The US economy was close to total collapse.

• BCSbunk

  Interesting video with Rep Paul Kanjorski from Jan 28, 2009.
  
  
  
  A major bank run was halted.
• BoatShoes

  ccrunner609 wrote: Thank you GW Bush. You saved us.

  Even if true, you're acknowledging that a government intervention saved us from the major problem with free banking, bank runs.
  
  The mythical "real conservative" ought to say..."should have let those bank runs happen so we could eliminate those inefficient banks from society"
• believer

  

  BoatShoes wrote:The mythical "real conservative" ought to say..."should have let those bank runs happen so we could eliminate those inefficient banks from society"

  Well for whatever it's worth this is precisely how I felt about it at the time. Too big to fail my ass!
• BoatShoes

  believer wrote:

  BoatShoes wrote:The mythical "real conservative" ought to say..."should have let those bank runs happen so we could eliminate those inefficient banks from society"

  Well for whatever it's worth this is precisely how I felt about it at the time. Too big to fail my ass!

  So if you accept the position in the article...you're saying you would've supported the total economic collapse of the U.S. as the result of a free market driven bank run?
• fish82

  

  BoatShoes wrote:

  ccrunner609 wrote: Thank you GW Bush. You saved us.

  Even if true, you're acknowledging that a government intervention saved us from the major problem with free banking, bank runs.
  
  The mythical "real conservative" ought to say..."should have let those bank runs happen so we could eliminate those inefficient banks from society"

  They should have let the bank runs happen so we could eliminate those inefficient banks from society.
  
  And furthermore, I don't buy for a minute the pansy talk about the "total collapse" of the economy. Even if it did, I have enough canned goods and ammo to last 5 years. Bring it.
• Footwedge

  Fishy....don't forget cases and cases of Dasano drinking water.
• believer

  

  BoatShoes wrote:So if you accept the position in the article...you're saying you would've supported the total economic collapse of the U.S. as the result of a free market driven bank run?

  If that's what it takes to bring about economic equilibrium...yes.
  
  The douche bags on both sides of the political aisle in DC clearly don't have the testicular fortitude to take steps to right the ship. Their immediate "solution" to any crisis is to toss taxpayer money at it. That only delays the inevitable and generally makes things worse in the long-term.
  
  Plus I do not buy for a minute that it would have brought "total economic collapse."
  
  The American economy has been through tough times in the past and it will weather the storm now...including a free market bank run.
  
  Just my humble opine!
• BCSbunk

  For me a bank run being halted implies that people were basically told, "no you cannot have your own money."
  
  The implications from that are actually horrific. If you were unable to withdraw your money, you had no choice but to watch your investments go down losing thousands of dollars and you cannot withdraw it to save it yourself.
  
  They should have allowed the bank run (allowed people to have their hard earned money)
• BoatShoes

  BCSbunk wrote: For me a bank run being halted implies that people were basically told, "no you cannot have your own money."
  
  The implications from that are actually horrific. If you were unable to withdraw your money, you had no choice but to watch your investments go down losing thousands of dollars and you cannot withdraw it to save it yourself.
  
  They should have allowed the bank run (allowed people to have their hard earned money)

  To me it's more like the Fed printing money out of nowhere to feed a monster that it is eating up all the money in the banks until it's full or until it doesn't think it needs to go eating up all of the dollars it had stored away in the banks and hopefully not printing too much so the monster pukes it back out into the economy to decrease the value of the dollars.
• bman618

  The collapse is still going to happen and will be worse the longer we delay it because we keep digging the hole deeper, spending continues to go up, trade deficit is bad and we continue to order more printers from China to print dollars even faster at the Fed. Inflation will continue to go higher, regardless of the lying government numbers, and possibly go into a hyperinflation depression once the bottom falls out of the house of cards.
• bman618

  The value of the dollar is already being decreased. It has lost 95 percent of its value since 1913, much of that after we removed the last link to the gold standard in the 1970s. The reason why we have not totally imploded from an economic situation, until we face it here in the short term future, was the Cold War and folks needing us and the principle reason, there was no other reserve currency ready for the world.
  
  When money is not backed by any commodity, it then represents the productivity of the nation, which is decreasing do to the loss of manufacturing. Instead of decreasing the supply of dollars into an equilibrum with the producitivity of the nation, we are quickly raising the printing of dollars which leads to inflation. Inflation is really around 7.25 percent, rather the government wants to admit it or not.
• fan_from_texas

  BCSbunk wrote: For me a bank run being halted implies that people were basically told, "no you cannot have your own money."
  
