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Forums - General - Krugman: Spend Now, Save Later

sergiodaly on 13 July 2010

i think spend money on "in home" (made in our own country) things is good for the economy and its crucial to do that in times of recession. Brazil come out of a very difficult time by doing that. spend its to put money in movement... a country needs that to put people in jobs and with all people with jobs they have more income from taxes. people should concern much more in spend "in home" rather than save and keep the money quiet!

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axt113 on 13 July 2010
mrstickball said:
axt113 said:

Yes because private market would never do anything like flood millions of gallons of oil into our oceans, or let us drive around in cars without functioning brakes.

....Or not allow us to clean up the oil spill because its illegal to pump 90% cleaned water back into the ocean.

Stick, yeah today they just used other dumb methods of making our economy spiral out of control.

Such as?

Richard, things would be far worse without government intervention

History tells us otherwise. Yes, Richard gave some examples that the government may have a regulatory precedent to intervene in some egregious cases. However, we note that more often than not, the government does more to harm the economy than help it. Look at Hong Kong and its lack of government oversights, and the incredible prosperity it has created in 100 years.




First off, we wouldn't have to worry about the water if BP had done it right the first time, this environmental and economic disaster is entirely private caused.

Lack of regulation of the financial markets, for one thing stick, is one big cause of the downturn, after all, wasn't it republican senators who were responsible for the Gramm-Leach-Bliley act which repealled glass-steagal?  Never trust an all republican act it seems

 Hong Kong is a very different situation than the US, I'm certain that if our country was one city smaller than New York and over 90% based on services, and all the other difference between Hong Kong and a country like the US were not there, that we could have a much different regulatory structure than we do, but its not and as we've seen, deregulation of our industries has led to more problems than benefits.



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richardhutnik on 13 July 2010
axt113 said:

Yes because private market would never do anything like flood millions of gallons of oil into our oceans, or let us drive around in cars without functioning brakes.

Stick, yeah today they just used other dumb methods of making our economy spiral out of control.

Richard, things would be far worse without government intervention

I was informed that, due to government intervention, BP is prevented from drilling closer to the shore, thus at greater risk.  Had BP been able to drill closer to the shore, this spill wouldn't of happened, I have been informed.



richardhutnik on 13 July 2010
mrstickball said:
richardhutnik said:

What part of government intervention has told people to do credit default obligations or drive the current leveraging in the derivative market to around 10 times the value of the world economy?  These markets are not regulated, and there was no indication of any government bailout.  So, anyone want to argue how the government is a source of moral hazzard or hindering the free market from making needed corrections?

Consider other things also like:

* Charles Ponzi nearly taking down the banking system in the northeastern United States.

* What part of government regulations causes credit rating services to get stupid and falsely value risk during the most recent meltdown?

* What part of government involvement caused Long-Term Capital Management to nearly take down the financial markets in the United States: http://en.wikipedia.org/wiki/Long-Term_Capital_Management

I was informed in a prior thread that at NO TIME has government involvement help save the financial markets from collapse.  Well, look at LTCM here.  The Federal Reserve brokered a deal to have other firms pool together and prevent the financial markest from collapsing.

To say government involvement is responsible for every ill is to be VERY short sighted and to live under the belief that if Ayn Rand were followed to the letter, we would end up have flowers and rainbows every day.

 

 

Correct me if I'm wrong, but didn't the credit default come as a result of packaging toxic mortgage assets to look better than they were? Weren't most of these toxic assets a result of government intervention in the mortgage market via the Community Reinvestment Act of 1999?

And the government held a gun to the heads of Wall Street and told them to leverage to hilt against them and engage in credit default swaps, and also to rate them worse than they actually are?  Who controlled the rating services?  I don't see the government rating the assets, and marking them down at all.  Show where they did.  Also, did the government order Wall Street to repackage the toxic assets?  All this, to me, looks like the markets doing it.  People driven by greed getting into the business, and markets valuing risk wrong, because of the repackaging.  Also, tell me where the government is involved in around $600 trillion in derivates.  DId the government set this up?  That is how much in derivatives has been floating out there.  This is the byproduct of government intervention how?

One can say the government did have an impact here, but to say if there was no government involvement things would of been just fine, is pushing it.  Do you remember the dotcom bubble?  Markets have tendencies to produce bubbles, with or without the government involved.

And you can push deregulation and the government not stepping in to stop certain mergers.  What do you think happens with companies when they get really larger?  Well, they get "too large to fail".



Akvod on 13 July 2010
Final-Fan said:
Akvod said:

Kasz216 said:
I find it funny that Akvod thinks saved money is still stuffed in matresses or buried in the backyard or something...

It pretty much is as good as doing so during a deflation. Why would you give a loan during a deflation? Say you wanted to make a 2% return on your loan. The inflation rate is -5%, so the interest rate should be -3%, that is, you giving money to the person you loaned to. Will you do that?

Whereas if it was positive 5%, it'll be you demanding a 7% interest.

So loans at 0% interest would be unattractive in a -5% deflationary economy? 

You'll be gaining more value by holding onto money (5%) than loaning it out (0%?)



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Final-Fan on 15 July 2010
mrstickball said:
Final-Fan said:
[...]
 I believe that your comment about the Dust Bowl is completely incorrect.  The seeds of destruction in that case were sown many years before the crash, and in fact part of Roosevelt's famous first 100 days were focused on repairing the ecological damage.  1929-1933 is not enough time for those farmers to seriously ass-rape the topsoil the way they did. 

