IMF Top Economist: Worst is Yet to Come

[Paulie]

It would be cool if he was on America's side. Hell--we need SOMEBODY on our side.

If he were, he wouldn't have come out and claimed ignorance, and blamed deregulation.

 

[Kevin_Kennedy]

Hell--we need SOMEBODY on our side.

Congressman Ron Paul

 

[dilloduck]

WARNING! WARNING! DANGER! DANGER! Will Robinson..

Some of you people are beginning to sound like me when it comes to this issue.

Welcome to Conspiracy Theory Road, citizens.

Yes, it does rather stretch one's credibility quota, doesn't it?

For in order to believe that, we have to believe that the brightest people in the world of economics couldn't see that shipping millions of high paying industrial jobs off shore, and then lending enormous sums of money to the working class which have been losing purchaing power for the last fourty years wouldn't lead to SOME KIND OF INSOLVENCY problem, eh?

Of courrse if their real agenda was bankrupting the nation and it's working class (and investing middle class, too, BTW) to make them pliable to accepting their inevitable serfdom, and the gowing police state, then of course one doesn't have to believe that the master class is entirely incompetent.

But THOSE are our choices.

We either believe that all the Kings economists and bankers couldn't see what steel workers with 8th grade educations were warning me about in 1969, and that they had NO IDEA that those morgage backed bond ratings were total bullshit, OR one can believe that at least some of the master class knew EXACTLY what was going to happen.

Of course we all know that none dare call it conspiracy

Hell--they didn't even have to conspire. They just DID IT. Sheep or citizens--no matter. We sure as hell couldn't stop them. Still can't.

 

[Toro]

That's not exactly a problem. Maybe the policy-makers should have listened?

They saw this particular housing mess coming as early as 2002. How come no one else did?

Lots of people saw the housing bubble coming, including me.

I generally agree with the Austrian school of thought on inflation, but I find many of these people to be as dogmatically rigid as Marxists. That's why they have been reduced to fringe status in the economic world.

Its not that the Austrians were wrong about this in the end. The problem is that when you have predicted apocalypse for a generation and prepare yourself for it, you miss tremendous opportunities in the mean time.

 

[Paulie]

Lots of people saw the housing bubble coming, including me.

I generally agree with the Austrian school of thought on inflation, but I find many of these people to be as dogmatically rigid as Marxists. That's why they have been reduced to fringe status in the economic world.

Its not that the Austrians were wrong about this in the end. The problem is that when you have predicted apocalypse for a generation and prepare yourself for it, you miss tremendous opportunities in the mean time.

I agree. But it's not just about opportunities. Getting rich while the country is going down the drain isn't exactly my cup of tea. That helps no one but the ones getting rich, as we can plainly see.

Maybe the reason they're so rigid is because they keep getting proven right. At what point do you start advocating at least SOME of their main ideals in US monetary policy?

I know the answer. You DON'T, until you kick the Keynesians out. That's kind of hard when we're infested with them.

 

[Richard-H]

Hell, I saw it coming the day Ronald Reagan was elected.

 

[Toro]

I agree. But it's not just about opportunities. Getting rich while the country is going down the drain isn't exactly my cup of tea. That helps no one but the ones getting rich, as we can plainly see.

Maybe the reason they're so rigid is because they keep getting proven right. At what point do you start advocating at least SOME of their main ideals in US monetary policy?

I know the answer. You DON'T, until you kick the Keynesians out. That's kind of hard when we're infested with them.

The Austrian aren't always right. If they were, then there would be no debate in economics.

Markets are not always efficient because efficient markets require perfect information and because people are human beings, not automotrans. Highly efficient markets assume that people are always maximizing utility. But that is not correct. The human beings assumed as homo economicus bear little resemblance to human beings studied by psychologists, in theory and in clinical trials.

 

[Paulie]

The Austrian aren't always right. If they were, then there would be no debate in economics.

Markets are not always efficient because efficient markets require perfect information and because people are human beings, not automotrans. Highly efficient markets assume that people are always maximizing utility. But that is not correct. The human beings assumed as homo economicus bear little resemblance to human beings studied by psychologists, in theory and in clinical trials.

I didn't claim they were ALWAYS right. I just said they keep being proven right. Meaning, a lot of the things they've been warning about are coming true. That's enough for me.

They are right a hell of a lot more often than the Keynesians.

Why can't the market determine interest rates through supply and demand of money? Supply and demand is the most basic tenet of economics.

Could it be that if central banks relinquished that power, then they would no longer be relevant, much less have power and control?

