'Five Zombie Economic Ideas That Refuse to Die'

[Oddball]

I will add Myth #6: Cuts in personal income taxes pay for themselves.

Of course, no economist worth his or her salt believes this - notice that the article deals with debates amongst economists. However, a wide swath of a certain part of the political spectrum continues to hold this belief as if it were a religion. Those people don't know the difference between a stove and a stochastic. But it is a widespread myth nonetheless. And all tribes need their myths.

Myth #7: Letting people keep what is theirs costs money.

 

[CrusaderFrank]

Frank, I hope you feel better, because that was a non sequitur. The article isn't about the cause of the crisis, but about myths that landed us on it's doorstep.

The great moderation is a belief that was prevalent for over a decade that monetarism had become such a refined science that it could sustain indefinite economic stability by merely adjusting the money supply via interest rate targets.

That idea was a crock of shit. It has now been disproven due to the fact that the monetarist approach can do nothing to address the bank's willingness to lend or to dislodge us from a kind of deflationary trap.

In short Alan Greenspan has been exposed as a reckless steward who inflated bubbles instead of stimulating real economic growth. Or alternatively perhaps that the economy is never formulaic in nature, but always a sum of unique real world intangibles. A complex dynamic system resist to confinement within simplistic models.

Again, ignoring the Fed, Fannie and Freddie role in melting down US Real estate sector is like thinking better building codes could have saved a lot of the homes at Nagasaki from the blast.

It just does not take new facts into account.

 

[The Rabbi]

I will add Myth #6: Cuts in personal income taxes pay for themselves.

Of course, no economist worth his or her salt believes this - notice that the article deals with debates amongst economists. However, a wide swath of a certain part of the political spectrum continues to hold this belief as if it were a religion. Those people don't know the difference between a stove and a stochastic. But it is a widespread myth nonetheless. And all tribes need their myths.

As stated you are correct. But only as stated.
In fact some cuts pay for themselves, and then some. When Bush cut the rate on dividends and capital gains revenue from dividend and capital gains taxes soared. They brought in much more money under the new rate than under the old rate.
Similarly, cuts in the marginal rate on the highest taxpayers produce more revenue, not less. But reductions in the rate on the lowest income tax paying segment will not pay for itself.
It involves incentive. When you have an incentive to sell this stock and take the money to do something else then you do it. When taxes are high you just hold on to it.

 

[loosecannon]

Frank, I hope you feel better, because that was a non sequitur. The article isn't about the cause of the crisis, but about myths that landed us on it's doorstep.

The great moderation is a belief that was prevalent for over a decade that monetarism had become such a refined science that it could sustain indefinite economic stability by merely adjusting the money supply via interest rate targets.

That idea was a crock of shit. It has now been disproven due to the fact that the monetarist approach can do nothing to address the bank's willingness to lend or to dislodge us from a kind of deflationary trap.

In short Alan Greenspan has been exposed as a reckless steward who inflated bubbles instead of stimulating real economic growth. Or alternatively perhaps that the economy is never formulaic in nature, but always a sum of unique real world intangibles. A complex dynamic system resist to confinement within simplistic models.

Again, ignoring the Fed, Fannie and Freddie role in melting down US Real estate sector is like thinking better building codes could have saved a lot of the homes at Nagasaki from the blast.

It just does not take new facts into account.

OK, Frank. But in this thread we are playing Jeopardy. Your answer must be in the form of a myth.

 

[antagon]

People need to get used to the idea that the US Economy and the Federal government are 2 separate things. Tax cuts allow business to dedicate more resources to their business which expands the private sector which then pays taxes on a bigger baseline.

Some people just look at the Federal government side and see a tax cuts as attempted murder. You're taking money away from the government! This is a very limited and GubbamintCentric World view.

this goes both ways, frank. your consistent BS about government policy being the impetus of everything bad in the world is also a "very limited and GubbamintCentric World view".

 

[Toro]

I will add Myth #6: Cuts in personal income taxes pay for themselves.

