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Old 12-16-2008, 12:35 PM   #41
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As Rates Race to Zero, Printing Presses Gear Up

When the Federal Reserve policymakers decide on interest rates Tuesday, investors will probably look one step beyond their decision, to gauge how much money will the Fed be willing to print once it is out of rate ammunition....


Printing Money

The Fed has already moved on from using interest rates as a monetary policy tool and the next fed funds target rate after the Dec. 16 meeting is "almost academic," ING economist Rob Carnell said.

The Fed's balance sheet has expanded to more than $2 trillion, made up of collateral received in exchange for liquidity provision, or loans of Treasurys.

"In our view, this is, for want of an alternative description, 'printing money'," Carnell wrote in his research. "And our assumption is that there is more of this to come."

Besides mortgage-backed securities and asset-backed securities, the Fed will purchase Treasurys, corporate paper and even stocks to provide much needed cash, he predicted.

"The Fed's only option is effectively to 'print money' by crediting the reserve balances held by commercial banks at the central bank," Ashworth also said.

Buying Treasurys would be the biggest weapon that hasn't been deployed yet, as such a policy means the Treasury could pump into the economy as much cash as it needs.

"There's no limit to the amount of money that the Fed can print and Congress can spend," Ashworth said.

But for some, that's a scary thought, as the amount of U.S. government debt is already staggering.

"Nobody really knows how these policies will work out," Stoeferle said. "If it were another country, the U.S. should probably declare bankruptcy."
I would say that a lot of people have a very good idea how these policies will work out -- the long run value of a fiat currency is zero -- the question is not how these policies will work out, but how long it will take.
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Old 12-16-2008, 05:32 PM   #42
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Fed Cuts Benchmark Rate to Near Zero

By EDMUND L. ANDREWS and JACKIE CALMES
Published: December 16, 2008
WASHINGTON — The Federal Reserve entered a new era on Tuesday, setting its benchmark interest rate so low that it will have to reach for new and untested tools in fighting both the recession and downward pressure on consumer prices.

Going further than analysts anticipated, the central bank said it had cut its target for the overnight federal funds rate to a range of zero to 0.25 percent, a record low, bringing the United States to the zero-rate policies that Japan used for six years in its own fight against deflation.

The move to a zero rate, which affects how much banks charge when they lend their reserves to each other, is to some degree symbolic. Though the Fed’s target had had previously been 1 percent, demand for interbank lending has been so low that the actual Fed funds rate has hovering just above zero for the past month.

Far more important than the rate itself, the Fed bluntly declared that it was ready to move to a new phase of monetary policy in which it prints vast amounts of money for a wide array of lending programs aimed at financial institutions, businesses and consumers.

In essence, the Fed is embarking on a radically different route to stimulate the faltering economy, and it puts the Fed chairman, Ben S. Bernanke, in partnership with the incoming Obama administration as it moves on a parallel track.
I would suggest that the Fed is not embarking on a radically different route, but instead it is radically accelerating down a route it's been on for some time.
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Old 12-16-2008, 06:58 PM   #43
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Sigh. So the difference between a bank and my grandmother's mattress just got even smaller? Awesome
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Old 12-16-2008, 08:11 PM   #44
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Originally Posted by DirkFTW View Post
Sigh. So the difference between a bank and my grandmother's mattress just got even smaller? Awesome
yeah, basically...for now we should say the difference between the fed and your grandmother's mattress got smaller, but there wasn't any difference in the first place. Seriously....if the interest rate is basically the price of money, what does a 0% interest rate tell you about the value of money?

What it tells me is that the price of a Federal Reserve Note is rapidly approaching it's intrinsic value.
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Old 12-17-2008, 11:20 AM   #45
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if you've nothing better to do with the next 10 minutes of your life...

Vintage Keynesian Propaganda

there's an enormous non-sequitor at the 4 1/2 minute mark that is painful...but more generally, the thing that struck me is the extent to which the thinking and the remedies now are so much the same as then.
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Old 12-18-2008, 11:24 AM   #46
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Fred Thompson gets it.


Check out the video.
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Old 12-18-2008, 12:05 PM   #47
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Originally Posted by alexamenos View Post
Fred Thompson gets it.


Check out the video.

That was great!!!

Now I am reminded why I voted for Thompson in the Primaries!!!
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Old 12-18-2008, 05:44 PM   #48
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Originally Posted by alexamenos View Post
Fred Thompson gets it.


Check out the video.
The problem with him like with many "Conservatives" is that they'll not act like this, when they are running for president or actually get some job in the government.

It's still hilarious. I respect him a lot more after seeing this.
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Old 12-18-2008, 06:01 PM   #49
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LOL! "Recipients must have screwed up on a monumental scale! No little screw ups will be rewarded."

Sigh.
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Old 12-18-2008, 07:55 PM   #50
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Originally Posted by Arne View Post
The problem with him like with many "Conservatives" is that they'll not act like this, when they are running for president or actually get some job in the government.
yeah, they're often more "conservative" when they're out of power than they are when they're in power. and yeah...it was pretty funny stuff.
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Old 12-20-2008, 10:57 AM   #51
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Paul Krugman may be the dumbest man in America who is not named "George Bush".

Like a stopped watch he managed to stumble onto something a few days ago....

Quote:
The revelation that Bernard Madoff — brilliant investor (or so almost everyone thought), philanthropist, pillar of the community — was a phony has shocked the world, and understandably so. The scale of his alleged $50 billion Ponzi scheme is hard to comprehend.

Yet surely I’m not the only person to ask the obvious question: How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole?

The financial services industry has claimed an ever-growing share of the nation’s income over the past generation, making the people who run the industry incredibly rich. Yet, at this point, it looks as if much of the industry has been destroying value, not creating it....

...Most of all, the vast riches being earned — or maybe that should be “earned” — in our bloated financial industry undermined our sense of reality and degraded our judgment.

