Paul Krugman Tells it like it is

[jem]

Some of us have been pointing out the pathetic performance by Obama and his cabinet since day 1.

Many many times I have said this is not a credit crisis. It is an asset reality crises.

We will continue to have asset depreciation because the assets were mispriced in real terms.

We have two choices. Deal with the return to pre financial engineered economic levels and pricing or create nominal change in asset prices by creating massive inflation.

but that inflation must lead to higher nominal wages and more "money in the hands of consumers" otherwise the price of assets will not rise.

Giving trillions to zombie banks will not raise wages in real or nominal terms.

Spending on Infrastructure and giving the money directly to the people could cause wage and asset price inflation. Give the trillions to each taxpayer. That could reflate housing prices and the stock market in nominal terms.


We just had 10-15 years of of stupid money which caused massive leverage and fraudulent levels of financial activity. That activity is gone. Just look at GE. GE financial is the poster child of the new (old) reality.

Will Ge Financial ever drive GEs performance the way it did for the last decade. I doubt it.

We need real productivity improvement or at least we need the correct kind of inflation.

if you are going to spend trillions spend it where it will make a difference.

Infrastructure, wages, cash for taxpayers. If we were each given 60 grand we would be a hell of a lot better off than anything we have seen washington propose.

Obama and his cabinet have been recklessly ignorant so far.

 

[omegapoint]

Quote from jem:

Some of us have been pointing out the pathetic performance by Obama and his cabinet since day 1.

Many many times I have said this is not a credit crisis. It is an asset reality crises.

We will continue to have asset depreciation because the assets were mispriced in real terms.

We have two choices. Deal with the return to pre financial engineered economic levels and pricing or create nominal change in asset prices by creating massive inflation.

but that inflation must lead to higher nominal wages and more "money in the hands of consumers" otherwise the price of assets will not rise.

Giving trillions to zombie banks will not raise wages in real or nominal terms.

Spending on Infrastructure and giving the money directly to the people could cause wage and asset price inflation. Give the trillions to each taxpayer. That could reflate housing prices and the stock market in nominal terms.


We just had 10-15 years of of stupid money which caused massive leverage and fraudulent levels of financial activity. That activity is gone. Just look at GE. GE financial is the poster child of the new (old) reality.

Will Ge Financial ever drive GEs performance the way it did for the last decade. I doubt it.

We need real productivity improvement or at least we need the correct kind of inflation.

if you are going to spend trillions spend it where it will make a difference.

Infrastructure, wages, cash for taxpayers. If we were each given 60 grand we would be a hell of a lot better off than anything we have seen washington propose.

Obama and his cabinet have been recklessly ignorant so far.

Really, trillions to banks? Can you provide a link to verify that?
Bank assets got false values due to the ratings agencies and they get worse when defaults increase. The idea is to decrease defaults by putting people back to work and thereby making bank assets attractive to investors. If you just gave money away to people you couldn't control where its spent and noone knows how much of it would go towards foreign imported goods from WalMart or whereever. If the stockmarket doesn't think equities at these prices aren't viable investments for the long term, that is unless you think the economy will never come back then okay these levels aren't good investments. You can
pull out an equity from the thousands and use it as an example but that tactic could be used to support any argument.

 

[stock777]

There are a lot of things I'd wish for...if only I had another planet to watch it from.

 

[jem]

Quote from omegapoint:

Really, trillions to banks? Can you provide a link to verify that?
Bank assets got false values due to the ratings agencies and they get worse when defaults increase. The idea is to decrease defaults by putting people back to work and thereby making bank assets attractive to investors. If you just gave money away to people you couldn't control where its spent and noone knows how much of it would go towards foreign imported goods from WalMart or whereever. If the stockmarket doesn't think equities at these prices aren't viable investments for the long term, that is unless you think the economy will never come back then okay these levels aren't good investments. You can
pull out an equity from the thousands and use it as an example but that tactic could be used to support any argument.

you did not pick up my point. There is no economy to come back to. It was a false economy. We will have to work long and hard to create real productivity and economic gains. We won't be returning to recent economic levels without real economic growth. That old economy was based on cdos and bad loans.

As far as trillions going to zombie banks - if you track what the fed and tarp have done and what is being proposed - you will see the trillions number.

Those bank assets are not going to become more attractive without massive wage inflation.

Right now real estate is still very over valued. We have a an overwhelming supply and we are selling off the best priced best looking assets one at a time.

This price is then called a comp - which temporarily gives a comp for all those other assets for sale.

But those others overwhelm the buyer pool - which is shrinking in buyer power everyday. In effect we are giving inflated marks to market for those assets everyday.

Those assets are mispriced to the high side. They are going lower.

The banks are arguing they insolvent because the price of those assets is marked low. The reality is those assets are still going down much farther.

its a friggen joke to blame credit conditions for the pricing.

