Most Republicans opposed this corporate welfare (the bailouts). But Bush and McCain supported it, along with Obama. In this they are probably more socialost than those who opposed it.
Jerry: the silly concept of banks "to big to fail" is just one of many examples risk is being eliminated. Why do banks have to engage in sane and sustainable business practices anymore if Uncle Sam will be there to handout billions to thdm when their reckless driving steers them into the ditch?
Historically low interest rates have anything to do with it, Will? They should have only done one QE and set the inflation rate to 0 afterwards and left the economy alone. I love this article from Anna Schwartz, the cowriter of Milton Friedman's A Monetary History of the United States.
I didn't know this, but George Selgin supports the Swedish solution. Not sure if I can agree with him or not but he's an excellent advocate for free banking.
You can't go wrong with Friedman. The reason so many things go wrong is that his ideas aren't implemented or implemented in a half-assed bizarre way (like the school choice program of some Detroit suburbs, which had a sort of red-lining to keep poor blacks from Detroit out of it) which can ultimately be destructive.
Yeah, Jerry, what dmarks said; the Alan Greenspan crony/bailout capitalism was what I was referring to.......And as usual Roberto is on the case, too. The Greenspan/Bernanke policy of easy money and ridiculously low interest rates certainly had a misallocative effect (toward housing and borrowing in general) on the economy and it obviously discouraged savings as well. If there ever was a death penalty for screwing up the economy, these two fellows would get it, I think.
I'm not so much against low interest rates as such! But they should be sensible and reality-based.
Such might be a lot more likely if the Fed were privatized and broken up into many small chunks, so we end up with a system that more directly meets needs instead of having the strange machinations of the so-called Sage of Constitution Ave NW wreak havok on things.
Of course, corrupt monopoly capitalists, Keynesians, and socialists all hate the idea of such free market ideas as many competing small actors. They prefer top down control.
Greenspan and Bernanke did what essentially all interventionists do. They took what was an average economic downturn (that more than likely would have self-corrected) and created a bubble the likes of which we hadn't seen in 80 years. Add to that the fact that Greenspan had long since earned the nickname of "Mr. Bailout" and, yeah, the crisis of 2008 was totally predictable (though only Peter Schiff and Ron Paul actually did).
"Of course, corrupt monopoly capitalists, Keynesians, and socialists all hate the idea of such free market ideas as many competing small actors. They prefer top down control."
So you in favor of using the Sherman Anti-Trust Act or something similar to break up the big banks, big oil companies, big telecom companies, big media companies, big retail companies, etc, similar to what was done to AT&T many years ago.
Ever since stumbling upon Gene Callahan's blog, I'm convinced at how NGDP level targeting can be used until the misallocations from an economy where there have been Austrian malinvestments and a bubble and a shortfall in aggregate demand are settled out. Here's a cool passage from one of Scott Sumner's articles that makes complete sense to me if there is going to be a Federal Reserve.
"Another approach — which would be more radical, but perhaps also more effective — would limit the Fed's role to setting the NGDP target, and would leave the markets to determine the money supply and interest rates. This would mitigate the "central planning" aspect of the Federal Reserve's current role, which has rightly come under criticism from many conservatives. To give a simplified overview, the Fed would create NGDP futures contracts and peg them at a price that would rise at 5% per year. If investors expected NGDP growth above 5%, they would buy these contracts from the Fed. This would be an "open market sale," which would automatically tighten the money supply and raise interest rates. The Fed's role would be passive, merely offering to buy or sell the contracts at the specified target price, and settling the contracts a year later. Market participants would buy and sell these contracts until they no longer saw profit opportunities, i.e., until the money supply and interest rates adjusted to the point where NGDP was expected by the market to grow at the target rate."
It sounds like the most politically viable free market oriented policy that I've heard of while still having a Federal Reserve. Keeping the Fed's role passive and letting the markets do the rest of the work. Also much better than the first suggestion where he talks about level targeting.