Think of the way almost everyone important [nb: ron paul and peter schiff?] missed the warning signs of an impending crisis. How was that possible? How, for example, could Alan Greenspan have declared, just a few years ago, that “the financial system as a whole has become more resilient” — thanks to derivatives, no less? The answer, I believe, is that there’s an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they’re doing.

After all, that’s why so many people trusted Mr. Madoff.

Now, as we survey the wreckage and try to understand how things can have gone so wrong, so fast, the answer is actually quite simple: What we’re looking at now are the consequences of a world gone Madoff.
No kidding the financial service industry has gotten s--- kicking rich in recent years. The last few years was a great time for mortgage bankers, no? And the vast monies collected by investment bankers is well documented...etc., etc...

gee, why has this been the case? all the liberals in the room now shout "greed", but it would never occur to Krugman that the reason this has been the case is because when the Fed pumps new dollars into the economy, those dollars have to enter somewhere. they don't just magically appear dispersed through the economy in such a manner that the prices and wages of everything are impacted all at once and equally. New dollars enter into the economy via the ....

... anyone?

...anyone?

....Bueller?

via the financial services industry. Not too surprisingly, those greedy little bankers are the first to get their grubby little hands on those new dollars, and what do they do? they do what any of us would do -- they keep a big freaking chunk of it. So....all this money being pushed into the economy vis a vis the financial service industry has created this little "world gone Madoff."

So, that was a few days ago and today we get a big freaking load of bigtime Krugman again...

Quote:
Greg Mankiw suggests that the Fed respond to the crisis by committing to substantial inflation over the next decade. Great idea, wish I’d thought of it. Oh, wait …

Actually, Greg has arrived at the same conclusion I did more than a decade ago, when I tried to model the problems then facing Japan, and now facing us. As I pointed out back then, the essence of a liquidity trap is that the real interest rate is too high, even when the nominal rate is zero. So the theoretically “correct” answer, if you can swing it, is to create expected inflation, pushing the real rate down.

As I put it, perhaps too glibly, the central bank needed to “credibly promise to be irresponsible.”
There's the prescription from this man concerned about a "world gone Madoff", the fed needs to print dollars like mad men and push those dollars into the hands of the Bernie Madoffs of the world!

Paul Krugman makes Scoop Jackson look like a freaking genius.
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Old 01-06-2009, 11:41 AM   #52
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my favorite wackonomicist --

Quote:
Praying for a Recession

blah, blah, blah, we need bigger government in order to keep us from having a great depression, and yes I think we need bigger government even when we're not threated with Great Depression, blah, blah, blah....

most Republicans aren’t going to accept the need for a big-spending, F.D.R.-type solution to the economic crisis.

The biggest problem facing the Obama plan, however, is likely to be the demand of many politicians for proof that the benefits of the proposed public spending justify its costs...


blah, blah, blah, blah if we the government don't spend lots of money people will stop getting out of bed in the morning and therefore all activity will grind to an absolute halt.
According to Krugman, the biggest problem for Obamanism is that politicians will be too demanding that requests for spending be rationally justified.

WTF????


Krugman is referring to the same congress that just doled out $700 billion and can't really tell you a damn thing about who is getting the money much less how it is being used. There's about three trillion dollars of empirical evidence floating through New Deal and Great Society era government programs that conclusively show that Congress is neither overwhelmingly reluctant to spend nor overly concerned with cost-benefit justification.

Moreover, Krugman's thinking shows a massive disconnect with human nature and reality. It is a problem that congressmen are too cautious with spending taxpayers money???? Since when?

so, what we learn from professor krugman:

-terrorists flying planes into buildings is good for the economy;

-people don't like to spend money to buy fun shit and therefore they need to be prodded in order to keep them from saving all of their hard earned dollars;

-congressman are excessively frugal and ill-disposed towards taking chances with taxpayer dollars.
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Old 01-06-2009, 03:23 PM   #53
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let's read what krugman really said...
-------------------------------------
Quote:
Fighting Off Depression
By PAUL KRUGMAN
“If we don’t act swiftly and boldly,” declared President-elect Barack Obama in his latest weekly address, “we could see a much deeper economic downturn that could lead to double-digit unemployment.” If you ask me, he was understating the case.

The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression.
the world is experiencing a measurable decline in manufacturing output, which is alarming in what that portends for 2009 and beyond...less employment, less demand for both consumer and capital goods, which is the beginning of a vicious downward cycle.

Quote:
So will we “act swiftly and boldly” enough to stop that from happening? We’ll soon find out.

We weren’t supposed to find ourselves in this situation. For many years most economists believed that preventing another Great Depression would be easy. In 2003, Robert Lucas of the University of Chicago, in his presidential address to the American Economic Association, declared that the “central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades.”

Milton Friedman, in particular, persuaded many economists that the Federal Reserve could have stopped the Depression in its tracks simply by providing banks with more liquidity, which would have prevented a sharp fall in the money supply. Ben Bernanke, the Federal Reserve chairman, famously apologized to Friedman on his institution’s behalf: “You’re right. We did it. We’re very sorry. But thanks to you, we won’t do it again.”

It turns out, however, that preventing depressions isn’t that easy after all. Under Mr. Bernanke’s leadership, the Fed has been supplying liquidity like an engine crew trying to put out a five-alarm fire, and the money supply has been rising rapidly. Yet credit remains scarce, and the economy is still in free fall.
so the flows of capital into the financial sector have not yielded the positive results expected, which were increased lending leading to increased business activity. these efforts have merely kept the economy from continuing the rapid downward spiral, sort of merely righted the ship as it were, not the intended upturn envisioned.

the question is why, and the answer is that the programs have not produced a perception by investors that they can with accuracy quantify what risk exists out in the marketplace. iow, we do not know if this is going to get better anytime soon or get much, much worse.

