Comments for "Krugman on Crisis"
MrM says:
Nemo sent me ...
MrM Sat Apr 4 18:51:47 2009 CDT #
Virtual Dawgbot says:
Sadly the uber-urbanist does not see the irony of discovering a dysfunctional financial system while traveling via public transit.
Virtual Dawgbot Sat Apr 4 18:52:03 2009 CDT #
CRbot says:
This comment thread has been CRC-IZED by yagij (CRbot helped a little).
http://realize.org/cr/crcizer/phpCRCo.php?path=%2F7281207084793086925&ord=asc&csslayout=reg&topic=Krugman+on+Crisis
And for the stubborn old-timers... it's also been HALO-IZED by CRbot.
http://realize.org/cr/halokit.php?halourl=http://www.haloscan.com/comments/calculatedrisk/7281207084793086925
CRbot Sat Apr 4 18:52:43 2009 CDT #
Ministry of Truth says:
Quick, throw more money on the fire!!!
Ministry of Truth Sat Apr 4 18:53:56 2009 CDT #
Lucifer says:
CR,
when will you capitulate and call it a 'depression-like' event. I do not see this as GD2, rather as a financial version of the black death.
Lucifer Sat Apr 4 18:58:03 2009 CDT #
Comrade Bear (tj and the bear) says:
MoT,
LOL!!! Yes, it's quite amazing how Krugman can acknowledge a monstrous debt burden and then suggest the solution lies in even more debt.
The general problem here, as I've cited numerous times before, is that politicians (and liberal economists) always feel the need to "do something". They can't and won't accept that some things simply cannot be fixed except through time and (horrors!) austerity.
That is, unless it's someone else, in which case that's exactly what we've preached through the IMF and World Bank.
Comrade Bear (tj and the bear) Sat Apr 4 19:02:27 2009 CDT #
Anonymous says:
Poor old Paul doesn't understand this is by design, the US sovereign debt downgrade and destruction of the dollar lie at the end of the path along with the death of the empire and the rise of a new one in the east.
Anonymous Sat Apr 4 19:03:31 2009 CDT #
EvilHenryPaulson says:
Hi Kruggie!
Will you be in Princeton late May / early June?
EvilHenryPaulson Sat Apr 4 19:03:40 2009 CDT #
Comrade Bear (tj and the bear) says:
lucifer,
So far it's mostly financial, but it won't stay that way. In that aspect we're progressing much like the GD, too.
Comrade Bear (tj and the bear) Sat Apr 4 19:04:25 2009 CDT #
Outsider says:
An economist saying we're doomed?
Okay. It's going in my scratch pad. Another bottoming indicator.
Outsider Sat Apr 4 19:05:33 2009 CDT #
1 currency now [yogi] says:
“Like so many other companies and institutions, HSG has been impacted by a global credit crisis which no one could have anticipated,” Hicks said.
“I’m bringing in minority partners, so I can pay off the loans,” he said. “I wouldn’t normally do that. In this particular environment, that’s what we should do.”
“Under normal market conditions, it would be a nonevent,” he said.
Sorry mr. billionaire, normal Ponzi game is up.
1 currency now [yogi] Sat Apr 4 19:06:45 2009 CDT #
nades says:
tj & MoT,
it has amazed me too.... Its time to acknowledge that:
A- This is not the same as the first depression
B- The population is not that same, we are much mentally weaker (average out)
C- The play book from the first GD will not work this time.
...........
nades Sat Apr 4 19:09:40 2009 CDT #
Char says:
Poor old Paul doesn't understand this is by design, the US sovereign debt downgrade and destruction of the dollar lie at the end of the path along with the death of the empire and the rise of a new one in the east.
Um, no. China will not replace the United States anytime soon as the de facto country to do business in/with. China is a closed system (communism and all). If you don't believe me, travel to China and try and open a business there. Can't? Thats because even if you had a straw man to operate on your behalf, you would still have to tear through layer upon layer of red tape.
Do business through a Chinese company? Let me summarize what its like to do business with Chinese companies. In China, relationships supposedly mean everything. However, their definition of relationship includes stealing your intellectual property, playing games (i.e. setting up meetings where contracts are to be signed, only to send an employee who claims they have no authority to sign contracts), and "tributes" to various government and corporate officials.
As badly as we screwed up the rest of the world with our version of finance, we are ironically posititioned to come out on top, yet again. Strange but true.
Char Sat Apr 4 19:10:38 2009 CDT #
K-epoch says:
Char - the interesting thing about your analysis is that there are plenty of companies sucessfully doing business in China, despite the many drawbacks that you listed.
Just look around you, your computer, cell phone, TV and soon your car. All Examples of companies sucessfully doing business in China.
Parent Post
K-epoch Sat Apr 4 21:15:27 2009 CDT #
Pavel says:
"They can't and won't accept that some things simply cannot be fixed except through time and (horrors!) austerity. "
He's saying that we can't afford austerity. More is less. Less is more.
Pavel Sat Apr 4 19:10:40 2009 CDT #
MrM says:
They can't and won't accept that some things simply cannot be fixed except through time and (horrors!) austerity.
Are you really asking for Depression-type of austerity? Seriously, are you sure you will be able to handle it? Unless you have an mp-sized family bunker.
It is actually pretty simple:
- Government debt to create/maintain jobs = Good
- Government debt to support zombie banks = Bad
MrM Sat Apr 4 19:10:41 2009 CDT #
Basel Too says:
Sorry mr. billionaire, normal Ponzi game is up.
Too many owners were playing the franchise flipping game. Buy a team with massive leverage, strong arm the city into building an arena/stadium heavily subsidized with public funds, and the sell to another buyer. That game is over, just ask the Sacto Kings.
Incidentally, Hicks is the owner that gave A-Rod the 10 year - $250M contract, totally distorting the existing salary structure. Couldn't happen to a better owner.
Basel Too Sat Apr 4 19:12:38 2009 CDT #
Comrade Bear (tj and the bear) says:
He's saying that we can't afford austerity.
We can; they can't.
Their power rests in the status quo.
Comrade Bear (tj and the bear) Sat Apr 4 19:13:40 2009 CDT #
nades says:
I dont think the average american could hand austerity.... we've gotten soft.... very very soft...