Of course, no economist worth his or her salt believes this - notice that the article deals with debates amongst economists. However, a wide swath of a certain part of the political spectrum continues to hold this belief as if it were a religion. Those people don't know the difference between a stove and a stochastic. But it is a widespread myth nonetheless. And all tribes need their myths.

Myth #7: Letting people keep what is theirs costs money.

We are discussing "economics," not "semantics."

 

[midcan5]

Again, ignoring the Fed, Fannie and Freddie role in melting down US Real estate sector is like thinking better building codes could have saved a lot of the homes at Nagasaki from the blast.

It just does not take new facts into account.

Frank proves again a central tenet of wingnut thought, he knows nothing, reads nothing, and yet has opinions on everything. So where do these wingnut opinions come from? They come from corporate think tanks that are only too happy the likes of Frank believe. If he had read he would have seen the reply below countering his last feed from wingnuttery land. Of course the wires in his head would spark and cross and confuse, but just maybe he would learn and then leave the land of Oz.

AUGUST WEST
5:10 PM ET
October 20, 2010

Fannie and Freddie at the root of the sub-prime crisis?

Talk about being dead wrong! Fannie and Freddie were NOT at the root of the sub-prime crisis. This is disinformation spouted by shills and ignoramuses. Sub-prime loans were originated by the unregulated private banking sector. In fact, neither Freddie nor Fannie originated loans, period. They bought loans from the private sector, or guaranteed interest and principal payments on MBSs issued by the private sector that rested on mortgages originated in (drum roll, please)...the private sector!

Nor did either Fannie or Freddie ever press banks to originate sub-prime loans. The private sector did that all by themselves. Fannie and Freddie may have relaxed the standards in their Seller-Servicer Guides, but at most--or at worst--they only approached the standards of the private sector. Sub-prime loans came from WaMu, IndyMac, Wachovia, Wells, and all the other private sector banks.

Neither Fannie nor Freddie ever told anyone to not verify borrowers' income or to inflate appraisals. They never ordered any bank to issue "no doc" loans. These were private-sector "innovations." Mortgage toxicity is a purely private-sector innovation.

Simpulo's error is so egregious as to call into question anything he writes on thus subject."

(from replies to article)

 

[CrusaderFrank]

Again, ignoring the Fed, Fannie and Freddie role in melting down US Real estate sector is like thinking better building codes could have saved a lot of the homes at Nagasaki from the blast.

It just does not take new facts into account.

Frank proves again a central tenet of wingnut thought, he knows nothing, reads nothing, and yet has opinions on everything. So where do these wingnut opinions come from? They come from corporate think tanks that are only too happy the likes of Frank believe. If he had read he would have seen the reply below countering his last feed from wingnuttery land. Of course the wires in his head would spark and cross and confuse, but just maybe he would learn and then leave the land of Oz.

AUGUST WEST
5:10 PM ET
October 20, 2010

Fannie and Freddie at the root of the sub-prime crisis?

Talk about being dead wrong! Fannie and Freddie were NOT at the root of the sub-prime crisis. This is disinformation spouted by shills and ignoramuses. Sub-prime loans were originated by the unregulated private banking sector. In fact, neither Freddie nor Fannie originated loans, period. They bought loans from the private sector, or guaranteed interest and principal payments on MBSs issued by the private sector that rested on mortgages originated in (drum roll, please)...the private sector!

Nor did either Fannie or Freddie ever press banks to originate sub-prime loans. The private sector did that all by themselves. Fannie and Freddie may have relaxed the standards in their Seller-Servicer Guides, but at most--or at worst--they only approached the standards of the private sector. Sub-prime loans came from WaMu, IndyMac, Wachovia, Wells, and all the other private sector banks.

Neither Fannie nor Freddie ever told anyone to not verify borrowers' income or to inflate appraisals. They never ordered any bank to issue "no doc" loans. These were private-sector "innovations." Mortgage toxicity is a purely private-sector innovation.

Simpulo's error is so egregious as to call into question anything he writes on thus subject."

