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Author Topic: It's the economy, stupid!  (Read 48274 times)

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Thad

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Re: It's the economy, stupid!
« Reply #100 on: September 30, 2008, 12:43:22 PM »

Or he it could be that "it" is Social Darwinism, and he's arguing that you can't support SD as it's commonly constructed without it leading to racist conclusions.

SD takes as one of its assumptions that we are not in a state of essentially economically enforced feudalism, with poor but talented and worthwhile fiefs squeezed for whatever they've got and kept down almost systematically.

That's pretty much it.  I don't think you can pick and choose which parts of "economic survival of the fittest" you think apply; it's either survival of the fittest or it's not.  If you believe the fittest people are the ones who make it to the top (and this entire crisis is a pretty good refutation of that point), then you must reasonably believe that the people in the other strata are there because of their own failings and not due to external circumstance.

FWIW, Shinra, I wasn't saying you're racist.  I WAS saying that you're supporting a line of thinking that, carried to its logical conclusion, IMPLIES racism -- there's a distinction there.  Similarly, I don't think Guild is racist, but he believes there shouldn't be public schooling, and in practice that would mean no education for the poorest Americans, who are disproportionately minorities.

I'm not saying you're racist.  I'm just saying you're proposing a line of reasoning that you don't seem to have followed to its conclusion.

But if we're going to dump 700 billion dollars into counteracting then, I'd prefer they go to the people on the bottom rather than the people on the top. The money should be relief, not reward.

We're in total agreement on this part.  But  government aid to people at the bottom is pretty much the opposite of what people typically describe as "survival of the fittest".

Any company who would collapse for their use of predatory lending and overlending should be allowed to collapse. The FDIC and the federal government will protect people's savings and mortgages. A bank collapsing does not suddenly throw tens of thousands of people out of their homes.

That's all conjecture.  FDIC money still has to come from somewhere, and we're looking at a taxpayer bailout any way you slice it.

People are already losing their homes, and have been for some time.  The housing bubble is a huge part of this mess.
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sei

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Re: It's the economy, stupid!
« Reply #101 on: September 30, 2008, 02:30:49 PM »

I don't remember having heard of Gresham's Law, but it was mentioned in a (non-economics) book I'm reading.
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François

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Re: It's the economy, stupid!
« Reply #102 on: September 30, 2008, 03:06:56 PM »

I'm going to try and detail my understanding of the issue; someone please tell me how wrong I am.

1-The government deregularizes mortgages in order to encourage banks to lend to the poor and to minorities.
2-The banks start loaning money to people in order to get them to buy houses they can't actually afford.
3-Now that there are lots more people who want to buy houses, the prices rise across the board due to the increased demand.
4-It turns out that the people who couldn't afford houses really couldn't afford them. A foreclosure epidemy ensues.
5-All the foreclosures kick property values in the nuts. The people who still have houses are stuck with mortgages much more expensive than what the actual houses are worth. The banks are stuck with devalued houses worth a fraction of what they paid for them.
6-The banks run out of money and collapse under the weight of the debts they've incurred in exchange for all that worthless real estate. I guess they gambled that it was more likely that home prices were going to continue to rise, and therefore that it didn't matter too much that the home buyers would never be able to repay them.
7-Now since the banks are all bound together, insuring each others' debt in an arcane, incestuous network that involves massive amounts of money that never existed in the first place, they all fall like dominoes.
8-Everyone freaks the fuck out and wants to get back whatever cash they can salvage out of this wreck, therefore thoroughly raping the stock market all over the place.

So, am I close?
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Brentai

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Re: It's the economy, stupid!
« Reply #103 on: September 30, 2008, 03:19:06 PM »

Pretty darn close.  I'll admit I'm not the World's Foremost Expert, but:

1-The impetus for deregulating mortgages, off paper, probably didn't have much to do with the poor.
2-All the defaulting loans right now aren't 100% tied to mortgages. There's a lot of very poorly thought-out business loans out there too.  Houses are simply the largest area of, forgive the loaded terminology, infection at the moment.
3-The banks weren't totally stupid.  They knew this was coming, but it's not an entirely simple matter to break out of an economic spiral once you're in it, as every non-rich person probably knows.
4-Not every bank is fucked here.  Just, ah, 90% or so.
5-The stock market dropping like a rock is the result of everybody pulling the hell out before their investment literally becomes $0.
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Thad

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Re: It's the economy, stupid!
« Reply #104 on: September 30, 2008, 03:46:37 PM »

6-The banks run out of money and collapse under the weight of the debts they've incurred in exchange for all that worthless real estate. I guess they gambled that it was more likely that home prices were going to continue to rise, and therefore that it didn't matter too much that the home buyers would never be able to repay them.

Maybe.  But anecdotally, I heard a caller on NPR yesterday who said he knew people on Wall Street who just shrugged and said "If this goes south, the government will bail us out."

Where the "let them fail" argument DOES have merit is that if we bail them out this time, they'll run their businesses like they expect one next time.

Where it doesn't, again, is that if they go, they'll take everybody else down with them.
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Brentai

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Re: It's the economy, stupid!
« Reply #105 on: September 30, 2008, 03:51:47 PM »

  I've finally killed Capitalism!  For everlasting peace!
:profit: GRRRRRRRRRRRR......
:8V: BAAAAAAAAAAAAH!!!!!
OH SHIT THAT WAS A LOAD BEARING BOSS!!!


TIME TO BAIL OUT: 14:00:00
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Re: It's the economy, stupid!
« Reply #106 on: September 30, 2008, 03:56:25 PM »

6-The banks run out of money and collapse under the weight of the debts they've incurred in exchange for all that worthless real estate. I guess they gambled that it was more likely that home prices were going to continue to rise, and therefore that it didn't matter too much that the home buyers would never be able to repay them.

