Financial News

[kapkomet]

Oh, so you're in favor of more regulation now. Hippie!

 

 

You, you....

 

Hippie!

 

 

I need to go study mark to market. (I'm actually serious, I'm studying for an exam and one of the sections in this chapter is mark to market. ) Maybe I'll enlighten you guys if I'm in the mood. Bwaaaaaahahahaha...

[StrangeSox]

Less regulations = more demand, then more supply to meet said demand. But then again, the government is perfect, and knows how to spend money better then any other entity in the history of the world. Whatever.

 

Yeah, if we only stripped away "regulations," we'd be right back on track! Acid Rain Demand will magically fall out of the sky then!

[BigSqwert]

Paul Krugman's take:

A deal to raise the federal debt ceiling is in the works. If it goes through, many commentators will declare that disaster was avoided. But they will be wrong.

 

For the deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.

 

Start with the economics. We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.

 

The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.

 

Indeed, slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse. On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs. On the other side, making the economy weaker now will also hurt its long-run prospects, which will in turn reduce future revenue. So those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker.

 

And then there are the reported terms of the deal, which amount to an abject surrender on the part of the president. First, there will be big spending cuts, with no increase in revenue. Then a panel will make recommendations for further deficit reduction — and if these recommendations aren’t accepted, there will be more spending cuts.

 

Republicans will supposedly have an incentive to make concessions the next time around, because defense spending will be among the areas cut. But the G.O.P. has just demonstrated its willingness to risk financial collapse unless it gets everything its most extreme members want. Why expect it to be more reasonable in the next round?

 

In fact, Republicans will surely be emboldened by the way Mr. Obama keeps folding in the face of their threats. He surrendered last December, extending all the Bush tax cuts; he surrendered in the spring when they threatened to shut down the government; and he has now surrendered on a grand scale to raw extortion over the debt ceiling. Maybe it’s just me, but I see a pattern here.

 

Did the president have any alternative this time around? Yes.

 

First of all, he could and should have demanded an increase in the debt ceiling back in December. When asked why he didn’t, he replied that he was sure that Republicans would act responsibly. Great call.

 

And even now, the Obama administration could have resorted to legal maneuvering to sidestep the debt ceiling, using any of several options. In ordinary circumstances, this might have been an extreme step. But faced with the reality of what is happening, namely raw extortion on the part of a party that, after all, only controls one house of Congress, it would have been totally justifiable.

 

At the very least, Mr. Obama could have used the possibility of a legal end run to strengthen his bargaining position. Instead, however, he ruled all such options out from the beginning.

 

But wouldn’t taking a tough stance have worried markets? Probably not. In fact, if I were an investor I would be reassured, not dismayed, by a demonstration that the president is willing and able to stand up to blackmail on the part of right-wing extremists. Instead, he has chosen to demonstrate the opposite.

 

Make no mistake about it, what we’re witnessing here is a catastrophe on multiple levels.

 

It is, of course, a political catastrophe for Democrats, who just a few weeks ago seemed to have Republicans on the run over their plan to dismantle Medicare; now Mr. Obama has thrown all that away. And the damage isn’t over: there will be more choke points where Republicans can threaten to create a crisis unless the president surrenders, and they can now act with the confident expectation that he will.

 

In the long run, however, Democrats won’t be the only losers. What Republicans have just gotten away with calls our whole system of government into question. After all, how can American democracy work if whichever party is most prepared to be ruthless, to threaten the nation’s economic security, gets to dictate policy? And the answer is, maybe it can’t.

[southsider2k5]

Spending in the next decade is projected to be $150 trillion?

 

That sounds about right to me.

[southsider2k5]

Paul Krugman's take:

 

Funny how he uses historical confidence to the downside, yet when he talks about spending, he ignores that it really hasn't done much for the economy this time around. And if he really wants to blame all of the spending on the Bush administration, and still claim the economy was really bad during then, that means two recessions in a row that tons of spending didn't fix the economy.

[Y2HH]

Funny how he uses historical confidence to the downside, yet when he talks about spending, he ignores that it really hasn't done much for the economy this time around. And if he really wants to blame all of the spending on the Bush administration, and still claim the economy was really bad during then, that means two recessions in a row that tons of spending didn't fix the economy.

 

Not reading or listening to Krugman is the only wise idea...he's making you dumber when it comes to economics. He's as far left as you can get...it's akin to listening to Rush Limbaugh on economic concerns on the flip side. They infect everything they do with their out of whack ideologies, and it shows.

 

Krugman is as much of an idiot as Limbaugh is.

