patrick.net

tatupu70 says

Could you post who they were? And what they said?

As I said,

And don't make me go frame by frame through this video pointing out the people and what they said.

If you're too lazy to passively listen to the video, I doubt you'll actively read a transcript of it.

tatupu70 says

Discrediting all Keynesians because Ben Stein made a poor stock prediction?

Hey, you asked for one example. And no, one example doesn't discredit all Keynesian, but I could easily give you 1000 examples - oh wait, I just did in the two above videos. So, the example I quoted above is typical. It's good to illustrate the point.

tatupu70 says

How about 1937? Wasn't that trying it your way?

What the hell happened in 1937 that was Austrian?

tatupu70 says

Unemployment is falling. The US is working trough the housing issues.

Unemployment is not falling. The stats are starting to exclude more and more long-term unemployed from the labor force. What do you think the government counts when it tallies the unemployment figure? It counts the number of people getting unemployment benefits, which run out after so long.

I'm not sure what you consider "working through the housing issues". The answer to that is lower prices.

tatupu70 says

I really don't think you understand Keynesian economics and that is part of the problem.

Translation: You don't support Keynesian economics. Therefore, you must not "understand" it.

I assure you, I understand the theory better than most economists. You see, I can actually do the math. The typical "economist" can barely do arithmetic.

But what I know is irrelevant. By any standard, Keynesian economics has empirically failed. And since it has had no competition for 80 years, you can't blame anything but the theory itself.

Why do you hate public employees shrek? What do you have against police officers and air traffic controllers?

shrekgrinch says

Really? I guess you want unemployment levels as high as 25% and as low as 14% for about a decade then?

Actually shrek, unemployment went down to 1.5% during WWII. Again, WWII was a Keynesian govt. spending program.

"Don't recall seeing that under Bush."

Because under Bush we had a massive housing bubble. From 2001-2009, there were ZERO private sector jobs created. We lost 653,000 private sector jobs under Bush. The only job gains under Bush were in government and in government contractors. Jobs might have been growing on trees in DC and northern Virginia and Wall St., but that was not the case in most of the country.

Dan8267 says

If you're too lazy to passively listen to the video, I doubt you'll actively read a transcript of it.

OK--I wasted 10 minutes and watched it. As I expected, NOBODY said that they were pro-bubble. NOONE. Would you like to try again and show me ONE case of anyone saying they are for bubbles?

Dan8267 says

Hey, you asked for one example. And no, one example doesn't discredit all Keynesian, but I could easily give you 1000 examples - oh wait, I just did in the two above videos. So, the example I quoted above is typical. It's good to illustrate the point.

I'm still looking for one example. Keynes said nothing about picking stocks. That example is an utter fail.

Dan8267 says

What the hell happened in 1937 that was Austrian?

You'll have to do the research yourself.

Dan8267 says

Unemployment is not falling. The stats are starting to exclude more and more long-term unemployed from the labor force.

Wrong again. Here are the job creation numbers:

http://data.bls.gov/timeseries/CES0000000001?output_view=net_1mth

Dan8267 says

I'm not sure what you consider "working through the housing issues". The answer to that is lower prices

Well, not exactly. That's part of the solution. The other part is making sure capital is available for qualified borrowers.

Dan8267 says

But what I know is irrelevant. By any standard, Keynesian economics has empirically failed.

That shows a lack of understanding. The factors that have weakened our economy have little or nothing to do with Keynes. Poor trade policies, poor tax policies, and too much governmental spending. And before you spout the usual anti-Keynesian BS. Keynes was not for government spending. During normal or good economic times, true Keynesians would be running surpluses not deficits. The real problems started with Mr. Reagan.

EightBall says

I'm a little sick and tired of the wealth inequality BS. There is a reason there is wealth inequality and it isn't because an evil 1% decided it would be a good thing that people were not able to make a living and grind the economy to a halt. The evil 1% were just playing the game set forth by the corrupt government goons

You don't think some of the 1% bought and paid for government officials to write the laws? And make the rules?

In any event, however we got to this place, we need to fix it. We won't have a healthy economy until the wealth disparity problem is fixed.

shrekgrinch says

it wasn't keynesianism that created a hostile business climate during the New Deal Era, i

I'll agree that the New Deal was based on Keynesian Economics (KE), but there's far more to KE than that. Also, the New Deal came long after the First Great Depression started, so you can hardly make the case that the New Deal caused the depression.

More importantly, back in 1971 then President Richard Nixon famously quoted Milton Friedman, "We are all Keynesians now.". Both Democrats and Republicans have embraced KE and ignored any other possible economic model. So, I'd say the problem has permeated both parties. The are both guilty of this. And Richard Nixon was no lefty. He used to have hippies neutered for fun.

shrekgrinch says

Because the Dems from Obama all the way down to idiots

I'd say that about both parties.

shrekgrinch says

If you are unfamiliar with Peggy Joseph, just watch this:

Yep, I remember that. The idea that you won't have to work to put gas in your car just because a black guy was elected president sounded stupid back when Peggy said it. It sounds just as stupid now. It would be interesting if someone did a follow up interview with her to see if she learned anything over the past few years.

However, your point is made. There are certainly a lot of fools in the Democratic Party that actually believed that Obama was going to magically change the world by running on a unicorn that shitted rainbows. I think that was an SNL sketch.

