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The Third Depression

nytimes.com

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Re: The Third Depression

#81

Post by rikthevik »

davidw wrote: post #30
kiba wrote: post #9

Earlier quoted context omitted.

It doesn't matter to me if they always decide a certain solution to certain problems, as long as they are right. Now, I am not against regulations per se(at least in the broad sense), but the kind of regulations that corporations brought and pay for. Government regulators can be brought, or sometime the regulatory framework cause a lot of economic distortion, often to the benefit of oligopolies or monopolies. Sometim…

> It doesn't matter to me if they always decide a certain solution to certain problems, as long as they are right. It doesn't seem obvious that anyone is "always right", and the discussions tend to go 'round and 'round...

Especially with economics. It's impossible to determine the causes of the current situation, though everyone loves to attribute successes to policies they like and failures to their opponent's policies.

Re: The Third Depression

#82

Post by hga »

w00pla wrote: post #65
jswinghammer wrote: post #7

Considering that his Keynesianism has basically destroyed Japan's future (while at the same time he faults them for not borrowing enough) I'd hope he'd proceed with a bit more caution. The basic problem he has is that he doesn't really understand why we're here. When debt chases bad assets it's a disease that has to be cleared. He ignored some pretty serious depressions in his analysis as well. The panic of 1819 come…

That is one thing I don't understand about this whole fiasco. He advocates spending and stimulus to get out of the this. He says "And both the United States and Europe are well on their way toward Japan-style deflationary traps". But didn't Japan spend a shitload of money during the 90ies (making their debt 200% of GDP)? Don't they now sit with that debt, a declining population and still no growth? I'm not an economi…

Well, 192.1% estimated as of last year.... Their apparent recovery from the Lost Decade a few years ago is now realized as being just another external bubble induced bump and they're well into their second Lost Decade.

You may not be an economic expert and maybe have a bias against this sort of thing, but most anybody should be able to see that this was a horrible mistake.

Almost certainly a terminal one for the Japanese people, or as Kenshiro of Fist of the North Star would say, "omae wa mō shindeiru" ("you are already dead").

Re: The Third Depression

#83

Post by sethg »

d2viant wrote: post #50
j_baker wrote: post #35

Earlier quoted context omitted.

"A defaulting and clearing of billions, maybe trillions, of unsustainable debt in the system is required." Seriously? What you propose would be the economic equivalent of a nuclear winter. You can't cure a disease by killing the patient. Besides that, it could even come back to bite us. Think of how many other countries are indebted to us. If we can default on our debts, why can't they?

They can and they are. We ARE going to default on our debt, it's inevitable. We can't possibly pay back the money we owe. We're going to do default the hard way by not paying our debts or we're going to default by inflation.

Right now, the going rate on 30-year T-bills is a little over four percent (http://www.ustreas.gov/offices/domestic-finance/debt-managem...), so it seems like the people and institutions that loan “us” (i.e., the United States government) money are fairly confident that “we” will not default.

(Granted, a lot of US debt is held by foreign central banks that are not purely driven by return on investment, but presumably if the Bank of China really thought the US was close to default, they would not be so inclined to throw their assets in our direction.)

Re: The Third Depression

#84

Post by anamax »

lionhearted wrote: post #20
cia_plant wrote: post #10

Earlier quoted context omitted.

I'm glad to finally find someone who knows exactly what caused the housing bubble and subsequent crash. Could you explain it to me? I find the whole matter very confusing myself, although I've read a lot about it. So: low interest rates caused the housing bubble. Could you explain how that happened exactly?

> I'm glad to finally find someone who knows exactly what caused the housing bubble and subsequent crash. Could you explain it to me? I find the whole matter very confusing myself, although I've read a lot about it. Yeah, it is a complicated topic. What did you want to know specifically, what were your questions? > So: low interest rates caused the housing bubble. Could you explain how that happened exactly? Low inte…

> Low interest rates were a big part of the problem - the price of money got below the cost of inflation.

Except that they didn't. They did get below the price of housing inflation, but that's in part due to lax lending standards, which were basically forced by regulators.

Fannie and Freddie didn't help by lying about the quality of the loans in the pools that they were selling. Not only did that screw folks who bought those pools, it screwed up everyone's market risk evaluation because their lie hid the fact that a huge fraction of the loans were going to folks who didn't have a prayer of paying back.

Yes, "everyone knew" that there were a lot of those loans, but the statistics, tainted by Fannie and Freddie's lies, said that things were a lot better than they actually were. Some folks thought that the stats were "optimistic", but few thought that they were as wrong as they actually were.

After all, who'd have thought that a GSE would commit fraud....

FWIW, the senior execs at Fannie and Freddie during this time were prominent Dems, some of whom launched Obama.

McCain actually tried to rein in Fannie and Freddie during this time, but got his teeth kicked in by Congressional Dems. (One could argue that McCain's efforts, in 2005/2006 were too little too late, but ....)

