Is Watching Atlasians Debate the Specifics of the Federal Financial Bailouts...

[Lunar]

lunar continues to ramble

To me it's worse.  At least we can get the GIST of some kind of military strategy.  I doubt any of us here have calculated the derivations and calculus that takes place in any of these financial deals.  It is of my opinion that if anyone here knew the correct solution, they could be making hundreds of thousands of dollars in New York right now because the entire upper class of that city has plunged into chaos because no one is sure. 

This is a simple post, I think we all need to chill and sit back a little bit before we jump the gun and accuse the government economic team, PhD's all, of making the wrong decisions.  The financial network, which various other institutions depend upon is INSANELY complex and sometimes fragile and sometimes not.  It's not the sort of thing that you can just read an Economist or WSJ article on and understand more than fractionally.  Sometimes costs of bailing out companies seem bigger than they appear (we'll make the money back).  None of the costs are actually burdening current US taxpayers, China's more than happy to buy all of it.

Look, I'm not saying the feds are right, I'm not saying that they're wrong.  I'm saying I think we, the uneducated and uninformed masses, don't have the tools to make legitimate and in-depth criticisms of the specifics of this sort of policy-making.

I think we can authentically criticize the overarching values (should we put business responsibility over societal utility, even if it would cause a depression), but when we start getting into the details, is it too early to cry foul?

Discuss (or not).

[○∙◄☻¥tπ[╪AV┼cVê└]

The government needs to focus more on job creation.

[Lunar]

This is potentially ABOUT job creation.  If you make sure you have easily accessible loans for small and medium businesses, then you have someone to hire the 4 million workers in the construction business that can no longer build new houses, soon to be unemployed.  If they no longer have a job, then other people will be unemployed as well.  It's my uninformed and undereducated opinion that Bernanke is in fact actually making the decisions he's making TO promote job creation!

This isn't a black and white situation.  People need to realize that.  This involves complexity of astronomical proportions.

[○∙◄☻¥tπ[╪AV┼cVê└]

This is potentially ABOUT job creation.  If you make sure you have easily accessible loans for small and medium businesses, then you have someone to hire the 4 million workers in the construction business that can no longer build new houses, soon to be unemployed.  If they no longer have a job, then other people will be unemployed as well.  It's my uninformed and undereducated opinion that Bernanke is in fact actually making the decisions he's making TO promote job creation!

This isn't a black and white situation.  People need to realize that.  This involves complexity of astronomical proportions.

I see this as a larger failure. The de-regulated private sector has failed. More regulations are needed to keep things more stable, plus the government needs to get involved with creating more jobs. We need good projects. For example, increased research, particularly alternative energy. A good national rail network. I'm sure there are plenty of more good examples.

[Lunar]

Well jfern, I agree with you on a lot of what you said.  But this is a crisis.  Education, research, and infrastructure are all long-term solutions.  We're dropping below our economic potential and we're trying to figure out how to get back up there.

Despite my economic score next to my profile, I strongly believe in government investment in universities (should be free), infrastructure (should be 1/2 the price of gas, tax gas if it isn't), and research (mega tax breaks).  You hit the nail on the head, this government is too concerned with that interest or that interest and not concerned enough with, again, taxing things with negative externalities (pollution, traffic) and not concerned enough with funding things with positive externalities, all of your aforementioned subjects.

But these things are CONGRESS's fault, and I think everyone should feel completely ok to criticize Congress.  They don't know anything more about economics than we do.  They just know who writes them fundraising checks for their reelection campaigns.

I agree with you completely that it is a larger failure.  Bush tax cuts, some of which were coincidencely perfectly timed to arrive after 9/11, favored the rich too much and Bush favored tax cuts on pollution.  All of this is dumb.  The macro picture could be improved, through more spending on things that make the business environment better (infrastructure/education).  I don't know this for sure, but that's my opinion.

