Recovering from Recession

[TrueBeaver]

I looked through the last couple pages and didn't see any economics-related topics so here goes, my apologies if I've missed one.

 

Basically, what's your opinion on recovering from recession? A lot of people attribute the "end" of this most recent recession to a return to Keynesian principles but others argue that those same principles created the problems in the first place. Relatedly, some countries (notably the US) have been monetizing their debt to try to get out of the recession. This has been met with criticism from other countries since devaluing your currency gives you trade advantages and could, in theory, lead to a dangerous trade/tariff/currency devaluation war. It has also been met with criticism at home from deficit hawks, who are concerned with the debt and see something as bold as quantitative easing as leading to massive inflation, and libertarians, who view virtually any government intervention as bad.

 

Considering that some conservative economists are coming around to quantitative easing, do you think we're close to reaching a consensus for anti-recession measures?

Considering the risks of several economies flooding the market with currency, are there better ways to deal with global recessions or are the rewards worth the risk?

Should central banks respond to increases in demand for money balances and their respective home currencies (demand for dollars in the USA, pounds in Britain, euros in Germany) with initiatives like quantitative easing, even at risk of commodity booms and inflation?

Today CNBC discussed Glass-Steagall and whether its repeal was to blame for the recession in the States. Would you support the reinstatement of the Act or is it better as it is now?

 

Don't know how familiar you all are with this so here's some background:

*Overview of Quantitative Easing

*Larry Kudlow and Senator McCain talking about Glass-Steagall in December 09 (video)

 

Bonus: for those interested you may enjoy these

 

Note: I purposely left this open to take any number of many directions (banking reform, macroeconomic policy, economic models, whether the American Recovery and Reinvestment Act (stimulus bill) helped, etc.) but the overarching point is: What is the best way to prevent and/or recover from a recession?

[sees_all1]

D.C. is filled with a bunch of corrupt bastards like Barney Frank.

This depression is their fault.

 

[hide=Fun stuff on Frank]

Barney Frank gets a sweetheart position for his sweetheart:

http://www.boston.com/news/local/massachusetts/articles/2011/05/27/rep_frank_acknowledges_recommending_companion_for_job_with_mortgage_agency/

 

Barney Frank's "tough regulation" allows the fed to dish out 80 billion dollars near interest free:

http://www.bloomberg.com/news/2011-05-26/fed-gave-banks-crisis-gains-on-secretive-loans-as-low-as-0-01-.html

 

Barney Frank telling us that the housing market is just swell:

http://www.youtube.com/watch?v=Q6Yv7jT0TX0

 

Bill O'Reilly famously ranting at Barney Frank:

 

On a lighter note, Paul Shanklin's parody, "Banking Queen"

[/hide]

 

 

I'll post more later, but just that got me pissed off.

[Assume Nothing]

I'll post in a few hours. I've just had a macroeconomics exam

[Lenticular_J]

I was taught that we should expand, expand, expand. Money supply, spending, everything. The thing is, theoretical economics doesn't take into account people that may very well be buttholes. I mean, with our massive debt (which is exaggerated - a massive amount is owed to ourselves, not good but not terrible), nobody is going to like more government spending. But lowering taxes is irresponsible of government.

 

Now, I'm just barely an economics student. A good one, I suppose, but still very much learning. I can see how Glass-Steagall's repeal would help out with the crisis of late. But, honestly, that was kind of coming to us, if you believe in the boom-bust cycles of capitalism. We were in a massive, uncontrolled boom since the internet really, with practically no regulation. We needed to be checked, I reckon, and it was more the natural cycles that tossed us into the dirt for a bit.

[1_Stone_Pwn]

We need more regulation, including the reinstatement of Glass-Steagall and everyone who worked in Wall Street and the Fed and could have stopped it thrown out by the collar. Do that and the recovery will take care of itself.

[jasignhagj]

Well, it just says that states can't make payments in anything but gold or silver.

[sees_all1]

I think we can all agree that we need to tax the rich more.

 

:rolleyes:

 

When the U.S. finally scares away all the rich people, we'll all be equal.

[marcustullius]

People should watch the documentary "Inside Job", I thought it was very good and straight forward.

