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Author Topic: the economy: coming to a front page near you  (Read 3121 times)
lester1/2jr
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« on: March 15, 2008, 05:01:36 PM »

I'm not what you'd call a big fan of this guy, but this is a good article.  Of course, he leaves out how his own socialist ideas helped create the subprime mess.  In the same way that the iran NIE put a kaibosh on endless will we attack iran discussions, at least for a while,  I can't imagine how the ongoing economic downturn isn't going to start moving more clearly from the business page to the front page.  I realize many of you feel this is so much doomesday / y2k  type stuff, but the numbers are fairly sobering when you look at them.   It's really an awful lot of money. 

you might want to click the link as it is a little easier to read

Quote
Betting the Bank
    By Paul Krugman
    The New York Times

    Friday 14 March 2008

    Four years ago, an academic economist named Ben Bernanke co-authored a technical paper that could have been titled "Things the Federal Reserve Might Try if It's Desperate" - although that may not have been obvious from its actual title, "Monetary Policy Alternatives at the Zero Bound: An Empirical Investigation."

    Today, the Fed is indeed desperate, and Mr. Bernanke, as its chairman, is putting some of the paper's suggestions into effect. Unfortunately, however, the Bernanke Fed's actions - even though they're unprecedented in their scope - probably won't be enough to halt the economy's downward spiral.

    And if I'm right about that, there's another implication: the ugly economics of the financial crisis will soon create some ugly politics, too.

    To understand what's going on, you have to know a bit about how monetary policy usually operates.

    The Fed's economic power rests on the fact that it's the only institution with the right to add to the "monetary base": pieces of green paper bearing portraits of dead presidents, plus deposits that private banks hold at the Fed and can convert into green paper at will.

    When the Fed is worried about the state of the economy, it basically responds by printing more of that green paper, and using it to buy bonds from banks. The banks then use the green paper to make more loans, which causes businesses and households to spend more, and the economy expands.

    This process can be almost magical in its effects: a committee in Washington gives some technical instructions to a trading desk in New York, and just like that, the economy creates millions of jobs.

    But sometimes the magic doesn't work. And this is one of those times.

    These days, it's rare to get through a week without hearing about another financial disaster. Some of this is unavoidable: there's nothing Mr. Bernanke can or should do to prevent people who bet on ever-rising house prices from losing money. But the Fed is trying to contain the damage from the collapse of the housing bubble, keeping it from causing a deep recession or wrecking financial markets that had nothing to do with housing.

    So Mr. Bernanke and his colleagues have been doing the usual thing: printing up green paper and using it to buy bonds. Unfortunately, the policy isn't having much effect on the things that matter. Interest rates on government bonds are down - but financial chaos has made banks unwilling to take risks, and it's getting harder, not easier, for businesses to borrow money.

    As a result, the Fed's attempt to avert a recession has almost certainly failed. And each new piece of economic data - like the news that retail sales fell last month - adds to fears that the recession will be both deep and long.

    So now the Fed is following one of the options suggested in that 2004 paper, which was about things to do when conventional monetary policy isn't getting any traction. Instead of following its usual practice of buying only safe U.S. government debt, the Fed announced this week that it would put $400 billion - almost half its available funds - into other stuff, including bonds backed by, yes, home mortgages. The hope is that this will stabilize markets and end the panic.

    Officially, the Fed won't be buying mortgage-backed securities outright: it's only accepting them as collateral in return for loans. But it's definitely taking on some mortgage risk. Is this, to some extent, a bailout for banks? Yes.

    Still, that's not what has me worried. I'm more concerned that despite the extraordinary scale of Mr. Bernanke's action - to my knowledge, no advanced-country's central bank has ever exposed itself to this much market risk - the Fed still won't manage to get a grip on the economy. You see, $400 billion sounds like a lot, but it's still small compared with the problem.

    Indeed, early returns from the credit markets have been disappointing. Indicators of financial stress like the "TED spread" (don't ask) are a little better than they were before the Fed's announcement - but not much, and things have by no means returned to normal.

    What if this initiative fails? I'm sure that Mr. Bernanke and his colleagues are frantically considering other actions that they can take, but there's only so much the Fed - whose resources are limited, and whose mandate doesn't extend to rescuing the whole financial system - can do when faced with what looks increasingly like one of history's great financial crises.

    The next steps will be up to the politicians.

