Occupy Wall Street protest

[BluegrassCat]

Look...some people are ideologues, some are pragmatists...you're the former, and so is Obama. No matter what the cost....you and he stay tied to your failed assertions and ideology. Unlike Clinton....In the wake of a resounding, historical rebuke in the mid term elections, it phased him not....he did not readjust, adapt, or amend, just hardened his unpopular, ineffective positions. So why could anyone expect you to change or reconsider? But you stay with that belief...if nothing else you're determined. Stay with the ship Captain...even as it descends to the ocean floor . It's entirely probable that even if he did win re-election, and after 8 years and a country crippled in debt and unemployment, bitterly divided between race and class, you'd still be showing us your charts and graphs and telling us not to believe our lying eyes...what a success it's really been.

It's almost become a truism on here that whatever you accuse others of is actually a perfect description of yourself and this one is spot on. Look, I'm going by the data, by what people who study this say, and you're going by your white-knuckle ideology of hatred. You're trapped in a echo chamber of propaganda. I give you evidence for my (and all economists') point of view and you spew insults. I ask for examples for your claims and you change the subject. I make an argument and you plug your ears, stomp your feet and throw a tantrum. You have NOTHING to say except what Limbaugh told you to say. You didn't come by your opinions honestly on your own; that's why you can't back any of it up. You lose your shirt every time you step into a political thread.

[hard4janira]

To say that "economists agree with me" (and therefore I am right) is silly. Anybody can find and economist and/or a study that validates their political point of view. Economists are political animals just like everybody else.

Somebody once said that if you took all of the economists in the world and stacked them from head to toe you would never reach a concensus...How true. I listen to Tom Keene every day and there is a never ending stream of financial experts and nobel prize winning economists who couldn't agree less on the problems or the symptoms of the economic mess we are in right now.

As for me personally, the more I read about everything that is going on the less I am inclined to support the Keynesian approach. We tried it during the great depression and it didn't work. Japan tried it in the 90's and it didn't work (and they are very vocal about the fact that it didn't work and that all they did was perpetuate 'zombie banks' it what amounted to lost decade). We are doing it again this time around and, as we all know, it isn't working. Krugman has been confronted with Japan before and his only retort is that they didn't spend enough... (which by the way, is the exact same thing that he is saying now).

So that begs the question: If all of this government 'stimulus' isn't working (as well as other things like TARP and numerous other bailouts) why do we keep doing them every time there is a panic? (This same question can be asked of Japan too, not just America). I think the answer is really simple actually: The POLITICAL cost of not doing anything is simply unacceptable for those in power. They have to try and do SOMETHING right? Or do they?...

Although I am not in any particular 'camp' (i.e. monetarist, Keynesian, Austrian) I am starting to believe that the Austrian school is really onto something. Stimulus is wasteful because it doesn't create permanent jobs and it doesn't finance projects for which there is a demand (necessarily). Further, it adds to debt either through borrowing or printing of money (which leads to inflation). We've had about a trillion and a half dollar round of stimulus under Obama and unemployment hasn't budged. That's a bad, bad sign. I'm still trying to figure out how a freshly paved road is going to increase IBM's bottom line, or Macy's for that matter.

Many economists (even the monetarists gasp!) would have you beleive that the entire world would have melted down like a great nuclear reactor if we didn't bail out the banks. But NONE of them can tell you exactly what WOULD have happened, other than it would have been a systemic doomesday scenario. I am mis-trustful of them and I am still waiting for some explanation of what would have happened if we didn't pass TARP. Personally, I think the shadow banks should have gone through bankruptcy (as well as AIG). I'm not sure that we've saved anything with all of these bailouts. We've re-capitalized the banks but guess what...they aren't lending! Plus we have inflation to deal with and a debt problem that is getting worse and worse..

