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Old 02-06-2011, 11:28 AM
 
Location: South Jordan, Utah
6,892 posts, read 7,717,150 times
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Quote:
Originally Posted by Willy702 View Post
You would prefer large corporations to go into default because some corner of the lending market seized up in a panic? Ok, that makes sense.
If they took so much risk in order to make large short term based bonuses and due to their excessive risks that they were not liable for and they could not cover their losses, yes, let them fail.
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Old 02-06-2011, 11:37 AM
 
Location: Conejo Valley, CA
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Quote:
Originally Posted by hilgi View Post
If they took so much risk in order to make large short term based bonuses and due to their excessive risks that they were not liable for and they could not cover their losses, yes, let them fail.
You're ignoring the real issues. The businesses that did what you just described were financial companies, but letting them fail will result in huge collateral damage for non-financial companies. These companies would fail not because they took excessive risks, etc but because they can't sell commercial paper, have trouble rollover its debt, etc.

Many financial institutions were allowed to fail and they even allowed a major financial company to fail, namely Lehman Brothers, the collateral damage from this failure was high and they didn't let it happen again. Some times you have to keep the parasite alive to save the host.

The bail-outs were necessary to avoid a complete financial meltdown, what is unforgivable is that congress has yet to implement serious financial reform. The average American is still drinking the "regulations are bad" kool-aid as well.
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Old 02-06-2011, 11:55 AM
 
5,359 posts, read 10,249,261 times
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Quote:
Originally Posted by user_id View Post
You label anybody that doesn't believe the world is ending an "optimist".
No, not really. In real practice, I do not tend to use the terms Optimist or Pessimist. That use there was mostly a poke in the ribs for Renaud from France. Just having fun.

Quote:
Almost every economic indicator has improved over the last 1-2 years, you just not willing to even bother researching matters.
Actually tend to agree that numbers are pointing up. But I do have my doubts about some of the "official" sourced numbers, due to the history of "revisions."

Among the numbers I watch are Architect/Engineering projects on the design boards. These turn into very large numbers the year after when they go to "build." Typical construction budgets are 10X to near 20X the A/E budgets, so any upturn in the A/E domain is magnified by orders of magnitude in the real world. Right now A/E is heading up, so that should mean the year ahead is has much more going on.

But numbers are just numbers, they barely represent what is going on and often do not correctly point into the future. You and I have had this part of this discussion for some years now, I think. My caution on watching numbers is that doing so it is like driving by watching the dashboard. There may be lots of dials and numbers there, but you need to look out ahead through the windshield to see where you are going.

This period has now been dubbed, "The Great Recession," (in fear of ever using the term Depression, again), with full recognition that it closely tracks after the 1930's Great Depression. Do we agree on that? And looking at that 1930's model, did it not have a mid-course uptick before diving deeper? How do the "numbers" show that ahead?

I am not saying we are heading back down, like the 1930's, but there is that very real downside risk. It has happened before. In a real world model, my concern is that we are in the "eye" of the hurricane. When the second side hits, it hits harder on all ready damaged structures and people.

I think this is a very real risk, as all the elements that brought US the first side of the hurricane, are all still there. Crushing debt. Many more foreclosures ahead. Severe trade imbalance. Still no taxes to bring down the upper-end wealth bubble. Record number of the bottom end on Food Stamps, and climbing, AND finally -- if things pick up, we run right back into the resource constraints -- Oil, Commodities, Food, that brought on the first side of The Great Recession.

Quote:

You believe what you want and that's that.
As far as what I believe -- I believe that no one would have been harmed by putting enough lifeboats on the Titanic, and driving slowly and cautious enough to have avoided the iceberg. But then as now -- That aint happening.
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Old 02-06-2011, 12:21 PM
 
Location: South Jordan, Utah
6,892 posts, read 7,717,150 times
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I am not ignoring a thing, I am looking at what got us to the point where commercial paper seized up, it wasn't an isolated incident. Look at Merrill Lynch, they had one trading group that took so much risk that it cost Merrill billions (actually us due to a bailout of $6.8 billion) when the trades went bad. Everyone made their bonuses and no one was liable yet the risk was on the backs of us.

Regulations are just games between corporations and government, we need actual liability for risk taking. If a financial instrument has so much inherent risk that a company can not covers its loss, than that instrument should not exist. If they create something so risky and the losses are passes to us, those responsible should loss everything and be criminally liable.

Quote:
Originally Posted by user_id View Post
You're ignoring the real issues. The businesses that did what you just described were financial companies, but letting them fail will result in huge collateral damage for non-financial companies. These companies would fail not because they took excessive risks, etc but because they can't sell commercial paper, have trouble rollover its debt, etc.

Many financial institutions were allowed to fail and they even allowed a major financial company to fail, namely Lehman Brothers, the collateral damage from this failure was high and they didn't let it happen again. Some times you have to keep the parasite alive to save the host.

The bail-outs were necessary to avoid a complete financial meltdown, what is unforgivable is that congress has yet to implement serious financial reform. The average American is still drinking the "regulations are bad" kool-aid as well.
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Old 02-06-2011, 01:11 PM
 
Location: Conejo Valley, CA
12,476 posts, read 18,096,168 times
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Quote:
Originally Posted by Philip T View Post
Actually tend to agree that numbers are pointing up. But I do have my doubts about some of the "official" sourced numbers, due to the history of "revisions."
The majority of economic data is not collected by the government. I realize that some people see conspiracies where ever they looked, but if you bothered to read about it you'd find that there is a perfectly legitimate explanation beyond the revisions. The numbers are publish from estimates as more time goes by the estimates become more and more accurate.


