Cafe Hayek - Latest Comments in LET THEM FAIL

Re: LET THEM FAIL

Mike Laursen — Mon, 09 Mar 2009 22:10:38 -0000

Have you seen this news clip from The Onion:

"Should The Government Stop Dumping Money Into A Giant Hole?"

http://www.theonion.com/con...

Re: LET THEM FAIL

indianajim — Sun, 08 Mar 2009 04:34:22 -0000

Ray G,

Your neighbor, or anyone whose knowledge is limited to just TV sound bites, is at least ignorant and perhaps stupid. I think anyone who bases opinions mrely on TV sound bites is stupid. If your neighbor is not stupid (he gets some information by reading and conversations with people like you who are not limited to TV sound bites), but merely ignorant, then suggest that he start spending his leisure time at Cafe Hayek instead of in front of the TV.

Re: LET THEM FAIL

Bueller — Sat, 07 Mar 2009 18:31:34 -0000

Word to the mother, Russ is right.

Re: LET THEM FAIL

Ray G — Sat, 07 Mar 2009 17:42:08 -0000

I just now got done with a conversation with my neighbor - an East European turned American. You'd think he'd have a higher level of suspicion of the government, but the bottom line is, he just trusts the government.

As much reading, and listening as I do, I sometimes forget that most people only catch a few soundbites on television, and that's the extent of their knowledge.

In his view, capitalism and free markets in general have been running rampant for the last 8 years, and it has simply failed. Now it is time to give Obama, and more government regulation a chance. A chance to correct all of that greed and corruption of the last 8 years.

That's all the citizenry sees and hears.

Re: LET THEM FAIL

vikingvista — Sat, 07 Mar 2009 15:26:03 -0000

"Krugman is brilliant when he sticks to economics."

He's the one publicly advising Obama to spend much more than he is. If the Federal government printed $10 trillion dollars and used it to buy Jerry Seinfeld's pocket lint, Krugman would count that as $10 trillion of GDP growth, and a job well done.

Re: LET THEM FAIL

RageFury — Sat, 07 Mar 2009 15:09:50 -0000

No we will not run out of money, the Fed will print it as needed. With that said it will debase the value of our currency every time they do it, just as it has since the Federal Reserveâs inception.

At least that is my understanding. Each time we bail these failures out we end up printing more money and eventually our dollar will end up worse than a penny stock... Of course the way the Fed prints we will anyways, it will just be sooner rather than later.

Re: LET THEM FAIL

foxmarks — Sat, 07 Mar 2009 11:30:50 -0000

In several comments I sense a confusion between âwealthâ and âmoneyâ.

The original post uses effective rhetoric. Saying âweâre going to run out of moneyâ slams the idea home.

Some, I think, understand the shorthand, while others get lost in the definitions of money. We will not run out of units of account. We will likely see our store of value diminished, and this will alter our means of exchange.

But what really matters is the wealth that money represents. And the current policy is to eat our wealth instead of create more. Eating wealth leaves us collectively poorer, but more equal. Yay for equality.

Bankruptcy can arrest the consumption of wealth, and opens opportunity for wealth creation. Sadly, terrifyingly, at the same time we are eating our wealth, policy is aimed at limiting the creation of new wealth and punishing those who do succeed.

We are aimed and shortage and deprivation. The measure of our starvation in dollars, yen, or troy ounces, matters less to the hungry man than creating a meal.

Re: LET THEM FAIL

Martin Brock — Sat, 07 Mar 2009 08:49:03 -0000

I agree with Jake (and Russ Roberts and others) that bailout mania creates incredible confusion as well as moral hazard (more among bondholders than among homeowners), but if we don't confront who is being bailed out, we'll never understand what's happening to us. No one much cares about the three letters "AIG", and term life insurance policy holders can switch providers easily enough. The AIG bailout is about default swaps on bonds and bond derivatives and about annuities. If not, I have no idea what it's about.

So we're bailing out would be retirees, and until we acknowledge this reality, we're only whistling in the wind. My kids may lose college tuition that I bothered to purchase for them nearly two decades ago, just as they reach college age. My kids and I could pay rents that I sacrificed to avoid for them, so we can bail out a lot of employee pension funds, so idle people can consume more longer without producing themselves.

That's all I know about the "crisis" at this point, so I'm wondering if my own waning years might better be spent in retirement or in shooting some statesmen, and I don't much distinguish the statesmen in D.C. from the ones in Manhattan. They're all statesmen to me.

Re: LET THEM FAIL

Jake — Sat, 07 Mar 2009 08:01:46 -0000

As another poster noted, we're unlikely to run out of money, but the consequences of always pushing out new capital (unsustained by an increase in the quantity or quality of goods and services), whether through the mechanisms of taxation, borrowing, or deficit spending all have dramatic negative risks. Maybe there's a time when those negative risks should be ignored, but I'm not so sure now is that time.

What I see as more important is that allowing those insolvent institutions to fail, or save them, or put them into conservatorship, or forcing them to sell to solvent institutions, must become the stated policy of the administration. And then that policy must be followed consistently.

Institutional investors have fled stocks and are unlikely to return until they have some measure of assurance that the companies they invest in will be able to profit in the future. Right now, there is no assurance of that. They don't know which company the government will "save" with capital infusion, which they will allow to fail, which they will force to sell to others, or how long they will do any of these things without changing their mind. Nobody can say from one week to the next, or one day to the next, what the government will be doing with GM, AIG, CITI, or dozens of other publicly traded companies. Companies that investors understood explicitly when they were investing that had the risk of failure.

