Rug Burn Junky on 31/7/2011 at 14:06
How many times and how many different ways do we have to explain to you that your entire conception of this stuff is utterly and completely wrong? It's not even just little pieces, it's the entire framework. Just. Wrong.
Just stop posting. This thread isn't about the stimulus. And you fucking things up by bringing in your mistaken thoughts on that subject is an unnecessary tangent. You're not adding anything other than parroting ignorance on an unrelated subject, so please stop.
Rug Burn Junky on 31/7/2011 at 14:41
But just because I'm in a charitable mood, and maybe some of this will penetrate your ignorance, one more time, let's explain why you're wrong.
Let's start with the basics. You have supply and demand. In a bubble, you have an excess of demand untethered from supply, due to market failures in the underlying finance. It drives prices up. Then you reach a point were the unsustainability is exposed and you have what is called a "minsky moment," in which no one is willing to bid things up any further because even the most irrationally exuberent have realized that prices are out of whack. That's what happened in 2007/2008.
So what comes next is the opposite of a bubble and just as bad. Instead of too much demand to associate with the underlying economic production, you have too little. Just as the bubble is driven by everyone buying even when the prices are too high, in the anti-bubble you have no-one buying even when prices are too low. You develop what is called an economic output gap - your economy is capable of a certain level of production, but you aren't reaching it because your resources are sitting idle becuase people think that no-one else will buy things, so they don't engage those resources (ie. "I'm not going to hire anyone to make things to sell, because I don't think I'm going to be able to sell them.") Once again, the finance has become untethered from economic production.
How do you fix this? Easy, you add demand. Normally, one of the best ways to add demand is to increase credit. You lower interest rates, borrowing goes, up and voila, you have a recovery. But that couldn't happen here, because the bubble was actually driven by interest rates being kept too low in the first place by this one, enormaous jack-ass who-really-didn't-know-what-he-was-doing-and-shouldn't-be-trusted-now (*cough*Greenspan*cough*).
So what's your other option? How about the action of last resort: adding a market player who isn't as resource constrained to buy things. That's stimulus. This convinces people that there will be demand in the future, so they start buying things themselves.
Now, what they spend it on? irrelevant mostly, as long as it's being inserted inot the economy at a point where it will be respent. Hire construction workers to build and bridges, or build commuter rail lines. Give it to the unemployed while they search for a new job. Make sure it's circulating.
That's the optimal solution once you've reached a point where you can't lower interest rates. Secondary is more of a Milton Friedman solution - increase the money supply in the hopes that it spurs inflation and a resulting increase in demand (but, since inflation is usually a result of too much demand, that's a little backwards - it can work, but it's like pushing on a string. That solution is what was attempted by QE2.)
We had an output gap of roughly 1.3 trillion dollars. If you wanted a recovery that was self sustaining, something close to that had to be spent. We spent half. Why? because fiscally conservative jack-asses who fret their fucking heads off over gubmint corruption wanted it smaller. Half as big, as it turns out. 700 billion. Well, ok, at least it's all effective spending, right? Well, wrong again, because fiscally conservative jack-asses also wanted half of THAT to be tax cuts, which don't go to the resource constrained segments of society, but rather to the segments that already have money.
Of course, due to political constraints, the adminstration made the ultimate error in grimacing and pretending that this was sufficient.
But of course it wasn't. And now those same jack-asses are criticizing it for exactly the reasons that they hamstrung it in the first place. And our little darling idiot is repeating those criticisms without understanding how fucking wrong they are.
"It's the same as trickle down!" Yes, right, because the trickle-down jack-asses demanded that that ineffective aspect be incorporated. Anybody who advocated FOR stimulus in the first place knew this was ineffective in the first place.
"It didn't work" Well, it worked better than nothing, but the reason it didn't work as well as it should have is because those same Jack-asses made sure it was too small. When your car's in a ditch and you want to hire a tow truck to get it out, but some jack-ass insists that using a riding lawnmower with some fishing line could get the job done, you'd be in idiot to listen to that same jack-ass again when the plan fails and he tries to tell you that it proves "towing doesn't work." That's what's happening here.
The problem with the stimulus, as was noted at the beginning, was that it was inadequate. But stupid people like CCCToad don't hear that. They simply hear "it didn't work." without understanding that there are crucial differences between "inadequate," and "ineffective."
So, in short, the criticisms of those same jack-asses who've been wrong all along should be disregarded. That includes our resident economic fucktard. So again: JUST SHUT THE FUCK UP, BECAUSE YOU'RE WRONG.
CCCToad on 31/7/2011 at 15:12
Quote:
Now, what they spend it on? irrelevant mostly, as long as it's being inserted inot the economy at a point where it will be respent. Hire construction workers to build and bridges, or build commuter rail lines. Give it to the unemployed while they search for a new job. Make sure it's circulating.
Actually, I think we agree about more than you think.
Which is my main criticism, the stimulus was too small to circulate much and my addition is that too much of what was authorized went into the coffers of the already-rich instead of making it into circulation.
Quote:
How do you fix this? Easy, you add demand. Normally, one of the best ways to add demand is to increase credit. You lower interest rates, borrowing goes, up and voila, you have a recovery. But that couldn't happen here, because the bubble was actually driven by interest rates being kept too low in the first place by this one, enormaous jack-ass who-really-didn't-know-what-he-was-doing-and-shouldn't-be-trusted-now
Again, agreed. My speculation as to why he did that is less charitable. I think he knew exactly what he was doing: enriching his cronies at the expense of the rest of the entire country. While I would have agreed with you a few years back, I find it hard to believe he was ignorant of what was happening when Congressional probes revealed that Goldman was well aware of the bubbles about to burst and gained immense profit from it.
edit: Now the rumor is that a corporate tax-holiday is going to be part of the deal. Does the GOP even give a damn about the problem or do they just see it as an opportunity to make more money for the already very wealthy?
