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It's the [Economy Thread], Stu... Silly Goose!

245

Posts

  • ElJeffeElJeffe Moderator, ClubPA mod
    edited January 2010
    Thanatos wrote: »
    "Growth" doesn't really help people who are out of jobs. I haven't heard of the market improving much here, anyway.

    GDP growth invariably precedes job creation. No, people who are out of jobs aren't directly benefited by positive growth, but the jobs should follow. So this is still good news.

    ElJeffe on
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  • tinwhiskerstinwhiskers Registered User regular
    edited January 2010
    ElJeffe wrote: »
    Thanatos wrote: »
    "Growth" doesn't really help people who are out of jobs. I haven't heard of the market improving much here, anyway.

    GDP growth invariably precedes job creation. No, people who are out of jobs aren't directly benefited by positive growth, but the jobs should follow. So this is still good news.

    It also means there are companies that are making money, and therefore not laying off more people. Which helps other companies stay in business, and gives states revenue to help keep unemployment benefits alive.

    tinwhiskers on
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  • themightypuckthemightypuck MontanaRegistered User regular
    edited January 2010
    enc0re wrote: »
    So it's pretty safe to call "recession over" as of two quarters ago. Nice.

    EDIT: Official graph.
    gdp_large.gif

    That's two quarters of nice growth right there.

    I'll give you one.

    Also. Hayek v Keynes rap pretty much won the thread.

    themightypuck on
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  • YougottawannaYougottawanna Registered User regular
    edited January 2010
    Hayek vs. Keynes should be in the OP IMO

    If unemployment is still at 10% by November it's [strike]good news for McCain[/strike] bad for democrats in the midterms. Has anyone tried to predict potential job growth this year if the jobs programs mentioned in the SOTU get passed before then?

    Yougottawanna on
  • enc0reenc0re Registered User regular
    edited January 2010
    Also. Hayek v Keynes rap pretty much won the thread.

    And it's chock full of good information too. They are soliciting donations on their website (econstories.tv). Unfortunately it sounds like they want to post interviews with economists next. I would give monies if they could guarantee it go to more rap videos. Like "restricted" donations to Haiti victims.

    Volcker v Greenspan anyone?

    EDIT: I came across that video on Wednesday and showed it to everyone I know. (I'm such a nerd.) Yet somehow I didn't think of posting it here.

    enc0re on
  • tbloxhamtbloxham Registered User regular
    edited January 2010
    Saar wrote: »
    Not to be crass but so what? Are we supposed to build up every square inch of the world so that people in the construction industry remain employed even though there is little demand for their services?

    This is why we need a dyson sphere

    tbloxham on
    "That is cool" - Abraham Lincoln
  • YarYar Registered User regular
    edited January 2010
    Can we use this thread to debate what caused the Great Recession? It was such a fascinating confluence of phenomena.

    Yar on
  • tsmvengytsmvengy Registered User regular
    edited January 2010
    mrt144 wrote: »
    Saar wrote: »
    Not to be crass but so what? Are we supposed to build up every square inch of the world so that people in the construction industry remain employed even though there is little demand for their services?

    No, obviously not. But that's long term thinking you're engaging in.

    I still support my local blacksmith.

    Err wrong. If the economy is growing past where we were before, then we will need to build more.

    When your economy is growing in a positive way, you need to build more shit to accommodate that growth.

    tsmvengy on
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  • SavantSavant Registered User regular
    edited January 2010
    Yeah, a good portion of that large GDP growth was an inventory bounce, which makes it a bit misleading to take at face value. There was a post about the Goldman Sach's number at Calculated Risk, which turned out to be pretty much correct (5.8% predicted versus 5.7% actual).

    Growth really looks like it is going to be fairly sluggish, which doesn't bode that well for really bringing down unemployment in the near term. They are really going to need to target unemployment more directly rather than just relying on anemic growth to handle everything.

    Savant on
  • CantidoCantido Registered User regular
    edited January 2010
    mrt144 wrote: »
    Saammiel wrote: »

    YES YES YES YES YES!

