Bailout bill fails; Dow plunges

[Countertrey]

The bottom line is the government creates nothing

I don't know... they seem to have done a pretty good job of creating a permanent underclass of entitlement parasites.


OH! You mean create things that actually CONTRIBUTE!

Never mind.

[KazooSkinsFan]

The bottom line is the government creates nothing

I don't know... they seem to have done a pretty good job of creating a permanent underclass of entitlement parasites.


OH! You mean create things that actually CONTRIBUTE!

Never mind.

Just to quibble, I'd argue they didn't create the class, they just fed it.

[Countertrey]

Just to quibble, I'd argue they didn't create the class, they just fed it.

Did you know that quibbling will get you expelled from the service academies?

[welch]

Couple of things different now from the '30s (can't step in the same river twice, as Whitehead and Irn-Bru might say!)

- in 1929, the US was the world's largest creditor nation, the world's largest exporter. Now the world's largest debtor and importer (see interesting book by Kevin Phillips, "Bad Money", or KP article in American Prospect, May 2008)

- I think the New Deal was a political success -- saved capitalism -- and an economic failure -- did not pull the country out of the Depression, "second" depression hit. (Another odd thought: I suspect that the US would have turned fascist rather than socialist if there had been a fundamental change. Father Coughlin and similar were more popular than the Communists or Socialists)

- FDR's economic problem, I think, is that he did not have the political clout spend as much Federal money as was needed.

- WW2 forced the country to spend a staggering amount. That re-started the economy. Call it right-wing Keynesianism...it was more acceptable to build aircraft acrriers and tanks than to build dams and parks. Also used more money.

- We have been spending as right-wing Keynesians ever since...what Eisenhower warned about: a military/industrial complex.

- So, today we already have military spending, and even if the country could afford more, we don't have the same industrial capacity we had. Quick comparison: when the Nazi's hammered the French and British armies in 1940, the Luftwaffe had a staggering 7,000 aircraft. Unheard of. Far more than the British and French could even imagine. However, by 1943 or '44, the US was producing about 7,000 aircraft every day. (Figures from SE Morrison, "US Naval Operations WW2", volume 1 I think).

- I think a crash would be worse than 1929. Here's hoping we don't have one!

[KazooSkinsFan]

- in 1929, the US was the world's largest creditor nation
, the world's largest exporter. Now the world's largest debtor and importer (see interesting book by Kevin Phillips, "Bad Money", or KP article in American Prospect, May 2008)

We are still the worlds largest exporter and we invest more abroad then is invested here, it's a global economy

- I think the New Deal was a political success -- saved capitalism

The New Deal "saved" capitalism?

- FDR's economic problem, I think, is that he did not have the political clout spend as much Federal money as was needed.

- WW2 forced the country to spend a staggering amount. That re-started the economy. Call it right-wing Keynesianism...it was more acceptable to build aircraft acrriers and tanks than to build dams and parks. Also used more money.

In the end if industry doesn't start producing there is no gain. Government building parks or planes doesn't generate wealth, it is spending. I don't think the "amount of money" was the difference, but that after WWII the mentality was different. Industry geared up to produce war kept on going and produced products. Also, people had a different mental attitude about the world and it caught on. But government cannot directly create a single net job ever on it's own because it produces nothing.

- We have been spending as right-wing Keynesians ever since...what Eisenhower warned about: a military/industrial complex.

- So, today we already have military spending, and even if the country could afford more, we don't have the same industrial capacity we had.

We have more manufacturing capacity then we ever had, not sure what you're talking about. No doubt that manufacturing has gone down as a percent of GDP, but in any other measure it has never gone down in any real measure (jobs, output, ...) for other then a short period of time.

Quick comparison: when the Nazi's hammered the French and British armies in 1940, the Luftwaffe had a staggering 7,000 aircraft. Unheard of. Far more than the British and French could even imagine. However, by 1943 or '44, the US was producing about 7,000 aircraft every day. (Figures from SE Morrison, "US Naval Operations WW2", volume 1 I think).

- I think a crash would be worse than 1929. Here's hoping we don't have one!

I agree with your sentiment. But I don't see any danger of that. I think this is a great overreaction. If we let the failed financial institutions die others would rise and replace them and we'd go on after some turmoil.