The credit condition is that people have to qualify for loans and the people lending money want assurance they will be paid back. That is real and that is why we are returning to 90s pricing.

thats not a credit crisis. its a return to reality.

 

[OPTIONAL777]

Yes, it was a false economy created by Bush and his administration.

You know, your daddy that you defended blindly for 8 years...GW?

The man who told America "we can fight wars without personal sacrifice, in fact, I'll cut your taxes and fight this war that we don't need. I'll return to trickle down deficit spending and voodoo economics, and you will love it because I am a republican. I'll help pass laws to keep you from BKing off your credit cards, and I will cut dividends which benefit those who own stocks, and they will take that money and bank it rather than re-investing in America. I will stand by and watch California get screwed by Enron during the energy de-regulation, I will have secret meetings with oil producing companies, then I will fill the reserves buy telegraphing that is what I am going to do and then buy at the market price without hedging. And you will love me and never question me because I am a republican."

Quote from jem:

you did not pick up my point. There is no economy to come back to. It was a false economy. We will have to work long and hard to create real productivity and economic gains. We won't be returning to recent economic levels without real economic growth. That old economy was based on cdos and bad loans.

As far as trillions going to zombie banks - if you track what the fed and tarp have done and what is being proposed - you will see the trillions number.

Those bank assets are not going to become more attractive without massive wage inflation.

Right now real estate is still very over valued. We have a an overwhelming supply and we are selling off the best priced best looking assets one at a time.

This price is then called a comp - which temporarily gives a comp for all those other assets for sale.

But those others overwhelm the buyer pool - which is shrinking in buyer power everyday. In effect we are giving inflated marks to market for those assets everyday.

Those assets are mispriced to the high side. They are going lower.

The banks are arguing they insolvent because the price of those assets is marked low. The reality is those assets are still going down much farther.

its a friggen joke to blame credit conditions for the pricing.

The credit condition is that people have to qualify for loans and the people lending money want assurance they will be paid back. That is real and that is why we are returning to 90s pricing.

thats not a credit crisis. its a return to reality.

 

[omegapoint]

Quote from OPTIONAL777:

Yes, it was a false economy created by Bush and his administration.

You know, your daddy that you defended blindly for 8 years...GW?

The man who told America "we can fight wars without personal sacrifice, in fact, I'll cut your taxes and fight this war that we don't need. I'll return to trickle down deficit spending and voodoo economics, and you will love it because I am a republican."

7 it doesn't do any good to debate Jem's points with who's to blame. Thats in the past and useless namecalling which I respect Jem for not resorting to and sticking to the points.

 

[OPTIONAL777]

There is no debating jems points unless we go back to the foundation of those points...

We are supposed to ignore how we got here, and debate the current situation?

If we don't deal with how we got here, we will no doubt get here again, again, again.

In the words of Susan Powter...

"Stop the insanity."

That begins with a full on confession of the insanity that took place under Bush, not to mention the likely violation of law and basic principles of acting in a fiduciary responsibility for the common good.

The bottom line is that people trusted the government, and the people were greedy and most willing participants in the whole pyramid ponzi scheme.

Now they want to blame Obama?

The blame goes to all Americans who voted in the past politicians who mucked things up, who got Americans chasing the American dream which is similar to a junkie chasing the dragon...

McCain would be doing better than Obama right now?

The corrupt republican congress and senate under Bush (do we forget how many of those folks were busted for corruption?) would be doing better right now?

Have any of the pols pointed to America and said, "Listen folks, this is really your fault, not the government's fault. You didn't want to know what we were doing, you went along with the Bush secrecy deal in government, you didn't care to pay attention, you wanted immediate gratification, you were greedy and played right along with the whole nonsense. You are guilty of being complicit in this whole affair. So don't blame anyone but yourself...and put on a damn sweater if you are cold. Someone forced you to sign that mortgage you couldn't afford? Someone forced you to buy a second plasma TV? Someone forced you to use your credit cards like some emergency saving account? Now stop blaming government and blame yourselves for voting in such crooks, and not demanding better oversight and control of our government. Stop bitching about the media when they go after and want to tell you about the corrupt government. Pull your darn heads out of the sand, grow up, and start acting like responsible adults who take responsibility for their choices of congressmen, senators, and president. Quit the damn whining and go do something productive."

Ya, the above truths would go over real well with the American people...

No, Gordon Gecko was wrong...Greed is not good, unregulated and uncontrolled capitalism benefits the few in the long run, destruction of the rights of the labor force is bad, and a return to a two tier class system of ruling and working class is where this ship has been headed ever since Reagan came into power.

Quote from omegapoint:

7 it doesn't do any good to debate Jem's points with who's to blame. Thats in the past and useless namecalling which I respect Jem for not resorting to and sticking to the points.