  The implications from that are actually horrific. If you were unable to withdraw your money, you had no choice but to watch your investments go down losing thousands of dollars and you cannot withdraw it to save it yourself.
  
  They should have allowed the bank run (allowed people to have their hard earned money)

  Banks don't keep all the money in their vaults at all times. They only have a small fraction at any given time. The rest is loaned out, earning interest, which allows them to pay interest. When there is a run on the bank, a handful of people get their own money back, and everyone else gets nothing. That doesn't seem like a good idea.
  
  FWIW, I think the US economy was close to collapse, and I do think some swift action by the Fed brought us back from the brink. I don't know if ARRA was necessary, but it seems to me that the Fed actions were.
  
  Certainly "true conservatives" can support limited government intervention in situations where we have market breakdown. I think that's what we saw in September of '08--fear resulted in arbitrary markdowns, collateral calls, and general panic that artificially pushed the economic system to the point of collapse. While there are some very real (and very pressing) structural/institutional/systemic problems with the US financial system, the panic resulted in an overreaction. That's largely why we've seen such a huge bounce in the DJIA in 2009--the market overshot on the downswing and is getting back to "normal" levels.
• Footwedge

  bman618 wrote: The collapse is still going to happen and will be worse the longer we delay it because we keep digging the hole deeper, spending continues to go up, trade deficit is bad and we continue to order more printers from China to print dollars even faster at the Fed. Inflation will continue to go higher, regardless of the lying government numbers, and possibly go into a hyperinflation depression once the bottom falls out of the house of cards.

  Don't worry BMan. Another World War will solve it all. It's already being planned...only the details need to be ironed out.
• Footwedge

  bman618 wrote:
  When money is not backed by any commodity, it then represents the productivity of the nation, which is decreasing do to the loss of manufacturing.

  There it is. But don't ever question the establishment. You may be labeled a Marxist.
  
  The US' GDP growth is based on paper productions. Contracts and IOU's supposedly worth trillions. A complete ruse if you will.
  
  Pretty much Wall Street is propped up with the paper wealth on accounting books. "Wealth" created by "I owe you x and you owe me y."
  
  But this was well known 35 years ago when I was taking economic classes at Pitt.
  
  Back then...the US manufacturing base was 23% of our total GNP...and the financials encompassed a mere 9%. Today, those numbers have flip flopped.
  
  I thought my economics professors were all gloom and doom wackos. Turned out...everything they said was true.
• Footwedge

  fan_from_texas wrote:

  BCSbunk wrote: For me a bank run being halted implies that people were basically told, "no you cannot have your own money."
  
  The implications from that are actually horrific. If you were unable to withdraw your money, you had no choice but to watch your investments go down losing thousands of dollars and you cannot withdraw it to save it yourself.
  
  They should have allowed the bank run (allowed people to have their hard earned money)

  Banks don't keep all the money in their vaults at all times. They only have a small fraction at any given time. The rest is loaned out, earning interest, which allows them to pay interest. When there is a run on the bank, a handful of people get their own money back, and everyone else gets nothing. That doesn't seem like a good idea.
  
  FWIW, I think the US economy was close to collapse, and I do think some swift action by the Fed brought us back from the brink. I don't know if ARRA was necessary, but it seems to me that the Fed actions were.
  
  Certainly "true conservatives" can support limited government intervention in situations where we have market breakdown. I think that's what we saw in September of '08--fear resulted in arbitrary markdowns, collateral calls, and general panic that artificially pushed the economic system to the point of collapse. While there are some very real (and very pressing) structural/institutional/systemic problems with the US financial system, the panic resulted in an overreaction. That's largely why we've seen such a huge bounce in the DJIA in 2009--the market overshot on the downswing and is getting back to "normal" levels.

  Fractional banking has helped expand the US economy over the past Century. But the rules were relaxed, and as a result, we are enduring the throes of Great Depression...part II. The only thing keeping the realities of the situation from surfacing....is the heavy increase of the welfare/warfare state....keeping 83% of the masses employed.
• gut

  Footwedge wrote: The US' GDP growth is based on paper productions. Contracts and IOU's supposedly worth trillions. A complete ruse if you will.