[Redskin in Canada]

Couple of things different now from the '30s (can't step in the same river twice, as Whitehead and Irn-Bru might say!)

I have the slightest impression that the famous Alfred North Whitehead and his equally well known colleague (in this board) may have drawn inspiration from Heraclitus of Ephesus and his Doctrine of Flux developed over two thousand years ago.

[Redskin in Canada]

- I think the New Deal was a political success -- saved capitalism -- and an economic failure -- did not pull the country out of the Depression, "second" depression hit. (Another odd thought: I suspect that the US would have turned fascist rather than socialist if there had been a fundamental change. Father Coughlin and similar were more popular than the Communists or Socialists)

True on all three counts: political success, economic failure, and the totalitarian temptation.

- WW2 forced the country to spend a staggering amount. That re-started the economy. Call it right-wing Keynesianism...it was more acceptable to build aircraft acrriers and tanks than to build dams and parks. Also used more money.

A war economy was the only way out to reactivate the economy.

- I think a crash would be worse than 1929. Here's hoping we don't have one!

If the situation is managed correctly, we will only have a recession and some relatively short period of pain and large job losses. General Electric and one of the three main auto giants may still fall.

You are right. If this is not handled correctly, it could be at least as bad. The US deficit is staggering.

[KazooSkinsFan]

You are right. If this is not handled correctly, it could be at least as bad. The US deficit is staggering.

And yet since the deficit is not out of line with historical averages in the only meaningful measure as a percent of GDP, why is it staggering?

Here's another factoid, the US deficit as a percent of GDP is LOWER then any major industrial country in Europe, why is ours so much more concerning?

I'm totally for balancing the budget by slashing spending, but you're just bringing up meaningless talking points, the same ones pounded by the unbiased media. Do you understand the stats I gave you? Please demonstrate you do.

[welch]

Yes, that Heraclitus.

General Electric ... still fall.

Now that is so frightening I'm almost tempted to play Mod and edit! I worked for a company very much like GE, and that company's stock is near and dear to my heart!

[welch]

More on topic, see the article by Kevin Phillips from American Prospect, last May:

Bubble and Bail

For most of the 20th century, America manufactured things. For the past 30 years, though, it has chiefly manufactured debt. Here's how Wall Street, with the aid of both political parties, gravely damaged the economy.


Kevin Phillips | May 5, 2008



As of spring 2008, we're probably just a third of the way through the unfolding debacle in the housing, credit, and financial markets. In political and regulatory terms, the ultimate problems and remedies have only begun to define themselves.

We're not just looking at an ordinary recession. Since the 1970s, the United States has redefined itself from a manufacturing nation to a financial economy built on debt, leverage, and a considerable ratio of speculation. Both political parties have been complicit in this, and the downturn now beginning will be unusual and potentially tragic.

The case being made in some reform-minded and progressive circles -- that we are on the cusp of a grand political, ideological, and pro-regulatory opening such as that of 1933 -- has some logic but also merits a considerable amount of economic and historical caution. The plausible analogies deserve a quick run-through. To begin with, there is the prospect that, over the next few years, the largest credit bubble since the Roaring Twenties is going to unwind with at least some of the angst and pain of the Depression years. In 2007, total credit-market debt in the U.S. reached almost 340 percent of gross domestic product, far above the previous high-water mark of 287 percent a few years after 1929. Second, it is also becoming likely that the 2006/2010 decline in U.S. home prices will be the largest in three-quarters of a century.

However, there are also good economic reasons why the analogy should not be overindulged; today's U.S. political economy is quite different from that of 70 years ago in several ways. First, whereas the 1929 crash came in the wake of three to four years of strongly deflationary trends in the global commodity markets, today's international economy is caught up in what appear to be major inflationary pressures in global agricultural and energy prices. In its panic over deflation, today's Federal Reserve may be more likely to err in the direction of feeding inflation.