    Holy shit, HOLY SHIT.

    This video. HOLY SHIT.

    Cantido on
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  • Ethan SmithEthan Smith Origin name: Beart4to Arlington, VARegistered User regular
    edited January 2010
    Mechanically, it's pretty simple.

    Bush's policies helped push us toward overheating. Lowering taxes during boomtimes promoted speculation, leading to one sector or another becoming a bubble.

    Ethan Smith on
    I would be ashamed to admit that I had risen from the ranks. When I rise it will be with the ranks, and not from the ranks..
  • LeCausticLeCaustic Registered User regular
    edited January 2010
    Mechanically, it's pretty simple.

    Bush's policies helped ... Lower... taxes during boomtimes ...

    Hey, look! I'm a newspaper!


    I won't do that again, I promise

    LeCaustic on
    Your sig is too tall. -Thanatos
    kaustikos.png
  • SaammielSaammiel Registered User regular
    edited January 2010
    Mechanically, it's pretty simple.

    Bush's policies helped push us toward overheating. Lowering taxes during boomtimes promoted speculation, leading to one sector or another becoming a bubble.

    The housing bubble started before Bush even came into office and interest rates are the key factor in accelerating investment here. Pretty graphs here.

    Saammiel on
  • YougottawannaYougottawanna Registered User regular
    edited January 2010
    Saammiel wrote: »
    Mechanically, it's pretty simple.

    Bush's policies helped push us toward overheating. Lowering taxes during boomtimes promoted speculation, leading to one sector or another becoming a bubble.

    The housing bubble started before Bush even came into office and interest rates are the key factor in accelerating investment here. Pretty graphs here.

    united_states.png

    Judging by this image it looks like the bubble first began in 2000-2002 or so. Furthermore, how do you figure that interest rates were the key figure in its formation?

    Yougottawanna on
  • juice for jesusjuice for jesus Registered User regular
    edited January 2010
    Saammiel wrote: »
    Mechanically, it's pretty simple.

    Bush's policies helped push us toward overheating. Lowering taxes during boomtimes promoted speculation, leading to one sector or another becoming a bubble.

    The housing bubble started before Bush even came into office and interest rates are the key factor in accelerating investment here. Pretty graphs here.

    That is a nice graph. Pretty clearly shows why housing is not an investment, any more than a TV or a car or any other normal good is. Home prices grew about 1% per year, inflation adjusted, prior to the big bubble. That probably comes from increased size and improved technology in newer houses (or mortgage deductions, I suppose). Too bad no amount of graphs will stop the next round of speculation.

    juice for jesus on
    Lanlaorn wrote: »
    That's just insulting, I think DBZ is bad but I'm not going to insinuate that it only appeals to people who are equal parts retards and psychopaths.
  • enc0reenc0re Registered User regular
    edited January 2010
    That is a nice graph. Pretty clearly shows why housing is not an investment, any more than a TV or a car or any other normal good is. Home prices grew about 1% per year, inflation adjusted, prior to the big bubble. That probably comes from increased size and improved technology in newer houses (or mortgage deductions, I suppose). Too bad no amount of graphs will stop the next round of speculation.

    Much of it isn't the house, but the value of the land it's attached to. They don't make it anymore, but demand keeps increasing year after year.

    enc0re on
  • mrt144mrt144 King of the Numbernames Registered User regular
    edited January 2010
    enc0re wrote: »
    That is a nice graph. Pretty clearly shows why housing is not an investment, any more than a TV or a car or any other normal good is. Home prices grew about 1% per year, inflation adjusted, prior to the big bubble. That probably comes from increased size and improved technology in newer houses (or mortgage deductions, I suppose). Too bad no amount of graphs will stop the next round of speculation.

    Much of it isn't the house, but the value of the land it's attached to. They don't make it anymore, but demand keeps increasing year after year.

