Quote :

"There is plenty of radical economic thought out there, you just have to know where to find it."

If you consider libertarianism radical, I guess. And believe me, I know where to find that sort of thing.

1/8/2010 4:31:43 PM

The Really Really Free Market?



You should google it HOOPS, its all about free stuff, thats my kind of economics

1/8/2010 5:28:50 PM

^^ Ok, well I forgot your definition of radical was a bit more . . . um radical . . . than others

Quote :

"Mainstream economists look down on it because it doesn't make use of econometrics. Basically, they treat it like an actual science. Austrian economists treat it as a social science, saying that you can't really understand economics by compiling statistics and modeling trends. Human behavior, which is at the core of economics, is too unpredictable to model in such a way."

Pretty much.

1/8/2010 5:38:18 PM

Quote :

"n many ways, I think the whole world has gone mad. Australia actually has a somewhat reasonable monetary policy, as do some of the South American countries. Think about what you know of history. Is there an era where you can say "yeah, looks like everyone basically had it right, except maybe a couple of countries." Of course not. I don't think this era is much different, and historians will look back at this period of time and see the monetary debacle for what it is. I think people justify bad policy bad saying "well, most every other country is doing it, so it has to be right." You can't really expect understand to understand economics and trade without looking at the currency, though, and if the currency is unstable, malinvestment is inevitable."

Oh come on. A hard currency policy and your preferred monetary policy of abolishing national currency and letting anyone print money and letting the market decide what currencies win out (hmmm....possibly the currencies of large, private, non-transparent banks?) are not the same thing. Then again, you're hoping the dollar keeps crashing in your own self-interest. I mean, that's what makes your gold investments go up. Hopefully we won't have a clampdown like under Volcker that causes your gold to lose 80% of its value once things recover, right? Bad for gold bugs, good for everyone else.

1/9/2010 1:10:00 PM

Quote :

"Then again, you're hoping the dollar keeps crashing in your own self-interest. I mean, that's what makes your gold investments go up. Hopefully we won't have a clampdown like under Volcker that causes your gold to lose 80% of its value once things recover, right? Bad for gold bugs, good for everyone else."

Haha, yeah right. If the dollar keeps crashing, that's a terrible thing for me. I use dollars, as does everyone else in this country. I get paid in dollars. If I have a few ounces of gold, sure, that'll retain some value in the case of double digit or hyperinflation. I would much prefer a situation where gold plummets and the value of the dollar goes way up. That would be a lot better for my future. At the same time, I'm trying to protect myself from a "worst case scenario" where my savings are wiped out.

How likely do you think it is that the Fed is going to raise interest rates like Volcker did? And think for a minute how high they would probably need to be at this stage in the game. I'm guessing over 20%. Bernanke would quickly become the most hated man in the country.

1/9/2010 1:37:55 PM

Quote :

"however, i find it unlikely that following such a collapse the calculation would use the more liberal gross income as a standard"

It was never the standard, it was just a way of calculating DTI in some subprimeloans you might refer to as "toxic". Of course you would use a more conservative way of calculating DTI when loaning a lot of money to someone with not so great credit at an adjustable rate.

Quote :

"This short list fails to cover a slew of other likelihoods such as cell phone, home insurance, gas, cable, repairs or new items purchased that are likely to be in the ledger of any person living in their own home."

home insurance is built in but the main point you're missing is that nobody would pay a cell phone bill or cable bill or credit card bill until they made their mortgage payment.

Even then, you had to get 3 months behind before foreclosure. There had to be a halt of income in skyrocketing costs.

Quote :

"What I find to be the largest discrepancy in with mambagrl's logic is in her initial defense she claims that it wasn't the reset of the ARMs, but, rather, to increase of cost in goods and then later debates that the increase in defaults couldn't have been due to too high a DTI since people could actively choose not to pay debts that are equally as important as the increase in what she deemed unavoidable goods that she ascertains were responsible for the bubble burst. Doesn't compute IMO. "

increase in the price of goods has an effect on everyone which hurts the economy. Now people who are not paid on sallary such as realators are making less. Less people are buying houses because of increase cost in goods now realators cannot make payments. Other people whom work for theirself or off commission experienced the same halt of income once people got tighter and tighter.

