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    Default 'Economists blind to reality'

    http://english.aljazeera.net/focus/c...449824699.html

    I took an economics class a couple years ago where the teacher was constantly talking about the recession--but before it had become big news. The reason he said he knew this is because he was not just an economist, but a political economist.
    I thought this was an interesting article, especially since that is what I learned about even before this mess blew up!
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    Default Re: 'Economists blind to reality'

    The reason he said he knew this is because he was not just an economist, but a political economist.
    Unfortunately, politics and economics are becoming more and more interdependent these days. But if you want to cut straight to the 'chase', do some digging in regard to human reactions to government created 'moral hazards'. Arguably, most of the bad economic developments of the past several years can be directly traced to 'moral hazard' ... from Freddie / Fannie lending policy to the secondary mortgage market to credit default swaps to AIG and FDIC insurance ! If people think that their risks are covered by the US taxpayer or a private insurer or a bankruptcy judge, they bear little or no personal consequences from acting irresponsibly ! But the ability of AIG or the FDIC to absorb losses covering bad risks is not infinite. And when the 'insurance company' goes broke, all of a sudden the real risks ( and losses ) come home to roost !




    As to economists being 'blind' to developing financial crises, one has to differentiate between economists who are favored by governments and mainstream financial media versus economists who are not. In general, the economists who typically get listened to by politicians and reported on by media tend to follow the so-called Keynesian school of economics. Economists who correctly predicted the recent financial turmoil tended to follow the Austrian school of economics. I won't elaborate on the reasons why gov't and mainstream financial media 'likes' Keynesians and 'dislikes' Austrians, in this thread at least.

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    Last edited by Melonie; 09-02-2009 at 02:03 PM.

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    Default Re: 'Economists blind to reality'

    That is true, since so much spending was overlooked and there was a lot of feelings of safety in the Americal economy, it's no wonder the 'recession' was ingnored until it was well established. No one had really even given thought to minimum wage, which has decreased since the 70s (taking inflation into considereation of course).
    Politics are so important to economy now. It is interesting to see what is being spent on political endevours when that money could be allocated elsewhere.
    I especially like the article because it mentions that economists were working within the neoliberal model. Its no wonder the political economists saw it coming!
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    Default Re: 'Economists blind to reality'

    Quote Originally Posted by Melonie View Post
    Unfortunately, politics and economics are becoming more and more interdependent these days. But if you want to cut straight to the 'chase', do some digging in regard to human reactions to government created 'moral hazards'. Arguably, most of the bad economic developments of the past several years can be directly traced to 'moral hazard' ... from Freddie / Fannie lending policy to the secondary mortgage market to credit default swaps to AIG and FDIC insurance !
    Arguably, most of the bad economic developments of the past several years can be directly traced to conservative deregulation of the financial industry, allowing people to buy homes with no money down, adjustable rate mortgages, and interest only loans. In Canada, which is fortunate not to have any conservative ideologues in positions of power, banks continued to remain financially secure, as Canada continued to keep banks regulated. Conservatism is the problem, not the solution.

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    ^^^ Believe it or not I agree with you re Canadian banks. They were not coerced into writing zero equity subprime loans / arm mortgages etc. because, unlike the US, in Canada it was possible to 'sell' gov't funded housing assistance as a social welfare benefit. Since a direct proposal of that nature would never have 'flown' in the USA, the Clinton administration attempted to achieve the same thing via HUD policy directives to Fannie Mae and Freddie Mac ... which ultimately encouraged large numbers of US banks to write zero equity subprime loans / arm mortgages etc. with Fannie and Freddie supposedly assuming the increased default risk. So in both Canada and the USA, the taxpayers ultimately footed the bill for low income housing - Canada was just more 'honest' about how it was being accomplished !

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    Default Re: 'Economists blind to reality'

    Quote Originally Posted by eagle2 View Post
    Arguably, most of the bad economic developments of the past several years can be directly traced to conservative deregulation of the financial industry, allowing people to buy homes with no money down, adjustable rate mortgages, and interest only loans. In Canada, which is fortunate not to have any conservative ideologues in positions of power, banks continued to remain financially secure, as Canada continued to keep banks regulated. Conservatism is the problem, not the solution.
    Baloney ! If REAL conservatism had been practiced and not the excesses of Bush, DeLay and the other politicians we would NOT have seen anything remotely resembling this mess.

