Hope & Change With New Congress

[Lordblood]

Originally Posted by Brucelee

Given that I teach Economics and Finance, that would be a mistake on my part, no?

Actually, Keynes initial work has some merit as far as it went. Subsequent observations and of course, the misuse of his THEORIES, have called most of his assumptions and conclusions into dispute among reputable economists.

I think the US' recent experience with Stimulus and such will put the final nail in the coffin except for of course, the true believers.

The question isn't really whether the government can contribute to aggregate demand in the short run (it can given the method). Rather, the issue is whether this is the best way (among alternatives) for the government to act.

That I think, is very much in question.

My last comment is to the "economics as a field." In truth, economics is not a science as traditionally defined. It is much more a bunch of theories about aggregate human behavior with money as a signal.

One can prove almost nothing in economics. That is why it is so much fun to teach.

We're on the same page now. I wholeheartedly agree that the spending over the recession has been wasteful. I suppose what we have to figure out is, which would be the better spend of money: tax cuts or government spending. I think at the moment it would have to be government spending, as tax cuts are not going to directly encourage anyone to spend.

I would like to know where you think Keynes' original theories stop and bad assumptions begin, and perhaps this is more of an opinion than a fact but either way I'm curious.

[Brucelee]

I favor tax cuts simply because the impact of pumping money into the consumer's pocket is faster and cheaper than having government try to spend money. Moreover, the speed of rescinding a tax cut is faster than trying to get the Feds to stop spending money.

That said, I would suggest what we need now is a bit of stability and patience. For one, I would repeal the HC law and start over.

But, that is just me.

[Brucelee]

http://www.washingtonpost.com/wp-dyn/content/article/2010/11/18/AR2010111806394.html

[jcb986]

What kind of President steps in when a professor locks himself out of his house and when the police arrived to make sure he was not a burglar, the professor then claims Police Brutality and Black Racism. Obama is your man...he backs everything that's wrong...but it's nice to see that some of the Democrats now see the light and are distancing themselves from him. :dance:

[Perfectlap]

"when a professor locks himself out of his house and when the police arrived to make sure he was not a burglar, the professor then claims Police Brutality and Black Racism. Obama is your man...he backs everything that's wrong..."

my recollection of that incident was that the Prez said the professor reacted stupidly, not just the police officer. Having been in federal law enforcement I can assure you that once the investigating officer has determined that the owner and the burglar were one and the same, YOU LEAVE. You don't stick around and engage and obviously pissed off'd owner. Some cops I worked with HAD to win every argument with a civilian, that made it personal right off the bat. Nine times out of ten we were dealing with someone whose blood was already up when you arrived, after some experience you learned to leave to people to pull their own hair out within the safety of their own property. That's how you keep an even keel to make smart decisions despite seeing more misery and dsyfunction in a single day than most experience in a year. Other guys took a different route and were just a walking bad attitude that continued once the shift was over.

[Brucelee]

Hey, the POTUS couldn't miss a "teachable moment" for the rest of us dumbells.

That is the world he lives in.

[Brucelee]

http://www.politico.com/news/stories/1110/45136.html

[jcb986]

Originally Posted by Brucelee

http://www.politico.com/news/stories/1110/45136.html

We are giving him his retirement in 2 years. He should then move to California and straighten out there mess.

[insite]

Originally Posted by Lordblood

I think at the moment it would have to be government spending, as tax cuts are not going to directly encourage anyone to spend.

encouraging people to spend when they're leveraged to the hilt & their personal asset bubble (HOUSE) just popped is ludicrous. the thing i don't understand is this:

why do people assume that if money is SAVED, it is not working in the economy?

if people aren't spending, they are either:

a) placing it into some type of savings account, whereby it can then be loaned out to others. this has a multiplier effect.

b) investing it, whereby it can provide needed capital for future production

c) de-leveraging

the real problem is that right now, most people fall into category C. they are paying down debt rather than saving. encouraging spending when, in aggregate, the populace is leveraged to the hilt, is not only irresponsible, it won't work! we pulled forward too much future demand with borrowed money. that leaves a consumption gap. at some point, we will have to pay the piper. the longer we wait, the worse it will get......

[Brucelee]

I would agree with insite, in that many consumers need to simply right the ship. It seems that pols don't seem happy with that scenario but as Gov Christie says: "it is time to stop kicking the can down the road."