Re: The Third Depression

#85

Post by sethg »

rbranson wrote: post #76
d2viant wrote: post #50

Earlier quoted context omitted.

They can and they are. We ARE going to default on our debt, it's inevitable. We can't possibly pay back the money we owe. We're going to do default the hard way by not paying our debts or we're going to default by inflation.

> We can't possibly pay back the money we owe. If the government were a person, economics might agree with you, but it's not. This is what fiscal conservatives fail to see. The government can hold debt so long, that, due to inflation, it's value will fall to the point where paying it off is trivial. This is not practical for persons that have a finite lifespan. Corporations also fall in this category, albeit to somew…

Also, one of the significant measurements of a country’s debt is the debt-to-GDP ratio; you can alleviate this measure of pain by reducing debt or increasing GDP.

Re: The Third Depression

#86

Post by Retric »

robryan wrote: post #31
Retric wrote: post #4

I suspect the real problem is the evaporation of superficial jobs. We have become a nation devoted to our wants, but when things look bad people quickly cut back on such things. A tiny fraction of our population are "farmers" but with the over abundance of food produced and the only way to make money is to either suck on the governments subsidies or create specialty locally grown, free range, Organic etc goods. I thi…

Or use advances in technology to find jobs, probably mostly in the way of finding ways to use unskilled people effectively. Theres no doubt their is an endless amount of work out there that could be done to make life better, it's just that it's probably uneconomical to undertake currently. Maybe the answer is part welfare state, except that the government assign positions to people collecting welfare.

I don't think technology helps the unskilled all that much. Consider the knowledge it takes to use a shovel vs. a backhoe.

Re: The Third Depression

#87

Post by bwanab »

gaius wrote: post #73
mark_l_watson wrote: post #17

Earlier quoted context omitted.

I agree with you. The most important area to save money: we have military bases and/or installations in about 3/4 of the countries on this planet. We need to stop that. We also need to allow state and local governments to go through bankruptcy to renegotiate pensions, etc. Harsh, but necessary. The easy copout is printing money.

Without a global presence it's questionable how long the USD would continue to be the world's reserve currency. If OPEC decides it'd rather trade in EUR then the USD goes into freefall and the US is pretty much screwed.

There's no evidence to back up this assertion. Many economies that don't have reserve currency status do just fine (e.g. Switzerland, Norway, S.Korea). The expense of US overseas deployments far outweighs the benefit of having a militarily enforced reserve currency.

Re: The Third Depression

#88

Post by bd »

roel_v wrote: post #75
paulnelligan wrote: post #26

I often wonder why more engineers don't get into economics. It is a control system and would be well suited to engineering graduates with expertise in control systems.

Sweet mother of jesus no. Engineers would gravitate towards a centrally controlled system in no time. Economics is not a control system, it's emerging behavior from independently acting agents (free market economics is, which I argue is the only morally defensible system). A UK (?) technology-oriented scientist build a computer-controlled economic system for some South-American country in the 1970's, complete with a…

Project Cybersyn:

http://en.wikipedia.org/wiki/Project_Cybersyn

Discussed here:

http://news.ycombinator.com/item?id=1190508

Re: The Third Depression

#89

Post by d2viant »

rbranson wrote: post #76
d2viant wrote: post #50

Earlier quoted context omitted.

They can and they are. We ARE going to default on our debt, it's inevitable. We can't possibly pay back the money we owe. We're going to do default the hard way by not paying our debts or we're going to default by inflation.

> We can't possibly pay back the money we owe. If the government were a person, economics might agree with you, but it's not. This is what fiscal conservatives fail to see. The government can hold debt so long, that, due to inflation, it's value will fall to the point where paying it off is trivial. This is not practical for persons that have a finite lifespan. Corporations also fall in this category, albeit to somew…

If I owe you a hundred dollars, I can say outright that I'm not going to pay you back or I can wait until that $100 is worth so little that it can't even buy a pack of gum at the store. The end result for the lender is pretty much the same -- the only thing that differs is the timeline.

Re: The Third Depression

#90

Post by hga »

sethg wrote: post #72
hnal943 wrote: post #45

Earlier quoted context omitted.

However, if following his advice in the past has led the world to financial ruin, wouldn't it be logical to question his assessment of the current situation?

His advice was not followed in the past. The Keynesian prescription, basically, is for the government to run deficits during recessions and to pay back those loans when the economy recovered. During the 2000 Presidential campaign and the first three-quarters of Bush 44’s Administration, Krugman excoriated Bush’s economic policies, because those policies were running up the national debt to unprecedented levels while…

The Keynesian prescription is fatuous because, with rare exceptions, politicians never are willing to stop the flow of goodies that get them elected (tax and borrow, spend, elect).

Sure, in theory, it might work to smooth out the normal business cycle (although I have serious doubts about its applicability to catastrophes, e.g. pushing on a string), but in normal circumstances it's a recipe for ever increasing sovereign government debt in the hands of mortal humans.

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