The best stimulus? Spend less, borrow less

by **UdonExpat** » August 1, 2010, 1:55 pm

Yes, that would be nice.

by TJ » August 1, 2010, 3:45 pm

That there has been no mention within this thread of the main two economic schools or philosophies which have strong and opposing positions on government stimulus and other state economic interventions. This is surprising.

I'm sure everyone has heard of Keynesian economics, though you might not know much about John Maynard Keynes himself who died in 1947. You should though. It is Keynes who is cited as the towering authority for government money printing, borrowing and spending. In his General Theory Keynes said that, as a rule, people save too much. He proposed to deal with this alleged problem by having the government print a lot of new money, which he said we should regard as "genuine savings." If you support the so-called advocates of Keynesian economics, aren't you interested in learning about the Keynesian economics they claim to implement?

My guess is that fewer of you are familiar with the Austrian School of Economics. They oppose Keynesian policies of government intervention in a nation's economy generally because of the unintended consequences. They predicted the Great Depression, the subsequent recessions and the current crisis. Ludwig von Mises, who died in 1973, is credited with introducing and championing Austrian economics the U.S.

Shouldn't everyone understand the pros and cons of these very contrasting economic theories?

by **UdonExpat** » August 2, 2010, 7:44 am

I'm not sure that the theories are particularly important except as talking points for the politicians seeking to impose their point of view.

It seems the US is operating under Keynesian ideas with different variations. I don't read about any politicians calling for the government to keep their hands off the economy. They simply argue about how best to manipulate it.

The current argument concerns allowing the Bush tax cuts to expire. The Republicans, party of Keynesian ideas for the rich, want to extend the tax cuts under their failed trickle down theory. The Democrats, party of Keynesian ideas for the populace, want to let the tax cuts expire under their theory that the rich should pay more and things will get better.

WASHINGTON — An epic fight is brewing over what Congress and President Obama should do about the expiring Bush tax cuts, with such substantial economic and political consequences that it could shape the fall elections and fiscal policy for years to come.

http://www.msnbc.msn.com/id/38400016/ns/38370609

"It's responsible to let the tax cuts expire that just go to 2 percent to 3 percent of Americans, the highest earning Americans," Geithner told ABC television's "This Week" in an interview broadcast Sunday.

Doing so would show the world that the U.S. is "willing as a country now to start to make some progress" reducing long-term budget deficits, he said.

Geithner said he does not believe that higher taxes for those high earners will hurt economic growth.

http://www.msnbc.msn.com/id/38401666

IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing.

http://www.nytimes.com/2010/08/01/opini ... ckman.html

Former Fed Chairman Alan Greenspan said that the push by congressional Republicans to extend the Bush tax cuts without offsetting the costs elsewhere could end up being "disastrous" for the economy.

http://www.huffingtonpost.com/2010/08/0 ... 66549.html

by **cookie** » August 2, 2010, 12:46 pm

the top priority for Obama is putting America back to work,
his biggest tool to accomplish this was the stimulus.
The stimulus has proven to be a succes
although the original stimulus was too small for the magnitude of the crisis.
notable economists and historians, including Joseph Stiglitz, Alan Blinder, and Mark Zandi, recently signed their names to statements calling for more government stimulus.
Fed Reserve Chairman Ben Bernanke . praised in the past by republicans, has said that deficit spending is critical in the short-term and that pulling support from the stimulus isn’t the right solution.
CBO Director Doug Elmendorf ,also praised by the republicans, has explained that there is “no intrinsic contradiction” between supporting more stimulus now and demanding deficit reduction later.
Yale economics professor Robert Schiller in New York Times, “We need more stimulus, not less — but we need to focus much more on actually putting people to work.
and the list goes on and on and on...
deficit reduction will come when the economy is back on track
-- and the budget will not be balanced on the backs of those who depend on Social Security, Medicare, and other key social outlays.

by **UdonExpat** » August 5, 2010, 7:59 am

As usual the GOP is doing anything it can to keep the country from emerging from the recession because if it does they will not do as well in the elections. They need the country to fail to gain seats. They aren't interested in the well being of the people, only in gaining control again so they can continue their agenda of diminishing the middle class and thereby create a true 2 class system. The haves and the have nots.

Even saving jobs and reducing the deficit is not enough to gain GOP support.

The Senate voted 61-38 on Wednesday to break a Republican filibuster of a bill that will provide $26 billion in aid to cash-strapped states. Republican lawmakers, who opposed previous domestic aid bills because of their deficit cost, opposed this bill even though it would reduce the deficit.