Rug Burn Junky on 31/7/2011 at 15:49
And yet time, and time, and time and time again, you parrot the company line of exactly those folks who are trying to accomplish those crony-enriching schemes by repeating the same easily disproven arguments that they do. And then conflating it with stupid Matt Taibbi level anti-Goldman shit that is just as crackpot-conspiracy-laden as the Tea Party. Fucking christ.
You are a sucker, hook line and sinker.
The same people who say "The stimulus failed" were the ones who CAUSED IT TO DO SO. The portions that were actually stimulus, worked, plain and simple. The portions that were diverted by Small Gubmint Libertarians didn't. So when they come out and say that the whole thing "failed," without acknowledging that the portions that they insisted upon fucked it up, the rest of us have a right to tell them to STFU.
Maybe you just have to accept the fact that you don't understand how the world works.
Shadow on 31/7/2011 at 17:20
Good thread, especially RBJ's posts.
Keep the rage flowing, friends, it makes for an interesting read.
heywood on 1/8/2011 at 01:50
EDIT: Shut beat me to it.
Now that further details are coming out, it looks like another increase won't be required until 2013. And the deal defers the hard decisions to a committee that has until this November to report otherwise additional cuts automatically kick in. I may be cynical, but I can't see a compromise being worked out by November now that the deadline pressure is gone. So they have effectively kicked the problem down the road to the next Congress.
On a side note, I've been following the news on this over the last month or two through the internet & occasional CNN. From afar it seems like the American press is more concerned about Casey Anthony going free than potential federal bankruptcy. I had been wondering whether we'd follow the UK and start facing up to the problem or follow the Greeks and run up a deficit so high our borrowing costs get out of control. So far it looks like Greek - people just don't seem to be taking it that seriously.
Rug Burn Junky on 1/8/2011 at 02:23
Because we're not Greece, and pretending that we are even remotely running the risk of imminent "potential federal bankruptcy" is an hysterical overreaction.
Oh, and England, thanks to "facing up to the problem," is in worse shape than we currently are thanks to their short-sited austerity.
Scots Taffer on 1/8/2011 at 02:35
Quote Posted by Rug Burn Junky
Haven't I given enough? I give and give, and you take and take, and where does that leave me?
Don't lie, you love it. Appreciate the replies though. ;)
Quote Posted by Rug Burn Junky
What happens on the market and "sensible level of return" is a side a effect, and really shouldn't be the focus. This is where I'm running out of time, but yes, we can go for many, many years without turning into Greece. The boom was bad, but it was a bubble, not a fundamental flaw in our economy (a fundamental flaw in our financial markets maybe, but that's another story.) As I said, we carried far more debt during the post-war period, and we were able to grow our way out of it. Alleviating the household balance sheet problem would be a start (inflation would be a GOOD thing right now, for exactly that reason), and keeping a basic social safety net which actually allows entrepreneurs to take risks instead of forcing them into wage slavery. One of the results of high levels of income inequality is a further downward push on wages in the general economy. The equilibrium we are reaching keeps wages just below the levels required for modern necessities, and requiring some debt spending, and keeping the populace resource-constrained in such a way that it minimizes market forces on behalf of labor - and disincentivizing saving. Unless of course you have an equity builder like a home - which allows for modest saving, at the cost of flexibility, trading one constraint for another. In the 50's this was counteracted by a strong union presence and sensible tax policies. Decreasing income inequality would go a long way to improving this - the market equilibrium will reach a point allowing for more productive, sustainable growth, without debt fueled bubbles being a necessity for any sort of uptick. Make sense?
Perfect sense. I have my suspicions that it's a little too harmonious but with a deal having just been brokered, I guess it will be interesting to see where the comprimises have come and what it means for the long-term health of the economy. Clearly though, the US debt ceiling was just another in what has been a long line of troubles for the global economy on its road to recovery and we've all got some way to go before anything looks promising.
heywood on 1/8/2011 at 02:40
Quote Posted by Rug Burn Junky
Because we're not Greece, and pretending that we are even remotely running the risk of imminent "potential federal bankruptcy" is an hysterical overreaction.
Oh, and England, thanks to "facing up to the problem," is in worse shape than we currently are thanks to their short-sited austerity.
Disagree with you there. Bankruptcy isn't imminent like Greece, but the state of public denial is like Greece. I think more realistically, we're going to follow the model of Japan and be stuck in a long term debt-induced period of little growth.
It's no longer possible to grow our way out of the deficit, so austerity is required in the form of both revenue increase and spending decrease. It's a simple compound interest problem. If you wait until economic conditions are better, you will have accrued that much more debt and the extra debt service costs will require austerity measures deeper than would be required today. The solution becomes more painful every day. It's the inverse of the retirement savings problem that Americans also have to face.
And the UK isn't that bad. Growth is flat due to austerity, but the unemployment rate is better than the US. I just spent two months there and subjectively, didn't see too many signs of economic hardship.
EDIT: What struck me about Greece was this - anybody with half a brain could see that rejecting the IMF-brokered deal would lead to bankruptcy and fiscal ruin, but the left and right still wouldn't come out of their entrenched positions. And when the UK and Euro news channels would interview ordinary Greeks on the street, they would often say they didn't believe the crisis was real. The EU and IMF essentially had to put a gun to their heads to get the government to act. While there's obviously some political tension in the UK, there seems to be more of a "we're all fucked, let's get on with it" mentality.
