Bernanke calls recession "likely over"

[Pangloss]

Fed Chairman Bernanke says the recession is likely over, and he's got some facts to back it up. His assessment is based largely on consumer spending. Let's take a look at this handy chart:

 

 

http://online.wsj.com/article/SB125301730771311713.html?mod=rss_Today%27s_Most_Popular

 

Obviously we'll have to wait and see, and it sucks that employment is generally a lagging economic indicator, but with any luck we may be able to put this behind us soon.

[abskebabs]

I don't know why anyone would place continual faith in Bernanke's predictions now, since he's been continuously wrong about the mortgage crisis and almost everything for the past 2 years.

[bascule]

I don't know why anyone would place continual faith in Bernanke's predictions now, since he's been continuously wrong about the mortgage crisis and almost everything for the past 2 years.

 

You say that as the bailout has, for all intents and purposes, worked out fairly well.

[abskebabs]

You say that as the bailout has, for all intents and purposes, worked out fairly well.

lol:D.

 

Yes, I won't deny it's prevented bankruptcies of firms that should have gone down anyway, but I'd hold your breadth about a real recovery. A bear market rally in stocks is not an economic recovery.

[bascule]

Yes, I won't deny it's prevented bankruptcies of firms that should have gone down anyway

 

Why is that? It would've lead to the complete collapse of the financial system. From the other thread it sounds like you don't believe this is the case, which really leads me to question how grounded in reality your economic views actually are. You seem to be off in Austrian la la land.

 

Do you think, following the collapse of Lehman Brothers, the world financial system was in danger of collapse or not?

[abskebabs]

Do you think, following the collapse of Lehman Brothers, the world financial system was in danger of collapse or not?

 

A collapse was inevitable given the actions taken under the perverse incentives generated by governmnets and central banks worldwide, but especially by the Federal Reserve. I don't believe the collapse of Lehman "ignited" anything, it was just bringing on the inevitable.

 

It's like a drunk builder who only has 10 bricks thinking he has 15 and mis-allocating his capital to build a larger house. As he sobers up he realises he's wasting resources and making losses, having to cut back. Our policy makers are effectively saying, no we should just carry on getting the guy more drunk at least he'll think he's getting rich!

 

All policymakers have done is destroyed further capital, prevented the bankruptcy of failed firms by passing on their debt to the taxpayer and turned a recession into a great depression.

 

Also, I couldn't care less if you think I'm in "Austrian la la land", I think it far better than parroting the opinions of economists and analysts that couldn't predict their way out of a paper bag and have been wrong about almost everything.

[iNow]

Bernanke's actions were the right thing to do. That's all there is to it. If he didn't act, we'd all be living out of boxes and making fence post soup for dinner right now.

 

Even highly conservative George Will suggested Bernanke should be named man of the year. Additionally, conservative David Brooks also recognizes that he acted appropriately. In other words, the only people who think Bernanke acted improperly are not working with an accurate view of reality, and are too busy arguing in favor of economic ideals which don't ever exist (much like a point Pangloss made really well in another thread just yesterday).

 

 

Reference to George Will's comment: http://abcnews.go.com/video/playerIndex?id=8560741

[abskebabs]

Oh of course! I'm sorry, too many free market ideals and capitalism caused the crisis.. Damn those greedy bankers just got so greedy all of a sudden...

[iNow]

I must say, I'm rather tired of people using attempts to ridicule the position of others instead of refuting it. I tend to hear this most often from free-marketeers. Odd to me that they so often lose focus of arguments on the merit and resort to the "nanner nanner boo boo" style of debate. Rolleyes, indeed.

[abskebabs]

Indeed, that wasn't appropriate though I did enjoy it>, given what has been discussed so far followed by your blanket remark, I couldn't resist.

 

Frankly, I think I'll take a break for now, I've discussed a hell of a lot in the politics section lately. I'll take the time to read and learn more and come back later.

[bascule]

A collapse was inevitable given the actions taken under the perverse incentives generated by governmnets and central banks worldwide, but especially by the Federal Reserve. I don't believe the collapse of Lehman "ignited" anything, it was just bringing on the inevitable.

 

I disagree with this position. Cheap credit alone did not cause the financial crisis. The crisis was created by the slew of incomprehensibly complex financial products created from this cheap credit. The cheap credit was the instigator, but a financial crisis was not inevitable given its existence.

 

Furthermore, Lehman Brothers was overleveraged. To reiterate again, they folded with a debt greater than the GDP of most nations. Why exactly was this allowed in the first place?