The question that should probably be asked is this: Is it better to suffer through a horrible depression that lasts 3 or 4 years or a very bad recession that lasts 10-15 years? I think that is what we are in for. We are in for a lost decade just like Japan in the 90's (but worse). We are already 4 years into this thing and housing still hasn't hit a bottom. Make no mistake, there is NO light at the end of the tunnel here.

[BluegrassCat]

A recent Bloomberg survey of economists and financial institutions found 85% (29/34) predicted Obama's new jobs bill would stimulate job growth and GDP.

To say that unemployment hasn't budged and that inflation is a current problem is not only silly but flatly wrong.

[Stavros]

To say that "economists agree with me" (and therefore I am right) is silly. Anybody can find and economist and/or a study that validates their political point of view. Economists are political animals just like everybody else.

Somebody once said that if you took all of the economists in the world and stacked them from head to toe you would never reach a concensus...How true. I listen to Tom Keene every day and there is a never ending stream of financial experts and nobel prize winning economists who couldn't agree less on the problems or the symptoms of the economic mess we are in right now.

As for me personally, the more I read about everything that is going on the less I am inclined to support the Keynesian approach. We tried it during the great depression and it didn't work. Japan tried it in the 90's and it didn't work (and they are very vocal about the fact that it didn't work and that all they did was perpetuate 'zombie banks' it what amounted to lost decade). We are doing it again this time around and, as we all know, it isn't working. Krugman has been confronted with Japan before and his only retort is that they didn't spend enough... (which by the way, is the exact same thing that he is saying now).

So that begs the question: If all of this government 'stimulus' isn't working (as well as other things like TARP and numerous other bailouts) why do we keep doing them every time there is a panic? (This same question can be asked of Japan too, not just America). I think the answer is really simple actually: The POLITICAL cost of not doing anything is simply unacceptable for those in power. They have to try and do SOMETHING right? Or do they?...

Although I am not in any particular 'camp' (i.e. monetarist, Keynesian, Austrian) I am starting to believe that the Austrian school is really onto something. Stimulus is wasteful because it doesn't create permanent jobs and it doesn't finance projects for which there is a demand (necessarily). Further, it adds to debt either through borrowing or printing of money (which leads to inflation). We've had about a trillion and a half dollar round of stimulus under Obama and unemployment hasn't budged. That's a bad, bad sign. I'm still trying to figure out how a freshly paved road is going to increase IBM's bottom line, or Macy's for that matter.

Many economists (even the monetarists gasp!) would have you beleive that the entire world would have melted down like a great nuclear reactor if we didn't bail out the banks. But NONE of them can tell you exactly what WOULD have happened, other than it would have been a systemic doomesday scenario. I am mis-trustful of them and I am still waiting for some explanation of what would have happened if we didn't pass TARP. Personally, I think the shadow banks should have gone through bankruptcy (as well as AIG). I'm not sure that we've saved anything with all of these bailouts. We've re-capitalized the banks but guess what...they aren't lending! Plus we have inflation to deal with and a debt problem that is getting worse and worse..

The question that should probably be asked is this: Is it better to suffer through a horrible depression that lasts 3 or 4 years or a very bad recession that lasts 10-15 years? I think that is what we are in for. We are in for a lost decade just like Japan in the 90's (but worse). We are already 4 years into this thing and housing still hasn't hit a bottom. Make no mistake, there is NO light at the end of the tunnel here.

I think it was Hippifried in Politics & Religion a while ago who argued we are going round in circles because economic theory hasn't changed since the 19th century -Keynes was offering a temporary solution to mass unemployment, not an alternative economic system; the Austrian school, to the extent that it was part of Friedman's monetarist theory and the de-regulation fetish that gripped the Thatcher-Reagan perspective hasn't worked either -one of the reasons we are in this mess is that de-regulation enabled high-flying capitalist whizz kids to invent all sorts of financial products that started out as ingenious ways of making money, but ended up being tacked on to real assets, like people's homes: and our government's didn't seem to know what was going on in the markets. If its true then they were in dereliction of their duty; if they did know and did nothing about it, ditto.