    Demand where? And how is it the best possible investment of any asset class?

    mrt144 on
  • SavantSavant Registered User regular
    edited January 2010
    mrt144 wrote: »
    enc0re wrote: »
    That is a nice graph. Pretty clearly shows why housing is not an investment, any more than a TV or a car or any other normal good is. Home prices grew about 1% per year, inflation adjusted, prior to the big bubble. That probably comes from increased size and improved technology in newer houses (or mortgage deductions, I suppose). Too bad no amount of graphs will stop the next round of speculation.

    Much of it isn't the house, but the value of the land it's attached to. They don't make it anymore, but demand keeps increasing year after year.

    Demand where? And how is it the best possible investment of any asset class?

    Hint: the human population is still growing.

    Anyways, real estate is a good hedge against inflation. Even if it doesn't go up much faster than inflation, it would likely still go up, while the inflation will devalue the debt in a mortgage. Most of the other classes of investments don't fair as well in an inflationary environment?

    Now, in a deflationary depression? You can lose your shirt with highly leveraged real estate.

    Savant on
  • LeCausticLeCaustic Registered User regular
    edited January 2010
    Saammiel wrote: »
    Mechanically, it's pretty simple.

    Bush's policies helped push us toward overheating. Lowering taxes during boomtimes promoted speculation, leading to one sector or another becoming a bubble.

    The housing bubble started before Bush even came into office and interest rates are the key factor in accelerating investment here. Pretty graphs here.

    united_states.png

    Judging by this image it looks like the bubble first began in 2000-2002 or so. Furthermore, how do you figure that interest rates were the key figure in its formation?

    Oh you have GOT to be kidding me. You really think that? I don't even know where to begin in the faulty logic you've presented.

    LeCaustic on
    Your sig is too tall. -Thanatos
    kaustikos.png
  • mrt144mrt144 King of the Numbernames Registered User regular
    edited January 2010
    Savant wrote: »
    mrt144 wrote: »
    enc0re wrote: »
    That is a nice graph. Pretty clearly shows why housing is not an investment, any more than a TV or a car or any other normal good is. Home prices grew about 1% per year, inflation adjusted, prior to the big bubble. That probably comes from increased size and improved technology in newer houses (or mortgage deductions, I suppose). Too bad no amount of graphs will stop the next round of speculation.

    Much of it isn't the house, but the value of the land it's attached to. They don't make it anymore, but demand keeps increasing year after year.

    Demand where? And how is it the best possible investment of any asset class?

    Hint: the human population is still growing.

    Anyways, real estate is a good hedge against inflation. Even if it doesn't go up much faster than inflation, it would likely still go up, while the inflation will devalue the debt in a mortgage. Most of the other classes of investments don't fair as well in an inflationary environment?

    Now, in a deflationary depression? You can lose your shirt with highly leveraged real estate.

    Hint: Location, Location, Location. Hint: Detroit Real Estate Hint: Don't be a smug ignoramus.

    Hint: Timing
    Hint: Easy Credit

    Every asset has it's day under the sun but each has its own risk.

    mrt144 on
  • ronyaronya Arrrrrf. the ivory tower's basementRegistered User regular
    edited January 2010
    Interest rates make borrowing cheaper, which then funds demand for houses. This makes both prices and supply of houses (i.e., new construction) increase.
    Savant wrote: »
    Anyways, real estate is a good hedge against inflation. Even if it doesn't go up much faster than inflation, it would likely still go up, while the inflation will devalue the debt in a mortgage. Most of the other classes of investments don't fair as well in an inflationary environment?

    Now, in a deflationary depression? You can lose your shirt with highly leveraged real estate.

    More precisely, that would be more-inflationary-than-expected environment and more-deflationary-than-expected. Inflation doesn't actually have to dip below zero to make a lot of people bankrupt.

    The problem is that everyone else also anticipates inflation and simply bundles the price into the price of real estate. So by investing in real estate as an inflation hedge, you've got to be betting that inflation is going to be much higher than other people think it will be.

