Is Obama shitting on us?

[Bowman]

OM NOM NOM

[Andres]

lol, you enrolled in the friedman university right around the time everyone in the world is back in love with keynes.

[Bowman]

Yeah... although who knows, maybe by the time I graduate things will swing back to free market economics after what will surely be the massive failure of the bailout programs.

[Aaron Haynes]

I'm interested in what you think would've happened if we'd allowed the banks to fail, like they deserved to according to free-market principles.

Oh, and of course, I'd like to know the real reasons they failed. If you say too much regulation, I'll consider it my Christmas present for the year.

(welcome back, btw )

[Andres]

Originally Posted by Bowman

maybe by the time I graduate things will swing back to free market economics after what will surely be the massive failure of the bailout programs.

i'm not sure that makes sense.

key parts of ideology A failed. if we try another ideology, and it fails too, A still failed. so i am not sure why everyone would go back to what caused a problem, especially if we can't find a way to get out of the problem, regardless of what ideology it comes from.

[Bowman]

That would be fair if we'd been on an actual free market system to begin with. In reality we've had a socialist-free market hybrid for decades, so it is not clear (and in my opinion, unlikely) that the free market elements of our economy are responsible for the economic problems that we're seeing. Now that we've made a pretty dramatic shift towards the socialist end of the spectrum, I think people will observe that socialism does not solve our economic problems and will begin to return to free-market ideologies.

[Pizza The Hut]

there has to be a good balance you nitwit

[Moocow]

Bowman, you sound like an anarchist.
I dig it, I dig it.
(and I agree)

[Pizza The Hut]

wait you agree with bowman?

[Moocow]

Yeah

[Bravoie]

So, Bowman, letting corporations create monopolies with no regulation whatsoever will save the economy?

[McJuicy]

The fed prints way more money then it has. The dollar has been DEVALUED PEOPLE

[Andres]

Originally Posted by Bowman

That would be fair if we'd been on an actual free market system to begin with. In reality we've had a socialist-free market hybrid for decades, so it is not clear (and in my opinion, unlikely) that the free market elements of our economy are responsible for the economic problems that we're seeing. Now that we've made a pretty dramatic shift towards the socialist end of the spectrum, I think people will observe that socialism does not solve our economic problems and will begin to return to free-market ideologies.

no, it wouldn't be fair only if you had been on an actual rfee market system to begin with. this is because there are no free market systems anywhere in the world and there will never be any, so you can't use that as a cover.

the reality is that the system in the financial sector in the past decade or so has been liberalized, regulations were dropped, and more liberties were allowed for banks. the market was "freed" more. this additional "freedom" is understood to have created these problems.

I can give you a compilation of documents, reports, and analysis by a variety of sources that will more or less give you insight into this, and you will be able to see for yourself that, in fact, the market forces were at fault for a considerable amount of the problems. i don't have time right now but i can do that a little later. TOODLES.

[Bowman]

Originally Posted by Moocow

Bowman, you sound like an anarchist.
I dig it, I dig it.
(and I agree)

No... People here think I'm crazy enough as it is. Please don't associate me with that stuff, thanks.

I'm looking forward to seeing the documents.

[Moocow]

I was gonna write a long response, but this video covers the current economic problems (and it was actually based on an article written before the economy went down), if anyone is interested:
http://www.youtube.com/watch?v=OF87sMjYlws

[Eric Burger]

I don't think people think you're crazy, Bowman.

I think they think you're an idiot.

[Andres]

as i said before it's not really relevant to say that the american system of capitalism is not a pure free market, it's also pretty inaccurate to say it's a mixture of free market ideas and socialism, since not every public ownership or state intervention is socialist. it's merely that, public or state intervention in capitalism; certainly no one would accuse keynes of being a socialist.

i am not that interested in pointing fingers or laying the blame on one person or ideology. however it is clear from watching the financial crisis unfold and from all the reports that have come out, that the way things happened went against certain theories. specifically your free market theories say that the market operates much better, more efficiently, and can regulate itself better than the government ever could. you've stated as much by saying that even things such as medicine shouldn't be regulated. the economic transactions between people are supposed to be done rationally (people are "rational actors") and they all are acting for their own self-benefit, and all of these self-benefits add up and become "society's benefit". therefore, it is better to let the market do these things on its own and that way we will achieve net societal benefit.

almost every step of the financial crisis contradicts that, or at least in the aggregate. people acted out of their own self-interest, in order to earn as much money as possible. but this didn't aggregate to a net benefit for society, it just resulted in the ruin of the entire system. people's self-interest was myopic and their assessment of reality was completely wrong. risk assessment is one of the biggest problems of the crisis: everyone was so in love with their profits that they completely failed to control themselves or accurately do business by understanding the risk involved in the transactions they were carrying on.