Quote:
Friedman’s claim that monetary policy could have prevented the Great Depression was an attempt to refute the analysis of John Maynard Keynes, who argued that monetary policy is ineffective under depression conditions and that fiscal policy — large-scale deficit spending by the government — is needed to fight mass unemployment. The failure of monetary policy in the current crisis shows that Keynes had it right the first time. And Keynesian thinking lies behind Mr. Obama’s plans to rescue the economy.

But these plans may turn out to be a hard sell.

News reports say that Democrats hope to pass an economic plan with broad bipartisan support. Good luck with that.

In reality, the political posturing has already started, with Republican leaders setting up roadblocks to stimulus legislation while posing as the champions of careful Congressional deliberation — which is pretty rich considering their party’s behavior over the past eight years.

More broadly, after decades of declaring that government is the problem, not the solution, not to mention reviling both Keynesian economics and the New Deal, most Republicans aren’t going to accept the need for a big-spending, F.D.R.-type solution to the economic crisis.

The biggest problem facing the Obama plan, however, is likely to be the demand of many politicians for proof that the benefits of the proposed public spending justify its costs — a burden of proof never imposed on proposals for tax cuts.

This is a problem with which Keynes was familiar: giving money away, he pointed out, tends to be met with fewer objections than plans for public investment “which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.” What gets lost in such discussions is the key argument for economic stimulus — namely, that under current conditions, a surge in public spending would employ Americans who would otherwise be unemployed and money that would otherwise be sitting idle, and put both to work producing something useful.

All of this leaves me concerned about the prospects for the Obama plan. I’m sure that Congress will pass a stimulus plan, but I worry that the plan may be delayed and/or downsized. And Mr. Obama is right: We really do need swift, bold action.

Here’s my nightmare scenario: It takes Congress months to pass a stimulus plan, and the legislation that actually emerges is too cautious. As a result, the economy plunges for most of 2009, and when the plan finally starts to kick in, it’s only enough to slow the descent, not stop it. Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy — well, you can see where this is going.

So this is our moment of truth. Will we in fact do what’s necessary to prevent Great Depression II?
the monies doled out so far have not been given as a "stimulus" to the economy, the money has been provided primarily as investments in businesses to keep them functioning. the fed now owns a large amount of equity in american industry, from banks to insurers to manufacturers. these $ have kept our unemployment figures modest, have kept our investment market from going totally in the crapper, and has bought time, breathing room, while the situation (hopefully) is better understood so that the money that is sitting idle is put to work (lent).

likewise these monies have not been thrown out as "new deal or great society" welfare payments as the fed has something in return. it's a new playbook to confront a crisis that due to being a result of new financial instruments hasn't been experienced before.

is krugman saying that congress shouldn't "ask questions"? uh, he doesn't say that, what he says is not that they "shouldn't ask questions" but that they should accept the assumptions- not ask for "proof"- that these programs will produce positive results for the economy. that demanding "proof" will waste time while it all goes deeper and deeper into a depressing cycle, making it more and more difficult to pull out of.

there seem to be two schools of thought out there on how to deal with our economic problems. on the one hand are those who say the problems are the result of poor decisionmaking by the state and we should just let the cycle go forward and affect whatever pain there may be in that "correction" and eventually we'll be OK. on the other hand are those who want to use whatever tools there may be to minimize the negative affects of the cycle, which are principally tools of the state, and therefore contain the damage.

put me down with the latter. laisse faire is not the way to go imo, and those who want to let the "market" exact its toll don't appreciate how the inertia of the ecinomy is very, very difficult to reinstate once it is gone.
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Old 01-06-2009, 03:49 PM   #54
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I wish the government would invest in me. I could use a yacht or two.

Actually, I'll just stick to a couple all-expenses-paid resort vacations. No shrimp cocktails, though. I'm allergic.
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Old 01-07-2009, 10:02 AM   #55
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A quadrillion dollar check --

Quote:
It is without doubt the largest cheque ever seen. But it’s worth little more than the paper it’s written on.

The astronomical sum of one quadrillion, seventy-two trillion, four hundred and eighteen billion and three million dollars only – note the only – was drawn on the MBCA Bank in Zimbabwe, part of one of the largest banking groups in Africa.

It was paid by Kasawe Estates, a property company, and was emailed to the Daily Mail by a group of former Rhodesian expatriats who are horrified at Zimbabwe’s incredible rate of inflation – officially 2.2 million per cent, but, British experts say, closer to 12.5 million per cent.

Currency dealers said the plunging value of Zimbabwe dollars made it almost impossible to estimate its value, but some thought it would have been worth no more than a few pounds yesterday -- and certainly even less today.

The incredible cheque, which is believed to be a payment as part of a property deal, was revealed as the Zimbabwe central bank decided to reduce the huge sums that hard-pressed citizens have to deal with by simply knocking 10 zeros off the end.

That means that from Friday, when new bank notes are printed, 10 billion old Zimbabwean dollars become a single dollar.

The desperate move was taken by bank governor Gideon Gono because the nation’s computers, calculators and ATMs faced meltdown because they can’t handle all the zeros involved when bread and staple foods cost billions and trillions of dollars.

The move came a week after Dr Gono introduced a 100 billion-dollar note which is now not enough to buy a loaf of bread.

But analysts said the move would do nothing to end an economic disaster blamed on President Robert Mugabe's land-grab policies which have caused chronic shortages of food and foreign currency.
...
Mugabe accuses businesses of unfairly increasing prices as part of a wider plot to incite people against his government and today warned companies that authorities would impose emergency measures if they continued profiteering.
...
Mugabe early this year signed into law a bill giving local owners majority control of foreign-owned firms, including mines and banks
You gotta admire Mugabe's consistency....he destroys anything resembling private property rights, prints Zim Dollars as fast as he can, and then blames the failing economy on a conspiracy of businessmen aimed at discrediting his government.
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Old 01-07-2009, 10:40 AM   #56
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interesting.
----------------------------------------------
Uncle Sam’s 16% Return: How Treasury’s Bank Investments Are Making Money
Posted by Heidi N. Moore

Treasury Secretary Hank Paulson is getting a better return than most fund managers this year.

