USA 2008 Depression

[Spokesperson 0]

The only time you create money is when you print more of it.

Thatchers policies were successful seen to the interests of the upper class. Unsuccessful as seen by the lower class that had to suffer because of her neoliberal economic policies.

The Friedman-Pinochet right-wing junta neoliberal experiment in South America failed because of the huge social impact it had. People were seen as robots who had no social rights, sure you can get an economy running that way. By making the workers "sacrifice" parts of their freedom and making them produce more the country gets richer and the workers too (things are produced quicker -> they get cheaper. but the workers eventually get poorer in relation to the rich). So their living conditions were awful and people began to revolt. The result of that economic policy is what we have in South America today where most countries apart from the drug-runners and murderers in the Colombian government are ruled by leftists.

Keynesianism doesn't work in a globalized economy, and neoliberalism doesn't work at all. Sure keynesianism is on its way back, but there is no liberal economic theory that works well enough nor explains how a society/economy works. The different economic theories and ideologies are just attempts to justify the current system. Like religion in the case when the king was chosen by some imaginary god.

Marxian economics covers important parts of the economy that isn't described in liberal economics. And most importantly it works.

Your formula doesn't say anything. Money "Velocity"? Transaction speed? Flux of money? p q ? Probabilities? That's the obvious formula for vector multiplication, multiplication of 1 dim matrices. What's M?

And besides, Friedman is dead. But it would be great if you could find the place where he says his theories were a complete disaster.

[dwringer 45]

Well with interest rates falling dramatically on all kinds of loans here in the US, especially on variable rate credit cards (the prime rate has fallen ~ 3 points in the last few months, which directly affects everyone with such a card - who are primarily lower income [fixed rates seem more common for people who already have great credit], and ol Dubya trying to pay off everyone with tax credits, then by the idea that giving money to the lower socioeconomic classes, you'd think the US economy actually WOULD improve. But it just doesn't seem like that's going to happen, because so much of our economy IS based on credit. And there's nothing banks like more than to lure people in with these low rates, then jack them up for any reason available by anywhere from 50-200%... that can't be good, since the people that get hit by that tend to be lower-income as well.

Heh, I guess I have very little idea what I'm talking about, I'm just going by my limited experience working for a major credit card company doing customer service

[TWCRASH 0]

Well with interest rates falling dramatically on all kinds of loans here in the US, especially on variable rate credit cards (the prime rate has fallen ~ 3 points in the last few months, which directly affects everyone with such a card - who are primarily lower income [fixed rates seem more common for people who already have great credit], and ol Dubya trying to pay off everyone with tax credits, then by the idea that giving money to the lower socioeconomic classes, you'd think the US economy actually WOULD improve. But it just doesn't seem like that's going to happen, because so much of our economy IS based on credit. And there's nothing banks like more than to lure people in with these low rates, then jack them up for any reason available by anywhere from 50-200%... that can't be good, since the people that get hit by that tend to be lower-income as well.

Heh, I guess I have very little idea what I'm talking about, I'm just going by my limited experience working for a major credit card company doing customer service

yeah you work for CS and your name is Punjab and the summers are killer in your area right?

[walker 0]

And besides, Friedman is dead. But it would be great if you could find the place where he says his theories were a complete disaster.

Hi all

In reply to Spokesperson: It was back in 2003:

I did not notice he had died but if I had I would have said good riddance to bad rubbish and forgot about him.

I had not bothered much with after he admitted his theory was wrong.

Quote[/b] ]So now Friedman says he was wrong

William Keegan The Observer, Sunday June 22 2003

My attention has been drawn, by none other than the great Sir Douglas Wass (whom some believe to be the model for my fictional character Sir Douglas Corridor) to news that most of us have missed.

Older readers will recall that Wass was Permanent Secretary to the Treasury during the late Seventies and early Eighties. Sir Douglas, in common with others, had to endure the experience of Margaret Thatcher and her close colleagues arriving in office as fully paid-up believers in a half-baked economic doctrine known as monetarism.

They had picked up a theory that the many difficulties of running the British economy could be overcome by controlling the money supply (or the 'money stock', as purists preferred to call it). At its extreme, this theory was broadened into the view that, if governments simply left the economy alone, and instructed the central bank to control the money supply, inflation would be banished, entrepreneurial activity would thrive, economic growth would deliver the goods, unemployment would disappear, and so on...

