If Ron Paul were in this race, I would vote for him. Barring that, I will vote to slap down these brain-dead Republican Neo-Con Fundamentalists, and wake them up from their dreams of hegemony.

I'm also not afraid Obama will will turn this country into a socialist state. Even though he advocates some socialist-type programs, it's the neo-con fiscal policies that are forcing government control over important businesses like banks.

QM,
"And if you think government research is ever going to surpass private enterprise research: HA"

I guess we should have put out bids on the Manhattan Project and the Apollo program... I'm sure that would have succeeded wildly... Also, I say this as an R&D engineer, private research is very good at developing technologies, but... Private research sucks at creating technologies, and it sucks at science, it always has, and I suspect it always will. The pay off in doing basic science research is so far down the road, and such a gamble that little or no private enterprise is willing to touch it.

Also, I used to be fiscally conservative, and socially liberal. I have read Adam Smith, and Thomas Malthus... But after I finished school, and entered the real world, I realized that it just doesn't work that well. If you look at economic history of the US, it is the times that we had liberal presidents that our economy grew the fastest, unemployment dropped the fastest, Carter was the one aberration.

The University of Nevada-Reno uncovered the following while conducting the economic comparison between Republican and Democratic presidential administrations from 1949 to 2005:
• Unemployment Rate- Republicans 6.0%, Democrats 5.2%
• Change In Unemployment Rate- Republicans +0.3%, Democrats -0.4%
• Growth of Multifactor Productivity- Republicans 0.9%, Democrats 1.7%
• Corporate Profits (share of GDP)- Republicans 8.8%, Democrats 10.2%
• Real Value of Dow Jones Index- Republicans 4.3%, Democrats 5.4%
(in logarithmic growth rates)- Republicans 2.8%, Democrats 4.4%
• Real Weekly Earnings- Republicans 0.3%, Democrats 1.0%
• CPI Inflation Rate- Republicans 3.8%, Democrats 3.8%

In short, it looks like Keynes is spot on.

Ideologically, I like fiscal conservatism, but pragmatism demands liberalization of fiscal policy. I am a liberal now, because of pragmatism, something I think you would understand with your comments about how great religion has been for the world (a statement I disagree with, btw. Sure good things have been done in the name of religion, but I am not so sure it outweighs the bad.).

Don't tell me that liberals know nothing of conservative thought. I used to think it my self, but then I looked around and grew up, became a liberal.

Also, calling our congress communist shows a complete ignorance of the definition of the term communism. Same with your use of the term socialism. Palin, and W are much more socialist than Obama. Bush with the buying of banks, and Palin with the paying of every citizen of Alaska.

First, gorillaman, I got that, and it was clever. You're still a tall freak.

Secondly, NetRunner, I think you are negligently miscategorizing neocons as conservatives. Spendthrift wars and nation-building is not conservative, it's innately liberal (Neoconservative). We've been over this before, but apparently it was all for not. I'm liberal on civil liberties and personal freedoms but conservative on fiscal policy. I guess that makes me Libertarian.

Now, get out of my wallet, you bums. I ain't paying for you, your sick children or your stupid goatfucking trains.

Alexander Fraser Tyler wrote: "A democracy cannot exist as a permanent form of government. It can exist only until the voters discover they can vote themselves largesse (defined as a liberal gift) out of the public treasury. From that moment on, the majority always votes for the candidate promising the most benefits from the public treasury, with the result that democracy always collapses over a loose fiscal policy, always to be followed by a dictatorship."

James Madison [fourth U.S. President] wrote: "In all cases where a majority are united by a common interest or passion, the rights of the minority are in danger!"

John Adams [second U.S. President] wrote: "Unbridled passions produce the same effects, whether in a king, nobility, or a mob. The experience of all mankind has proved the prevalence of a disposition to use power wantonly. It is therefore as necessary to defend an individual against the majority (in a democracy) as against the king in a monarchy."

Sounds pretty familiar, does it not?