Parent Post
nades Sat Apr 4 19:16:35 2009 CDT #
Anonymous says:
I respectfully disagree. If you or any of your friends or family are Marines, you would know what I'm talking about. For that matter, all of our servicemen and women have experienced and are prepared for whatever lies ahead.
Parent Post
Anonymous Sat Apr 4 19:37:00 2009 CDT #
Michael says:
When the interest rate cuts by the Fed began this cycle, they started from a historically very low base 5.25% and could not have much of an affect, due to the already cheep credit.
Michael Sat Apr 4 19:14:56 2009 CDT #
Interesting Times says:
I respect and admire you Krugman. But sorry man, you're wrong. We should have coffee sometime.
Interesting Times Sat Apr 4 19:15:43 2009 CDT #
Anonymous says:
Goldielocks and the three bears.
Finding Nemo.
Humpty Dumpty.
And now Alice in Wonderland.
What's next.......
101 DambedNations.
Anonymous Sat Apr 4 19:16:02 2009 CDT #
Michael says:
Dumbo
Parent Post
Michael Sat Apr 4 19:17:58 2009 CDT #
Comrade-Dope jg (jg) says:
CR, nades has capitulated to G.D. Time for you to get on the bandwagon, sir!
Hilarious, how rich and smart folks -- Hicks and K-Man -- could not see this coming, nor the inevitable solution, as tj lays out.
My wife is off to Maine next week to find us a bunker. She thinks it is for summer vacations. I tell her, but she does not believe me, that it is to keep us away from the big mess forthcoming.
Different paths, same result, okay with me.
Comrade-Dope jg (jg) Sat Apr 4 19:16:29 2009 CDT #
Comrade Bear (tj and the bear) says:
MrM,
I've been preparing for a Greater Depression for 5 years now, although one can never be totally prepared.
Regarding good vs. bad debt, the government is more than capable of keeping everyone busy and fed with the money they already collect sans deficits. Instead, they choose to grow every existing insane program plus add more. If they insist on pursuing this course they'll soon not have the ability to do either, and I fear for that day.
Comrade Bear (tj and the bear) Sat Apr 4 19:22:02 2009 CDT #
Same-O Same-O says:
Our employment picture rested on their status quo. The transfer from private to public of these astronomical losses means the American people will be held responsible when this comes tumbling down. The multi national banks and corporations will simply go on doing business in the new epicenters of trade and growth. Relatively debt free and ready to start the business cycle all over again.
Capital has no nationality jus ROI, the higher the better.
Same-O Same-O Sat Apr 4 19:22:33 2009 CDT #
Char says:
Remember when Stan O Neal got 160 million for driving Merril Lynch into the ground? Those days are over until the next bubble.
Char Sat Apr 4 19:26:16 2009 CDT #
Comrade-Dope jg (jg) says:
Outsider, I'm buying 2-5 years of wheat and powdered milk, and will supplement it with deer and fish and vegetables from a greenhouse.
Good enough for the Indians, good enough for us.
I'm hoping that snow and distance will keep the hordes away.
Comrade-Dope jg (jg) Sat Apr 4 19:26:25 2009 CDT #
Black Star Ranch says:
Tough weekend. Earlier today MrsBSR was laid off and the youngest son lost his part-time job washing dishes.
Thank goodness the big old garden can't lay ME off - and the cows and chickens will still "put out".
We'll need to decrease to a truck or two (from three).
Black Star Ranch Sat Apr 4 19:27:13 2009 CDT #
Michael says:
Sorry to hear about that BSR.
Parent Post
Michael Sat Apr 4 19:32:42 2009 CDT #
nades says:
jg, maine is beautiful 6 months a year but its going to be a shock compared to the jewel come winter! :)
nades Sat Apr 4 19:28:34 2009 CDT #
Comrade-Dope jg (jg) says:
No fun, BSR; sorry about the bad news.
Garden, cows, chickens, trucks, and guns and well/springwater, presumably; if you have little/no debt, you are probably set.
Comrade-Dope jg (jg) Sat Apr 4 19:30:21 2009 CDT #
MrM says:
I've been preparing for a Greater Depression for 5 years now, although one can never be totally prepared.
I hope you are right and you are prepared to face Grapes of Wrath. Very few are ready for this. This is more than just having no debt and not invested in the stock market.
MrM Sat Apr 4 19:30:39 2009 CDT #
JimPortlandOR says:
OK, this won't be a replay of the Great Depression, with the principal difference that in the 1930's we primarily had a manufacturing base for the economy. We really didn't need to import much to have our wants/needs met. The fall of the market was a demand-shortfall phenomena and the effects were widespread unemployment and human distress on a scale we haven't seen since then. There are other differences, of course (some safety net, a cushion of willingness to deficit spend, etc.)
The key issue, it seems to me, is what is the basis for a revived US economy?
We manufacture some stuff, but much of our wants/needs must be imported (clothes, electronics, perhaps cars (soon?)), and how will we pay for those imports? Who will employ those who have lost jobs that probably won't come back? Financial services is not a business that can be counted upon for growth in the next 10 years. Housing is dead probably for a decade. Car production may occur here, but the profits will go abroad.
An even more challenging problem is where the capital to build the new wealth-creating businesses of the future will come from? We won't be generating that for a long time, and we can't count on other countries to view us as the safe haven for their wealth.
So, what will the USA Version 3.0 (or 4.0, depending on your metrics) look like? Can we achieve even the kind of social stability of northern european countries relying on just our own wealth and job creation? We are not positioned well for that outcome.
I think what Krugman (and others) are worrying about is a generation or more of depressed US economic conditions that has no spark plug to ignite the engine. That is what I worry about. Without it, not only will the economy suck, we can't assume our social stability can withstand this kind of future.
JimPortlandOR Sat Apr 4 19:30:42 2009 CDT #
Bill Hicks says:
http://www.theoildrum.com/node/5177#more
Parent Post
Bill Hicks Sat Apr 4 19:34:39 2009 CDT #
diogenes says:
No worries mate...the messiah will save us!
Parent Post
diogenes Sat Apr 4 19:59:17 2009 CDT #
BrantW says:
Krugman's Keynesian bias results in him being blind to the true nature of this economic crisis. This is the reason he is 'suprised' at how difficult things are. I guess Keynesians believe that you can shift debt from the private to public sector, and in the process ballon debt to 500% of GPD (from the current 360%+) and all will be well. Well it does not work that way in the real world. No matter where the debt is...it still have to be serviced. The income for that comes from the economy....so total debt to GDP is always a limiting factor.