    There are plenty of ways to dispose of liquidity in a manner that suppresses inflation - TIPS? - real estate doesn't have any special property that shields its own price from inflation.

    ronya on
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  • mrt144mrt144 King of the Numbernames Registered User regular
    edited January 2010
    ronya wrote: »
    Interest rates make borrowing cheaper, which then funds demand for houses. This makes both prices and supply of houses (i.e., new construction) increase.
    Savant wrote: »
    Anyways, real estate is a good hedge against inflation. Even if it doesn't go up much faster than inflation, it would likely still go up, while the inflation will devalue the debt in a mortgage. Most of the other classes of investments don't fair as well in an inflationary environment?

    Now, in a deflationary depression? You can lose your shirt with highly leveraged real estate.

    More precisely, that would be more-inflationary-than-expected environment and more-deflationary-than-expected. Inflation doesn't actually have to dip below zero to make a lot of people bankrupt.

    The problem is that everyone else also anticipates inflation and simply bundles the price into the price of real estate. So by investing in real estate as an inflation hedge, you've got to be betting that inflation is going to be much higher than other people think it will be.

    There are plenty of ways to dispose of liquidity in a manner that suppresses inflation - TIPS? - real estate doesn't have any special property that shields its own price from inflation.

    The only thing that real estate has an inherent advantage is that you can leverage the fuck out of it over a long period of time. But that assumes you have the credit worthiness to get a good rate, real estate prices outpace inflation, and have a downpayment that allows you not to be fucked by depreciation of house prices.

    mrt144 on
  • ronyaronya Arrrrrf. the ivory tower's basementRegistered User regular
    edited January 2010
    Or maybe there's a bank that mysteriously doesn't care about creditworthiness and offers house loans to people who can't realistically pay it back.

    (which doesn't necessarily apportion blame to the banks or the government's interest rates. I like the Tyler Cowen quote - "Let's say that the government subsidized the price of bananas, you bought so many bananas, put them on your roof, and then the roof collapsed. Is that government failure or market failure? The price was distorted, but I still say this is mostly market failure. No one made you put so many bananas on your roof.")

    ronya on
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  • mrt144mrt144 King of the Numbernames Registered User regular
    edited January 2010
    ronya wrote: »
    Or maybe there's a bank that mysteriously doesn't care about creditworthiness and offers house loans to people who can't realistically pay it back.

    (which doesn't necessarily apportion blame to the banks or the government's interest rates. I like the Tyler Cowen quote - "Let's say that the government subsidized the price of bananas, you bought so many bananas, put them on your roof, and then the roof collapsed. Is that government failure or market failure? The price was distorted, but I still say this is mostly market failure. No one made you put so many bananas on your roof.")

    That's a once a generation type of event though and isn't really a rational basis to formulate investment decisions upon. Cause I'm trying to really imagine an investment strategy where "lack of credit standards" is integral to it being better than other options. Or are you mocking FHA loans?

    mrt144 on
  • YougottawannaYougottawanna Registered User regular
    edited January 2010
    LeCaustic wrote: »
    Saammiel wrote: »
    Mechanically, it's pretty simple.

    Bush's policies helped push us toward overheating. Lowering taxes during boomtimes promoted speculation, leading to one sector or another becoming a bubble.

    The housing bubble started before Bush even came into office and interest rates are the key factor in accelerating investment here. Pretty graphs here.

    (image snip)

    Judging by this image it looks like the bubble first began in 2000-2002 or so. Furthermore, how do you figure that interest rates were the key figure in its formation?

    Oh you have GOT to be kidding me. You really think that? I don't even know where to begin in the faulty logic you've presented.

    Are you responding to me or Sammiel?

    Yougottawanna on
  • HenroidHenroid Mexican kicked from Immigration Thread Centrism is Racism :3Registered User regular
    edited January 2010
    Henroid wrote: »
    Hachface wrote: »
    MKR wrote: »
    Henroid wrote: »
    Can you guys explain how debt is good? I'm a little baffled at that.

