Who else resents USAians for causing this finanical crisis?

[Kidlicious]

Originally posted by HalfLotus
The Federal Reserve's artificially low interest rates and rampant inflation via our fiat currency are the primary causes of this problem. The Wall Street and corporate malinvestment are symptoms.

Too much of the economic discussion entirely ignores the policies of the most powerful central bank in the history of the world. Educate yourself on the Fed.

Just the opposite. Investors knew that the Fed was pumping money into the economy, which makes the economy more vulnerable to a crash. This should have encouraged them to be more prudent, but it didn't. The Fed didn't encourage risky investment, it discouraged it.

[One_more_turn]

Easy money + no regulation = recipe for disaster

Take one dough away, things may turn out to be ok.

[Dr Strangelove]

Wouldn't it be fair to say it's been both government's and big business' policy to prop up the housing market as a means of proping up the economy?

[Unimatrix11]

Now, if i understand it right (and i am not at all sure i do), the money supply might have grown with the US-defecit ? Wasnt all that money first created, when Mr. Bush needed it for his wars ? And then it was spent in the US-economy ? And they all of a sudden had more money than they could invest in their own enterprises ? And maybe they offered this money on the money-market (since, maybe regulation didnt allow for them to expand into other fields or it was just not as profitable, or somesuch) ? Thus low interest rates, easy money, risky businesses (which forces others to take the same risk, in order to prevent to be simply bought out, if those businesses should work out ?) ?

[Agathon]

Originally posted by Dr Strangelove
Wouldn't it be fair to say it's been both government's and big business' policy to prop up the housing market as a means of proping up the economy?

It has been a long term policy in the anglo countries to treat home ownership as the cornerstone of society. It was a calculated political move to tie people into the capitalist system by tying them to property. Why else do you think governments put up all the money for that suburban infrastructure?

This even happened in New Zealand where the National Government deliberately modeled Auckland on Californian suburbanism (it was a huge political payoff to property developers as well).

This was perhaps one of the stupidest decisions in history. Such cities are now dependent on cheap energy and are too spread out to make public transport effective. If (or should I say, when) oil gets really expensive, these places will be a massive drag on the economy.

And it's all down to these ****ing idiots thinking that proper urban planning was "communism".

[HalfLotus]

Originally posted by One_more_turn
Easy money + no regulation = recipe for disaster

Take one dough away, things may turn out to be ok.

The market was regulated in the leading up to this. The most important factors in an economy, interest rates and currency value, are both regulated by the Federal Reserve.

[Kidlicious]

Originally posted by HalfLotus


The market was regulated in the leading up to this. The most important factors in an economy, interest rates and currency value, are both regulated by the Federal Reserve.

It's a lot less harmfull on the economy than deflation which is what the gold standard causes.

[HalfLotus]

The Dollar could certainly use some deflation right now. We are on the brink of hyperinflation which is a very unpleasant situation to be in.

[Kidlicious]

Originally posted by HalfLotus
The Dollar could certainly use some deflation right now.

Maybe in the 19th century, not today. The economy is consumer driven. That's the only thing keeping it going.

[KrazyHorse]

Originally posted by HalfLotus
The Dollar could certainly use some deflation right now.

Really? It would be a good idea to drive even more people into negative equity on their homes and more of them into foreclosure?

[HalfLotus]

Originally posted by KrazyHorse


Really? It would be a good idea to drive even more people into negative equity on their homes and more of them into foreclosure?

In the long run, yes. The housing market was a big bubble - there needs to be a market correction, it is unavoidable. You can let the market correct, and return to stability quickly - 1-2 years.

Or you can tax and inflate, and throw more money at bad businesses and bad investments, and have this depression last until 2015.

Taxing everyone directly (and indirectly via inflation) punishes everyone, including those who have made sound investments - it also rewards those who made poor investments. Not wise imo.

My suggestion would be to pay more attention to the wisdom of economists who predicted this scenario (Austrian Economists), and realize that the market oracles of the past 10 years (Greenspan, Bernanke, Krugman) were flat wrong.

[KrazyHorse]

Speaking of delfation, the TIPS spread is/was negative for much of the last week.

Ruh-roh...

[Imran Siddiqui]

I didn't know that Warren Buffett was an Austrian Economist!

[KrazyHorse]

Originally posted by HalfLotus


In the long run, yes. The housing market was a big bubble - there needs to be a market correction, it is unavoidable. You can let the market correct, and return to stability quickly - 1-2 years.

This is absolutely retarded.

People buy houses with a reasonable expectation of inflation priced in. Right now debtors (both in housing and elsewhere) are having a difficult enough time sticking to their obligations instead of just walking away. A sudden change to a deflationary regime adds 3+% to the real interest rate they pay.

I forgot what part of economics it was that tells you that cascade defaults are good for society as a whole. Would you like to remind me?

[KrazyHorse]

Or you can tax and inflate, and throw more money at bad businesses and bad investments, and have this depression last until 2015.

Thanks for playing, but we already have enough economic loons. If we gain too many more we're going to have to declare a cull...