UptonStellington

I'm looking to see what people's thoughts are on whether WWII brought us out of the Great Depression, and IF it did, WHY? The argument has become a dangerous one lately, as people are saying things like: Massive government spending for WWII brought us out of the Great Depression. And that was on a war. Imagine if we spent the same amount on something productive instead, like green technology or healthcare? One problem I have with the standard argument that WWII brought us right out of the Depression are that, as far as I know, it's not as if WWII started and things were going great all of a sudden. The bear market that characterized the Great Depression didn't even end until 1948 or so. But the bigger problem I have with this line of argument is that even IF WWII brought us out of the Depression, the United States then and the United States now are two different animals. As far as I know, before WWII, we were running a current account surplus, and though there may have been large deficits run during WWII, we had a manufacturing base and exportable goods and services to back that deficit up. In other words, we were running deficits with the aim of improving industrial capacity in order to be more productive. Today, we are already faced with massive deficits that have gone to finance not production, but consumption. And we'd be borrowing even more money to invest in things that would be only questionably productive.

What the? I'm from Nashua too! I didn't know there were others... Thank god for the Teletrash.

Has anyone read "Capitalism at Work"? It's all about Enron -- how its failures are always blamed on the free market, but how its downfalls were actually a result of political medelling (how do you spell that word?!) by people like Ken Lay. I actually came across this video on YouTube, where the author, who had worked as Lay's speechwriter, mentions the parallels between Lay and an Ayn Rand villain. If anyone has read it, I'd like to know whether it's worth the read....

Wait. I would think this last sentence is true to the extent that these goods are bought with debt. But if they are bought through the exchange of services -- we offer them financial / business services, etc., and we get goods in exchange -- I don't see what the problem is?

Hazlitt's book is great -- I wish they'd assign it to high school students. Jennifer, let me make sure I've got your take clear: If I want a good from Mr. Wen, I have to give Mr. Wen something else in return. Are you saying that what I've been giving Mr. Wen is not exactly as quantifiable as what Mr. Wen has been giving me? And further, that whatever I AM giving Mr. Wen is highly dependent on how I'm doing financially, whereas what Mr. Wen is giving me is valuable regardless of economic disturbances?

(Mods feel free to merge this with another thread, like ABCT) Since sNerd posted the YouTube video of Peter Schiff making his spot-on predictions for the recession, I've spent the last two days reading everything I can about the guy. Whenever he's on TV (CNBC had him on last Thursday and mentioned the popular YouTube videos), he defends the idea that we have to produce before we can consume, that our money is becoming worthless, etc. As an economics student, I'm constantly witness to professors selling the merits of a "service economy," and that the trend nowadays is for other countries to do the manufacturing while we do the services. But Schiff disagrees with that, constantly calling ours a "phony service-sector economy". In an interview, he said this regarding trade deficits: Can somebody clear this up for me? Don't we simply have the comparative advantage in the sectors Schiff named (on an international scale, in the financial and other professional services) -- do we really need to be the ones with industrial capacity?

Why did they experience the drop in value? ... If a gold standard were adopted for the US, I don't see why there would still be trading of gold in the same way there is right now, which is as an inflationary hedge.

I was talking with a bunch of people about presidential candidates and Ron Paul came up. Somebody said, "yeah, but how can you think a guy who wants to return to the gold standard is qualified to be president?" I asked him what he thought was so bad about the gold standard, and he said that the gold standard was what bankrupted the country. We talked a little bit about fiat money, but the conversation shifted and I never found out what he was really talking about. Regardless, I hear a lot of people with the same reaction to a gold standard -- that it bankrupted the country, etc. I remember one of my economics professors talking about this, too, and I can't remember what period he was referring to. Does anybody know? Why is there such popular resistance to a gold standard? ... people seem to have some idea of it being the cause of economic decline in the past. What part of history are they referring to? The Great Depression?

There's that. But more than that, I'll ask them how, exactly, do they think Greenspan as an advocate of free markets?

We're doing an Ayn Rand unit in one of my philosophy classes, and I can't wait to hear the professor or other people say next week, "Even Alan Greenspan, who always talked about how much of an influence Rand's ideas had on him, admitted, after 40 years, that there is a flaw."

Yes, monthly loans and leases in bank credit to commercial and industrial, real estate, and consumer. They have steadily gone up. Granted its from Cato, but there is this story that I just came across with the same data, as well: http://www.cato.org/pub_display.php?pub_id=9685

I don't know if someone had mentioned this earlier, I just skipped to the last page of this discussion, but commercial paper aside, it's curious how much talk there is of credit markets being frozen for Main Streeters and yet: http://www.federalreserve.gov/releases/h8/data.htm Am I missing something?

I second that question.

I think the greatest line so far has been, though I can only paraphrase Biden, "When we're talking about taxing and taking money from the oil companies to give to the American people, we don't call it 'redistribution.' We call it 'being fair.'" He had a look on his face as if he was legitimately offended that she tried to call it for what it is.

Ditto what everyone has said, for the most part. If I understand this, were you having a conversation about economics and rational choice, which lead you to this current debacle? She sounds like the typical psych student at my school (which pains me to say, I wish they weren't like this) -- always citing some statistic and context dropping. Regarding Hong Kong, who are these "experts" she's referring to? Until you can both agree that the people she's quoting are "experts," she is only appealing to authority. Another thing -- if acting rationally means acting in accordance with reality, hasn't our tendency to do so been amply demonstrated by the incredible growth in real wealth (since I'd argue that wealth demonstrates our ability to cope with reality) over the decades and centuries, not to mention the explosion of real wealth that occurred once people were left free to act in their own interests?