Please follow link for the full articlehttp://www.guardian.co.uk/business/2003/jun/22/comment.economicpolicy

The key quote of Friedman is from the primary source article in the Financial times where Friedman admitted:

Quote[/b] ] 'The use of quantity of money as a target has not been a success.' He added: 'I'm not sure I would as of today push it as hard as I once did.' (FT, 7 June 2003).

I along with many others with an ounce of common sense could see that by ignoring Velocity of Transactions just because the math was too hard, his whole theory was fundamentally flawed. It took him 50 decades and millions of lives ruined and lost to realise it.

As to Marxist economics they have resulted in the same scale of problems though they took a little longer to manifest them selves. Also they are fundamentally flawed as they miss out Female inputs; Marx was notoriously sexist, even Engels recognised it. Marx was fundamentally a fascist authoritarian opposed to freedom. That is why he hated Bakunin. Marx just wanted an excuse for he and his mates to be the bosses. He never wanted to get rid of capitalism he just wanted to be the boss. A look into Marx's private life shows that.

So far Keynesian economics have proved to be the most effective and while like most science they are hypotheses and thus open to refining they are the best so far.

Me I am a practical anarchist I use what works and have always made it clear. Economies require intuition to drive. Formula might one day give us a computer controlled economics but until then I prefer lots of humans trying lots of things, so free-market with some laws it is.

That is why I liked Gordon Brown as chancellor in the UK, he knows how to steer an economy. It is a far more important role than Prime minister anyway. I wish he would go back to doing it. If Tony Blair had not been inveigled or blackmailed into following Bush into the stupid Iraq war the UK would still have the best chancellor in centuries in the job.

Kind regards walker

[Spokesperson 0]

Quote[/b] ]As to Marxist economics they have resulted in the same scale of problems though they took a little longer to manifest them selves. Also they are fundamentally flawed as they miss out Female inputs; Marx was notoriously sexist, even Engels recognised it. Marx was fundamentally a fascist authoritarian opposed to freedom. That is why he hated Bakunin. Marx just wanted an excuse for he and his mates to be the bosses. He never wanted to get rid of capitalism he just wanted to be the boss. A look into Marx's private life shows that.

Miss female inputs? Marxism has nothing to do with sexism. Marxism contains no opinions, just pure analysis. What Marx did in his private life has nothing to do with marxism. And he was definately no fascist.

You are no anarchist for that matter either.

Thanks for the link.

PS. Im sure Friedman could handle the maths, if not, it would be quite easy to put some pure mathematicians on the job.

[dwringer 45]

yeah you work for  CS and your name is Punjab and the summers are killer in your area right?

Hah, I'm not sure whether I should be offended or not, so I'll give you the benefit of the doubt

But anyways, nah; I quit that job after 4 months anyway. And I'm American; it was one of the few banks that outsources to rural America instead of India (but I wouldn't bet on that lasting for too much longer )

[Sc@tterbrain 0]

Marxian economics covers important parts of the economy that isn't described in liberal economics. And most importantly it works.

Speaking of "propaganda," your the king.

Your just as bad as any other zealot who has so invested in their own faulted beliefs, that reality becomes something you can no longer grasp.

Because competing ideologies have been weakened by demagogues, that dosen't make your ideology stronger.

Despite the degredation of perspicacity among the masses, there are still enough people left to see your message for the garbage it is.

Even if you win in the short run, you still lose. At least that's the track record of what you believe.

[Baff1 0]

@ Walker,

The UK manufacturing industry needed to be destroyed.

Why should the rest of us all have continued to pay for it?

Subsidising unprofitable industry is not good for the

economy. It's bad for it.

I lived through this too.

I applaud that I will never own another British Leyland car.

Hooray!

With regards to Friedman, Keynes and whatnot, thanks for pointing me in the right direction but I don't think I have anything to offer you in a discussion about these people. I've never heard of them.

The French economy is where the UK economy was at the dawn of the Thatcher era, not the US.