But we're talking about whether specific large financial investment companies go under or go afloat, whether or not they will be able to pay back debts amounting to what, hundreds of billions (at least), to the sources that loaned them the money without realizing the risk.

Gawsh, I don't want to type up long complicated posts on this thread since I'm trying to argue that all of us are stupid! 

[MODU]

Gawsh, I don't want to type up long complicated posts on this thread since I'm trying to argue that all of us are stupid! 

hahaha . . . well, I don't think any of us really are qualified to talk on 95% of the topics that we argue about on here to begin with, so don't feel too bad. 

[Lunar]

Of course, of course. 

Say, politics.  I mean, when we say "Ooops, bad move Obama, that ad was awful" we know we are in a fog of war without access to internals or knowledge of his end goals.  We're making predictions about what will backfire or not which will be confirmed in the trackers in two days.  Also, collectively, we're actually qualified to be political consultants.

But when we say "Oops, bad move Bernanke, you shouldn't have bailed out AIG," everyone is acting as if they know every firm AIG is invested in and what the impact that move, or lack thereof, would have on the overall economy (hint, it probably doesn't only affect AIG and prob affects small businesses).

I'm just saying, before we call foul, let's wait a bit.  We can guess and that's fun, but let's not pretend like any of us are crunching the calculus on every firms' investments to figure out what the utility-maximizing decision is.  It's just like a war.  On the first day, it's sort of silly to start critiquing where Petraeus (or whoever) moves each brigade.  Afterwards we can.

[CARLHAYDEN]

lunar continues to ramble

To me it's worse.  At least we can get the GIST of some kind of military strategy.  I doubt any of us here have calculated the derivations and calculus that takes place in any of these financial deals.  It is of my opinion that if anyone here knew the correct solution, they could be making hundreds of thousands of dollars in New York right now because the entire upper class of that city has plunged into chaos because no one is sure. 

This is a simple post, I think we all need to chill and sit back a little bit before we jump the gun and accuse the government economic team, PhD's all, of making the wrong decisions.  The financial network, which various other institutions depend upon is INSANELY complex and sometimes fragile and sometimes not.  It's not the sort of thing that you can just read an Economist or WSJ article on and understand more than fractionally.  Sometimes costs of bailing out companies seem bigger than they appear (we'll make the money back).  None of the costs are actually burdening current US taxpayers, China's more than happy to buy all of it.

Look, I'm not saying the feds are right, I'm not saying that they're wrong.  I'm saying I think we, the uneducated and uninformed masses, don't have the tools to make legitimate and in-depth criticisms of the specifics of this sort of policy-making.

I think we can authentically criticize the overarching values (should we put business responsibility over societal utility, even if it would cause a depression), but when we start getting into the details, is it too early to cry foul?

Discuss (or not).

Yes Lunar, you do ramble.

However, you get everything wrong!

First, the whole idea of the bailout is fundamentally wrong (no need to get into specifics).  What it amounts to is the taxpayer will bear the costs of the insane activities of a few wastrels.

Second, I was on record months ago here telling everyone that the economy was going to be a disaster.  I specifically noted that whoever is the next President will inherit such a disaster.

Third, many of the schemes concocted on Wall Street are complex simply for complexity sake.  Their only purpose is to be so bizarre and insane that anyone trying to understand them will give up.  Their only purpose is to cover massive fraud with a heavy layer of manure.

Fourth, capitalism requires that people not only prosper from making good actions, but suffer for taking ill considered actions.  Well, with the bailouts we have eliminated the punishment, except for punishing the innocent taxpayer. 

Unless the bailout mania gets stopped cold, the economy will go into the toilet. 

[CARLHAYDEN]

Of course, of course. 

Say, politics.  I mean, when we say "Ooops, bad move Obama, that ad was awful" we know we are in a fog of war without access to internals or knowledge of his end goals.  We're making predictions about what will backfire or not which will be confirmed in the trackers in two days.  Also, collectively, we're actually qualified to be political consultants.