The second relevant caution is that finance is a far more dominant element in the current-day U.S. economy than anyone could have imagined in the era of Herbert Hoover. Even amid 1929 ballyhoo and tickertape, finance was overshadowed by manufacturing. In the 1990s, by contrast, financial services sprinted ahead of manufacturing as a share of U.S. GDP. By 2006, financial services counted for over 20 percent of the economy, and manufacturing just 12 percent. As of 2008, portions of this swollen sector -- mortgage finance, reckless securitization products like Collateralized Debt Obligations (CDOs), and elements of the credit markets -- now threaten to implode. Still, even if the de-leveraging of the U.S. economy over the next few years is as painful as it was during the 1930s, that does not necessarily re-recommend the New Deal regulatory model. It will probably recommend some model that the 2008 political debate has not even touched upon.

The third relevant caveat is that the United States is now far more exposed to negative international actions and perceptions than it was in the 1920s and 1930s. Back then, the United States enjoyed three beneficial attributes: It was the world's leading energy producer, the world's leading manufacturer, and the world's leading creditor nation. So favored, the U.S. economy was able to survive the years of Herbert Hoover's inactive stewardship. Over the last decade, however, under the derelict management of George W. Bush, the United States has cemented its embarrassing status as the world's leading debtor nation, the No. 1 importer of foreign manufactured goods, and the No. 1 importer of foreign oil. As a result, the shrunken dollar has lost over 40 percent of its value against the euro since 2002. That shrinkage could even intensify if foreigners believe that the U.S. government, in particular the Federal Reserve Board, is committed to supplying liquidity to rescue reckless financial institutions at risk of inflation and at the expense of dollar holders.

Full story at:

http://www.prospect.org/cs/articles?art ... e_and_bail

[Redskin in Canada]

I'm totally for balancing the budget by slashing spending, but you're just bringing up meaningless talking points, the same ones pounded by the unbiased media.

ALL THAT stupid biased media. Sure ...

Interestingly, THIS and THISdifferent angles on the negative effects of the deficit should remind me not to discuss political topics in this board. Invariably, it comes down to an open or veiled personal attack. Sorry for wasting your time.

For those others -really- interested to hear an independent and market-based analysis of the roots and potential consequences of this crisis see the Bailout Reader.

[Redskin in Canada]

More on topic, see the article by Kevin Phillips from American Prospect, last May:

The third relevant caveat is that the United States is now far more exposed to negative international actions and perceptions than it was in the 1920s and 1930s. Back then, the United States enjoyed three beneficial attributes: It was the world's leading energy producer, the world's leading manufacturer, and the world's leading creditor nation. So favored, the U.S. economy was able to survive the years of Herbert Hoover's inactive stewardship. Over the last decade, however, under the derelict management of George W. Bush, the United States has cemented its embarrassing status as the world's leading debtor nation, the No. 1 importer of foreign manufactured goods, and the No. 1 importer of foreign oil. As a result, the shrunken dollar has lost over 40 percent of its value against the euro since 2002. That shrinkage could even intensify if foreigners believe that the U.S. government, in particular the Federal Reserve Board, is committed to supplying liquidity to rescue reckless financial institutions at risk of inflation and at the expense of dollar holders.

That biased media.

Thanks Welch. Good news pick. More and more experts aree turning back to history and whatever analogies and differences from previous crises can teach us to sort out this one now.

[KazooSkinsFan]

I'm totally for balancing the budget by slashing spending, but you're just bringing up meaningless talking points, the same ones pounded by the unbiased media.

ALL THAT stupid biased media. Sure ...

Interestingly, THIS and THISdifferent angles on the negative effects of the deficit should remind me not to discuss political topics in this board. Invariably, it comes down to an open or veiled personal attack. Sorry for wasting your time.

For those others -really- interested to hear an independent and market-based analysis of the roots and potential consequences of this crisis see the Bailout Reader.

OK, you DON'T understand deficits as a percent of GDP. While you object to my having asked you that, you proved me right. And it wasn't an insult so much as a question I wouldn't have had to ask because if you did you'd not have posted what you did and ignored it in the rebuttal. But hey, Left political agenda posting's not consistent with facts, so you're right this is a waste of time.