Maybe.  But anecdotally, I heard a caller on NPR yesterday who said he knew people on Wall Street who just shrugged and said "If this goes south, the government will bail us out."

Where the "let them fail" argument DOES have merit is that if we bail them out this time, they'll run their businesses like they expect one next time.

Where it doesn't, again, is that if they go, they'll take everybody else down with them.

So, wait, what's the solution here? Bailing them out solves nothing. Letting them fail causes them to cackle as they take everyone with them.

Bail them out, then execute the people in charge?
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Brentai

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Re: It's the economy, stupid!
« Reply #107 on: September 30, 2008, 04:00:35 PM »

Bail them out, and simultaneously set up new rules to prevent them from putting themselves in this position again.  The old Deal did both parts, but was sort of lax and loopholey on the second bit.  In theory they're cooking up something now which addresses current and future problems a bit more satisfactorilyationly.

It's kind of the Big Brother equivalent of telling your kids that you'll post their bail, but they're fucking going to have to stick to a curfew.
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Re: It's the economy, stupid!
« Reply #108 on: September 30, 2008, 04:17:53 PM »

Post their bail, then take away their Xbox.
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Classic

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Re: It's the economy, stupid!
« Reply #109 on: September 30, 2008, 04:21:47 PM »

Place them in semi-indentured servitude.
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François

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Re: It's the economy, stupid!
« Reply #110 on: September 30, 2008, 04:24:56 PM »

Heh. Republican ideal of capitalism, meet reality. Reality, meet the Republican ideal of capitalism.
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Brentai

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Re: It's the economy, stupid!
« Reply #111 on: September 30, 2008, 04:34:59 PM »

The Democratic ideal of capitalism isn't perfect either, you know.
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Classic

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Re: It's the economy, stupid!
« Reply #112 on: September 30, 2008, 04:36:28 PM »

Isn't that socialism?  :happy:


:serious: But man, jeez, Roast Beef basically thinks deregulation is about the worst thing ever.
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François

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Re: It's the economy, stupid!
« Reply #113 on: September 30, 2008, 05:02:53 PM »

The Democratic ideal of capitalism isn't perfect either, you know.

Yeah, it's not. But, I mean, we're certainly having an object lesson about deregulation right now, even though it might not be entirely/directly responsible.
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Catloaf

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Re: It's the economy, stupid!
« Reply #114 on: September 30, 2008, 05:41:15 PM »

We need to have more regulations.  Then get other countries to have the same regulations so greedy bastards can't do greedy bastard shit anywhere.
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Brentai

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Re: It's the economy, stupid!
« Reply #115 on: September 30, 2008, 05:47:13 PM »

Ho, yes.  Let's try to impose American systems of government on other countries.  That one is always a good time.
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Air

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Re: It's the economy, stupid!
« Reply #116 on: September 30, 2008, 05:48:08 PM »

 ::(:
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Ocksi

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Re: It's the economy, stupid!
« Reply #117 on: September 30, 2008, 07:18:14 PM »

there are three parts of the collapse that haven't been discussed, that i've seen.  the intertwining debt mentioned came about from banks and lending groups bundling together toxic assets (failure mortgages, bad loans) and selling them to people who didn't know any better.  the organizations would give them billions in credit to take up these bundles of loans, assuming the loans would then pay off and return a profit.

many of these organizations were international entities, based in china and europe.  the joke that's been going around economic circles is, "yeah, china's been selling us all these toxic toys, foods, and everything else.  all we've been selling them is toxic assets."

the third part of this is all that credit these outside organizations are extending in exchange for toxic assets is that once they caught a smell of what was happening, when the loans started really turning sour, they stopped extending that credit to companies like lehman and bear sterns, not to mention freddy and fannie.  without those credit lines, these companies could no longer afford to continue making bad loans, which meant they could no longer make any money.

but they had so much credit they were trying to cover from previous bad loans that the debt over just a few days of not earning retard money collapsed companies worth hundreds of billions of dollars.

if these companies aren't saved, their creditors crumble in the same way they have.

and now two interesting solutions i've heard, one which bails out the world market at the sacrifice of the US dollar and economy in general, and one that erodes the world economy, lowering all world currency to be competitive with the dollar again.  both plans include a few depression years, but, honestly, i don't think there's any avoiding that at this point.

the first plan extends the bailout money to money managers who have proven themselves responsible by avoiding this huge collapse.  spread it evenly among as many of these banks, funds, groups, whatever you can find.  attain the real value of the assets that are currently showing highly inflated value (which is one reason the paulson plan was so bad: he wanted to buy toxic assets at the value the companies who tanked set them, or close to it, with no way to assess their true market value) and have a big auction.  smart money managers will obviously pay only the closest thing to their true appraisal of market value as they can get and still profit from it, so they will not assume toxic assets, they will be granted privilege to refinance the deals in an appropriate way after getting the assets at cost.

this would lead to profit and, in the end, ways to reduce the pressures on outside creditors.

the other option is to take the bailout money and use it to invest in infrastructure and industrial programs, new deal-style.  create jobs, factories, etc.  then use those factories to produce american goods at affordable prices, sell them to other countries, and actually have an american product worth exporting for the first time since cheap chinese goods came on to the market.  after a few years of global depression, quality goods flooding the world market could put america back on top.
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Mongrel

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Re: It's the economy, stupid!
« Reply #118 on: September 30, 2008, 07:29:35 PM »

I would love to see the 'worthless, shit goods' pendulum swing back towards the quality end of things for a while, but I doubt it'll happen soon.
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Dooly

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Re: It's the economy, stupid!
« Reply #119 on: September 30, 2008, 07:41:06 PM »

This thread has me wondering if I should start investing in some foreign currency before our dollar takes a nosedive.
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