    It gives the creditor an interest in our stability. You don't go to war with a country that owes you a bunch of money.

    It's the new MAD.

    U.S. treasury bonds are also the safest place to put your money that exists. Rich people and corporations basically use the public debt as a savings account.

    ... what? You can withdraw money you invest in bonds?

    Let's take this to the economy thread, I don't mean to veer this thread too much. I'm gonna quote this tree over there.

    Henroid on
  • HachfaceHachface Not the Minister Farrakhan you're thinking of Registered User regular
    edited January 2010
    @Henroid
    You're not supposed to withdraw from a savings account all that often. In fact, there are often penalties for frequent withdrawal. Bonds are for people who know they won't need the cash on hand for a while.

    That said, it's possible to sell a bond before maturation.

    Hachface on
  • HenroidHenroid Mexican kicked from Immigration Thread Centrism is Racism :3Registered User regular
    edited January 2010
    How much does it screw with US economic decisions when these companies are putting money in and out of the bonds covering the debt? Not that it's going on frequently as you've said, but can't they artificially skew the debt one way or the other to influence those decisions?

    Henroid on
  • HachfaceHachface Not the Minister Farrakhan you're thinking of Registered User regular
    edited January 2010
    Henroid wrote: »
    How much does it screw with US economic decisions when these companies are putting money in and out of the bonds covering the debt? Not that it's going on frequently as you've said, but can't they artificially skew the debt one way or the other to influence those decisions?

    This is all standard practice. T-bills and bonds serve an important function in the economy.

    Hachface on
  • big lbig l Registered User regular
    edited January 2010
    Henroid wrote: »
    How much does it screw with US economic decisions when these companies are putting money in and out of the bonds covering the debt? Not that it's going on frequently as you've said, but can't they artificially skew the debt one way or the other to influence those decisions?

    The debt is so enormous that one company's decisions don't really matter. If Company X wants to sell off all their bonds, there are enough people out there buying bonds that they will get bought.

    big l on
  • mrt144mrt144 King of the Numbernames Registered User regular
    edited January 2010
    Henroid wrote: »
    How much does it screw with US economic decisions when these companies are putting money in and out of the bonds covering the debt? Not that it's going on frequently as you've said, but can't they artificially skew the debt one way or the other to influence those decisions?

    Remember, the ocean is full of sharks.

    mrt144 on
  • JuliusJulius Registered User regular
    edited January 2010
    big l wrote: »
    Henroid wrote: »
    How much does it screw with US economic decisions when these companies are putting money in and out of the bonds covering the debt? Not that it's going on frequently as you've said, but can't they artificially skew the debt one way or the other to influence those decisions?

    The debt is so enormous that one company's decisions don't really matter. If Company X wants to sell off all their bonds, there are enough people out there buying bonds that they will get bought.

    Yeah pretty much. It's a theoretical problem because if enough companies suddenly start selling their bonds it fucks up things, but it's unlikely to happen.

    Julius on
  • SavantSavant Registered User regular
    edited January 2010
    Henroid wrote: »
    How much does it screw with US economic decisions when these companies are putting money in and out of the bonds covering the debt? Not that it's going on frequently as you've said, but can't they artificially skew the debt one way or the other to influence those decisions?

    Ok, let me explain how this works.

    Roughly every month or so, when the US government needs to finance some debt, it will hold an auction on US Treasury bonds, notes, and bills. How these work is that they have a set face value (which is called par), a coupon rate, and a maturity date. Bills have maturity dates that come up in a year or less, notes have maturities that come up in two to ten years, and bonds have maturities in the range of twenty to thirty years.

    These securities give a cash flow dependent upon the coupon rate and the face value. How this works for notes and bonds, is that they will give coupon payments semiannually to the bond holder worth the face value times the semiannual coupon rate. So, for example, if you buy a 10 year note at auction with a face value of $1000, and the semiannual coupon rate is 2.5%, then every six months you'll get a payment of $25 until maturity in 10 years. Additionally, at the maturity you receive the redemption value of the bond, so in the case of the example you'd get the $1000 at maturity in addition to the coupons.