[KazooSkinsFan]

More on topic, see the article by Kevin Phillips from American Prospect, last May:

The third relevant caveat is that the United States is now far more exposed to negative international actions and perceptions than it was in the 1920s and 1930s. Back then, the United States enjoyed three beneficial attributes: It was the world's leading energy producer, the world's leading manufacturer, and the world's leading creditor nation. So favored, the U.S. economy was able to survive the years of Herbert Hoover's inactive stewardship. Over the last decade, however, under the derelict management of George W. Bush, the United States has cemented its embarrassing status as the world's leading debtor nation, the No. 1 importer of foreign manufactured goods, and the No. 1 importer of foreign oil. As a result, the shrunken dollar has lost over 40 percent of its value against the euro since 2002. That shrinkage could even intensify if foreigners believe that the U.S. government, in particular the Federal Reserve Board, is committed to supplying liquidity to rescue reckless financial institutions at risk of inflation and at the expense of dollar holders.

That biased media.

Thanks Welch. Good news pick. More and more experts aree turning back to history and whatever analogies and differences from previous crises can teach us to sort out this one now.

You obviously didn't read my rebuttal to those points either. Yes, totally biased media.

We are the largest importer. True, we are also the largest exporter. Oops, not mentioned.

We are the largest debtor nation. True, but not as a percent of, wait for it, GDP! And guess what, we are also the largest foreign INVESTOR. Not mentioned. Oops. And, we have more cash outsided the country then foreign cash in the US! Wow, where's that?

Bush does suck, I agree with that. But once again, facts are picked that support the chosen agenda and the ones that don't are ignored. And what irritates me most about this is that I don't like deficit spending, but my choices are the clueless Republicans who talk about small government and don't mean it and the Democrats who talk about endless socialism and sadly DO mean it. And they warp the facts to get there. So I end up in the position of letting bias stand or arguing it to no purpose since the Republicans don't want to do anything about it anyway.

[welch]

The point: is this different than 1929 (that is, "can't step in the same river twice).

Yes.

We were the largest exporter of maufactured goods and of energy. Largest creditor.

Now largest importer of manufactured goods and oil. Largest debtor.

Whatever happened in 1929 is past, and won't be much guidance to the future.

[KazooSkinsFan]

The point: is this different than 1929 (that is, "can't step in the same river twice).

Yes.

We were the largest exporter of maufactured goods and of energy. Largest creditor.

Now largest importer of manufactured goods and oil. Largest debtor.

Whatever happened in 1929 is past, and won't be much guidance to the future.

You focus on largest importer, true, ignore largest exporter, also true. Focus on the world's largest creditor, true, ignore we extent the most credit, also true. America sucks, we're screwed, we should only focus on those facts and ignore the ones that don't support your ludicrus contention. OK, where does that get us? Do those facts that you keep ignoring register with you at all in any way? We should just focus on the world's largest importer and ignore our being the largest exporter? We should focus on being the largest receiver of credit and ignore that we grant the most? Why? Why do you keep IGNORING my pointing out the other side of the equation and repeating your one sided assertions? Address it. We are the world's largest EXPORER!!! We are the world's largest Granter of credit!!! Hello? Hello? Is anyone home?

[Redskin in Canada]

...
The Historical Parallels
We tend to think of the Depression as having been triggered by the stock-market crash of 1929. The Wall Street crash is conventionally said to have begun on "Black Thursday" — Oct. 24, 1929, when the Dow Jones industrial average declined 2% — though in fact the market had been slipping since early September. On "Black Monday" (Oct. 28), it plunged 13%, the next day a further 12%. Over the next three years, the U.S. stock market declined a staggering 89%, reaching its nadir in July 1932. The index did not regain its 1929 peak until 1954.
...

http://www.time.com/time/business/artic ... 50,00.html

I sincerely thought that this mess was dangerous but it is really going out of control WORLDWIDE.



Let us enjoy the NFL while most of us still have jobs and some liquidity. I am still bracing myself seeing some of the worst scenarios unfold.

Predictably, the bailouts in the US and the UK are not having the desired effect by their short-sighted creators.

I have not lost hope but the ripples of this mess are already hitting markets here in Asia and even Iceland!!! Not good.

[Irn-Bru]

You focus on largest importer, true, ignore largest exporter, also true. Focus on the world's largest creditor, true, ignore we extent the most credit, also true.

So we're the largest exporter and importer, which means we break even, right?

