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

economist.com

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

#51

Post by PakG1 »

jpdoctor wrote: post #46
anigbrowl wrote: post #14

Earlier quoted context omitted.

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…

> I really, really want to know how you just 'reboot' the financial system without massive disruption to retail banking or the payments system. There will be massive disruption in any case. It can come in the format of recapitalization (Iceland) or inflation due to inflating their insolvency away (Latin America). > How do you 're'capitalize a new bank? OP meant recapitalize the failed banks. Short version: 1. Fire th…

You honestly think we'll be able to find other people qualified to run the new banks? Maybe, maybe not. But I'd imagine that whoever's running the show right now will easily be able to stay in the picture. It's like being a CEO. Once a CEO of a big corp, always a CEO of a big corp, no matter how poor your track record. Maybe I'm just being cynical here.

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

#52

Post by waqf »

wtvanhest wrote: post #33
mcphilip wrote: post #10

Earlier quoted context omitted.

This is an online version of an article in the Leaders section of the Economist magazine. The articles in that section are mostly short summaries of topics discussed in greater detail in the relevant subsections of the issue. For instance, the same print issue as this 'nonsensical raving' has a much more detailed summary of the euro crisis in the Briefings section if you're looking for the gory details alluded to in…

Then for future reference, link to that article. The one posted was a gigantic waste of time and had no information.

We should write a filter for HN that makes it impossible to submit articles from the Leaders section!

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

#53

Post by jamesaguilar »

TomOfTTB wrote: post #43
jamesaguilar wrote: post #36

Earlier quoted context omitted.

> With all due respect raising taxes that high is a straw man. How high? And how is it a straw man? A straw man is a false argument that someone uses to make another person's position seem weak in a debate. I don't see that happening here. (Except maybe in your post. You're making it seem like the person you're responding to is in favor of doubling or tripling the tax rate or something, when in reality he probably su…

> How high? And how is it a straw man? A straw man is a false argument that someone uses to make another person's position seem weak in a debate. I don't see that happening here. I suspect it's around where they were during the Clinton presidency. But I honestly don't know. And if we were making policy rationally instead of trying to demonize one side or the other what we'd be doing is trying to find that out. As for…

> Right now you're just making up numbers so I can't really debate your point.

No, I'm not, and it's a bit disrespectful of you to say so. You could have verified what I was saying with a mere sixty seconds of fact-checking on your own.

I was talking about receipts, just like earlier in the paragraph. What tax it comes from really does not matter for the purposes of this discussion. Receipts would have had to increase somewhere on the order of 10-20% during the Bush years for that period to have a balanced budget. That's according to this chart (http://www.heritage.org/budgetchartbook/growth-federal-spend...). Now, this is from a conservative think-tank, so take that with whatever grains of salt you will, but this is consistent with spending charts I have seen on non-partisan sites.

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

#54

Post by TomOfTTB »

yequalsx wrote: post #48
TomOfTTB wrote: post #43

Earlier quoted context omitted.

> How high? And how is it a straw man? A straw man is a false argument that someone uses to make another person's position seem weak in a debate. I don't see that happening here. I suspect it's around where they were during the Clinton presidency. But I honestly don't know. And if we were making policy rationally instead of trying to demonize one side or the other what we'd be doing is trying to find that out. As for…

Here are some charts. I don't know how to make links in a comment. http://paul.kedrosky.com/archives/2011/07/tax-burdens-around...

I'm not saying you're wrong because I don't know but you are over simplifying

First you're forgetting those countries don't have state taxes. For example, the top tax rate in California is close to 40% when you combine both State and Federal. Plus you have some cities that have income tax.

Second you're forgetting loop holes. Again the point I made above is U.S. citizens paid less in taxes when the U.S. tax rates were higher.

So again I can't say you're absolutely wrong. But you did over simplify (and you also ignored the point made in the very post you were supposedly replying to)

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

#55

Post by jpdoctor »

PakG1 wrote: post #51
jpdoctor wrote: post #46

Earlier quoted context omitted.

> I really, really want to know how you just 'reboot' the financial system without massive disruption to retail banking or the payments system. There will be massive disruption in any case. It can come in the format of recapitalization (Iceland) or inflation due to inflating their insolvency away (Latin America). > How do you 're'capitalize a new bank? OP meant recapitalize the failed banks. Short version: 1. Fire th…

You honestly think we'll be able to find other people qualified to run the new banks? Maybe, maybe not. But I'd imagine that whoever's running the show right now will easily be able to stay in the picture. It's like being a CEO. Once a CEO of a big corp, always a CEO of a big corp, no matter how poor your track record. Maybe I'm just being cynical here.

> You honestly think we'll be able to find other people qualified to run the new banks?

Clearly the ones currently running the bank are unqualified, which is why it is insolvent. Leaving them in place and expecting a different outcome is not sensible.