All Krugman needs to do it look at a plot of total US debt as a % of GDP for the last 80 years to see why this problem will not be resolved through policy, reflation, or jumpstarting of the credit system.
The problem is not that there is no credit. The problem is that there are not enough creditworthy borrowers....and those that are credit worthy can not find anything to invest in that will make a positive return.
This crisis will be over when debt to GDP is reduced to less than 150%...either though inflation, or debt default. In current dollar terms...that is about a $20 trillion dollar hit. So far, we have not taken a net hit at all. Debt liquidation in the private sector has been offset by ballooning public sector debt. The debt service IS lower, but it is still unsustainable.
Those of the Austrian or Classic persuasian who saw this coming long ago are not at all suprised that we are a long long ways from the end of this.
By the way, the current stock market rally and bout of optimism is a delusional interlude. 1930 all over again. This market could rally to SP1000....and then drop to 300.
I guess it is 'unAmerican' to admit the truth...that there is nothing that can be done, and we just have to let the credit ballooned fake economy re-adjust. Basically, that means the US needs to get about 60% poorer.
BrantW Sat Apr 4 19:30:58 2009 CDT #
Comrade Bear (tj and the bear) says:
BSR,
Sorry to hear it. Guess you'll have lots of help with that garden until they find their next gigs.
Comrade Bear (tj and the bear) Sat Apr 4 19:32:13 2009 CDT #
Outsider says:
Did MrsBSR have a hint, or was this totally out of the blue? Good thing you're well positioned. 2 in one day. Ugh.
Outsider Sat Apr 4 19:32:24 2009 CDT #
Same-O Same-O says:
Sorry BSR. Good luck. You are way ahead of most in escaping from the consumption trap.
We cut down to one car when the lease was up on mine. Frustrating at times but the $550(insurance,gas,payment) a month saved is worth the scheduling conflicts.
Same-O Same-O Sat Apr 4 19:32:29 2009 CDT #
Comrade-Dope jg (jg) says:
nades, I have no idea why my San Diego-native wife picks Maine; cute, charming I guess.
But, we lived in Chicago for two years, Minneapolis for four, and dreary The Netherlands for one, so any latent, weather-induced suicidal tendencies on her part have been worked out.
Comrade-Dope jg (jg) Sat Apr 4 19:33:18 2009 CDT #
Comrade Bear (tj and the bear) says:
Well said, Jim, and my thinking too.
I'm optimistic that something will come along, but for now the what and when are a mystery.
Comrade Bear (tj and the bear) Sat Apr 4 19:34:20 2009 CDT #
Virtual Dawgbot says:
N.B. Extreme disagreement follows.
nades says: Today, 5:09:40 PM PDT
...
B- The population is not that same, we are much mentally weaker (average out)
We are stronger, smarter, more educated, longer lived and more adaptable than any group at any time in human history. Americans didn't get here by accident and didn't stay here by accident either. It is fashionable to bust on we soft, lazy, unsophisticated arrivistes. Do so at your peril.
We have further to fall, more resource reserves, more history of self reliance and more resolve than near any other potential rival.
Don't mistake a sleeping dragon for a dying dragon.
Virtual Dawgbot Sat Apr 4 19:34:22 2009 CDT #
diogenes says:
The america you described died in 1968 with "the summer of love". No responsibility for anything. We are all just victims...oh and I forgot the mandatory...it's bushes fault.
Parent Post
diogenes Sat Apr 4 20:05:29 2009 CDT #
mock turtle says:
ive never heard a dem say we are all just victims
i hear repubs say it a lot
Parent Post
mock turtle Sat Apr 4 20:47:20 2009 CDT #
starbucks says:
Well at least Roubini is looking a little less bearish:
http://julia.nonsociety.com/lifecast/90860415
starbucks Sat Apr 4 19:34:27 2009 CDT #
Lobbyi$t Ben Dover says:
We are investing right now (not by choice) a new bubble. It is a debt bubble in need of inpossible taxes to feed it. What happens when it goes Bang? This mess is only going to get bigger and I wonder who will servive.
Lobbyi$t Ben Dover Sat Apr 4 19:36:11 2009 CDT #
Black Star Ranch says:
Thanks all. We moved here at the turn of the millenium knowing things would fall apart - we're just fine. It sure is (even for us) an eye-opener though, realizing time to prepare is just about gone.
Black Star Ranch Sat Apr 4 19:36:16 2009 CDT #
Interesting Times says:
BSR sorry to hear about the family. You're probably the most prepared among us and I wish you all well.
Interesting Times Sat Apr 4 19:37:14 2009 CDT #
Comrade Bear (tj and the bear) says:
Grapes of Wrath
My grandparents described it very vividly. I'll be damned if I thought it would happen again, until I realized (years ago) that was exactly what was happening.
Comrade Bear (tj and the bear) Sat Apr 4 19:38:25 2009 CDT #
Comrade-Dope jg (jg) says:
Jim and Virtual, I do not share your confidence in the general U.S. population.
Look at the shootings going on, now, when the downturn has just begun. Look at what a zoo Katrina was.
I am sure that many parts of the U.S. -- farmers, ranchers -- are well prepared, and will do fine. I have no confidence that the city folks will remain calm and levelheaded once the banking holidays start.
Comrade-Dope jg (jg) Sat Apr 4 19:38:53 2009 CDT #
Outsider says:
"jg, maine is beautiful 6 months a year but its going to be a shock compared to the jewel come winter!"
Since living in NH I've actually found the winters are just as nice as the summers. No bugs. No snakes. More quiet. But at the same time severe, and much more scratching of the soil to get it to grow. It was a tough life for the early settlers for good reason.
Outsider Sat Apr 4 19:39:12 2009 CDT #
Anonymous says:
Another inflationist bites the dust IMO
.
It would be funny to see .B.e.r.n.a.n.k.e. or .Gei.th.ne.r.. get a nice cream pie in the face broadcasted on network news
or maybe jail time..bukakke style pie
.
Anonymous Sat Apr 4 19:39:52 2009 CDT #
MrM says:
Krugman's Keynesian bias results in him being blind to the true nature of this economic crisis.