"Most simply, the Federal Reserve should begin by adopting an approach of "level targeting" of nominal GDP. This doesn't mean keeping NGDP level, but rather targeting a specified trajectory, such as a 5% NGDP growth path, and committing to make up for any near-term shortfalls or excesses. Thus, if NGDP grew by 4% one year, the central bank would cut rates or engage in quantitative easing until its models yielded an expectation of 6% NGDP growth for the following year."
The point is that one can diagnose an economy in many different ways and that the financial crisis wasn't just because of this drop in aggregate demand or a drop in NGDP. There was obviously a huge housing bubble and incompetence from a government created Fannie Mae and Freddie Mac!
Maybe Glass-Steagall, the Gramm-Bliley-Leach Act, and a possible poor execution of trying to "deregulate" the banks might have played a role too. I'm not really sure. The financial crisis is far more complex than I thought in terms of its causes that one cannot be truly sure.
Jerry: the massive over regulation problem encouranges monopolies or situations with too few "players".
However in some of these situations such as retail, there are so many thousands of companies.... nothing even close to a monopoly to break up.
And no need for anti trust in big media. Even the hated Clear Channel company only controls 8% of radio stations, last time I checked. Just back off from FCC overregulation so it is easier for others to join in.
Obviously not. David Friedman offered a great take on why the financial crisis happened in the first place and he goes into how those agencies were created as a result of the New Deal.
And I recall a year or two ago that Barney Frank, one who specifically defended and furthered the Fannie and Freddie policies that caused the housing collapse, was defending keeping Fannie and Freddie going.
This man, who was one of the architects (not the only one, but a big one) of the financial collapse, has no credibility on these agencies, does he?
19 comments:
As a typical socialist nation, reward was in fact almost unlimited for the top rulers.
Didn't GWB sign the bailout legislation? Was he a Socialist too?
How about expanding a little on how we are eliminating risk.
Most Republicans opposed this corporate welfare (the bailouts). But Bush and McCain supported it, along with Obama. In this they are probably more socialost than those who opposed it.
Jerry: the silly concept of banks "to big to fail" is just one of many examples risk is being eliminated. Why do banks have to engage in sane and sustainable business practices anymore if Uncle Sam will be there to handout billions to thdm when their reckless driving steers them into the ditch?
The auto industry handouts are another example.
"Didn't GWB sign the bailout legislation? Was he a Socialist too?"
Yep...
I should delete my comment. RN said it best.
Historically low interest rates have anything to do with it, Will? They should have only done one QE and set the inflation rate to 0 afterwards and left the economy alone. I love this article from Anna Schwartz, the cowriter of Milton Friedman's A Monetary History of the United States.
http://www.nytimes.com/2009/07/26/opinion/26schwartz.html?_r=1&
I didn't know this, but George Selgin supports the Swedish solution. Not sure if I can agree with him or not but he's an excellent advocate for free banking.
You can't go wrong with Friedman. The reason so many things go wrong is that his ideas aren't implemented or implemented in a half-assed bizarre way (like the school choice program of some Detroit suburbs, which had a sort of red-lining to keep poor blacks from Detroit out of it) which can ultimately be destructive.
Yeah, Jerry, what dmarks said; the Alan Greenspan crony/bailout capitalism was what I was referring to.......And as usual Roberto is on the case, too. The Greenspan/Bernanke policy of easy money and ridiculously low interest rates certainly had a misallocative effect (toward housing and borrowing in general) on the economy and it obviously discouraged savings as well. If there ever was a death penalty for screwing up the economy, these two fellows would get it, I think.
I'm not so much against low interest rates as such! But they should be sensible and reality-based.
Such might be a lot more likely if the Fed were privatized and broken up into many small chunks, so we end up with a system that more directly meets needs instead of having the strange machinations of the so-called Sage of Constitution Ave NW wreak havok on things.
Of course, corrupt monopoly capitalists, Keynesians, and socialists all hate the idea of such free market ideas as many competing small actors. They prefer top down control.
