Question: What is the difference between a Recession and a Depression? Anwser: A recession is when the man down the street loses his job, and can't fund work. A Depression is when you loses your job and can't find work.
Regards, LelandJ Bob Calco wrote: > http://bit.ly/hx4DJ > > - - - > Before talking about how we did get here, let me say a quick word about what > didn't cause this mess. Those who wish to blame greed for the crisis need > to explain how and why it is that greed seems to causes crises only at > specific times, despite the fact that it is omnipresent as a feature of > human nature and market economies. As the economist Larry White has noted, > if we saw a bunch of planes crash all on the same day, we wouldn't blame > gravity. It's always there. Something else must be at work. I would argue > that the key is the set of institutions through which greed or self-interest > is channeled. That is, good institutions can cause self-interest to > generate desirable unintended consequences, and bad ones can cause > undesirable ones. So perhaps we should be looking at institutions and > policy. > > Those who wish to blame deregulation or the supposed "laissez-faire" > philosophy of the Bush Administration are going to have to identify the > deregulation in question, which will be a challenge given that the last > deregulatory legislation in the financial industry was in 1999 under > Clinton. These folks will also have to explain how the enormous growth in > the Federal Register and domestic spending over Bush's two terms reconciles > with his supposed belief in laissez-faire. Answer: it doesn't. > > The two key causes of this crisis are expansionary monetary policy on the > part of the Fed and a series of regulatory and institutional interventions > that channeled that excess credit into the housing market, creating a bubble > that eventually had to burst. In other words, the boom (and the inevitable > bust) are the product of misguided government policy, not unbridled > capitalism. > > The Fed drove up the money supply and drove down interest rates very > consistently since 9/11. When central banks do so, they make long-term > investments relatively cheaper than short-term ones, thus the excess funds > flow toward such goods. Historically, these were producer goods in capital > industries, but in this particular case, a set of other government > interventions and policies pushed those funds toward housing. > > A state-sponsored push for more affordable housing has been a staple of > several prior administrations. Fannie Mae and Freddie Mac are key players > here. Although they did not orginate the questionable mortgages, they did > develop a number of the low down-payment instruments that came into vogue > during the boom. More important, they were primarily responsible for the > secondary mortgage market as they promoted the mortgage-backed securities > that became the investment vehicle du jour during the boom. Both Fannie and > Freddie are, we must remember, not "free-market" firms. They are > "government-sponsored entities," at one time nominally privately owned, but > granted a number of government privileges, in addition to carrying an > implicit promise of government support should they ever get into trouble. > With such a promise in place, the market for mortgage-backed securities was > able to tolerate a level of risk that truly free markets would not. As we > now know, that turned out to be a big problem. > > Other regulatory elements played into this story. Fannie and Freddie were > under significant political pressure to keep housing increasingly affordable > (while at the same time promoting instruments that depending on the > constantly rising price of housing) and extending opportunities to > historically "under-served" minority groups. Many of the new no/low > down-payment mortgages (especially those associated with Countrywide) were > designed as reponses to this pressure. Throw in the marginal effects of the > Community Investment Act and zoning laws that crowded residential > development into less and less space in many large cities, not to mention > the bully pulpit arguing for more affordable housing of at least the last > two presidents, and you have the ingredients of a credit-fueled and > regulatory-directed housing boom and bust. And all of this was happening > with the enthusiastic support of much of the private sector, who benefitted > from the wealth generated by the government-induced boom. > > ... > > The Obama Administration's 2009 budget is also connected to the current > mess. According to the president, the reason we got into this mess is that > we apparently spent too much on housing, the financial sector, and debt in > general and not enough on the core issues of the environment, health care, > and education. For the life of me, I cannot see how such a theory can > explain anything of what's happened the last six months, but it does serve > to create a rationale for a budget that contains a whole bunch of new > initiatives that don't obviously seem to be related to the Great Recession. > At a time when the US government has taken on a whole bunch of new debt with > the bailouts and the stimulus, one would think that the next year's budget > should show more restraint and focus on issues central to economic recovery. > As many commentators have noted, it's hard to both argue that too much debt > got us into this mess and that more will get us out. > > Instead, as several members of the administration have said quite > explicitly, they see this crisis as an "opportunity" to promote a variety of > long-standing economic reforms. Again, at a time when the federal > government is already deeply in debt, planning to spend hundreds of billions > on new initiatives having nothing to do with recovery seems a bit strange. > It's especially ironic in light of the accusations make by the likes of > Naomi Klein that it was the Bush Administration and conservatives in general > who manufactured or jumped on crises as a way to push through their > long-standing free market policies. Even the most cursory study of American > history would show that crises grow the state and destroy the market, and > now we have the explicit evidence in front of us from Rahm Emmanuel and > Hilary Clinton. In any case, whatever the merits of this spending on its > own, none of it will do anything to promote recovery. > - - - > > What he said. > > - Bob > > [excessive quoting removed by server] _______________________________________________ Post Messages to: [email protected] Subscription Maintenance: http://leafe.com/mailman/listinfo/profox OT-free version of this list: http://leafe.com/mailman/listinfo/profoxtech Searchable Archive: http://leafe.com/archives/search/profox This message: http://leafe.com/archives/byMID/profox/[email protected] ** All postings, unless explicitly stated otherwise, are the opinions of the author, and do not constitute legal or medical advice. This statement is added to the messages for those lawyers who are too stupid to see the obvious.