    Bills are effectively zero coupon bonds, which means that you don't receive a coupon payment at all, but just receive the face value at redemption. How this works is that the bills are sold at a discount at auction below their face value. For example, if you were buying a $1000 face value bill that matures in a year and wanted to get about 5% annual interest on it, you would want to pay $1000/1.05 = $952.38 for it now.

    The bonds and notes with coupon payments can also be sold at a discount if the market wants higher interest than the coupon rate for them, or they can be sold at a premium (above the face or redemption value) if the market is willing to go for a lower interest rate than the coupon rate. More or less the interest rate (but not the coupon rate) is determined by what people are willing to pay for the Treasuries in the auction.

    Also, these Treasuries can be traded on the secondary market, so you don't have to buy them directly from the US Treasury (though you can buy them that way if you want). So you can buy them from a large institutional trader anytime after they are issued and before the maturity date, or you can sell them to someone else too. This secondary trade is more important than you might think, as the Federal Reserve commonly trades in and out of US Treasuries in order to manipulate the money supply.

    The US government hasn't defaulted on these yet, so the interest rates determined by US Treasuries are often considered to be the risk free rates. When you see the massive debt numbers of the US government, how they finance it is by selling these, and then they roll them over and pay the interest on the Treasuries by selling even more. As you may be able to determine by looking at this, one potential problem of having too much debt is that the demand for these treasuries may not keep up with the ever increasing supply of them. Which means that they'll be sold at a steeper discount, which effectively raises interest rates and makes the government pay out even more nominally to service the debt. And since we have a fiat currency, one possible way to deal with this is to monetize the debt by running the virtual printing press, which can be rather inflationary and devalue the currency depending upon the current situation of the economy.

    Savant on
  • tsmvengytsmvengy Registered User regular
    edited January 2010
    LeCaustic wrote: »
    Saammiel wrote: »
    Mechanically, it's pretty simple.

    Bush's policies helped push us toward overheating. Lowering taxes during boomtimes promoted speculation, leading to one sector or another becoming a bubble.

    The housing bubble started before Bush even came into office and interest rates are the key factor in accelerating investment here. Pretty graphs here.
    united_states.png

    Judging by this image it looks like the bubble first began in 2000-2002 or so. Furthermore, how do you figure that interest rates were the key figure in its formation?

    Oh you have GOT to be kidding me. You really think that? I don't even know where to begin in the faulty logic you've presented.

    Well, if you look at the trendline for inflation-adjusted housing prices, and you look at what the previous price cycles looked like, then 2000 or 2001 is where prices should have stabilized in real dollars (or gone down in inflation-adjusted dollars).

    tsmvengy on
    steam_sig.png
  • ronyaronya Arrrrrf. the ivory tower's basementRegistered User regular
    edited January 2010
    Henroid wrote: »
    Henroid wrote: »
    Hachface wrote: »
    MKR wrote: »
    Henroid wrote: »
    Can you guys explain how debt is good? I'm a little baffled at that.

    It gives the creditor an interest in our stability. You don't go to war with a country that owes you a bunch of money.

    It's the new MAD.

    U.S. treasury bonds are also the safest place to put your money that exists. Rich people and corporations basically use the public debt as a savings account.

    ... what? You can withdraw money you invest in bonds?

    Let's take this to the economy thread, I don't mean to veer this thread too much. I'm gonna quote this tree over there.

    Like the others have said, you can buy and sell bonds. Selling it is how you "withdraw" the money. If the price crashes in the interim you won't be able to "withdraw" much, that's all.

    But as for how debt is good. It's like this:

    Debt is just buying money now by selling money that you will have later. This often makes sense if you're considering an investment: just take that $1000 now and go into debt, invest it in something that'll earn back the $1000 plus interest, then pay back the debt later. Career-oriented university education is often like this.

