Have Financial markets gone socialist

[OCinBuffalo]

Pretty interesting:

 

http://www.washingtonpost.com/wp-dyn/conte...id=opinionsbox1

Molson, you love to search the Internet for links.

 

Try doing this one: Washington Post Archive 1987

 

I'm sure Wall Street, as we know it , was never the same again back then too.

[Chilly]

I love football on TV

Dogs that love cats

and BAILOUTS!

[YellowLinesandArmadillos]

And if this was 1975, you'd be right. But it ain't, so you're not.

 

You are forgetting that so, so, so many jobs in this economy are not based on working for "the man". Small businesses are now the majority in this country in terms of where people work. If anything, the failure of the creditors is likely to help small business, rather than hurt it, because the cost of money is cheap, and everybody needs to generate some loans right now. That makes it highly competitive = low interest rates, and less cost for investment.

 

The biggest strength of small business: it's diversity. Sure there are many that are likely to fail, but there's also many that are likely to pick up their customers and grow. The point is that it's not all based on one or two big companies, and therefore it's not based on unions and union people.--> and this is where this hysteria is coming from.

 

Otoh, Wall Street people always think the sky is falling, or that everybody must be failing, when their own stupidity causes them to fail. The self-absorbed can't help feeling that everything is going to hell, just because what they do is going to hell. But, that part of NYC has been around for a long time. Way, way longer than them, and it will be around loooooooong after they are gone.

 

The smart view is this: no matter who wins the election, their Treasury and Labor Secretaries aren't going to deal with this properly. They will fail massively just like they always have, and then some capital will get organized and start lobbying to buy the assets of these companies. Then, we will have brand new companies, with new acronyms or nicknames, and they will be ready and willing to perpetuate the myth that all Wall Street people are infallible, because of where they go to work, eat and live.

 

Life will go on, and nobody will end up caring one way or the other, because there's always that next deal to work on, and there's money to be made.

 

Noice analysis, I have always said this country when the crap hits the fan has the unbelievable ability to ignore its politicians! This is a good thing.

 

Interesting comment on cheap money. From my perspective, I couldn't agree more, I just got a business credit card with lots of access to cash cheaply. All I have is $20,000+ in photography and computer equipment. P.S, The computer equipment loses value faster than I can spit, but the photog stuff at my end still holds value.

[YellowLinesandArmadillos]

I love football on TV

Dogs that love cats

and BAILOUTS!

Hail Mary!

[Dwight Drane]

And if this was 1975, you'd be right. But it ain't, so you're not.

 

You are forgetting that so, so, so many jobs in this economy are not based on working for "the man". Small businesses are now the majority in this country in terms of where people work. If anything, the failure of the creditors is likely to help small business, rather than hurt it, because the cost of money is cheap, and everybody needs to generate some loans right now. That makes it highly competitive = low interest rates, and less cost for investment.

 

The biggest strength of small business: it's diversity. Sure there are many that are likely to fail, but there's also many that are likely to pick up their customers and grow. The point is that it's not all based on one or two big companies, and therefore it's not based on unions and union people.--> and this is where this hysteria is coming from.

 

Otoh, Wall Street people always think the sky is falling, or that everybody must be failing, when their own stupidity causes them to fail. The self-absorbed can't help feeling that everything is going to hell, just because what they do is going to hell. But, that part of NYC has been around for a long time. Way, way longer than them, and it will be around loooooooong after they are gone.

 

The smart view is this: no matter who wins the election, their Treasury and Labor Secretaries aren't going to deal with this properly. They will fail massively just like they always have, and then some capital will get organized and start lobbying to buy the assets of these companies. Then, we will have brand new companies, with new acronyms or nicknames, and they will be ready and willing to perpetuate the myth that all Wall Street people are infallible, because of where they go to work, eat and live.

 

Life will go on, and nobody will end up caring one way or the other, because there's always that next deal to work on, and there's money to be made.

 

I suggest you make this Day 1 of a 150 day journal. Then every day as we go along, write how you feel. You just might be able to make some money selling that as a book. Worked for Ms Frank.