[StrangeSox]

Not reading or listening to Krugman is the only wise idea...he's making you dumber when it comes to economics. He's as far left as you can get...it's akin to listening to Rush Limbaugh on economic concerns on the flip side. They infect everything they do with their out of whack ideologies, and it shows.

 

Krugman is as much of an idiot as Limbaugh is.

 

maybe in the MSM...

[StrangeSox]

Also not sure how accurate it is to say Limbaugh and Krugman are equivalent when it comes to economics, considering one's, you know, a degreed and well-respected economist and the other is a radio show host.

[southsider2k5]

Also not sure how accurate it is to say Limbaugh and Krugman are equivalent when it comes to economics, considering one's, you know, a degreed and well-respected economist and the other is a radio show host.

 

Yet much like Rush, Krugmans economics flips with every change in the President.

[Y2HH]

Also not sure how accurate it is to say Limbaugh and Krugman are equivalent when it comes to economics, considering one's, you know, a degreed and well-respected economist and the other is a radio show host.

 

A degreed and well-respected idiot, you mean.

 

This is the same guy that wanted Alan Greenspan to replace the Nasdaq bubble with a housing bubble in his staunch agreement with Paul McCully of Pimco fame.

 

How'd that work out for this well-respected degreed economist?

 

The very thing he said would fix our economy in 2002 is the very thing that led to most of what we have now.

 

Or, in his own words: "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

 

Pure awesome.

 

It's a good thing the Internets keeps things around forever...

 

http://www.nytimes.com/2002/08/02/opinion/...bble&st=cse

 

Krugmen subsequently spent the next decade playing revisionist history games, dogging the creation of the housing bubble he said would fix everything.

 

Yes, he's a economist...but he's not well-respected by anyone other than the ultra left, because his ideology has infected any real skill he might have, because he looks at everything from a one sided perspective...making him an idiot.

Edited August 1, 2011 by Y2HH

[southsider2k5]

Not reading or listening to Krugman is the only wise idea...he's making you dumber when it comes to economics. He's as far left as you can get...it's akin to listening to Rush Limbaugh on economic concerns on the flip side. They infect everything they do with their out of whack ideologies, and it shows.

 

Krugman is as much of an idiot as Limbaugh is.

 

I agree 1000000%

[Y2HH]

I agree 1000000%

 

Krugman does one thing and one thing well...he promotes disastrous economic policy for short term fixes. For example, the creation of housing bubble to offset the lack of industrial spending in the early 00's, as he called for in a previous post I made. Would it work? Yes. Obviously, it did work...very well. But when the backlash of such a policy arrives, and boy did it arrived, he responds by blaming the GOP and the creation of a overly free market that was out of control.

 

He'd probably be a pretty brilliant guy if he stopped allowing his ideology to infect his knowledge...because that's exactly what he does.

 

His answer to the current situation? Borrow more...spend more...keep borrowing more, and keep spending more...because interest rates are low. On the surface, he's right, borrowing when interest rates are low is SMART...but not when you're already leveraged to the hilt...which he ignores. This is like your neighbor that's sinking under his mortgage, car payments, bills, etc...borrowing even more because interest rates are low. Short term he'll be fine...because he's borrowing from Peter to pay Paul. But eventually, Peter has to be paid, too.

 

So, Y2HH, would borrowing and spending more right now work? I'm glad you asked! Hell yes it would work, Krugman is right. But again, it's the promotion of a shortsighted and irresponsible economic policy, which Krugman seems to love since he keeps doing it. This would work wonders until you have to eventually pay it back...or should I say, until our children or grandchildren have to start paying it back...but hell, he's right in saying it would fix everything NOW. This is poor judgment...we need to look out for the future of this place for the sake of our kids being here when we are gone...

 

I may not have said that before I became a father, but I say it now. I'd love this world to be a better place when I leave it because I know she's going to have to live with it.

Edited August 1, 2011 by Y2HH

[Balta1701]

That sounds about right to me.

The current Federal government is about $3 trillion or so right? So to get to $150 trillion in 10 years the government needs to average spending that is 5x what it currently is?

 

Man, you are expecting some insane inflation. On the bright side, the national debt will drop from 100% of GDP to like 5% of GDP. We could pay it off in 15 minutes.

[StrangeSox]

A degreed and well-respected idiot, you mean.

 

This is the same guy that wanted Alan Greenspan to replace the Nasdaq bubble with a housing bubble in his staunch agreement with Paul McCully of Pimco fame.

 

How'd that work out for this well-respected degreed economist?