New Hampshire Republican Senator Judd Gregg estimated in a Wall Street Journal op-ed yesterday that the Treasury’s Troubled Asset Relief Program has had a gain of about $8 billion so far in the past three months. “The TARP, for all its warts, has involved using tax dollars to invest in assets that will have a return to the taxpayer,” noted Gregg. “In fact, the estimate to-date is that the TARP has actually had a gain of about $8 billion, while recapitalizing the financial system. With this type of stimulus, there will be little, if any, long-term increase in the debt.”

TARP has taken a lot of heat for being a somewhat cobbled-together effort, but if it keeps going along the same lines, it will put to shame many professional U.S. private equity funds with decades in the business.

Consider: With an $8 billion gain on the $200 billion investment Treasury has made so far in U.S. banks and companies until Dec. 30, that adds up to about a 4% return — or better than most hedge funds, mutual fund managers and private equity firms can claim this year as they have suffered in the red.

If you annualize TARP’s return on the assumption that it will continue to succeed, it would add up to a roughly 16% return on that initial $200 billion investment per year. Of course, Treasury Treasury started making these investments fairly close to what many believe is the market bottom, while other investors had acquired assets at much higher prices through the crisis and beforehand.

That is healthier than the returns for many private equity firms. Nearly 57% of limited partners in private equity funds expect returns of less than 16% to their private equity portfolios — and that is over the next three to five years, according to Coller Capital, since many private equity funds are in negative territory for the short-term.

TARP is also doing far better than the average hedge fund, which posted an 18% loss in the year to November, according to Barron’s. As of Nov. 30, the Hedge Fund Research Fund of Funds Composite Index — which measures hedge fund performance — was down 19.40%.

In addition, hedge funds are suffering record redemptions as $43.5 billion of money left the industry in 2008 up to Oct. 31, according to Hedge Fund Research. That compares to a net inflow of $194.4 billion in 2007.

That is a marked difference from TARP, where money just keeps flowing in and in.

Fund managers and the Treasury both have a lot of money to deploy. Treasury has yet to call on the remaining $350 billion of TARP funds from Congress. The 10 largest private equity funds are sitting on nearly $200 billion of unused funds, according to data provider Prequin, with Goldman Sachs alone holding $31.15 billion and Bain Capital $21.1 billion. Other flush investors also have plenty of cash: Warren Buffett’s Berkshire Hathaway has a cash pile of $106.1 billion, according to data from Bloomberg.

If the keeps going the way it is, Secretary Hank Paulson will have leave a profitable legacy. More importantly, the government –which has already saved the banking industry and the auto industry — will prove itself to be the new “smart money” in the system.
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Old 01-07-2009, 01:17 PM   #57
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“In fact, the estimate to-date is that the TARP has actually had a gain of about $8 billion, while recapitalizing the financial system.
That is interesting.

A couple of months ago the Treasury had to step in and buy these assets because nobody could price them accurately, and without exposing these assets to the market, government accountants and spokespersons estimate their price to be 8% more than they were a couple of months ago. Enron and Madoff must envy those sorts of returns.

Anyway....if one prints up a few trillion dollars or so and then uses those trillions of dollars to chase certain assets, it's almost certain that the nominal value of those assets will rise.

The problems occur when we start confusing the rise in paper value with an increase in the sort of wealth that might have some impact upon the quality of lives we lead.
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Old 01-07-2009, 03:21 PM   #58
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Originally Posted by alexamenos View Post
That is interesting.

A couple of months ago the Treasury had to step in and buy these assets because nobody could price them accurately, and without exposing these assets to the market, government accountants and spokespersons estimate their price to be 8% more than they were a couple of months ago. Enron and Madoff must envy those sorts of returns.
no, your are confusing things.

the fed didn't by the assets that "nobody could price...accurately", those assets remainded on the balance sheets of these financial firms. the fed was criticized by some groups for not purchasing the various securities as paulson had mentioned doing that very thing (the phrase "reverse auction" was used), and there was much hand wringing by some about the fed paying too much for these mbs, swaps etc. so they were not bought, they are still there in the firms (unless they did so in other sales).

the fed made investments and received equity in the firms, or made loans with debenture like rights. that is what the article is referencing with the yield they state has been realized.

as for the anecdote on "enron and maldoff", as the fed's investments are in firm's whose equities are openly traded on a daily basis on the exchanges that you and I may also be using to invest with, the comparison lacks any connection to reality.

Quote:
Anyway....if one prints up a few trillion dollars or so and then uses those trillions of dollars to chase certain assets, it's almost certain that the nominal value of those assets will rise.
as mentioned, the $ (which are more modest than "a few trillion" btw) were in the businesses themselves, and so far (knock on wood) there has been a sense of stability in the exchanges that has made these investments turn to the positive.

the fed's approach has been able to calm the investment market, which has led to this rise in values.

apparently the fed does have a better handle on what they are doing, and are making many good decisions, than what some people seem to believe.....

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The problems occur when we start confusing the rise in paper value with an increase in the sort of wealth that might have some impact upon the quality of lives we lead.
don't know about you, but a rise in the value of the stocks I own, my mutuals, a rise in the value of my 401, are absolutley going to have an impact in my life going forward. if the values in my accounts continued to fall like they did in 07/08 over the next couple of years, meaning they would be worth about 25% (or less) of what they were at their zenith, my future "quality of life" would certainly be affected...in a very negative way mind you.

so bottom line the fed's actions have ahad a very positive and measureable affect on every single one of us who a) are employed and b) have investments.

a few atta boys! should be offered their way

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Old 01-11-2009, 11:28 AM   #59
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Zimbabwe introduces $50 billion note

HARARE, Zimbabwe (CNN) -- Zimbabwe's central bank will introduce a $50 billion note -- enough to buy just two loaves of bread -- as a way of fighting cash shortages amid spiraling inflation.