 

Personally, I'm not very knowledgeable about economics at all, but imo more bank regulation and higher taxes for the wealthy. And CLAMP DOWN on conflicts of interest in the government

[TrueBeaver]

I was taught that we should expand, expand, expand. Money supply, spending, everything. The thing is, theoretical economics doesn't take into account people that may very well be buttholes. I mean, with our massive debt (which is exaggerated - a massive amount is owed to ourselves, not good but not terrible), nobody is going to like more government spending. But lowering taxes is irresponsible of government.

 

Now, I'm just barely an economics student. A good one, I suppose, but still very much learning. I can see how Glass-Steagall's repeal would help out with the crisis of late. But, honestly, that was kind of coming to us, if you believe in the boom-bust cycles of capitalism. We were in a massive, uncontrolled boom since the internet really, with practically no regulation. We needed to be checked, I reckon, and it was more the natural cycles that tossed us into the dirt for a bit.

There's considerable support among economists for increasing spending during a recession. Considering the equation of exchange (MV=PY), they argue that when velocity (V) drops, prices (P) won't respond accurately or in time so the size of the economy (Y) will shrink. In order to prevent this you must increase the money supply (M) to prevent economic shrinkage that could last long after the recession ends. Ramesh Ponnuru (a conservative pundit) wrote a great article about it, as well as highlighting many conservative economists who agree, for National Review a few months back.

 

The problem with this is that it fuels a commodity-backed recovery which many people, notably Peter Schiff, contend is not sustainable since it results in higher prices for food, gas, etc. Ponnuru explains the rise in commodity prices by citing increased Asian demand for them.

 

This is Schiff on the Kudlow Report talking about it on January 24, 2011:

 

I'm a believer in pragmatism over principle, and since the Great Depression was perpetuated by central bankers who were too tight on the money supply then congratulated themselves for adhering to principle, I'm partial to the idea of increasing the money supply now then over time lower the interest to lower average inflation rate, despite being generally opposed to increases in federal spending. That said, the stimulus bill was a disaster.

 

About lowering taxes: the four biggest tax cuts in the last century were Bush's in 2001 and 2003, Reagan's throughout his first term, Kennedy's in 1962, and Coolidge's in his (kind of) second term (1924, 1926, and 1928). Coolidge's paid off a fourth of the debt and, along with Harding's policies, created prosperity during the 1920s. Kennedy's vastly increased tax revenue. Reagan's increased tax revenue even more than Kennedy's (if I recall correctly) and ushered in an unparalleled era of prosperity, as evidenced by over 20 years of DOW increases. Bush's helped alleviate the damage from the internet bubble bursting and, although they appear to be not as significant as the other three yet, helped continue the era of prosperity until the housing market collapsed. So, tax decreases are not irresponsible at all. Government spending more than they take in is irresponsible.

 

While looking for sources and exact numbers I came across this.

[Lenticular_J]

About lowering taxes: the four biggest tax cuts in the last century were Bush's in 2001 and 2003, Reagan's throughout his first term, Kennedy's in 1962, and Coolidge's in his (kind of) second term (1924, 1926, and 1928). Coolidge's paid off a fourth of the debt and, along with Harding's policies, created prosperity during the 1920s. Kennedy's vastly increased tax revenue. Reagan's increased tax revenue even more than Kennedy's (if I recall correctly) and ushered in an unparalleled era of prosperity, as evidenced by over 20 years of DOW increases. Bush's helped alleviate the damage from the internet bubble bursting and, although they appear to be not as significant as the other three yet, helped continue the era of prosperity until the housing market collapsed. So, tax decreases are not irresponsible at all. Government spending more than they take in is irresponsible.

We only barely touched on supply-side economics, I wish I'd remembered because it certainly makes sense to me.

 

That's why the whole "tax the rich" argument can be invalidated. They're the ones that provide the money for the rest of us. Businesses, corporations, blah, blah, blah... Income taxes aren't quite the main source of revenue for our government (well, if that includes business incomes it definitely is - personal, not so much). Raising taxes on businesses is a bad idea, no matter how romantic it sounds to take from the rich - it trickles down, meaning you're taking from the poor as well.

 

I guess capitalism is a pretty black-and-white thing. Works most practically with laissez-faire policies, even though many more or less moral aspects can only be enforced with regulation. I like economics. It's a crazy field of study.