Or did you mean they were encouraged to abuse the land before then?  Wikipedia indicates, and this agrees with my dim recollection of research years ago for school, that vast areas had been overfarmed and/or poorly farmed for decades and the Dust Bowl was a more or less inevitable result; the problem was already happening but was turned into a sudden catastrophe because of a severe drought.  If that is what you meant I would ask you to show that the government was the primary factor in this sort of behavior. 

The result of all this was improved (ecologically sound, more sustainable) farming techniques and land usage tactics (not sure if there is better terminology) which was in large part mandated by the government, and at the LEAST the government played a key role in educating the farmers as to these methods.  As opposed to letting them figure it out on their own a la laissez faire. 

Blah. I lost all of what I put. I'll try to explain it again :-p

If you research about farming in the locations of the dust bowl - the prime culprits of who over-farmed, and caused the dust bowl - you will find out why they were there in the first place.. The government gave the land away for people to farm there. It wasn't a free market exchange of land - it was given to people for free. That is where I take issue with the causes of the dust bowl. Had the government not of intentionally incentivized the farming of these areas, I don't believe that the dust bowl would of happened...If not severely diminished from what we saw, as better ecological practices would of been in place later on, when it may have reached farming levels like we saw in the 20's.

That's where my beef with a lot of federal practices are - they cause a problem (Community Reinvestment Act of 1999, Smoot-Hawley, ect) then have to fix it using our money - essentially screwing us both ways. You can argue that laissez faire caused problems in the dust bowl, but the truth was that intervention caused it...Thus negating the ability for typical laissez faire means to rectify the problem, because government has the power to royally screw things up more than individual people...Which is why I'm not a big fan of them handling stimulus funding.

Ultimately, I believe that the governmental powers should lie primarily with local and state governments, and not federal powers. America is a big freaking country - 300 million and an area larger than almost anywhere else in the world. Trusting one entity in Washington DC is not the way to solve Americas problems. If Ohio has a problem, I want an Ohioan to fix it. Federal powers should only exist in areas that are consequential to everyone, and not simply where the federal government decides that it should be involved in. Comparatively, I think thats why you have rugged government efficiency in areas of Europe - small federal governments in small nations where people are closer to their politicians. For anyone to agree in the United States (like a president), you have to have ~50% of every American interested in the candidate....How often can you find a good agreeable candidate for those many people? Thats why we get retards like the past few presidents we've had.

1.  They didn't actually GIVE it away IIRC, I think it was something like $1 an acre.  What market price do you suppose would have been fair for Godforsaken prairie 200 miles from nowhere? 

2.  Who says it was the mere fact that it was being farmed that caused problems?  Instead of, say, overly-intensive farming and/or farming using poor techniques, that government did not encourage that I am aware of? 



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Final-Fan on 15 July 2010
mrstickball said:
richardhutnik said:
What part of government intervention has told people to do credit default obligations or drive the current leveraging in the derivative market to around 10 times the value of the world economy?  These markets are not regulated, and there was no indication of any government bailout.  So, anyone want to argue how the government is a source of moral hazzard or hindering the free market from making needed corrections?
[...]
To say government involvement is responsible for every ill is to be VERY short sighted and to live under the belief that if Ayn Rand were followed to the letter, we would end up have flowers and rainbows every day. 

Correct me if I'm wrong, but didn't the credit default come as a result of packaging toxic mortgage assets to look better than they were? Weren't most of these toxic assets a result of government intervention in the mortgage market via the Community Reinvestment Act of 1999?

No, I believe you are wrong about that.  Where did you get that information? 



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My advice to fanboys: Brag about stuff that's true, not about stuff that's false. Predict stuff that's likely, not stuff that's unlikely. You will be happier, and we will be happier.

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Final-Fan on 15 July 2010
Akvod said:
Final-Fan said:
So loans at 0% interest would be unattractive in a -5% deflationary economy? 

You'll be gaining more value by holding onto money (5%) than loaning it out (0%?)

Well, no, loans at 0% would still get you back the same dollar amount, which would still be worth 5% more.  On the other hand, you'd gain nothing by it and risk them defaulting, so I have no idea what I was thinking with that post.  I think I was tired. 



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NoddyHolder on 15 July 2010

so, we should just keep borrowing against the debt to maintian spending?



Akvod on 15 July 2010
Final-Fan said:
Akvod said:
Final-Fan said:
So loans at 0% interest would be unattractive in a -5% deflationary economy? 

You'll be gaining more value by holding onto money (5%) than loaning it out (0%?)

Well, no, loans at 0% would still get you back the same dollar amount, which would still be worth 5% more.  On the other hand, you'd gain nothing by it and risk them defaulting, so I have no idea what I was thinking with that post.  I think I was tired. 


Yeah, that was a weird exampel you gave me.

What I meant was, if there's deflation, then there's no point in loaning. Considering that any investment is a risk, and that you can't spend the money while you loan it, why would you loan if you won't get anything back.

You're in a liquidity trap.

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

 

Damn, you're talking about tired and sleep? I'm fucking hanging on a thread right now =/ Can't fucking sleep, can't fucking enjoy myself >.<

 

Gonna have the day off tomorrow... or I guess today...