[jcb986]

Originally Posted by insite

encouraging people to spend when they're leveraged to the hilt & their personal asset bubble (HOUSE) just popped is ludicrous. the thing i don't understand is this:

why do people assume that if money is SAVED, it is not working in the economy?

if people aren't spending, they are either:

a) placing it into some type of savings account, whereby it can then be loaned out to others. this has a multiplier effect.

b) investing it, whereby it can provide needed capital for future production

c) de-leveraging

the real problem is that right now, most people fall into category C. they are paying down debt rather than saving. encouraging spending when, in aggregate, the populace is leveraged to the hilt, is not only irresponsible, it won't work! we pulled forward too much future demand with borrowed money. that leaves a consumption gap. at some point, we will have to pay the piper. the longer we wait, the worse it will get......

Now this is an assumption on my part, but maybe this is why your investors are not investing. I am 65 and I am retiring in January 2011. I lost about $75K in the bubble burst so I am not investing in any risky stocks and I want to preserve my basic capital left so I can use it during my retirement years. There are many more like me because we are the War babies and we have entered into our retirement days. Now as for the others go, I think they over extended and cannot help in the short term, but we baby Boomers invested for more than 30 years...so it my take a long time to rebuild the economy.

[insite]

Originally Posted by jcb986

Now this is an assumption on my part, but maybe this is why your investors are not investing. I am 65 and I am retiring in January 2011. I lost about $75K in the bubble burst so I am not investing in any risky stocks and I want to preserve my basic capital left so I can use it during my retirement years. There are many more like me because we are the War babies and we have entered into our retirement days. Now as for the others go, I think they over extended and cannot help in the short term, but we baby Boomers invested for more than 30 years...so it my take a long time to rebuild the economy.

by not investing, though, i'm guessing you at least have your money in a bank. this allows it to be loaned out to others & it still works in the economy.

you raise a great point, though: after having been burned recently in the markets, a lot of people are very hesitant to jump back in that water. bernanke has a solution for that: quantitative easing, you will notice, has driven the returns on your savings accounts & money market accounts to virtually zero. his policies have ensured that conservative-minded investors cannot make money in low risk investments. in fact, he has ensured that you will LOSE money to inflation. he is trying to force people into risky assets because, to him, for some reason, the market = the economy.....

most of us of course know that this is BS; the market is NOT the economy, and the fact that the market is doing quite well while the economy is by most measures NOT doing well.

[extanker]

i,m retired and the wife still works but we have been buying condos and townhouses in our old people gated community. there are some pretty good deals now days...we are becoming suburban slumlords...beats what the savings account is paying

[Perfectlap]

^ more money in bank deposits does not encourage more loan making. This has been the unwelcome surprise of the Fed, Hank Paulson under Bush and now Geithner under Obama. If the banks have excess cash, as they do now with trillions in reserve, they will simply find other ways to use it like funding foreign investment projects or lending to Wall Street trading firms. The banks will take your deposits, pay you a Turkish Lira in interest and tell you to have a nice day.

The banks can be up their necks in cash but unless credit demand remains weak the cash pegged for consumer loans -- and busines loans frankly since they exist on consumer demand-- will sit idle. The banks are sticking to pre-bubble lending standards that do not correllate with post-bubble incomes and spending. Sure you bailed us out, took the haircutt and the bounce will only be "bonused" to our guys. This spells a very very weak recovery that although it is trending in the right direction sets up the economy like a big 757 jetliner that loses two of its engines mid-flight.
We can't produce the necessary lift to climb fast enough. All this had little to do with the govt and much to do with the role of the American worker in a new economy. We outsourced and consumed ourselves out of rising wages. What did you think was going to happen when China's GDP goes from under $1 trillion to over $6 trillion on American consumptio of cheap goods? The banks have no skin in the game because even with 10% unemployment the big ones at least are turning profits. When 8 of every 10 Americans owns $1 of every $10 dollars invested on Wall Street and are making no more than they were 10 years ago you have to start wondering what the game plan has been all these years.

[brp987]

[QUOTE=Perfectlap. We outsourced and consumed ourselves out of rising wages. What did you think was going to happen when China's GDP goes from under $1 trillion to over $6 trillion on American consumptio of cheap goods?[/QUOTE]

At the rate that we are paid, the outsourcing only awaited China's adoption of capitalism. But then how is it that Germany has escaped our fate? Even while outsourcing some BMW production to the US.