    I used to think that the major issues facing the next president would be how to get out of Iraq and what to do about health care. At this point, however, I suspect that the biggest problem for the next administration will be figuring out which parts of the financial system to bail out, how to pay the cleanup bills and how to explain what it's doing to an angry public.



solution: dissolve the governent, putting 3 trillion back into the economy!! (keep the coast guard)
« Last Edit: March 15, 2008, 05:03:14 PM by lester1/2jr » Logged
indianasmith
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« Reply #1 on: March 15, 2008, 05:34:23 PM »

Nice comment at the end, there, Lester!

Of course, if the government were completely dissolved, millions of people who collect money from it directly or indirectly would storm Washington, demanding that they get "their" program back!  I am not nearly as libertarian as you are, but I see so much of the current mess as due to a great misunderstanding of what the role of government was meant to be.

Governments were never intended to provide for their citizens.  The whole point of having a government is to protect the citizens.  Protect their lives, their property, and their God-given natural rights.

Because once government starts providing, three things happen: One, the provision can never be taken away; Two, the amount of the provision can never be reduced; and Three, the citizens will demand that more and more of their needs be provided for.  And so we arrive where we are.
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Zapranoth
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« Reply #2 on: March 15, 2008, 07:19:36 PM »

Lester, I'm going to ask this rhetorical question, but for the love of God please don't answer it, because no way am I going to be drawn into this discussion in a web board:

Dissolve the government... . AND THEN WHAT?
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Dave M
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« Reply #3 on: March 15, 2008, 08:33:36 PM »

...four the government realizes there are too many people for it to provide for everyone, so we need to have fewer people.
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lester1/2jr
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« Reply #4 on: March 16, 2008, 08:14:31 AM »

indiana smith- thanks bro.  I noticed in last onths jobs report that we lost some 68 thousand jobs or something.

but they actually ADDED 38,000 goverenment jobs!  did we aquire some new territory I wasn't aware of? 

not only are those not real jobs in the original meaning, but theye are in fact the types of liabilities you are talking about.  our tax dollars are now going to 38,000 more people, who probably have full benefits.  It's great for those people but can only fairly be counted as a loss for the taxpayer.

zapranoth-  people imagine chaos without a government and let me say I am NOT for "anarchy" in the cartoon sense.  think of it this way: 

people say "the government " builds roads and pay police to keep us safe.  but where does the government get the money for that?  us!!  so "they" don't really pay for anything do they?  how much money do you get from the government?  other than the use of the computer at the library, I can't think of anything, but i give them a third of my paycheck. 

we can, at the comunity or even state level, pay the police and the road guys to do their jobs.  directly

I want to have order, but most of my money doees not go to things I need or even want.  it goes to subsidize tings we don't use or need and to foreign countries that hate us. ad of course, the beaurocracy to keep it all in place. 

do we need a department of education?  would teachers not know what to teach if the government didn't send down what can and cannot be in textbooks?  would they start teaching creationism?  I live on massachusetts, they aren't going to teach out of the bible to us.  not if they want us to be able to compete globally, which they do or we would all starve.

what does the department of energy even do?  I'll post another aticle on this but basically, the department of education isn't a school.  the department of labor isn't a factory.  they don't PRODUCE anything. 

I could go on , but basically China and India can kick our ass in manufacturing and our spreading of capitalism has been succesaful to the point that we have smoe serious competition all over the world.  but what china and russia will probably NEVER have is liberty and it would be a good idea for us to emphasize that as a selling point for our country.  I mean, we were founded by religious fanatics who were escaping enlightened europe, more or less.  we can't allow "wrong" tings in the name of freedom
« Last Edit: March 16, 2008, 08:16:57 AM by lester1/2jr » Logged
flackbait
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« Reply #5 on: March 16, 2008, 10:24:17 AM »

I just think we should do what the UK does and quit printing money for a couple of years. Therefore artificially increasing the value of the dollar. Which is something we sorely need to do right now.

lester1/2jr: If I was to go into the ROTC(reserve officers training core) uncle sam would be giving a nice little scholarship to complete college(little as in he pays for everthing)!
« Last Edit: March 16, 2008, 10:25:57 AM by flackbait » Logged
lester1/2jr
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« Reply #6 on: March 17, 2008, 08:49:51 AM »

no he wouldn't, we would!
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