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Gibson raided
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<blockquote data-quote="John Roberts" data-source="post: 35743" data-attributes="member: 126"><p>Re: Gibson raided</p><p></p><p></p><p>I have been watching this game (politics) for a long time and I find it remarkable how some representatives get repeatedly rewarded for bringing home the pork (airports, bridges, highways, etc some are notable), despite otherwise unremarkable legislative track records.. Voters get what they deserve but they are all operating under the false premise the government spending is OPM, it is literally all of our debt and a scary amount. </p><p></p><p></p><p>The stimulus did pretty much what economists expected, and some were way out front, predicting a double dip in 2011. Art Laffer comes to mind and I don't recall exactly when he first predicted this, but he was literally wrong, because we haven't dipped into a technical recession (yet), just very slow to no growth (some are calling this stag flation, but the inflation is somewhat mitigated by deflationary forces (like housing assets that haven't stopped falling). </p><p></p><p>I have also been hearing the argument that the stimulus wasn't big enough. Big enough to do what? Correct the underlying malaise? I have posted on other forums about this so I may be repeating myself here, but government stimulus only generates a short term bump in GDP, so on paper it looks like a few percent swing, but guess what? When the stimulus runs out, you get what is called a gap down, as that couple percent comes back out of the GDP. The fact that we are flat now, means that in the last two years the economy has recovered enough to make up for the stimulus running out. </p><p></p><p>Politicians, over the last decade (Bush included) have become attracted to short term stimulus to level out the normal (small) dips in economic cycles, and when the economy comes roaring back as it usually does, they pat themselves on their back for a job well done. This time it was different. This wasn't your normal business cycle correction, but the result of a decade or longer of way too easy housing credit, that rippled through the entire economy pumping everything up to artificially high levels. First we had to deal with de-leveraging the financial institutions to keep the banks solvent, and that was a struggle (some would say we aren't finished yet), and the poor shape of the european banks will make an interesting object lesson in what happens if you just rubber stamp the bank's stress test, as the sovereign debt that makes up so much of their balance sheets is starting to unravel. (danger will robinson). Domestic business is in pretty good shape because they pulled in their horns and have plenty of cash on their balance sheets, but right now they are keeping that money in their pockets, uncertain about the near future. The last leg of out economic stool is the consumer, who has been de-leveraging (reducing debt) for the last several years, but still has a long way to go. It is actually a good thing for American households to reduce debt and increase savings, but not good for merchants trying to sell ski boats. </p><p></p><p>I am not going to argue for austerity right now, that would be insensitive, but it is disingenuous for any credible economist to suggest that all we need to do is throw more short term stimulus at this and all will be fine. We are coming off a ten year binge of easy credit , and we can't just get the government to tear up a few mortgages (or sue a few banks) and make that all go magically away. </p><p></p><p>It is going to be painful (more painful), and the folks who smoked all that free dope still need to pay the piper. The housing market has bottomed in a few regions, but there is still too much inventory out there, and people in unsustainable situations (still upside down) that need to smell the rose fertilizer and move on. </p><p></p><p>We can agree that the last stimulus was horribly mismanaged, but even perfect management would only make a proportional difference. Am I preaching to myself that stimulus is just a short term marginal factor and does not address the underlying issues?. While few have noticed, the incredibly low interbank rates have been used by the major banks to recapitalize (for a few years now), and business are not fools either, so they reduced the rates of all their balance sheet debt... only the rest of us who work for a living and are expected to "consume" can't borrow cheap at the overnight interbank window and lend it out at higher rates to recapitalize.</p><p></p><p>There is an old saying about easy answers to hard problems , so I shouldn't need to diagram that. </p><p></p><p>Another stimulus program, better managed than the last one, can make another short term bump on paper and keep us out of technical recession for another year or so, but you can't keep borrowing and stimulating to fudge the GDP above 0% growth forever. We need real growth like 4%+ to fund the deficit spending out legislators have become so comfortable with. Now we need even more growth to back fill this hole we're digging but i haven't seen much constructive change. </p><p></p><p>Sorry no easy answer... from where I sit. but i remain an optimist. We will eventually get it right after we try everything else first. </p><p></p><p>JR</p></blockquote><p></p>
