The United States Economy

[blackson]

What are your thoughts about it?

I personally think it's just a phase that we will get through as soon as we as a whole stop whining and worrying about it.

[blue_tetris]

I agree. Most of these things are self-perpetuating phenomena. The biggest problem here is that people blame deregulation for the failings of the economy, which seems to make the free market look bad. When you deregulate anything, you get a bit of market freefall which makes economic freedom look detrimental.

Look at Russia. After the socialized structure fell apart there, their economy went way south. It's not because deregulation is bad. It's because the industries that were regulated didn't know how to operate competetively in those regards.

But, yeah, the market cycles. It just does. And the present market situation isn't nearly as bad as it was in the mid-80's or mid-70's. It's a short phase and, because of the high-rate of information exchange in this day and age, people are able to blow it out of proportion in ways that the 1970's economic fatalists could never have dreamed.

[blackson]

What are your opinions of the bail outs?

Should the government make taxpayers pay for companies who unresponsibly lent their money to the wrong people?

[blue_tetris]

I'm opposed to public money going to private places. Straight up.

[blackson]

Well then...

[kamikaze3000]

The US economy is a mess. The majority of the first world economies are too.

It's gonna take time for it to recover, but it'll happen eventually. Look on the bright side. At least we're not getting it as bad as it was in the 30s. That was a seriously awful time.

[t̷s͢uk̕a͡t͜ư]

I don't know a whole lot about macroeconomics, but I sort of saw this as a long time coming, ever since Bush started overspending. Even with the euro exceeding our dollar and gas prices quadrupling, I doubted those were the only consequences.

[lord_day]

I'm opposed to public money going to private places. Straight up.

If AIG hadn't been bailed out, the damage would have been phenomenal. Most likely it would have cost far more than the government have spent or will spend on them.

[blue_tetris]

Yeah. But that means I used my money to save certain other people some money. It defies any sort of conservative economic principles--handing out public money--and it defies any sort of liberal economic principles--giving that public money to a cause which benefits the wealthiest financial markets long before anyone near the middle or bottom tiers.

[Zelda_S_Kenneth]

Except for AIG, nobody else deserves to be bailed with public funding. They had it coming, and they were too blind to see that if they didn't do something, they'd end up in the thorn-Bush.

Give it time. It'll fix itself. It always has.

[blackson]

Another cause of all of this is people spending what they didn't have. With credit and loans, people got into debt, and don't know how to get out.

[blue_tetris]

In the late 90's, the big craze was "Bad credit? No problem!" It was this push to give people the American dream. It gave those financial markets lots of business and they didn't assess possible costs well enough. It was really a calculated risk and their calculations were off, and only by a shade. When you're dealing with that many accounts, tiny marketing errors lead to major costs and they're hard to predict. However, they're not impossible to predict. The biggest problem is that people are willing to let these companies off the hook because marketing, as a discipline, is seen as guesswork. It's not at all guesswork, and the American people will be more willing to give up their public money to save the "unlucky" rather than the unqualified.

[lord_day]

I think you underestimated the damage that would happen if AIG went under. Sure, some of your money was spent to keep them up, but it's almost certain that you would have experienced worse losses if they hadn't been bailed out.

The governor of AIG's home state of New York, David Paterson, has granted the company an exemption from insurance regulations to allow it to raid its ­subsidiaries' reserves for $20bn. He warned that a collapse of AIG would hurt businesses in every corner of the globe.

http://www.guardian.co.uk/business/2008 ... editcrunch

An AIG collapse could have cost financial institutions $180 billion, or 50 per cent of the capital they have raised since the credit crunch began last year, RBC Capital Markets analyst Hank Calenti wrote.

http://www.independent.co.uk/news/busin ... 33257.html

Just to give some examples.

[blackson]

Check.

[blue_tetris]

I think you underestimated the damage that would happen if AIG went under. Sure, some of your money was spent to keep them up, but it's almost certain that you would have experienced worse losses if they hadn't been bailed out.

