Economics business.The Sub-prime Crisis. How bad is it?

[lemit]

The economists who taught me economics, on restaurant napkins they carefully tucked into their pockets because the napkins represented intellectual property, would have said that there are times when the economy must be restored at the expense of theory.

Regardless of our general ideas of what represents economic health, we must occasionally do whatever we must do to preserve an economy that we can thereafter theorize and argue about.

--lemit

[Lumber Joe]

Well, it made other problems reveal.

[LaurieAG]

Hi Lumber Joe,

Originally Posted by Lumber Joe

Well, it made other problems reveal.

I have a feeling that some of the nastier problems have not been fully revealed but they will be revealed within the next 2 months.

There's just been too much cheerleading from those who should know better and too much concensus from those with vested interests (along with too many US banks on deathwatch and commercial property tanking just to name a couple).

All the current situation shows is that the higher echelons of the investment world don't occupy the same world (or have the same set of rules) that the rest of us do, real business included. It's either tax them because they give so little back, regulate them effectively and remove all loopholes or abolish them so that everybody else can have a level playing field.

[LaurieAG]

There is a historical precedence for our current global financial problems, Tacitus in his 'Annals' provides details about ancient roman Emperor Tiberius.

Money lending is an ancient problem in Rome, and a frequent cause of disharmony and disorder. Even in an earlier, less corrupt society steps had been taken against it. At first, interest had been determined arbitrarily by the rich, but then the twelve tablets had fixed the maximum at 10 percent. Next, a tribunes law had halved the rate. Finally loans on compound interest were forbidden completely. Fraudulence, attacked by repeated legislation, was ingeniously revived after each successive counter-measure
....
Eighteen months were allowed in which all private finances had to be brought in line with the law. The result was a shortage of money. For all debts were called in simultaneously, and the numerous convictions and sales of confiscated property had concentrated currency in the treasury and its imperially controlled branches. To meet this situation the senate had instructed that creditors should invest two-thirds of their capital in Italy, and debtors immediately pay the same proportion of their debts. However, creditors demanded payment in full, and debtors were morally bound to respond. The first results were importunate appeals to money-lenders. Next, the praetors court responded with activity. The decree requiring land purchases and sales, envisaged as relief, had the opposite effect since when the capitalists received payment they hoarded it, to buy land at their convenience. These extensive transactions reduced prices. But large scale debtors found it difficult to sell; so many of them were ejected from their properties, and lost not only their estates but their rank and reputation. Then Tiberius came to the rescue. He distributed 100 million sesterces among specially established banks, for interest free three-year state loans, against security of double the value of landed property. Credit was thus restored; and gradually private lenders, too, reappeared.

Then came along Emperors Caligula, Claudius and finally Nero.

[LaurieAG]

Is globalism too big to fail?

Considering that a 'jobless' recovery is just an admission that the system isn't working, surely now is the time to bite the bullet

If the 'recovery' means more jobs and industry going overseas then who really benefits, a few shareholders? some resident within the countries that suffer the loss of employment and industry?

Is globalism too big to fail? Is 'government of the people, by the people, for the people' a bit passe in the modern world, it certainly seems so for our neo politicians.

[Michaelangelica]

Originally Posted by LaurieAG

Is globalism too big to fail?.

We dig it up. the Yanks sell it to China (Chevron Mobile's biggest deal ever from the Gorgon Gas fields). The Chinese Make stuff. Walmart sells the stuff.
Everybody happy? Nobody happy?

[LaurieAG]

Hi Michaelangelica,

Originally Posted by Michaelangelica

We dig it up. the Yanks sell it to China (Chevron Mobile's biggest deal ever from the Gorgon Gas fields). The Chinese Make stuff. Walmart sells the stuff.
Everybody happy? Nobody happy?

And we get a couple of jobs and the people of Australia get to pay for the accelerated depreciation of the foreign multinationals assets (probably twice if 2x acceleration) and a carbon tax for the entire process to boot.

Add this to the current state of play and we can look forwards to beautiful ETS figures, a massive windfall profit for the Australian government while the dark clouds start building in the north.

Gee, last time pig iron Bob sold iron to the Japanese during the depression and then took the side of the allies in WWII. Is Australia going to be neutral this time because of contractual obligations? Human nature is so predictable and greed at any cost is pathetic.

[lawcat]

Originally Posted by LaurieAG

Is 'government of the people, by the people, for the people' a bit passe in the modern world, it certainly seems so for our neo politicians.

Therein lies the trick. What does government "by the people" mean? What does "government for the people" mean?

Are there any benefits in globalism? Are there any costs? What are the risks? How does the government benefit from globalism? How do people beneift? What "government by the people" benefits?

There are too many judgment calls to find an answer, but if someone can derive a singular, reasoned, and ultimately convincing conclusion I would love to read it.

In the end it all goes to the question of profits: How much appetite for profit do we have considering the risks? And these are discretionary decisions.

[maikeru]

Originally Posted by lemit

I have to confess I couldn't get past DiLorenzo's first line:



That's an interesting interpretation of the social contract. It's not just a little overreaching, it kind of reaches back to the origins of all civilization and says they are all corrupt, every single one of them, and the fact that he is able to put anything in print is just a sign of how we've given up our individuality.

No, it's more than that. He's saying that the fact he exists is a denial of his premise and that he as the author of that line is therefore an idiot.

I've seen him on CSPAN. He makes a little more sense than that, although that's not difficult to imagine, but he doesn't make enough sense to be taken seriously.

But who cares? Anybody who has that as his thesis is still an idiot. The rest doesn't matter. If you are in a bookstore, pick up a book, and read that as a first line, you should put down the book and find somewhere to wash your hands.