Here's what's going on, as I see it. Bankers have the power, because they control the money. The bankers have long since bought most of Congress, and congress prefers to vote on their careers, rather than the best interest of the nation. So we perpetually get bad policy, because no one is representing us. Politicians do not want to let the market correct, because of the pain that would accompany the correction, and it would probably lead to most of them being voted out.

This needs to stop. Someone has to have the balls to say enough is enough, and let the market correct the only way it can.

Do you really think we're going to recover from over 2 trillion dollars of debt and deficit being thrown at this mess? The wars are not going to stop, so there goes all that savings. The entitlements aren't going to stop, so there goes all that savings. The social spending isn't going to stop, so there goes all THAT savings.

Where are the fundamentals that would lead one to believe that there's any hope for the Dollar, much less the United States?

 

[LordBrownTrout]

Let's see, the last time I was over here we were discussing a 700 billion doLar bailout in which the constituency got screwed. Now our govt is going to up it to 7 trillion. I'm just about ready to head for the compound in Montana.

 

[Richard-H]

I didn't claim they were ALWAYS right. I just said they keep being proven right. Meaning, a lot of the things they've been warning about are coming true. That's enough for me.

They are right a hell of a lot more often than the Keynesians.

Why can't the market determine interest rates through supply and demand of money? Supply and demand is the most basic tenet of economics.

Could it be that if central banks relinquished that power, then they would no longer be relevant, much less have power and control?

Here's what's going on, as I see it. Bankers have the power, because they control the money. The bankers have long since bought most of Congress, and congress prefers to vote on their careers, rather than the best interest of the nation. So we perpetually get bad policy, because no one is representing us. Politicians do not want to let the market correct, because of the pain that would accompany the correction, and it would probably lead to most of them being voted out.

This needs to stop. Someone has to have the balls to say enough is enough, and let the market correct the only way it can.

Do you really think we're going to recover from over 2 trillion dollars of debt and deficit being thrown at this mess? The wars are not going to stop, so there goes all that savings. The entitlements aren't going to stop, so there goes all that savings. The social spending isn't going to stop, so there goes all THAT savings.

Where are the fundamentals that would lead one to believe that there's any hope for the Dollar, much less the United States?

Maybe, if we would admit that the function of banks should be service, not profit and that that portion of economics would be best run by the government entirely. We should eliminate the private banks thru socialization, not eliminate the central bank. Then government could run them for the benefit of the country and not for the benefit of the bankers.

The banks should serve business not control it.

 

[Zoomie1980]

Lots of people saw the housing bubble coming, including me.

I generally agree with the Austrian school of thought on inflation, but I find many of these people to be as dogmatically rigid as Marxists. That's why they have been reduced to fringe status in the economic world.

Its not that the Austrians were wrong about this in the end. The problem is that when you have predicted apocalypse for a generation and prepare yourself for it, you miss tremendous opportunities in the mean time.

And if you predict something long enough you are always right, eventually, even if it takes 25, 35, 50, 70 years.... The DOW WILL hit 20,000, and gasoline will plummet to $1.50/gal. I predict it, and I will be right.......some day..... oops, already right on one of those.....

 

[Kevin_Kennedy]

Maybe, if we would admit that the function of banks should be service, not profit and that that portion of economics would be best run by the government entirely. We should eliminate the private banks thru socialization, not eliminate the central bank. Then government could run them for the benefit of the country and not for the benefit of the bankers.

The banks should serve business not control it.

No portion of economics could possibly be better run by government than by the free market. It's government intervention and the central bank that predominately led to this financial crisis in the first place. The government is incapable of interfering in the market without causing a problem.

 

[BaronVonBigmeat]

Lots of people saw the housing bubble coming, including me.

I generally agree with the Austrian school of thought on inflation, but I find many of these people to be as dogmatically rigid as Marxists. That's why they have been reduced to fringe status in the economic world.

They've been reduced to the fringes because their policy recommendations are not what governments and bankers want to hear.

 

[Toro]

They've been reduced to the fringes because their policy recommendations are not what governments and bankers want to hear.

No, its because they are dogmatically rigid. They are ideologues. They are not empiricists.

The empiricist will change his opinion in light of contrary evidence. The ideologue will retain his opinion despite contrary evidence.

 

[Toro]

Why can't the market determine interest rates through supply and demand of money? Supply and demand is the most basic tenet of economics.

The market does determine the interest rate through the supply and demand for money. The operations of most central banks are through the short-term money markets. Long rates are set almost entirely through the market. The supply of money is a function are several factors, including the velocity of money, the introduction of new technology, trade, etc., that have little or nothing to do with government. In fact, the setting of interest rates is done both by the government and by the market.