Once these people defaulted on their mortages, credit cards and other loans, pressure was put on the banks. Now the banks are reluctant to lend money which means homes stay on the market longer than before. Now houses sell for less which decreases appraisal value.

All those people that were ready to refinance once their rate adjusted are now adversely affected by a sudden, unexpected decreases in home value that may not give them room to refinance (tighter credit remember.)

By now the whole system is falling on itself all because of oil prices.

1/10/2010 11:21:51 PM

^ Actually, oil prices have risen b/c the system is falling on itself. The root cause is much deeper.

1/12/2010 12:29:29 AM

well the cause certainly isn't ARMS

1/12/2010 11:34:15 PM

No, the cause is an unsound monetary policy based on central planning which leads to inflation and malinvestment. Gas prices, the stock bubble in 2000, the housing bubble, the destruction of the middle class, these are all symptoms of the root problem which is the ridiculous idea that we can spend our way to prosperity (Keynesian economics).

1/13/2010 9:34:29 AM

The root problem is the private sector. All these problems occured during a time of relative Laissez-faire. Public investment had nothing to do with these problems. The private sector is going to fail occaisionally because people are stupid and greedy; both individually and collectively.

Though I agree that Keynesian public investment doesn't solve the root problem.

1/13/2010 11:02:14 AM

Relative laissez-faire? Is that supposed to be funny or just painfully wrong?

1/13/2010 11:11:23 AM

Quote :

"The root problem is the private sector. All these problems occured during a time of relative Laissez-faire. Public investment had nothing to do with these problems. The private sector is going to fail occaisionally because people are stupid and greedy; both individually and collectively."

I don't even know how you could say something like this with a straight face. Relative Laissez-faire? Relative to what, the Soviet Union?

Come on, man. Greed is a fine thing. In a free market, greed is always balanced by fear of loss. Riches might motivate someone to speculate, but they can lose it all in a day. The root problem is loose credit. The market can rein in greed, but it can't rein in artificially low interest rates from the Fed.

1/13/2010 11:14:05 AM

Relative to now; relative to other, similar states. The massive bump in Keynesian policy didn't happen until recently.

1/13/2010 11:18:31 AM

^^

Quote :

"but it can't rein in artificially low interest rates from the Fed. "

not in the presence of greed

1/13/2010 11:30:29 AM

^^^ Exactly. When there is no consequence for risky behavior, people are of course going to take huge risks. The banks are backed by the government, are deemed "too big to fail", and are given access to easy credit, all of which encourage loose lending standards. There is very little risk on their end because of government regulation. In a true free market, banks that made the kinds of decisions we've seen would not last very long. They would be forced to make safer choices if they didn't have the government guaranteeing their success no matter what.

1/13/2010 11:35:17 AM

Do you think greed is a new thing? Humans just started exhibiting that kind of behavior in this past decade or so, and it caused a market crash? Of course not. People have always been that way. They'll try to get as much for themselves, at the expense of others. Yes, banks were greedy. Yes, speculators were greedy. We don't look at why that greed was allowed to continue, though. Without the low interest rates, banks couldn't have given out these loans. If the government or central bank gives individuals or companies the incentive to engage in risky/greedy behavior, do we blame companies, or do we blame the people that provided the incentive? What is the root cause in that situation?

On a somewhat related note, people will often point to Japan and compare to our own situation. They'll say, "look, Japan did all these Keynesian spending programs, and while they were a complete failure, Japan didn't have inflation! In fact, they've had deflation." Well, the deflation thing is mostly a myth. Prices have been relatively stable in Japan. Of course, the debt to GDP ratio is over 200% now, and things are getting pretty hairy.