(from replies to article)

I thought it was because I put together Private Placement Offerings through all major Wall Street investment banks for a major NYC real estate developer for the first 15 years of my career, but you know best.

We'll do this slowly because like the lie that McCarthy Blacklisted good honest people, Progressive continue to lie about how the US residential mortgage banking market works.

Banks need CRA credit to survive and prosper, that's a fact.

Fannie and Freddie set the guidelines for the paper they'll buy, that's a fact.

Banks get CRA Credit for originating mortgage and selling them to Fannie and Freddie.

Banks started originating sub prime and No Income No Asset loans, not because they were stupid and careless, but because Fannie and Freddie, who controlled 40% of the market said banks must provide these loans to Fannie and Freddie.

Again, like the lie that McCarthy named names and ruined people, Progressives are lying about EVERYTHING!

Why would a bank make a no income no asset loans? Why? Are they stupid?

They made those loans because F&F said those were the loans they wanted to buy.

 

[Norman]

Again, ignoring the Fed, Fannie and Freddie role in melting down US Real estate sector is like thinking better building codes could have saved a lot of the homes at Nagasaki from the blast.

It just does not take new facts into account.

Frank proves again a central tenet of wingnut thought, he knows nothing, reads nothing, and yet has opinions on everything. So where do these wingnut opinions come from? They come from corporate think tanks that are only too happy the likes of Frank believe. If he had read he would have seen the reply below countering his last feed from wingnuttery land. Of course the wires in his head would spark and cross and confuse, but just maybe he would learn and then leave the land of Oz.

AUGUST WEST
5:10 PM ET
October 20, 2010

Fannie and Freddie at the root of the sub-prime crisis?

Talk about being dead wrong! Fannie and Freddie were NOT at the root of the sub-prime crisis. This is disinformation spouted by shills and ignoramuses. Sub-prime loans were originated by the unregulated private banking sector. In fact, neither Freddie nor Fannie originated loans, period. They bought loans from the private sector, or guaranteed interest and principal payments on MBSs issued by the private sector that rested on mortgages originated in (drum roll, please)...the private sector!

Nor did either Fannie or Freddie ever press banks to originate sub-prime loans. The private sector did that all by themselves. Fannie and Freddie may have relaxed the standards in their Seller-Servicer Guides, but at most--or at worst--they only approached the standards of the private sector. Sub-prime loans came from WaMu, IndyMac, Wachovia, Wells, and all the other private sector banks.

Neither Fannie nor Freddie ever told anyone to not verify borrowers' income or to inflate appraisals. They never ordered any bank to issue "no doc" loans. These were private-sector "innovations." Mortgage toxicity is a purely private-sector innovation.

Simpulo's error is so egregious as to call into question anything he writes on thus subject."

(from replies to article)

I have to agree with frank on this one. Or at least on some things.

First off, The FF was really very big player on the crisis, quiet obviously. Free market just didn't one day decide that "There is no fear of losses at all". Freddy and fenny didn't directly say that they do guarantee the loans, but WS bet that they would. And FF actually BOUGHT the mortgages and thus went bankrupt, so obviously it is flat out lie to say that it wasn't hugely involved. I mean obviously if free market banks can just make a garbage mortgage and sell it to FF with profit, THEY WILL! To think that was private bankers fault is simply put nuts. Nothing forced FF to buy.

2ND thing that played a huge role was the cheap money from allan greenspan fed.

And say whatever you want, but the housing crisis was far from failure of free markets. US banking was regulated then and is regulated now by things like FDIC, that have consequences if left without secondary coat of regulations.

So in terms of failure of free markets or government? I do say 95% government. Maybe in bed with the "freemarket" guys though. But hey the freemarket bet right! The government bailed them out. So if you consider that it was actually victory for free market.


The article is very wrong. Obviously

A) FF bought the mortgages.
B) FF Allowed to free banks to create sub primes. They didn't just spontaneously appear. FF buying the mortgages combined with cheap credit by fed let them do that. Why would all banks just spontaneously say "Hey, let's create the riskiest mortgage ever, that is guaranteed to loose as money in the end".