    If you're a very long-lived institution - like a government - you can sit in debt permanently working steadily through an overlapping series of such investments. This will have exactly the same impact as if the government simply printed an extra $1000 and locked it in its reserves as a permanent surplus - there is no difference. The "permanent debt" here is an illusory accounting artifact.

    But you will (rightly) observe that this is not the situation the US finds itself in; the US has repeated government budget deficits, so the debt keeps growing. But there's a simple utilitarian redistributionist defense for this, too.

    Consider - suppose an evil demon seizes you and offers you a choice: you can give him your money now, or he'll dump you in the US circa 1900: before penicillin, before widespread electrification, before the rise of the postwar middle class, before commercialized radio and television (and, of course, said evil demon will empty your mind of any useful modern knowledge so that you can't exploit it to make your life better). You'll just be dropped in 1900 at the same position on the overall social ladder that you occupy now.

    Which one do you pick? It seems obvious that nearly a century of progress has made a you in 2010 much, much better off than a you in 1900 is - even if you in 2010 has to lose all his life savings. Screw money, you have penicillin.

    And, likewise, someone is going to have to pay all that debt the US is building up eventually - either through the chaos of a default, or massive devaluation, or coughing up a future tax. Well, so what? That guy is going to be unbelievably better off than you anyway.

    (of course, there are lots of ways to dispute this account. You might think that economic growth is going to halt. You might think that you do in fact prefer to be dumped in 1900 with your money (despite the fact that no amount of money would save you from tuberculosis then). You might think that there are moral problems with saddling your great-grandchildren with debts. But this account is (I think) the mainstream philosophical defense of an increasing public debt).

    * note that I have fudged the distinction between public and private debt for simplicity.

    ronya on
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  • enc0reenc0re Registered User regular
    edited January 2010
    The problem with your time travelling demon analogy is that those two aren't the same guys. There is a moral issue with someone in 1900 running up the credit card of someone else in 2010.

    enc0re on
  • ronyaronya Arrrrrf. the ivory tower's basementRegistered User regular
    edited January 2010
    Yeah, I was editing the post to include that response. I got beat'd, clearly :P

    But regardless. If you accept the utilitarian defense of modern state redistribution - i.e., taxing the very rich to improve the welfare of the very poor - all you are doing in this case is taxing the (relatively rich) future to improve the welfare of the (relatively poor) present. In both cases you are (in the vast majority of cases) doing so against the individual permission of the rich.

    If you dispute doing so on the grounds of running up someone else's credit card, then you also have to dispute redistribution. Do you? Or is there some moral distinction to be made here?

    ronya on
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  • YougottawannaYougottawanna Registered User regular
    edited January 2010
    I would imagine a risk of running large amounts of debt would be that at some point the auction value of t-bills would go down, meaning debt would progressively become more expensive to take on, which would put the government on a cycle towards insolvency.

    Yougottawanna on
  • Salvation122Salvation122 Registered User regular
    edited January 2010
    I would imagine a risk of running large amounts of debt would be that at some point the auction value of t-bills would go down, meaning debt would progressively become more expensive to take on, which would put the government on a cycle towards insolvency.

    This is why we are terrified of China.

    Salvation122 on
  • DeebaserDeebaser on my way to work in a suit and a tie Ahhhh...come on fucking guyRegistered User regular
    edited January 2010
    ronya wrote: »
    Or maybe there's a bank that mysteriously doesn't care about creditworthiness and offers house loans to people who can't realistically pay it back.

    This is kind of exactly what happened. Mortgage banks made money selling loans to other banks who made money bundling these loans into RMBSes and CDOs. The more loans they made, the more money they made. I did closings for a mortgage bank pre-crash. They were literally giving $300K to people making $30K a year and had fuck all for a downpayment.

    I heard loan agents in closings assure people that when the interest payment jumps up on their interest only loans, they'll be able to refi and their houses and have equity because the value on their house will be higher!

    The reason they didn't give a shit is because they sold pretty much all of their loans to BOA so they could make more money selling loans.

    Deebaser on
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