Warren Buffet speaks common sense; alarms most Republicans

[Ben Kenobi]

Small problem-- The state (here the United States) seems to be having a problem "getting by"

Spending is up, way up from the Bush era. Spending has to come down, taxes have to come down. Tax freedom day in the states is now in August.

The only plan that's going to work is to cut the spending down to around 1 trillion a year. That means cuts of close to 3 trillion. Today, not 10 years from now. That's the stark reality. Will it mean curtailing the fed employees, yes. Even if they cut them by 50 percent, they'll still be twice as large as they were in the Bush Sr. days.

[notyoueither]

I'll be concerned about that when the world stops desperately seeking dollars and US Treasuries for safety.

Thank you for a non-pretentious little git answer to my initial question. You don't care.

I guess not many people take seriously the rumblings about alternatives to US dollar reserves and currency of trade.

My understanding is that the US has a lot to lose.

[Asher]

Change in output of housing is ~0.7% of gdp...

Are you both saying that the CDS cluster**** was a minor blip?

I'm genuinely interested in how the Fed ****ed up so badly in the US while the BoC, which more-or-less mirrors the Fed, didn't **** up so badly.

Or are we just going to use commodities as a scapegoat as usual?

[Kuciwalker]

Your concerns would be more interesting if they weren't directly contradicted by the data.

xpost

[Asher]

Spending is up, way up from the Bush era. Spending has to come down, taxes have to come down. Tax freedom day in the states is now in August.

Lowering taxes - fastest way out of a deficit. Just ask Perry, amiright?

[notyoueither]

Your concerns would be more interesting if they weren't directly contradicted by the data.

xpost

I am reminded of a saying. I think it goes... whistling past the grave yard.

It takes a certain kind of ignorance to think that things never change.

[Ben Kenobi]

Do you think minorities spend a larger share of their income on healthcare than white people? I don't see how else raising the cost of healthcare is supposed to hit minorities harder.

They spend more and have higher insurance costs on average. Any increase in healthcare is going to proprotionally hit minorities hard.

You know that inflation from increasing the money supply also increases wages.

No, it doesn't. Not unless you're union. Rather then raise prices, businesses will fire workers. Which is what we've been seeing as workforce participation has dropped precitpitously. Especially for minorities.

Right? If food and fuel are increasing in price faster than wages, it's not because the money supply is larger. QE1 and QE2 aren't even Obama's policies because both were implemented by the Federal Reserve under Ben Bernanke, and QE1 began before Obama was even president.

Oh bull****. Nothing is ever his. He owns the worst recession since the Great depression.

Do you think offering someone free money makes them worse off...?

If you require them not to work to earn it, yeah, it does.

[Ben Kenobi]

Lowering taxes - fastest way out of a deficit. Just ask Perry, amiright?

When coupled by spending cuts, yes. But you always leave out that part of the equation.

[Asher]

Ben: Are you worse off with your subsidized education?

[Kuciwalker]

Are you both saying that the CDS cluster**** was a minor blip?

It ought to have been, essentially. The current recession is far, far out of proportion to what can be justified by the idea that we built too many houses.

I'm genuinely interested in how the Fed ****ed up so badly in the US while the BoC, which more-or-less mirrors the Fed, didn't **** up so badly.

Speculation:

1. The US is more vulnerable to AD shocks because of the special status of the US dollar and US debt. We are exposed to both foreign and domestic financial shocks because of the 'flight to safety'.

2. From what I recall of Nick Rowe's (Canadian macroeconomist blogger) posts about the BoC, it is explicitly inflation-targeting and properly adjusted its inflation target (upwards) in response to the crisis.

edit: glancing at wiki. the BoC's mandate is defined exclusively in terms of inflation. The Fed's mandate is defined in terms of both inflation and unemployment, which in practice means that the Fed can't be held directly accountable for any given macroeconomic outcome.

3. When the Fed implemented IOR (interest on reserves; basically, the Fed pays banks money to keep dollars sitting in vaults) out of fears that TARP, etc. would be too expansionary, they didn't realize how contractionary a move that would be.

4. Internal Fed politics vs. internal BoC politics?

[Asher]

When coupled by spending cuts, yes. But you always leave out that part of the equation.

The cuts the government would have to make would be so obscene, you may as well just fold the US military. What a stupid idea.

The US' tax rates are unsustainably low for any modern, developed country this side of anarchy. No one has figured it out there.

Whether you eliminate income tax and add a substantial consumption tax, I don't care. You can't keep taxes that low and have a modern, developed country worth a damn.

[Ben Kenobi]

Ben: Are you worse off with your subsidized education?

Which part of it, K-12? My university education?

I don't believe that I got a good value for what I paid for it, no.

I believe that I could have easily passed the GMAT straight out of high school. If my program had let me challenge the exams for all my courses, I could have never gone at all, and got a degree.

