Question: You Hate Spending Money, But How Do We Get Out of This Recession?

[Ryan Rearden]

Gold.!

[hitlerfromhell]

[Mwak]

Originally Posted by the Cold Hearted Sin

We need to smash capitalism.

Either that, or we can congratulate ourselves in a few years for climbing out of this mess, only to return in a few decades.

[daddyx]

Originally Posted by myrage

Some Republicans and a lot of conservatives are mad about the $1.2 trillion deficit, but my question is how do you think we should end the recession?

Do you think it will end naturally by the natural economic cycle if we do nothing?

Do you think tax cuts are the answer?

Your thoughts?

Simple, cut back on the Federal government's spending on social programs, and stop bailing companies out.

[655321]

Bad business models need to dismantle to build productive models or go bankrupt. Prices need to fall. (I ranted a bit on this yesterday.)

Pumping more money into the system keeps bad business models afloat and prices too high.

The short term problem is liquidity. If people cheerleading the bailout have learned anything, they've learned that when Congress approves the creation of $850 billion, it permits the Fed to dish out $8.5 trillion at its own will in our fractional-reserve system of banking/lending. We can't rid ourselves of central banking tomorrow, but the gov't can: (1) absorb the central bank to the Treasury Dept.; then, (2) freeze lending from the central bank while the Treasury audits the books of banks who wish to borrow from the Treasury after the stimulus while taxes are being collected, (3) share those books with the public so the Treasury and Congress are accountable for malinvestment of the taxpayers' money, (4) raise interest rates and lend the taxpayers' money for profit with the condition that ARM rates freeze, (5) use interest payments to prepare for the inevitable unemployment rise to have the funds for people who've paid into the unemployment program.

Then, America has the depression it needs with a funded unemployment insurance program. Prices are forced to fall and the responsible businesses and promising models are they're able to expand while making their payments. Unemployment drops in a way where people don't just get jobs for now, but they're now working in viable companies that've ratched up the capital with their viable models and policies to buy the resources of the failed companies at cheap prices. Production rises with more workers. More workers ables for more consumption. Less reckless lending inhibits reckless consumption and more saving. More saving makes for more entrepreneurs.

Then, we have ourselves a more stable economy and we can go from there, but it'll take some rough years as prices go down and corporate bankruptcy rises with unemployment. People need to face the fact that you can't just dump money out of a plane. Greenspan did this and made the problem exponentially worse than it could've been.

NOTE: If a bank doesn't want to freeze existing ARM's or stop lending to Wall St. at ridiculous rates like 2-5% money down, we know they won't get paid back what they lend, so lending to them becomes a wasted handout.

[JoeMan212]

Originally Posted by myrage

I mean, economists largely view this as "the greatest crisis since the Great Depression." The Great Depression was largely ended because of massive government spending (70% of the US economy in 1944, due to WWII).

Your thoughts?

My thought is that your assumption that the Great Depression ended because of government spending is load of horse crap.

The broken glass theory is, well, broken. Everyone acknowledges the new work for the glacier, but no one ever seems to consider the shop owner who's window was broken. Because he is paying for a new window, he will not spend the money on a new suit (ala Hazlitt "Economics in One Lesson"). The broken window does not create anything, it simply transfers demand from one place to another.

Now it is true, perhaps, the shop owner was planning on saving the money not spent on the glass, but in a market that type of savings shapes the growth of future demand. Because, the shop owner believes he will be able to purchase something with higher utility in the future, he will save some of his money today. Does this lower quantity demanded today, probably, but does this also signal an increase in actual demand of future goods, no doubt.

[McBell]

Originally Posted by myrage

Some Republicans and a lot of conservatives are mad about the $1.2 trillion deficit, but my question is how do you think we should end the recession?

Do you think it will end naturally by the natural economic cycle if we do nothing?

Do you think tax cuts are the answer?

I mean, economists largely view this as "the greatest crisis since the Great Depression." The Great Depression was largely ended because of massive government spending (70% of the US economy in 1944, due to WWII).

Your thoughts?

You are not a capitalist.

[655321]

Originally Posted by JoeMan212

My thought is that your assumption that the Great Depression ended because of government spending is load of horse crap.

The broken glass theory is, well, broken. Everyone acknowledges the new work for the glacier, but no one ever seems to consider the shop owner who's window was broken. Because he is paying for a new window, he will not spend the money on a new suit (ala Hazlitt "Economics in One Lesson"). The broken window does not create anything, it simply transfers demand from one place to another.

Now it is true, perhaps, the shop owner was planning on saving the money not spent on the glass, but in a market that type of savings shapes the growth of future demand. Because, the shop owner believes he will be able to purchase something with higher utility in the future, he will save some of his money today. Does this lower quantity demanded today, probably, but does this also signal an increase in actual demand of future goods, no doubt.

I love this analogy. It's why I always call the State a "window breaker"

[JoeMan212]

It was Dick Chaney who said:

"You know, Paul, Reagan proved that deficits don't matter. We won the mid-term elections, this is our due."

Fitting for someone in the federal government to not worry about a deficit. Consider if a private business going through difficult times decided to print money to pay off it's interests, this would be considered criminal. But when government goes the way of Zimbabwe, it is stimulus.

The whole Keynesian premise of inspired demand through inflation should have been tossed out the window the first time stagflation occurred in the 1950's.