[Dwight Drane]

Yes. We all recall. How are the commodities doing?

 

 

 

SUV and pickup shortage is less about people not having money and more about the reality of gas prices and the stupidity of US manufacturers pinning their hopes on big vehicles. Smaller cars like the Prius are selling for 125% retail.

 

Ask me in 5 months......this is the classic smash and grab as I mentioned before. The grab can turn in 48 hours, so you have to be in the right spot ahead of time. This isn't "buy the dips, long term philosophy". This is....we are seeing an orchestrated move where unlimited pressure can be used on "enemies" of the dollar in order to prop up the system as long as it takes to get the "good guys" as far away from harm as possible. When the curtain gets pulled....either by choice or by rival nations....it is toast.

 

If this board goes offline any time over the next few months for whatever reason....good luck!

[molson_golden2002]

Molson, you love to search the Internet for links.

 

Try doing this one: Washington Post Archive 1987

 

I'm sure Wall Street, as we know it , was never the same again back then too.

I like Samuelson, he's an interesting guy.

 

And newsflash, somethings wrong on wallstreet.

 

The housing sector looks shot and that will bleed into everything else.

[molson_golden2002]

I love football on TV

Dogs that love cats

and BAILOUTS!

Pervert!

[TPS]

Wrong on the Keynesian definition, and we haven't used laissez faire since the Great Depression, and we aren't now, nor have we been since Bush has been in office, as you, lamely, suggest.

 

I exactly described the Keynesian model = regulation, taxation, and spending. A Keynesian:

 

1. Attempts to set price and wages, albeit roughly at best, through regulation.

2. Limits profits through taxation, supposedly thereby "fostering competition"(some of what Keynes said makes sense, this does not, because it is completely free of the concept of using profit for R&D = better, more competitive products. No surprise that he missed this, you would too if you were Keynes and were living in those times).

3. Competes with existing business(because it has all mostly failed in 1932) to buy products = government spending, even when it doesn't have the money. Thus, this government-based, Demand-Side Economics means the government creates false demand for products by buying things it otherwise doesn't need.

If you can find an actual quote of "what Keynes said" about "limiting profits through taxation" I'll buy you dinner (via gift certificate) at a restaurant of your choice. Specifically, show me the source where Keynes said (in his model) that you need to limit profits through taxation.

 

And where exactly did you find this explanation of the "Keynesian model?"

[OCinBuffalo]

Can't argue with anything you just said above. My macro econ 101 book was put away three years ago when I left the Hill, I deal only in balance sheets and maximizing profits as a small business owner now, micro 102.

Good. I really don't want to spend the 20 mins I have remaining on Econ 110(macro for me) and 112(micro) class.

My only question for you is that I thought what you wrote about Keynes was more socialism then Keynesian, how would you differentiate the two or would you?

I would say that both are economic concepts that have unfortunately been bastardized by politics. There is a time for shared social SERVICES = socialism: my buddy who is a social worker, whose job it is to tell people they have HIV cannot and should not be asked to "run things like a business". How do you get more efficient at that? Do a GoToMeeting instead of telling them in person? Of course not.

 

On the other hand, most government employees/political staffers wouldn't last a day in what I do. So I honestly have no idea where they get the idea that they should tell me a thing about how to do it by regulating me(or the Internet). Or, take my profit away because they are afraid I won't spend it prudently on R&D. Or, buy things from me or my competitors(we don't really have any, yet) in an effort to "shore up competition or demand". I produce and compete just fine without them. I know how to invest in my people properly, and I'd like to get some of what I earned, since I created this from scratch with no 2nd round investment and have suffered greatly because of it. I suppose I could have gotten an around 8:30 to 4:30 on the dot government job...but then I'd spend ALL my time here, and I'd have to argue that more taxes and spending were a good idea.

 

Anyway, the fact is that I see the full effect of Keynesian policy right in front of me every day = government hires people, and it's mostly terrible.

 

As far as I am concerned I want nothing to do with your Keynesian "tweaks". Besides, it's hard to call the 70% capital gains tax we had in the 70s, which was directly due to over-use of Keynesian policy, a "tweak". More like taking from somebody only because they have it --> socialism.