Greenspan and Bernanke did what essentially all interventionists do. They took what was an average economic downturn (that more than likely would have self-corrected) and created a bubble the likes of which we hadn't seen in 80 years. Add to that the fact that Greenspan had long since earned the nickname of "Mr. Bailout" and, yeah, the crisis of 2008 was totally predictable (though only Peter Schiff and Ron Paul actually did).
"Of course, corrupt monopoly capitalists, Keynesians, and socialists all hate the idea of such free market ideas as many competing small actors. They prefer top down control."
So you in favor of using the Sherman Anti-Trust Act or something similar to break up the big banks, big oil companies, big telecom companies, big media companies, big retail companies, etc, similar to what was done to AT&T many years ago.
Sometimes you surprise me, dmarks.
I'm in favor of it, too, Jerry (well, at least the banks part). And you know who else is - Stephen Moore of the Wall Street Journal!
Ever since stumbling upon Gene Callahan's blog, I'm convinced at how NGDP level targeting can be used until the misallocations from an economy where there have been Austrian malinvestments and a bubble and a shortfall in aggregate demand are settled out. Here's a cool passage from one of Scott Sumner's articles that makes complete sense to me if there is going to be a Federal Reserve.
"Another approach — which would be more radical, but perhaps also more effective — would limit the Fed's role to setting the NGDP target, and would leave the markets to determine the money supply and interest rates. This would mitigate the "central planning" aspect of the Federal Reserve's current role, which has rightly come under criticism from many conservatives. To give a simplified overview, the Fed would create NGDP futures contracts and peg them at a price that would rise at 5% per year. If investors expected NGDP growth above 5%, they would buy these contracts from the Fed. This would be an "open market sale," which would automatically tighten the money supply and raise interest rates. The Fed's role would be passive, merely offering to buy or sell the contracts at the specified target price, and settling the contracts a year later. Market participants would buy and sell these contracts until they no longer saw profit opportunities, i.e., until the money supply and interest rates adjusted to the point where NGDP was expected by the market to grow at the target rate."
It sounds like the most politically viable free market oriented policy that I've heard of while still having a Federal Reserve. Keeping the Fed's role passive and letting the markets do the rest of the work. Also much better than the first suggestion where he talks about level targeting.
"Most simply, the Federal Reserve should begin by adopting an approach of "level targeting" of nominal GDP. This doesn't mean keeping NGDP level, but rather targeting a specified trajectory, such as a 5% NGDP growth path, and committing to make up for any near-term shortfalls or excesses. Thus, if NGDP grew by 4% one year, the central bank would cut rates or engage in quantitative easing until its models yielded an expectation of 6% NGDP growth for the following year."
http://www.nationalaffairs.com/publications/detail/re-targeting-the-fed
The point is that one can diagnose an economy in many different ways and that the financial crisis wasn't just because of this drop in aggregate demand or a drop in NGDP. There was obviously a huge housing bubble and incompetence from a government created Fannie Mae and Freddie Mac!
Maybe Glass-Steagall, the Gramm-Bliley-Leach Act, and a possible poor execution of trying to "deregulate" the banks might have played a role too. I'm not really sure. The financial crisis is far more complex than I thought in terms of its causes that one cannot be truly sure.
Jerry: the massive over regulation problem encouranges monopolies or situations with too few "players".
However in some of these situations such as retail, there are so many thousands of companies.... nothing even close to a monopoly to break up.
And no need for anti trust in big media. Even the hated Clear Channel company only controls 8% of radio stations, last time I checked. Just back off from FCC overregulation so it is easier for others to join in.
Roberto said: "There was obviously a huge housing bubble and incompetence from a government created Fannie Mae and Freddie Mac!"
Is there even a good reason for these government agencies to exist any more? Was there ever?
Obviously not. David Friedman offered a great take on why the financial crisis happened in the first place and he goes into how those agencies were created as a result of the New Deal.
And I recall a year or two ago that Barney Frank, one who specifically defended and furthered the Fannie and Freddie policies that caused the housing collapse, was defending keeping Fannie and Freddie going.
This man, who was one of the architects (not the only one, but a big one) of the financial collapse, has no credibility on these agencies, does he?
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