Senate Democrats said the measure would prevent states from firing 290,000 teachers, firefighters and police officers. The Congressional Budget Office said it would reduce the deficit by almost $1.4 billion. But it wouldn't reduce the deficit in a way that appeals to Republicans (aside from Sens. Olympia Snowe and Susan Collins of Maine, who support the measure).

http://www.huffingtonpost.com/2010/08/0 ... 70440.html

by **Farang1** » August 11, 2010, 5:41 am

Well, here we go again. Transferring the balance to another credit card.

http://news.yahoo.com/s/ap/us_federal_r ... JpZWRhYg--

by **cookie** » September 21, 2010, 9:05 am

the best stimulus????
let the numbers talk;
the fastest expansion in the last 60 years..... nothing else to add.... =D>

"This would be the fastest year-on-year expansion of trade ever recorded in a data series going back to 1950,''

Breakingnews » Breakingnews
Trade growth forecast raised to 13.5%

* Published: 20/09/2010 at 10:48 PM
* Online news: Breakingnews

The World Trade Organization on Monday raised its trade growth forecast for 2010 to 13.5 percent from 10 percent, describing the pace as the fastest-ever annual expansion.

"Following faster-than-expected recovery in global trade flows so far in 2010, WTO economists have revised their projection for world trade growth in 2010 upwards to 13.5 percent,'' said the trade body in a statement.

The forecast growth marks a sharp recovery from a 12.2 percent plunge in world trade in 2009, when exports were hurt by the economic slowdown.

"This would be the fastest year-on-year expansion of trade ever recorded in a data series going back to 1950,'' noted the WTO.

http://www.bangkokpost.com/breakingnews/197254/trade-growth-forecast-raised-to-13-5

by **UdonExpat** » October 1, 2010, 7:53 am

The financial bailout (TARP) will expire in a few days. Some of the bailout money has been repaid and more is scheduled to be repaid. The taxpayers will probably not be made whole, but the eventual overall cost of the $700 billion bailout looks like it will be considerably less; under $50 billion. Good news for the US and world economies. Certainly $50 billion is a lot of money, but not nearly as frightening as $700 billion.

TARP's Legacy: Good or Bad?By Peter Barnes
Published September 30, 2010

Exactly two years after it was enacted, the government’s reviled Troubled Asset Relief Program [TARP] will die Sunday -- or, in technical terms, lose its legal authority to enter into new obligations -- as mandated by the 2008 TARP law.

While it is widely credited with helping prevent a second Great Depression, TARP became despised by voters as a symbol of out-of-control government spending, and after rescued banks resumed paying top employees big bonuses while the nation struggled with a weak economy. The $700 billion bank bailout still could cost some politicians their jobs in the Congressional mid-term elections in five weeks; two Senate Republicans who voted for TARP in 2008 lost primary challenges earlier this year.

But TARP is getting a good financial eulogy: At one time, government analysts projected taxpayers could lose more than $300 billion on TARP. On Thursday, however, the Obama Administration announced the final cost likely would be much less.

“I think right now, the briefing that the President got had that number at under $50 billion,” White House press secretary Robert Gibbs told reporters Thursday after President Obama’s daily meeting with his economic team. “And I think that number is likely only to improve.”

Supporters credit TARP’s financial turnaround to unexpectedly stronger repayments by many bank recipients. More than $25 billion in interest, dividend and other extra proceeds helped, too.

“We’ve gotten almost all the money back that we put into the banks and we’ve gotten it back with interest,” said Sen. Judd Gregg (R-N.H.), who voted for TARP. “This is the first federal program that I can remember where the taxpayers actually made money. Not only did they make money, but it did what it was supposed to do.”

TARP received a boost Thursday from insurance giant AIG (AIG: 39.06 ,+1.58 ,+4.22%), which got government bailout valued at $180 billion. The company announced an agreement-in-principal with the Treasury Department to repay “all its obligations to American taxpayers” in a complex restructuring plan that will take a year or more to play out. The AIG rescue included about $70 billion in TARP funds--including $22 billion the company drew down Thursday.

“If the common stock the American government holds in AIG were sold today, that investment would net the federal government $20 billion,” Gibbs said.

But not all observers are cheering TARP’s legal demise.

“One of the goals was to help restore lending, and that didn’t happen,” said Neil Barofsky, the special inspector general of TARP.

