Are we poised for a new "New Deal"

[Pangloss]

With the economy struggling and public opinion very much in favor of government intervention, and both candidates supporting some degree of intervention, I can't help but wonder if we're headed towards some new version of the New Deal, at least in terms of massive government spending programs and new regulations for the financial sector, which has become so important to average Americans due to mortgage financing, educational lending and retirement planning.

 

The Bush administration is talking about a whole new agency devoted to bailouts and management of government-owned corporations -- something we would not have even dreamed of in this country just a year or two ago (but today taxpayers own 80% of AIG!).

 

The libertarian side of me thinks this is all insane, but the centrist part of me wonders if it may in fact be necessary in order to maintain the kind of calm, progressive economy we all seem to want. Our tolerance for pain has become very small, and the financial sector has grown so large that maybe we NEED better regulation of it. Isn't slow, regular growth better than rapid growth with massive, random setbacks?

 

What do you all think?

[ecoli]

I hope not, but it wouldn't surprise me.

 

I mean, its not like anyone asked our permission to take on trillions of dollar worth of bad investments.

 

I don't even think the Fed got approval from congress to take over AIG. (it may have been a different lender, I can't remember).

 

 

The point it that our government is overstepping its bounds without solving real problems. I think our monetary policy contributed greatly to this financial crises, and all the government and the Fed is offering is more inflation at a time when we need to be tightening up our currency.

 

That's how business cycles work.

[Realitycheck]

With baby boomers retiring, and obesity epidemics, and pointless troop surges around the entire world to assert our one brand of freedom, sure, why not spend a trillion dollars to simply fix the banking regulations and regulators? We're just going to borrow it all from China. It's just another 5 billion dollars a year in interest expense at 5%. Now what happens when China, et al, calls for the debt to be paid in full? What's the balance right now? 500 billion for China, 5.3 trillion in all, half of which is owned by foreign countries. Hey, it's just another 5 billion dollars a year for the interest. Only that much more. This is a steal.

 

Just out of curiosity, where does China get all of their money? I thought that they didn't have any money. I thought that they were a communist country. So they just print up Monopoly money to lend to us so we can pay all of this interest to them? Sounds kind of convenient.

 

When the Dems take over, with all of the plans that they have in mind, things start looking realllllllllllllllllllllllllllllllllllllllllly stretched out thin. Of course, it's alllllllllllllllllll going to just get tacked on to the credit card, because we just have to keep this budget balanced and who looks at the balance sheet anyway? It's just another 5 billion dollars in interest expense a year. Interest is cheap!

 

Bad investments are bad. Renting is good!

[Pangloss]

Just out of curiosity, where does China get all of their money? I thought that they didn't have any money. I thought that they were a communist country. So they just print up Monopoly money to lend to us so we can pay all of this interest to them? Sounds kind of convenient.

 

China has the second-largest economy in the world, generating on the order of seven trillion US dollars, or roughly half the size of the US economy. With roughly 300 million people in its middle class, about the same as the number of people in the entire US, that suggests that their per-capita productivity is still developing. And there are over a billion people who have yet to contribute.

 

The Chinese don't just have money. They're reinventing the word.

[Realitycheck]

It's just another 5 billion dollars a year in interest expense at 5%. Now what happens when China, et al, calls for the debt to be paid in full? What's the balance right now? 500 billion for China, 5.3 trillion in all, half of which is owned by foreign countries. Hey, it's just another 5 billion dollars a year for the interest. Only that much more. This is a steal.

 

Oops. 50 billion dollars. I lost track of all of the zeroes.

[CaptainPanic]

The Bush administration seems to be willing to spend up to 700 billion dollar on this bail out plan. They want to create a fund that can trade in the worst mortgage loans. (Mind you that "The plan would raise the ceiling on the national debt and spend as much as the combined annual budgets of the Departments of Defense, Education and Health and Human Services" - source: see below).

 

We must realize that although this 700 billion fund will not evaporate completely, it will not make any profit - most likely it will actually lose money. Of course it's very noble from the US government to help the economy when it needs it the most. But I wonder, where did they find such huge sums of money? Although it will not evaporate completely, the initial investment sum must come from somewhere... and the losses this fund is likely to make will be paid by someone. Who? Tax payers of course.

 

Is the US government just creating extra money? Printing more money will not solve the problem.

 

Is McCain really planning tax reductions for everyone? That's just retarded with these kinds of plans from his own republican party.

 

What is perhaps even worse is that the Bush administration wants to give the Treasury Secretary Henry Paulson almost absolute control over this fund. (Give absolute control over 700 billion dollar to a guy who is part of a corrupted government does not seem like a good plan to me).

 

source: http://www.bloomberg.com/apps/news?pid=20601087&sid=ae6b6P1L8E_E&refer=home

[Pangloss]

You know, I just realized something. President Clinton's oft-lambasted statement from his final State of the Union message, about how the government should invest in the stock market, doesn't seem quite so ludicrous now.

 

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line[/hr]

 

US News has an interesting piece analyzing the political situation surrounding the upcoming bill to spend $700 on a bailout agency. The piece looks at various other media articles and analysis and kinda tallies everything up.

 

http://www.usnews.com/usnews/politics/bulletin/bulletin_080922.htm

 

Some interesting quotes:

 

Roll Call says "Congressional leaders were confident Sunday that they will pass a $700 billion bailout package in the coming days, despite an emerging partisan split over homeowner protections and executive salary caps being part of the plan."

 

Under the headline "Dems Say They Won't Get Fooled Again," The Politico reports, "Sen. Patrick Leahy (D-Vt.) says he's seen this movie before: The Bush administration, citing an unprecedented national threat, puts the hammer on Congress to ram through gargantuan legislation with a minimum of review -- and the murkiest of repercussions."

 

U.S. News and World Report says, "The job of keeping the Great Unwind from turning into another Great Depression has now fallen to" Federal Reserve Chairman Ben Bernanke and Paulson. Newsweek's Fareed Zakaria writes, "In Paulson, America is extremely fortunate to have a man of tremendous intelligence, drive and pragmatism, who will engage in 'bold and persistent experimentation' until the job is done."

 

The Financial Times reports the "US Treasury's $700bn rescue plan for distressed mortgage assets seems likely to give us another: the trillion-dollar deficit."

[bombus]

Try this one for size:

Mushroom Cloud over Wall Street

 

By Mike Whitney

 

"One bank to rule them all;

One bank to bind them..."

 

"The transformation from a free market to a centralized, Soviet-style economy run by men whose judgment and credibility is already greatly in doubt; does not auger well for the markets or the country. Anyone with a lick of sense would cash in their chips first thing Monday and look for capital's Elysium Fields overseas or as far as possible from the circus sideshow now run by G-Sax ringleader, Colonel Klink."

 

http://www.informationclearinghouse.info/article20839.htm