 

Also, I couldn't care less if you think I'm in "Austrian la la land", I think it far better than parroting the opinions of economists and analysts that couldn't predict their way out of a paper bag and have been wrong about almost everything.

 

So you're basically saying you have no concern for reality and are happy to live in a theoretical nonsense world?

 

I'm happy to stay firmly ground in reality, viewing the situation in the gestalt including the social ramifications, rather than just viewing the best economic outcome alone, at least as the Austrian school views it. "Let it collapse" looks great from the Austrian school perspective, but ignores that if the financial sector collapsed life for everyone would really, really suck for quite some time. But hey, it would weed out the bad debt and corruption, hooray!

[Pangloss]

A bear market rally in stocks is not an economic recovery.

 

Of course not. What would you consider a real recovery? Throw some terms out there and we'll probably all more or less agree.

 

 

(And enough with the ridicule.)

[abskebabs]

Perhaps this should provide an impression of what effect the TARP has had:

[bascule]

Perhaps this should provide an impression of what effect the TARP has had

 

You do realize that TARP passed at the same time as an international financial crisis was starting, right?

 

I sense a bit of post hoc ergo propter hoc in your argument. Can you demonstrate why that's an effect of TARP, and not the financial crisis?

 

What do you think that graph would've looked like if TARP hadn't passed? Would loans have been up, or would they, I don't know, have cratered amidst a complete collapse of the financial system.

[abskebabs]

You do realize that TARP passed at the same time as an international financial crisis was starting, right?

 

I sense a bit of post hoc ergo propter hoc in your argument. Can you demonstrate why that's an effect of TARP, and not the financial crisis?

 

What do you think that graph would've looked like if TARP hadn't passed? Would loans have been up, or would they, I don't know, have cratered amidst a complete collapse of the financial system.

 

Indeed, I find it quite interesting that you are quick to correctly object that correlation does not necessarily indicate causation, and this is an emprical fallacy, representative of a method that cannot be applied in a subject like Economics; precisely when it affects your own prejudices and a priori notions about what caused the crisis, and what its solutions are.

 

The problem with empricism in Economics is that when it comes to explaining every phenomenon one can always argue "Sure, my theory was wrong at matching A with B, but that only shows one didn't take into account C!", or more suitable to the justification of the bailout: "Things got really bad as a result of government intervention, but they would have been even worse without it!" You can argue both ways about every empirical situation, which actually requires historical understanding along with economic analysis accordning to laws formulated et ceteris paribus to understand.

 

Perhaps as another illustration you may find the following graph, used to justify with the bailout, although it does relate to Obama's stimulus as opposed to Paulson's; more useful:

 

[bascule]

or more suitable to the justification of the bailout: "Things got really bad as a result of government intervention, but they would have been even worse without it!"

 

Things didn't get "really bad." You can talk about how things are "really bad" in terms of various economic indicators and I'll say they aren't because we don't have swathes of people waiting in line for soup and bread.

 

That said, do you disagree that without TARP, things would be worse?

 

Perhaps as another illustration you may find the following graph, used to justify with the bailout, although it does relate to Obama's stimulus as opposed to Paulson's; more useful

 

I dislike when people bandy about the terms "bailout" in regard to Obama's economic recovery plan. We're talking about TARP, which is a separate piece of legislation, with its own respective set of pros and cons, and was passed under Bush, not under Obama. You of all people shouldn't be interchanging them (even admittedly) as if they're synonymous.

[Skye]

The lagging unemployment rate could easily drag retail sales back down again over the six months. So there's some speculation that there will be a W-shaped recession, with an apparent recovery for a few months, then some poor results for a few months, then the actual recovery starting March-ish next year.

[abskebabs]

You of all people shouldn't be interchanging them (even admittedly) as if they're synonymous.

 

My aim was more geared to elucidate the methodological point I was making, indeed I don't think they either the TARP or the stimulus have done any good; in fact they have brought a lot of harm, burdening the rest of the economy with the failures of a smaller portion.

 

It's kind of like solving the problem of a broken leg by breaking the other.

[bascule]

My aim was more geared to elucidate the methodological point I was making, indeed I don't think they either the TARP or the stimulus have done any good; in fact they have brought a lot of harm, burdening the rest of the economy with the failures of a smaller portion.

 

It's kind of like solving the problem of a broken leg by breaking the other.

 

And your solution is... shoot the patient?

[abskebabs]

And your solution is... shoot the patient?