  How so? Services such as consulting and M&A advisory are a very real source of revenue and productivity. Not to mention we still own a fair amount of the production that has moved overseas, the US has just shifted more to managing/owning manufacturing than being directly engaged in it.
  
  There was no GDP growth from "contract and IOU's supposedly worth trillions"...The growth in financial services was transaction fees and coupon clipping of what was supposed to be hedged instruments. When that insurance defaulted, huge unexpected losses resulted. But this is not materially different than shocks we have witnessed in auto manufacturing (bloated inventory, overstated residual values on leases), airlines (too large a fleet, too many routes) and real estate. Wherever there is leverage (which virtually ALL businesses engage in these days), there is risk of being overleveraged when improper hedges or an economic downturn result in catastrophic losses.
  
  The difference to the overall economy with the banking crisis was the impact on the flow of capital. The auto or airline industry going through a crisis doesn't necessarily cause a liquidity crisis that then spreads havoc to other sectors.
• eersandbeers

  BoatShoes wrote:

  believer wrote:

  BoatShoes wrote:The mythical "real conservative" ought to say..."should have let those bank runs happen so we could eliminate those inefficient banks from society"

  Well for whatever it's worth this is precisely how I felt about it at the time. Too big to fail my ass!

  So if you accept the position in the article...you're saying you would've supported the total economic collapse of the U.S. as the result of a free market driven bank run?

  
  Yes, I would have.
  
  The free market is not a perfect market. It will have periods of downturn, and pandering fear by claiming there would have been a "total economic collapse" is just that.
• gut

  bman618 wrote:It has lost 95 percent of its value since 1913

  This is such a chicken little argument. Yes, you got screwed if you stuffed that money under a mattress.
  
  If you invested - as you should - in the stock market, govt bonds, even a savings account at the bank, then you've outpaced inflation and are better off. From 1963 to present alone, investing that $1 in 1yr treasuries would be worth over $16, and you could have done far better in the market or even longer-term treasuries.
  
  People need to be disincentivized from stuffing money under the mattress.
• Footwedge

  gut wrote:

  Footwedge wrote: The US' GDP growth is based on paper productions. Contracts and IOU's supposedly worth trillions. A complete ruse if you will.

  How so? Services such as consulting and M&A advisory are a very real source of revenue and productivity.

  
  That is your opinion...which is different from mine. Real wealth is defined by tangible items born through the fruits of human labor. Not the paper products that have replaced real goods and services. At least that's what Adam Smith stated in his book "Wealth of Nations".
  

  The difference to the overall economy with the banking crisis was the impact on the flow of capital. The auto or airline industry going through a crisis doesn't necessarily cause a liquidity crisis that then spreads havoc to other sectors.

  The banking crisis is much more complex than simply being a liquidity problem. Liquidity problems are elastically controlled through fiscal and monetary policy.
  
  To state that the banking crisis can all to attributed to poor liquidity is farcical.
  
  Artificial bubbles created by the market fixers were the primary cause of Depression part 1. Ibid for Depression part II.
  
  Whether you like it or not, the SEC was formed in 1934 along with other regulatory agencies that minimized the risk of Depressions occuring.
  
  Is it just irony that the repeal of regulatory practices coincided with banking industry bubble pop part 2?
  
  I think not.

• Footwedge

  gut wrote:

  bman618 wrote:It has lost 95 percent of its value since 1913

  This is such a chicken little argument. Yes, you got screwed if you stuffed that money under a mattress.
  
  If you invested - as you should - in the stock market, govt bonds, even a savings account at the bank, then you've outpaced inflation and are better off. From 1963 to present alone, investing that $1 in 1yr treasuries would be worth over $16, and you could have done far better in the market or even longer-term treasuries.
  
  People need to be disincentivized from stuffing money under the mattress.

  You are getting into the area of what defines money. What exactly is money? How is it defined? What exactly proves that a dollar bill will settle all debts, public or private?
  
  Empires dating back to the Romans crashed because they had nothing tangible to back up their currency. It's happened time and time again over the history of the world.
  
  Gold, silver...and yes even copper and iron were traditionally held in reserve in backing a governments money. Today, there aren't anything tangible backing of money. The value of different currencies are simply a collective opinion of what people think it's worth.
  
  Once Nixon took the US off the gold standard, there was no accountability required as it relates to "squaring up" national debts.
  