if you are a mortgage broker, and you get paid commissions and a salary, what possible incentive could you have to make sure absolutely every loan you appraise is worth the risk? the incentive would be not getting fired, since making a bunch of shit loans could endanger your position. the only reason you would be fired though is if the company itself is concerned with the loans going bad. the only reason the company would be concerned is if they stand to lose heavy business from banks quickly if such is the case. but the banks are not concerned about that because the banks are able to sell off these risky loans to investors. perhaps more importantly, they are able to cut them into pieces, mix them in with allegedly better loans, make packages out of the whole thing, have these packages rated, and then sell them off to investors. so the banks don't have the same incentive to control their loaning standards as before. the whole thing becomes its own culture, though. people aren't necessarily doing this maliciously, they honestly believe that all these investments will pay off one way or another because house prices will always go up. thinking that house prices will always go up is astoundingly dumb, yet that is exactly how many models operated. the financial models that companies had for their securities were so off it's not even funny, and they were off because it was better for business (temporarily) that they were.

another important one to add is the role of rating institutions. rating institutions miserably failed at rating products properly, for two main reasons. 1) they were associated with and depended on the financial institutions to make a profit, 2) they had competition, and because of this competition they had to cater more to their customers (financial institutions that want favorable credit ratings).

do you see the problem there? the financial institutions aren't interested in their products being rated properly. they are interested in their products being rated in such a way that they can sell it. the rating institutions aren't interested in rating products properly. they are interested in making a profit.

that, for example, reveals a key lack of understanding in the examples you've given us. you have told us that a rating agency that lies will lose business and prestige, so it is in their best interest not to. what you fail to realize is that often, the more honest the rating agency is the less profitable it will be, since it will run against the interests of its clients. so the agency has two choices, it can lose business and go bankrupt, or it can lie and be profitable.

this is something that not only applies to rating agencies, it applies to many other institutions. fannie and freddie are notable for this. while many people have tried to blame fannie and freddie, it is a fact that F&F lost a considerable share of the market during the peak of the housing bubble, essentially because they were actually restricted of joining in by virtue of being more tightly controlled. other institutions had more of a problem. as you can see very few banks managed to come out unscathed, because they had the resources to be able to compete otherwise. but there were lots of banks and institutions that simply could not compete with people doing stupid shit, so they had to reduce themselves to their level.

you have mentioned before the example of doctors not being regulated by an agency. try to think about it this way. you're a good doctor, and you charge a lot. there's suddenly 4 new doctors in town, none of them licensed, but they charge much less and start taking your clientele. sure, you can keep being a good doctor until they fail, but can you afford it? can you wait two or three years until someone kills a patient?

this isn't to deny that there were other issues involved. the federal reserve's lending policies fueled the crisis by making money available, and a mixture of government policy and government communications to create a culture of home ownership did not help either. but as i said before, even if these things had a role, their presence doesn't immediately absolve your pet theory simply by being there. at its most basic stage (individuals in the economy), it is clear that they acted poorly, and this poor behavior was not a result of government intervention.

besides the financial crisis, it should be said that the housing bubble itself is problematic. if nonsensical bullshit like that happens in a capitalist society, what does it say about people's abilities to properly make economic decisions? the peaks and lows are too dramatic to make any of this a good idea.

alan greenspan, who is pretty involved in these things and as you know is very pro-market, said "I found a flaw. I don't know how significant or permanent it is, but I've been very distressed by that fact. Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak." he more or less went on to say what should be obvious, that the behavior of the financial institutions goes against self-preservation which should have been a priority if they were rational and logical, but they weren't. which means you can't just let them be.

in terms of reports and articles there are a bunch of things i would recommend. i'll list them here.

- the new york times did a series called "the reckoning" which delves deep into several of the players of the financial crisis. the articles cover alan greenspan, phil gramm, aig, countrywide, wamu, citygroup, and fannie and freddie. the content of the institutional reports is mostly of incredible faith in a bubble, and recklessness. no one was very concerned with the future, just the insane amounts of money they were making in the present. http://topics.nytimes.com/top/news/b...ing/index.html
every article in this series is good, but i think the most interesting one is the latest, which deals with the role of ratings agencies and how they failed.

- the new left review had a good report by robin blackburn about the crisis in general. this might be a little too lefty for you but i'll still post it. http://www.newleftreview.org/?view=2715

- there is a report on CRA foreclosure. CRA is as you might be familiar with a law passed by jimmy carter that placed some requirements on banks. this has been attacked by a bunch of fringe republicans as being the cause of the crisis, by claiming more or less that the government forced banks to lend money to poor people. this is not true for a variety of reasons. if you read the nyt reports you'll see that the culture within the institutions was most certainly not "aw goddamn the government is forcing me to loan", it was "boy, i want to make a profit quickly". second of all, the majority of banks involved did not fall under this law. this report shows that loans that were because of that law actually performed better than other loans, because these loans were better regulated and better controlled, since they were given as a responsibility and with care, not as a way to make cheap money.
http://www.traigerlaw.com/publicatio...udy_1-7-08.pdf
i doubt you've bought into the CRA stories, but regardless i am posting it there in case you haven't heard about it.