Zimbabwe's dollar is virtually worthless, with foreign currency now being used to purchase basic items.

The country's acting finance minister, Patrick Chinamasa, made the announcement in a government gazette released Saturday.

Although Chinamasa did not give the date on which the $50 billion and new $20 billion notes would come into circulation, an official at the Reserve Bank of Zimbabwe said the notes would be distributed to all banks by the end of Monday.

Zimbabwe is grappling with hyperinflation now officially estimated at 231 million percent, and its currency is fast losing its value. As of Friday, one U.S. dollar was trading at around ZW$25 billion.

When the government issued a $10 billion note just three weeks ago, it bought 20 loaves of bread. That note now can purchase less than half of one loaf.

Realizing the worthlessness of the currency, the RBZ has allowed most goods and services to be charged in foreign currency. As a result, grocery purchases, government hospital bills, property sales, rent, vegetables and even mobile phone recharge cards are now paid for in foreign currency, as the worthless Zimbabwe dollar virtually ceases to be legal tender.

Once a regional economic model, Zimbabwe is in the throes of an economic crisis, with unemployment running at more than 80 percent and many families unable to afford a square meal. President Robert Mugabe's critics blame his policies for the economic meltdown, but he says the West is sabotaging his efforts.

In order to attract foreign currency, Zimbabwe's central bank has, since September, licensed at least 1,000 shops to sell goods in foreign currency. All mobile phone service providers are now licensed to accept foreign exchange for airtime and other services.

John Robertson, an economist in Zimbabwe, said he's puzzled by the introduction of the $50 billion and $20 billion notes.

"I am not really sure what these notes would be for," he said. "No one now accepts the local currency. It is a waste of resources to print Zimbabwe dollar notes now. Who accepts a currency that loses value by almost 100 percent daily?"

In August, the RBZ slashed ten zeros from the currency. But the zeroes have bounced back with more vigor.

A power-sharing deal between Mugabe and opposition leader Morgan Tsvangirai signed in September, and brokered by former South African leader Thabo Mbeki, raised hopes of halting Zimbabwe's plunge into economic destruction.

But the pact has stalled over the allocation of key cabinet ministries, with Tsvangirai accusing Mugabe of grabbing all key posts such as defense, home affairs, local government, foreign affairs and finance.
Clearly the Zims need greater government intervention to stem this economic crisis. I'd suggest a $700 billion stimulus package, but that would only buy a few lottery tickets.
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Old 01-27-2009, 02:06 PM   #60
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Animal spirits....the current lamaise in the economy is caused by animal spirits.

Really?

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Animal spirits offer an explanation for why we get into recessions in the first place -- for why the economy fluctuates as it does. It also gives some hints regarding what we need to do now to get out of the current crisis.
animal spirits....

If a guy brandishing a dead chicken were to say that our economic downturn was caused by animal spirits we'd think he's a kook voodoo priest, but if he's wearing a brooks brother suit and writing for the WSJ then he must be a prominent keynesian and an Ivy League professor....Rightfully embarrassed keynes defenders might be tempted to say that "animal spirits" is a metaphor, but it isn't a metaphor. "Animal spirits" means "animal spirits".

And what, according to the voodoo priest/keynesian economist, must be done to tame these animal spirits?

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So what must we do to revive our animal spirits and economic growth? We must be certain that programs to solve the current financial and economic crisis are large enough, and targeted broadly enough, to impact public confidence. Not only do we need a fiscal stimulus significantly greater than the proposal that is currently on the table, government action is also needed to take the place of the credit markets that seemingly worked so well when animal spirits were high.
ah...bigger government! Much, much bigger government then even O'bama imagines!!! Surely that will get those pesky animal spirits back in line!
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Old 01-27-2009, 03:11 PM   #61
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well, in this case "animal spirits" IS a metaphor, and a damn good one at that.

there is not one iota of schiller exhibiting anything close to being an "embarassed keynes defender"....and the points he makes on confidence and trust are right on.
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Old 01-27-2009, 04:20 PM   #62
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lol...you're so reliable.

"Animal spirits" is not a metaphor. It is a horribly elitist and demeaning phrase certainly, but when keynes called people in the market place animals he literally means they're animals -- we are animals who don't act rationally (we private people that is, not politicians who are rational actors according to keynes). We are driven by base animal instincts and we need to be managed accordingly.

...same with the Ivy League professor....

The points that he makes on confidence and trust are typical keynesian confusion of effect and cause -- of course people are unconfident with respect to the economy....anyone loaded down with debt and incapable of paying their phone bill is quite rationally unconfident. Likewise, a lender is likely to be quite unconfident about lending 6 figures to someone who isn't holding a job. This lack of confidence is a result of the recession, not it's cause.

Moreover, to say that problems in our economy came about because of a drop in confidence is like saying that I can't play basketball for the Dallas Mavericks because I lack confidence rather than the fact that I'm white, short, slow and I can't shoot. It's a stupid and irrational explanation, in other words.