There is no doubt that the Fed is complicit in this mess and is perhaps the primary culprit. However, the market is also to blame. Without all this "financial engineering," i.e. technological advancement in finance, there is zero way this would have happened.

The next time bomb sitting out there are collateralized default swaps, "CDSs." These have nothing to do with the government and are a creation of the market. They will represent market failure on a massive scale.

I generally agree with the Austrian school of thought on money. However, there are times when government must backstop the economy.

 

[editec]

The IMF put out a report saying that home prices were not in a bubble, at least not around the world, and that some countries, i.e. Canada, were cheap. I believe they said that the US was somewhat overvalued but not a bubble, though I can't remember exactly. I have it somewhere. I'll see if I can post it.

I track these things on a daily basis. I can assure you, two years ago, the IMF was gushing over how this was the greatest era of co-ordinated global growth in decades.

I do not doubt it.

As I recall the myth is that the world-wide economy made major economic downturns impossible.

Anyone here familiar with ship building?

If you are, consider why they put watertight hatches in ships to separate compartments of it.

Now consider the world economy like a ship and national economies used to be like the various watertight compartments of that ship.

Which ship would you rather be on?

The one with lots of watertight compartments that is taking on water, or the one with only one compartment that is taking on water?

Ironically, the argument against FREE TRADE is REALLY the same argument as the one against centralized planning of an economy.

The strength of capitalism is that there are multiple players all playing their own game. Some of them are right and some wrong, so when things go South the righter ones stay afloat thus keeping the ship of economic state afloat, too.

Well, now that we have a one world economy, when one player makes a huge mistake, it effects the worlds economic ship of state.

We are on a very large ship with only one compartment, and that ship has a gigantic gash in the hull and is taking on a lot of water.

Only on this economic ship of State when they announce woman and children first, they don't mean they get on the lifeboats, first.

Oh no, what they mean is that women and children are throw to the sharks first.

Am I wrong?

Ask half this board what are the things we need to cut from our government's areas of responsibility.

You will discover that it will be the women and children will be the people who suffer with those proposed cuts that some of our resident self proclaimed Austrian economists are proposing.

Not one of them wants to cut the military, the courts or the police, I promise you that.

They ALL want to cut social services which help who?

THE PEOPLE, mostly woman and children, that's who.

 

[indago]

THANKSGIVING — What's for dinner?

 

[Paulie]

The market does determine the interest rate through the supply and demand for money. The operations of most central banks are through the short-term money markets. Long rates are set almost entirely through the market. The supply of money is a function are several factors, including the velocity of money, the introduction of new technology, trade, etc., that have little or nothing to do with government. In fact, the setting of interest rates is done both by the government and by the market.

I'm not sure how setting the federal funds rate as you see fit is allowing the market to determine the overall price of credit. All it is doing is creating an environment where credit is artificially cheap, and new money is hitting the streets. This is what keeps leading to the recent asset bubbles.

If you say the Fed is to blame, then that relies inherently on their manipulation of credit. Setting the fed rate at 1% allows banks to offer loans cheaper than they should be. It's putting too much debt into people's budgets that otherwise have no business indebting themselves.

Cheap credit is enticing, and since we've been living off credit for decades now, it only exacerbates the problem to have it be "affordable" for everyone.

It props up an economy for a while, but ultimately it ends up wiping out the middle class.

Had the market been determining rates exclusively, there would have been no sub-prime mortgages because most banks probably wouldn't have taken the risk without having virtually free overnight loans. Although, in light of all these bailouts one has to wonder if the banks knew the safety net would ultimately be there regardless.

 

[editec]

If he were, he wouldn't have come out and claimed ignorance, and blamed deregulation.

DEregulation was PART of the problem.

Why you people insist that this enormously complex SNAFU has but one cause simply amazes me.

Had we not changed the banking charters they could not have gambled with our money they way they did.

Then nothing that the FED did would have caused this ENORMOUS BANKING crises.

Why is that hard for some of you to understand?

It took multiple mistaken policies to get us into this mess.

 

[editec]

The problem is that the Austrians saw it coming 25 years ago.

That philosophy is in part responsible for the problem.

They believe that sans regulations this problem would not have happened, and if there were no FED I might be included to agree with them.

But of course had there been no FED then the whole game would be so different that of course this problem couldn't have happened.

Its almost like they're saying the solution on Earth is to make Earth, Mars.

They're right ONLY if we pretend that history doesn't exist.