However, what you are neglecting is that there are a lot of Republican fools who are just as irrationally religious about nonsensical dogma like "if you don't tax the rich, money will magically trickle down to the poor" which has been empirically disproven over the past 30 years.

Both parties are delusional.

shrekgrinch says

Dan8267 says

And the same thing is happening to high skilled, heavily educated people in America.

No. I was referring to people who produce actual value. Liberal Arts professors on tenure don't fall under that category at all despite all the 'heavy education' wasted on them, for example.

As was I. I was referring to high tech engineers in networking, software, biotech, nanotech, etc. I thought that was obvious, but then again, I live in the software industry so I talk about stuff like this with colleagues all the time. Perhaps it's not so apparent to those outside the field.

I'll agree that Liberal Arts is bullshit and a waste of resources.

shrekgrinch says

I guess you want unemployment levels as high as 25% and as low as 14% for about a decade then?

Isn't that what we have right now if you correctly measure the unemployment level? If you count underemployment, aren't we over 25%?

And ultimately, this is because the basis of trust has been utterly destroyed and the economy will only recover when that trust is restored. The fastest way to restore that trust is to make people realize their losses and to prosecute fraud. Only when that is done, will commerce resume to pre-depression levels. And while this depression is going on, we are permanently losing real wealth that could have been produced if we just stopped playing accounting fraud games.

shrekgrinch says

Something that its diehards refuse to acknowledge. It can't be falsifiable. Therefore it is based on faith, not logic or science.

Exactly. And diehards of any political faith do this. It's the argument that pro-torture people made during the Bush administration and it's the argument that pro-bailout people are making during the Obama administration.

This is the most disgusting thing about politics. I want X to be true therefore the only valid evidence is that which supports X. Screw everything else. It's like the exact opposite of the Scientific Method.

HousingWatcher says

Actually shrek, unemployment went down to 1.5% during WWII. Again, WWII was a Keynesian govt. spending program.

Yes, WWII ended the Great Depression. I think it did so mainly because the militarization of our economy restored trust and that trust continued after the war. I think that the trust had more to do than the demand. And I know I'm fighting an uphill battle against KE by saying that.

The fact is that we have spent more, adjusted for inflation, on warfare in the past ten years than we did during WWII. If increasing aggregate demand through war was truly an economic benefit, then the economy should be better now than it ever was. It should have also been a boom time during the Vietnam War. The fact is, since WWII, there has not been an association with war spending and economic prosperity.

Furthermore, the use of war to improve an economy, even if it did work, would be downright evil. Getting America out of the First Great Depression was not worth allowing the Holocaust to happen or the loss of 48,231,700 lives.

Wouldn't it be far better to take all the military industry jobs and refactor them to rebuild New Orleans and our nation's infrastructure? Isn't the development of capital goods a better economic strategy than the destruction of civil engineering projects through warfare?

tatupu70 says

As I expected, NOBODY said that they were pro-bubble.

Surely, you smart enough to understand that the person does not have to utter the exact words, "I'm pro-bubble" to indicate that they were for the housing bubble. In fact, no pro-bubble person would use the word bubble to describe the bubble. That's the whole point. They used the term "housing boom". It's always a boom, not a bubble, to those who are in favor of it.

And people wonder why I act like Captain Obvious. It's because you have to tell people obvious things many times before they accept it as true.

tatupu70 says

Dan8267 says

What the hell happened in 1937 that was Austrian?

You'll have to do the research yourself.

Although I'm willing to play devil's advocate against any idea before accepting it, I'm not willing to spend my time supporting your arguments without proof of cheese. If you want to convince me of something, you're going to have to make a good case for it yourself.

tatupu70 says

Wrong again. Here are the job creation numbers:

http://data.bls.gov/timeseries/CES0000000001?output_view=net_1mth

Tatupu, there is no way that you could possibly be so naive as to accept the government's statistics on unemployment. Statistics released by government serve one purpose: to make the government look as good as possible. Please tell me, you don't believe their inflation statistics too.

Trusting government statistics on unemployment and inflation is like trusting Philip Morris, now Altria, statistics on smoking and cancer.

tatupu70 says

That shows a lack of understanding. The factors that have weakened our economy have little or nothing to do with Keynes. Poor trade policies, poor tax policies, and too much governmental spending. And before you spout the usual anti-Keynesian BS. Keynes was not for government spending. During normal or good economic times, true Keynesians would be running surpluses not deficits. The real problems started with Mr. Reagan.

Tell that to the 99.9% of economists and politicians who are Keynesians. They seem to have a very different understanding of KE than you have.

Ron Paul, Austrian, predicted the bubble, the bust, and the depression

Joe Scarborough: How could it be that you knew this on the banking committee in 2003 and nobody else did until after the collapse.

Ron Paul: I would think that the easiest explanation is Washington, DC is permeated by Keynesian economic thinking. Very few even know the name Austrian Economics and understand the business cycle.

Keynesian Economics vs. Austrian Economics

And since you keep asserting that I have no understanding of KE, let me clarify it for you

Keynesian school – All recessions are bad and must be suppressed by government actions. This protects established businesses and jobs. The methods are elaborate and costly, but a benefit to the public overall.

Austrian school – When markets stray too far from reality they must be purged by adversity. This clears unneeded or failing enterprises so capital is not allocated wastefully, and new businesses can emerge. Periodic small recessions are the price of a healthy economy, although in principle they can also be avoided through wise allocation of resources.