We should give Krugman the benefit of the doubt - for sure he is well aware of the trend in the public debt. However, when the public stops consuming and starts saving (for whatever reasons, be it too much debt or job insecurity), the economy goes into the death spiral. When everybody saves 100% of income, nobody buys anything and everything gets laid off and incomes goes to zero. So of course the government has to step in and fill in the slack in demand. And of course it means running deficit and public debt, but that is the right response to aggregate demand shocks.
I am actually thinking that a cleaner and simpler solutions would have been to give cash to everybody, say $10,000 per person. That's your $3 Trillion solution, and it will solve much of consumer loan/mortgage problems, people with little debt will spend, the inflation will be stoked, the dollar will devalue (=become more competitive). Treasury can simply issue these checks, so no dependence on the bond market. The only problem is that banksters need a lot more than $10K...
MrM Sat Apr 4 19:42:37 2009 CDT #
Same-O Same-O says:
Went out to dinner last night in the Hawthorne district of Portland. Went to three places before we found a table. A packed brew pub. Talk around us was of the economy and no BS, 4 guys talking about PM's.
On the way to dinner NPR had an interview with a state legislator who was talking about next years budget. 30% across the board cuts in all agencies. Layoffs of 100 state troopers that they just hired and trained. A 7 WEEK reduction in the school year. He was talking about statewide town meetings for government programs at the community level to make a pitch why they shouldn't be cut. All of this on top of nearly 11% unemployment with some counties over 15%. Oregon is seeing some puckerfactor signs of depression.
Same-O Same-O Sat Apr 4 19:42:53 2009 CDT #
MrM says:
BSR - best of luck to you and your family. Keep it up!
MrM Sat Apr 4 19:45:46 2009 CDT #
Interesting Times says:
"I am actually thinking that a cleaner and simpler solutions would have been to give cash to everybody, say $10,000 per person"
What happens after $10k runs out?
Interesting Times Sat Apr 4 19:45:48 2009 CDT #
nades says:
BSR - everything will work out, it always does! :)
Good luck!
nades Sat Apr 4 19:46:33 2009 CDT #
jo6pac says:
I think a new bubble is a great Idea as long as I'm in on the ground floor. WTF.
>:o
jo6pac Sat Apr 4 19:46:50 2009 CDT #
Lobbyi$t Ben Dover says:
BSR,
Good luck!
Lobbyi$t Ben Dover Sat Apr 4 19:47:23 2009 CDT #
Comrade-Dope jg (jg) says:
Thanks for the anecdote, SameO. Wow.
Comrade-Dope jg (jg) Sat Apr 4 19:49:00 2009 CDT #
MrM says:
What happens after $10k runs out?
Runs out on what? On buying things and hence supporting consumption? On lowering debt? Both are good things. Of course it is inflationary and is equivalent to a haircut applied to all creditors, but what's wrong with that?
And I am not saying this is a flawless solution - but it might less flawed than all this Paulsen-Geithner machinations.
MrM Sat Apr 4 19:50:26 2009 CDT #
Puzo says:
Don't know if this has been posted here.
http://bit.ly/AMNaZ
George Carlin 3 minute clip: The Truth About Wall Street And Washington
Puzo Sat Apr 4 19:50:58 2009 CDT #
Interesting Times says:
"but it might less flawed than all this Paulsen-Geithner machinations."
Well... that's aiming pretty low ;)
Interesting Times Sat Apr 4 19:51:35 2009 CDT #
Interesting Times says:
Let's just say, there isn't enough prison space for my current solution.
Interesting Times Sat Apr 4 19:52:46 2009 CDT #
Outsider says:
"$10,000 per person. That's your $3 Trillion solution"
That would actually be $10,000 for every man, woman and child. So if you cut out the minors, it would be less than $3T - maybe more like 1.5T?
$10T would I believe wipe out all mortgage debt in this country, 2008 figures:
http://www.federalreserve.gov/releases/z1/Current/z1r-2.pdf - page 3
While $10T seems ridiculous, I wouldn't be surprised to see the current plan go that high or higher. And without mortgage debt, the economy would most definitely have been super stimulated.
Outsider Sat Apr 4 19:53:19 2009 CDT #
Comrade Bear (tj and the bear) says:
When everybody saves 100% of income, nobody buys anything and everything gets laid off and incomes goes to zero.
Sorry, the world doesn't work that way.
There is a basic level of economic activity that will always occur, and it's simply a matter of letting things get back to that level and then rebuilding -- in a sustainable fashion -- from there.
It would be different if we had a fundamentally sound system shocked by an exogenous event. In that instance the government can effectively prevent a mostly psychological downward spiral. But that's hardly the case now.
Comrade Bear (tj and the bear) Sat Apr 4 19:54:03 2009 CDT #
JimPortlandOR says:
I have a friend who is a bartender in a very successful bar in Seattle (he commutes from Portland for Fri-Sun work). He previously made lots of cash in tips, now off by about 50%. He said liquor drinkers have gone from premium brands to well-stock or to beer. Beer drinkers have gone from craft beers to PBR. Most of his tips previously (80%) were in cash. Now half of tips (on lower bills) are put on credit cards. Each weekend regulars come in and say they have been laid off. Only an anecdote, but those who say bars sell more in bad times are surely wrong it seems.
On the other hand, some folks seem to have money to eat out in restaurants. On a recent Wednesday night, a up-scale restaurant was nearly full (with lots of tables). My guess is a combination of denial and some folks feeling insulated from the downturn - until they get the pink slip. But Portland foreclosures are growing, as CR's charts of major city FC rates indicate, and a year ago folks were saying Portland would be immune to that because the bubble didn't occur much here.
But every week, more and more empty stores and businesses. We are nowhere near the bottom it seems.
JimPortlandOR Sat Apr 4 19:54:22 2009 CDT #
Black Star Ranch says:
Again, thanks all....I must be old and senile though, 'cause I find this exciting! A little unnerving, but exhilarating in the fact that this is HISTORY BEING MADE! In a past life, the USMC taught me to stay alive and at 240-lbs, I can stand some pushing away from the table a might earlier, anyway. ROFLOL.
Time to milk a cow..............Semper Fi.