[Tim]

I think They're full of [cabbage] when they say "The world has recovered."

 

I for one havent had any luck in employment because it struck right as I finished school and royally raped over many people between 19-21 in Australia. The only reason they think "oh its over" is because they're not being effected by it, young people got hit the worst and its still a nightmare in NSW.

[TrueBeaver]

We only barely touched on supply-side economics, I wish I'd remembered because it certainly makes sense to me.

 

That's why the whole "tax the rich" argument can be invalidated. They're the ones that provide the money for the rest of us. Businesses, corporations, blah, blah, blah... Income taxes aren't quite the main source of revenue for our government (well, if that includes business incomes it definitely is - personal, not so much). Raising taxes on businesses is a bad idea, no matter how romantic it sounds to take from the rich - it trickles down, meaning you're taking from the poor as well.

 

I guess capitalism is a pretty black-and-white thing. Works most practically with laissez-faire policies, even though many more or less moral aspects can only be enforced with regulation. I like economics. It's a crazy field of study.

If you're interested, Milton Friedman's Free To Choose series that was on PBS years and years ago is incredibly informative and interesting (to me, at least). You can watch the episodes here. But yes, like them or hate them, the rich who own businesses will pass on the costs of tax increases to the poor and middle classes who are buying their product while those who are middle class who own businesses won't be able to compete.

 

I have to agree that economics is an awesome field of study. One of my favorite quotes is from Friedrich August von Hayek, "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."

 

Also, Federal revenue by source.

 

I think They're full of [cabbage] when they say "The world has recovered."

 

I for one havent had any luck in employment because it struck right as I finished school and royally raped over many people between 19-21 in Australia. The only reason they think "oh its over" is because they're not being effected by it, young people got hit the worst and its still a nightmare in NSW.

This. It's incredibly elitist to look at some numbers and declare that the recession has been for 2 years while you're sitting in your big house and your cook is preparing your dinner. :shame:

It would be laughable if it wasn't so sad.

[Will H]

We need more regulation, including the reinstatement of Glass-Steagall and everyone who worked in Wall Street and the Fed and could have stopped it thrown out by the collar. Do that and the recovery will take care of itself.

 

Regulations mean nothing when a corrupt government is part of the problem.

 

 

What I would see as a real solution is get rid of the fed entirely and put us on the gold standard again. Federal Reserve notes arent even constitutional anyways.

 

Article 1 Section 8 of the US constitution [powers of congress]:

"To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;"

 

Article 1 Section 10 of the US constitution

"No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility."

 

Federal Reserve notes arent real money and aren't even allowed by the constitution. Also by the constitution are not considered to be real money. Also part of the problem.

 

That's not an argument for returning to the gold or silver standard, that's an argument that the US constitution is wrong. Which it is on several counts.

 

The fact that people blindly follow that document without thinking irritates me.

[marcustullius]

I think They're full of [cabbage] when they say "The world has recovered."

 

I for one havent had any luck in employment because it struck right as I finished school and royally raped over many people between 19-21 in Australia. The only reason they think "oh its over" is because they're not being effected by it, young people got hit the worst and its still a nightmare in NSW.

 

Out of 30 - 50 applications, I've gotten two calls backs, one of which was fishy/a scam. Not very optimistic anymore.

 

e: I remember reading this like a year ago

http://www.theatlantic.com/magazine/archive/2010/03/how-a-new-jobless-era-will-transform-america/7919/

 

Blurb:

 

The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.

 

I can't remember much of it, but I found it interesting at the time. Again, I don't know much about economics so maybe some of you other guys can say things about it

[Giordano]

 

e: I remember reading this like a year ago

http://www.theatlantic.com/magazine/archive/2010/03/how-a-new-jobless-era-will-transform-america/7919/

 

Blurb:

 

The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.

 

I can't remember much of it, but I found it interesting at the time. Again, I don't know much about economics so maybe some of you other guys can say things about it

 

I've also had this feelin/thought. Companies reworked their organization to be more efficient with less employees. Now with the recession 'over' they're more efficent now than before and won't hire workers like they did back then.

[Lenticular_J]

One thing that I thought I might toss in here: skilled labor. It's a rare and valuable commodity in our professional America, and becoming rarer as kids are encouraged to go to college and enter into overfull professional fields. I don't understand the stigma. Welders make as much as engineers in many cases, and plumbers may some day be the new computer engineers. Some day soon.