To illustrate, pay attention to the part of the videos above that go like this:

Peter Schiff (Austrian): It's not wealth that has increased in the past few years, we haven't increased our productive capacity. All that's increased is the paper value of our stocks and real estate. But that's not real wealth.

Arthur Laffer (Keynesian): Of course it is!

Schiff then goes on to describe how realizing losses (a recession) is the only way to cure the economy of the sickness of malinvestment.

But, of course, I understand nothing about economics like I understand nothing about physics because you assert so. Remind me again, which one of us built a robot with a neural net brain in graduate school? Oh yeah, that was me. I may be wrong about some things, but I am never clueless about a subject matter when I express an opinion. I form opinions very slowly and only after intense research.

Dan8267 says

Surely, you smart enough to understand that the person does not have to utter the exact words, "I'm pro-bubble" to indicate that they were for the housing bubble

I didn't know that there was a code involved. My mistake.

Dan8267 says

And people wonder why I act like Captain Obvious. It's because you have to tell people obvious things many times before they accept it as true.

Nothing is obvious here except maybe to you. Some people didn't understand that housing was unsustainable due to degraded underwriting standards. That much is true. But, if they did understand it, NONE of them would have been pro-housing. I'll say it again. NOBODY was or is pro-bubble. To think otherwise is just idiotic.

Dan8267 says

Tatupu, there is no way that you could possibly be so naive as to accept the government's statistics on unemployment. Statistics released by government serve one purpose: to make the government look as good as possible. Please tell me, you don't believe their inflation statistics too.

Oh, you're one of those. It makes it very difficult to debate with you. Any numbers you don't agree with are suspect. But any stats that you like are OK, right? Like when job creation was highly negative--those numbers are correct, I'm sure. Numbers from Mish are right too, huh?

Dan8267 says

Keynesian school – All recessions are bad and must be suppressed by government actions. This protects established businesses and jobs. The methods are elaborate and costly, but a benefit to the public overall.

Completely incorrect. Government actions are not intended to protect established businesses and jobs, but rather to try to limit the feedback loop of job losses and reduced spending.

Dan8267 says

Schiff then goes on to describe how realizing losses (a recession) is the only way to cure the economy of the sickness of malinvestment

And how is that at odds with Keynesian thinking at all? Malinvestment needs to be penalized (realized), but good investment shouldn't be penalized also as collateral damage.

tatupu70 says

Some people didn't understand that housing was unsustainable due to degraded underwriting standards. That much is true. But, if they did understand it, NONE of them would have been pro-housing. I'll say it again. NOBODY was or is pro-bubble. To think otherwise is just idiotic.

That's the definition of being pro-bubble. They all advocated policies and investments that supported and inflated the bubble and led to the collapse.

What you mean to say is that nobody is pro-depression, i.e., no one would advocate deliberately creating a depression in order to make short-term financial gains.

However, you are also wrong about that. The too-big-too-fail banks would definitely do it all over again. And why not? They are in better shape now than they were before the bubble. They were protected from their malinvestments, got to keep all the ill-gotten gains, and they eliminated most of their competition from small banks that went under. Those small banks didn't own high-ranking politicians.

tatupu70 says

Completely incorrect. Government actions are not intended to protect established businesses and jobs, but rather to try to limit the feedback loop of job losses and reduced spending.

I'm going to have to call bullshit on that. The entire purpose of the U.S. automobile bailout was to protect specific U.S. jobs in that specific industry and those specific companies so that those specific voters in the rust belt would not vote the current crop of politicians out of office. It had nothing to do with limiting a feedback loop. It was about securing votes by securing jobs.

Government is very selective about which jobs it protects and who is allowed to be fucked over.

tatupu70 says

And how is that at odds with Keynesian thinking at all? Malinvestment needs to be penalized (realized), but good investment shouldn't be penalized also as collateral damage.

Austrian Economics would say let the big banks fail and let smaller, smarter banks gain market share. Keynesian Economics says don't let them fail, protect them at all costs. Remember, Ben Bernanke is known for having studied the First Great Depression and his policies are based on Keynesian Economic Theory. And unfortunately, so many people in the media have drank the Kool Aid, that Bernanke appeared on the cover of Time Magazine.

And that's a pretty gross glorification of someone who has wrecked our economy, caused massive unemployment, and kept basic necessities like food and shelter unaffordable. Still, he's portrayed as a hero.

Yes, Hitler's also made the Person of the Year cover, but his image wasn't made to glorify like Bernanke's image is above. Bernanke's a freaking 3D dollar bill, the image of prosperity!

Dan8267 says

That's the definition of being pro-bubble. They all advocated policies and investments that supported and inflated the bubble and led to the collapse.
What you mean to say is that nobody is pro-depression, i.e., no one would advocate deliberately creating a depression in order to make short-term financial gains.

Nope--I said it how I meant to say it.

Dan8267 says

However, you are also wrong about that. The too-big-too-fail banks would definitely do it all over again. And why not? They are in better shape now than they were before the bubble.

Are you kidding me? That's just plain wrong. Please show me one of the TBTF banks that is in better shape now? They have taken HUGE losses (some went under, mind you). They had to massively dilute their owners' shares. And they continue to realize the losses with seemingly no end in sight. How exactly is that "better"??

