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Thread: Note to Krugman: Greece Proves Keynesian Economics Wrong

  1. #11
    SiriuslyLong is offline
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    Quote Originally Posted by SiriuslyLong View Post
    Ron Paul called the housing bubble and subsequent recession in 2003 during a banking committee session. No one listened to him. That's not hilarious, it is sad. Here it is....

    Ron Paul in the House Financial Services Committee, September 10, 2003

    Mr. Chairman, thank you for holding this hearing on the Treasury Department's views regarding government sponsored enterprises (GSEs). I would also like to thank Secretaries Snow and Martinez for taking time out of their busy schedules to appear before the committee.

    I hope this committee spends some time examining the special privileges provided to GSEs by the federal government. According to the Congressional Budget Office, the housing-related GSEs received $13.6 billion worth of indirect federal subsidies in fiscal year 2000 alone. Today, I will introduce the Free Housing Market Enhancement Act, which removes government subsidies from the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the National Home Loan Bank Board.

    One of the major government privileges granted to GSEs is a line of credit with the United States Treasury. According to some estimates, the line of credit may be worth over $2 billion. This explicit promise by the Treasury to bail out GSEs in times of economic difficulty helps the GSEs attract investors who are willing to settle for lower yields than they would demand in the absence of the subsidy. Thus, the line of credit distorts the allocation of capital. More importantly, the line of credit is a promise on behalf of the government to engage in a huge unconstitutional and immoral income transfer from working Americans to holders of GSE debt.

    The Free Housing Market Enhancement Act also repeals the explicit grant of legal authority given to the Federal Reserve to purchase GSE debt. GSEs are the only institutions besides the United States Treasury granted explicit statutory authority to monetize their debt through the Federal Reserve. This provision gives the GSEs a source of liquidity unavailable to their competitors.

    The connection between the GSEs and the government helps isolate the GSE management from market discipline. This isolation from market discipline is the root cause of the recent reports of mismanagement occurring at Fannie and Freddie. After all, if Fannie and Freddie were not underwritten by the federal government, investors would demand Fannie and Freddie provide assurance that they follow accepted management and accounting practices.

    Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.

    Despite the long-term damage to the economy inflicted by the government's interference in the housing market, the government's policy of diverting capital to other uses creates a short-term boom in housing. Like all artificially-created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.

    Perhaps the Federal Reserve can stave off the day of reckoning by purchasing GSE debt and pumping liquidity into the housing market, but this cannot hold off the inevitable drop in the housing market forever. In fact, postponing the necessary, but painful market corrections will only deepen the inevitable fall. The more people invested in the market, the greater the effects across the economy when the bubble bursts.

    No less an authority than Federal Reserve Chairman Alan Greenspan has expressed concern that government subsidies provided to GSEs make investors underestimate the risk of investing in Fannie Mae and Freddie Mac.

    Mr. Chairman, I would like to once again thank the Financial Services Committee for holding this hearing. I would also like to thank Secretaries Snow and Martinez for their presence here today. I hope today's hearing sheds light on how special privileges granted to GSEs distort the housing market and endanger American taxpayers. Congress should act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors who were misled by foolish government interference in the market. I therefore hope this committee will soon stand up for American taxpayers and investors by acting on my Free Housing Market Enhancement Act.

    Dr. Ron Paul is a Republican member of Congress from Texas.

    http://www.lewrockwell.com/paul/paul128.html

    Hilarious? I think you need to re-evaluate. Many people have been hurt and it could have been prevented had closed minded idiots like yourself listened to individuals like Schiff and Dr. Paul.
    No comments on this? I guess Hava-gafa-kasha likes pain and suffering of everyday people (especially republican everyday people). On the other hand, perhaps he and people like him actually wanted a crisis? Never let a good crisis go to waste, right? A good crisis leads to more government control which is PRECISELY what the liberal left wants - ALL POWERFUL GOVERNMENT CONTROL.

    Liberalism - ideas SOOOO Good that they're MANDATED.
    Last edited by SiriuslyLong; 05-18-2012 at 03:34 PM.

