I will tomorrow (thursday). I am getting packed for the 12 hour flight back to NYC through 6 timezones. Should be able to hit it thurs night.
LegendKiller, can you comment on the questions I posted above that are quoted in this message? I'd be curious to hear your take on these questions.
It was politics that screwed this one over, not the FRB.
I'll respond to this tomorrow when I get home. However, I wanted to clear up your last part.
The Fed doesn't "eliminate" anything from inflation. Inflation has been, is, and always will be released in two components, headline and core. Headline includes *ALL* items in a basket of goods, core does not.
The Fed had *nothing* to do with the inflation of the 1970s as the rates kept at the time were enough to deal with the inflation of that period. The inflation of that period was solely caused by the misguided policies of the political administrations and the geopolitical spectrum well outside of the Fed's control. Had the Fed responded to the eventual inflationary tidal wave pent up by those misguided policies there would have been enormous amounts of deflation followed by inevitable inflation once the tidal wave was unleashed by the elimination of the price controls and the geopolitical events.
This whiplash of economic turmoil would have destroyed the economy quickly.
As a result, the Fed was effectively powerless to prevent the inevitable inflation once the policies were eliminated.
the fed had nothing to do with the vietnam war and the decision to float currencies rather than continue the bretton woods accord. it also had nothing to do with OPEC exerting control on oil supplies.
milton friedman wanted to reform the banking system not to keep the money supply constant but to precisely control the size of the money supply so that the MV side of the equation can keep up with the Q on the other side and thereby maintain P at a constant level. doing so is probably impossible in any economy except the most rudimentary.
and of course talking about this in nominal terms ignores the fact that sometimes and for whatever reason real inflation does happen (though in man-hour terms the trend of history is real deflation).
Really? Could you elaborate on which politics it was that prevented the FRB from doing its job?
Well, I feel the need to toot my own horn. What I predicted earlier is now has come to pass. The EU central bank has started buying government debt from some of the EU member states. The ultimate outcome of this is clear and easy to see and it's only a matter of time now. It will take a long time though.I don't know why you're even dwelling on the point that you are. I never said that Greece isn't part of the EU. I never said that Greece defaulting on it's debt wouldn't be a problem for the EU. Greece defaulting on its debt would be a problem because it is part of the Euro.
What I did say was that the EU will default on its debt. That debt defaults inevitably happen. Not all the time. But about a twice a century or so for any given country. Greece has debt problems. Inevitably, Greece's debt problems will be transferred onto the EU central bank as a whole in one way or another through bail outs or debt swaps or whatever. Even though the EU central government doesn't have a lot of debt now, it will. This global debt crisis will cause them to go into major debt as the debts of the EU's individual countries is socialized onto the EU collectively. And then when things reach their breaking point the EU will default/devalue.
People act as if the government is some separate entity from the rest of the economy. They act as if we just cut Gov't spending, all it will do is effect the deficit. It will not effect the economy. This is totally absurd. Every penny that the government spends eventually ends up as someone's paycheck (it might have to go through several transactions first, mind you). Whenever you cut spending, that is someone with less money (or maybe someone who no longer even has a job). If the cuts are big enough, this will effect the economy as a whole quite a bit as those people no longer have money to spend on goods and services. The tax base will decrease. He is pointing out the opposite. More spending puts more money in the economy.
Interesting article. There are a lot of points which are arguable (as always) but it is an interesting read none-the-less. There was some hyperbole, and I don't think he is trying to advocate massive (unnecessary) increases in government spending, but is trying to argue that running a budget deficit is "ok."
one of the comments is pretty good as well:
People act as if the government is some separate entity from the rest of the economy. They act as if we just cut Gov't spending, all it will do is effect the deficit. It will not effect the economy. This is totally absurd. Every penny that the government spends eventually ends up as someone's paycheck (it might have to go through several transactions first, mind you). Whenever you cut spending, that is someone with less money (or maybe someone who no longer even has a job). If the cuts are big enough, this will effect the economy as a whole quite a bit as those people no longer have money to spend on goods and services. The tax base will decrease. He is pointing out the opposite. More spending puts more money in the economy.
yeah, lets just ignore the huge hole and pretend it's not there.
meanwhile, lets keep spending money we don't have.
much better alternative don't you think?