Dan8267 says

I'm going to have to call bullshit on that. The entire purpose of the U.S. automobile bailout was to protect specific U.S. jobs in that specific industry and those specific companies so that those specific voters in the rust belt would not vote the current crop of politicians out of office. It had nothing to do with limiting a feedback loop. It was about securing votes by securing jobs.

And how exactly is the auto bailout an example of Keynesian economics?

Dan8267 says

Austrian Economics would say let the big banks fail and let smaller, smarter banks gain market share. Keynesian Economics says don't let them fail, protect them at all costs

Again--this is where I don't think you understand Keynesian economics. It most definitely does NOT say to protect/bail out failing industries. Where did you get that idea??

Great job with the Hilter reference though--it's a nice touch.

tatupu70 says

Nope--I said it how I meant to say it.

Fine, then you are simply wrong. I don't feel like arguing every minute detail. So let's just agree to disagree on these facts. Evidently, there's nothing on the Internet I can quote that will get you to accept my facts even if I show the video of the fact.

tatupu70 says

Are you kidding me? That's just plain wrong. Please show me one of the TBTF banks that is in better shape now?

Only one? Can I show you ten?

Bank of America: $907.3b in deposits, TARP participant.
Wells Fargo: $759.7b in deposits, TARP participant.
JPMorgan Chase: $639.7b in deposits, TARP participant.
Citibank: $320.8b in deposits, TARP participant.
PNC Bank: $188.1b in deposits, TARP participant.
US Bancorp: $151.9b in deposits, TARP participant.
Sun Trust: $118.5b in deposits, TARP participant.
Capital One Financial: $114.3b in deposits, TARP participant.
Toronto-Dominion (TD) Bank: $104.8b in deposits, as a Canadian bank it was not eligible for TARP funds.
BB&T: $95.0b in deposits, 2.12% market share, TARP participant.

tatupu70 says

And how exactly is the auto bailout an example of Keynesian economics?

If you don't understand that, you have no right to say that I don't understand Keynesian economics.

"Steven Rattner, arguing for the Keynesians, said that markets sometimes fail, and defended the auto bailout..."

The auto bailout was quintessential Keynesian Economics.

The Economic Perspectives blog sums it up nicely,

John Maynard Keynes, a British economist, popularized the notion that the government can and should play an active role in managing the macroeconomy. Keynes acknowledged that classical thought might have applicability over an extremely long time period, but “in the long run we are all dead.” If people wait for the macroeconomy to correct itself, they may not live long enough to see the changes. The severity and prolonged duration of the Great Depression convinced most people of the validity of Keynes’ insights. During the Great Depression, prices were falling, but that did not motivate an increase in purchases and employment as classical economics predicts. Even if people had income, they were reluctant to spend it because of uncertainty about the future.

Mainstream economics since the Great Depression is Keynesian economics. The overwhelming majority of economists around the world believe it is appropriate for the government to take actions to promote economic growth and to maintain low unemployment and low inflation. The debate in the United States is not whether the government should try to achieve these goals. Instead, the discussion is about what the government should do. Essentially, Republicans argue that public policies should primarily benefit businesses and the wealthy because they are the job creators. Democrats respond that making the wealthy richer will not cause them to hire more workers unless there is a significant increase in the demand for goods and services.

But what if Keynes was just wrong. What if the whole theory that WWII ended the First Great Depression because of increased aggregate demand is just plain wrong. What if the real reason WWII ended the First Great Depression was because business knew they could trust the government to eventually pay for goods and services rendered and that after the war consumers could be trusted to pay for goods and services due to the savings via war bonds and other instruments that were accumulated during WWII? What if the key is trust not demand?

And that is what you simply are not getting. If I'm wrong, then why isn't America currently experiencing an economic boom due to the $1 trillion spent on the war in Iraq and Afghanistan alone? And that's not counting our other undeclared wars and military operations or the quasi-military organizations like the TSA and the Homeland Security Agency. That's a lot of aggregated demand.

If I'm right, then it makes sense that no amount of military spending can fix an economy because it does not restore the trust necessary for commerce. But if I'm right, all the Keynesians are wrong. And that is something no Keynesian will ever admit as you have demonstrated.

You are simply not even open to the possibility that there are alternative explanations, and no math and no history will convince you otherwise. I have supported everything I have said in this thread. There is nothing more you can ask of me. I have already answered every question you thought could stump me, and I'm not even an economist. Image what a real Austrian Economist could say on this matter. Too bad there aren't any in America.

Dan8267 says

Fine, then you are simply wrong. I don't feel like arguing every minute detail. So let's just agree to disagree on these facts. Evidently, there's nothing on the Internet I can quote that will get you to accept my facts even if I show the video of the fact.

OK fine. You have posted a video that shows Peter consistently saying that there was a housing bubble. I'll wholehearted agree that he saw it coming when others didn't. Only that has nothing to do with the discussion at hand. How does Keynesian economics relate to poor underwriting standards?? And the repeal of Glass Steagal?

Dan8267 says

Back in 2002, the top 10 banks controlled 55 percent of all U.S. banking assets. Today, the top 10 banks control 77 percent of all U.S. banking assets.

Again--if you had posted that the TBTF banks control a higher percentage of assets, then I'd agree. But, you didn't. You said they are in better shape and would do it all over again. Which is completely idiotic. They have all incurred and will continue to incur HUGE losses from the housing bubble. Just out of curiosity-do you think Lehman is better off? Or WAMU?