Explicit understandings of the consequences associated with risk should never be shed in favor of implicit misunderstandings of arbitrary official action on a company's, and shareholders, behalf.

Re: LET THEM FAIL

Martin Brock — Sat, 07 Mar 2009 07:19:56 -0000

Krugman is brilliant when he sticks to economics.

I haven't seen the evidence that he's brilliant at anything, besides apologizing for his partisans. A Nobel Prize in Economics is not this evidence.

Re: LET THEM FAIL

Martin Brock — Sat, 07 Mar 2009 07:07:32 -0000

If we revert to Japan, then this becomes our lost decade, and weâre basically screwed.

Like the last decade wasn't lost. The "war on terror" left me feeling sooo much richer.

But can the Obamatrons make things even worse? Sure they can.

Re: LET THEM FAIL

Martin Brock — Sat, 07 Mar 2009 07:02:34 -0000

Forget gold. The money of the not too distant future is canned goods and ammo.

When you finish digging in, can I have your HD TV?

Re: LET THEM FAIL

Martin Brock — Sat, 07 Mar 2009 07:00:11 -0000

We won't run out of money unless the United States government disintegrates as a monetary authority internally, and this disintegration seems unlikely to me, not least because Uncle Sam can disintegrate New York as easily as it can disintegrate Moscow or Bejing or Tehran.

We could run out of international trading partners, but the current chaos has strengthened the dollar thus far. Apparently, other monetary authorities are no more trustworthy than ours. Apparently, our trading partners have no more attractive option than to sell us goods and then return dollars to our Treasury to spend, even as our central bank manufactures more dollars to buy the Treasury notes back from them. It's a very strange game, and I don't pretend to understand it well.

Re: LET THEM FAIL

indianajim — Sat, 07 Mar 2009 04:41:11 -0000

Christopher writes:

"Krugman is brilliant when he sticks to economics. The instant he gets into politics or any other subject his logic and factual accuracy disappear."

I don't think that it is reasonable to divorce economics from politics nor many other subjects precisely because the economic analysis has usefully been applied to so many aspects of human action, politics not the least of these.

Re: LET THEM FAIL

CRB — Sat, 07 Mar 2009 04:29:06 -0000

We can't let them fail now because the taxpayers already own the default risk through the FDIC and ownership of AIG.

It's cheaper to keep them afloat and hope for a recovery.

Re: LET THEM FAIL

Gary Arndt — Fri, 06 Mar 2009 19:52:57 -0000

We will never run out of money if we can just make more money.

Inflation is a politically preferable option at this point because America has forgotten what inflation is like.

Re: LET THEM FAIL

Russ Nelson — Fri, 06 Mar 2009 19:42:22 -0000

Mesa Econguy: A friend of mine who is an investor says "We're doomed."

Re: LET THEM FAIL

Russ Nelson — Fri, 06 Mar 2009 19:41:14 -0000

(sarcasm) But that would require that markets be free to do their work! And we can't have that, can we?(/sarcasm)

Re: LET THEM FAIL

Christopher_Renner — Fri, 06 Mar 2009 19:14:13 -0000

@Mesa Econoguy: I disagree, partially. Krugman is brilliant when he sticks to economics. The instant he gets into politics or any other subject his logic and factual accuracy disappear.

Re: LET THEM FAIL

Mesa Econoguy — Fri, 06 Mar 2009 17:54:21 -0000

Krugman is an economic moron, and idiot.

Re: LET THEM FAIL

vikingvista — Fri, 06 Mar 2009 17:37:10 -0000

"So why does Krugman, among others, have such a different point of view?"

Because they have the point of view that spending money and wealth creation are one in the same.

Let's all go and spend all of our money on as many copies of "Barry Manilow's Greatest Hits" as our collective dollars will allow, and make ourselves wealthy!

"The average fiscal multiplier across all 43 recession episodes is -1.5."

--p17, http://papers.ssrn.com/sol3...

Re: LET THEM FAIL

Mesa Econoguy — Fri, 06 Mar 2009 14:37:15 -0000

And Russ, when economists start saying âWeâre going to run out of money,â I get scared. Outside of the usual Malthusian armageddonists, I believe you are the first to articulate this.

And you are correct, given $50 â 70 trillion in unfunded liabilities staring us in the face next decade.

If we revert to Japan, then this becomes our lost decade, and weâre basically screwed.

Have a wonderful weekend, everyone.

Re: LET THEM FAIL

Mesa Econoguy — Fri, 06 Mar 2009 14:20:08 -0000

...clowns with wrecking balls.

Posted by: Michael Smith | Mar 6, 2009 4:06:07 PM

Clowns is too strong an adjective. It presumes some knowledge of what to do, in order to do the opposite, eliciting a humorous response.

These people are rank amateurs, tossed smack into the middle of trench warfare.

They have no reference frame from which to work, they have multiple faulty economic premises, and they cannot even hire fellow naÃ¯ve do-gooders who share their utopian views to serve their cause (likely because they know they'll get slaughtered).

Re: LET THEM FAIL

M.G. in Progress — Fri, 06 Mar 2009 12:40:13 -0000

As there is a compelling case not to rely anymore on some bankers, an orderly and systematic bank run on would-be insolvent banks, seems an appropriate solution to set up parallel new good banks and strengthen also good ones.

Re: LET THEM FAIL

michaelsmith — Fri, 06 Mar 2009 11:06:07 -0000

I agree we should let them fail.

But the members of the Obama administration -- at least in terms of their economic policies so far -- are best described as clowns with wrecking balls.