    Conservatism says: " What business does the government have in the mortgage business ? " Without Fannie Mae and Freddie Mac and "Friends of Angelo" we wouldn't have had the sub-prime mortgage mess.

    Goldman Sachs and the other big bubble-makers and beneficiaries are tied to the Democrat Party via both campaign contibutions and the personnel pipeline to Treasury and The Fed. Matt Taibi's piece in ROLLING STONE " The Great American Bubble Machine" is very instructive especially on the dot.com and mortgage messes which were Dem driven notwithstanding Gramm's push to deregulate banking. The problem was that we had banks that were deregulated as to what they could invest in and sell BUT who were reliant on the Federal government i.e. the taxpayers standing behind a lot of what they were doing. As Melonie points out, if they had to do it with their own money, they wouldn't have. Federal guarantees increased the level of risk-taking far beyond it's natural plane.

    Cosnservatism says: "The only job the Fed ought to have is to establish and maintain slow and steady growth of a sound currency." Instead we've had a Fed. that has tried, and mostly failed, to control the economy and we've all had to pay the price.

    Conservatism says : "The Government has limited and enumerated powers and ought to stay within them." and " Local and State governments are more effective and responsive than Washington." Instead we have seen the Federal government explode in the last 40 years or so with resultant increases in spending and DEBT.

    Conservatism says : "Failure is part of capitalism and business failures are NOT the business of government. " Instead we have gotten bail-outs and stimulus packages up the wazoo. Bubbles happen. They go back to Ancient Egyptian and Roman grain merchants. When they burst, as they always do, equilibrium returns. It is NOT the job of government to select the winners and losers.

    Our current problems are NOT the result of conservative economics. Quite the contrary. The ham fisted hands of government are all over the current mess. Starting with the Fed. The Keynesian stimulus package is not working. The economy is recovering ( albeit slightly ) in spite of the Federal government and NOT because of it.

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    Default Re: 'Economists blind to reality'

    Quote Originally Posted by Melonie View Post
    ^^^ Believe it or not I agree with you re Canadian banks. They were not coerced into writing zero equity subprime loans / arm mortgages etc. because, unlike the US, in Canada it was possible to 'sell' gov't funded housing assistance as a social welfare benefit. Since a direct proposal of that nature would never have 'flown' in the USA, the Clinton administration attempted to achieve the same thing via HUD policy directives to Fannie Mae and Freddie Mac ... which ultimately encouraged large numbers of US banks to write zero equity subprime loans / arm mortgages etc. with Fannie and Freddie supposedly assuming the increased default risk. So in both Canada and the USA, the taxpayers ultimately footed the bill for low income housing - Canada was just more 'honest' about how it was being accomplished !
    and most of banks and mortgage companies in the US weren't either. Only a small percentage of the bad loans fell under the CRA. The vast majority of the bad loans went to the middle and upper class who did not fall under the CRA. Banks and mortgage companies were not forced to provide loans to speculators flipping condos. Over half of the subprime loans didn't even go to Fannie Mae, but to other financial institutions, such as Lehman Brothers.

    Of course all of these facts are meaningless to conservative ideologues since they contradict conservative ideology. Conservatives will not acknowledge that in an unregulated market, banks and other finance companies will make risky loans that might not be paid back.

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    Default Re: 'Economists blind to reality'

    Quote Originally Posted by Eric Stoner View Post
    Baloney ! If REAL conservatism had been practiced and not the excesses of Bush, DeLay and the other politicians we would NOT have seen anything remotely resembling this mess.

    Conservatism says: " What business does the government have in the mortgage business ? " Without Fannie Mae and Freddie Mac and "Friends of Angelo" we wouldn't have had the sub-prime mortgage mess.
    Yes we would. Less than half of the subprime loans were bought by government institutions. If these government institutions did not exist, it would not have prevented the bankruptcy of Lehman Brothers or the other private financial institutions that would have collapsed without massive bailouts from the federal government.