Dan8267 says

If you don't understand that, you have no right to say that I don't understand Keynesian economics

I think I've hit upon your misunderstanding of Keynesian economics then, if you believe bailouts of failing companies is Keynesian in nature. Because it most definitely is NOT.

Dan8267 says

You are simply not even open to the possibility that there are alternative explanations, and no math and no history will convince you otherwise. I have supported everything I have said in this thread. There is nothing more you can ask of me. I have already answered every question you thought could stump me, and I'm not even an economist. Image what a real Austrian Economist could say on this matter. Too bad there aren't any in America.

I'm very open to the possibility. That's actually why I've been debating, because I'm curious to other ideas. But all you've presented is strawmen arguments--trying to frame Keynesian as something it's not and then knocking down the strawman.

You have provided no math. No explanations other than the videos that are useless. Again--how does Peter predicting the housing bubble discredit Keynes? I saw the bubble too when I lived in CA. Does that mean I'm from the Austrian school too?

Dan8267 says

If I'm wrong, then why isn't America currently experiencing an economic boom due to the $1 trillion spent on the war in Iraq and Afghanistan alone? And that's not counting our other undeclared wars and military operations or the quasi-military organizations like the TSA and the Homeland Security Agency. That's a lot of aggregated demand.

Because the money isn't getting to the right people--as evidenced by the wealth disparity being close to the highest in US history. You might also notice the other time when disparity was at this level.

Dan8267 says

If I'm right, then it makes sense that no amount of military spending can fix an economy because it does not restore the trust necessary for commerce.

OK--I won't be closed minded. Do you have any measures of "trust"? What exactly do you mean by "trust"? Trust in what?

Do you even know what a Straw Man argument is? It's called a "straw man" argument because the attacker is deliberately attacking a position that his opponent is not taking. The metaphor is that the attacker sets up a man made of straw, attacks the fake straw man, which cannot defend itself because it is not real. Then the attacker declares victory.

You have consistently misused this term. So here's an example of a Straw Man argument.

Republican: The deficit is too high. We must cut spending.

Republicans: Why are you trying to dismantle the entire military and leave us defenseless?

If you are asserting that I have ever, ever used a Straw Man argument, then you are an outright liar. I have shown actual video of Keynesians debating with Austrians on the issue of the current financial crisis. I have quoted their actual words. That, by definition, cannot be a straw man argument.

It appears that you are taking the Fox News approach of repeating a lie until the audience believes it. I would hope that no one on this site is dumb enough to fall for your tricks. The evidence I have presented is overwhelming, whereas you have offered absolutely no evidence at all to counter. Everything you've said has been an assertion, unfounded in reality.

And so ironically, you end your last rant with an actual Straw Man argument.

Do you have any measures of "trust"?

Yes, because if you cannot precisely measure trust in some standard unit like liters, it must have no effect whatsoever on the economy. That's a perfect example of a Straw Man argument.

I forgot to comment on how ridiculous it is to state that going from a 55% market share to a 75% market share isn't considered a big gain in any industry. Especially when all the execs get record breaking bonuses while doing so. Yeah, I'm sure those bankers would undo all that if they could. The rest of us would like to fail as well as these bankers.

If this helps, a lot of people hide their real income and look a lot more poor to the government. Not everyone, but quite a large number of folks do do that.

Dan8267 says

Do you even know what a Straw Man argument is? It's called a "straw man" argument because the attacker is deliberately attacking a position that his opponent is not taking

Yes--although I don't think we're opponents. You are continually attacking a made up version of Keynesian economics.

Dan8267 says

I have shown actual video of Keynesians debating with Austrians on the issue of the current financial crisis

You have shown no such videos. Seriously--wtf are you talking about??

Dan8267 says

The evidence I have presented is overwhelming, whereas you have offered absolutely no evidence at all to counter

Again--what evidence??? You've shown videos of one man predicting the housing bubble. How in the hell does that say anything about Keynesian economics???

Dan8267 says

Yes, because if you cannot precisely measure trust in some standard unit like liters, it must have no effect whatsoever on the economy. That's a perfect example of a Straw Man argument.

lol--you really have no clue. I just asked if you could measure trust. How is that a straw man argument? How is that an argument at all?? It's a question.

Dan8267 says

I forgot to comment on how ridiculous it is to state that going from a 55% market share to a 75% market share isn't considered a big gain in any industry. Especially when all the execs get record breaking bonuses while doing so. Yeah, I'm sure those bankers would undo all that if they could. The rest of us would like to fail as well as these bankers.

It's a big gain in market share, sure. So what? Citi could have 100% market share by offering loans at 1% and savings at 10%. Would they be better off?

What is important is profits, not market share.

There's no point in arguing this till the heat death of the universe. Let's put it to a vote. My thesis versus yours. Let the community decide.

Dan's Thesis

This depression is the result of lack of trust in our financial system. This depression would not have been nearly as severe if the investment bankers who committed fraud were prosecuted and the banks who made bad investments had been let to fail. Smaller, wiser banks would have gained market share, and investors would be able to trust again because they would know that the government is keeping fraud in check instead of actively helping the criminals rob investors. As such, this depression will end when trust is regained, not when we spend enough money.