Roubini has some very good ideas on how to do this right, and not be a scam:

HOME (Home Owners’ Mortgage Enterprise): A 10 Step Plan to Resolve the Financial Crisis
Nouriel Roubini | Sep 24, 2008

Even if the Treasury TARP plan is implemented fairly and efficiently the US will not avoid a severe U-shaped18-month recession and a severe financial and banking crisis: the recession train has already left the station in Q1 and the financial/banking crisis will be severe regardless of what the Treasury and the Fed do from now on. What a proper rescue plan can do is to avoid having the US experience a multi-year L-shaped recession and extreme financial crisis like the one that led to a decade long stagnation in Japan in the 1990s after the bursting of their real estate and equity bubbles.

I have also argued that, in order to resolve this financial crisis it is not enough to take the bad/toxic assets off the balance sheet of the financial institutions (a new RTC); it is also necessary and fundamental to reduce the debt overhang of millions of insolvent households via a significant debt reduction on their mortgages (an HOLC program like the one that was implement during the Great Depression); and also recapitalize undercapitalized banks with public capital in the form of preferred shares (as the RFC did with 4000 banks during the Great Depression). An RTC scheme without an HOLC and RFC component would not resolve two fundamental problems: millions of households are insolvent and unable to service their mortgages; the financial system is vastly undercapitalized and needs capital to avoid an ugly credit crunch and to foster new credit creation that is needed for future growth.

That is why I proposed the creation of a HOME (Home Owners’ Mortgage Enterprise) that would be a combination of an RTC, a HOLC and a RFC. Let me flesh out this proposal and its key elements and compare it to the Treasury TARP proposal that in its current form has many flaws.

There are 10 steps in this HOME proposal to resolve this most severe financial crisis. Here they are:

First, like in the Treasury TARP plan you need to buy illiquid/toxic assets and take them off the balance sheet of banks and financial institutions to reliquify them and allow new credit creation. The biggest problem here – as the debate between Bernanke and senators yesterday is one of the proper valuation and the proper price at which the government should buy these assets (the RTC did not have this problem as it was working out assets of failed S&Ls): if the government buys the asset at at price that is too high (too small of discount relative to face value) the fiscal cost will be huge and you massively subsidize reckless bankers and their shareholders. If you buy at a discount that is too high you minimize the fiscal cost in the short run but many banks could go bust and the eventual fiscal cost of bailing out the depositors of failed banks could be large. You can debate endlessly whether such assets should be bought at current market price or at prices closer to hold to maturity values (as Bernanke suggested). Given that these assets are impaired pricing the long run value of them is mission impossible. Thus, there is only one solution to this fundamental uncertainty: avoid the government overpaying by having the government having some of the positive benefits of an upside gain in case the banks’ values recover after the bailout. I.e. you need for the government to have some equity in the banks whose assets are purchased by the government. This leads to step 2 of the proposal.

Second, in exchange for the purchase of illiquid asset (at whatever price it is agreed) the government gets preferred shares in the financial institutions that senior to existing common and preferred shares and that are convertible into common shares to allow government to participate into any future upside.

Third, even if the government gets preferred shares as in step 2, the banks will need more capital if they are undercapitalized and they have not fully reserved/provisioned for the losses coming from writing down the asset being sold to the government. So you will need to inject further actual public capital in the form of preferred shares in the financial institutions ( this is what the RFC did during the Great Depression).

Fourth, given the risk to the government deriving from the public injection of capital in the financial system the existing shareholders of the banks need to take a first-tier loss to minimize the risks for the government share. How to do that? First, you need to suspend dividend payments on common share and possibly even existing preferred shared; you also need to force to partially match the public capital injection with new Tier 1 capital.

Fifth, public and private recapitalization of financial institutions unfairly benefits unsecured creditors (all creditors but insured depositors) of such institutions. So, you also need to convert some of this unsecured debt (the sub debt and other debt unsecured debt) into equity (a debt for equity swap). Such swap further reduce the leverage of the financial system (leading to a lower debt to equity ratio for financial institutions).

Sixth, after this crisis is resolved the banking and financial system may need lower capital than before this crisis so as to avoid new asset and credit bubbles; and if you recapitalize some banks that will be able to lend more (still with lower leverage ratios) you still need to let other insolvent banks and financial institutions to go bust and disappear. Only healthier institution should survive. So you need to a systematic triage between banks that are distressed, undercapitalized and illiquid but solvent once the private and public recapitalization occurs from those that are fundamentally insolvent and that need to be shut down. You need to destroy the bad apples to let the good ones or the sick but curable ones survive and thrive.