    Quote Originally Posted by Eric Stoner View Post
    Goldman Sachs and the other big bubble-makers and beneficiaries are tied to the Democrat Party via both campaign contibutions and the personnel pipeline to Treasury and The Fed. Matt Taibi's piece in ROLLING STONE " The Great American Bubble Machine" is very instructive especially on the dot.com and mortgage messes which were Dem driven notwithstanding Gramm's push to deregulate banking.
    The Republicans were behind many of the laws passed deregulating the financial industries. Ronald Reagan was the one who signed the bill allowing banks to offer the risky alternative mortgages that played such a key part in the foreclosure crisis. Of course there were Democrats that went along who were just as responsible, but deregulation is a key tenet of conservative ideology.

    Quote Originally Posted by Eric Stoner View Post
    The problem was that we had banks that were deregulated as to what they could invest in and sell BUT who were reliant on the Federal government i.e. the taxpayers standing behind a lot of what they were doing. As Melonie points out, if they had to do it with their own money, they wouldn't have. Federal guarantees increased the level of risk-taking far beyond it's natural plane.
    There were no federal guarantees for the private financial institutions buying the risky subprime loans. There was no federal guarantee for Lehman Brothers.


    Quote Originally Posted by Eric Stoner View Post
    Cosnservatism says: "The only job the Fed ought to have is to establish and maintain slow and steady growth of a sound currency." Instead we've had a Fed. that has tried, and mostly failed, to control the economy and we've all had to pay the price.
    The Fed has not tried to control the economy. I don't know where you get that idea from. For the past 30 years, the Fed's main concern has been keeping inflation under control.

    Quote Originally Posted by Eric Stoner View Post
    Conservatism says : "The Government has limited and enumerated powers and ought to stay within them." and " Local and State governments are more effective and responsive than Washington." Instead we have seen the Federal government explode in the last 40 years or so with resultant increases in spending and DEBT.
    There were no significant increases in debt except when we had conservative presidents pass their massive tax cuts. Ronald Reagan made drastic cuts in domestic non-military programs, yet still ran up trillions of dollars of debt.


    Quote Originally Posted by Eric Stoner View Post
    Conservatism says : "Failure is part of capitalism and business failures are NOT the business of government. " Instead we have gotten bail-outs and stimulus packages up the wazoo. Bubbles happen. They go back to Ancient Egyptian and Roman grain merchants. When they burst, as they always do, equilibrium returns. It is NOT the job of government to select the winners and losers.
    And when government did nothing when our banks and major industries were failing, we ended up with a depression lasting more than 10 years.

    Quote Originally Posted by Eric Stoner View Post
    Our current problems are NOT the result of conservative economics. Quite the contrary. The ham fisted hands of government are all over the current mess. Starting with the Fed. The Keynesian stimulus package is not working. The economy is recovering ( albeit slightly ) in spite of the Federal government and NOT because of it.
    Yes it has. We would be much worse off today if it weren't for the massive government intervention to prevent the collapse of our financial industry. Look what happened last time when the government failed to act. The government stimulus has saved/added a significant number of jobs. The unemployment rate would be much worse without it. In China, where the government implemented an even bigger (relative to GDP) stimulus program, it was very successful and the Chinese economy is back to rapid growth again.

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    Default Re: 'Economists blind to reality'

    Quote Originally Posted by eagle2 View Post
    Yes we would. Less than half of the subprime loans were bought by government institutions. If these government institutions did not exist, it would not have prevented the bankruptcy of Lehman Brothers or the other private financial institutions that would have collapsed without massive bailouts from the federal government.


    The Republicans were behind many of the laws passed deregulating the financial industries. Ronald Reagan was the one who signed the bill allowing banks to offer the risky alternative mortgages that played such a key part in the foreclosure crisis. Of course there were Democrats that went along who were just as responsible, but deregulation is a key tenet of conservative ideology.


    There were no federal guarantees for the private financial institutions buying the risky subprime loans. There was no federal guarantee for Lehman Brothers.



    The Fed has not tried to control the economy. I don't know where you get that idea from. For the past 30 years, the Fed's main concern has been keeping inflation under control.


    There were no significant increases in debt except when we had conservative presidents pass their massive tax cuts. Ronald Reagan made drastic cuts in domestic non-military programs, yet still ran up trillions of dollars of debt.