An economy crippled by it's labour laws, an economy unable to compete in the world, dependant on protectionism with it's major industries all nationalised and inefficient. Crippled by it's unions and blackmailed into loss making behaviour.

Giving tax back to the poor may improve your economy, but only the rich people have the know how and the motivation to drive an economy.

Only the top 5% of income earners in the country pay more into the system than they take out. They are the wealth generators.

So while redistribution of their wealth may help your economy, driving them away will collapse it.

You need tax breaks for the rich to encourage them to live here and make money here. If they aren't here, you can't tax them and give the money to the poor at all.

you may get 135 cents back in you economy for every dollar put in instead of 75, but with no dollars going in, 135 X 0 = 0.

Better to have 75% of something than 135% of nothing.

Clearly there is a balance to be struck here.

(I think redistribution of wealth is more critical for social cohesion than it is for the economy).

P.S. I've always thought Gordon Brown was a piss poor chancellor. In ten years we have gone from a saving and investment society to a personal and national debt society.

For a pensioner like me, he's been a total nightmare. I've never been poorer.

My taxes are all up, my services are all reduced. You go Gordon.

Pat yourself on the back and tell us all how wonderful you are.

[walker 0]

Hi all

My fears of a serious Depression in the US were increased by a Financial Times report that the USA was among the minority of countries that refused to have a Financial Sector Assessment Program (FSAP). The FSAP is a joint IMF-World Bank system to alert countries to weaknesses in their financial systems and was instituted back in the late 1990s.

Check for your selves

http://www.imf.org/external/np/fsap/fsap.asp#U

This system was designed to spot Recessions before they start. The fact that the White House was hiding these figures and preventing transparency leads me along apparently with the markets to assume that the situation in the US is far worse than is being admitted.

What is the White House hiding?

Worried walker

[baddo 0]

I'm a bit worried about the economy too. But what I am a lot more worried is that people will panic and draw their money away from the markets and hide them in some old sock of theirs. That is what we definitely don't need now.

I've been actually cooling my girlfriend down about this, as she already lost a good deal of money from her investments and is about to take it all back even if it means that she will lose. I'm thinking she should just keep her investment, as it is not a financial disaster for her even if she loses it all, so I think it is better to just let it be now and let the economy sort itself out, and take the money when she can take it with profit.

But we need people not to be overly optimistic about their capability to pay mortgage payments etc. But at the same time we want to have people spending money and not drawing it away.

In Finland during the 1980's the banks were, as I have learnt, sloppy, and the result was ugly things started to happen when the 1990's started. That together with the downfall of the USSR which caused us to lose lots of trade, we got major problems. In 1991 both of my parents lost their jobs among thousands, I think tens of thousands, of others. It was not a happy time indeed... fortunately they were able to recover relatively quickly, but many others weren't. I wouldn't want to see similar things happen now.

 I think it was some economist or someone like them, a wise man anyways, who said something along the lines of "predicting economy is like going into a completely dark room and feeling with your hands what the room has inside" I think that is even too accurate, I think predicting which way the economy is going to go next is not at all as accurate a thing to do as feeling things in a dark room with your hands   Because emotions make people change their investing behaviour. You can talk all day about making rational decisions, but people are after all emotional and can be lead into believing something which is totally not true, and then the "totally not true" thing will turn true as the people believed it and panicked, and made it become true.

[malick 0]

I believe, saying it's just my opinion, that the US like any Empire before it and any other to come, is on the downfall.

Like Rome, France or the UK (and others !, the US have followed the same trend, but very quickly (less than 60 years). Too many wars, too much weight on the "taxpayer" without real investment in national infrastructure for more than a decade. Other countries are beginning to reach a high level of development, challenging the US superpower.

This country has grown too fast and isnow paying that price. Most investments now go the military industry (50% of world spending) despite alarming signs of internal malfunction (Katrina, aging infrastructure, education, out of equilibrium economy...)

Let's hope the US recession of 2008 won't bring what the previous recession of 1929 brought us. Except that this time, China is 30 times larger than Germany, with nukes.

Malick

[gsleighter 0]

I've been following this thread since its onset, and although I'm no economist (Nor do I understand a great deal of some of what's been said here), I thought I'd opine.