I think that where there was no separation of a bank's tangible assets -its customers accounts -and its 'casino' operations, ie its investment branch, then a bank collapse would have immediately impoverished millions of people -even the Bush administration could not have coped with that. TARP was a bandage and it stopped the bleeding, but the wound is a deep one, and as you suggest we are in for a grim decade at least, but so far I have yet to see any economic suggestions -other than the creation of jobs-that will change things.

[hard4janira]

I think it was Hippifried in Politics & Religion a while ago who argued we are going round in circles because economic theory hasn't changed since the 19th century -Keynes was offering a temporary solution to mass unemployment, not an alternative economic system; the Austrian school, to the extent that it was part of Friedman's monetarist theory and the de-regulation fetish that gripped the Thatcher-Reagan perspective hasn't worked either -one of the reasons we are in this mess is that de-regulation enabled high-flying capitalist whizz kids to invent all sorts of financial products that started out as ingenious ways of making money, but ended up being tacked on to real assets, like people's homes: and our government's didn't seem to know what was going on in the markets. If its true then they were in dereliction of their duty; if they did know and did nothing about it, ditto.

I think that where there was no separation of a bank's tangible assets -its customers accounts -and its 'casino' operations, ie its investment branch, then a bank collapse would have immediately impoverished millions of people -even the Bush administration could not have coped with that. TARP was a bandage and it stopped the bleeding, but the wound is a deep one, and as you suggest we are in for a grim decade at least, but so far I have yet to see any economic suggestions -other than the creation of jobs-that will change things.

Personally, I am not against de-regulation. De-regulation gets a bad rap most of the time. I'm not saying that there shouldn't be any rules: I'm just saying that more and more regulation created by larger and larger bureaucracies is not the answer. Take the SEC for example; They were basically led by the nose do the doorstep of Bernie Maddoff and they STILL couldn't catch the guy. That's gross incpompetance and ineptitude from a government agency that failed to perform it's basic function. To think that if we had all these regulations and agencies in place to monitor them is naive - I KNOW that this would never work.

So what about the swaps then, or the crazy financial instruments that these Wall Street 'wiz-kids' came up with? On the surface, I am not against them in theory. What I am against is the lack of transparency into these instruments which is what we had. If AIG wants to go out and over-leverage 500 times in swaps against Lehman brothers - I say let them do it: HOWEVER, these swaps should be on the books for all to see, especially the shareholders. Do you honestly think that shareholders would stick around and keep money in a company that takes such dangerous risks? The stock price of AIG (or any other company) would be punished as a result and the company would hesitate to engage in such risky behavior. In this sense, the market is self-regulating if the proper parties have all of the requisite information. So here is where we probably agree: We need more/stronger regulation to make sure that people who have a stake in a company (bondhoders/shareholders) have FULL visibility into a companies financials.

Now, a lot of companies were not forthright about thier holdings and THIS IS CRIMINAL BEHAVIOR. Bear Stearns, for example, were sitting on a couple of Hedge Funds (the Enhanced Leverage Fund and I can't remember the name of the other one...) When these two funds collapsed (and subsequently brought down the Wall Street giant) it became clear that the fund managers misguided (or outright lied) to the investors about the quality of the assets in these funds. The fund managers were tried and acquited - to this day I do not know how.... but it is this kind of nonsense that makes me want to join the OWS protesters. These fuckers should have spent some time in jail, that's all I'm saying.

I also think that there was shady (if not criminal) behavior by the credit rating agencies who by all accounts knew that they were rating B stuff AAA. I've always said and I still say that criminal behavior should be punished. If you are an OWS protester and you are in the park because the rating agencies and investment banks were not held accountable for these shennanigans then I am with you 100%. I do believe 100% that there was some criminal behavior here that has gone unpunished and it is not fair to the American people.