To say that business cycles are caused by inexplicable changes in animal spirits is to say that business cycles are caused because they happen. It's no explanation at all, just a bunch of noise preceding the inevitable call for more government.
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Old 01-27-2009, 04:46 PM   #63
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Dear sir/madam:

This week, I found out I lost my job and will soon default on my mortgage. I stand to lose everything if I can’t get back on my feet quickly. You are one of my closest relatives and/or friends, so I am asking you for help in this most dire of times. Below are some items toward which you could contribute:

a new shed- would help me better organize... and an uncluttered home is the start to an uncluttered mind
broadband internet- I can’t search for jobs online with a crappy dial-up
wireless broadband internet- I could trip on the internet cable and that would really screw up my chances of getting back on my feet
digital tv- it can be bundled with the internet for a $5 annual savings, so I might as well
weather monitoring equipment- how dumb would it be if I showed up to an interview wearing summer clothes in the winter! 50% of interviewing is looking smart
a security system- burglars could steal my suit the night before my interview... see above
a gun- just in case I forget to set the new security alarm, I can shoot the bastards
telescope- astrology is the key to the mysteries of the universe. I will find my path in the stars
a new pool pump- the old one clogs too frequently, so I lose valuable time that I could use looking for a job!
ultra-premium gas- stinky exhaust gives me a light head, which keeps me from thinking clearly in my job search
a hybrid- see above regarding stinky gas
braces for my kids- IT’S FOR THE KIDS!
fishing license- you know what they say about teaching someone to fish instead of just giving them fish...
museum tickets- can’t begin to move forward unless I know where I come from
water park tickets- I can’t work without lots of play
condoms- I can’t work without lots of...umm... on second thought, maybe I’ll leave this one out
more dirt for my lawn- more dirt leads to more grass which leads to a happier environment for me as I look for work
a new driveway- I can’t go out looking for a job if the driveway to my garage is nicked up
shopping day at the mall- gotta look my best if I want to succeed! duh.

Also, in the interest of full disclosure, I must let you know that I met a stranger who needs an abortion, so I already agreed to pay for it out of both the kindness of my heart to adult strangers and my absolute loathing of little kids. Some of your money may go to pay for this.

And to my moronic neighbor, Rodney Blah: I will make sure not a single cent of this ends up in your hands, your children’s hands, or in the hands of anyone you hold dear. You deserve to suffer.

The rest of my plans can be found in a 600 page PDF found here.

Sincerely,
Your bestest friend in the whole wide world whom you could never do without

P.S. - In case you were thinking about not donating, remember all the
money I owe you from the past? Forget about getting any of it back if
I go under. I own you.
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Old 01-27-2009, 06:59 PM   #64
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Originally Posted by alexamenos View Post
lol...you're so reliable.
..as you are so very predictable.

Quote:
"Animal spirits" is not a metaphor. It is a horribly elitist and demeaning phrase certainly, but when keynes called people in the market place animals he literally means they're animals -- we are animals who don't act rationally (we private people that is, not politicians who are rational actors according to keynes). We are driven by base animal instincts and we need to be managed accordingly.
"elitist and demeaning"? not in the least.

yes, we are all animals. you may wish to believe that you are not, yet that is merely self deception on your part.

the argument is not that people "don't act rationally', and really quite the opposite is the message in this piece. mistrust and a lack of confidence is truly a rational reaction to the economic situation that we are confronted with today.

Quote:
...same with the Ivy League professor....
now who is engaging in elitism? why yes, it appears to be alex.

Quote:
The points that he makes on confidence and trust are typical keynesian confusion of effect and cause -- of course people are unconfident with respect to the economy....anyone loaded down with debt and incapable of paying their phone bill is quite rationally unconfident. Likewise, a lender is likely to be quite unconfident about lending 6 figures to someone who isn't holding a job. This lack of confidence is a result of the recession, not it's cause.
the issue is that a lender is uncomfortable lending to a borrower who does have a job, and the consumer who isn't loaded down with debt and fully capable of paying their phone bill isn't confident in their future.

schiller goes into an explanation of cause and effect, and it is a rational conclusion of how the crisis has sapped the trust of the public. schiller doesn't place the blame for the recession on this mistrust, he is offering the cause of the deepening of the recession on this animal instinct.

apparently you don't understand the concept...

Quote:
Moreover, to say that problems in our economy came about because of a drop in confidence is like saying that I can't play basketball for the Dallas Mavericks because I lack confidence rather than the fact that I'm white, short, slow and I can't shoot. It's a stupid and irrational explanation, in other words.
as he doesn't say what you suggest he does, there is no response I can make.

Quote:
To say that business cycles are caused by inexplicable changes in animal spirits is to say that business cycles are caused because they happen. It's no explanation at all, just a bunch of noise preceding the inevitable call for more government.
you appear to be making an argument that consumption is not influenced by individual decisions. now I see why you react so negatively to the suggestion that the economy is influenced by 'animal spirits", you believe that people act like machines.

they (we) aren't and don't.
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Old 01-27-2009, 07:14 PM   #65
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mistrust and a lack of confidence is truly a rational reaction to the economic situation that we are confronted with today.
yes it is...and it is an effect of the situation, not a cause as Dr. Schiller suggests:

Quote:
Animal spirits offer an explanation for why we get into recessions in the first place...
apparently you don't understand the concept...
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Old 01-27-2009, 07:38 PM   #66
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you're failure to see the forest for the trees is alarming...

Quote:
The term "animal spirits," popularized by John Maynard Keynes in his 1936 book "The General Theory of Employment, Interest and Money," is related to consumer or business confidence, but it means more than that. It refers also to the sense of trust we have in each other, our sense of fairness in economic dealings, and our sense of the extent of corruption and bad faith. When animal spirits are on ebb, consumers do not want to spend and businesses do not want to make capital expenditures or hire people.

A critical aspect of animal spirits is trust, an emotional state that dismisses doubts about others. In talking about animal spirits, Keynes sought to convey the message that swings in confidence are not always logical. The business cycle is in good part driven by animal spirits. There are good times when people have substantial trust and associated feelings that contribute to an environment of confidence. They make decisions spontaneously. They believe instinctively that they will be successful, and they suspend their suspicions. As long as large groups of people remain trusting, people's somewhat rash, impulsive decision-making is not discovered.

