Barrack Obama (Betas Only)

[crazedrat]

lol free market autistic

[discojoe]

lol free market autistic

lol kid who isn't familiar with reality but pretends he is even though he's not fooling anybody

[crazedrat]

Please, educate me..

[discojoe]

Please, educate me..

Happily.

Bailouts create moral hazard. If a bank knows it will receive a government bailout in case of insolvency, it will be less hesitant to issue loans to high risk customers, which is exactly what the government wants them to do. Those high risk people are often minorities whose votes can be bought with favors, so it is politically advantageous for politicians to pass a law that results in banks issuing loans to these people. These loans, many of which will be defaulted on, are financed with money that could have been invested in something that creates jobs. Instead, it is squandered on unsustainable handouts so that corrupt bureaucrats can get reelected.

As to the economic catastrophe that you claim was averted by the bailouts, what you're not considering is the fact that we would already be in full recovery if there had never been any bailouts or artificially low interest rates. It would have been a sharp dip that probably would have lasted around a year and a half. In the Depression of 1920, which was more severe than the Great Depression, the government cut spending and taxes. A year and a half later the economy was in full swing.

So now, instead of having the whole mess behind us, we've got this massive deficit, slow recovery, and a precariously positioned currency all looming before us. A bailout is like a massive fix of heroin to a recovering addict: "Well if we didn't administer the heroin, he would be experiencing horrible withdrawal symptoms." Yes, but withdrawal is precisely what he needs to go through to overcome his addiction. At this rate, you're just postponing the inevitable and wasting money to do so.

Here's another analogy. Suppose you're trying to quit smoking because it's unhealthy and because you're broke. You are barely making ends meet and have been maxing out credit cards to pay for cigarettes (this actually does happen with smokers). The best thing for you to do is to go cold turkey, enduring the week or two of cravings in order to get past the addiction and stop spending thirty dollars a week on cigarettes. So you decide that you'll quit and use the would-be cigarette money to pay down your credit card debt. However, before you can begin your marathon, your financially strapped mother maxes out two credit cards on fifty cartons of Marlboro Reds and gives them to you for free, saying that she had to do it so that you wouldn't have to go through the unpleasant experience of nicotine withdrawal. Sure, now you don't have to feel like shit for two weeks, but it's at the expense of your longterm health and money that your mother doesn't have. And now that you know your mother will bail you out, you are less careful about how you spend your own money, since you're not the one paying paying the consequences, which further destabilizes your mother's financial situation.

[crazedrat]

The bailout is more like antibiotics with terrible side effects administered to a patient with a severe infection.
The financial crisis was a different matter than the great depression. For one thing, we live in a global economy nowdays. If the dollar had bottomed out other countries would of pulled their money out of it. Had that happened, the dollar would of inflated like crazy, and it would never fully recover. The prospect of a full, quick recovery you're giving isn't real. China was discussing openly about moving onto a silver standard. They had concrete plans to that and could have had it happen in about a month. They didn't, and the bailouts are responsible for that.
Also, in comparing immediate decline Vs. gradual decline, there are some advantages to gradual decline which you didn't mention. It's true, generally, a gradual decline gives a bigger dip over time. But since this dip happens slowly it allows for people and organizations to adjust to the changes with planning and precision, which is invaluable compared with a catastrophic change. Basically it's like losing your home suddenly vs. being told you'll lose it in six months. The time you have to plan for contingencies is invaluable, and it's the same for the corporations.

[discojoe]

OK, before I correct all of that nonsense, I want to be clear about something: I don't think you actually know anything about economics. I think you literally make everything up on the spot, without any hard knowledge about economics or history, depending on your ability to make what you say sound plausible. Put more simply, you make up Ti arguments on the spot, hoping that if they are coherent enough, people will agree with you. Once again, you're ignoring whether or not your "data" applies to reality.