Black Star Ranch Sat Apr 4 19:54:27 2009 CDT #
GreaterFool says:
What does the US financial system look like after this? The financial system is supposed to pump capital where it's needed, keeping some of the capital to survive, in a symbiotic relationship with the greater economy. However, that relationship clearly became more parasitic than symbiotic in recent years, as the financial system become very,very bloated.
It seems as thought the current plan is to save the parasites, but put them on a leash. Not sure that's going to work out so well.
GreaterFool Sat Apr 4 19:58:33 2009 CDT #
Same-O Same-O says:
Link to the OPB story I referred to above.
http://news.opb.org/article/4688-potential-cuts-paint-bleak-picture-salem/
Same-O Same-O Sat Apr 4 20:01:13 2009 CDT #
MrM says:
It would be different if we had a fundamentally sound system shocked by an exogenous event. In that instance the government can effectively prevent a mostly psychological downward spiral. But that's hardly the case now.
I am afraid we have both the debt overload and the demand shock.
MrM Sat Apr 4 20:03:36 2009 CDT #
Interesting Times says:
"I am afraid we have both the debt overload and the demand shock."
We should have a contest on the most concise way of describing current events.
This is my #1 pick so far.
Interesting Times Sat Apr 4 20:05:34 2009 CDT #
Comrade Bear (tj and the bear) says:
I am actually thinking that a cleaner and simpler solutions would have been to give cash to everybody, say $10,000 per person.
McHugh, a guy that runs a TA newsletter, has been pushing the idea of a one-time refund of 5 to 10 years income taxes. His idea is that we're not out of the woods until you rectify the people's individual balance sheets.
Not endorsing the idea, but it beats everything I've heard coming out of DC (although that's not saying much).
Comrade Bear (tj and the bear) Sat Apr 4 20:06:27 2009 CDT #
Flaminia says:
I'll be damned, but I agree with Dawg again. Just consider one small detail: over the past 20 years American workers--especially younger ones--have adapted to job and even career change as a periodic normal life event. One of the advantages that the U.S. has always had was its moveable, malleable population. Some of the younger people in the EU have learned this secret too, but the Americans have moved even further along that road. This country's population is still distinctively nimble. The only other country with such a strong dose of this attribute that comes to my mind at the moment is Australia and they lack our resources and critical mass.
Flaminia Sat Apr 4 20:07:15 2009 CDT #
Comrade Bear (tj and the bear) says:
HISTORY BEING MADE
Oh yeah. Decades from now we'll be the geezers telling the scary stories to the upstart young'uns (hopefully).
Comrade Bear (tj and the bear) Sat Apr 4 20:09:06 2009 CDT #
Comrade Bear (tj and the bear) says:
put them on a leash
But they're handing them the wrong end of the leash!!!
Comrade Bear (tj and the bear) Sat Apr 4 20:09:52 2009 CDT #
Anonymous says:
schiff faber interview
http://www.europac.net/report/reports/report_faber.pdf
Anonymous Sat Apr 4 20:11:55 2009 CDT #
JimPortlandOR says:
Hell, we've known for a decade that millions of American were living payday to payday, running up credit card debt, overpaying for houses to keep up with the pack, and withdrawing equity that was paper-only from their houses.
As a country of citizens, we are collectively bankrupt now that the economy is withdrawing jobs, lower real estate values, and tightening credit. In GD-I, the vast bulk of the people were not heavily in debt before the crash came. Same for the banks. They also grew beyond their means by leveraging, derivatives and other financial tricks.
There is NOT enough Fed US debt capacity to fill these huge holes, and I believe that Obama/Geithner/Summers know that. They have to talk around the problem and push it down the road.
Perhaps the best solution is the US gov. to assume all the bank and personal debt and then default on our T-bills. Sovereign default, like Russia and Argentina. Write off our past excesses and learn to live on current income. The people cost will be unimaginatively huge. But like our grandparents/great grandparents, we will learn again that their is no free lunch and caution in spending is prudent and essential.
JimPortlandOR Sat Apr 4 20:14:26 2009 CDT #
michael says:
Krugman is a clown.
Maybe he is just not getting it - wonder when he will.
But more likely he is continously manipulating his audiences by picking the facts that support his day's talk, but never giving a complete and consistent picture. That's disgusting for a scientist he pretends to be.
michael Sat Apr 4 20:16:36 2009 CDT #
mock turtle says:
michael
you have no evidence to justify your silly claim that krugman is a clown
shame on you
krugman is a plain speeking economist
Parent Post
mock turtle Sat Apr 4 20:45:50 2009 CDT #
Uncle Billy, Mental Widget says:
Once again Prof. Krugman demonstrates that he is a flack. He writes in his columns and blog posts that he is "scared." He tells a group of ex mortgage morons in the desert that he's "terrified," twice. He is not a stupid man. He knows that the most influential prize-awarded economic voices are not supposed to be going around saying "I'm terrified." He knows the effect this will have. He is doing this with a purpose. What is it? Why would he want to mong the fear? Think peoples.
Uncle Billy, Mental Widget Sat Apr 4 20:17:09 2009 CDT #
Comrade Bear (tj and the bear) says:
4 guys talking about PM's.
There's your next bubble.
Comrade Bear (tj and the bear) Sat Apr 4 20:18:06 2009 CDT #
Lawyerliz says:
Well it was a simply lovely day here on Merritt Island (Fla), and I bought plants and planted some of them and ate Middle Eastern takeout and Home Depot was simply swarming with people and we had to go further from the store entrance to park.
And I was feeling really cheery, until I read about Mrs BSR, and Krugman's being terrified.
He's just getting around to being terrified now?
I'm hoping that since we are less than 5 miles from NASA's entrance (and part of the Nasa reserve land is at the end of our street that civil order will be reasonably preserved.
Lawyerliz Sat Apr 4 20:19:25 2009 CDT #
BrantW says:
Lawyerliz,
Good point. People that really know what is going on...were scared 10 years ago. 3 years ago they were terrified. Now they are the ones that probably hav the least to be afraid of...since they are prepared.
Parent Post
BrantW Sat Apr 4 20:46:13 2009 CDT #
anon says:
Great Moyers interview.
http://www.pbs.org/moyers/journal/04032009/watch.html
anon Sat Apr 4 20:19:54 2009 CDT #
Comrade Bear (tj and the bear) says:
I am afraid we have both the debt overload and the demand shock.