I mostly marked time. There were some courses that were engaging.

[Asher]

It ought to have been, essentially. The current recession is far, far out of proportion to what can be justified by the idea that we built too many houses.

The problem isn't that you built too many houses. It's too many people bought houses when they could not afford it. It's that you could buy a house with zero down and a 40-year mortgage. It's that Americans, by and large, are the most fiscally irresponsible people on the face of the planet (both in government, and personal spending).

The fact that there were many houses is just one part of it.

And this isn't even going in to the nonsense of mortgage-backed securities, the ridiculousness of how subprime mortgages were used in CDS, and how fundamentally flawed risk models by macroeconomic genius statisticians were pervasive and used in all of the banks which triggered the catastrophic credit crunch.

Speculation:

1. The US is more vulnerable to AD shocks because of the special status of the US dollar and US debt. We are exposed to both foreign and domestic financial shocks because of the 'flight to safety'.

2. From what I recall of Nick Rowe's (canadian macroeconomist blogger) posts about the BoC, it is explicitly inflation-targeting and properly adjusted its inflation target (upwards) in response to the crisis.

3. When the Fed implemented IOR (interest on reserves; basically, the Fed pays banks money to keep dollars sitting in vaults) out of fears that TARP, etc. would be too expansionary, they didn't realize how contractionary a move that would be.

4. Internal Fed politics vs. internal BoC politics?

Of course, I've no idea if any of these points of speculation are correct. IIRC Canada & the USA had very similar inflation rates over the past five years.

I offer the following points of speculation:

1) It is MUCH harder to get a mortgage in Canada than the USA.
2) Canada has MUCH stricter regulations on the banks in general in terms of how much they can leverage, what kind of products they can sell, etc. Just prior to the big credit crunch, the big five Canadian banks were whining incessantly to the government that the "oppressive" regulations against them are preventing them from profiting wildly like the US banks could be doing. They stopped complaining about that over the past few years...
3) Canada's banks aren't regionally fragmented (in general), which meant they were more centralized and strongly positioned. Leading to fewer bank failures.
4) Canadians are fiscally more competent and carry less debt in general, maintain healthier balance sheets
5) Canadian companies were encouraged to offer shorter workweeks to employees rather than laying off when possible. This lessened the effect on unemployment and was less disruptive to the workforce

[Aeson]

AD is a nominal aggregate. It is completely controllable by varying the money supply.

Your statement was that the Fed can completely offset shocks in aggregate demand. This is not true in cases where they are not allowed to act to do so. (I am not sure how much pressure is put on them, but it could explain Ben's reluctance to use the methods he had previously supported.)

No.

Yes

THIS IS NOT WHAT EASY MONEY MEANS. THIS IS NOT WHAT EASY MONEY REFERS TO.

I was the one who used the phrase. It was what I meant by the use of the phrase. It is acceptable use of the terms in the English language. The meaning I was using was made explicit by the surrounding context which included the exact same concepts I reaffirmed to you after your first misreading. I don't care what "easy money" means to you because you're incapable of thought other than to regurgitate some phrase you read in a text book.

When someone with no job goes to the bank and gets a loan for mid six figures with nothing down I call that "easy money".

Yes, there are plenty of real problems that the Fed is powerless to fix. We would have had some minor depression in output after the housing bubble burst.

I am not sure due to your use of "minor depression"... but are you dropping the "nonexistant recession"?

The economy, however, is actually really good at reallocating resources and that depression would have been small, temporary, and contained.

I disagree as usual with the extent of your claims. I have already said I think the recession (is it officially a depression now?) was exacerbated by the Fed's reaction.

No, it's really not. The problem of malinvestment in housing was at least an order of magnitude too small to cause 9% unemployment 3 years later.

You are still avoiding addressing several of the factors I mentioned. (The funny thing is one of them I mentioned was the Fed, yet you labeled my entire argument as not being able to get to the 9% unemployment even though you claim the Fed is entirely to fault.)

[Ben Kenobi]

The cuts the government would have to make would be so obscene, you may as well just fold the US military. What a stupid idea.

On a per capita spending basis and including inflation, that would be the equivalent of 1946 level spending. Hardly folding up the military. It's what the US did last time they were up to their eyeballs in debt and it worked.

The US' tax rates are unsustainably low for any modern, developed country this side of anarchy. No one has figured it out there.

They have the highest corporate of any of the G-12. It needs to be lowered to 15 like in Canda.

Whether you eliminate income tax and add a substantial consumption tax, I don't care. You can't keep taxes that low and have a modern, developed country worth a damn.

Yes, you can. It's all about allocating to people making the economica decisions. People as a whole make more and better decisions than a central planner. They react faster and on the aggregate, have vastly more information.