Re: OT: That means NOT woodworking related.

Jeff, (and Mark),

Arguing/debating the relative merits of economic theory is probably futile.
Face-to-face we'd at least be more civil. With civility as the theme here, I
want to point out a couple of apparent assumptions that may not be accurate.

Jeff, In one thread you mentioned the S&L bailout of the 80's where you
seemed to infer that the cause was greedy officers and directors of those
banks. Certainly there were some instances of that (keating, Silverado etc)
but the primary reason was a shift in economic policy that caught most of
these banks in the position of having lent long (30 year fixed home loans
made up the bulk of portfolios) while they borrowed short. (Meaning they
loaned out money in savings accounts and short CD's). There was a huge
duration mismatch. Didn't matter when the spreads hadn't moved much. Spread
was profit and life was good. The real problem came when rates and inflation
soared in the late seventies and early 80's. To keep the deposits, banks had
to pay more interest, ultimately way more than they were receiving on the
loans. That was the spawn of the crisis. Crooks in the process? sure, a few.
Not enough to bring down the system.

The second thing you seemed to intimate was that the taxpayers ultimately
paid the price. Some lost deposits that weren't insured but no depositor
lost money in an insured account. Congress essentially recapitalized the
industry by making loans available and by setting up the Refinance
Corporation (refcorp) to pay the insurance claims that were beyond the
ability of the insurer to pay (then FSLIC now FDIC). Refcorp sold bonds in
the market to raise the cash. Bond holders were and still are being paid
from a 10% levy on the profits of the Federal Home Loan Bank System. (fed
charter but wholly owned by the member banks) Essentially the industry foots
the bill not the taxpayer. Sure one could argue that the consumer who uses
banks ultimately pays but that's true of anything.

Anyway, I usually avoid these discussions simply because they usually
degenerate into useless name calling pretty fast. I respect reasoned
arguments, especially opposing ones, but hate to see a good one diminished
by a misunderstanding of facts. Facts have no position on the political
spectrum. The are what they are. Distortion of facts, intentional or not, is
why these discussions fall apart. I concede that I may be misreading your
intent so feel free to correct me if you wish. In fact you may well be aware
of all of the above. If so, then using the
bailout/Reagan/republican/crook/Bush doing it again kind of connection
would, in my opinion be a cheap shot.


--
Patrick Fischer
Olalla, WA


"Jeff" <joesiege@xxxxxxxxx> wrote in message
news:1fe2f09e-dcb6-4e08-90bf-a8a8edf4b91f@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
On Mar 21, 12:11 am, Mark & Juanita <nos...@xxxxxxxxxxxxx> wrote:
Jeff wrote:
On Mar 20, 12:39 am, Mark & Juanita <nos...@xxxxxxxxxxxxx> wrote:
Jeff wrote:
On Mar 19, 9:49 pm, Robatoy <Counterfit...@xxxxxxxxx> wrote:
On Mar 19, 8:22 pm, Jeff <joesi...@xxxxxxxxx> wrote:

... snip

Taxes are a hot-button issue here, but I never get that worked up
over
them. My wife and I paid Uncle Sam a boatload of money but our bill
pales compared with our counterparts in the rest of the Western
world.

So that makes it all better? Since the rest of the world is taxing the
bejeebers out of its citizens, we should follow along?

A little clarification here. I think the fed bailout of Bear-Stearns
is
equally as bad as bailing out people who took out home loans they knew
they
couldn't afford. Both actions promote irresponsibility. There is
nothing
written anywhere that says people have to be successful all the time.

My comment was more in line with your comment relative to stocks vs.
jobs.
Yeah, the dems talk a good game about jobs, but in the end, who really
provides the jobs? It's the businesses, the corporations, the
entrepreneurs who are creating jobs and wealth. Many of those businesses
are publicly traded on the stock market. The government only taxes wealth
and the dems especially could be considered anti-job with their strong
emphasis on penalizing those who create jobs through higher taxes, more
regulation, and other anti-business policies. You don't promote
prosperity
by piling more and more weights on the elements of society contributing
to
that prosperity.

Market cap measures the value of companies. Its indexes aren't even
considered when determining stages of the business cycle. Businesses
respond to demand which is powered by consumer confidence. That
indicator rises in a robust labor market. To answer your question:
Consumers create jobs.

Republicans are not adverse to assisting business cronies, but
consumer confidence is better provided by policies designed to
strengthen the labor market. For example, overseas profit centers are
taxed at lower rates. This is good for cronies. They can sack a
business unit and bring it up in China. Or they can ship form
processing to India and charge back to the company so that it's taxed
at the lower rate. You may applaud this type of activity. I don't.

You picked a strange time to argue in favor of de-regulation. The
current crises was made possible by the formation of a shadow banking
industry that existed outside of Federal regulatory control. Savings
were moved from banks to funds that bought asset backed commercial
paper from investment houses that bought collateralized debt from
securitized mortgages. Now we have an old fashioned bank run with no
FDIC support. The cycles between these fiascoes are exactly as long as
people's memories. This shadow industry was allow to thrive at a time
when the 1980s savings and loan crisis became a distant memory. The
greatest period of prosperity and innovation in this country came at a
time of greatest regulation so I don't buy the argument that it
stifles progress. Sustained growth requires a stable financial
environment.


I'm sure the next comment will be the exorbitant salaries of the CEO's
vs.
the workers. Guess what? I agree that there is a problem here, but the
solution is not more government oversight,but stockholders, particularly
the institutional investors exerting their weight on the boards.

Where I work, the CEO sits on the Board with whom he enjoys a cozy
relationship. It's reflected in his salary and bonuses. I doubt the
average stock holder considers his multi-million dollar bonuses in
their best interest. How do you suggest they exert their weight?


You really don't understand economics and how the economy works, do
you?
Explains your party preference pretty well.

My majoral concentration was economics but feel free to enlighten
me....

What flavor of economics was in favor at the time of your major? Those
I
knew when I was in school were equally divided between Marxism and
Keynesian economic theory. Adam Smith capitalism was in short supply.


If Adam Smith was in short supply, then there probably little demand.
Funny how that works ;-) IMO Alfred Marshall provided a much better
theoretical foundation for his flavor of thought. In their day, Smith,
Marx, Marshall and Keynes each asked the right questions. Each in
response to the conditions of his time. Personally, I think Schumpeter
is a better guide through current conditions but I'm just a hack
arguing economics on the Internets...

Cheers,
Jeff


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