Undoubtedly, but in this case the latter is a symptom, not a cause.
Comrade Bear (tj and the bear) Sat Apr 4 20:20:18 2009 CDT #
Broward Horne says:
"We are stronger, smarter, more educated, longer lived and more adaptable than any group at any time in human history"
-----
And more deceitful, more selfish, more deluded, more egotistical. Looks like a wash to me.
Broward Horne Sat Apr 4 20:22:22 2009 CDT #
Interesting Times says:
Lawyerliz - If I were you I would seriously check the perchorate (rocket fuel) levels of your plants and water before eating and drinking.
Interesting Times Sat Apr 4 20:23:41 2009 CDT #
Lawyerliz says:
We really haven't cut the spending all that much.
And we have all this bad stuff happening as a result of just a teensy bit of
austerity??
Lawyerliz Sat Apr 4 20:23:44 2009 CDT #
poic.v20 says:
""We are stronger, smarter, more educated, longer lived and more adaptable than any group at any time in human history" "
Didn't the Greeks, Romans, Mongols, Chinese and a few others that slip my mind say the same thing?
poic.v20 Sat Apr 4 20:24:06 2009 CDT #
adornosghost says:
Well? When are we going to understand "BAU" is over with?
Almost all comments are seeking solutions to a world that no longer exists.
Some have come to see that changing deck chairs or changing captains is not a solution. This is a systemic problem.
All rational people have abandoned ship.
What will be when the mist clears, I haven't a clue.
adornosghost Sat Apr 4 20:27:32 2009 CDT #
ANSFA says:
I have been thinking a lot about this, looking at very different angles from my own......and it seems to me that we have two options.
a) Unorganized chaos = Real financial meltdown (as in no money from government to pay its obligations, and everything is down hill fom there; ATM's with no money, worthless 401Ks and similars; bankrupt states, counties and villages; disfunctional hospitals, fire and police departments, troops in two foreign wars with no financial backing and no open supply lines, military bases all over the planet that can not meet its financial obligations to its foreign hosts, overcrowed jails, a disfunctional legal system, uncontrolled gangs and drug dealers, crumbling infraestructure, and the list goes on). In summary, a survival of the fittest in towns, cities, villages, and suburbs across America. Not a pretty picture, right?
b) organized and gradual chaos. Call it "controlled meltdown" = printing money out of thin air....it keeps the illussion alive.....and the "world leaders" wing it as time goes by. Sure, this implies inflation or hyper-inflation once currency looses its value, or most of it.
As much as it bothers me to accept it, I think Americans are *NOT* ready for option "a", and I don't think the planet can take a Non-Pax-Americana-world either.
So......printing money out of thin air is the best alternative to flying bullets, and people taking the law in their own hands. Mr. Krugman should know this.
Bush + H. Paulson and Obama + T. Geitnher, and Bernanke, know this very well. Give the guys credit. They were, and are, indeed looking for the greater good.
People, think about it! Most of us blogging here would have our priorities change overnight if all those derivatives (CDS, etc.) that we all dislike so much become "worthless" and "several big banks and AIGs" bring our imperfect American government to its knees.
If that day ever arrives.....I doubt that even CR will be blogging daily!
ANSFA Sat Apr 4 20:28:20 2009 CDT #
michael says:
Do you really believe yourself, what you're writing here?
"Looking for the greater good" - yeah, clintonesque "that depends on what 'greater good' means"?
Give me one example where these guys have NOT taken the path of least resistance, with some window dressing to make it "the greater good".
They're only postponing the pain as much as they can, making the long term picture increasingly... unimaginable.
Parent Post
michael Sat Apr 4 20:53:34 2009 CDT #
Comrade Byzantine_Ruins says:
The america you described died in 1968 with "the summer of love". No responsibility for anything. We are all just victims.
In ase any of you doubted the aphorism, "Progress moves forward one hearse ride at a time."
Comrade Byzantine_Ruins Sat Apr 4 20:28:32 2009 CDT #
Lawyerliz says:
Oh please. There aren't that many launches. The fuel is burned up.
There are no cancer clusters.
By the way, years ago, I had my hand on the switch which would blow up the shuttle if it somehow veered over land--before that facility went operational. Now you can't get in places as you could.
Lawyerliz Sat Apr 4 20:29:27 2009 CDT #
Char says:
Krugman is wrong. This is not the Great Depression. We are a much more efficient society. We didn't have computers or the internet or planes or television or phones in every house or strip malls or many other modern implements back then.
We have a while to go before unemployment goes down, but the stock market has bottomed out and will sideways trade between 6500 and 8000 for the rest of 2009. Then, it will be up up up.
Char Sat Apr 4 20:31:26 2009 CDT #
Lawyerliz says:
Uh-oh, poor Char.
Lawyerliz Sat Apr 4 20:33:35 2009 CDT #
Anonymous says:
Doomers - Come on
Even in the GD, peak unemployment was ~25-30%.. Once the economy makes some needed adjustments (avg salaries down ~30%, exec salaries down a lot more), lot of projects start to make sense and you will see economic activity picking up.
And, By the time this cycle completes in 2-3 years, I am sure a lot of you will be stuck some place in tundra farming lichen
Anonymous Sat Apr 4 20:34:12 2009 CDT #
CRbot says:
This comment thread has been CRC-IZED by yagij (CRbot helped a little).
http://realize.org/cr/crcizer/phpCRCo.php?path=%2F9088773471981546160&ord=asc&csslayout=reg&topic=Bailout%3A+The+Potomac+Two-Step
And for the stubborn old-timers... it's also been HALO-IZED by CRbot.
http://realize.org/cr/halokit.php?halourl=http://www.haloscan.com/comments/calculatedrisk/9088773471981546160
CRbot Sat Apr 4 20:36:06 2009 CDT #
Broward Horne says:
"avg salaries down ~30%"
-------------
Salaries can't come down until debt comes down.
Broward Horne Sat Apr 4 20:37:21 2009 CDT #
mock turtle says:
from the associated press
SPOKANE, Wash. -- Spokane-based Sterling Savings Bank and Walla Walla-based Banner Bank are offering mortgages at interest rates below 4 percent to stimulate sales and help builders move homes.
mock turtle Sat Apr 4 20:40:04 2009 CDT #
mock turtle says:
heres a link
http://www.king5.com/topstories/stories/NW_040409WAB-AP-mortgage-rates-KS.a227724a.html
article goes on to say these banks are using bailout funds
Parent Post
mock turtle Sat Apr 4 20:41:11 2009 CDT #
Lawyerliz says:
Nah, I will just keep on planting orange and other fruit and nut trees and
tending my broccoli and cabbages on this very beautiful tho occasionally very hot and humid island.