A global fiasco is brewing in Japan

Quote :

"My intended point — overly condensed — was that 2010 will prove to be the year that Japan flips from deflation to something very different: the beginnings of debt monetization by a terrified central bank that will ultimately spin out of control, perhaps crossing into hyperinflation by the middle of the decade. ... The only reason why this has not yet blown up is because investors (mostly Japanese) have not yet had the leap in imagination required to understand their predicament, and act on it. That roughly is the argument of Dylan Grice from Societe Generale in his latest Popular Delusions note released today. “A global fiasco is brewing in Japan.” Japan’s deficits are already within the hyperinflation “red flag” zone identified by historian Peter Bernholz (”Monetary Regimes and Inflation” .. the Bible on this subject). As you can see from the charts below, prices start to spiral into the stratosphere once the deficits as a share of government expenditure rises above a third and stays there for several years."

[Edited on January 13, 2010 at 11:38 AM. Reason : ]

1/13/2010 11:38:19 AM

I don't disagree with any of that except the notion that loose investment automatically means poor investment choices. I am in total agreement that the fed is currently fucking us.

I just don't want people pointing to things like the internet speculation crash of 2000 and oil prices as results of that. TODAY you could say that the middle class is being fucked and a new housing bubble is being created, but not earlier. Interest rates were much higher then than today.

1/13/2010 11:59:13 AM

The internet bubble was a whole different animal. That was just poor investment choices. I always sort of wondered why people were willing to dump tons of money into the stocks of companies that produced nothing and provided no service. Most of them were about as useful as http://www.zombo.com.

1/13/2010 12:03:12 PM

And yet Zombocom survives today; a testament to it's genius.

1/13/2010 12:11:59 PM

Not all bubbles are created by the government. The internet bubble was a result people figuring out the commercial aspect of the web and going nuts with it. All these internet start-up companies were around, and might have been worth a million bucks on paper, but the company itself didn't have a single employee or customer. They weren't worth anything. Obviously, the tech market was overspeculated and prices came back down to earth.

Oil is a different situation, as far as I can tell. Everyone was driving huge land yachts, but supply was remaining steady. If demand is going up, sometimes by a factor of 2-4 with these trucks that get 8 MPG, but supply is staying the same, how could the price not go up? There were oil speculators in the mix.

The issue is with how the Federal Reserve responded to the internet bubble. We went into recession in 2000-2001, and Greenspan slashed interest rates. Greenspan even said that ARMs were a great thing and should be encouraged because it would give borrowers more flexibility.

1/13/2010 12:20:08 PM

Not all bubbles are created by government interference, but they are definitely strengthened by it. The dot-com bubble is not as obviously linked to monetary policy, but misallocated resources due to manipulation of interest rates sends false signals and creates over-investment in certain sectors. The problem very well may have existed without the Federal Reserve and fractional reserve banking, but these aspects of our current monetary policy without a doubt contributed to the size of the bubble.

Oil prices relative to the dollar have increased mostly due to the devaluing of the dollar (by the Federal Reserve), which could be easily seen in the chart I posted earlier that has since disappeared. Oil prices when compared to gold have remained fairly stable.

The current reactions to the various problems are only serving to perpetuate and intensify the problems by placing regulation on top of regulation in order to attempt to legislate the economy into performing to our liking. Instead, there needs to be a serious economic correction. Unfortunately this will never be willingly permitted to happen under the current politicized economy. Government will continue to distort the market further by artificially propping up struggling sectors and creating moral hazard until it cannot do so any longer. Each time they attempt to prop up the economy rather than allow the market to correct, it just pushes the problem off to some point in the future where it will be even worse. The Fed is almost at their limit in trying to deal with the current crisis, and it may not be enough. These corrections are inevitable, and it would be in our best interest to allow them to happen in small doses instead of stacking them up until the dollar finally collapses and our economy is destroyed.

