>> ^GenjiKilpatrick:

Because you "earn" the income of about 80 people.
Or in otherwords - since the supply of money is limited - you steal the wages of 79 people who would otherwise have an income.
That's called selfish. Plain and simple.
[Not to mention completely cruel & dickish now that we're in a Global Depression]
>> ^pyloricvalve:
Why is it morally justified to impose a higher tax rate on the more highly paid? I'm already paying twenty people's worth.. Why should it be more?



The supply of money isn't limited, per se...it's directly related to the total amount of debt. If people promise to pay more debts (and therefore interest), then there is more money overall. That's a big reason why consumer confidence and the housing market are such huge drivers in the economy. The more people take out loans for stuff/cars/homes, the more money becomes available for banks to loan. Hence, when there are too many defaults and foreclosures, the supply of money shrinks and you get credit crunches, etc.

If anyone's "stealing", they're stealing a relative amount of money compared to everyone else. You've got the right general idea, I think, but it's more like having a piece of a pie when the pie can get bigger and smaller.

http://videosift.com/video/Making-Sense-Small-Businesses-Battle-the-Credit-Crunch

Wow! Thank you for the quality and the doublepromote!

PBS News Hour channel has some good videos on it.

In reply to this comment by blankfist:
*quality *doublepromote

economy video:
http://videosift.com/video/Making-Sense-Small-Businesses-Battle-the-Credit-Crunch

>> ^gtjwkq:
Setting working conditions and minimum wages is the art of benefiting the hired at the expense of the employers and the unemployed. Pretty soon a black market for illegal hiring will grow as businesses and people try to survive in tough times despite such ill-considered regulations. So you actually end up with 3rd world salaries that way.

Minimum wage is a whole other topic, but my read of what you're saying here is that 3rd world salaries in the US are unavoidable, and we should just accept it. Suffice to say, I disagree.

Just FYI, almost 70% of America's GDP accounts for consumer spending, its not reliable as an indicator of a nation's productivity. Over the years, a lot of that spending is just people borrowing with their home equity extractions and mostly credit card debt. Now that we're in a credit crunch, GDP will probably fall (unless statisticians come up with a more hedonistic interpretation for it).
In a recession like we're having, in the private sector you need more productivity and you need to flush out the malinvestments and money wasting businesses.

I agree with this, though I'd replace the Austrian-defined "malinvestment" with just plain "bad investments." Why did the market go for an asset bubble, rather than go after investments with a real long-term prospect?

In the public sector, you need less govt so it can be less of a burden on the private sector.
How can that possibly happen if govt borrows/taxes/prints a stimulus into existence (adding to the burden of debt), then proceeds to use all that taxpayer money to expand govt programs and spending (more burden),

How does laying off schoolteachers, firefighters, police officers, closing VA hospitals, etc. Help recovery? It seems like a highly ideological statement to say that no one the government gives money to should be employed.

Being worried about the debt seems natural, but why you would say the spending itself adds burden? That seems to presuppose that money spent by government is automatically, intrinsically going to purchase nothing of value to anyone.

[It] bails out the inefficient businesses that should've failed otherwise (more burden)

For what it's worth, the left (myself included) isn't pleased about the bailouts. We're mollified slightly when the CEOs of several of these institutions is asked to resign. I'm not so worried about the auto bailouts (since they're all loans, and I suspect they'll be repaid), but the bank bailouts should involve more pain from people who aren't taxpayers.

and poorly hands that money out to businesses via govt contracts instead of letting consumers make better choices with their money themselves (burden burden burden)?

As a general proposition, I would agree with this, though we're "fortunate" in that successive rounds of conservative politicians have let our infrastructure crumble, so we have a very convenient, worthwhile target for stimulus. That's in contrast to Japan, whose stimulus mostly went towards things of little long-term economic benefit, like increasing their level of hurricane and earthquake resistance.

Blaming mostly investment banks for this recession is like force-feeding alcohol to a bus driver and blaming him for killing all the passengers in the resulting crash. Don't you have any idea of the Fed and other federal institutions' role in causing the market distortions that led to this recession? How can you give them a free pass as the major culprits?

I've seen Peter Schiff use this metaphor (and others like it) several times. It makes no sense.

You say government force-fed them alcohol, when really what it did is give them money. Why is government solely or primarily at fault for the investment bank using that money to make bad investments?