@twcrash - You may not be feeling the economic crunch yet, but I assure you, things are not all good. Being in a lower tier of the economic spectrum, rising costs of gas, utilities, and food are putting the squeeze on my family. We're moving into a smaller place, doing away with some luxuries (Like our own washer and dryer, and selling the nicer furniture), and we're on WIC and (finally, they just raised the income limits a little, that's not an indicator of economic health) food stamps. I've got an Associate's Degree, and I'm applying for grants to finish my Bachelor's, but I'm fortunate to have some family support for babysitting, and own my own vehicles that run well. It's not so easy as "Well, poor people just don't work hard enough."

@Spokesperson - I'm incredibly happy that the track record for personal liberty and success in communist countries has been so abysmal. Capitalism without control is a terrible, even evil, thing, that creates a surplus poor population controlled through incarceration for nonviolent crimes created by classist and racist legislature. But nothing we put up with in America compares to the atrocaties commited by China, Cuba, Stalinist Russia, and North Korea. I suspect that you've never put your money where your mouth is, which isn't a surprise, given the relative anonymity of the internet (And they don't even have THAT in China).

$0.02

Anyway, off to wash the dog.

[gsleighter 0]

Oh, and @Walker and company:

Very educative and informative discussion, thanks very much.

Like I said, I'm no economist, but you're all as educational as you are a treat to read.

-Gabe-

[Trapper 0]

BUZZARD @ April 09 2008,15:08)]I wish it were like Germany where the so-called "free-employed" have the choice to either pay social security, or set up their own private retirement fund+insurances. But then again in Germany at least AFAIK the system works, whereas here social security is the nightmare of lost funds where you can be sure that you way more less out of it than you have to pay for over the years.

One of the biggest discussions in Germany is that the system doesn't work anymore for the average employee.

Additional private retirement and health insurances and handicap pensions are necessary to maintain previuos standards of living in case. The default social security taxes make employees unattractive on the global market and lower our income already remarkable, making private precaution even more necessary and impossible.

Many medical practices have to hope for and prefer the private health insured patients to delay their busting. Other patients are treated as second class since a few years.

[Spokesperson 0]

@Spokesperson - I'm incredibly happy that the track record for personal liberty and success in communist countries has been so abysmal. Capitalism without control is a terrible, even evil, thing, that creates a surplus poor population controlled through incarceration for nonviolent crimes created by classist and racist legislature. But nothing we put up with in America compares to the atrocaties commited by China, Cuba, Stalinist Russia, and North Korea. I suspect that you've never put your money where your mouth is, which isn't a surprise, given the relative anonymity of the internet (And they don't even have THAT in China).

There have never been any communist countries. Tell me what kind of atrocities Cuba has committed? When it defended itself against a US and CIA backed invasion at the bay of pigs? Assassination attempts on foreign presidents? Terrorism like shooting tourists from the sea and blowing aeroplanes and harboring those who commited those crimes?

The cuban personal liberty record is one of the best in the world.

[chops 111]

The cuban personal liberty record is one of the best in the world.

Spokesperson. It's almost fascinating to see how you can turn any thread into an excuse to spout your delusions. I'd like to start an "Are you a tit man or a leg man?" thread and see if you can work something in there. "Tits are an attempt by the capitalist ruling classes to exploit those who do not posses the means of production...blah blah blah"

Anyway...It seems from a global position at least, that any down turn in the USA, can be offset to a degree by the rise of China and India.

Here in Australia, the stock market took a nose dive recently, due to the sub-prime mortgage crisis. But the fact that a big sector of the economy here is based on digging up rocks and putting them on ships to China, meant that we haven't been to badly affected, as yet.

On another aside, it's interesting to see it called "sub-prime" mortgage lending, when in fact it was just plain sly, greedy, underhanded and irresponsible. Any of those words would do better than "sub-prime".

[Commando84 0]

yeah lol at spokesperson but i understand him a bit now, he just defends cuba he is like the watchdog that defends cuba on these forums sort of, in all times, in all weathers and in any kind of discussion

I dunno i've been thinking a bit and i think its going down now but it will go up again like it always does, and about the IMF warning system for recession i think Us doesn't want to be tied to much to others and have their own freedom to walk their own path even if its not the optimal one.