 

http://www.youtube.com/watch?v=3h_pp8CHEQ0

[Zierro]

I think They're full of [cabbage] when they say "The world has recovered."

 

I for one havent had any luck in employment because it struck right as I finished school and royally raped over many people between 19-21 in Australia. The only reason they think "oh its over" is because they're not being effected by it, young people got hit the worst and its still a nightmare in NSW.

 

Same exact situation here in Florida. I have tons of friends all looking for jobs. Only one of them found one solely because he walked into one of his favorite restaurants right as someone was getting fired because they were on their cellphone too much.

 

Out of 30 - 50 applications, I've gotten two calls backs, one of which was fishy/a scam. Not very optimistic anymore.

 

Yep, scams flourish in times like these. My friend (the one who now has a job) had the misfortune of working with one for about a week. He thought it was fishy at first but he was homeless and didn't have much of an option, that is until we looked it up online and heard the horror stories of people working their asses off and making anywhere from $50 to absolutely nothing and even getting abandoned on the side of the road because they questioned their pay. :blink: Beware anything sales-related.

[marcustullius]

 

Out of 30 - 50 applications, I've gotten two calls backs, one of which was fishy/a scam. Not very optimistic anymore.

 

Yep, scams flourish in times like these. My friend (the one who now has a job) had the misfortune of working with one for about a week. He thought it was fishy at first but he was homeless and didn't have much of an option, that is until we looked it up online and heard the horror stories of people working their asses off and making anywhere from $50 to absolutely nothing and even getting abandoned on the side of the road because they questioned their pay. :blink: Beware anything sales-related.

 

One I went to was for asbestos removal. Beware of placement agencies. I was surprised because aside from pyramid schemes, I haven't really heard of many scams in my city.

 

My friend has been looking for a job/applying since LAST SUMMER.

 

A trend I'm noticing is there are a LOT more elderly people working at jobs that would typically go to the young people/students, who normally would be retired. I guess they either didn't save enough or want to keep working?

[Assume Nothing]

For western economies, the problem isn't really recession or boom and bust - it's stagflation. Imported cost-push inflation where the costs of production rise, thus average price levels rise, thus workers (a cost of production) demands more pay, creating a perpetual cycle of inflation until the government intervenes. This isn't usually a significant problem, but coupled with high unemployment, you get the worst of both worlds. Stimulating demand will cause inflation, and stimulating supply will cause no growth in real output - neither desirable effects.

 

The UK and the US has also amounted very large debts with very high budget deficits - as theory would suggest they should be easing fiscal policy, it appears as though the government is forced to tighten fiscal policy in order to get a balanced budget. Governments are no longer able to spend it's way out of recessions, and we're left hanging as consumer confidence is at an all time low.

 

Rapid, large reductions in government expenditure could have devastating effects because there is a negative multiplier effect associated with reducing government expenditure, and if the size of our skilled workforce is decreased, then economic growth will be difficult to achieve as we have less resources available to produce goods/services for the world.

 

Correcting problems like would mainly depend on how the government prioritizes the four main macroeconomic objectives - What's worse, inflation or unemployment? It's a trade-off, as they typically have an inverse correlation, and that's where the government has to decide. Although some policies may meet all objectives - usually it doesn't do it to a high enough extent.

 

Supply side policies/reforms could correct the problems too, by making firms more competitive, but there's a significant up front cost with large opportunity costs - where is the money going to come from? Defence?

 

It may not be politically possible or practical either, as there would be issues with environmentalists and politicians if it's about improving infrastructure by building new roads/improving old ones, or arguably, building new schools (although less politically restrictive).

 

Quantitative easing may be effective, but very dangerous in terms of the potential inflationary effects - within a few years, the money supply will have washed through the economy and it's likely that average price levels could rise a significant extent (depending on the size of the QE) as a result.

 

I haven't learnt enough about Economics to know how to prevent a recession, but to recover from it - it would be great if the government has some money in order to spend it's way out. Reducing government spending to reduce the budget deficit makes little sense to me - if the economy is unable to grow and actually contracts, surely it more difficult collect the taxes in the first place?

 

I seem to be talking on a tangent now, I'll post when someone replies to this