Okay, now that I've watched the whole thing, a disclaimer: The second half is essentially a campaign ad for McCain. Still, I think the first half offers a valuable summary of what happened.

I'm only a few minutes into the video, but knowing me, when it's done I'll forget to post it, so I'm doing it now. This looks like it's a pretty good description of what happened (which Yaron Brook and others on this board have talked about... nice to have it in YouTube form). Scroll down a little till you see the video. http://kudlowsmoneypolitics.blogspot.com/

Okay, David, THIS is what I'm getting at. Must the seller reveal the fact in order to be non-fraudulent in this case? And D'Kian, I agree. My professor did, too... though his point was, what if, all the same, a company doesn't disclose that information and people are harmed as a result of it? Shouldn't there be a law on the books that forces the company to disclose the relevant information to the consumer?

Brian, this was actually my exact reply during the discussion. If you hear the CEO of Lehman coming out and saying that the market is too complex even for him to understand what's going on, wouldn't that be an alarm signal that MAYBE you don't want to put your money with them, or with any mutual fund that does? My professor's reply was that we trust companies like Lehman, who have had good track records, so we buy into them, though we might not have any way of knowing where they are investing, and isn't this reason enough to force some sort of disclosure from Lehman if we are going to give them our money? .... I still say no, buyer beware. If there is uncertainty and you think it's a risk, DONT put your money there. The same goes with a mutual fund -- if you don't understand the mechanics of the mutual fund and where all the money is going/coming from, then be weary of putting your money there and accept the fact that you might not get it back. But I'm still wondering if it would be legitimate to have rules that force companies to disclose what they are doing, say, for the sake of investors in this case. D'Kian, I agree, and I think my response to Brian applies to yours, as well. One would think that the companies that DO disclose information would have the best business anyways. One of my professor's points was that that model of business (disclosing information) might not come about until after trial-and-error periods in the market, during which time people could very well have died.

Laws that disclose the hazards of the product that would change people's minds if they were to buy that product. For example, had people known the Pinto might burst into flames, they probably would not have bought it. This also applies to pharma companies: If the company does some tests on its drugs and finds out that they hold potential hazards, should they have to disclose that information to prospective consumers, or is it 'buyer beware'? [this was the example used in my discussion, although as I'm writing this, I seem to remember that on all drug commercials there are those warnings that go on for five minutes: May cause diarrhea, abdominal pain, etc] And of course, the current issue that we talked about was disclosure laws in terms of the financial market. Apparently people did not have to say that they were buying or selling securities backed by subprime mortgages... should they have had to disclose that information, by law, if they were asked? Or is it their right to keep it secret, even if that would fundamentally alter the consumer's choice?

I was speaking with my professor today and I find myself puzzled about an issue I had never considered before. Are disclosure laws consistent with free market principles (ie, upholding contracts), or are they unnecessary government intervention? We ended up talking about the Pinto. My case was "buyer beware," while he argued that, how can the buyer beware if the company selling the pinto purposely did not disclose safety defects that it had found in tests, and consumers had no way of finding out about the safety defects until some of them had experienced them first hand? I said that perhaps a case could be made for cases such as the Pinto being a "breach of contract," where Ford is telling consumers it is selling them one thing when it knows it is selling another. Regardless of the specifics of the Pinto case, what should be the role of the government in this area? Should there be full-disclosure laws that require companies to publish and make available to consumers all knowledge of possible safety defects? One alternative that was tossed around during the conversation is that in an industry such as pharmaceuticals, such laws would not be in place, and the consumer should buy at his own risk, although there might be no way for him to find out the possible hazards that had been discovered by the company beforehand, and could die as a result.

Oh man! That would be like Christmas! As far as the raw CRA playing a direct role, I am also not sure. And why did the proportion of sub-prime grow so rapidly after 2004? I wonder if it has something to do with the growing prosperity of the credit derivatives market, especially credit default swaps, whose market was twice the size of the stock market by mid-2007. Is it any coincidence that the credit default swap, which is essentially credit insurance, was introduced the same year as the CRA was significantly strengthened?

Indeed, this is a scary prospect. I don't know what the likelihood of full-scale nationalization during one presidential term is, though I'm inclined to say it would be pretty tough to do. Though a more full-blown trend in that direction obviously isn't good, what really scares me is the lose-lose situation we face in regards to pharmaceuticals. BOTH McCain and Obama have been openly hostile to the industry, both want to enact crippling regulations. With a lot of patents about to expire and more hampering down already on the part of the FDA, it looks like pharma is becoming even MORE susceptible to politics rather than market conditions. The turmoil we're experiencing in the financial sector right now is obviously disconcerting, but in my personal opinion, if things keep going the way they are now, we have an even bigger mess awaiting us around the corner in terms of quality of life.

The problem here is that in speaking about actualities versus potentialities, you have glossed over what the actualities are. Humans ARE creatures whose means of survival is reason, whether the human is 1 day old, 30 years old, or 98 years old -- it is a human by virtue of the fact that reason is its means of survival (put the embyro/zygote/fetus debate aside here). A chimp does not operate on this level. The fact that a human baby and a chimp baby are as intelligent as eachother is irrelevant when drawing conclusions about the essential traits of either entity. A human baby possesses the rational faculty and has merely not developed it; a chimp does not. Rights do not stem from intelligence or the USE of the rational faculty -- otherwise, there would be a lot of people without rights.

Larry Kudlow (CNBC's Kudlow & Company, and an economist recommended by Yaron Brook in his investing lecture), though he doesn't make any bones about his conservative politics, has blamed the government: http://newpaltzjournal.com/?p=913