After your edit we said similar things, yours just had a political spin on itgovt would not have to spend money on social programs to keep them alive.
I understood you meant the flat tax. Its proven a useful tool in reducing tax evasion. You may not be convinced, but that doesn't make raising the point illegitimate. I agree other measures, such as stepping up enforcement, would probably help too. Compliance is a problem of high rates and a complex system, though. How many American millionaires pay the full rate? Few, I'd guess.This was in regards to your flat tax idea. I also doubt a flat tax will resolve the issue of tax evasion in Greece.
I offered theoretical and experimental justifications for my idea, when challenged. Who here is offering scientific proof? At least I didn't make an ad hominem argument.No, it just mean that you can't be taken seriously.
Most of Eastern Europe, among other countries. Most recently Bulgaria, which instituted a flat income tax rate of 10% and saw revenues increase 40%. When Russia went for a low flat tax, it worked so well they dropped the rate again, and revenue increased again. Greece needs more economic growth, not more efficient redistribution of wealth.Which countries are you talking about here?
The most obvious.
Interesting article. There are a lot of points which are arguable (as always) but it is an interesting read none-the-less. There was some hyperbole, and I don't think he is trying to advocate massive (unnecessary) increases in government spending, but is trying to argue that running a budget deficit is "ok."
one of the comments is pretty good as well:
People act as if the government is some separate entity from the rest of the economy. They act as if we just cut Gov't spending, all it will do is effect the deficit. It will not effect the economy. This is totally absurd. Every penny that the government spends eventually ends up as someone's paycheck (it might have to go through several transactions first, mind you). Whenever you cut spending, that is someone with less money (or maybe someone who no longer even has a job). If the cuts are big enough, this will effect the economy as a whole quite a bit as those people no longer have money to spend on goods and services. The tax base will decrease. He is pointing out the opposite. More spending puts more money in the economy.
This. The whole point of Glass-Steagall was to order society so that one failing important sector of the economic system would not take down another. Screw the Republicans for leading its abolishment and the Democrats for not leading its re-establishment. Had Glass-Steagall been in affect the financial collapse would have been limited primarily to the mortgage industry and more easily contained.Glass Stegal would have prevented this from happening and should be reinstated to prevent it from happening again but what does that have to do with blatant fraud?
I don't understand how you can have these opinions coexisting inside one brain. Either Glass-Steagall would have been a sufficient protection or it wouldn't have. I think you are on the right track with paragraph number two, so carrying on...This. The whole point of Glass-Steagall was to order society so that one failing important sector of the economic system would not take down another. Screw the Republicans for leading its abolishment and the Democrats for not leading its re-establishment. Had Glass-Steagall been in affect the financial collapse would have been limited primarily to the mortgage industry and more easily contained.
One thing though - Glass-Steagall never predicted the massive securitization of home loans which to a large degree gets around Glass-Steagall anyway, as any entity can invest in these securities.
I would actually go further. I would like to see a securitization commission (modeled on the current insurance commissions) created which oversees and sets standards for all securities traded by any corporation with implicit or explicit government backing or insurance, or which has any access to any Federal Reserve programs. Basically an insurance commissioner for every financial tool that doesn't fall under an existing insurance commissioner's jurisdiction. Separating entities based on general categories of operations is a bit dated. Well intentioned, but I don't think it would be nearly robust enough to have any effect today.I think we need a new version of Glass-Steagall, but even more importantly we need to tighten up home mortgage rules, starting with the GSAs which have not revised the insane policies (some mandated by law and/or oversight) which were the root cause of this crash.