1/13/2010 1:32:52 PM

Quote :

"Yes, banks were greedy. Yes, speculators were greedy. We don't look at why that greed was allowed to continue, though. Without the low interest rates, banks couldn't have given out these loans. If the government or central bank gives individuals or companies the incentive to engage in risky/greedy behavior, do we blame companies, or do we blame the people that provided the incentive? What is the root cause in that situation? "

Thats the fundamental problem in this whole system. Lower interest rates were NECESSARY for the masses to survive and own a home. The greed however was only needed so that certain individuals could get fat off of the system. Which one would society be better off without? Thats whats at fault.

You can't blame people for having posessions when looters come in and steal everything. You have to blame the looters for being uncivilized. Well these private sector goons on wall street were no more civilized than old day looters.

1/13/2010 7:28:04 PM

That's like saying lower food prices are necessary for people not to starve. Or lower health care prices are necessary for people to not die from disease. While it may be true, it's not realistic to think we can just force those prices to be lower. Of course, that's not going to stop government from trying to ignore reality and solve the problem anyway.

An interest rate is based on the amount of capital available to loan (supply) and amount of investors wishing to take out loans (demand), along with the confidence in the return of that loan. It is essentially the price of a loan, and when prices are fixed through government controls, it leads to distortion in the market. It's unsustainable.

[Edited on January 13, 2010 at 8:23 PM. Reason : .]

1/13/2010 8:21:56 PM

Quote :

"It's unsustainable. "

Which is why capitalism must be checked by socialism.

1/13/2010 9:20:22 PM

^Why does everyone need to own a home. How is this a necessity?

1/14/2010 9:40:14 AM

Yeah, and it's not as if we ever actually increased "home ownership." If you take out a huge loan with the bank, you don't own the home...you're borrowing it. If the goal was to increase the number of people that own homes, we should have been trying to figure out how to make homes (and land) more affordable. Instead, we made it so it's easier to get a loan, which raised the cost of homes. The only solution for bringing down the cost of homes is the free market, though. You're not going to legislate lower prices.

1/14/2010 10:07:48 AM

http://twitter.com/zombocom

1/14/2010 10:10:27 AM

That's true also. Politicians talk about wanting to make home ownership more affordable, but as soon as prices start dropping, they go to great lengths to keep prices artificially high. Their idea of affordable housing is subsidized housing (meaning more control for them), not actual lowering of prices to a reasonable level.

1/14/2010 10:41:12 AM

well "borrowing" money to buy a home makes more sense financially than renting long term.

Quote :

"^Why does everyone need to own a home. How is this a necessity?"

Don't you own a home or want to someday? Its called the American dream.

It helps limit the mass poverty that comes with capitalism.

1/14/2010 10:43:47 AM

You sure do hate capitalism a lot for seemingly not knowing much about it.

1/14/2010 10:54:11 AM

Quote :

"well "borrowing" money to buy a home makes more sense financially than renting long term."

No, it doesn't. You should view living in a house or apartment as an expense. When you borrow money for a house, you have to pay interest on the loan. Not only that, but you have to pay for all the expenses that come up with the house. Does it make more sense to pay off a house over 15 years than to rent for 15 years? Sure. That's not what usually happens, though. People get a loan, live in the house for a few years, and then have to move for some reason, and get a new loan for a more expensive house.

Quote :

"Don't you own a home or want to someday? Its called the American dream."

That isn't the American dream. That's the line the politicians tried to sell to us in the 90s.

1/14/2010 10:59:21 AM

who said I hate capitalism. Everything has advantages and disadvantages and none of them work well alone. Capitalism moves all the money towards a few people and socialism takes away incentives. The mixtures present in the western world today are a great example of how socialism can be used to eliminate harsh poverty mixed in with capitalism to still provide incentive to work.

Quote :

" People get a loan, live in the house for a few years, and then have to move for some reason, and get a new loan for a more expensive house."

and during normal economic times they have equity built up

[Edited on January 14, 2010 at 11:02 AM. Reason : vs renting and having to come out of pocket with downpayment and closing costs]

1/14/2010 11:00:18 AM

Quote :

"It helps limit the mass poverty that comes with capitalism."