Tatupu's Thesis

Keynesian Economics is perfect. Austrian Economics has no merits. And the only reason we're in a depression is that we haven't killed enough brown people. Increase the spending, or government stimulus, on our war machine by starting a few more wars with Iran, Pakistan, and India and we will come out of the depression. In the meantime, we should continue to give vast sums of money to the banks so they can retain their talented CEOs by offering them tens of millions of dollars in bonuses. This is just common sense.

Patrick.net readers, please vote.

Dan I think it's because we have too many people living on government hand outs now. Too many takers and not enough givers. Government is distorting free market in healthcare, education, housing, food, infrastructure. Any place they touch starts to fall apart and gets too expensive.

And we as the people keep on voting for these socialists because government spending, like drug addiction, feels good. We as a nation don't learn from our mistakes. We don't vote for less government spending. Only thing we get is bigger government spending and more outsourcing in a self perpetuating cycle.

FortWayne says

Only thing we get is bigger government spending and more outsourcing in a self perpetuating cycle.

Well, the issue of why we have big government and high spending is a subject that deserves its own thread. I hate to derail this thread when it's finally ending (hopefully).

But I'll put in my conjecture. I think the reason we have run-away government spending is because in 1913 we started the income tax. The government takes in some much money based entirely on what the population makes rather than the services the government provides.

Then everybody fights for a piece of this pie because they figure it's better if they get some than letting someone else get it. The tax revenue is like a pig's trough and every special interest has to eat as much as it can before the other pigs get to it. The result is that everyone is demanding more spending and no one demands cuts. Thus, the spending keeps growing.

A better system would be to use the income tax only as Woodrow Wilson initially intended it, as a means of providing a safety net for the poor by taxing only millionaires.

Instead of having a general funding from a tax that applies to everyone, we should fund government services by taxing the users of those specific services. For example, the quintessential example of why we need to social the cost of a service is the light house. You can't privatize light houses because the light is available for everyone to use, so everyone should pay for it.

Under the system I propose, instead of paying for the light house with an income tax, we would pay for it with a tax on boats that only boat owners would pay. Commercial boat owners, like shippers, would pass on the cost as part of the shipping cost. But land lovers with no boats won't pay this tax, except indirectly via shipping costs for anything they buy that arrives by boat.

Similarly, we would pay for the highway transportation tax with an automobile tax or a gas tax, the closest we can practically come to a millage tax. We would pay for every service, except poverty related ones, with taxes that apply to those who benefit from the service.

The idea is that now people can debate in detail about whether or not they need more lighthouses or bridges. The same people advocating the spending will be paying for it, and they can make the decision without the temptation to try to get a free meal at someone else's expense. In other words, socialize the cost, but socialize it to just the scope of the actual users and no one else.

The result would be far less government spending and far more efficient use of money on government services.

Dan8267 says

Tatupu's Thesis
Keynesian Economics is perfect. Austrian Economics has no merits. And the only reason we're in a depression is that we haven't killed enough brown people. Increase the spending, or government stimulus, on our war machine by starting a few more wars with Iran, Pakistan, and India and we will come out of the depression. In the meantime, we should continue to give vast sums of money to the banks so they can retain their talented CEOs by offering them tens of millions of dollars in bonuses. This is just common sense.
Patrick.net readers, please vote.

See, you just can't stop yourself from putting up strawman arguments, can you?

If you'd really like, I'll put up my thesis for you.

Dan8267 says

The ultimate Keynesian solution to our current depression, which resulted from the housing bubble, is simply to burn everyone's house, condo, apartment, or shack to the ground. No exceptions.

But it isn't it also interesting when Greenspan who basically takes a page from Rand says nearly the same thing?

Supply side economics I could argue works but also brings a bit if a twist on things. While products go down in price it can shift where labor goes. If there is a human element towards it then some might long for a return for something that won't happen.

I think this thread can have people agree on matters but with differences as to why so.Dan8267 says

But I'll put in my conjecture. I think the reason we have run-away government spending is because in 1913 we started the income tax. The government takes in some much money based entirely on what the population makes rather than the services the government provides.

That's a good point but I'd also add that by the time the gold standard was taken off and deficit ceilings were pretty much unlimited then spending is no longer dependent on revenue.

If spending was really dependent on revenue then we'd have no real deficit. When money and credit is produced in masse eventually it leads to inflation somewhere.

If taxes were instead user fees for people that would make more sense but some would argue it is regressive and the ability to pay would limit access.

tatupu70 says

See, you just can't stop yourself from putting up strawman arguments, can you?

If you'd really like, I'll put up my thesis for you.

If my synopsis of your thesis is wrong, then it is because you have done such a piss poor job of stating your position. Perhaps if you stopped making assertions about my ideas and presented a coherent counterplan, you would not be "misunderstood".

My summary was based on what you conveyed to me, not necessary what you wanted to convey. But that's entirely you're fault for not having the balls to make a clear stand. People like you prefer to attack and remain a moving target as to not have to defend any position yourself. That is intellectual laziness.

mdovell says

But it isn't it also interesting when Greenspan who basically takes a page from Rand says nearly the same thing?

Greenspan, Bernanke, and Rand are/were all Keynesians. Greenspan and Bernanke were both influenced by Rand, and Atlas Shrugged is a sort of bible to these people.

Not that Rand was completely wrong. There are bits of truth in her writings as well as in Marx's. But neither had a complete, correct model. And that's the fundamental problem with dogma, whether it's state dogma or religious dogma. There's no room for correction.

mdovell says

That's a good point but I'd also add that by the time the gold standard was taken off and deficit ceilings were pretty much unlimited then spending is no longer dependent on revenue.