But directly to the point you ask: Yes, I believe there are many candidates who will perform better and for less money. (In the words of Charles de Gaulle: The cemeteries of the world are full of indispensable men.) Probably a fair fraction are inside the organization already, but if I were the regulator in charge, I would cross fertilize and take folks from outside the organization because internal allegiances are probably in the way of a thorough reorg.

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

#56

Post by michaelochurch »

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…

"Bold" action by the politicians and the central banks created much of the current mess.

The problem is a lack of boldness. Bold regulation on banks and insurance companies is necessary. If we're going to do bailouts, we had better make sure the same misbehaviors can't happen again.

In the U.S., we're fucking up my trying to fix failing institutions in-place. No management changes. No meaningful regulations. Often the laws are written by the industry they're intended to police (cf. health insurance). That's a horrible strategy. We need to become outright liberal again and double down on boldness, not play around with this compromising corporate-friendly chickenshit nonsense.

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.

This sounds like a quote by Herbert Hoover. Contrary to history's view of him (which is intensely negative) he was a very intelligent and probably a good-hearted man. He, however, believed that there was absolutely nothing government could do to save the economy, and that letting the beginnings of the Great Depression go unchecked was the least evil action. He was wrong.

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.

That is true. The bailouts were a necessary evil, but the way they were handled was ridiculous. Top management at the bailed-out banks should have been fired, and real regulation should have been put in place to prevent the behaviors that made the bailouts necessary.

What ultimately is destroying the U.S. is not the conduct around our banking system. That's bad, I'll give you that. It's the two astronomically expensive wars we are fighting that are unlikely to end any time soon.

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

#57

Post by rorrr »

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…

Exactly. It's not that politicians must "save" the economy now. We must save ourselves from the politicians who created this mess.

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

#58

Post by MaysonL »

intended wrote: post #18
MaysonL wrote: post #17

Earlier quoted context omitted.

So far this year, 73 US banks have failed, with resolution handled by the FDIC. Bank failures don't have to be horrific. We would arguably be better off as a country if rather than bailing out the big banks they had been taken over, recapitalized, and reprivatized.

They aren't hardly at the scale of Lehman/BoA though - its hard to imagine a failure of one of those banks being handled by the FDIC with anything approaching grace or control. While the greater point may be true, it does have the benefit of hindsight to a certain degree. At the same time - after seeing the effects of Lehman's collapse, the regulators really didn't have any other choice than saving those banks. The o…

True, obviously action was necessary, but it didn't have to be no-strings bailouts. At the very least, the bankers who ran their banks into [probable] insolvency should have been removed from control, and their shares and options rendered worthless.

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

#59

Post by theoj »

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…

Contrary to what some pundits would like you to believe, this is not new ground. A real estate bubble followed by a balance sheet recession has happened in at least 2 other places before: Sweden in 1992 and Japan in 1991. Different choices in these countries led to different outcomes.

In Sweden, the government demanded steep losses from equity holders before it took over a large part of the financial system (unlike US officials, the Swedish government officials were not afraid to use their superior bargaining position to get an excellent deal for the government). The upfront cost for recapitalization was 4% of GDP, the net cost in the end was less than 2% of GDP (based on different computation methods some even say 0%). Following asset sales in 1995, the Bank Support Authority went into a dormant role in 1996, 4 years after the crisis.

http://www.nytimes.com/2008/09/23/business/worldbusiness/23k...

Japan handled things differently and ended up with debt totaling 200% of GDP. See this excellent YouTube video from economist Richard Koo that explains the Japanese experience:

http://www.youtube.com/watch?v=HaNxAzLKegU

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

#60

Post by TomOfTTB »

jamesaguilar wrote: post #53
TomOfTTB wrote: post #43

Earlier quoted context omitted.

> How high? And how is it a straw man? A straw man is a false argument that someone uses to make another person's position seem weak in a debate. I don't see that happening here. I suspect it's around where they were during the Clinton presidency. But I honestly don't know. And if we were making policy rationally instead of trying to demonize one side or the other what we'd be doing is trying to find that out. As for…

> Right now you're just making up numbers so I can't really debate your point. No, I'm not, and it's a bit disrespectful of you to say so. You could have verified what I was saying with a mere sixty seconds of fact-checking on your own. I was talking about receipts, just like earlier in the paragraph. What tax it comes from really does not matter for the purposes of this discussion. Receipts would have had to increas…

We weren't talking about balancing the budget we were talking about eliminating the debt and you didn't say 10-20% you said 5-10%. So do you have a source for the 5-10% or am I right that you just made that number up?

I don't mean to flame but I based my statement on facts not a desire to disrespect you. Namely the Total U.S. tax revenue which was $2.1trillion. 10% of that is $210 billion which is less than half the interest on our national debt

(btw - The U.S. deficit for 2011 was $1.5 trillion)

For the record I'm not trying to be holier than thou. I've absolutely guesstimated (aka "made up") numbers in the heat of the moment. But when someone called me on it I didn't try to be indignant about it

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