Also, criticizing me by saying things like "I consider myself an expert after reading one biased book" is just your Te PoLR. First of all, even if I did only read one biased book, knowledge is knowledge, correct is correct, and I am correct. Second, I've so far read approximately a dozen books on economics, several of them by Keynesians. Third, I am an economics major and I go out of my way to learn more about the subject -- far beyond the curriculum in the classroom. I am still not an expert, but I know far more than the likes of you.

The financial crisis was a different matter than the great depression. For one thing, we live in a global economy nowdays. If the dollar had bottomed out other countries would of pulled their money out of it. Had that happened, the dollar would of inflated like crazy, and it would never fully recover. The prospect of a full, quick recovery you're giving isn't real. China was discussing openly about moving onto a silver standard. They had concrete plans to that and could have had it happen in about a month. They didn't, and the bailouts are responsible for that.

It's really hard to respond to these types of paragraphs in which you basically just jump all over the place, making random intuitive leaps that have little justification. For instance, the first three sentences are almost totally disjointed and have no obvious logical relationship to one another. (Also, the constructions "would of" and "should of" are grammatically nonsensical. What you mean to say are "would have" and "should have." I've already corrected you on this once before. You should be able to remember something so easy and basic.)

Anyway, the fact that the financial crisis was "a different matter" from the Great Depression isn't a meaningful statement. Obviously both events were different from one another, but that isn't helpful when trying to determine the kinds of policies needed to correct both situations. Neither is it helpful to say that we live in a global economy now as opposed to the days of the Great Depression. Both assertions are just isolated data fragments (that may or may not be true) with no consequential purpose. The rest of the paragraph is pretty much the same series of baseless unrelated assertions disguised as a point-by-point thesis.

For one thing, we live in a global economy nowdays.

OK... and? Does basic economics only apply to isolated nations but not to the planet as a whole?

If the dollar had bottomed out other countries would of pulled their money out of it.

Why would the dollar have bottomed out as a result of good fiscal policy? If anything, the dollar is at much greater risk of bottoming out now as opposed to two years ago.

Had that happened, the dollar would of inflated like crazy, and it would never fully recover.

Why would it need to fully recover? Part of our country's fiscal problem is that the dollar's reserve status allows us to endlessly refinance our debt instead of pay it off. The problem with doing this is that foreign countries will eventually stop buying our securities, though it is impossible to predict exactly when this will happen.

The prospect of a full, quick recovery you're giving isn't real.

Except you've presented no evidence to back up your position on this issue.

China was discussing openly about moving onto a silver standard. They had concrete plans to that and could have had it happen in about a month. They didn't, and the bailouts are responsible for that.

If China did that, it would be good for us, because we would be forced to save money and actually produce goods. Cause and effect wins.

Also, in comparing immediate decline Vs. gradual decline, there are some advantages to gradual decline which you didn't mention. It's true, generally, a gradual decline gives a bigger dip over time.

And a longer dip. Everyone is worse off in the end (i.e., there is no net benefit).

But since this dip happens slowly it allows for people and organizations to adjust to the changes with planning and precision, which is invaluable compared with a catastrophic change.

That makes sense in theory, but in practice the result of gradual declines is that more people are worse off because the precise adjustments made by companies are made with the idea of weathering the storm in mind, not with bouncing back from recession into economic growth. This leads to greater and longer-lasting joblessness and economic stagnation. It is far better for everyone in society if the economy is allowed to make its sharp dip and rebound quickly and decisively. The market as a whole adjusts to recessions better and more efficiently by itself than it does when the government intervenes.

Basically it's like losing your home suddenly vs. being told you'll lose it in six months. The time you have to plan for contingencies is invaluable, and it's the same for the corporations.

That analogy is bogus. Corporations have plenty of time to watch and analyze the market as well as preemptively formulate contingency plans in the event of fiscal emergencies. This goes back to what I was saying about moral hazard, where companies that expect the government to bail them out are more likely to act recklessly instead of practicing good fiscal policies. You're basically saying it's better to use taxpayer money to subsidize bad behavior in the banking system than to let these banks operate under the powerful incentive of self-preservation, which they don't need to worry about when Big Bro promises to come to the rescue if banks run out of money.