To me, this seems like trying to jail the CEO of Smith & Wesson for a murder committed with one of their guns, while holding the person pulling the trigger blameless.

It is a kind of selection, just not as brutal as you described, because its not the end of the world: people get fired, businesses go bankrupt, the assets of incompetent people are transfered to the competent people, people are hired again somewhere else and eventually the economy resumes growth.

Yes, people get fired, lose their health insurance, lose their savings (what's left of them), go even more deeply into debt, potentially lose their home...yep, nothing at all brutal in that!

The market is not an omnipotent unstoppable force, its complexity just eludes the narrow-mindedness of the fools that try to plan it, specially when they're the same fools that screwed it up in the first place. A market is already planned by those in it, and they have the best incentives in place to make the best plans, because they are usually the first ones to pay for their mistakes. Politicians and bureaucrats, on the other hand, are exempt from responsability and are seldom punished when they waste huge amounts of money. They are the ones who commited the worst sins.

Why are politicians exempt from accountability? Don't we have elections?

Which CEO of these companies is now on welfare or in jail? Seems to me, other people wind up paying for their mistakes, government bailout or no.

The terrible mistake in your criticism of the market is that you constantly blame its "emergent" irrationality as an excuse for thinking on its behalf. What you correlate to auto-immunity on an otherwise healthy body I would compare to a heavily medicated pacient that undergoes daily surgeries after years of treatment for what started out as a sore throat.

I think anyone familiar with the history of the Great Depression, and the 1920's generally would view things my way. This is why I decry Austrians with such venom -- they engage in revisionist history rather than adapt to the revelation that government isn't Satan, and that the market can indeed do the wrong thing all by itself.

Setting working conditions and minimum wages is the art of benefiting the hired at the expense of the employers and the unemployed. Pretty soon a black market for illegal hiring will grow as businesses and people try to survive in tough times despite such ill-considered regulations. So you actually end up with 3rd world salaries that way.

Just FYI, almost 70% of America's GDP accounts for consumer spending, its not reliable as an indicator of a nation's productivity. Over the years, a lot of that spending is just people borrowing with their home equity extractions and mostly credit card debt. Now that we're in a credit crunch, GDP will probably fall (unless statisticians come up with a more hedonistic interpretation for it).

In a recession like we're having, in the private sector you need more productivity and you need to flush out the malinvestments and money wasting businesses. In the public sector, you need less govt so it can be less of a burden on the private sector.

How can that possibly happen if govt borrows/taxes/prints a stimulus into existence (adding to the burden of debt), then proceeds to use all that taxpayer money to expand govt programs and spending (more burden), bails out the inefficient businesses that should've failed otherwise (more burden) and poorly hands that money out to businesses via govt contracts instead of letting consumers make better choices with their money themselves (burden burden burden)?

Seriously, if you're counting on govt to do anything productively, you probably got the wrong person for the job. People are far better at making choices with their own money than the govt is with money that they effortlessly take from others.

Blaming mostly investment banks for this recession is like force-feeding alcohol to a bus driver and blaming him for killing all the passengers in the resulting crash. Don't you have any idea of the Fed and other federal institutions' role in causing the market distortions that led to this recession? How can you give them a free pass as the major culprits?

AFAIK, creative destruction in economics is an often misunderstood sophism that doesn't apply to what I'm advocating. If an economy is moving towards a recession, the recession is not the problem, the artificial *boom* was the problem that the market is trying to correct with a recession. It is a kind of selection, just not as brutal as you described, because its not the end of the world: people get fired, businesses go bankrupt, the assets of incompetent people are transfered to the competent people, people are hired again somewhere else and eventually the economy resumes growth.

The market is not an omnipotent unstoppable force, its complexity just eludes the narrow-mindedness of the fools that try to plan it, specially when they're the same fools that screwed it up in the first place. A market is already planned by those in it, and they have the best incentives in place to make the best plans, because they are usually the first ones to pay for their mistakes. Politicians and bureaucrats, on the other hand, are exempt from responsability and are seldom punished when they waste huge amounts of money. They are the ones who commited the worst sins.

The terrible mistake in your criticism of the market is that you constantly blame its "emergent" irrationality as an excuse for thinking on its behalf. What you correlate to auto-immunity on an otherwise healthy body I would compare to a heavily medicated pacient that undergoes daily surgeries after years of treatment for what started out as a sore throat.