Think of it this way: Laws against burglary are not sufficient protection against having your house burgled, but they are still an important part of the protection. Proponents of abolishing Glass-Steagall were correct in saying that it had become largely outdated, but incorrect in saying that it did not retain a great deal of value. (Or to put it another way, the fact that organized crime has progressed from killing people with swords to killing people with guns is not reason to remove laws prohibiting attacking someone with a sword.)I don't understand how you can have these opinions coexisting inside one brain. Either Glass-Steagall would have been a sufficient protection or it wouldn't have. I think you are on the right track with paragraph number two, so carrying on...
I would actually go further. I would like to see a securitization commission (modeled on the current insurance commissions) created which oversees and sets standards for all securities traded by any corporation with implicit or explicit government backing or insurance, or which has any access to any Federal Reserve programs. Basically an insurance commissioner for every financial tool that doesn't fall under an existing insurance commissioner's jurisdiction. Separating entities based on general categories of operations is a bit dated. Well intentioned, but I don't think it would be nearly robust enough to have any effect today.
It might be surprising to see someone who claims largely libertarian values to want such a thing, but the financial industry as we know it is one that exists entirely because of the government subsidies it receives. There are almost no truly private banks in the world. As for the few that exist, they wouldn't fall under the purview of the commissioner I am proposing anyways because they decline FDIC coverage, etc. For markets that are actually extensions of government regulations, it makes sense to have robust regulators who actually have some authority over them. I am a big fan of strong regulation, just usually not the kind that pro regulation types are in favor of...
We agree on pretty much everything.Think of it this way: Laws against burglary are not sufficient protection against having your house burgled, but they are still an important part of the protection. Proponents of abolishing Glass-Steagall were correct in saying that it had become largely outdated, but incorrect in saying that it did not retain a great deal of value. (Or to put it another way, the fact that organized crime has progressed from killing people with swords to killing people with guns is not reason to remove laws prohibiting attacking someone with a sword.)
Right, so...I'm not necessarily against this, but consider that the GSEs abolished income verification and credit rating as "outdated metrics", stopped requiring qualified third party appraisals, and began wholesale acceptance of non-complying loans, admittedly under considerable government pressure to do so. Private institutions adopted the same procedures.
Well if those agencies actually had robust regulations to conform to, that might just have helped a wee bit...Therefore it's hard to see how government regulation could have saved us from foolish policies begun and established by the government and quasi-government entities.
I agree completely. Regulations usually help, if they are sensible and are enforced. At the least the regulators could have been raising hell about all the non-complying loans which might have been enough to slow up the flood until sanity could overcome greed and politics.We agree on pretty much everything.
Right, so...
Well if those agencies actually had robust regulations to conform to, that might just have helped a wee bit...
Personally I'd like to see the GSEs nuked completely. Fire the boards and auction off the bits that can be sold. End this whole subsidized home ownership charade once and for all. Granted that's a political non-starter, but one can dream!
Lol, if the government taxes less and spends less that means there will be less money in the economy?
Actually borrowing money does put more money into the economy but it also adds additional cost to service the debt and since we never seem to actually pay down the principle we will be paying interest on the full amounts for decades to come. There are a few bankers in here, at 2% what is the interest payments on $100 over 30 years, compounded of course since we have to borrow the interest payments as well?
Glass steagall wouldn't have prevented the crash.
Keep in mind, the worst offenders of the credit bubble weren't deposit taking banks but were pure investment banks. On the flip side, as mentioned above, the GSEs aren't banks at all.
Greece is trying to renegotiate the terms of a drastic pension reform required under the terms of an economic rescue deal agreed this month with the EU and the IMF, senior government officials said.
In the first sign of glitches over the 3-year bailout plan, officials said they wanted the EU and IMF to agree full pensions should be payable after 37 years of contributions instead of 40, as set out in the deal, and allow the reform to be implemented later than foreseen.