 

[georgephillip]

"Two years after the financial crisis, the U.S. economy has steered clear of total disaster, with the Dow Jones industrial average currently near its pre-crash level. But the theories that caused it all are still out there, lurking in the shadows."

By John Quiggin

This was my favorite, you read it everyday on USMB.

"The Trickle-Down Hypothesis: the idea that policies that benefit the wealthy will ultimately help everybody.

Unlike some of the zombie ideas discussed here, trickle-down economics has long been with us. The term itself seems to have been coined by cowboy performer Will Rogers, who observed of U.S. President Herbert Hoover's 1928 tax cuts: "The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover ... [didn't] know that money trickled up.""

Five Zombie Economic Ideas That Refuse to Die - By John Quiggin | Foreign Policy

Five Zombie Economic Ideas That Refuse to Die - By John Quiggin | Foreign Policy

"By every measure, the U.S. economy is failing to recover from the Great Recession.

"Every measure except one.

"In the last 18-20 months, corporate profits climbed at the fastest pace on record.

"Non-financial companies are reporting the highest free cash flow (profits after dividends and capital expenditures) in a half-century.

"Profit margins at S&P 500 companies are now (12/2010) above 9%, approaching uncharted territory. Joseph Lavorgna, chief U.S. economist of Deutsche Bank, stresses, 'Not only are we seeing a tremendous V-shaped recovery in corporate profits, but we are in fact seeing the biggest corporate profit recovery ever.'

"The Obama recovery is turning the traditional formula on its head; corporate profits have not been a leading indicator of economic recovery, but a lagging indicator of Main St. impoverishment.

"The Greatest Recovery in corporate profits and the Great Recession are two sides of the same coin."

The Greatest Recovery, Part I

 

[Oddball]

I will add Myth #6: Cuts in personal income taxes pay for themselves.

Of course, no economist worth his or her salt believes this - notice that the article deals with debates amongst economists. However, a wide swath of a certain part of the political spectrum continues to hold this belief as if it were a religion. Those people don't know the difference between a stove and a stochastic. But it is a widespread myth nonetheless. And all tribes need their myths.

Myth #7: Letting people keep what is theirs costs money.

We are discussing "economics," not "semantics."

I'm referring to the blatantly dishonest semantics of economic zombies.

 

[editec]

TRICKLE DOWN economic policies are helpful ONLY when the SUPPLY side of the equasion is lacking money to invest.

TRICKLE UP economic policies are helpful ONLY when the DEMAND side of the equasion is lacking money to buy stuff.

Is that really so confusing?

 

[Oddball]

People lacking the money to buy stuff usually occurs because the velocity of money has slowed, not because there isn't enough of it in the system....All pumping currency into the system does is inflate prices and tax, via that inflation, those who can least afford it.

The "trickle down" economic model -at least as it was attempted in the 1980s- also called for spending cuts, which never materialized...It's completely disingenuous to claim that something has failed when it was never tried.

 

[iamwhatiseem]

You can talk about economic models all day long, but until you get past the fact that the single largest problem in this country is that at least 95% of all consumers rarely consider value beyond the price tag. Nor do they pause to consider the consequences of their buying choices beyond the immediate effect on their wallet.
Our entire manufacturing sector of this country is on the fast track to zero. Our economy switched foundations in the past 30 years, we went from a nation of doers to a nation of debtors. We don't save money, we borrow it. And until that changes, all this talk is semantics.

 

[Oddball]

You can talk about economic models all day long, but until you get past the fact that the single largest problem in this country is that at least 95% of all consumers rarely consider value beyond the price tag. Nor do they pause to consider the consequences of their buying choices beyond the immediate effect on their wallet.

Not true at all...There is always a segment of the population that will pay more for items of perceived higher value (brand name, added features, etcetera).

Our entire manufacturing sector of this country is on the fast track to zero. Our economy switched foundations in the past 30 years, we went from a nation of doers to a nation of debtors. We don't save money, we borrow it. And until that changes, all this talk is semantics.