By the way, we went out to see the latest satellite launch, and my mom heard a noise. what's that? she sez. A frog I said. Another noise, oh, my what's that? A bug of some kind. A city girl she's been cut off from the natural world so long she doesn't recognize the sound of a frog or bug.
And people are not as physically strong or fit as they used to be. I don't know if they are smarter or not. My world is infested with really stupid people, a lot of whom seem to work for lenders and mtg brokers. If not the gov't.
Lawyerliz Sat Apr 4 20:40:40 2009 CDT #
1 currency now [yogi] says:
I agree with dawg. =-O
Americans are smarter than ever. A 14 year-old who rides my subsidized subway to public school gets real-time facebook information from all over the world. Faster than the NYT.
I coach a college team. They are all smart, if a bit materialist. They are not pursuing careers in finance (or at least they know not to tell the coach). But they will all know what a Ponzi scheme looks like in all its forms.
1 currency now [yogi] Sat Apr 4 20:40:43 2009 CDT #
Comrade Bear (tj and the bear) says:
Anon,
U-6 is already 60% there and climbing quickly; wait until the automaker bankruptcies and state/county/city government cutbacks kick in.
Comrade Bear (tj and the bear) Sat Apr 4 20:41:49 2009 CDT #
nova says:
<tbody>
“I am actually thinking that a cleaner and simpler solutions would have been to give cash to everybody, say $10,000 per person.
</tbody>
Bonus Babies? March on Washington. Build shanties. Watch the calvary come. It was already tried last time around
nova Sat Apr 4 20:42:10 2009 CDT #
Comrade Byzantine_Ruins says:
We are stronger, smarter, more educated, longer lived and more adaptable than any group at any time in human history. Americans didn't get here by accident and didn't stay here by accident either. It is fashionable to bust on we soft, lazy, unsophisticated arrivistes. Do so at your peril.
We have further to fall, more resource reserves, more history of self reliance and more resolve than near any other potential rival.
I thnk stated a little less triumphally, this is generally true. People who don't want to admit the world now has another China are welcome to live in denial as long as they want. This is going to be a culturally-politically homogenous pain in your ass with an emphasis on egalitarian principles pretty much for the indefinite future. Access to two oceans and a historic charter is about as solid as it gets.
Feel free to talk about how it sucks. The parts that suck will perish. That's what this phase in the life of states is about. The imperishable parts will become part of the next reinvention of the state.
Next time, try not to be such a bunch of self-important crybabies.
Comrade Byzantine_Ruins Sat Apr 4 20:42:38 2009 CDT #
BrantW says:
MrM,
Your 'solution' is nonsense.
Debt to GDP has averaged about 160%. That means that our total debt needs to be about $20T-$25T. It is currently over $50T. We need to write off $20T-$25T in debt just to get to a healthy level. Do you really think we will not overshoot. We will. Probably to below 100%. This is basically economic doomsday.
The problem with your idea is that the government does not have any money...so you are calling for us to print money out of thin air. The deadly error that people make when they start down that road, is that with deflationary pressures, you can print money, and for a while get no inflation.
But two things are guaranteed to happen, long run:
1. We have a sudden stop event (balance of payments crisis) when foreign creditors refuse to participate in the scam. South Korea and Argentina are the most recent examples. This would basically result in Us wealth dropping by 60% overnight...and credit being truly unavailable at any cost.
2. Policy makers get suckered into thinking they have the green light to inflate. $10K becomes $20K becomed $50K. Due to lag effects, once inflation shows up, it is too late. Inflation starts...and the policy makes shut off the spigot...but it is too late. There is so much money in the pipeline that inflation surges to Zimbabwe like levels before anything can be done. Go back to #1 above.
Either way, the the economy will be destroyed. Your idea is consistent with American thought...do what you can to save today, and ruin tomorrow. Total shortsightedness is what brought us here...and your idea is more of the same.
One of the principal advantages that 1st world economies have over 3rd world ones...is that we understand that a stable store of value is paramount.
Let me call out some industries:
-Heavy construction (large builings)
-Infrastructure construction (highways, powerplants, water, wastewater, bridges, pipelines, energy resources)
-Plant construction (manfuacturing, process, chemical)
-Mining
None of these can take place in an economy with unstable currencies because these project have timelines measured in years. If contractors can not be confident in prices of materials when they will need to buy them...they will not bid. This is a huge segment of our economy, and your plan would basically shut it down due to the volatility and decline in the dollar. Your idea is the final step that takes us to bannana republic status.
BrantW Sat Apr 4 20:44:13 2009 CDT #
Basel Too says:
Americans are smarter than ever.
true, but the rest of the world is also smarter than ever.
Basel Too Sat Apr 4 20:44:27 2009 CDT #
Lawyerliz says:
Nice Byz.
I just wish all those smart people would be rubbing elbows with me.
Where are they?
Maybe everyone was much stupider is the past? I don't remember the adults being stupider when I was a kid. Less well read than I but not stupider.
Lawyerliz Sat Apr 4 20:47:28 2009 CDT #
Lobbyi$t Ben Dover says:
Depends on what you want to call smart. Education may not make you smart. A lot of people who are educated created this mess. On the other hand life may make you smart with out an education.
Lobbyi$t Ben Dover Sat Apr 4 20:49:33 2009 CDT #
Comrade Byzantine_Ruins says:
And, By the time this cycle completes in 2-3 years, I am sure a lot of you will be stuck some place in tundra farming lichen.
The crisis is not economic. It's political. Until you see that, it'll never be solved.
Comrade Byzantine_Ruins Sat Apr 4 20:49:50 2009 CDT #
Lawyerliz says:
I meant smart, not book smart.
I think in some cases, more formal education can make you stupider!
Lawyerliz Sat Apr 4 20:51:06 2009 CDT #
longwaver says:
A theory I have...
We are at / near rock bottom when the issues are so severe and clear that a high percentage of the commentators / economists begin to agree with each other.