It's true that being on a gold standard does limit government spending, which is why medieval kings were constantly trying to find new sources of gold and new ways of taking the gold they paid to peasants back in taxes.

However, even without the gold standard, I don't think the Federal budget would have increased nearly as rapidly if it didn't have a single, massive, general source of income. It's a lot easier to raise one general tax than it is to raise hundreds of smaller ones. Each tax raise is a battle, as it should be. A debate amongst the public about what is worth paying for and what is not. The income tax effectively takes the right to have this debate away from the public.

Dan8267 says

If my synopsis of your thesis is wrong, then it is because you have done such a piss poor job of stating your position.

Really? Here's what you said:

Dan8267 says

And the only reason we're in a depression is that we haven't killed enough brown people

Please point me to where I've said anything remotely like this. Or this:

Dan8267 says

Increase the spending, or government stimulus, on our war machine by starting a few more wars with Iran, Pakistan, and India and we will come out of the depression

Or this:

Dan8267 says

In the meantime, we should continue to give vast sums of money to the banks so they can retain their talented CEOs by offering them tens of millions of dollars in bonuses.

You can't, because I haven't.

What I have said includes:

tatupu70 says

I think I've hit upon your misunderstanding of Keynesian economics then, if you believe bailouts of failing companies is Keynesian in nature. Because it most definitely is NOT

and

tatupu70 says

Government actions are not intended to protect established businesses and jobs, but rather to try to limit the feedback loop of job losses and reduced spending.

tatupu70 says nothing.

Still not taking a definitive position I see

Dan8267 says

tatupu70 says nothing.

Still not taking a definitive position I see

OK--what do you want me to take a position on? What caused the housing bubble? What should the government have done in 2008? What should the government be doing now?

You've been all over the place on this thread...

Dan8267 says

If you want me to dumb this down, I'll give the following example.
The ultimate Keynesian solution to our current depression, which resulted from the housing bubble, is simply to burn everyone's house, condo, apartment, or shack to the ground. No exceptions.

What the HECK are you smoking Dan8276?! Seriously, have you ever read anything Keynes actually wrote, or just oversimplified critiques of it? Keynes believed in government spending, but he wasn't a loon set on mass destruction. Let me dumb this down for you; put down the pipe and pick up a book.

60 Minutes just did a piece tonight on tearing down abandoned houses n Cleveland. They are going to demolish about 20,000 houses.

futuresmc says

What the HECK are you smoking Dan8276?! Seriously, have you ever read anything Keynes actually wrote, or just oversimplified critiques of it?

"To dig holes in the ground," paid for out of savings, will increase, not only employment, but the real national dividend of useful goods and services. - Keynes

Unfortunately, Keynesians believe this crap even more than Keynes even intended. The idea that they have thought in every economics class is that it is the government's responsibility to increase aggregate demand, how doesn't matter, just as long as total spending (private + government) is at pre-depression levels, the economy will recover.

And Keynesians believe this because WWII proved it. WWII got us out of the last Great Depression and therefore it proves the above hypothesis. It's now dogma. No questioning it. That's why the banks got the bailout. That's why the auto industry got the bailout. That's why the government gave incentives for people to buy houses in 2008. It's all about stimulus.

What I'm arguing is that the real reason WWII ended the First Great Depression is that the war restored trust in the economy. Business started hiring and producing again because they knew Uncle Sam could pay. There was plenty of demand during the First Great Depression, but the demand went unsatisfied because no one could trust the economy because of all the scamming of the 1920s.

During WWII, Americans saved like crazy since they still couldn't buy anything. So after WWII, Americans had huge savings in things like war bonds. This meant that business could trust the economy again because they knew people had savings to spend. Had it not been for that, the First Great Depression would have resumed after WWII. Instead, since trust was restored, the next decade became a period of prosperity for America.

Today, trust has been wiped out by all the fraud in the financial industry. Worst still, the government has actively protected those who committed the fraud at the expense of their victims and society at large. Investors are thinking, if I get fucked over by some criminal, the government is going to protect him, not me. That's not good for making business deals.

The government can stimulate all it wants. It can triple the national debt in spending. That's not going to end this depression. If anything, it will prolong it for a decade.

In order to end the depression, government has to restore trust. To do that, government needs to start prosecuting financial fraud instead of appointing the criminals to high ranking positions in the government. And it needs to let well-run business take over when dumb, big dinosaur companies run themselves into bankruptcy. Had the federal government done exactly this back in 2008, we would no longer be in a depression. Period.

Why is this so hard to accept? If the stimulus worked, then why does the economy still suck balls? And if Bernanke is such a genius, why is 1 in 2 Americans below the poverty line now? Keynesians are simply choosing to completely ignore the reality all around them. And by the way, every in our government and on Wall Street is a Keynesian except Ron Paul and Peter Schiff, who have no say over anything. So if Keynesian Economics is so good, why are the results so bad?

HousingWatcher says

60 Minutes just did a piece tonight on tearing down abandoned houses n Cleveland. They are going to demolish about 20,000 houses.

Typical Keynesian idea. And it's not just Cleveland. It's happened in Detroit and in south Florida. I suspect it goes on elsewhere as well.

The Keynesians are always saying the problem with housing is that it was overbuilt rather than overpriced. I suspect I could sell any house in one week if I got to set the price.