[QUOTE="John Roberts, post: 35743, member: 126"] Re: Gibson raided I have been watching this game (politics) for a long time and I find it remarkable how some representatives get repeatedly rewarded for bringing home the pork (airports, bridges, highways, etc some are notable), despite otherwise unremarkable legislative track records.. Voters get what they deserve but they are all operating under the false premise the government spending is OPM, it is literally all of our debt and a scary amount. The stimulus did pretty much what economists expected, and some were way out front, predicting a double dip in 2011. Art Laffer comes to mind and I don't recall exactly when he first predicted this, but he was literally wrong, because we haven't dipped into a technical recession (yet), just very slow to no growth (some are calling this stag flation, but the inflation is somewhat mitigated by deflationary forces (like housing assets that haven't stopped falling). I have also been hearing the argument that the stimulus wasn't big enough. Big enough to do what? Correct the underlying malaise? I have posted on other forums about this so I may be repeating myself here, but government stimulus only generates a short term bump in GDP, so on paper it looks like a few percent swing, but guess what? When the stimulus runs out, you get what is called a gap down, as that couple percent comes back out of the GDP. The fact that we are flat now, means that in the last two years the economy has recovered enough to make up for the stimulus running out. Politicians, over the last decade (Bush included) have become attracted to short term stimulus to level out the normal (small) dips in economic cycles, and when the economy comes roaring back as it usually does, they pat themselves on their back for a job well done. This time it was different. This wasn't your normal business cycle correction, but the result of a decade or longer of way too easy housing credit, that rippled through the entire economy pumping everything up to artificially high levels. First we had to deal with de-leveraging the financial institutions to keep the banks solvent, and that was a struggle (some would say we aren't finished yet), and the poor shape of the european banks will make an interesting object lesson in what happens if you just rubber stamp the bank's stress test, as the sovereign debt that makes up so much of their balance sheets is starting to unravel. (danger will robinson). Domestic business is in pretty good shape because they pulled in their horns and have plenty of cash on their balance sheets, but right now they are keeping that money in their pockets, uncertain about the near future. The last leg of out economic stool is the consumer, who has been de-leveraging (reducing debt) for the last several years, but still has a long way to go. It is actually a good thing for American households to reduce debt and increase savings, but not good for merchants trying to sell ski boats. I am not going to argue for austerity right now, that would be insensitive, but it is disingenuous for any credible economist to suggest that all we need to do is throw more short term stimulus at this and all will be fine. We are coming off a ten year binge of easy credit , and we can't just get the government to tear up a few mortgages (or sue a few banks) and make that all go magically away. It is going to be painful (more painful), and the folks who smoked all that free dope still need to pay the piper. The housing market has bottomed in a few regions, but there is still too much inventory out there, and people in unsustainable situations (still upside down) that need to smell the rose fertilizer and move on. We can agree that the last stimulus was horribly mismanaged, but even perfect management would only make a proportional difference. Am I preaching to myself that stimulus is just a short term marginal factor and does not address the underlying issues?. While few have noticed, the incredibly low interbank rates have been used by the major banks to recapitalize (for a few years now), and business are not fools either, so they reduced the rates of all their balance sheet debt... only the rest of us who work for a living and are expected to "consume" can't borrow cheap at the overnight interbank window and lend it out at higher rates to recapitalize. There is an old saying about easy answers to hard problems , so I shouldn't need to diagram that. Another stimulus program, better managed than the last one, can make another short term bump on paper and keep us out of technical recession for another year or so, but you can't keep borrowing and stimulating to fudge the GDP above 0% growth forever. We need real growth like 4%+ to fund the deficit spending out legislators have become so comfortable with. Now we need even more growth to back fill this hole we're digging but i haven't seen much constructive change. Sorry no easy answer... from where I sit. but i remain an optimist. We will eventually get it right after we try everything else first. JR [/QUOTE]
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