    And when government did nothing when our banks and major industries were failing, we ended up with a depression lasting more than 10 years.



    Yes it has. We would be much worse off today if it weren't for the massive government intervention to prevent the collapse of our financial industry. Look what happened last time when the government failed to act. The government stimulus has saved/added a significant number of jobs. The unemployment rate would be much worse without it. In China, where the government implemented an even bigger (relative to GDP) stimulus program, it was very successful and the Chinese economy is back to rapid growth again.
    What were government agencies backed by the full faith and credit of the Federal government doing in the mortgage business ? What do you think Fannie and Freddie were doing with the mortgages they were writing , and buying and guaranteeing ? They securitized them . And what happened to those securities ?

    Lehman failed because it was over leveraged.So was Merrill Lynch and AIG and several others. I opposed bailing out any of them. Let them fail and then move in to clean up the mess as FDR did and the RTC did to clean up the S & L mess.

    Kindly distinguish as I do between various Republican assholes and conservatives.
    They are NOT one and the same. DeLay, Gramm ( the Congressional village idiot Dennis Hastert ) were all Republicans. The failure who headed the SEC and missed just about every problem and brewing scandal from Madoff to CDS's was a former Republican Congressman. So what ? What were Bob Rubin and Bill Clinton who signed the deregulation legislation in 1998 that effectively repealed Glass - Steagall ? What party do Barney Fwank and Maxine belong to ? Who opposed any effort to rein in Fannie and Freddie and limikt sub-prime mortgages ? Who have the Goldman Sachs crew gone to work for ? What about all the Dem senators and Congresspeople who went along with all this nonsense.

    There were plenty of Federal guarantees for Bear Stearns; and AIG ; and plenty of TARP money for various banks whether they wanted it ( Citigroup ) or not ( Chase ). The FED has guaranteed TRILLIONS. The FDIC limit was raised to 250,000 and expanded to include things like money-market accounts. Were you asleep from September to December 2008 ?

    Are you remotely familiar with what the Fed is and what it does and how it does it ? Why do you think Volcker and then Greenspan and then Bernancke regularly testified before Congress about the overall economy and not just the inflation rate. I WISH the Fed would stick to it's original mandate and just stick to giving us slow and steady monetary growth and a stable banking system instead of meddling and trying to fine tune the economy by messing with interest rates and the money supply. Who do you think prints that stuff in your wallet ? Who do you think decides how much of it to print ? Whether or not to buy government debt and how much ?

    Stop it ! You're killing me with your creative historical revisionism ! FDR ran up record deficits. Johnson laid the groundwork for the great Inflation of the 70's compounded by Carter's policies. I WISH Reagan had gotten the spending cuts he wanted. Look at the actual numbers and check out the growth in NON-DEFENSE spending under Reagan and Bush I. Both fell for a dirty Congressional trick. Reagan was promised spending cuts in return for tax increases. He INCREASED taxes but never got the promised spending cuts. Worse yet, Bush I was offered the same lousy deal. Despite being around when Reagan was double - crossed Bush raised taxes but also never got the promised spending cuts.

    As I have explained, Government turned a recession into a Depression well beofre the banks started failing in 1932 and 1933. After the Market crashed the Fed cut the money supply and raised interest rates and Hoover raised taxes. When banks were in trouble the Fed did not do what it was supposed to do which was support those with short term cash flow crunches as a result of "runs" until it was too late. Hoover asked the newly elected, but not yet inaugurated, FDR to join him in supporting a plan to support the banks but FDR refused. FDR prolonged the Depression by ineffective spending and raising taxes. Read your history and look at the numbers ! FDR and the Fed caused the 1938 Recession by cutting the money supply, raising interest rates and raising taxes. Even Paul Krugman has acknowledged FDR's responsibility.

    As for Obama's stimulative program you are definitely making it up as you go along. What was unemployment before his stimulative package passed ? We were told that unless it passed we'd have unemployment of 8 %. What is it now?
    9.7 % And climbing although the rate of increase is leveling off. Show me one job created or saved by Obama's program. In autos ? Cash 4 Clunkers is over and both GM and Chrysler laid off thousands as did hundreds of dealers and suppliers.

    China is a net CREDITOR and had plenty of it's own cash to invest in it's infrastructure.