The Bush Administration, facing a meltdown of the financial system in fall 2008, created TARP. Within a year, it invested more than $500 billion in more than 700 financial firms, including most of the nation’s largest banks and Wall Street companies. It also invested in Chrysler and General Motors and in mortgage modification programs.

Any final taxpayer losses in TARP, which may take years realize, likely will be suffered in the auto and housing programs, analysts say.

But some 600 banks -- including several large ones like SunTrust (STI: 25.80 ,0.00 ,0.00%) and Regions Financial (RF: 7.27 ,+0.06 ,+0.83%) -- still owe the Treasury about $65 billion in TARP funds. And in August, 123 banks missed mandatory dividend payments to Treasury, about $45 million in total.

“It’s a little early to write the obituary on TARP,” Barofsky said. “Although Treasury’s ability to spend new money stops on October 3rd, these programs are ongoing and hundreds of billions of taxpayer dollars are definitely still out there.”

Through its Office of Financial Stability, the Treasury will oversee TARP programs that have been allocated all of their final funding and continue to operate past Sunday, such as its mortgage programs. It will also manage outstanding TARP investments.

As part of the Dodd-Frank financial regulation reform bill it passed in July, Congress shut down most of TARP, forbidding Treasury from launching any new TARP initiatives. And, in a political gesture designed to appease angry voters, Congress reduced TARP’s legal spending authority to $475 billion, though still well above the level needed to continue operating existing programs.

In likely its final commitment in TARP, the Treasury announced Thursday it invested $570 million of TARP funds in 84 community development financial institutions, which are firms that target at least 60% of their lending and other economic development activities in areas underserved by traditional banks.

You can read the Treasury’s latest monthly report on the TARP, for August, here: http://www.financialstability.gov/docs/ ... 0%2010.pdf

http://www.foxbusiness.com/markets/2010 ... al-eulogy/

by **UdonExpat** » October 4, 2010, 8:47 am

Well sometimes I'm happy to eat my words. I thought the bailout was a loser. Not the first time I've been wrong.

TARP has become a dirty word in our nation's political discourse. Few terms elicit such anger from voters and politicians.

In many ways, that's understandable. No one wanted to bail out Wall Street. No one wanted to use taxpayer dollars to rescue an industry that helped cause the worst economic crisis in a generation.

It was unfair. It was appalling. But it was necessary. We had no other choice.

Two years ago, we stood at the brink of an economic catastrophe. Ordinary American families were questioning whether their money was safe in banks. A growing financial panic threatened to sink our nation into an economic downturn that rivaled the Great Depression.

A bi-partisan majority in Congress responded by enacting the Troubled Asset Relief Program. The debate over this issue was heated. On October 3, 2008, when TARP became law, one member of Congress even went so far as to say, "I don't think it is too much of a stretch to say this may be the day America died."

Two years later, with TARP officially set to expire today, it's an appropriate time to look back and evaluate that program's effectiveness. And now that the fog of an intense financial panic has lifted, it's clear that the critics and cynics were wrong. TARP has proven remarkably successful at stabilizing the economy and laying the foundation for future growth.......................

http://www.huffingtonpost.com/herbert-m ... 48465.html

by **cookie** » October 4, 2010, 11:24 am

UdonExpat wrote:Well sometimes I'm happy to eat my words. I thought the bailout was a loser. Not the first time I've been wrong.

TARP has become a dirty word in our nation's political discourse. Few terms elicit such anger from voters and politicians.

In many ways, that's understandable. No one wanted to bail out Wall Street. No one wanted to use taxpayer dollars to rescue an industry that helped cause the worst economic crisis in a generation.

It was unfair. It was appalling. But it was necessary. We had no other choice.

Two years ago, we stood at the brink of an economic catastrophe. Ordinary American families were questioning whether their money was safe in banks. A growing financial panic threatened to sink our nation into an economic downturn that rivaled the Great Depression.

A bi-partisan majority in Congress responded by enacting the Troubled Asset Relief Program. The debate over this issue was heated. On October 3, 2008, when TARP became law, one member of Congress even went so far as to say, "I don't think it is too much of a stretch to say this may be the day America died."

Two years later, with TARP officially set to expire today, it's an appropriate time to look back and evaluate that program's effectiveness. And now that the fog of an intense financial panic has lifted, it's clear that the critics and cynics were wrong. TARP has proven remarkably successful at stabilizing the economy and laying the foundation for future growth.......................

http://www.huffingtonpost.com/herbert-m ... 48465.html