If you're talking about trade balances, yeah, the US is in big trouble there, but it's hard for me to see a way to blame government for the way private business is shifting capital overseas. I suppose you could declare that we need to bring our working conditions and pay down to the level of a 3rd world nation in order to "compete", but that seems like a big step backwards to me.

Looking at the government debt to GDP ratio of the US and Japan since 1987, I think it's tough to say they're somehow in dramatically better shape than us in terms of public debt today.

I haven't seen a full economic analysis that compares the predicted debt w/stimulus vs. predicted debt without stimulus, but it seems to me somewhat intuitive that in an economic decline, your tax revenues will fall, and your obligations will increase. That's what's really causing all the state budget issues throughout the country.

If one believes (as I do), that the stimulus will provide for both short term (people get jobs and businesses get orders as part of the gov't programs), and long term (via the infrastructure that's built) benefit, it seems strange to me that people would say it is somehow a bad idea, purely because it increases the debt by less than 10%. It's also going to raise the GDP, which offsets a bit of the debt problem. If it also sparks a recovery, it's absolutely worth the money.

Personally, I disagree with your notion that we should welcome all downturns, big and small, debt-deflation or otherwise as a joyous of creative destruction.

If you look at who made the mistakes (investment banks, mostly), and who's suffering due to the resultant credit crunch (everyone, everywhere who needs credit to buy a car, or grow their business), it doesn't seem to me that it's some sort of positive natural selection, any more than the Black Death was something people should look back upon as having fortunately cut back our "surplus" population, and made our species stronger as a result.

Austrians/libertarians/conservatives tend to think of the market as some sort of omnipotent, omniscient, unstoppable force of nature that is some sort of mortal folly to tinker with. If the market goes into a tailspin, it's because we've committed sins, and need to pay for them, and only once our souls have been through the cleansing fire will we be able to go back to our lives.

Personally, I think it's emergent behavior amongst a pack of animals who think themselves rational. It can do a lot of good, but sometimes it suffers bouts of auto-immune insanity, and there are things government can do that makes an appreciable, positive impact. It's a bit like practicing medicine; generally the body has to heal itself, but with research you can learn how to make medicines (or perform surgeries) that can limit damage, and speed recovery.

I think he is talking about Car Sales as an indicator of economic strength, not his personal difficulty in buying a car or whatever

I reckon the point he was trying to make is that all these Economists predicted this that and the other. None seemed to see this credit crunch coming, or were in denial about it, and many of their forecasts are totally off the mark. Seems to me he realised he didn't know what was going on and nobody else does either. To him, the idea of asking for a financial forecast is a joke because if we had had the ability to see the edge of this bad economic weather we wouldn't have sailed into it in the first place.

my $0.02

An AP report from October 2008 - Badgered by lawmakers, former Federal Reserve Chairman Alan Greenspan denied the nation's economic crisis was his fault on Thursday but conceded the meltdown had revealed a flaw in a lifetime of economic thinking.



From 2007. Alan Greenspan forecasting the economies state and the credit crunch problems, upon creation of Greenspan Associates.

That's why prudential supervision of investment institutions and not just of traditional banks is so important and why the credit crunch has ballooned out so immensely for the most part over a fairly insignificant but irresponsibly, immensely highly leveraged sub-prime mortgages. As for the reserve bank printing money, I would still argue that above all that keeping them separate from the treasury and the political authority is paramount. History has shown that particularly if political pressure is placed on monetary policy it creates runaway inflation. As far as monetising debts, of course large scale monetisation will bring hyper-inflation, but equally a country highly in budget deficit may plausibly be forced to depreciate it's currency to finance an otherwise insurmountable burden. As for low steady levels of inflation, they are almost impossible to eliminate and in some ways are necessary to maintain an efficient economy.

I love how (around the 8:15 mark of the first video) the aide makes the crack about people who got credit and then didn't make their payments being the cause of the credit crunch, the stupid shit doesn't want to admit that they were making their payments until their interest rates got jacked sky high and their payments in some cases were quadrupled!

"Sure, the management of these companies is not free from blame. They probably could have prepared for this crisis better. But they could not be expected to predict the current economic crisis and the credit crunch, which prevents them from just borrowing to tide them over bad times.