Seventh, as in the case of the RTC the assets of the banks that are bankrupt and are allowed to fail go to the HOME for workout (debt restructuring/reduction).

Eighth, you need an HOLC-like program for debt reduction of the household sector. Households in the US have too much debt (subprime, near prime, prime mortgages, home equity loans, credit cards, auto loans and student loans) while their assets (values of their homes and stocks) are plunging leading to a sharp fall in their net worth. And households are getting buried under this mountain of mounting debt and rising debt servicing burdens. Thus, a fraction of the household sector – as well as a fraction of the financial sector and a fraction of the corporate sector and of the local government sector – is insolvent and needs debt relief. When a country (say Russia, Ecuador or Argentina) has too much debt and is insolvent it defaults and gets debt reduction and is then able to resume fast growth; when a firm is distressed with excessive debt it goes into bankruptcy court and gets debt relief that allows it to resume investment, production and growth; when a household is financially distressed it also needs debt relief to be able to have more discretionary income to spend. So any unsustainable debt problem requires debt reduction. The lack of debt relief to the distressed households is the reason why this financial crisis is becoming more severe and the economic recession - with a sharp fall now in real consumption spending – now worsening. The fiscal actions taken so far (income relief to households via tax rebates) and bailouts of distressed financial institutions (Bear Stearns creditors’ bailout, Fannie and Freddie and AIG) do not resolve the fundamental debt problem for two reasons. First, you cannot grow yourself out of a debt problem: when debt to disposable income is too high increasing the denominator with tax rebates is ineffective and only temporary; i.e. you need to reduce the nominator (the debt). Second, rescuing distressed institutions without reducing the debt problem of the borrowers does not resolve the fundamental insolvency of the debtor that limits its ability to consume and spend and thus drags the economy into a more severe economic contraction. So of the five possible uses of fiscal policy – income relief to households (the 2008 tax rebate), rescue/bailout of financial institutions (Bears Stearns, Fannie and Freddie, AIG), purchase of assets of failed institutions (an RTC-like institution), recapitalization of undercapitalized financial institutions (an RFC-like institution), government purchase of distressed mortgages to provide debt relief to households (an HOLC-like institution) – the last option is the most important and effective to resolve this severe financial and economic crisis. During the Great Depression the Home Owners’ Loan Corporation was create to buy mortgages from bank at a discount price, reduce further the face value of such mortgages and refinance distressed homeowners into new mortgages with lower face value and lower fixed rate mortgage rates. This massive program allowed millions of households to avoid losing their homes and ending up in foreclosure. The HOLC bought mortgages for two year and managed such assets for 18 years at a relatively low fiscal cost (as the assets were bought at a discount and reducing the face value of the mortgages allowed home owners to avoid defaulting on the refinanced mortgages). A new HOLC will be the macro equivalent of creating a large “bad bank” where the bad assets of financial institutions are taken off their balance sheets and restructured/reduced.

Ninth, we need to avoid a situation where the recapitalization of the banks and the resolution of this financial crisis leads to another credit and asset bubble. Many things need to be done to avoid this risk but a rapid change of the Basel II capital adequacy ratios to reduce their the pro-cyclicality would be essential.

Tenth, start implementing rapidly a reform of the system of regulation and supervision of financial institutions in a world of financial globalization. With the collapse of most of the shadow banking system most of these shadow banks are now being folded in the traditional banks and will be regulated like banks. Indeed all institutions of large size and that are systemically important (commercial banks, investment banks, non-bank mortgage lenders, hedge funds, private equity funds, etc.) should be supervised and regulated in a similar way. To make the financial system more stable over time and avoid severe financial crises like the current one will require that both banks and former shadow banks be regulated and supervised better than they have been in the last decade. After all traditional banks have performed as poorly – and some more poorly – and have lost more money than shadow banks during this severe financial crisis. So both the poor regulation and supervision of banks (as regulators were asleep at the wheel while the laissez fair ideology and voodoo-cult of self-regulation and market discipline and internal risk management became dominant) and the lack of sensible regulation of shadow banks lies behind the current financial disaster. Thus, folding shadow banks back into the traditional banking system will make the overall financial system more stable only if the proper reform of the regulation and supervision of financial institutions in a world of financial globalization will be undertaken. This important matter is the subject of the chapter (titled “Financial Crises, Financial Stability, and Reform: Supervision and Regulation of the Financial System in a World of Financial Globalization”) that I have written for the recently published World Economic Forum’s Financial Development Report.