[MehMan 0]

@Spokesperson - I'm incredibly happy that the track record for personal liberty and success in communist countries has been so abysmal. Capitalism without control is a terrible, even evil, thing, that creates a surplus poor population controlled through incarceration for nonviolent crimes created by classist and racist legislature. But nothing we put up with in America compares to the atrocaties commited by China, Cuba, Stalinist Russia, and North Korea. I suspect that you've never put your money where your mouth is, which isn't a surprise, given the relative anonymity of the internet (And they don't even have THAT in China).

We have another thread for this.

@Spokesperson:

You have your topic for your stuff.

[shinRaiden 0]

@Spokesperson - I'm incredibly happy that the track record for personal liberty and success in communist countries has been so abysmal. Capitalism without control is a terrible, even evil, thing, that creates a surplus poor population controlled through incarceration for nonviolent crimes created by classist and racist legislature. But nothing we put up with in America compares to the atrocaties commited by China, Cuba, Stalinist Russia, and North Korea. I suspect that you've never put your money where your mouth is, which isn't a surprise, given the relative anonymity of the internet (And they don't even have THAT in China).

There have never been any communist countries. Tell me what kind of atrocities Cuba has committed? When it defended itself against a US and CIA backed invasion at the bay of pigs? Assassination attempts on foreign presidents? Terrorism like shooting tourists from the sea and blowing aeroplanes and harboring those who commited those crimes?

The cuban personal liberty record is one of the best in the world.

Quote[/b] ]Cuba remains a Latin American anomaly: an undemocratic government that represses nearly all forms of political dissent. President Fidel Castro, now in his forty-seventh year in power, shows no willingness to consider even minor reforms. Instead, his government continues to enforce political conformity using criminal prosecutions, long- and short-term detentions, mob harassment, police warnings, surveillance, house arrests, travel restrictions, and politically-motivated dismissals from employment. The end result is that Cubans are systematically denied basic rights to free expression, association, assembly, privacy, movement, and due process of law.

Human Rights Watch

It would appear that you would be smoking something more than just the Cubano's, perhaps something supplied by their comrades FARC?

[Spokesperson 0]

Human Rights Watch is by all means a biased and liberal organization. In Cuba fundamental human rights are guaranteed and respected to 100%. Nowhere else is this done, neither in South America nor in the United States. People starve, people die of curable diseases because they don't have money to pay the doctor, people are homeless and freeze to death, millions are unemployed. This is not the case in Cuba thanks to its socialist system. Cuba is unique. It shows that third world countries can succeed despite of blockades and imperialist aggression.

Freedom is a relative word, which the human rights watch fails to understand. Freedom for whom? Freedom to exploit others, or freedom from being exploited by others? You can't have both freedoms at the same time.

The liberal, human rights watch-type, freedom favors the freedom of a minority to exploit a majority. In Cuba the majority is free from exploitation from an old system of the 19th century that's crashing as we speak.

[franze 196]

There is going to be some discussion of policy anywhere economics are concerned. However, economic discussions should not consist entirely of political opinions.

Keep to the original topic or this gets locked.

[walker 0]

Hi all

The main trigger for the current Depression is believed to be Sub prime lending.

Consequent to that today the US prosecutors began their investigations into who created the Sub prime bubble.

Investment banks such as UBS (UBS), Merrill Lynch (MER) and Goldman Sachs (GS) could be in focus after New York Attorney General Andrew Cuomo subpoenaed 18 banks over allegations that they misrepresented debt as an alternative money market instrument when they sold it to individuals.

Here have a read:

http://www.washingtonpost.com/wp-dyn....64.html

Essentially Sub prime worked like this banks such as UBS, Merrill Lynch and most importantly Goldman Sachs had a lot of questionable mortgages that they and their subsidiaries had sold.

Contrary to the myth most of the sub prime loans were not to poor people on their first home in fact most of it was second homes or investment properties, condominiums, in places like Florida and California. These are the kind of things these companies sell. They sold them to people who were loosing their jobs or who's investments were already crashing or to any Joe off the street BUT the whole thing was based on the false premise that property prices always go up.

The banks thought they had guaranteed investments if people defaulted then they just foreclosed and had all the money people had already paid plus the extra money the property would be worth!