BULLSHIT. I am just a graphic designer from the UK and I predicted the fucking credit crunch, it was fucking obvious for two reasons:

1) people were encouraged to take out credit they couldn't afford. this has been a news story for about 5 years. The existence of websites with names like easycredit123.com should ring alarm bells in every finance department in the world.

2) ever heard of boom/bust?

If these economic conditions were so hard for the largest companies in america to comprehend, i have a simple solution... give me $1,000,000,000 and I will tell you when the next crisis is coming.

Economic conservatives have always hated unions - either because unions interfere with the god-like operation of the free market, or because they cut into the bottom line. Of course they're going to try to put the blame on the unions.

However, I think the union-haters may be partly right. While unions are great for protecting worker's interests, unfortunately they also create a great deal of rigidity. The fact is that the money to pay these workers doesn't rain down like manna from heaven. It comes from consumers. When you have a bunch of workers and give them good wages during the economic good times, when there is a lot of consumer demand for your product, everything works well enough. But when consumer demand goes slack, you have to cut your costs. Profits in the car industry weren't so great that they could take the cut instead. And while the figure of $70/hour may have been misleading, it does tell you something important : basically for every productive worker the company pays, it has to pay the same amount to a non-productive worker. That's like tieing anchors around both your feet. The auto industry cannot cut it costs, when it desperately needs to.

Sure, the management of these companies is not free from blame. They probably could have prepared for this crisis better. But they could not be expected to predict the current economic crisis and the credit crunch, which prevents them from just borrowing to tide them over bad times. So yes, a significant portion of the blame should fall on the unions. They're pretty much the reason why the auto companies had to go to the government to beg for help, and why taxpayers will probably end up footing the bill. Essentially, all of us have to pay for the privilege of a few to keep their jobs.

To sum up, while unions do good things to protect workers and help make decent jobs possible, they need to recognize that the capitalist system is dynamic, and the ability to fire workers or cut their pay if necessary is a requirement for the smooth running of that system. Liberals are right to question the motives of conservatives whose first response is to blame the unions. However, they should not unthinkingly react with the opposite conclusion, that unions are innocent. Lets consider the facts, okay?

I'm not entirely sure what you are deeming a simplistic viewpoint, or where you are gathering these 'supposes' from. Regardless, the bailout the banks have received I doubt has done little to ease the credit crunch, despite it's goal to do so, getting a loan is probably just as hard as it was before the bailout.

Now, I certainly don't think it's a good thing people will lose their jobs, that is never a good thing, but that doesn't mean the taxpayers should be responsible. I think you missed the point I was trying to make, and that is, where do we draw the line? Why are the jobs of auto workers more important than mine or yours? If the company I work for is going to fire me do to less profits, is the government obligated to step in, and why? I realize it's a large number of people in this case, but the companies aren't going to disappear, they will be forced to declare bankruptcy, and some people will most likely lose their jobs, not the 30 million you claim. Now you say they wouldn't lose their jobs all at once, in a few years you say, would a bailout prevent that, as no doubt the companies need to restructure regardless?

Look my point is, it's sad that people might lose there jobs, but it is not the governments responsibility nor should it ever be, to support companies who are under-performing whether their fault or no.

>> ^dag:
^Don't forget that the auto unions were large contributors to the Democrats and Obama. I don't think letting them go into chapter 11 would be an option.


Haven't forgotten.

The way I understand it, under Chapter 11 they would keep operating. There'd be a big negotiation about how to reorganize the company, but they'd be forced to get new leadership. There probably would be layoffs at lower levels too, but it wouldn't be like GM suddenly closing its doors, which we're on track to see happen in a few months if things don't change.

Normal Chapter 11 bankruptcy probably wouldn't work, due to the credit crunch -- nobody's willing to loan GM (or anyone else) billions for them to keep operating while settling debts with creditors. Without that, they'd do Chapter 7 bankruptcy, where they cease to exist as a corporate entity and sell off their assets to recoup what they can to pay off creditors.

I don't think having GM go kaput like that would be a good idea right now.

But I'm just parroting my understanding of what I've read from people with PhD's in this topic.

Here's a good article from The New Republic that gives the topic a good shake: http://www.tnr.com/politics/story.html?id=a4893b49-36df-4784-9859-2dfa3a3211bf