This chapter analyzes in detail the episodes of financial crisis in emerging market economies and advanced economy; discusses the causes and consequences of such crisis; measures the economic and fiscal costs of such crises; discusses the debate on whether monetary and credit policy should target asset prices and asset bubbles; studies the weaknesses of financial regulation and supervision in advanced economies financial systems that led to the recent crises; and finally considers eleven separate key issues in the reform of the regulation and supervision of financial institutions in a world of financial globalization that are necessary to prevent future crisis and make them less virulent. These eleven issues that are key in reforming financial regulation and supervision are: the distorted compensation system of bankers/traders and the related agency problems between financial institutions shareholders and their managers; the flaws of the originate and distribute securitization model; regulatory arbitrage and the instability of the shadow banking system given its reliance on short term liquid financing, high leverage and long term illiquid lending; the weaknesses of self-regulation and market discipline and the need of greater rules-based regulation; pro-cyclical capital requirements and other issues with the Basel II capital requirements; the distorted incentives of credit rating agencies; asset valuation and fair value accounting in a world where assets can be highly illiquid and hard to price; the lack of transparency in financial markets; the inadequate regulatory regime; the lack of international coordination of regulatory policies; and the issue of who will regulate the regulators, i.e. how to avoid the regulatory capture by the financial industry of the regulators and supervisors of financial institutions.

So now that the shadow banking system is being folded in the formal banking system it is high time to rethink how both banks and the former non-bank financial institutions should be properly regulated and supervised.

http://www.rgemonitor.com/roubini-monitor/253739/home_home_owners_mortgage_enterprise_a_10_step_plan_to_resolve_the_financial_crisis

When I think of economic fundamentals here are some things that come to mind:

-How much disposable income do consumers have? It's still extremely high in this country. However, energy prices are making a dent.

-How difficult is it to start up a business? Relatively easy (extremely easy for service based businesses).

-How prevalent are the five factors of production (Natural Resources, Human Resources, Capital, Entrepreneurs, Knowledge)? Those factors are not declining.

-How much economic freedom do we enjoy? Less all the time but we are still very free in almost all respects.

-Is there still plenty of competition in all aspects of the economy? For the most part.

-Monetary policy? Don't get me started on the Federal Reserve Board.

-Fiscal Policy? We need to focus on that, both on the Federal and Local levels.

There are other influences on the economy that are not as good as they have been in the past (for example getting credit is increasingly difficult), but all in all I agree with McCain. The fundamentals are strong. But what's the point of saying that over and over? I don't know.

He didn't say that the financial markets are performing well, or that the housing market is on the up and up. He's being so vague that he's reminding me of Obama

http://www.heritage.org/research/features/index/country.cfm?id=Unitedstates
"The economy of the United States is 80.6 percent free, according to our 2008 assessment, which makes it the world's 5th freest economy. Its overall score is 0.3 percentage point lower than last year, reflecting minor declines in four of the 10 economic freedoms. The United States is ranked 1st out of 29 countries in the Americas, and its overall score is much higher than the regional average.

The United States scores higher than the world average in eight areas and 30–40 percentage points higher in five: business freedom, investment freedom, financial freedom, property rights, and freedom from corruption. Foreign investment is subject to the same rules as domestic capital. Financial markets are open to foreign competition and are the world's most dynamic and modern. The judiciary is independent and of high quality.

America could do better in its scores for fiscal freedom and government size, which are 7 and 8 points below average, respectively. Total government spending equals more than a third of GDP. Corporate and personal taxes are moderately high and are getting relatively higher as other advanced economies reform with lower tax rates.

