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Farmerkev wrote:

JakeTheTall wrote:

Farmerkev wrote:

There is a mental component to recessions you can't deny. A pessimistic attitude tends to build on itself.
The converse is also true.
So far things aren't quite as bad as some try and make out.
They went as good as people thought under Clinton either.
It's kind of like watching someone talk themselves into getting sick or well.

I can deny it has any meaningful effect.

Do weather forecasters cause hurricanes ?

Can you avoid getting wet in a thunderstorm if you think positive ?

Is there a positive side to losing your job or you home ?

Is is pessimistic to change one's behaviors if one thinks they may lose their job or their home ?

Jake, be serious.
If you go on a picnic or not has no bearing on the rain.
It does have a bearing on the guys that sold you the stuff for and to get to the picnic.
Economic activity isn't a natural driven phenomenon.

The less people spend because they fear they will get laid off the more likely the business downturn will get bad enough to lay them off.

The cold callused part of the equation is recessions are good for the long term health of the economy and people.

My hurricane / thunderstorm analogy was more to mean that once economic conditions are created, there's no stopping them.  And that people in the path of the hurricane, but its still 3 days ahead, may be asking what the fuss is.

You're of course correct that people spend less when they're afraid they will lose their job, and that affects business, but that's a symptom of the event, not the cause of it.

And, I agree on the cold rational part of valuing a recession.  The more dangerous part is that the Feds might muck up the "rescue" and create future moral hazards or to let companies / banks remain zombies, a la Japan from 1990-2000 and later.

Tallgeese wrote:

It makes one wonder what the economy would be like if it weren't based on debt.

I bet the growth numbers would be much smaller, but they'd better reflect real wealth and reserves.

user wrote:

:: practices irrational exuberance, hoping kev will notice ::

Fantasising your way to wealth and prosperity?  Hey, if enough people believe you, you can get a nice scheme going for a while. You can put up some impressive numbers. Just hope no one askes for an accounting.

Tallgeese wrote:

Ribtorus wrote:

Tallgeese wrote:

It makes one wonder what the economy would be like if it weren't based on debt.

I bet the growth numbers would be much smaller, but they'd better reflect real wealth and reserves.

Yes, I do think you're right. Unfortunately, the conservative mantra is "max economic growth" as the greatest growth - even though it's a debt-based bubble that will hurt many with every "correction."

It's a conservative mantra?

ShnickyShnack wrote:

What does the gold standard have to do with anything?

For all its problems, it would prevent subprime crises. One argument against it is that instead of too much credit, you would have too little.

Don't be an idiot.

"non sequitur" offends me.

Anyway, presidents and their admins do at the very least influence the economic habits of all Americans by what they encourage, and what they practice.  And Bush basically encouraged us to spend more money, while he did the same.  Never once did I hear "shop realistically" or "ask yourself if you really need it" or "don't do as I do."

freecat wrote:

ShnickyShnack wrote:

Your gold standard reference seemed like just as much of a non sequitur. Sorry if that offends you.

I thought you were just saying something stupid to annoy me. If you don't see the connection between a monetary system and credit, especially the impact a commodity standard (e.g. gold standard) would have on credit markets, then you have no business criticizing a gold standard or those who advocate one.

Once again, I understand it. I just didn't understand (and don't understand) why you mentioned it in this thread. It's either a leap of logic so great that I can't follow, or it's just a non sequitur. Hence my communism reference. Which by the way was true, so far as it goes. A communist system would indeed have prevented the subprime nonsense. Well, duh, right?

freecat wrote:

I guess the point is that everyone seems to want to regulate all banks but the central bank. A lot of people knock around the gold standard, but the fact remains that it is one of the best-known ways to regulate central bankers. Comparing it to a system where there is no private investment, period, is silly. I'm not especially eager for a return to the gold standard, but it wouldn't crush the economy the way you seem to think. You'd get fairly predictable, steady deflation, rather than steady inflation. So what?

Aha, see now you're starting to make a bit of sense.

And I can't speak for anyone else, but I for one don't see a gold standard "crushing" the economy. I just don't think it's feasible at this time. Oh and I tend to get annoyed by those who see it as a magical panacea.

And it's interesting to think about the Fed. Especially nowadays, with a popular mantra being that Alan Greenspan is the cause of what's ailing the system now. But even if it's true, how smart is it to allow one person so much influence over the financial system?

Who watches the watchers, as it were?

Last edited by ShnickyShnack (2008-07-19 11:36 am)

freecat wrote:

A return of the US dollar to the gold standard isn't feasible. Abolishing legal tender laws and allowing banks or nutjobs in Montana to issue their own currency, backed by gold, silver, silicon, chicken feet, or whatever... is more feasible. Then if the Fed gets too wacky, banks can insist on other forms of payment in their contracts.

A less extreme suggestion: let U.S. lenders demand payment in Euros, pounds, or whatever if they are anxious about the future value of the dollar. Then the Fed would at least be limited by, almost in competition with, other central banks.

Actually that Montana nutjob idea sounds great!

Okay, so it's different.

I know: lets move to the body organ standard!

One day we'll have to pull up the pavement to make the ground safe for our horses' feet.