 

[Landis82]

Quote from stock777:

can't put the genie back in the bottle

the time to act was when the scumbags were raping the system

too many morons, thieves and liberals around to have done that.

You mean like the Republican from Texas, Phil Gramm who spearheaded the "Commodity Futures Modernization Act of 2000" that lead to de-regulation and no oversight whatsoever
of credit default swaps?

Yeah, that must be the liberal you are talking about.

 

[omegapoint]

Quote from jem:

you did not pick up my point. There is no economy to come back to. It was a false economy. We will have to work long and hard to create real productivity and economic gains. We won't be returning to recent economic levels without real economic growth. That old economy was based on cdos and bad loans.

As far as trillions going to zombie banks - if you track what the fed and tarp have done and what is being proposed - you will see the trillions number.

Those bank assets are not going to become more attractive without massive wage inflation.

Right now real estate is still very over valued. We have a an overwhelming supply and we are selling off the best priced best looking assets one at a time.

This price is then called a comp - which temporarily gives a comp for all those other assets for sale.

But those others overwhelm the buyer pool - which is shrinking in buyer power everyday. In effect we are giving inflated marks to market for those assets everyday.

Those assets are mispriced to the high side. They are going lower.

The banks are arguing they insolvent because the price of those assets is marked low. The reality is those assets are still going down much farther.

its a friggen joke to blame credit conditions for the pricing.

The credit condition is that people have to qualify for loans and the people lending money want assurance they will be paid back. That is real and that is why we are returning to 90s pricing.

thats not a credit crisis. its a return to reality.

I've always believed the economy and individuals livelihoods are too dependant on asset appreciation and not enough on real productivity that has less to do with moving paper from one investor to the next. And that theres no bottom in sight is also not lost on me, an oversupply of real estate brings the aggregate value down. What the plan hopes to do is from the income stimulus created jobs starts a trend of spending and a return to at least improve mortgage default rates to where the
paper is attractive enough for investors to start to step in. Another contributor its hoped is investment in energy as
a means to creating a foundation from which to get the middle class involved again. This wage inflation thing you bring up I can't believe people will be held hostage to keeping wages low by increasing prices on goods and services. A better solution would be to tighten expense accounts and level off income all the way up the org chart. I'm sure you're aware of the disparity of income trend thats decades old by now. If you don't have a viable middle class than the economy will suffer.

 

[omegapoint]

Quote from OPTIONAL777:

There is no debating jems points unless we go back to the foundation of those points...

We are supposed to ignore how we got here, and debate the current situation?

If we don't deal with how we got here, we will no doubt get here again, again, again.

In the words of Susan Powter...

"Stop the insanity."

That begins with a full on confession of the insanity that took place under Bush, not to mention the likely violation of law and basic principles of acting in a fiduciary responsibility for the common good.

The bottom line is that people trusted the government, and the people were greedy and most willing participants in the whole pyramid ponzi scheme.

Now they want to blame Obama?

The blame goes to all Americans who voted in the past politicians who mucked things up, who got Americans chasing the American dream which is similar to a junkie chasing the dragon...

McCain would be doing better than Obama right now?

The corrupt republican congress and senate under Bush (do we forget how many of those folks were busted for corruption?) would be doing better right now?

Have any of the pols pointed to America and said, "Listen folks, this is really your fault, not the government's fault. You didn't want to know what we were doing, you went along with the Bush secrecy deal in government, you didn't care to pay attention, you wanted immediate gratification, you were greedy and played right along with the whole nonsense. You are guilty of being complicit in this whole affair. So don't blame anyone but yourself...and put on a damn sweater if you are cold. Someone forced you to sign that mortgage you couldn't afford? Someone forced you to buy a second plasma TV? Someone forced you to use your credit cards like some emergency saving account? Now stop blaming government and blame yourselves for voting in such crooks, and not demanding better oversight and control of our government. Stop bitching about the media when they go after and want to tell you about the corrupt government. Pull your darn heads out of the sand, grow up, and start acting like responsible adults who take responsibility for their choices of congressmen, senators, and president. Quit the damn whining and go do something productive."

Ya, the above truths would go over real well with the American people...

No, Gordon Gecko was wrong...Greed is not good, unregulated and uncontrolled capitalism benefits the few in the long run, destruction of the rights of the labor force is bad, and a return to a two tier class system of ruling and working class is where this ship has been headed ever since Reagan came into power.

Man 7 you're making me want to just give up since I agree in spades with everything you said but so do alot of level headed righties that deregulation can't be allowed to run amok anymore. The greed thing sure, its wage slavery with the way middle class incomes are so begrudgingly held up. I won't even reveal how left I am but heres hoping energy saves the day.