Quote:
Originally Posted by Philip T View Post
t numbers are just numbers, they barely represent what is going on and often do not correctly point into the future.
How do you know they "barely represent what is going on"? This is the problem you believe you have some special ability to "see what is going on", yet how do you do it? The only thing us mere mortals have is "the numbers", these are the only things that can reliably tell you what is going on in the economy. Do they give you perfect information? Of course not, but by looking at numerous data-sets you can get a pretty detailed picture about what is going on in the economy. Right now GDP is growing but job and wage growth is poor. Nobody is suggesting otherwise and this is clearly represented "by the numbers".

The biggest problem in economic forecasting isn't the numbers, but rather selective addition to some numbers while ignoring others.




Quote:
Originally Posted by Philip T View Post
This period has now been dubbed, "The Great Recession," (in fear of ever using the term Depression, again), with full recognition that it closely tracks after the 1930's Great Depression. Do we agree on that? And looking at that 1930's model, did it not have a mid-course uptick before diving deeper? How do the "numbers" show that ahead?
Firstly, no, I don't think this recession closely tracks the Great Depression. I think a far better analogy is Japan in the 90's. Secondly, your comment about the great depression is inaccurate, you appear to be talking about the behavior of equities. GDP, unemployment, etc never had an uptick, they crashed after 1929. See here:

File:US GDP 10-60.jpg - Wikipedia, the free encyclopedia

No uptick, but in 1937 the economy did weaken as the government decided it was time to be "austere". If we are going to learn anything from the great depression here its that the US should not fall pry to the "austerity movement". Keep the dough following until the economy is hot.
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Old 02-06-2011, 01:18 PM
 
Location: Conejo Valley, CA
12,476 posts, read 18,096,168 times
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Quote:
Originally Posted by hilgi View Post
Regulations are just games between corporations and government, we need actual liability for risk taking. If a financial instrument has so much inherent risk that a company can not covers its loss, than that instrument should not exist.
Yes, you are ignoring things. You are ignoring the special relationship the financial industry has in the economy. A bank, etc isn't just another business, it has a very special relationship in the economy. There are limits to what sort of liabilities you can expose the financial industry to, if you allow outright failures then the financial industry will collapse again and again. This is precisely what happened in the past. Your solution has already been tried and it failed, on the other hand firm financial regulations have proven to be successful. After the great depression there wasn't another major financial crisis until today, around 80 years later. Now is it a coincidence that the minute congress cut the "red tape" in the financial industry that the financial industry became unstable? I suppose for the ideological....
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Old 02-06-2011, 05:44 PM
 
Location: South Jordan, Utah
6,892 posts, read 7,717,150 times
Reputation: 3042
Quote:
Originally Posted by user_id View Post
Yes, you are ignoring things. You are ignoring the special relationship the financial industry has in the economy. A bank, etc isn't just another business, it has a very special relationship in the economy. There are limits to what sort of liabilities you can expose the financial industry to, if you allow outright failures then the financial industry will collapse again and again. This is precisely what happened in the past. Your solution has already been tried and it failed, on the other hand firm financial regulations have proven to be successful. After the great depression there wasn't another major financial crisis until today, around 80 years later. Now is it a coincidence that the minute congress cut the "red tape" in the financial industry that the financial industry became unstable? I suppose for the ideological....
I ignore nothing, I just don't like risk that can't be covered. Creating a system that grew for 70 years because of government protection and support is not proof that it is the best model. I would prefer several small banks going under year after year, as opposed to mega banks growing to the point that they can take down the world with their risk.

Limited liability needs to be paid for, we should not give any corporations a free ride just because of the “special relationship” we have with them.
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Old 02-06-2011, 07:29 PM
 
Location: Conejo Valley, CA
12,476 posts, read 18,096,168 times
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Quote:
Originally Posted by hilgi View Post
Creating a system that grew for 70 years because of government protection and support is not proof that it is the best model. I would prefer several small banks going under year after year, as opposed to mega banks growing to the point that they can take down the world with their risk.
I never said it was the "best model", but its track record is far better than the system you are suggesting which was already tried. Indeed, our current system was created to deal with the problems associated with the systems you are advocating. Have you spent any time at all reading about financial history?


Quote:
Originally Posted by hilgi View Post
Limited liability needs to be paid for, we should not give any corporations a free ride just because of the “special relationship” we have with them.
I see, so we are going to wave a magic wand and pretend that the banks don't play a special role in the economy? Is that you Alan?
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Old 02-06-2011, 08:00 PM
 
Location: South Jordan, Utah
6,892 posts, read 7,717,150 times
Reputation: 3042
Quote:
Originally Posted by user_id View Post
I never said it was the "best model", but its track record is far better than the system you are suggesting which was already tried. Indeed, our current system was created to deal with the problems associated with the systems you are advocating. Have you spent any time at all reading about financial history?



I see, so we are going to wave a magic wand and pretend that the banks don't play a special role in the economy? Is that you Alan?
Sadly once again you prove that you can only debate with a formulaic debate, you lack the ability to debate with someone who may disagree with you but not in the usual dichotomy.

What system am I advocating?
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Old 02-06-2011, 09:47 PM
 
Location: Conejo Valley, CA
12,476 posts, read 18,096,168 times
Reputation: 4343
Quote:
Originally Posted by hilgi View Post
Sadly once again you prove that you can only debate with a formulaic debate...
Sadly you're still trying to pigeonhole people rather than addressing the actual issues. I've already heard your rants about how special and non-partisan you think you are, I don't need to hear it again.

Quote:
Originally Posted by hilgi View Post
What system am I advocating?
Did you already forget what you typed? Its still there, go read it.

Tell me, what improvements would you make to the banking system that existed in 1900 in the US?
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