Might take another year or two, but eventually the concept of more debt will sicken everyone at all levels. In the home, local, state, federal.
Once all conversations start with "how can we accomplish X with no additional debt?", we are at / near rock bottom.
longwaver Sat Apr 4 20:52:04 2009 CDT #
Black Star Ranch says:
Look to the bright side. Couples and families will adjust to single family "bread-winners" in approaching times. Families will relearn the art of communicating with siblings, parents and grandparents. Families will also relearn the importance of family and friends. Having to decide what's necessary and what ISN'T will be decisions not required before. Cutting down to a single car makes neighbors plan better for trips into town or ?. Neighbors will get to know each other better as half of the families will be staying at home. Items we take for granted will possibly be reprioritized as luxuries (hi-speed, satellite, cell-phones, multiple appliances, phantom power).
And, if I were to have a choice of what Country to weather this storm in, I'd pick THIS one. I wouldn't chase any other dream. It's comforting to know that we have long been considered the "bread-basket of the world", and that won't change.
Black Star Ranch Sat Apr 4 20:52:56 2009 CDT #
Lawyerliz says:
Now there's a scary thought, longwaver.
By the way I've noticed there is much less flaming than formerly.
Lawyerliz Sat Apr 4 20:54:14 2009 CDT #
Lawyerliz says:
Well, Byz, it is political and economic.
Any cure will involve politics.
Lawyerliz Sat Apr 4 20:58:46 2009 CDT #
1 currency now [yogi] says:
From turtle's link to <4% fixed.
"This is real money," Costa said. "There's no tricks."
The trick is paying back TARP at 9%. Anyone who claimed it would make money must be held accountable for lies or stupidity.
http://ethisphere.com/ethisphere-tarp-index-report/
1 currency now [yogi] Sat Apr 4 21:00:30 2009 CDT #
Broward Horne says:
" 14 year-old who rides my subsidized subway to public school gets real-time facebook information from all over the world."
----
I know a monkey that can push a button to get a banana.
Is it a smarter monkey?
Broward Horne Sat Apr 4 21:01:06 2009 CDT #
Anonymous says:
I was in NYC this week except for some extra retail space for rent the level of activity seemed normally...the flights in/out were full....today in Vegas the place is jumping....the bankrupt GGP mall was packed and the sales were no numerous than usual...confidence appears to have returned in spite of the media attention on unemployment CAN ANYONE ExpLAIN THIS?
Anonymous Sat Apr 4 21:02:29 2009 CDT #
Comrade Byzantine_Ruins says:
CAN ANYONE ExpLAIN THIS?
Were you expecting a tribe of cannibals to have taken the mall over since you visited last?
Parent Post
Comrade Byzantine_Ruins Sat Apr 4 21:05:10 2009 CDT #
nades says:
Dawg and BR,
I think the infastructure is great, i think the average person lives better than kings did just 100 years ago. We as a group have more education and intellect too. I agree.
Still we have a culture have grown needy and weak. Things have to be there for people. Everyone demands things. Cant get by with out help.
nades Sat Apr 4 21:03:28 2009 CDT #
Blackhalo says:
"What happens after $10k runs out?"
Print more?
Blackhalo Sat Apr 4 21:05:32 2009 CDT #
rich says:
There's not a doubt in my mind that Bernanke and Obama are on the same page, which is to try to inflate our way out of this. I believe their two strategies are subterfuge (pretending they're not inflating) and incrementalism (believing they can manage higher rates of inflation and, by manipulating CPI and its new incarnations, make it look as though inflation is less than it is.
There is one big fly in their ointment, and it is health care. The U.S. health care system is a ticking time bomb. Every day it's allowed to live, it gets worse, and becomes more of a nightmare for the economy and economic recovery.
They have to bring health care costs under control, fast. But that will undermine their inflation scheme. They are screwed.
We are seeing signs of inflation everywhere. Look at base metals prices, miners' stock prices, oil prices, and especially OIH and XLE.
The one place we aren't seeing it is in PM prices right now, but somebody is dumping gold, and it might even be Ft. Knox. But the dumping of gold will end in not too long. And when it does, you want to be in gold, silver, GDX, SLW, AEM, etc.
AEM is going to $100.
rich Sat Apr 4 21:09:33 2009 CDT #
Comrade Bear (tj and the bear) says:
BSR,
Another good by-product will be people rediscovering how to create and repair things themselves.
Comrade Bear (tj and the bear) Sat Apr 4 21:10:03 2009 CDT #
Broward Horne says:
Even a monkey can make an economy look good with $12.8 trillion in extra borrowing. Come on.
Broward Horne Sat Apr 4 21:10:33 2009 CDT #
MrM says:
the government does not have any money
The government produces as much money as it thinks is required by the economic situation, unless you are suggesting to go back to gold or some other rigid standards, which grow at rates not related to the economy (I disagree with this option).
There are only two ways to deal with the debt problem this country has (not mutually exclusive)
- Default on debt and penalize external creditors
- Inflate and penalize all creditors
The first option is unlikely, but the second one is a certainty
MrM Sat Apr 4 21:12:18 2009 CDT #
Comrade Bear (tj and the bear) says:
MrM,
Obviously "living within our means" is not an option.
Comrade Bear (tj and the bear) Sat Apr 4 21:19:24 2009 CDT #
1 currency now [yogi] says:
Some inflation, some austerity, or colorful pictures:
http://www.spiegel.de/fotostrecke/fotostrecke-41267-23.html#backToArticle=617478
1 currency now [yogi] Sat Apr 4 21:24:45 2009 CDT #
MrM says:
Obviously "living within our means" is not an option.
"Living within our means" is the only option available, at least in the near term. However, nobody know what "our means" will mean after the recession is over - we are not going back to the previous consumption levels for sure, but how much of adjustment it will be we do not know and is not that important to know, as the system will work it out itself. What is important is to keep people employed and to keep resources properly utilized. To do that, the government needs to compensate for the demand shock.
MrM Sat Apr 4 21:29:14 2009 CDT #
1 currency now [yogi] says:
The 14 year-old monkey on facebook is probably better informed than the 65 year-old dope watching CNN.
Endless speculation of what Michelle O will wear on her playdate with Merkel's husband.
1 currency now [yogi] Sat Apr 4 21:33:06 2009 CDT #
END