Dan8267 says

the real reason WWII ended the First Great Depression is that the war restored trust in the economy. Business started hiring and producing again because they knew Uncle Sam could pay.

That's complete nonsnse. Businesses hired people because there was a huge demand for military equipment from the govt. Businesses needed to meet that demand and were forced to hire people. Confidence had nothing to do with it.

Dan8267 says

The Keynesians are always saying the problem with housing is that it was overbuilt rather than overpriced.

Housing most certainly was overbuilt. They were building hosues in the middle of nowhere far away from civilization.

futuresmc says

Keynes believed in government spending, but he wasn't a loon set on mass destruction.

The thing is, it doesn't even matter what Keynes believed. He's dead. What matters is what his apostles believe. And they believe in ridiculous things.

The Keynesian leaders of our country would believe that a feasible way to get out of this depression would be if America were attacked by space aliens. Because you see, if a threat of Martians were expected, we'd spend a lot of money on defense, and that aggregated demand would cause the economy to recover.

And if the space aliens don't attack? Well, if it all ends up being a hoax, then we are still better off because that hoax got us out of the depression.

Our Salvation!

Of course, I'm just being a complete, paranoid fool for bringing up this example. I'm just taking Keynesian thought to some bizarre extreme. There is no way the Keynesians in our government or media would actually believe something so fucking ridiculous.

Except that, they do, and that's what's scary.

http://www.youtube.com/embed/nhMAV9VLvHA

Dan--

What you're missing is that WWII eliminated the wealth disparity in the US. That is what healed the economy. Wealth disparity is the sickness.

http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4#the-gap-between-the-top-1-and-everyone-else-hasnt-been-this-bad-since-the-roaring-twenties-1

You are right that wasteful government spending that doesn't go to the right people is useless. Nobody wants that. Keynesian or Austrian alike.

HousingWatcher says

That's complete nonsnse. Businesses hired people because there was a huge demand for military equipment from the govt. Businesses needed to meet that demand and were forced to hire people. Confidence had nothing to do with it.

Um.....

You also have to remember that we had the draft back then. Drafting people out of business and into war naturally would lift wages as there would be wage inflation due to the lower amounts of people. But it is not as if everything spent came back. Spending on war might seem to stimulate the economy but it isn't really so. Eventually the concept of defense becomes marginalized. If the USA made one more h bomb it would not add to the defense that much but it would cost more in maintenance.

Also remember is that the government took a command of the economy and rationed goods at home so how would that help an economy? Of course things got better after as if you restrict a good by taxation and take it off naturally consumption rises. If we took prices off of gasoline consumption would rise driving up the price from the additional demand. The government also had orders from companies to shift from consumer to war production. There is no real civilian use for a tank.

Government spending on the military has a greater use at home rather than during deployment. It is doubtful that some soldiers paying for some burgers at a camp in Afghanistan is going to make its way into their home towns..and yet we've closed military bases at home which does have a significant negative impact (I grew up near a base that closed in '95 and they are still debating today what to do with it)

I would almost counter that technically if the cause of the depression was the crash of '29 that we would have to be on the same level before that crash in order to call the depression off. That year was not 1941 but 1953..if the confidence was there during ww 2 why didn't the stock market go back up to where it was prior to the crash immediately?

Also what about the depression of 1920 and how we got out with no government intervention at all.

tatupu70 says

What you're missing is that WWII eliminated the wealth disparity in the US. That is what healed the economy. Wealth disparity is the sickness.

I agree that wealth disparity is a sickness, and a great one when as extreme as it is today. However, there was a still a huge difference between the Rockefellers and everyone else in the 1950s.

More to the point, decreasing the rich-poor gap isn't what ended the last depression. I haven't heard anyone propose that before. Everyone always credits the increase in spending as Krugman did in the above video.

tatupu70 says

You are right that wasteful government spending that doesn't go to the right people is useless. Nobody wants that. Keynesian or Austrian alike.

As Krugman stated in the video, even spending massive amounts on preventing a fictitious alien attack would not be a waste. It would be salvation. He proposed that if the government pulled of a hoax and got the American public to believe that space aliens were about to attack, that the government spending on the military would end the depression "in 18 months".

What I'm saying is that no amount of stimulus spending is going to restore trust in the financial system. We either have to wait a long time for people to forget about the fraud (10 years or so) or we need to prosecute the fraud so that everyone knows it won't happen again. If we do that, we can end the depression much sooner.

I'm all for shifting production from consumer goods like plasma TVs to useful infrastructure investments like building roads and fiber optic cables during times when consumer spending drops, but that isn't going to restore trust. And without trust, it's hard to do any business. And that is what Keynesians don't get. The only tools in their toolbox are lower interest rates and spend government money. And that's not good enough.

I would love to hear Paul Krugman, Ben Bernanke, Alan Greenspan, and Henry Paulson all stand up together and say that the depression will end if we prosecute all the perpetrators of fraud. Of course, Paulson is guilty of that fraud, so it won't happen.

Dan8267 says

What I'm saying is that no amount of stimulus spending is going to restore trust in the financial system. We either have to wait a long time for people to forget about the fraud (10 years or so) or we need to prosecute the fraud so that everyone knows it won't happen again. If we do that, we can end the depression much sooner.

I know that's what you're saying, but I agree with HW that that is complete nonsense.