  As such, the US has seen no problem in growing the overall GNP, (or GDP today's reference} artificially.
• gut

  Footwedge wrote: That is your opinion...which is different from mine. Real wealth is defined by tangible items born through the fruits of human labor. Not the paper products that have replaced real goods and services. At least that's what Adam Smith stated in his book "Wealth of Nations".
  
  The banking crisis is much more complex than simply being a liquidity problem. Liquidity problems are elastically controlled through fiscal and monetary policy.
  
  To state that the banking crisis can all to attributed to poor liquidity is farcical.

  I did not characterize the banking crisis as solely a liquidity problem. The economic shock that resulted was, in large part, an issue of frozen credit markets COMBINED with a reduction in appetite for risk.
  
  And it's not my opinion that services are a real part of GDP and productivity, it is, in fact, included and certainly does add value. You are making a gross oversimplification to blame the severity of economic downturns on the loss of manufacturing, given that many of our corporations are global and retain ownership and profits on those manufactured goods. Additionally, the last 2+ decades coinciding with a growth in financial services has seen the mildest recessions in quite some time prior to this recent one.
  
  Leverage - not a shift in the mix between service/mfring - is responsible for this severe recession. There is no proof that the loss of mfring jobs has made our economy more susceptible to recession or the depth more severe, especially considering the US is not the only country to be hit really hard.
• gut

  Footwedge wrote: Gold, silver...and yes even copper and iron were traditionally held in reserve in backing a governments money. Today, there aren't anything tangible backing of money.

  Gold as a "tangible" backer is pretty much worthless. It has little productive value today. Gold's value as a hedge is solely because the market accepts and relies on it, which really is no different from agreeing and relying on a fiat currency. Copper and oil, and to a lesser extent silver, have real demand for real productive uses. But obviously it would be pretty dumb to actually store and keep those assets to back a currency, limiting the supply for production and driving up costs. Fiat money need not function any differently than a gold standard, but we figured out long ago that controlling the money supply is a much better tool for managing growth.
  
  How you define wealth/money has nothing to do with my argument about the decrease in the value of the dollar. It IS a chicken little argument because holding dollars now has a cost associated with it, which provides good incentive for savings and investment, which fuels growth. To say "the dollar has lost 95% of its value" is a completely misguided criticism when that same dollar invested in virtually risk-free assets would be worth much more, not less.
• Footwedge

  gut wrote:

  Footwedge wrote: Gold, silver...and yes even copper and iron were traditionally held in reserve in backing a governments money. Today, there aren't anything tangible backing of money.

  Gold as a "tangible" backer is pretty much worthless. It has little productive value today. Gold's value as a hedge is solely because the market accepts and relies on it, which really is no different from agreeing and relying on a fiat currency. Copper and oil, and to a lesser extent silver, have real demand for real productive uses. But obviously it would be pretty dumb to actually store and keep those assets to back a currency, limiting the supply for production and driving up costs. Fiat money need not function any differently than a gold standard, but we figured out long ago that controlling the money supply is a much better tool for managing growth.
  
  How you define wealth/money has nothing to do with my argument about the decrease in the value of the dollar. It IS a chicken little argument because holding dollars now has a cost associated with it, which provides good incentive for savings and investment, which fuels growth. To say "the dollar has lost 95% of its value" is a completely misguided criticism when that same dollar invested in virtually risk-free assets would be worth much more, not less.

  For the record, I wasn't the one who stated that the dollar has lost 95% of it's value. Whereby Bman's statement is actually true, I agree with your reply regarding investing and riding inflation.
  
  But that's really not my issue anyhow. My issue is the perception that globalization is somehow a good thing....or even worse...that there's nothing we can do about it.
  
  For example...here is another doom and gloom reality check posted by the Daily Finance today.
  
  Just more of the same. More outsourcing, more reduction in real jobs, the reiteration that Americans now earn 9% less in real purchasing power vs. 27 years ago and so on and so forth.
  
  Expectation that another 29% of American jobs will be outsourced in the next 2 decades and so on.
  
  Really? Tack on another 29% of unemployed Americans?
  
  http://www.dailyfinance.com/story/freelance-nation-why-permanent-jobs-may-not-come-back/19319743/
  
  But never a fuckin peep on roundtabling the problem. Why?
  