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    Who promoted the easy money that enabled the whole mess ? The Fed.
    Who created Fannie and Freddie and then failed to rein them in ? The government. And Fannie and Freddie securitized a LOT of those crappy mortgages.

    Republicans do not equal conservatives. Sad to say. The policies of Bush, Delay and Hastert were NOT conservative.

    WHAT ???? The Feds bailed out Citicorp, Bear Stearns, Merrill Lynch, AIG and at least a half dozen others.

    When the Fed plays with interest rates and the money supply to stimulate or cool down the economy, that is trying to control it afaic.

    Baloney ! FDR rang up record deficits. JFK and Johnson had deficits. Carter had deficits. Clinton had deficits until Congress brought him to heel.

    Hoover and The Fed turned a recession into a Depression by cutting the money supply, restricting credit and raising taxes. Banks did not start failing in large numbers until the end of 1932 when the Fed refused to bail out a major New York bank and President elect FDR refused to go along with Hoover's proposed bank bailout. FDR prolonged the Depression with ineffective spending and tax increases coupled with the Fed raising rates in 1937 causing the Recession of 1938. Even in 1937, if FDR had done nothing ( he CUT spending to try and balance the budget ) we still would have had a severe recession thanks to the policies of the Fed.

    Stop it ! You're killing me. Obama's stimulus was passed because we were told that without it, unemployment would hit 8 %. Now it's 9.7% and climbing ALTHOUGH the rate of increase is slowing. Still increasing, just not as fast. It hasn't saved a single job.

    China is a net CREDITOR and didn't need to borrow to invest in it's infrastructure.
    Last edited by Eric Stoner; 09-08-2009 at 07:19 AM.

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    Default Re: 'Economists blind to reality'

    Quote Originally Posted by Eric Stoner View Post
    Stop it ! You're killing me. Obama's stimulus was passed because we were told that without it, unemployment would hit 8 %. Now it's 9.7% and climbing ALTHOUGH the rate of increase is slowing. Still increasing, just not as fast. It hasn't saved a single job.

    China is a net CREDITOR and didn't need to borrow to invest in it's infrastructure.
    Ever stop to think about why unemployment is so high? Could it be that wages have been stagnant for 20+ years while inflation marches on? The powerhouse consumer force that creates the economic growth of our nation has been undermined, and now there is little hope for a quick recovery.

    How many people do you know can support a family of 4, a mortgage, a car and all their basic needs on a blue collar income? There was once a time where that was the case, when minimum wage was a livable wage (equivelent to $14 and hour in today's dollars). We have been losing ground since the 1970's, and now we are at a point that the middle class just can't afford middle class lifestyles.

    Lets call it trickle up economics, shall we?


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    ^^^ this is the 'purchasing power of wages' theory, which actually has a fairly poor history in the real world ...

    (snip)"Kudlow said that "4 percent growth is a lot lower than the 7 to 8 percent growth one would expect after a deep recession". But this kind of increased output is not growth. We have hardcore Dems like Charles W. McMillion, a former contributing editor of the Harvard Business Review, pushing the same fallacy by arguing that Roosevelt's disastrous policies were actually a roaring success because GDP took off under his presidency. Naturally, this committed Keynesian is 100 per cent behind Obama's economic spend and tax policies.

    What this Harvard man (the more Harvard graduates I encounter the less respect I have for that university) has failed to grasp is that economic growth is not a reduction in idle capacity: it is the accumulation of capital. Maurice Fitzgerald Scott points out "that all growth must result from investment". (A New View of Economic Growth, Clarendon Press, 1998, p. 15). This led him to the very Austrian conclusion that there is no residual or separate factor called "technical progress" because technical advances are embodied in capital. (Incidentally, Fitzgerald Scott is a Cambridge man, England, and is certainly no Austrian). It follows that a genuine economic recovery must also lead to increased capital accumulation. That does not seem to be the case at present.

