banks and other financial firms should never have then leveraged the hell out of those mortgages. Those banks and firms deserve to crash and die. Unfortunately, however, their crashing and dying causes huge problems for lots and lots of businesses and people who had nothing to do with those bad decisions. Those folks are in no way at fault, but they're getting crushed anyway, and the overall economy is losing their productivity, skills, products, and services.
Why should that be allowed to happen, just in the name of market purity? It's economically inefficient, morally unjustifiable, and socially destructive.
"An unarmed man makes a good victim." One of my favorite quotes and one of the most true...
Regardless, under your economic theory, wouldn't we have been better off to let market forces determine what war materiel got produced, in what quantities, and at what price? Wouldn't we have been better off to let market forces allocate domestic goods and set the prices for them, rather than having rationing and price controls? Wouldn't an unfettered market have met our wartime needs more quickly and efficiently than gov't control did?
as far as being economically inefficient... is what we are doing now any better? no. just costing the tax payer even more.
Morally unjustifiable? how about punishing those who caused the problems? would that help?
socially destructive? this i may be able to reach and agree with. people losing their jobs because an industry other than their own wend under is a bit destructive. ...how about the bailout for ONLY those people? i know it wouldnt work but it sounds fun doesnt it?
i wish i could sit around all day and discuss this with everyone here but i need to get goin to work.
Urbi, always a pleasure.
In other words, someone may have purchased a home 10 years ago. They may have financed it with a relatively conservative 15-year fixed rate mortgage. If that person is trying to sell the house today, they may have buyers lined up to pay the asking price, but if none of them can get financing the sale will not occur.
Still, I agree with Kuzi that I don't think we need to be sticking our hands into this mess. They bought their tickets. They knew what they were getting into. I say, let 'em crash!