Using that same logic, it could be said that our entire farming sector is on the fast track to zero, given that a scant 3% or less of the population is in that line of work, yet we produce more food than ever before.

That we've become a nation of debtors really doesn't relate to the rise of technology making us more productive, with fewer people involved a given field.

If you want to talk about us being a nation of debtors, that problem can be laid at the doorstep of our national fiat currency Ponzi scam, known as the Federal Reserve.

 

[The Rabbi]

We are the world's leading manufacturer of goods. That hasn't changed.

 

[iamwhatiseem]

You can talk about economic models all day long, but until you get past the fact that the single largest problem in this country is that at least 95% of all consumers rarely consider value beyond the price tag. Nor do they pause to consider the consequences of their buying choices beyond the immediate effect on their wallet.

Not true at all...There is always a segment of the population that will pay more for items of perceived higher value (brand name, added features, etcetera).

Yes, however that segment is a tiny minority. The nations largest retailer, Walmart, is larger than it's top 10 competitors...combined. And who are those competitors? - Mini-Walmarts.
We are a nation of people who buy with price as the top 9 out of 10 reasons for buying. If this wasn't true - the above wouldn't be true.

 

[Oddball]

You can talk about economic models all day long, but until you get past the fact that the single largest problem in this country is that at least 95% of all consumers rarely consider value beyond the price tag. Nor do they pause to consider the consequences of their buying choices beyond the immediate effect on their wallet.

Not true at all...There is always a segment of the population that will pay more for items of perceived higher value (brand name, added features, etcetera).

Yes, however that segment is a tiny minority. The nations largest retailer, Walmart, is larger than it's top 10 competitors...combined. And who are those competitors? - Mini-Walmarts.
We are a nation of people who buy with price as the top 9 out of 10 reasons for buying. If this wasn't true - the above wouldn't be true.

Target seems to be doing awfully well, working under the model that they deliver better goods for the price....I do know that their clothing is better quality for comparable prices.

And as someone with a 4E width foot, don't even get me started on the crappy selection of shoes at either retailer.

 

[william the wie]

You can talk about economic models all day long, but until you get past the fact that the single largest problem in this country is that at least 95% of all consumers rarely consider value beyond the price tag. Nor do they pause to consider the consequences of their buying choices beyond the immediate effect on their wallet.

Not true at all...There is always a segment of the population that will pay more for items of perceived higher value (brand name, added features, etcetera).

Yes, however that segment is a tiny minority. The nations largest retailer, Walmart, is larger than it's top 10 competitors...combined. And who are those competitors? - Mini-Walmarts.
We are a nation of people who buy with price as the top 9 out of 10 reasons for buying. If this wasn't true - the above wouldn't be true.

Target seems to be doing awfully well, working under the model that they deliver better goods for the price....I do know that their clothing is better quality for comparable prices.

And as someone with a 4E width foot, don't even get me started on the crappy selection of shoes at either retailer.

Google Hitchcock shoes, I wear 6Es because there are no mass produced 7Es.

 

[Publius1787]

"Two years after the financial crisis, the U.S. economy has steered clear of total disaster, with the Dow Jones industrial average currently near its pre-crash level. But the theories that caused it all are still out there, lurking in the shadows."

By John Quiggin

This was my favorite, you read it everyday on USMB.

"The Trickle-Down Hypothesis: the idea that policies that benefit the wealthy will ultimately help everybody.

Unlike some of the zombie ideas discussed here, trickle-down economics has long been with us. The term itself seems to have been coined by cowboy performer Will Rogers, who observed of U.S. President Herbert Hoover's 1928 tax cuts: "The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover ... [didn't] know that money trickled up.""

Five Zombie Economic Ideas That Refuse to Die - By John Quiggin | Foreign Policy

Five Zombie Economic Ideas That Refuse to Die - By John Quiggin | Foreign Policy

Welcome to reality and enjoy the video. By the way. The largest flow of dollors goes to wages.