Look here for some data on our trade deficit. See especially what happens after 1971, when the United States cut all ties between the dollar and gold. The question is, where is all that extra money coming from?

Or, where was it coming from? Because we are unlikely to be the world's largest debtor for much longer. This, by the way, is where the phrase "exporting our inflation" comes from. See commentary on YouTube from guys like Peter Schiff and Ron Paul; they've been especially good on this.

(Caution to Kazoo: Reality has a 'liberal bias' in these data. Look away!)

We are the world's largest Granter of credit!!!

And our capacity to rack up debt makes that look like peanuts. Are you arguing with welch's actual claim that there was/is a problem with U.S. borrowing, or just the semantics of making sure we mention that America also exports a lot, too?

Okay, America exports a lot. We're still (oops. . .not in Smack).

[Irn-Bru]

I sincerely thought that this mess was dangerous but it is really going out of control WORLDWIDE.

Let us enjoy the NFL while most of us still have jobs and some liquidity. I am still bracing myself seeing some of the worst scenarios unfold.

Reality is going to hit, the only question is how long the pain will last. This one bears more resemblance to 1929 than 1921.

I've been reading Rothbard's work on the depression for the first time. Call me a sadist. . .

I have not lost hope but the ripples of this mess are already hitting markets here in Asia and even Iceland!!! Not good.

Yes. . .and there went my last-ditch ex-pat escape plans. Well, not really.

[Redskin in Canada]

The question is, where is all that extra money coming from?

Or, where was it coming from?

I do not like even the ribbon.

Size matters:

A - B = C

You see, to some, it is the individual sizes of A and B that matter, not the negative magnitude of C.

Size matters to us too. It just happens to be the magnitude and negative sign of C sustained OVER many years.

[KazooSkinsFan]

You focus on largest importer, true, ignore largest exporter, also true. Focus on the world's largest creditor, true, ignore we extent the most credit, also true.

So we're the largest exporter and importer, which means we break even, right?

Look here for some data on our trade deficit. See especially what happens after 1971, when the United States cut all ties between the dollar and gold. The question is, where is all that extra money coming from?

Or, where was it coming from? Because we are unlikely to be the world's largest debtor for much longer. This, by the way, is where the phrase "exporting our inflation" comes from. See commentary on YouTube from guys like Peter Schiff and Ron Paul; they've been especially good on this.

(Caution to Kazoo: Reality has a 'liberal bias' in these data. Look away!)

We are the world's largest Granter of credit!!!

And our capacity to rack up debt makes that look like peanuts. Are you arguing with welch's actual claim that there was/is a problem with U.S. borrowing, or just the semantics of making sure we mention that America also exports a lot, too?

Okay, America exports a lot. We're still (oops. . .not in Smack).

My points are, I thought they were pretty clear frankly:

- Only the data that supports the contention is being presented
- There is no perspective
- Values are being presented in nominal instead of real values making them irrelevant as arguments. For an example of that, click on your balance of trade link. There's still WAY more involved in importing and exporting, but you can't even start the discussion until you look apples to apples.

The issue I have with your argument is that you change that to somehow I am defending our fiscal policies, which OBVIOUSLY I'm not and you already know that. Are you saying I'm only allowed to point out logical fallacies when I disagree with them in every way? For example, that we are the world's largest importer leads to what logical conclusion on it's own? I'm saying none because we're the worlds largest exporter and there are so many factors involved. Most basic comparison, trade balance as percent of GDP. Do you realize how many details are glossed over, like that Toyota can be an exporter and Ford is a massive importer? We have cheaper costs, we don't repatriate money becuse of our tax code. You question where the money comes from is complex and yet none of those are acknowledged in any way and we're jumping to the conclusion of the factoids. Yet that the world's #1 economy is the world's #1 importer is presented on it's own as an America sucks argument. But I can only point that out if I disagree it's an issue? Nonsense.

[Redskin in Canada]

For example, that we are the world's largest importer leads to what logical conclusion on it's own? I'm saying none

So far so good.

... because we're the worlds largest exporter and there are so many factors involved.

Such as the small almost imaterial difference of their relative HUGE NEGATIVE SIZE.

Yet that the world's #1 economy is the world's #1 importer is presented on it's own as an America sucks argument.