Unfortunately, we have just passed through a period in which confidence was blind. It was not based on rational evidence. The trust in our mortgage and housing markets that drove real-estate prices to unsustainable heights is one of the most dramatic examples of unbridled animal spirits we have ever seen.
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Old 01-27-2009, 09:21 PM   #67
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I'm quite aware that Dr. Schiller says that animal spirits drive the booms and busts of business cycles -- that's why I posted his article under the heading of "wackonomics."
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Old 01-28-2009, 09:42 AM   #68
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^^^ this from a person who doesn't believe people are animals.....
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Old 01-28-2009, 10:16 AM   #69
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^^^ this from a person who doesn't believe people are animals.....
^^^this from a person who doesn't understand that animals don't clip coupons, balance checkbooks, comparison shop...

It's good that you defend the notion that animals spirits drive boom and bust cycles. I saw today that the Fed is going to bailout folks who are 60 days or more behind in their mortgage payments. It seems to me that the inequity of taking money from people who manage their affairs and giving it to those who don't will make the animal spirits quite mad. What do you think? Will this make the animal spirits happy or sad?
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Old 01-28-2009, 12:11 PM   #70
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well, since people are animals, and people "clip coupons, balance checkbooks, comparison shop", then yes there are animals who do just those very things.

I defend the theory that people act out of their individual emotions, their perception of the present and the future, how best to respond to those inputs and react accordingly.

there is a popular theory of decisionmaking that places fear as the primary thought behind how individuals respond to situations. that theory provides not only a better understanding of why the economy deteriorated as rapidly as it has but also provides an endorsement of the "animal spirits" principle.

as to the "bailout of folks", state the plan and I'll comment. I'd expect once it is outlined we'll see it isn't a "bailout" but rather more of a plan to help people work out of their situation. a "work out" is not a "bail out".

as for plans to calm the housing market, if there is a sense that there is a lower chance of further price deterioration the marketplace will be more positive about investing, lenders will feel more comfortable that the prices will satabilize and their risk of asset decline is reduced, and all of that will lessen the further downward momentum.

and the animal spirits will be much, much more calm and less combustible.

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Old 01-28-2009, 02:19 PM   #71
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as to the "bailout of folks", state the plan and I'll comment. I'd expect once it is outlined we'll see it isn't a "bailout" but rather more of a plan to help people work out of their situation. a "work out" is not a "bail out".
Are you referring to House Bill 1 which will cost $800,000,000,000+? If so, we have seen the full text of said work out and it only helps Congress work out the age-old question of how best to reward those who contributed most to their campaign.
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Old 01-28-2009, 03:03 PM   #72
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what exactly do you see in the bill that is a "reward" to campaign contributors?
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Old 01-28-2009, 04:02 PM   #73
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I think the Senate version is out too. Here are some items that have been popping out between the two outlines:

$6,000 million to subsidize university building projects
$400 million for HIV and chlamydia testing
$75 million to stop smoking
$1,500 million for a “carbon-capturing contest”
$200 million for DOD alternative energy vehicles
$572 million for Coast Guard “Acquisition, Construction, & Improvements”
$150 million for the Smithsonian
$100 million for non-intrusive detection technology at sea ports
$150 million for construction at sea ports
$25 million to repair off-road ATV trails
$200 million for FEMA
$276 million for construction of data backup facilities and cyber-security for the State Dept.
$2,825 million for broadband internet, $1,000 million of which is for wireless broadband internet
$350 million for State Department broadband internet
STD education programs

At least they got rid of paying for contraceptives and reseeding the White House lawn.

I am assuming this money goes to someone's pocket who helped them. Maybe I'm wrong. Maybe they are just spending for the sake of spending. This is supposed to be a "stimulus" plan to save us from a severe "economic crisis" the likes of which we haven't seen since the 1940s, correct? Why does it look more like a hodgepodge of everyday spending bills?

Where's the work out for you and me? Maybe we're supposed to wait for it to trickle down to us from the wealth of the federal government.
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Old 01-28-2009, 06:05 PM   #74
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I think the Senate version is out too. Here are some items that have been popping out between the two outlines:

$6,000 million to subsidize university building projects
$400 million for HIV and chlamydia testing
$75 million to stop smoking
$1,500 million for a “carbon-capturing contest”
$200 million for DOD alternative energy vehicles
$572 million for Coast Guard “Acquisition, Construction, & Improvements”
$150 million for the Smithsonian
$100 million for non-intrusive detection technology at sea ports
$150 million for construction at sea ports
$25 million to repair off-road ATV trails
$200 million for FEMA
$276 million for construction of data backup facilities and cyber-security for the State Dept.
$2,825 million for broadband internet, $1,000 million of which is for wireless broadband internet
$350 million for State Department broadband internet
STD education programs

At least they got rid of paying for contraceptives and reseeding the White House lawn.

I am assuming this money goes to someone's pocket who helped them. Maybe I'm wrong. Maybe they are just spending for the sake of spending. This is supposed to be a "stimulus" plan to save us from a severe "economic crisis" the likes of which we haven't seen since the 1940s, correct? Why does it look more like a hodgepodge of everyday spending bills?

Where's the work out for you and me? Maybe we're supposed to wait for it to trickle down to us from the wealth of the federal government.
yes, it is an omnibus spending program that is intended to put people to work, so it will possibly provide work to you (not me it seems from the list) if your employer could provide its services for any of the targeted items.

let's say you work for a tech firm like cisco, they'll get some of this. or a construction firm who does public bldgs, plenty of meat on that bone. medical professional? there's the std area, or the anti-smoking initiative. work for a firm that manufactures imaging equipment? you're in luck!

not so sure tho about the spending being payback to campaign contributors, but there is the likelihood that some of those cats will get their paws on a few of these $.
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Old 01-28-2009, 06:17 PM   #75
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there is a popular theory of decisionmaking that places fear as the primary thought behind how individuals respond to situations.
I'm afraid you're still lacking a bit in your understanding of Keynes/Schiller's animal spirits explanation for business cycles, for if you did you would not bother citing a theory about how people respond to situations. Telling me that people routinely respond out of fear to situations tells me nothing about what causes a situation to change in the first place....