No if anything, that's more your solution and the solution that has been taken. Intervene heavily in money and banking, create an unsustainable boom followed by a bust, slap yourself in the face and say, golly gosh I should have done even more damage, then I'd get better!

 

Even better, let's raise taxes and increase govenment spending, bidding resources away from the already crippled private sector!

 

But for God's sake, don't allow the market or prices to correct!

[iNow]

Even better, let's raise taxes and increase govenment spending, bidding resources away from the already crippled private sector!

 

But for God's sake, don't allow the market or prices to correct!

 

Your ideology is not aligned with reality. Problems were a direct result of the market, and had been building for nearly a year before the crash of Lehman. Further, for you to say that things would have been better without intervention from the government with TARP shows just how profoundly your idea of "better" has escaped the realm of common sense and real world impact.

 

You are burying your head in the sand of ideals, and your presentations are suffering accordingly. We don't live in a world of ideals, nor will a purely free market (such as that required for your ideas to work) EVER exist.

 

So... can we all at least agree to argue based on reality, and not based on fantasy and wish thinking?

[abskebabs]

Your ideology is not aligned with reality. Problems were a direct result of the market, and had been building for nearly a year before the crash of Lehman. Further, for you to say that things would have been better without intervention from the government with TARP shows just how profoundly your idea of "better" has escaped the realm of common sense and real world impact.

 

You are burying your head in the sand of ideals, and your presentations are suffering accordingly. We don't live in a world of ideals, nor will a purely free market (such as that required for your ideas to work) EVER exist.

 

So... can we all at least agree to argue based on reality, and not based on fantasy and wish thinking?

 

Just because my conclusions do not fit in with your own pet theory or that fed to you by your political masters does not make them an "ideology" that has nothing to do with reality.

 

Rather than resorting to criticising any specific points in my reasoning, your labelling makes your argument moot, not that you had any to begin with.

 

Just out of curioisity, did you look at the earlier link I provided on the inflationary depression created in 1921? It was in many ways worse than the 1929 one, yet there was a swift recovery within 2 years. And you know what the Harding administration did? They engaged in NO stimulus, and lowered government spending and taxes. Meanwhile the Fed was not allowed to inflate either. Keynesians still cannot explain this even today, and they are also the same people who predicted a depression after World War 2 given the huge drop in government spending.

 

And I'm the one who's crazy?

 

For reference you may want to check out the following piece by Tom Woods on the subject:

http://www.firstprinciplesjournal.com/articles.aspx?article=1322&loc=fs

Edited October 20, 2009 by abskebabs

[bascule]

And your solution is... shoot the patient?

 

No if anything, that's more your solution

 

[...]

 

But for God's sake, don't allow the market or prices to correct!

 

You mean... don't let the economy collapse? That's quite the euphamism there.

 

I mean, honestly, I don't know how you can manage this sort of doublethink. You think TARP is the shoot-the-patient solution, when the alternative you're offering is the complete collapse of the worldwide economy. That is the shoot-the-patient solution.

 

Do you really think that's a good solution?

[abskebabs]

You mean... don't let the economy collapse? That's quite the euphamism there.

 

I mean, honestly, I don't know how you can manage this sort of doublethink. You think TARP is the shoot-the-patient solution, when the alternative you're offering is the complete collapse of the worldwide economy. That is the shoot-the-patient solution.

 

Do you really think that's a good solution?

 

What is it you don't understand?

 

Doing more of the things that created the crisis in the first place does not solve it. Indeed, continuing these policies, is precisely what destroys and has been destroying the economy.

 

How is it not doing these things creates (gasp!) a complete collapse? The only thing the policies of the past year have done is to further damage the economy, bail out inefficient companies, keep the capital structure poorly adjusted and make inevitable the upcomng dollar crisis.

 

The prices adjust and losses are revealed in balance sheets because entrepreneurs are revealed the level of malladjustments of capital that were made during the boom. The damage has already been done, and the correction needs to be allowed to take place, the sooner the better. Otherwise look forward to your 10 year depression.

[bascule]

What is it you don't understand?

 

There's two questions I've asked you over and over and over which you've never answered me directly on. You seem to like to go off on tangents.

 

1) Do you think if no government action was taken following the failure of Lehman Brothers that it would've lead to a collapse of the worldwide financial system?

 

2) (answer only if "yes" is your answer to #1) Do you think the resulting collapse would be a good thing because it provides the necessary "corrections" to the market?

 

Call me crazy, but I think propping up a corrupt system with government money is preferable to a collapse. I'll call you crazy for preferring a collapse.