Ron Paul: Stimulus Packages Will Turn Recession Into A Depression

[Agathon]

At any rate, perception is going to be quite important going forward.

What else is there in a faith based economic system? I just read the best quote on the financial crisis and the incompetence of bankers: "Those whom the gods wish to destroy, they first teach math".

In many ways the problem is the same as that the communists faced. You have people sitting in offices staring at numbers which are supposed to represent commodities, but who are so insulated from the world outside that they have no real idea of the real processes that underly the manufacture and supply of those commodities. It's rather like 1984 where you can't go anywhere without the news reading out some meaningless figures that have little relationship to reality.

edit: and before I get jumped on. Governments have been doing exactly the same crap, especially NuLabour. The "community vibrancy index" was my favourite. The only statistic people would trust these days is the body count for executed bankers, hedge fund managers and politicians.

[Velociryx]

Now, now Aggie...that was different.

If we didn't spend that trillion bucks, the terroists would win.

Or...something.

-=Vel=-

"bdee, bdeee, bdeee...uh...fool me once........shame on.....shame on you.....fool me...............I can't get fooled again!"

[Naked Gents Rut]

Nobody knows what will happen.

That's no justification for this spending spree. We know what's likely to happen based on historical experience, which is the best evidence we have to go on.

Is it really rational to believe that any more, given the house of cards it turned out to be?

Now? Yes. Just look at the yields on U.S. Treasuries for proof.

I'm not so sure it will be rational in a couple years when the recession is over and previously-panicked international investors stop and think about what the recent addition of trillions of dollars to the already large U.S. national debt really means.

The stimulus is a bet. You need to convince us that it's a bad one.

No, I don't. An intelligent person doesn't gamble with trillions of dollars.

[Victor Galis]

Hmmmm, let's see: A trillion dollars of deficit spending, when the banks and brokerages can't buy bonds because they're broke, and other countries won't touch that steeming pile with a ten foot pole.

Way to turn a recession into a depression, if that's what they want.

What's the connection? Investors aren't stupid enough to lend to those probably insolvent institutions regardless of what the government does or doesn't do.

[Victor Galis]

You could always try to justify a trillion or three to get the financial system fixed when nothing is done for the average Joe.

Assume it gets worse. A lot worse. There's a lot of social unrest that goes along with broadly felt, persistent hard times. Without doing something substantial to at least seem to try to blunt the pain, things can get pretty ugly.

That's an interesting point. Even a convincing placebo is a good idea. So much depends on confidence. Restoring confidence or preventing its total collapse is a worthy goal in and of itself.

That's no justification for this spending spree. We know what's likely to happen based on historical experience, which is the best evidence we have to go on.

That's a non-sequitur. What was the last recession when the government did absolutely nothing?

Now? Yes. Just look at the yields on U.S. Treasuries for proof.

I'm not so sure it will be rational in a couple years when the recession is over and previously-panicked international investors stop and think about what the recent addition of trillions of dollars to the already large U.S. national debt really means.

That is the sticking point, but I feel you're trying to merge two completely separate questions into one. They are: Will the stimulus help prevent massive unemployment and fall in output? and Can we afford it? While you can argue that answering no to the latter means the former is irrelevant, I would argue that we can afford some stimulus even if $800 billion might be bad in the long term.

I'm actually thinking that offsetting some of the cost with an immediate increase on taxes on the rich might be the best approach. It might also ease some of the popular anger.

No, I don't. An intelligent person doesn't gamble with trillions of dollars.

Then we really should make sure to replace the idiots on Wall Street

[notyoueither]

I think it's likely we are facing a depression sort of scenario

Why? I really don't understand this...

Because previous periods of severe financial upheaval have been followed by depressions. I don't see why this one will be any different. What can be different is the impact in severity and length. It could be the dirty 30's, but it likely will not be due to government intervention and social programs. Unless the system cracks.

I can't make an economic case for it, but I don't count on the cases made by the experts either. Economics is misnamed as a science, along with the rest of the social 'sciences'.

[Naked Gents Rut]

The periods of severe financial upheaval that weren't followed by depressions are more numerous than the ones that were. How big the disparity is really depends on what you choose to call a "severe financial upheaval".

[notyoueither]

The largest banks /financial institutions in the world have been brought to their knees, and some wiped out.

How many times since 1945 has that happened?

[Velociryx]

Oh....let's just bring back Solon's reforms and be done with it.

Sheesh.
-=Vel=-

[Naked Gents Rut]

The largest banks /financial institutions in the world have been brought to their knees

In the world? You're being far too American-centric in your outlook...

How many times since 1945 has that happened?

Here's a whole paper about that topic. It looks at eight financial crises that were followed by recessions of varying severity. No depressions...

[notyoueither]

The crisis is not a strictly American phenomena. Would that it were.

Before I check your link, I have to say I am puzzled by the aversion to the word 'depression.'

[Naked Gents Rut]

The crisis is not a strictly American phenomena.

No, but the majority of high-profile financial institution failures have been. How can you claim that the world's largest financial institutions have been "brought to their knees"? The only way you can defend that conclusion is by ignoring Asia and large swathes of Europe...

http://en.wikipedia.org/wiki/List_of_acquired_or_bankrupt_banks_in_the_late_2000s_financial_crisis

Before I check your link, I have to say I am puzzled by the aversion to the word 'depression.'

I like to preserve extraordinary terms for extraordinary events.

[notyoueither]

The paper seems to be a study of local or regional crises, none of which was global.

International trade went along mostly as per normal. Meaning any country or region at least had a passing life preserver to grab onto from time to time.

This is different. The fans have turned brown everywhere at the same time. True, some are distinctly darker shades of brown, but it's all **** nonetheless.

[notyoueither]

The crisis is not a strictly American phenomena.

No, but the majority of high-profile financial institution failures have been. How can you claim that the world's largest financial institutions have been "brought to their knees"? The only way you can defend that conclusion is by ignoring Asia and large swathes of Europe...

http://en.wikipedia.org/wiki/List_of...nancial_crisis

I was under the impression those Belgian and British banks were significant. Were being the operative term.

[notyoueither]

Before I check your link, I have to say I am puzzled by the aversion to the word 'depression.'

I like to preserve extraordinary terms for extraordinary events.

OK, but I think we are overdue for one.

Shellgames and bubbles have put it off for longer than should have been. That only means it will be more painful, IIUC.