That sounds like a pretty negative view of capitalism to me. And I happen to disagree completely. Capitalism raises the standard of living substantially for everyone in the society. In a truly capitalistic society, the classes over time become much less extreme. It's the current government interference in the market (corporatism) that causes the wealth to accumulate in the hands of a few.

1/14/2010 11:09:29 AM

Quote :

"well "borrowing" money to buy a home makes more sense financially than renting long term."

Not necessarily. Primary homes are often liabilities not assets once you consider the amount of work that goes into upkeep and improvements over time. Some homes break from this trend by being early adopters to new areas that become significantly more affluent over time.

Quote :

"Don't you own a home or want to someday? Its called the American dream. It helps limit the mass poverty that comes with capitalism. "

I do own my own home, but I am by no means entitled to do so and in some ways wish I did not. The american dream is also being wealthy, should we give everyone a million dollars so that this dream is achieved?

Owning a home does not limit poverty. Home ownership is expensive and requires a lot of financial responsibility that rent does not. furthermore ownership leaves you in debt placing your financial well-being at the mercy of someone driving for the greatest profit. if anything home ownership can more easily place an individual on the path to poverty when they were otherwise okay.

Quote :

"and during normal economic times they have equity built up"

Not really. again you have to take into account the investments made into the home during the Xyears of living there and realize that the housing rate of appreciation is typically in line with inflation, therefore netting you nothing above the homes original value. additionally if you only live in the home for 5 or 7 years then you essentially have done nothing more than rent since the amount of principle paid down will be quite low.

People would be on the upside if they purchased homes for the some value at which they rent, but this rarely happens.

[Edited on January 14, 2010 at 11:19 AM. Reason : edits]

1/14/2010 11:10:48 AM

How exactly does pure "ideal" capitalism not ultimately lead to Walmart controlling everything?

1/14/2010 3:12:41 PM

The only way they would control everything is if they could provide every good and every service at a lower price than every other company. If they could, then it'd be great for everyone, but if they can't, competition will always pop up. Is there anything now that really stops Wal-mart from selling whatever it wants to at low prices? Why do we still have other department stores? It isn't because the government put a cap on how much Wal-mart could sell. Wal-mart might be able to provide a broad range of generic products at a low price, but they can't have the variety of a more specialized store like Best Buy or Old Navy.

1/14/2010 3:20:41 PM

^Without regulation, they CAN. Without regulation, whats stopping the most powerful economic entity from buying EVERYTHING? Yes, competition can pop up, but how is a smaller business going to offer a better value than Walmart? And even if said competition blossomed, what's to keep Walmart from buying it out? Or buying all the surrounding land and erecting a wall? Or buying the electric company and denying the competition power? Or making a deal with the competition to fix prices?

As for other large retailers, you would be surprised how many are actually controlled by the same entity. I can't think of a good reason why these economic super-powers would not simply combine, given the opportunity. This is simply the logical conclusion I come up with, given my limited knowledge of economics. Can you tell me why they wouldn't?

1/14/2010 3:50:51 PM

Quote :

"Yes, competition can pop up, but how is a smaller business going to offer a better value than Walmart?"

If a company has no competition because no one can provide better goods or services at a lower price (better value as you put it), how exactly is that bad for society? As soon as said company attempts to exploit their position by raising prices or lowering quality, someone will be there to open a competing business and keep them in line.

Outside of government support, a business can only survive by making its customers happy. Otherwise there are always other options.

1/14/2010 4:14:14 PM

Quote :

"As soon as said company attempts to exploit their position by raising prices or lowering quality, someone will be there to open a competing business and keep them in line."

Like I said, whats to stop said company from stifling/buying/racketeering w/ the new competition?

1/14/2010 4:20:40 PM

Well if there is room in the market for competition to make a profit, the big company won't last long trying to buy out every competitor. So the business will either lose its market share to competitors, or go broke trying to buy them all out. There is always another option for consumers right around the corner. Any business trying to hold them hostage would not survive.