But when we say "Oops, bad move Bernanke, you shouldn't have bailed out AIG," everyone is acting as if they know every firm AIG is invested in and what the impact that move, or lack thereof, would have on the overall economy (hint, it probably doesn't only affect AIG and prob affects small businesses).

I'm just saying, before we call foul, let's wait a bit.  We can guess and that's fun, but let's not pretend like any of us are crunching the calculus on every firms' investments to figure out what the utility-maximizing decision is.  It's just like a war.  On the first day, it's sort of silly to start critiquing where Petraeus (or whoever) moves each brigade.  Afterwards we can.

Lunar, now you've gone and done it.  You've show you know even less about economics than the typical member of Congress.

Apparently you believe that the Chairman of the Fed owns everybody else's assets and can freely seize them to bailout those who engaged in massive stupidity (and in many instances, fraud).

Its really very simple.

Joe Tycoon screws up.

John Taxpayer gets his assets seized to pay for Joe's screw up.

John didn't ever know Joe.

So, no matter how "complex" Joe's screw up may have been, there is NO reason John has to pay for Joe's screw up.

[Smid]

Despite my economic score next to my profile, I strongly believe in government investment in universities (should be free), ...

You may be interested to take a look at the model for university education we have over here...

It's not free, per se, but the Government gives you a loan which is indexed at inflation and paid back on top of your taxes (so if you don't earn enough, you don't pay it back until you do earn enough). It's also heavily subsidised, so the amount you pay back is far below the actual cost of the degree. It means that expense isn't a factor for people from low income backgrounds, while a graduate who goes on to become a hot-shot corporate lawyer still contributes to their education. I think it gets the balance pretty well right between a fully private system and a completely subsidised system. Don't know if it would work in the US, but it's an idea you might want to kick around a bit.

[Lunar]

Despite my economic score next to my profile, I strongly believe in government investment in universities (should be free), ...

You may be interested to take a look at the model for university education we have over here...

It's not free, per se, but the Government gives you a loan which is indexed at inflation and paid back on top of your taxes (so if you don't earn enough, you don't pay it back until you do earn enough). It's also heavily subsidised, so the amount you pay back is far below the actual cost of the degree. It means that expense isn't a factor for people from low income backgrounds, while a graduate who goes on to become a hot-shot corporate lawyer still contributes to their education. I think it gets the balance pretty well right between a fully private system and a completely subsidised system. Don't know if it would work in the US, but it's an idea you might want to kick around a bit.

Free isn't what I meant, I was typing quickly before bed.  I was thinking more like subsidized to the extent of the positive external benefit (increasing the competitiveness of American workers, lowering debt of the incoming workforce, etc.)

but this is a tangent

[The Duke]

I think Lunar makes a good comparison.

A lot of people here were dead set against Petraeus due to ideology and partisanship.  Liberals/Democrats were against him because they were against the war and as a matter of ideology believed it could not be salvaged.  Conservatives/Republicans were against changing strategies because they were in the tank partisans for Bush/Rumsfeld and those who did end up supporting Petraeus did so only because they would follow Bush's new strategy as blindly as they followed his old strategy.

Some people oppose this bailout because they hate Bush.  Some oppose it because they hate corporations.  Some oppose it because they hate government intervention in the marketplace.  No one is a partisan for Ben Bernanke, so he gets no love except from those who actually know a little something about economics.

[politicaltipster]

Actually, I disagree with the idea that people shouldn't criticise Paulson or Benanke.

Although I strongly agreed with Petraeus on Iraq, I think the Bush administration were wrong to leave the selling of the plan to an unelected official. If Bush had gone out to the country and pushed the surge, instead of hiding behind Petraeus's coat tails, then his popularity wouldn't have been so low and there would have been more support behind it. Fortunately, Lieberman and McCain essentially did Bush's job for him while MoveOn made the huge blunder of personally attacking Petraeus. However, it could have very easily have gone the other way.

