Quote: Original post by choffstein

Quote: Original post by Mike2343
I believe in free markets. Not the thing we have now, which is highly manipulated and distorted. I think we the government had just let things go, it would have hurt, hurt bad but we'd be out of it already. Healthy businesses would have acquired bad ones.

You should do some more research on how OTC derivatives markets are designed. With no central clearing agency, and members being non-neutral, you end up with issues of spiraling liquidity crunches -- i.e. a system, that without bailouts, would have ended up collapsing absolutely every business involved.

What was it .... like $50 trillion for the notional value of just the OTC credit default swaps?

Anyone who says that we shouldn't have done bailouts just really doesn't realize how complete the financial sector collapse would have been, and how average Joe's across the globe would have been eating out of the gutters.

Dunno about the economy as a whole, but my company is projecting an increase of sales in 2010, which will be 42nd profitable year in a row if true :)

Quote: Original post by HostileExpanse

Quote: Original post by d000hg
Interest rates are crazy low in the UK (and US I think) and still people aren't buying property. When rates inevitably rise, that should depress sales more as people can't afford the larger mortgage payments, prices then fall.
Meanwhile the horde of unhappy landlords who bought at the top of the price boom will find their mortgage payments exceed the rent they can bring in. But they can't sell without making a huge loss on what they paid; either way a huge number of houses go on the market at rock-bottom prices from desperate sellers or bank reposessions, and many people are left in debt.

Not sure how you would have missed it, but the "people buying at the top of the boom and then having to flood the market with homes and foreclosures" thing has kinda already happened...

Not in the UK, to any great extent. Since you use the word "foreclosures" I assume you're American, but I don't think it's even complete over there.
The very low interest rates mean people can hold onto their homes right now for a long time even without having a job. For instance, we are paying £60/month ($100) for the mortgage on our home, it was £400/month before (and we havne't paid any of it off, the debt is the same).
I'd suggest very few people have been forced to sell so far, that will happen when unemployment peaks and tax & interest rates go up.

Quote: Original post by HostileExpanse
Polling seems to indicate a jump in consumer confidence in the US, and some countries have already reported positive GDP.


If you had doubts in the last year, are you more secure about your short-term future now?




Being somewhat dependent on the auto industry in the US, I've been seeing signs of a pickup, and overall, I feel better about the next few months. As an aside, I'd credit the stimulus plans for a fair amount of this, as well as the bailouts for averting the cascade of bank failures that was nearly inevitable.

I'm trying to get a 3 million dollar floor plan currently and the "credit crunch" is very real to me. It's pretty frustrating because the market is flooded with cheap opportunities right now.

My instinct is that the cash for clunkers thing may have prompted some new entrants into the market but it also may have stolen a decent portion of its business from the future pipeline.

I hope you're right, but if you the upcoming winter is incredibly bad, like bad beyond all expectation then i'd argue it's an unintended consequence of pushing near terms buyers of the next few months into buyers today.

Quote: Original post by HostileExpanse
...and, AFAIK, the (credible) economists of that camp still cite the stimulus spending programs of the New Deal as being helpful for the economy.

There's frankly not that many economist left, credible or otherwise, that put forward that idea. To keep yourself firmly in the Keynes camp you need to believe instead that the War was the "economic stimulus package" that ended the depression.

Quote:
I don't think anyone is claiming that the economy will suddenly enter a 2007-style boom .... but that's quite a different thing from saying that the bailouts have been some sort of massive failure.

As I stated earlier in this post, if the coming winter months are hideous beyond forecasting for the car business, it may well be an unintended consequence of pushing the pipeline forward.

Quote: Original post by LessBread

Quote: Original post by Way Walker
What worries me is, looking at the log of real gdp per capita, the overall trend is linear, so would it be fair to say that we or the market or whatever has become used to exponential growth? (Actually, it looks like it may be increasing even a bit faster than linear, which is even worse.) Are there any predictions on how long we can maintain exponential growth? It just doesn't sound sustainable in the long term, but how long is long term?

Economic growth should track with population growth (which is exponential).

As I said, the plot I was looking at was of the log of real gdp per capita, so it was already normalized by population and to 2005 (or 2000, the site wasn't clear) prices. If economic growth tracked with population, the general trend would have a slope of 0. A quick glance shows that this isn't the case. Granted, it's a small slope, with 0.015 fitting well before 1950 and 0.021 after 1950, but it looks real and the slope itself has increased.