OOPS! when the property started to not sell and decline in price. The banks were now stuck with a whole bunch of declining assets and if any one could see the assets when they were sold they would not buy them.

So they added lots of reasonable assets together and percentages of assets to make it as complex as possible things like peoples first home mortgages, business property mortgages, public loans to local government for infrastructure building and other kinds of assets all mixed together and created a paper asset based on these complex unfathomable mixed assets. They then sent their best salesman and marketing teams out to sell these dodgy assets to the rest of the world telling every one that these were the best return assets available. These bits of paper were the very essence of sub prime.

This is what polluted all those banks and pension shares.

But while sub prime was the trigger the explosive part of the mix is US debt levels.

Sadly walker

[Journeyman 0]

But while sub prime was the trigger the explosive part of the mix is US debt levels.

Of all your lengthy (and interesting) writings, the most accurate and to the point concerning the US slump is that one liner!

It is increasingly unlikely that the current US national debt will ever be fully serviced.

I'm just waiting for the day that the U.S. Treasury declares a force majeure on dept!

This is definitely a worse case scenario but a very real prospect when you start to factor in other realities like peak oil and food supply shortages leading to ever increasing fuel and energy costs.

I've already traded in most of my risky shares and bonds. My UK property will be next. I don't fancy taking chances with investments here anymore. Emigrating soon to a tropical island!  

[TWCRASH 0]

I've been following this thread since its onset, and although I'm no economist (Nor do I understand a great deal of some of what's been said here), I thought I'd opine.

@twcrash - You may not be feeling the economic crunch yet, but I assure you, things are not all good. Being in a lower tier of the economic spectrum, rising costs of gas, utilities, and food are putting the squeeze on my family. We're moving into a smaller place, doing away with some luxuries (Like our own washer and dryer, and selling the nicer furniture), and we're on WIC and (finally, they just raised the income limits a little, that's not an indicator of economic health) food stamps. I've got an Associate's Degree, and I'm applying for grants to finish my Bachelor's, but I'm fortunate to have some family support for babysitting, and own my own vehicles that run well. It's not so easy as "Well, poor people just don't work hard enough."

@Spokesperson - I'm incredibly happy that the track record for personal liberty and success in communist countries has been so abysmal. Capitalism without control is a terrible, even evil, thing, that creates a surplus poor population controlled through incarceration for nonviolent crimes created by classist and racist legislature. But nothing we put up with in America compares to the atrocaties commited by China, Cuba, Stalinist Russia, and North Korea. I suspect that you've never put your money where your mouth is, which isn't a surprise, given the relative anonymity of the internet (And they don't even have THAT in China).

$0.02

Anyway, off to wash the dog.

Your economic woes are not due to the country's economic problems. They are your own.Don't blame the Government on your poor planning. If you are unskilled this is your fault and not the governments. My god we have so many trade tech schools for younger people its disgusting. And I speak this from experience because I slept in a friends car for 6 months til i got my act together and decided I would be the one to change my life. And I have worked 3 jobs at one time to make ends meet so don't preach to me about i don't have a clue. I grew up in East L.A. And if it came to putting food on the plate for my family again I would live there in L.A. again and work 3 jobs to make sure it happened. at one point we lived in a converted hotel (now 1 room apartments) at 6501 Walker Avenue in Bell Ca. (check it in google maps ) before we could move in i had to bug bomb it for 3 days and about 4 pounds of powder to kill off all the roaches which took 2 days to clean up. I swamped trucks at 3 Am at albertson's unloading more chicken than i would ever care to see for 40 bucks. I worked at various food pantries unloading their trucks so I could take some of it home to feed my family as well. I have swamped trucks, been a security guard and even finished cement at one point in my life. along with way too many crappy jobs to list here. So get off your ass and do something about it.

[gsleighter 0]

Actually, I'm about 2/3rds the way to a Bachelor's Degree, courtesy of the Montgomery GI Bill, and I've been working 65-70 hour weeks for a long time to make ends meet. Not exactly sitting on my ass waiting for the next welfare check. So, maybe instead of a pissing contest over who's worked harder, we focus on my point, which was that all indicators are that the economy is not well.

It's easy to place the blame.