    Instead of promoting growth Roosevelt's policies encouraged capital consumption. (Hoover was every bit as bad). In other words, the production structure actually shrank even though GDP rose. Professor Higgs calculated that from 1930 to 1940 net private investment was minus $3.1 billion. (Robert Higgs, Depression, War, and Cold War, The Independent Institute, 2006, p. 7). W. Arthur Lewis calculated that from 1929 to 38 net capital formation plunged by minus 15.2 per cent (W. Arthur Lewis, Economic Survey 1919-1939, Unwin University Books, 1970, p. 205). Benjamin M. Anderson estimated that in 1939 there was more than 50 per cent slack in the economy. (Benjamin M. Anderson, Economics and the Public Welfare: A Financial and Economic History of the United States 1914-1946, LibertyPress, 1979, pp. 479-4. This is what some contemporaries had to say about Roosevelt's economic policies:

    ...the present Administration has shown but scant inclination to profit in any way from the errors of its predecessors. By consuming more than we have produced we have succeeded only in digging our way deeper into depression; we have tried to recover from depression by spending our way out of it rather than adopting the alternative procedure, -- the one which has effected recovery from every past depression, -- of saving our way out of it. By the policy of maintaining consumer purchasing power we have had to draw upon our store of past savings, and by so doing we have not only failed to keep up our accustomed rate of capital formation but have actually destroyed past accumulations by neglecting to provide for maintenance, depreciation, and obsolescence. C. A. Phillips, T. F. McManus and R. W. Nelson, Banking and the Business Cycle, Macmillan and Company 1937, pp. 165-166).

    This was not a simple matter of opinion but a factual statement(snip)

    (snip)Now monetary expansion works by releasing what the late Professor Hutt termed "withheld capacity". Now when -- as happened during the 1930s -- a government enforced wage rate policy prevents the employment of idle capital and labour then a loose monetary policy is supposed to work by raising the value of the worker's product relative to his wage rate. In simple English, inflation is used to lower real wages rates and so price labour back into employment. The policy failed because Roosevelt and his advisors adhered to the purchasing power of wages fallacy. (This tells us much about the Roosevelt administration's economic incompetence and concradictions).

    It's true that Obama is no Roosevelt -- thank God -- and that he has not been able to impose the sort of regulatory regime that locked the US economy into depression in the 1930s. Nevertheless he is still doing a great deal of harm. For example, his intention to double the capital gains tax will strike a severe body blow at capital accumulation and technical progress. (Few understand that capital gains taxes reduce the funding of new inventions and retard investment in research and development projects).

    There is also an impending avalanche of new taxes that Obama and his supporters assure Americans will have no affect on growth and living standards. Moreover, his massive deficits and borrowing policies will further retard the process of capital accumulation. It is preposterous for anyone to assert that the combined effect of these policies will not damage the prospects for future economic growth. Such a denial defies both history and sound economics. (How could anyone ever forget the spectacle of Democratic Congressman Pete Stark seriously asserting that the more debt the government accumulates the wealthier Americans will become). In fact, one needs to consider the possibility that the US might now be facing the spectre of capital consumption. It has happened to others and there is no fundamental reason why it cannot once again happen to the US.

    There is nothing unique about the Obama's of this world. They come and they go. But you can guarantee one thing: their presence eventually turns into a misfortune for others. In the 1920s Austria's Social Democrats implemented their version of Obama's vision. Theirs was a world in which every worker got a square deal and his union stood ready to defend him against rapacious capitalists, a world in which capitalist inequalities were verboten and the social good prevailed over profit motive and greed. And how did that turn out? It was calculated that from 1918 to 1930 Austria lost something like 79 per cent to 87 per cent of its capital. Fritz Machlup to caustically observed that

    Austria was successful in pushing through policies which are popular all over the world. Austria has most impressive records in five lines: she increased public expenditures, she increased wages, she increased social benefits, she increased bank credits, she increased consumption. After all those achievements she was on the verge of ruin. (Fritz Machlup, The Consumption of Capital in Austria, Review of Economic Statistics, II, 1935, p. 19).

    I have said more than once that history never repeats itself: what happens is that people keep forgetting it.(snip)

    from

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    Default Re: 'Economists blind to reality'

    Quote Originally Posted by Paris View Post
    Ever stop to think about why unemployment is so high? Could it be that wages have been stagnant for 20+ years while inflation marches on? The powerhouse consumer force that creates the economic growth of our nation has been undermined, and now there is little hope for a quick recovery.