Quote: Original post by Dreddnafious Maelstrom

Quote: Original post by HostileExpanse
...and, AFAIK, the (credible) economists of that camp still cite the stimulus spending programs of the New Deal as being helpful for the economy.

There's frankly not that many economist left, credible or otherwise, that put forward that idea. To keep yourself firmly in the Keynes camp you need to believe instead that the War was the "economic stimulus package" that ended the depression.

There's a distinction between "helpful for the economy and "ended the depression", but hey, let's not let nuance intrude on our ideological pronouncements, right? In the Krugman column I linked to above, he described the war as an "enormous public works project" not an "economic stimulus package", but to be fair he does suggest that "public works amount(s) to a major fiscal stimulus". Another of his remarks is notable: But the definitive study of fiscal policy in the ’30s, by the M.I.T. economist E. Cary Brown, reached a very different conclusion: fiscal stimulus was unsuccessful “not because it does not work, but because it was not tried.”

In my view, I don't think we would have won WWII without the New Deal. For example, the electrification projects of the New Deal, major public works projects that built dams and brought hydroelectric power to the North West and other parts of the country, provided the power for the aircraft factories and ship yards that built a major portion of our arsenal. If those facilities had not be built before the war, the delay that would have followed from having to build them first could easily have cost us the war. The Japanese came very close to winning in the Pacific, a lot closer than most people realize.

Quote: Original post by Way Walker

Quote: Original post by LessBread

Quote: Original post by Way Walker
What worries me is, looking at the log of real gdp per capita, the overall trend is linear, so would it be fair to say that we or the market or whatever has become used to exponential growth? (Actually, it looks like it may be increasing even a bit faster than linear, which is even worse.) Are there any predictions on how long we can maintain exponential growth? It just doesn't sound sustainable in the long term, but how long is long term?

Economic growth should track with population growth (which is exponential).

As I said, the plot I was looking at was of the log of real gdp per capita, so it was already normalized by population and to 2005 (or 2000, the site wasn't clear) prices. If economic growth tracked with population, the general trend would have a slope of 0. A quick glance shows that this isn't the case. Granted, it's a small slope, with 0.015 fitting well before 1950 and 0.021 after 1950, but it looks real and the slope itself has increased.

Track is a vague term. The small slope is consistent with that. I suppose productivity gains account for that slope.

Quote: Original post by LessBread

Quote: Original post by Way Walker

Quote: Original post by LessBread

Quote: Original post by Way Walker
What worries me is, looking at the log of real gdp per capita, the overall trend is linear, so would it be fair to say that we or the market or whatever has become used to exponential growth? (Actually, it looks like it may be increasing even a bit faster than linear, which is even worse.) Are there any predictions on how long we can maintain exponential growth? It just doesn't sound sustainable in the long term, but how long is long term?

Economic growth should track with population growth (which is exponential).

As I said, the plot I was looking at was of the log of real gdp per capita, so it was already normalized by population and to 2005 (or 2000, the site wasn't clear) prices. If economic growth tracked with population, the general trend would have a slope of 0. A quick glance shows that this isn't the case. Granted, it's a small slope, with 0.015 fitting well before 1950 and 0.021 after 1950, but it looks real and the slope itself has increased.

Track is a vague term. The small slope is consistent with that. I suppose productivity gains account for that slope.

A slope of 0.021 means doubling every 33 years. That's maybe a small slope if we're asking what will happen in our lifetime (it's still asking for a doubling in productivity between entering and leaving the workforce), but not so small if we ask what will happen in our grandchildren's lifetimes. Can we sustain doubling the gdp per capita every couple generations? What would happen if the slope of the real gdp per capita was 0? I don't know a lot about economics, but the explanations I hear for why credit is important to the economy seem to require this sort of exponential growth.

Quote: Original post by Way Walker
A slope of 0.021 means doubling every 33 years. That's maybe a small slope if we're asking what will happen in our lifetime (it's still asking for a doubling in productivity between entering and leaving the workforce), but not so small if we ask what will happen in our grandchildren's lifetimes....

Well .. recall that in our children's lifetime both population and technology growth in certain sectors will have grown exponentially as well.

Population growth (of the workforce) alone could theoretically reach a 2% rate, which may lessen concerns about exponential economic growth.
In any case, I personally agree with the notion that a fair amount of the US's economic growth is not safely sustainable... I actually run into some idealistic overlap with libertarians on this topic