--lemit

Hi Lemit,

Excellent observation. Too bad I've missed this thread. I wish I'd joined the conversation earlier.

Mainstream economists consider the Austrians idiots, but they are a favorite of Libertarians and other independents. Increasingly people have become wary of Keynesian and other schools of economic thought and have turned to outliers like the Austrians. I agree on some points with the Austrian School of Economics, with their observations on how a "free market" ought to work, *ought to* being the key words here, but I've found out that much like Libertarians, etc. they tend to be too extreme and too myopic in their total belief in "free markets," "natural" regulation through capitalism, etc. that it's become something short of an alternative economic mantra and unjustifiable, unprovable religious belief system. I don't believe in "free markets," but I believe we can have "freer markets," and I don't believe we can approach and reach the ideal in the real world, with people, resources, and the limitations of human thought and action.

Likewise, beliefs in people being wholly rational or irrational are unfounded as well, so economic models and theories based on rational or irrational agents are flawed. We know from common and personal experience, psychology, and increasingly backed by neuroscience that people and their decisions are both rational and irrational, and more rational or irrational depending on situations, beliefs, education, etc. If they cannot account for such basic unpredictability in models and theories, basically we need to keep in mind they're working with "best case" scenarios but not necessarily realistic or wholly predictable ones. In short, it boils down to economics often being perceived as but not really being a science. The scientific method has no place in it, nor does validation by testing and experimentation and refinement of theories. (Indeed, how can one do it in many cases with economic theories and models? It is often impractical or impossible.) It's more akin to a mishmash of mathematics, psychology, philosophy, and history, IMO. And it appears very logical and good, and several of the fundamentals have a strong basis in our perception and experience of reality, but not really of reality or the natural world out there.

For example, several economists often are strong adherents in the growth of populations and consumption to boost GDP but do not factor in that population growth can lead to unsustainable crowding, resource depletion, lowered quality or standard of living, or even population collapse due to resource depletion, food scarcity/famine, untenable living standards or living costs, disease, war, etc. Many ignore, deride, or mock Malthus. I've also run across a lot of scientific ignorance or mocking or derision of global warming on Austrian economist websites and blogs. If they cannot even understand basic science and common sense, I am not inclined to trust all their predictions, theories, and analyses. Many of them just might be idiots. Very smart, very well educated idiots, but idiots nonetheless because they ignore even basic tenets and observations of reality. I look at it this way: science lets reality (the natural world) be teacher, when others would simply like to "teach" or remake reality. Which one is more realistic? Which one is doable?

As LaurieAG suggested earlier in the thread, I suspect that all our man-made systems are more like "shadows" that mimic natural systems, but have less of the stability, full utilization and capacity, efficiency, natural design, or grace that natural ones do. We must make do with imitations. We can always more closely approach, but never realize the ideal. Realizing this, I believe boom, bust, collapse, and failures as well as successes will be more frequent and, indeed, are inevitable, due to our shortcomings.

Seriously, several things I'd really be interested in knowing is if the 'free market' is just another flawed human construct, is it really a 'natural' system because it shadows mainstream cosmological constructs, and accordingly, are mainstream cosmological constructs 'natural' systems or flawed human constructs based on the global financial system?

As Shakespeare put it, "Lord, what fools these mortals be!"

[LaurieAG]

Hi Lawcat,

Originally Posted by lawcat

Therein lies the trick. What does government "by the people" mean? What does "government for the people" mean?

It's probably one of the earliest warnings of democratic failure. In the ancient greek Peloponnesian war the Athenians lost not too long after changing their system of democracy.

Originally Posted by lawcat

Are there any benefits in globalism? Are there any costs? What are the risks? How does the government benefit from globalism? How do people beneift? What "government by the people" benefits?

That's the problem with globalism, national borders are blurred and accounting on anything else apart from the aggregate of the global economy within these borders just leads to more than 100% of 'good' news and less than 100% of the 'bad' news with nobody being accountable for any of it apart from the 'good' news.

Originally Posted by lawcat

In the end it all goes to the question of profits: How much appetite for profit do we have considering the risks? And these are discretionary decisions.

That's what I said in my previous post, give capitalism and globalism the unregulated 'hidden hand' of the market they will soon work out the best way to make profits, war. Also, if you demonise your perceived enemy enough, many atrocities are considered 'acceptable' risk.

When democracy is spun so much that it isn't 'for the people' anymore but 'for the business that might employ the people' in better times, how close to political corruption can you get.

I come from Queensland Australia, Rupert Murdoch's home state, global media mogul and owner of all my major local, regional, state and federal newspapers. In Australia in the past 20 years we have had 16 state Members of Parliament (MP) locked up on criminal convictions. Half of these MP's were from Queensland and were evenly balanced with members from all sides of politics.

While this would undoubtedly be reported as greater media scrutiny leading to
greater political accountability surely there is a direct connection between print media control and official corruption, especially considering that quite a few politicians have also been convicted in the state that hosts the 'Jerusalem Post'.

While our political spin doctors have had a field day in the media it seems that their true contribution to the world for the new millennium is the combination of two old words to form two new ones. The old ones are Propaganda and Paranoia and the new ones both mean the same thing.

Propanoia and Paraganda - Public fear and loathing generated as a result of professional spin doctors doing what they are paid for. This can be used against political opposition members in ways like 'our guys might be corrupt but at least their not stupid like the opposition' type of comentators who hammer home that same message day in day out. It can also be used to justify things like torture and terms like 'collatteral damage' were introduced to desensitize the general public. It has even be used to convince an unwilling public to support unwinnable wars.

Why stop at one when there are good profits to be made.