    How many people do you know can support a family of 4, a mortgage, a car and all their basic needs on a blue collar income? There was once a time where that was the case, when minimum wage was a livable wage (equivelent to $14 and hour in today's dollars). We have been losing ground since the 1970's, and now we are at a point that the middle class just can't afford middle class lifestyles.

    Lets call it trickle up economics, shall we?
    Superficially there is something to what you say until we look a little deeper.
    The "middle class lifestyle" of today is much more consumptive and far less thrifty than a few decades ago. Today, everyone has at least one car, flat screen T.V., cell-phone; I-phone; I-pod;washer, dryer, dishwasher plus a house with at least one mortgage. Add in private school; parochial school and then college for the kids and it all adds up.

    The minimum wage was never designed to support a "middle class lifestyle" BUT REAL wages have declined while state and local taxes have gone up. So has the price of health insurance.

    Currently, many corporations are profitable because they have laid off workers and cut expenses to the bone. But there is no Obama policy designed to increase investment and expand payrolls. The stimulus package is 85% unspent and most of the money thaty was spent did NOT go to infrastructure projects. A LOT of it went to propping up spendthrift states and cities to spare them from the hard choices that are long overdue.

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    Default Re: 'Economists blind to reality'

    ^^^ actually, the proposed Obama policy is to increase capital gains taxes, which will make it significantly more difficult and expensive for US businesses to raise capital with which to make efficiency improvements and add new jobs - unless of course said US business is on the US gov't's 'subsidy' list.

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    Default Re: 'Economists blind to reality'

    To be fair, neither democrats or republicans have done much to turn around the current economic situation, and since our economy has been in decline for a couple decades now, republicans and democrats have all had a shot.

    And even though 'minimum wage' is deifintely not a 'living wage', at one point it used to be. Also, consumerism has changed since the 70's as well. These into account it's no wonder the economy has suffered.

    Obama has several other investements as part of the 'economic recovery plan'. Even though investments in infrastructure were big news BEFORE Obama was elected little was put into effect. Of course right now the other elements of the his erp, healthcare is taking the limelight, with education and environment tagging along.
    Goodbye Seattle Lusty Lady, where every Miss is a Hit, and every Hit is Missed. 1985-2010.

  19. #16
    Banned Melonie's Avatar
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    Default Re: 'Economists blind to reality'

    ^^^ I'd take issue with the US economy 'being in decline for a couple of decades'. The US economy did reasonably well in the 1990's and again did reasonably well in the 2000's despite the setback of 9/11.

    And even though 'minimum wage' is deifintely not a 'living wage', at one point it used to be
    True, but I doubt that Americans have the 'stomach' to restore the global economic conditions that would again make this truly possible ... i.e. bombing the productive capacity of America's international competitors out of existance thus leaving the US as the only major source of manufactured products anywhere in the world. This is precisely what happened in the aftermath of WW2 ... with the vast majority of european and asian factory capacity having been decimated while US factory capacity was untouched.

    As a result, it didn't matter what wage level workers in east germany or japan or france or greece were willing to work for ... because there wasn't any place for them to go to work ! If anybody in the world wanted manufactured goods, they were forced to pay 'monopolistic' American prices ... prices high enough to cover America's much higher labor and benefit costs. But as Europe and Asia rebuilt their capital base thus rebuilt their factories, all of a sudden Datsuns ( Nissan) and Volkswagens built with much cheaper foreign labor began making inroads into America's former de-facto monopoly. Today of course nothing at all remains of America's former de-facto monopoly, and as such American businesses face head to head competition with the lowest labor cost producers anywhere on the globe. In this environment there is simply no way that a 'living wage' can be paid to unskilled US labor without quickly bankrupting the employer's business ( or the US taxpayer, if that business is on the gov't's 'subsidy' list ).

  20. #17
    Banned Eric Stoner's Avatar
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    Default Re: 'Economists blind to reality'

    The minimum wage was always intended to be a basic floor of subsistence. Originally it was $1 an hour ( circa 1935 ) which added up to about $40 a week. For a family of four with only one earner that was just enought to get by paying for food, clothing, rent, utilities, taxes and not much else. Who seriously thinks that a family of four can afford just those basics on today's minimum wage ?

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