1/14/2010 4:38:45 PM

It is possible. There are historical precedents for the situation I'm presenting. It's happened before, and government intervention is what stopped it. Why should I think differently now?

1/14/2010 5:07:39 PM

Quote :

"It's happened before, and government intervention is what stopped it."

You know of an example of a monopoly existing without being supported by government regulation?

1/14/2010 5:47:16 PM

http://www.truechristian.com/img/Obama_speech.gif

lmao

1/14/2010 6:11:30 PM

Quote :

"As soon as said company attempts to exploit their position by raising prices or lowering quality, someone will be there to open a competing business and keep them in line."

i think this is a rather pedantic view of the situation. this is like saying anyone can just open a business and choose to offer the exact same service as their competitor but for only 10% less. if this was so easily applicable across the board then we would have companies popping up in all industries endlessly.

if said company exploits their position there isn't much that could be done about it. any opening competitor would be constrained to just one area (can't franchise immediately) and would likely get bought out before any major change in market share would take place. other issues that would arise are the availability of goods. with limited incoming revenue and limited capital the number of goods offered would likely be less as would the stock of available goods.

when there is a monopoly and one unit controls all the newly formed entity has no chance to establish itself and become a true competitor.

As I type this now I recall that this is the exact explanation provided by Adam Smith when he was advocating regulation of such large industries.

1/15/2010 9:33:47 AM

^^^Have you never heard of Standard Oil, or are you purposely ignoring it because you've internally rationalized against it being a self-made monopoly?

Are you one of those people who treats their unorthodox viewpoints as self-evident truths?

[Edited on January 15, 2010 at 9:41 AM. Reason : ^^^]

1/15/2010 9:38:41 AM

Explanation of why free-market monopolies are unsustainable, and addresses Standard Oil as well as other classic monopoly cases: http://mises.org/daily/2694#1

1/15/2010 9:54:53 AM

There was nothing wrong with Standard Oil. Rockefeller ran an efficient, productive operation, and they were able to sell their product at a low price. Standard Oil was never a monopoly, though. There were hundreds of oil companies at the time, but because the oil business required such a large initial investment, Standard Oil was able to provide that low price.

Now, the fear of monopolies is always that they'll drive out/buy out all the competition, and then jack up prices. That's never what happens, though. If they did that, someone else would say "hmm, these guys have a huge profit margin, I could get into the business and undercut them easily."

The dangerous monopolies are the government created monopolies. A huge company will lobby to have laws made which exclude competitors. Then they can jack up prices, because everyone else is denied entry to the market.

1/15/2010 9:58:19 AM

please see above as to why competitors could not simply appear if a monopoly were to raise prices.

1/15/2010 10:07:06 AM

Quote :

"this is like saying anyone can just open a business and choose to offer the exact same service as their competitor but for only 10% less"

Well if the established company is running efficiently and offering good value, then that makes it difficult. If however a monopoly is gouging consumers, then it would be rather easy to compete. If an industry is profitable, people will enter. There are a lot of ambitious people out there willing to take out loans if they feel there is potential to make money. It's not like just one person is going to think maybe I should try to compete. As long as a competitor can be profitable, they will be there.

[Edited on January 15, 2010 at 10:24 AM. Reason : .]

1/15/2010 10:22:58 AM

i never said new people would not enter the business. but what you forgot to address why they would fail.

as stated above

Quote :

"if said company exploits their position there isn't much that could be done about it. any opening competitor would be constrained to just one area (can't franchise immediately) and would likely get bought out before any major change in market share would take place. other issues that would arise are the availability of goods. with limited incoming revenue and limited capital the number of goods offered would likely be less as would the stock of available goods. when there is a monopoly and one unit controls all the newly formed entity has no chance to establish itself and become a true competitor. As I type this now I recall that this is the exact explanation provided by Adam Smith when he was advocating regulation of such large industries."

1/15/2010 10:25:03 AM