Background:
The United States is the world's dominant economy. With over two centuries of a fundamentally free, constitutionally protected economy, America benefits from its massive scale and intrastate competition. Trade barriers among the 50 states are unconstitutional, for example, allowing for the free movement of goods and labor. However, there have been troubling developments in recent years. Property rights have been threatened by the Supreme Court's 2005 ruling in Kelo v. City of New London. Congress has been active in raising the minimum wage, which has harmed labor freedom, but inactive in lowering corporate tax rates, unlike most other advanced economies. Most alarming, America's major political parties have been unwilling to curb growing government expenditures, particularly public entitlements.

Inflation is certainly bad, but the Federal Reserve is not ignoring it. Core PCE inflation is at 2.0%, the top of the FED's comfort zone. Their recent policy statement acknowledged that inflation is becoming more of an issue, and at the last meeting two dissenting votes were cast to stop cutting interest rates too far.

I think that the Federal Reserve will stop cutting rates very soon, as the inflation hawks begin to get more worried. Its members aren't stupid, and the FED is more competent than the fiscal policy idiots who also contributed to the economic mess.

>> ^BansheeX:
@Solipsy
Once the long overdue second depression finally comes, you may finally realize that all of this stuff you espouse has led you into a situation where you are attempting to survive without a job or with wheelbarrows full of worthless fiat money. So good luck with that when it comes.


Did you miss the bit where the person you're talking to said they began suffering from debilitating MS at age 22? And isn't working because of that? "All this stuff" being espoused by Solipsy isn't what led to his/her current situation, rotten luck did. Or possibly environmental contamination caused by profit-driven free-market corporations without adequate regulation did - seems more likely than his/her political ideology at any rate.

If you're honestly arguing that social security be eliminated (and that's *ALL* I'm talking about - the federal reserve and the gold standard and all that other stuff you keep bringing up isn't the topic at hand), then do you want people in situations like Solipsy's - which are far too common - to simply die? Or should they go begging at a local church - another system a good objectivist would typically argue isn't worth supporting? Local charities maybe? Great idea as long as the local people can afford to give to charity.

Social security, aside from all other welfare programs or federal agencies or fiscal policy issues, is in my opinion (and that of MANY other intelligent, educated people) a good thing which should be maintained. It can be improved upon, but eliminating it would be a horrible idea until a more stable alternative (which everyone who needs it can use) is devised.

Oh, and if my holding this opinion causes you to vomit, fine. You need to stop reading commentary on the internet if you have such a weak constitution that opinions not your own (or ignorance, if you choose to see it that way) cause such a violent reaction.

Clinton did nothing for national defence. HA, ROFL, Source please? The right will want you to believe that the "Bush doctrine" to protect America is new under Bush, but Clinton always had America's security first and took preemptive actions whenever he could (remember, he didn't have 9/11 to justify illegal action), in the interview he cites situations where this is/was true including the attempted off of Bin Ladin and creating defence against terrorism, it was the inaction of the right when they took office that allowed for 9/11 to happen. Not to mention Bush has failed to find/kill Bin Ladin even when deploying the armed forces in an illegal war and invading two countries, has lied about much worse things than fellatio including torture and inhumane treatment, pretences to invade a country and kill thousands of innocents and our soldiers, and his campaign policies. He has alienated the entire world KILLING any hegemony that Regan, Bush Sr, and Clinton established during their presidencies, created NCLB which does nothing but hurt the public education system, and has done jack shit with the economy except raise the national debt. I would go on, but anyone who doesn't get the point will never be swayed.

"Were it not for Perot, he would've lost in '92 and much of today's hells might've been avoided."
Were it not for the electoral college, a flawed election system that is based on 18th century paranoia GWB wouldn't be president and ALL of today's hell might be avoided.

He didn't just kick ass in this ambush because he's a good orator, he also spoke the truth and not some partisan bull shit that CNN and Fox always spew.

I can't wait for someone to say that he's fiscal policy only worked because he was riding Regan's econ policy...

/edit - http://thinkprogress.org/clinton-interview the full transcript... I think it isn't translated perfectly, I read it via another website and they used this as a source and the english was broken at places but it's still there.