 

The difference is therefore simple: Keynesian policy was bastardized for years by chicken-ass politicians looking to trade hand-outs for votes(um, the Democratic Congress from 1944-1994) LBJ style. It was bastardized, and therefore back-handed socialism was the result.

As far as your question on 3 goes, I think that the monetary supply being "too great" is both a solution, but also right now the problem. Money when the real estate market recently became over leveraged and money was still too accessible. There was great political pressure on all sides to keep it this way, but rates should have been raised a lot sooner than they were. The effect would have been to tighten credit requirements earlier and lessened the extent of the current problem. Politically, it probably would have been suicide, Americans were drunk off lots of money at home while the value of dollar was still sky high and changes couldn't have occurred until some negative consequences started happening. Not sure when this should have occurred but sooner than it did.

Bold = huh?

 

I am guessing from the rest that you agree with me that unsound political influence in sound economic policy is the root of all evil here. It was PC to say that a poor person "should" live in house they "own", when their earning power says otherwise, even if it means the ass falls out of the market. All these adjustable rate mortgages were given based on government mandate, not funding, and/or government tax breaks. The fact is that a tax break is no substitute for sound business practice/business models.

 

This is the supreme arrogance of the "government knows best" position-->tax break = problem solved, all idiots are suddenly smart, and all bad plans/products are suddenly good.

 

There are 10 software programs right now that were built based on government grants in one of the sectors we work in. NOT ONE of them would be bought by anyone, ever. But since government is involved in that sector, the clients were essentially forced to buy crap. More importantly, if you didn't want to buy the crap, the government made their own crap solution, and gave it away for free. So, you get to choose between crap, and crappier, and still not solve any of the problems that have plagued this industry for 20 years. Keynesian policy indeed. Let's get us some more crap! (This will all be over soon, I guarantee it.)

[YellowLinesandArmadillos]

Bold = huh?

 

Sorry, had too many thoughts going and my fingers couldn't keep up. Not sure I could clarify at the moment.

[StupidNation]

So much for all those free market traders. I am glad that the financial markets were helped, a guess Keynesian principals work!

 

The market wasn't free before this bail-out. This market was subsidized by Fannie and Freddie gubmint guarantees before the bail-out.

 

If I told you that I would guarantee mal-investment do you think it would increase disproportionately? Well the "I" is Uncle Sam and he exacerbated this. Mal-investment will always come in cycles, but the market doesn't create this gigantic bubbles. No big ass bubble existed until the Fed Reserve was allowed to create fictional forms of investment.

[YellowLinesandArmadillos]

Good. I really don't want to spend the 20 mins I have remaining on Econ 110(macro for me) and 112(micro) class.

 

I would say that both are economic concepts that have unfortunately been bastardized by politics.

Agreed, but that doesn't negate the theory just that it was misused. Kinda like calling Marxian Analytical theory Communism, big difference.

 

Anyway, the fact is that I see the full effect of Keynesian policy right in front of me every day = government hires people, and it's mostly terrible.

 

As far as I am concerned I want nothing to do with your Keynesian "tweaks". Besides, it's hard to call the 70% capital gains tax we had in the 70s, which was directly due to over-use of Keynesian policy, a "tweak". More like taking from somebody only because they have it --> socialism.

 

You mean bastardized Keynesian theory.

 

The difference is therefore simple: Keynesian policy was bastardized for years by chicken-ass politicians looking to trade hand-outs for votes(um, the Democratic Congress from 1944-1994) LBJ style. It was bastardized, and therefore back-handed socialism was the result.

 

Generally agree but too simplistic a statement. LBJs program were as much a social/political reaction to the times then actual theory in practice.

 

I am guessing from the rest that you agree with me that unsound political influence in sound economic policy is the root of all evil here. It was PC to say that a poor person "should" live in house they "own", when their earning power says otherwise, even if it means the ass falls out of the market. All these adjustable rate mortgages were given based on government mandate, not funding, and/or government tax breaks. The fact is that a tax break is no substitute for sound business practice/business models.