The governor of AIG's home state of New York, David Paterson, has granted the company an exemption from insurance regulations to allow it to raid its ­subsidiaries' reserves for $20bn. He warned that a collapse of AIG would hurt businesses in every corner of the globe.

http://www.guardian.co.uk/business/2008 ... editcrunch

An AIG collapse could have cost financial institutions $180 billion, or 50 per cent of the capital they have raised since the credit crunch began last year, RBC Capital Markets analyst Hank Calenti wrote.

http://www.independent.co.uk/news/busin ... 33257.html

Just to give some examples.

I don't misperceive the damage that would be done. It's just weird that we should have to bail anyone out for this. To me, at the core of our social liberties is our economic liberty. Sometimes, lots of damage is going to happen and the people who entrusted AIG for their financial services should be penalized for doing so. The fact that this number of people and organization is really high should perhaps give future consumers incentive to undermine monopolization of financial markets.

If we bail these groups out now, they can expect to be bailed out in the future. There's really no penalty for doing bad business if you can rely on public money to support your business whether or not they trust you.

One bandage now means ten or twenty down the line. At some point, that company's liberty to pursue business as it pleases needs to also translate into that company's liberty to fall hard if it fails.

[blackson]

Let me ask you, did you think the Governmnt's move in bailing out AIG was for the better or worse?

(With all future and present conditions attached)

[blue_tetris]

I think it saves people some money and it may even help the economy in the short run, like, while the present administration can still take advantage of its good press. I don't think it's helpful in the long run to have the government regulating the economy to that degree.

It essentially means that we're using our money to pay businesses that we don't pick, instead of using our money to pay businesses that we do pick. On principle, it's some violation of our liberty. Economically, it's a short-term solution. It really depends on your goals as to whether it is good or bad. It's not capital, either way. It's liquid, so it generates no long-term wealth.

[blackson]

Any other ideas/arguments?

[Atilla]

The problem with not bailing these companies out, however, is that it leads to a loss of investments and jobs, thus making the economy plunge even further. I agree that, in principle, you shouldn't be bailing companies out after they make bad decisions, but I think some kind of bail-out is necessary for practical reasons. I favour long-term loans at relatively low interest - once the economy has turned around, you should be able to recoup all the government money without causing too many problems.

[lord_day]

I would agree that it is bad policy to bail out companies like this, however I think that most companies will not expect the same treatment. For example, no-one even thought twice about bailing out Lehman Brother's. I think AIG was just that important, that it needed to be done. And yes, the present situation is not desirable, because more and more money will be needed to keep them afloat. But in my opinion there is no alternative.

edit: I pretty much agree with what Atilla said.

[blackson]

I think it's wierd how AIG got bailed but no others. Leeman Brothers didn't get anything, and it dropped about 48 hours before AIG. Also recently, Washington Mutual failed. It's almost some sort of prejudice towards who they want taxpayers to bail out. Freddy May and Fanny Mac were important, but now it's just another name in a growing list. I imagine some govenment meeting of people throwing darts to choose how they spend someone else's money.

[lord_day]

I think it's wierd how AIG got bailed but no others. Leeman Brothers didn't get anything, and it dropped about 48 hours before AIG.

Lehman Brothers got nothing, because it was deemed that the cost of keeping them afloat wasn't worth it. AIG is/was a far far bigger company than Lehman Brothers. That is one of the key differences.

[sidke]

I really don't try to follow this much anymore... This is the latest I've heard/seen on the matter:
Refer to this
Of course I felt inclined to read the article attached:
The article inspiring

[Pikman]

[quote="lord_day"][quote="Blackson"]I think it's wierd how AIG got bailed but no others. Leeman Brothers didn't get anything, and it dropped about 48 hours before AIG. [/quote]

Lehman Brothers got nothing, because it was deemed that the cost of keeping them afloat wasn't worth it. AIG is/was a far far bigger company than Lehman Brothers. That is one of the key differences.[/quote]
And WaMu failed for the sake of AIG. AIG is the country's biggest insurance provider. I believe the strategy is to drop the failing companies so AIG can grow. Vanguard doesn't look too good themselves; they spent most of yesterday telling people their assets were safe, but you never know.

[Atilla]

Telling people their assets are safe is always a bad sign. Nobody feels the need to reassure you that your assets are safe when things are going well.