On the other hand, I believe that a lot of what the mortage companies and investemen banks did was simpy bad business (not criminal) and bad business should GO BANKRUPT. Bankruptcy doesn't mean they go away, it simply means that the stakeholders take their loses (privatized losses), management gets canned, and a stronger company emerges. This sense of 'too big to fail' and socialized losses where the taxpayer takes on the burden of bad business decisions is simply NOT CAPITALISM. By the way, I'd like to make it VERY CLEAR that this Wall Street vs. Main Street business is simply bullshit. Wall Street IS main street. How many jobs were lost when Lehman when under? 26,000. That's TWENTY SIX THOUSAND. You think those were all fat-cats driving Bently's? Nope, that included mail clerks, secretaries, security guards - a whole shitload of regular joes lost jobs. And what about GM? How come the OWS protesters aren't occupying Deerborn, MI? GM is seen as 'main-street', but it's just another example of crony capitalism at it's absolute worst. GM is a company that has been against the ropes for years. Even before the collapse in 2008, GM had to go to the Federal Government for loans at reduced interest rates because it couldn't get them in the open market. This is not capitalism. The taxpayer has been bailing out the auto-makers for YEARS and it is wrong. These companies should have gone through bankrupcty years ago. They would be much stronger companies now. The reason that Washington bails out the auto-makers is because of the unions. The unions are very powerful and they provide a lot of campaign finance money to the louts in DC. So the taxpayer continues to subsidize the losses in Michigan for political reasons: It is really a shame and a disgrace. The OWS protesters have every right to be up there in Michigan as well.

Lastly (as I ramble on here), the Federal goverment was complicit in the housing bubble, and we probably wouldn't be in the mess at all if these assholes weren't involved in shit they have no business in. Fannie and Freddie are perfect examples of government that is completley out of control. Two GSE's that privatize gains and socialize losses via government gurantees. Government encouraged poor lending (even mandating it in some cases via the CRA and threats of lawsuits from the regional Federal Reserve banks). The GSE's DIRECTLY ENCOURAGED BAD LENDING PRACTICES AND POOR UNDERWRITING STANDARDS, and politicians were more than happy to be complicit with these shennanigans as they took thousands upon thousands of dollars to the bank in the form of campaign contributiosn (see Rahm Emmanuel). It's a disgrace and a shame to see these politicians running around blaming capitalism and the banks for the housing bubble when they are the most culpable of all. Thomas Sewell wrote a terrific little book 'The Housing Boom and Bust' which (admittedly) takes an informative albeit conservative look at the reasons behind the housing boom/bust. You can read it in half a day and I reccommend it to anybody who would like a lay-person's read on what happenned.

Fuck it, that's all for now I need coffee.....lol

[hard4janira]

A recent Bloomberg survey of economists and financial institutions found 85% (29/34) predicted Obama's new jobs bill would stimulate job growth and GDP.

To say that unemployment hasn't budged and that inflation is a current problem is not only silly but flatly wrong.

What the economists like is the social security tax-cut part of the plan. Gee, imagine that, tax cuts to stimulate the economy and create jobs. Wow, who would have ever thought of that!

I have no doubt that directly injecting 'stimulus' into the ecomomy will contribute to the GDP, for a while. But at what cost? The first round of stimulus certianly hasn't increased GDP to the point of offsetting the debt burden created by borrowing/printing that took place in order to inject it into the economy. Funny side note here: Obama is big on fixing roads and bridges, but as Rand Paul pointed out, the entire annual road/highway budget of Kentucky is less that what Obama threw down the toilet at Solyndra.... You really have to wonder where Obama's priorities lie....