Even though every Keynesian's answer for how to address a recession is to spend more, Keynesians obviously cannot say that recessions are caused by reductions in spending because recessions are by definition reductions in spending. This would be to say that recessions are caused by recessions, which is of course a useless explanation for why recessions happen...

so....the Keynesians need a causal explanation for recessions, hence....

Keynesians say recessions happen because the animal spirits go from being happy to sad--fear, confidence, trust etc. are not responses to changes in the economy, but rather changes in animals spirits cause the economy to go from bust to boom and back again to bust.

As stupid as the animal spirit explanation sounds, and it is very stupid, it is not quite as stupid as most marxist explanations for why recessions happen (ie, recessions happen because capitalism is so productive that people can't consume stuff fast enough)...

...but I digress.

Granted....modern keynesians are a bit more careful about bringing out the animal spirits, but sometimes they slip...and it's funny when they do.

anyhoo....an interesting contrast and comparison is Rothbard's Austrian explanation of the business cycle theory as presented in America's Great Depression. I highly ecommend Part I of the book to anyone interested, it's available free on line. What makes it interesting is that he uses economics to explain why cycles happen rather than invoking animal spirits like a stone age shaman.
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Old 01-28-2009, 07:10 PM   #76
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yes, it is an omnibus spending program that is intended to put people to work, so it will possibly provide work to you (not me it seems from the list) if your employer could provide its services for any of the targeted items.

let's say you work for a tech firm like cisco, they'll get some of this. or a construction firm who does public bldgs, plenty of meat on that bone. medical professional? there's the std area, or the anti-smoking initiative. work for a firm that manufactures imaging equipment? you're in luck!

not so sure tho about the spending being payback to campaign contributors, but there is the likelihood that some of those cats will get their paws on a few of these $.
But it's the same crap that's always proposed ("pork"), only this time it's gargantuan and likely the first of a series of gargantuan spending sprees.

If the point is to willy nilly generate jobs, why not just create two massive task forces: Team 1 digs holes in the ground and Team 2 fills those holes up. The answer is because that solution accomplishes absolutely nothing productive as input back into the economy. Unfortunately, some of these items are not much more beneficial than digging and filling holes. Too many "bridges to nowhere" in a bill that's intended to solve our once-in-100-years economic crisis.
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Old 01-28-2009, 07:18 PM   #77
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odd that you focus on the word 'respond". everyhing we do is a response. response to stimuli, response to need, response to desire, response to fear.all animal spirits too.

of course the keynesians don't say that animal spirits is the ONLY cause of cycles. I can see where you have trouble with that idea, clearly you have an absolutist view coming from the mises school of thought which is so totally focused on bank credit (money supply).

odd as well that you state "every Keynesian's answer for how to address a recession is to spend more", when in fact keynes supported tax cuts as a tool to stimulate the economy during business contractions.

and the oddest is your continued lampooning of the 'aminal spirits" concept popular with economists such as keynes and schiller, while you offer unbridled enthusiasm for the anarchist rothbard, who believes that all successful entrepreneurs are in essence great fortune tellers.
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Old 01-29-2009, 09:09 AM   #78
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odd that you focus on the word 'respond". everyhing we do is a response. response to stimuli, response to need, response to desire, response to fear.all animal spirits too.
Odd that you can't seem to understand the difference between cause and effect.

....incidentally....odd that you accuse me of setting up a strawman when Schiller unequivocally states that moody animals cause us to get into recessions in the first place. I'm not the one arguing this, the ivy league keynesian economics professor is...
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Old 01-29-2009, 12:19 PM   #79
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animal spirits is an explanation of what drives decisionmaking. it influences both booms and busts.

how anyone could deny that individual decisions don't drive the economy is beyond me...well? what causes booms and busts if it is not individual decisions?

oh yeah, people are machines who don't have independent thought....
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Old 01-31-2009, 09:32 AM   #80
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Shit we don't learn from history....

New Deal v. 1.0 brought us some classic stuff--like the notion of enforced scarcity whereby the wise men in the government would cut supply of a thing in order to prop up prices....things like killing baby pigs and plowing up crops while people were going hungry. How stupid is that? If people have a problem being hungry, who other than a keynesian politician would think cutting the supply of food is a good idea?

anyhoo....

the hits just keep on coming...a new new deal plan may be on the way:

link

in addition to subsidizing new cars, the government is going to pay to slaughter the trade-ins:

Quote:
Under a bill introduced by Sen. Dianne Feinstein, D.-Calif., owners of older cars would get vouchers worth thousands of dollars toward the purchase of newer, more fuel-efficient vehicle. For the customer to get that cash, the car dealer would have to certify that the trade-in was getting scrapped and not resold. The car's vehicle identification number (VIN) would be tracked to make sure it never shows up on a vehicle registration again.

Crushing the old car has two benefits. First, it ensures that the consumer's purchase of a more efficient vehicle actually has a net environmental benefit. Second, it prevents a glut of used cars on the market, which would reduce trade-in values for new car buyers, which would cut into the sales incentive effect.
so....the situation in the auto market is such that supplies are abundant -- way abundant to the point where some autoworkers need to find another way to make a living and auto buyers ought to see prices dropping...especially in the used car market.

But the government, in their infinite wisdom, wants to rectify an entirely tolerable situation by destroying economic resources. This is classic 'person a digs the hole and person b fills it up' kind of stuff.
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