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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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 Posted: Tue Feb 10, 2009 7:21 am Post subject: |
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| visitorq wrote: |
| I also don't see how the Fed ties into it |
It has been explained several times here on Dave's how the Fed caused the Great Depression and this one.
If you don't see it, you need to study economics. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Feb 10, 2009 10:19 am Post subject: |
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| I wonder, where would the US economy be today without it? I think the issue was there being too much risk and bad judgement (started with the subprime mortgage crisis), not the basic principles of the FIRE economy itself. I also don't see how the Fed ties into it (he was ranting about about Ponzi schemes and I kinda lost track); of course it's painful to have to bail out the irresponsible people who started this mess, but other than bailing the financial industry out I don't really see an alternative. I also think we should bail out manufacturing sector, with conditions attached. |
The Fed.. It is the source of all this.
Anyways. On the weekend I read The Student Loan Scam
http://www.amazon.com/Student-Loan-Scam-Oppressive-History/dp/0807042293
The FIRE economy is a parasite on the host (the economy) now. It is way to large and powerful. For just one example of how the financial services industry screws people, read the above book. I strongly recommend it, esp if you have grad school in your sights.
But you're right. We need finance. Niall Ferguson (of Harvard, Stanford and Oxford) in The Ascent of Money (a financial history of the world) makes an excellent case that human advancement has happened hand in hand with financial innovation. We need to be able to access debt, and for a fair price. Did you know that loan sharks in Glasgow charge 11million percent interest a year? This is how poor people borrow, and it ruins them. But the FIRE economy got out of control. It needs to be pulled in. Leverage brought way down etc.
There has been too much credit growth. |
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visitorq
Joined: 11 Jan 2008
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| Posted: Wed Feb 11, 2009 3:16 am Post subject: |
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| mises wrote: |
| Quote: |
| I wonder, where would the US economy be today without it? I think the issue was there being too much risk and bad judgement (started with the subprime mortgage crisis), not the basic principles of the FIRE economy itself. I also don't see how the Fed ties into it (he was ranting about about Ponzi schemes and I kinda lost track); of course it's painful to have to bail out the irresponsible people who started this mess, but other than bailing the financial industry out I don't really see an alternative. I also think we should bail out manufacturing sector, with conditions attached. |
The Fed.. It is the source of all this.
Anyways. On the weekend I read The Student Loan Scam
http://www.amazon.com/Student-Loan-Scam-Oppressive-History/dp/0807042293
The FIRE economy is a parasite on the host (the economy) now. It is way to large and powerful. For just one example of how the financial services industry screws people, read the above book. I strongly recommend it, esp if you have grad school in your sights.
But you're right. We need finance. Niall Ferguson (of Harvard, Stanford and Oxford) in The Ascent of Money (a financial history of the world) makes an excellent case that human advancement has happened hand in hand with financial innovation. We need to be able to access debt, and for a fair price. Did you know that loan sharks in Glasgow charge 11million percent interest a year? This is how poor people borrow, and it ruins them. But the FIRE economy got out of control. It needs to be pulled in. Leverage brought way down etc.
There has been too much credit growth. |
Seems to be mainly an oversight issue; I still think the theoretical purpose of the Fed is justified. At least they're offering banks liquidity they need this time, unlike in the Great Depression where they did nothing.
And in the interim between crises, I kinda like the idea somebody (forget who) had of replacing the Fed with a computer that would increase the money supply automatically according to economic growth and leave greed/stupidity out of it. |
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Hater Depot
Joined: 29 Mar 2005
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| Posted: Wed Feb 11, 2009 8:28 am Post subject: |
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| One of the limits of the Japanese example is that they already had excellent infrastructure and so just to spend money they wound up building a bunch of useless stuff, like cement posts, that didn't add any value to their economy. In the US it's pretty widely acknowledged that there's a big need for maintenance of existing infrastructure and construction of new stuff, and doing both would create a lot of value. We need to fix up our highways and bridges and electrical grid and build new high-speed rail and broadband capacity. So Japan in 1992 spending a lot on infrastructure is very different from the US doing so in 2009. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Wed Feb 11, 2009 12:36 pm Post subject: |
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| visitorq wrote: |
| mises wrote: |
| Quote: |
| I wonder, where would the US economy be today without it? I think the issue was there being too much risk and bad judgement (started with the subprime mortgage crisis), not the basic principles of the FIRE economy itself. I also don't see how the Fed ties into it (he was ranting about about Ponzi schemes and I kinda lost track); of course it's painful to have to bail out the irresponsible people who started this mess, but other than bailing the financial industry out I don't really see an alternative. I also think we should bail out manufacturing sector, with conditions attached. |
The Fed.. It is the source of all this.
Anyways. On the weekend I read The Student Loan Scam
http://www.amazon.com/Student-Loan-Scam-Oppressive-History/dp/0807042293
The FIRE economy is a parasite on the host (the economy) now. It is way to large and powerful. For just one example of how the financial services industry screws people, read the above book. I strongly recommend it, esp if you have grad school in your sights.
But you're right. We need finance. Niall Ferguson (of Harvard, Stanford and Oxford) in The Ascent of Money (a financial history of the world) makes an excellent case that human advancement has happened hand in hand with financial innovation. We need to be able to access debt, and for a fair price. Did you know that loan sharks in Glasgow charge 11million percent interest a year? This is how poor people borrow, and it ruins them. But the FIRE economy got out of control. It needs to be pulled in. Leverage brought way down etc.
There has been too much credit growth. |
Seems to be mainly an oversight issue; I still think the theoretical purpose of the Fed is justified. At least they're offering banks liquidity they need this time, unlike in the Great Depression where they did nothing.
And in the interim between crises, I kinda like the idea somebody (forget who) had of replacing the Fed with a computer that would increase the money supply automatically according to economic growth and leave greed/stupidity out of it. |
Yes, mostly an oversight issue. I'm also in favor of replacing the Fed with a computer. So was Greenspan before he took over the Fed... |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Fri Feb 13, 2009 9:18 am Post subject: |
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| Mises wrote: |
| I'm also in favor of replacing the Fed with a computer. So was Greenspan before he took over the Fed... |
However, after leaving the Fed, Greenspan indicated that still favored a gold standard as we had in the late 19th century, prior to the creation of the Federal Reserve. He said he still believed that a well managed central bank could work, but he didn't seem confident that it would.
The fact is, fiat money can never work. It is mathematically impossible. According to economic theory, fiat currency must fail over time, and it has always failed, in practice. At this point in time, the US dollar can undeniably be included with the group that has failed. It stll exists, but falling below 2% of its original value can only be termed a total failure. |
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