And can you say inflation isn't a problem? Why don't you ask people who are living paycheck to paycheck who have to deal with the increased cost of food and energy. Even Krugman was surprised by what he saw back in may (note the first paragraph).

http://krugman.blogs.nytimes.com/201...flation-notes/

Oh, and you REALLY know that Obama is flat out of ideas when he allows people to sue employers if they think they were discriminated against (i.e. not hired0 because they were unemployed. What a dope. As if Obama needed to alienate business any more than he already has.... Now they live in fear of being sued because they aren't hiring uneployed people.... I guess that's one way to try and get the unemployement numbers down.

[Stavros]

Hard4Janira: a compelling argument: and I agree with you, that the quality of the regulatory process is the key to the oversight the private sector should be submitted to, and you provide good examples why this should be so, and where and how it failed.

I also understand the reasoning you provide for culpability of banks and hedge funds for their own risks, and for the government-sponsored laxity in the creation of popular but financially disastrous mortgages that had been going on for years and was unsustainable.

However, if you are in the White House or Downing St and you are told that, not 26,000 but 2 million six hundred thousand people will lose their jobs this weekend because of all those shabby dealings and weird financial instruments, and incompetent regulatory agencies run by the people you put there -do you say Let the Markets Decide? Or, We need a rescue plan...both carry risks, but the risk of political suicide is not in most politicians In Tray.

The Greek government created 800,000 jobs in the last ten years or so, most if not all civil servants; many are/were grace and favour jobs for relatives, party members, and so on. In effect, Greece actually has defaulted, it wanted a prosperity it could not make on its own, so it borrowed itself into a paradise of credit, only to discover that heaven on earth is not possible.

There was talk of BP going bankrupt as a consequences of the Deepwater Horizon disaster in the Gulf of Mexico, and, because its revenues account for £1 in every £7 of most pensions in the UK it is said to be Too Big To Fail -but it can, and if it did, what would happen? Its assets would be bought up by Shell, Exxon, Conoco, Chevron and Total who would then have to re-structure their own portfolios for competition reasons and so on: but it can be done. In one sense, then, nobody is Too Big To Fail.

But just as the story is not over yet, if you are saying that we have to in effect purge the capitalist economies of the credit-soaked parasites, are you prepared to deal with its political as well as its economic consequences? There are no simple or easy answers to this, but it is clearly the most important issue of the day.

[BluegrassCat]

And can you say inflation isn't a problem? Why don't you ask people who are living paycheck to paycheck who have to deal with the increased cost of food and energy. Even Krugman was surprised by what he saw back in may (note the first paragraph).

http://krugman.blogs.nytimes.com/201...flation-notes/

And you say inflation is a problem? Go ahead and ask those people and they'll tell you it's because they're un or under-employed, not because of inflation. See what Krugam said this month.

http://krugman.blogs.nytimes.com/201...not-exploding/

And if you're interested in reading an objective and thorough discussion of the lead up to the crisis of 08 rather than right wing talking points try "All the Devils are Here" by McLean & Nocera.

[Ben]

[hard4janira]

I also understand the reasoning you provide for culpability of banks and hedge funds for their own risks, and for the government-sponsored laxity in the creation of popular but financially disastrous mortgages that had been going on for years and was unsustainable.

Add to that the Federal Reserve, who by keeping interest rates artificially low for nearly a decade made credit available to people who simply would not have access to that capital otherwise. The Federal reserve (along with CMA and the GSE's) contributed massively to the housing bubble that simply had to burst.

However, if you are in the White House or Downing St and you are told that, not 26,000 but 2 million six hundred thousand people will lose their jobs this weekend because of all those shabby dealings and weird financial instruments, and incompetent regulatory agencies run by the people you put there -do you say Let the Markets Decide? Or, We need a rescue plan...both carry risks, but the risk of political suicide is not in most politicians In Tray.

I agree 100% and I suggested as much in my first post I think. The POLITICAL cost of not doing anything (or seemingly not doing anything) is simply too much to bear. You are right, it's probably political suicide. Remeber though, TARP failed to pass congress the first time around. Only after Bernanke and Paulson put the fear of financial holocaust into both parties did they rally enough support to get it passed with the second effort.