Also, Bush's decision to convene the Iraq Study Group in 2006, which implied that he had no plan of his own, made him look weak. Indeed, I believe that the ISG (and the rumours that they were going to recommend a withdrawal) gave a green light to AQ and made things much worse.

Similarly, although there is a coherant (though incorrect) a case to be made for a bailout  I think it is undemocratic to try to stifle debate. The US taxpayer (and maybe other taxpayers as well if this plan is aped by other countries) is going to have to foot the bill - so the taxpayer has the right to scrutinise the deal. I'm not American but wasn't one of the founding principles of the US 'no taxation without representation'?

Personally, I think this is unecessary. Sure, the stock market did badly but even by Friday morning it had barely entered bear market territory (as defined by -25% ytd). If Wall Street could survive a 1987 style crash then it can survive this crisis. Sure things would have been unpleasent for Wall Street, but as one of my colleagues put it on TV (in a slightly different context) bailing out the banks is like "like taking a drunk to the liquor store".

[Lunar]

Oh, it's fine to criticize them.  But criticisms have to admit a certain fog of war - we simply don't know what numbers and high-end mathematical models these PhD economists are using to make their decisions.  Unlike a tactical war or political decision, I feel that a lot of what is going on in actually beyond us.  The complexity and math is not the sort of thing one can understand by reading a few WSJ articles.

People on the forum, and people I overhear in real life, when they criticize him, tend to do it more on larger, principled terms about what a government "should" do.  I mean, Bernanke/Paulson aren't making these decisions without internal debate and there is plenty of reason to suspect that they might be making the wrong decision.  But without knowing the exact interlinking of the financial system with other parts of the economy, the exact cost/risk of government payouts, and absolutely essential details like these, we can't come up with our own risk model to determine if the right decision is being made.  We're sort of shooting in the dark here moreso than most topics boggled about on this forum

[Хahar 🤔]

This isn't a black and white situation.  People need to realize that.  This involves complexity of astronomical proportions.

That applies to a lot of things. For instance, the Middle East. If they'll be simplistic about that, we can be simplistic about the economy.

[Torie]

Well said Lunar. I know this sounds arrogant, but given that I have no clue as to the merits of the bailout, the costs and benefits, and the risks created and avoided, I doubt anyone else here does.

[Lunar]

This isn't a black and white situation.  People need to realize that.  This involves complexity of astronomical proportions.

That applies to a lot of things. For instance, the Middle East. If they'll be simplistic about that, we can be simplistic about the economy.

It's not a tit-for-tat thing.

But I'll tell you what, *I* won't be simplistic about the Middle-East if you do me the same thing for me on the economy.

[Хahar 🤔]

This isn't a black and white situation.  People need to realize that.  This involves complexity of astronomical proportions.

That applies to a lot of things. For instance, the Middle East. If they'll be simplistic about that, we can be simplistic about the economy.

It's not a tit-for-tat thing.

But I'll tell you what, *I* won't be simplistic about the Middle-East if you do me the same thing for me on the economy.

I didn't say it was you.

[CARLHAYDEN]

Well said Lunar. I know this sounds arrogant, but given that I have no clue as to the merits of the bailout, the costs and benefits, and the risks created and avoided, I doubt anyone else here does.

Simple question.  Are those who made bad decisions being held harmless for their actions?  If so, is this the course of action of which you approve?

Another simple question.  Why should the innocent taxpayer be sacrificed for the bad actions of financiers?

Another question.  If we pay the "danegeld" this time, what's to prevent future bailouts?

In focusing on the everchanging minutiae of the proposed bailout you are concentrating on individual trees, and failing to see the forrest.

Oh, and if you like the details, perhaps you can tell me if you approve of having the american taxpayer bailout foreign banks (that's part of the current proposal - see Politico).