 

The very thing he said would fix our economy in 2002 is the very thing that led to most of what we have now.

 

Or, in his own words: "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

 

Pure awesome.

 

It's a good thing the Internets keeps things around forever...

 

http://www.nytimes.com/2002/08/02/opinion/...bble&st=cse

 

Krugmen subsequently spent the next decade playing revisionist history games, dogging the creation of the housing bubble he said would fix everything.

 

I think you need to re-read that article. He's not saying that a housing bubble would be a good thing. The very fact that he calls it a bubble should make that clear.

[Balta1701]

Funny how he uses historical confidence to the downside, yet when he talks about spending, he ignores that it really hasn't done much for the economy this time around. And if he really wants to blame all of the spending on the Bush administration, and still claim the economy was really bad during then, that means two recessions in a row that tons of spending didn't fix the economy.

It still impresses me how you get 60% of the stimulus turned into tax cuts that people like Krugman say won't work and then bash the concept of "Stimulus spending" in the same breath.

[StrangeSox]

Yes, he's a economist...but he's not well-respected by anyone other than the ultra left, because his ideology has infected any real skill he might have, because he looks at everything from a one sided perspective...making him an idiot.

 

Well, he's a Nobel laureate and his textbook is widely used, so I dunno how accurate your statement here is.

[Y2HH]

I think you need to re-read that article. He's not saying that a housing bubble would be a good thing. The very fact that he calls it a bubble should make that clear.

 

I read the article. He may not be calling it a "good thing" but he's directly calling for it as the fix to the problem. Again, he's promoting poor policy for a short term fix. Whether he thinks it's a good idea or not, he's promoting it as the fix. That's my point, that's what he does.

 

He's doing it now by saying the fix for our situation is borrowing more and spending more. For the short term, that would work...but it's pretty clear by now that this country needs to stop with short term fiscal fixes...they're what got us where we are.

Edited August 1, 2011 by Y2HH

[StrangeSox]

It still impresses me how you get 60% of the stimulus turned into tax cuts that people like Krugman say won't work and then bash the concept of "Stimulus spending" in the same breath.

 

Right, from January 2009 he was saying that it'd only help slightly and not lead to a real recovery. We know now that the recession was worse than anyone thought at the time. We know now that the economy keeps stalling as what stimulus we did get is phased out.

[Balta1701]

Right, from January 2009 he was saying that it'd only help slightly and not lead to a real recovery. We know now that the recession was worse than anyone thought at the time. We know now that the economy keeps stalling as what stimulus we did get is phased out.

Hell, the GDP numbers that came out last week show that the actual 12 months of the recession were a full percentage point of GDP worse than they were thought to be beforehand, which would have even made a $1.2 trillion stimulus that wasn't bloated by tax cuts insufficient to fill the gap.

[Y2HH]

Right, from January 2009 he was saying that it'd only help slightly and not lead to a real recovery. We know now that the recession was worse than anyone thought at the time. We know now that the economy keeps stalling as what stimulus we did get is phased out.

 

And the answer isn't more short term fixes, which is what Krugman is promoting...again.

 

It's pretty clear by now that we need to get some long term solutions in place, something we've been putting off for far to long...I think this is something most of us can agree with.

[StrangeSox]

I read the article. He may not be calling it a "good thing" but he's directly calling for it as the fix to the problem. Again, he's promoting poor policy for a short term fix. Whether he thinks it's a good idea or not, he's promoting it as the fix. That's my point, that's what he does.

 

He wasn't advocating for the creation of a bubble. Noting that it's the only way for Greenspan's policies to work isn't the same as directly calling for it.

[StrangeSox]

And the answer isn't more short term fixes, which is what Krugman is promoting...again.

 

It's pretty clear by now that we need to get some long term solutions in place, something we've been putting off for far to long...I think this is something most of us can agree with.

 

The first step in any long-term fix is to get people employed again. Large austerity measures certainly aren't going to help in the near or long term.

[Balta1701]

He wasn't advocating for the creation of a bubble. Noting that it's the only way for Greenspan's policies to work isn't the same as directly calling for it.

I want a green energy bubble. I will directly advocate for an enormous amount of money being wasted on green energy developments, most of which wind up busting. You can quote me on that 10 years from now.

[Y2HH]

He wasn't advocating for the creation of a bubble. Noting that it's the only way for Greenspan's policies to work isn't the same as directly calling for it.

 

Take your blinders off, then we can have a real conversation.

[StrangeSox]

Take your blinders off, then we can have a real conversation.

 

"Concede to my position, then we can all talk about how we agree"