Nobody, absolutely nobody argues that being the largest importer is a negative factor. Everybody else in this thread argues that it is the SUSTAINED TRADE DEFICIT, i.e., the negative difference over many years, that puts the US economy at tremendous peril.

But I can only point that out if I disagree it's an issue? Nonsense.

I am reminded of the mental attitude that led you to argue until it blew you in the face that the Giants were wrong last season after they played ther last regular season game.

It is a mental attitude. You choose to select stubborn paths until they explode in your face and make you the subject of ridicule by others.

The US does not suck. It is still a relatively free country (less so as a result of this crisis) and the home of the Washington Redskins

[welch]

Wait a minute.

This is not an "America sucks" argument. The Phillips article argues that the world has changed since 1929, and whatever "worked" in the '30s probably will not work now.

Just quickly,

- the European banking system is interlocked with the US

- Europe has no cross-border ministries of finance; the European Union has mostly adopted a single currency, but has no Fed and no Treasury Department, and the European Parliament does not have the power of the US Congress.

- India and China depend on exporting goods and services to the US and Europe. We can't afford them just now, so???

Financial Times thinks a world-wide plan like the UK plan might "work". Others guess that the recession will go deep and last 6 - 12 months.

I suspect that once layoffs spread beyond the financial sector, where they are already drastic, life will get tough. What happens to Charlotte/Greensboro when Wells tears down Wachovia? Then what happens to North Carolina?

Be glad you have a job, if you do.

[KazooSkinsFan]

Yet that the world's #1 economy is the world's #1 importer is presented on it's own as an America sucks argument.

Nobody, absolutely nobody argues that being the largest importer is a negative factor. Everybody else in this thread argues that it is the SUSTAINED TRADE DEFICIT, i.e., the negative difference over many years, that puts the US economy at tremendous peril.

Here is the original quote:

under the derelict management of George W. Bush, the United States has cemented its embarrassing status as the world's leading debtor nation, the No. 1 importer of foreign manufactured goods, and the No. 1 importer of foreign oil.

It is not the "sustained" point, it is a George Bush point. Bush does suck but this is not why. Also, you just repeat it's a sustained deficit with absolutely no perspective in real terms or how it's being measured. Flow of currency is not just trade balance. Maybe that's what "everyone else" is arguing, but it's still meaningless on it's own. It's a typical liberal argument, here is a factoid, I'm going to draw unsupported, quantified conclusions from and state it's bad. I'm also going to change my point, in this case from it being a Bush bashing to a long term one.

Bottom line, it's a factoid, not an argument and the conclusions drawn whatever "everyone's" argument are not supported in any meaningful way. Which was in fact my point when it was presented and I addressed it.

[KazooSkinsFan]

Wait a minute.

This is not an "America sucks" argument

Again:

the United States has cemented its embarrassing status as the world's leading debtor nation, the No. 1 importer of foreign manufactured goods, and the No. 1 importer of foreign oil

This "embarrassing status" isn't "America Sucks?" Neither is the #1 economy being the #1 importer, ignoring we're the #1 exporter? Neither is we're the #1 debtor ignoring we're the #1 creditor? I do dislike the oil stat and Congress has to stop interfering in energy production, but oil is a commodity we buy on the open market. I'm not arguing any of this is OK, I'm saying AS PRESENTED it's nonsense.

The Phillips article argues that the world has changed since 1929, and whatever "worked" in the '30s probably will not work now

Nothing worked in the 30s, WWII ended the Great Depression. But what WOULD HAVE worked in the 30s would work now, we have to stop having GOVERNMENT screw up the economy with overregulation. Like underwriting mortgages, insane corporate taxes, SOX, taxing 20% of our paychecks to make people dependent on government retirement and healthcare, prohibiting low end workers not worth the minimum wage from getting jobs, insanely complex taxes that incent individuals and companies to do uneconomically efficient activities, taxing foreign operations of US companies, taxing money repatriated by US companies, foreign military spending to maintain cheap oil while severely restricting domestic energy production and exploration, repeatedly taxing the same money (corporate, income, capital gains taxes) and to Irn-Bru's point flooding the economy with cheap, ever currency devaluing cash. And that's just off the top of my head how GOVERNMENT is causing the current crisis.