Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The world economy is heading towards a black hole unless bold action taken

economist.com

Post reply on HN
Print view View original

21–30 of 140 posts

Re: The world economy is heading towards a black hole unless bold action taken

#21

Post by sliverstorm »

anigbrowl wrote: post #14
OstiaAntica wrote: post #8

"Bold" action by the politicians and the central banks created much of the current mess. If we'd just cleared the pipes by letting the banks fail, recapitalizing new banks, and basically rebooting the financial system, we'd be much further along. Instead, we got bailouts and crony capitalism and ad hoc intervention, and today the global system is in many ways in worse shape now than in 2008. (Banking is more concentr…

letting the banks fail, recapitalizing new banks, and basically rebooting the financial system Please tell us how that works in practice rather than in theory. I really, really want to know how you just 'reboot' the financial system without massive disruption to retail banking or the payments system. How do you 're'capitalize a new bank? If you just mean create new banks, who is running these banks? I mean, I'd like…

Oh, it's not a big deal, you just need everbody to go without money and food for a few years while you get the things off the ground. No sweat.

Re: The world economy is heading towards a black hole unless bold action taken

#22

Post by TomOfTTB »

flourpower wrote: post #15
OstiaAntica wrote: post #8

"Bold" action by the politicians and the central banks created much of the current mess. If we'd just cleared the pipes by letting the banks fail, recapitalizing new banks, and basically rebooting the financial system, we'd be much further along. Instead, we got bailouts and crony capitalism and ad hoc intervention, and today the global system is in many ways in worse shape now than in 2008. (Banking is more concentr…

We shouldn't practice financial regulation like it's holistic medicine. Metaphors about cleaning the pipes and taking the pain should be weighed against the evidence we have about what happens when you let banks fail, and that didn't go very well when we did it with Lehman Brothers.

The failure of Lehman Bros. did not directly cause the financial collapse.

The financial collapse was caused when other banks realized how bad Lehman's balance sheet was. Because their own balance sheets were also bad and they deduced all the other banks out there are probably in just as much trouble.

So banks stopped lending to each other and that's what caused the collapse.

But those circumstances wouldn't have changed if we bailed out Lehman. Because the realization would still have been the same.

Re: The world economy is heading towards a black hole unless bold action taken

#23

Post by jcromartie »

Lately, I've noticed that political and financial systems seem to behave according to the laws of increasing entropy in closed systems. For that reason, sometimes I fear that there is no fixing it, and that only a new system will be better.

Re: The world economy is heading towards a black hole unless bold action taken

#24

Post by yequalsx »

dmfdmf wrote: post #12

I agree with OstiaAntica. This Economist article is a thinly veiled call for more debt and more inflationary spending. Who stands in the way of "recovery" ? The obstinate Germans (who learned the lesson of hyperinflation last century) with the only sound Euro economy, i.e. they will be paying for the bailouts. In the USA its the Tea Party and the few Republicans with a spine who recognize that the problem is the mass…

The are numerous examples of countries having a larger debt to GDP ratio than the United States who recovered nicely from such debt ratio.

In the U.S. taxes are around 24% GDP which is quite low relative to the rest of the industrialized world and quite low relative to our recent past (50 years). Raising taxes will counteract any hyper inflationary forces. Increasing the debt for the U.S., given that the borrowing rate is ridiculously low and tax rates are similarly low, will not lead to hyper inflation. Inflation is a not a problem in the U.S. right now.

Re: The world economy is heading towards a black hole unless bold action taken

#26

Post by Duff »

Bold action would be allowing toxic institutions like Bank of America to collapse.

Bold action would force the proprietrary trades of institutions like Goldman Sachs to take place in public, on an open, regulated market.

Bold action would halt the free trade policies that are building up Asia at the expense of the west.

Bold action would be ceasing the subsidy of suburban housing, the student loans and failed local/regional governments.

Re: The world economy is heading towards a black hole unless bold action taken

#27

Post by pnathan »

I find the preaching of fear distasteful.

It is better to gravely recognize the scope of the problem, assemble facts regarding the situation, and then to move to positively affect the situation on all levels, from globally to locally.

The bold action that is needed is to not panic, but to take measured steps regardless of ideology and re-election chances.

I wish I was in a position to do more than work hard, invest, and not panic.

Re: The world economy is heading towards a black hole unless bold action taken

#28

Post by TomOfTTB »

yequalsx wrote: post #24
dmfdmf wrote: post #12

I agree with OstiaAntica. This Economist article is a thinly veiled call for more debt and more inflationary spending. Who stands in the way of "recovery" ? The obstinate Germans (who learned the lesson of hyperinflation last century) with the only sound Euro economy, i.e. they will be paying for the bailouts. In the USA its the Tea Party and the few Republicans with a spine who recognize that the problem is the mass…

The are numerous examples of countries having a larger debt to GDP ratio than the United States who recovered nicely from such debt ratio. In the U.S. taxes are around 24% GDP which is quite low relative to the rest of the industrialized world and quite low relative to our recent past (50 years). Raising taxes will counteract any hyper inflationary forces. Increasing the debt for the U.S., given that the borrowing ra…

With all due respect raising taxes that high is a straw man. I'd be all for raising taxes if it worked but it doesn't. Nation states are competitive entities and they compete for the world's resources. If the U.S. dramatically raises taxes on the rich then emerging countries like Hong Kong see an opportunity and lower their tax rates. Then you start to see capital flee the U.S. for overseas.

That's why per capita tax receipts have stayed fairly consistent over time even though the tax rate has fluctuated: http://www.angrybearblog.com/2007/09/comparing-presidents-re...

Don't get me wrong. We could and should raise taxes to the highest levels we can. But there's a threshold where it becomes cheaper for rich people to hide their money than it is for them to pay higher tax rates. When we cross that threshold we see tax revenue start to drop.

So while I'm in favor of raising taxes I don't think we can raise taxes to the point where it would get us out of this mess.

Re: The world economy is heading towards a black hole unless bold action taken

#29

Post by yaks_hairbrush »

dmfdmf wrote: post #12

I agree with OstiaAntica. This Economist article is a thinly veiled call for more debt and more inflationary spending. Who stands in the way of "recovery" ? The obstinate Germans (who learned the lesson of hyperinflation last century) with the only sound Euro economy, i.e. they will be paying for the bailouts. In the USA its the Tea Party and the few Republicans with a spine who recognize that the problem is the mass…

How is the US government debt the problem? I just don't see it. Government debt certainly didn't cause the problem, we can still borrow at a 2% rate, and there's been little evidence of inflation.

Re: The world economy is heading towards a black hole unless bold action taken

#30

Post by wtvanhest »

This article has no depth and is not worth discussing.

Here are two quotes taken from the article:

1) "That could change if Congress came to its senses, passed Barack Obama’s jobs plan and agreed on a medium-term deficit-reduction deal by November." - Author favors Obama's plan and says it will fix the problem.

2)"while Mr Obama has favoured class warfare over fiscal leadership." - Author refers to the exact same policy, but now calls it favoured class warfare.

This has a ton of link bate and zero information anyone actually cares about.

Post reply on HN