 

This is the supreme arrogance of the "government knows best" position-->tax break = problem solved, all idiots are suddenly smart, and all bad plans/products are suddenly good.

years.

 

Agree!

 

There are 10 software programs right now that were built based on government grants in one of the sectors we work in. NOT ONE of them would be bought by anyone, ever. But since government is involved in that sector, the clients were essentially forced to buy crap. More importantly, if you didn't want to buy the crap, the government made their own crap solution, and gave it away for free. So, you get to choose between crap, and crappier, and still not solve any of the problems that have plagued this industry for 20 years. Keynesian policy indeed. Let's get us some more crap! (This will all be over soon, I guarantee it.)

 

By any chance are referring to Adobe Acrobat among others?

[YellowLinesandArmadillos]

P.S. I wish as a staffer I worked 8:30-4:30. Was usually there from 7:00am till 8:00 pm on a good day.

[TPS]

The market wasn't free before this bail-out. This market was subsidized by Fannie and Freddie gubmint guarantees before the bail-out.

 

If I told you that I would guarantee mal-investment do you think it would increase disproportionately? Well the "I" is Uncle Sam and he exacerbated this. Mal-investment will always come in cycles, but the market doesn't create this gigantic bubbles. No big ass bubble existed until the Fed Reserve was allowed to create fictional forms of investment.

How do you define "big ass bubble?"

 

Here are a few before the fed was created:

US Banking crisis of 1837, speculation in cotton and land. Depression lasted until 1843.

1873 financial crisis based on railroad speculation.

1893 sliver speculation crisis and a depression that lasted 5-6 years.

1907 financial crisis related to coffee and union pacific.

[DC Tom]

How do you define "big ass bubble?"

 

Here are a few before the fed was created:

US Banking crisis of 1837, speculation in cotton and land. Depression lasted until 1843.

1873 financial crisis based on railroad speculation.

1893 sliver speculation crisis and a depression that lasted 5-6 years.

1907 financial crisis related to coffee and union pacific.

 

The Ducth tulip bubble in the 1640's (I believe) was one of the most severe ever. No, seriously...there really was an investment bubble in tulip bulbs in the Netherlands.

 

And I believe there was some sort of mercantile investment bubble in Florence in the mid-13th century, ended by the bubonic plague.

 

Both of those preceded the Fed as well. Bubbles are a natural result of market forces and people being stupid.

[TPS]

The Ducth tulip bubble in the 1640's (I believe) was one of the most severe ever. No, seriously...there really was an investment bubble in tulip bulbs in the Netherlands.

 

And I believe there was some sort of mercantile investment bubble in Florence in the mid-13th century, ended by the bubonic plague.

 

Both of those preceded the Fed as well. Bubbles are a natural result of market forces and people being stupid.

Those are in Kindleberger's famous book as well. I wanted to focus on the US prior to the fed.

[molson_golden2002]

Those are in Kindleberger's famous book as well. I wanted to focus on the US prior to the fed.

The 1837 financial collaspe followed after "the Fed" of that day, the Second Bank of the United States, had been killed by Jackson which exasterbated an already bad situation. Buffalo was crushed by that depression and Ben Rathbun, the guy that built most of the city and owned the village of Niagara Falls ended up in jail during it.

[meazza]

The Ducth tulip bubble in the 1640's (I believe) was one of the most severe ever. No, seriously...there really was an investment bubble in tulip bulbs in the Netherlands.

 

And I believe there was some sort of mercantile investment bubble in Florence in the mid-13th century, ended by the bubonic plague.

 

Both of those preceded the Fed as well. Bubbles are a natural result of market forces and people being stupid.

 

Bookstabber wrote about that in his book http://search.barnesandnoble.com/A-Demon-o...e/9780471227274 for which he uses a cover that you would think would be a Robert Langdon story.

[DC Tom]

Those are in Kindleberger's famous book as well. I wanted to focus on the US prior to the fed.

 

I know. I just wanted to point out as well to Stupid up there that bubbles aren't new, nor are they unique to the US.