- there is a good paper on the effect of securitization on loan performance. it seems that securitizing and bundling of loans makes their performance more risky, and the authors find a connection between that and lax screening.
http://papers.ssrn.com/sol3/papers.c...act_id=1093137

- here is an article (the people who commissioned it might raise a red flag though) that suggests that subprime loans themselves weren't the cause of the crisis, rather they were a consequence of the bubble, and it kinda explains why and how. http://papers.ssrn.com/sol3/papers.c...act_id=1262365 the importance of this is the suggestion that, contrary to mythological nonsense, the crisis wasn't caused by "poor people defaulting".

- on that same vein, this paper calldd "understanding the subprime mortgage crisis" (http://papers.ssrn.com/sol3/papers.c...act_id=1020396) looks at loan performance and determines that the most important factor for the collapse was not who the loans were given to and who gave them. the important factor was the price of housing, which ties into what i mentioned before that people honestly thought prices were going to keep rising and all their risk assessments depended on prices at least keeping a certain level. once this proved to be untrue, the whole thing died.




though i like being argumentative and teasing you, i am not that interested in pointing fingers, or in dancing over the grave of your ideology, or shit like that. but i think it is definitely clear from this financial crisis that people behave in a certain way, and make certain decisions, and that those decisions don't actually aggregate to something that is beneficial to society. any credible theory or analysis of society from an economic perspective has to take that into account, and if it doesn't take that into account, it is not very good. and it is especially not very good if the conclusions it reaches are the opposite of what actually happens.

markets have their purpose, and they are not bad for the most part. but this, this thing that happened, that is how markets behave. they don't behave the way you often claim they do, because you tend to skip parts or tend to claim that two goals are parallel when they actually go against each other. if there is to be a point to free market theories (especially when you want to use them to philosophically describe the proper society), then you actually have to address how they look in practice.

[Aaron Haynes]

The flawed assumption isn't so much that what's good for the market and what's good for social well-being run parallel, it's that they are intrinsically linked somehow. That the market is naturally an engine for social good, because whenever society demands something, the economic factors involved will provide the solution by proxy.

This can happen, and has, and should. But there are two huge x-factors involved: how, and why.

The free-market economy doesn't intrinsically care about social issues. It doesn't care about discrimination. It didn't care about segregation. It doesn't care about pay disparity. It doesn't care about global warming. It doesn't even care about its own long-term well-being, the consequences of which are finally coming back to bite us in the ass. There's only one problem to be solved: how do we get a return on our investment, and more? Social issues are simply factors in that equation: sometimes they're obstacles, sometimes they're opportunities. When the market solves social problems, it does so by proxy of attaining what it's designed to do.

Sometimes this proxy system works. High demand for a necessary service will generate economic momentum. But it's not a foregone conclusion. Sometimes the need outpaces the demand. Sometimes we don't recognize the need for what it is, because the comforts of our current system insulate us from consequences yet to fully manifest. Sometimes the current system is so ingrained that it's much easier and more stable for market forces to maintain it in the short-term. The economy is as driven by inertia as anything, and sometimes it takes a shitload of broken eggs before it occurs to someone to that they could try making an omelette. Especially when there's no immediate reason to make vast structural changes to an unstable-yet-insular system.

The market is a powerful engine, and it can solve social problems, but it's a very naive and idealized view to think that it always will, more efficiently than any other societal force, more efficiently than multiple forces working in tandem with it, constantly tweaked and reassessed to determine the optimal result. It's not a conscious or intrinsically benevolent force. It's a smart, insular, and often ruthless machine. It can drive, but it can also be driven when necessary.

[Aaron Haynes]

The Bush Administration is now working with the Democrats to revive the Auto Bailout against the efforts of Senate Republicans.

We've entered the fucking Twilight Zone, people.

[Andres]

Not really that strange, though. The last fucking thing Bush wants is to cap off his eight years of shit with the collapse of some of the U.S.'s most iconic corporations, ideology or no ideology.

[Aaron Haynes]

I read about Dick Cheney's reference to "becoming the party of Hoover", so you're probably right.

But after eight years of not giving a rotting hunk of shit what the American people thought of him, why start now? Does he really think this is going to make the slightest difference in his enduring legacy? Am I giving people way too much credit by thinking that "At least the Big Three didn't collapse before January 20th" won't fly as a historical talking point?

I think one of us -- either I or the Bush administration -- is being really naive.

[Evil Ash]

THIS IS THREAD ABOUT POOP

[Andres]

Originally Posted by Aaron Haynes

I read about Dick Cheney's reference to "becoming the party of Hoover", so you're probably right.

But after eight years of not giving a rotting hunk of shit what the American people thought of him, why start now? Does he really think this is going to make the slightest difference in his enduring legacy? Am I giving people way too much credit by thinking that "At least the Big Three didn't collapse before January 20th" won't fly as a historical talking point?

I think one of us -- either I or the Bush administration -- is being really naive.

Unblock me already you bag of puss. You know you want to shoot the shit about politics with me.

[Aaron Haynes]

lol

ok, done.

[Kale Monster]

fairly sure andres has me blocked. >: (