The Greek government created 800,000 jobs in the last ten years or so, most if not all civil servants; many are/were grace and favour jobs for relatives, party members, and so on. In effect, Greece actually has defaulted, it wanted a prosperity it could not make on its own, so it borrowed itself into a paradise of credit, only to discover that heaven on earth is not possible.

Ergo austerity measures. And it isn't just Greece. It's Ireland, Portugal, Spain, and now Italy (which really has a lot of folks worried). The big quesiton over the next couple of weeks is if Germany and Frace are going to suck the big one and re-capitalize the banks. The jury is still out on that.... I hope they don't. That will be the end of the Euro... These bankrupt countries are REALLY going to have to deal with austerity measurs then... Same thing will be coming to the US one day.

There was talk of BP going bankrupt as a consequences of the Deepwater Horizon disaster in the Gulf of Mexico, and, because its revenues account for £1 in every £7 of most pensions in the UK it is said to be Too Big To Fail -but it can, and if it did, what would happen? Its assets would be bought up by Shell, Exxon, Conoco, Chevron and Total who would then have to re-structure their own portfolios for competition reasons and so on: but it can be done. In one sense, then, nobody is Too Big To Fail.

While I think the BP should be held 100% accountable for the clean-up I do think that it was embarrassing that the Obama administration 'shook down' BP for political points. The environmental impact of the spill is one of the greatest overblown stories in history. Nobody is even talking about it anymore and I was the the Gulf in August and enjoyed lovely, beautiful beaches. I agree that nobody is 'too big to fail' - but we should find a way to remove that phrase from our vocabulary completely. Any and all businesses should go through bankruptcy if necessary. No company in America (can't speak for the world) should be 'too big for bankruptcy'. If they are, you can bet your bottom dollar that there is crony capitalism at work.

But just as the story is not over yet, if you are saying that we have to in effect purge the capitalist economies of the credit-soaked parasites, are you prepared to deal with its political as well as its economic consequences? There are no simple or easy answers to this, but it is clearly the most important issue of the day.

Well, I'm saying this:

1) Any company that SHOULD go bankrupt needs to go through bankruptcy, and government shouldn't stand in the way of that happening. I don't care if you are an investment bank, an auto manufacturer, or a cupcake bakery that employs 5 people. Bad business decisions MUST be punished by the market.

2) Profits AND losses should both be privatized. No more Federal 'guarantees' of mortgages, student loans, bank accounts, or any other such nonsense. It creates a HUGE moral hazzard that leads us directly into the kinds of messes that we have now

3) If somebody commits a crime then punish them swiftly and severely. We treat white collar criminals with kid-gloves and it's wrong. There are so many shennanigans going on in these investment banks that it really gives captialism a black eye. You have to enforce the laws of the land and you have to be efficient in doing so. I honestly think that so many people get away with these crimes because they don't fear getting caught or what would happen if they actually do get caught.

4) Obey the rule of law. We have bankruptcy rules in place already. Who in the hell does Obama think he is telling the bondholders at GM to go stuff themselves while he bails out the union employees? I really regret that the Supreme Court rejected the bondholders case in this instance (they simply didn't have enough time to put forth a proper case). Also, a mortgage is a legal CONTRACT between two parties. How does the government justify telling a judge that he can arbitrarily reduce the amount of principal on a loan in the hopes that the borrower doesn't go under? That is an EXTREME violation of the rule of law. If I hold the title to that property I'm getting screwed big time. Why would I ever loan money again to anybody to buy anything If I fear the government will step in and arbitrarilty modify the terms of my contract without any legal precedence whatsoever? People who borrowed more than they can afford need to go through bankruptcy (or forclosure) just like the investment banks. It seems harsh and unkind, but honestly this is the ONLY fair way for the market to work. The sooner we do this, the sooner the market acutally finds a bottom and the sooner the 'bad assets' get off the books of these goddamn banks.