  There are a few authors who have written excellent books on how to combat the problem. From a very practical position I might add.
  
  Unfortunately, you will never see the main stream media discuss this issue. The reason for this is easily explained, but nevertheless, stunningly remarkable.
• gut

  Footwedge wrote: Expectation that another 29% of American jobs will be outsourced in the next 2 decades and so on.
  
  Really? Tack on another 29% of unemployed Americans?

  That is not how it works and never has. 29% of jobs being outsourced does not equal "unemployment" but rather transition. At times this past 15 years or so we have been near historic lows on unemployment. Globalization is neither inherently good nor bad (though I think Adam Smith would argue competition and specialization it enables is good), but how an economy adapts is really the key.
  
  I do share your concern over the reduction in real wages, however I'm not sure what the real data is there. I've seen various measures that include benefits to show the worker is better off, and as any smart person negotiating a compensation package will tell you, wages is only part of the equation. Sure, the increase in the standard of living has not kept pace with the past, but eventually that gap relative to other countries had to start narrowing.
  
  I think most people would rather be the manager coordinating distribution of goods outsourced to another country then actually putting the widgets on themself.
• Footwedge

  gut wrote:

  Footwedge wrote: That is your opinion...which is different from mine. Real wealth is defined by tangible items born through the fruits of human labor. Not the paper products that have replaced real goods and services. At least that's what Adam Smith stated in his book "Wealth of Nations".
  
  The banking crisis is much more complex than simply being a liquidity problem. Liquidity problems are elastically controlled through fiscal and monetary policy.
  
  To state that the banking crisis can all to attributed to poor liquidity is farcical.

  I did not characterize the banking crisis as solely a liquidity problem. The economic shock that resulted was, in large part, an issue of frozen credit markets COMBINED with a reduction in appetite for risk.

  Yet you fail to address the issues that correspond to the frozen markets and loss of risk appetite.
  
  "Risk appetite" is pretty appetizing when you are too big to fail....running financial operations whereby "heads I win, and tails I win as well" because the end game will be a bailout from the government. We learned that lesson back in the 80's whenever Reagan and Congress relaxed regulations of the Savings and Loan people.
  
  Pretty good gamble, huh?
  

  And it's not my opinion that services are a real part of GDP and productivity, it is, in fact, included and certainly does add value. You are making a gross oversimplification to blame the severity of economic downturns on the loss of manufacturing, given that many of our corporations are global and retain ownership and profits on those manufactured goods.

  I never said that services are not part of our GDP or that they shouldn't be a part of our GDP. But when simple math shows causes and effects....regarding real growth...and I mean real gdrowth of the GDP (not the bullshit that we see today in adding back the huge growth in government jobs as part of our GDP), corresponds directly with the outsourcing of jobs and an increase in financial services, should be a true head turner.
  

  Additionally, the last 2+ decades coinciding with a growth in financial services has seen the mildest recessions in quite some time prior to this recent one.

  Absolute bullshit. The only "perceived" growth in our economy was a result of 2 artificial bubbles...1. the dotcom cherade, whereby investment hucksters hoodwinked the public in pump priming investors in ballooning the worth of these pieces of shit, inspite of price to earnings ratios that were incredibly benign, and 2, the financial housing bubble, whereby Wall Street again pump primed and balooned the housing frenzy in manipulative fashion...which has hastened the realities of Americans losing our collective wealth.
  

  Leverage - not a shift in the mix between service/mfring - is responsible for this severe recession. There is no proof that the loss of mfring jobs has made our economy more susceptible to recession or the depth more severe, especially considering the US is not the only country to be hit really hard.

  I will agree that leveraging had a lot to do with it. But what caused accessive leveraging? What was liberalized in creating excessive leveraging? well you can start with the repeal of Glass Steagle, which had worked quite well since Depression part 1.
  
  As for providing proof on the loss of manufacturing contributing to our economic demise.....proof is in the numbers.
  
  Compare and contrast the overall economic growth with countries that have seen GDP rates 4 to 5 times higher than the US has seen over the past decade. Vietnam, China, Laos, India....all growing their manufacturing base...and kicking our ass economically. Look it up.
  
  Americans need to take off their rose colored glasses, evaluate the data, and come to the same conclusion that most economists have come to. The loss of the American smokestacks has had an extreme deleterious effect on our growth, our hope, and if not changed, our future.