  2. #12
    SiriuslyLong is offline
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    Quote Originally Posted by Havakasha View Post
    Ron Paul and Peter Schiff? LMFAO. Your two buddies talking economics?
    Absolutely hilarious!. Remember both have been predicting hyperinflation in
    the U.S. for many years.

    Just trying to lighten things up.
    Nice edit. You're not trying to lighten things up. You are trying to deride and attack individuals who are different from you. Isn't racism kind of the same thing? Hating others because they are different than you?

    "Liberals speak often of tolerance, but they only tolerate Liberals and Liberal ideas."

    That's #26 of the 60 Hard Truths about Liberals: http://familyguardian.tax-tactics.co...s/Liberals.htm

  3. #13
    SiriuslyLong is offline
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    Quote Originally Posted by Havakasha View Post
    Ron Paul and Peter Schiff? LMFAO. Your two buddies talking economics?
    Absolutely hilarious!. Remember both have been predicting hyperinflation in
    the U.S. for many years.

    Just trying to lighten things up.
    And if they have been predicting hyperinflation for many years, you probably ought to give the idea some consideration. You might learn something worthwhile. Clearly they know something.

  4. #14
    SiriuslyLong is offline
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    Avoidance is an easy tactic to address. Much easier than diversion.

  5. #15
    SiriuslyLong is offline
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    Still wondering what Lloyd thinks of the Free Housing Market Enhancement Act of 2003.

  6. #16
    Havakasha is offline
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    They have been predictiing hyperinflation for many years and getting it wrong for many years. NO thanks. They are clearly incompetent.

  7. #17
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    BRAD NORINGTON, WASHINGTON CORRESPONDENT From: The Australian May 21, 2012 12:00AM


    AFTER all the talk of the austerity needed to fix Europe's debt crisis, Barack Obama has shifted the debate by urging financial stimulus to boost job growth.

    As host of the Group of Eight world leaders' summit at Camp David, the US President was yesterday attuned to the mood of voters in France and Greece, who have angrily rejected belt-tightening and sought broad government intervention.

    The acting Greek administration yesterday called fresh elections for June 17.

    "There's now an emerging consensus that more must be done to promote growth and job-creation right now in the context of these fiscal and structural reforms," Mr Obama said at the end of the summit.

    Pitching economic growth and jobs as the top priority, the President pointed out that Europe was the US's largest economic partner and the wellbeing of both was interconnected. "Put simply, if a company is forced to cut back in Paris or Madrid, that might mean less business for manufacturers in Pittsburgh or Milwaukee.


    "And that might mean a tougher time for families and communities that depend on that business."

    The US President's rhetoric is a marked contrast to the austerity drive led by German Chancellor Angela Merkel to deal with the eurozone crisis.



    He appears to have taken his cue from the election of France's new Socialist President, Francois Hollande, and the angry mood of voters in Greece who reject cutbacks to government benefits and look set to express their feelings in fresh elections. In a joint statement issued yesterday, leaders of the G8 group of nations - the US, Japan, Britain, Germany, France, Italy, Canada and Russia - agreed urgent remedial action was needed to stop the European debt crisis spreading and becoming a global contagion.

    While pinpointing Greece as central to the problem, the G8 leaders urged that all efforts be put into ensuring it remained within the eurozone.

    However, Ms Merkel sought to put a gloss on her apparent isolation. "Solid finances and growth belong inseparably together, and should not be put into contrast," the German leader said.

    http://www.theaustralian.com.au/news...-1226361722638
    Last edited by Havakasha; 05-21-2012 at 12:40 AM.

  8. #18
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    http://uk.news.yahoo.com/g8-summit-s...--finance.html

    G8 Leaders Want 'Strong Eurozone' With Greece
    Sky News – Sun, May 20, 2012

    G8 Leaders Want 'Strong Eurozone' With Greece
    G8 leaders have expressed hope that debt-stricken Greece stays in the eurozone and vowed to "take all necessary steps" to try to combat the deepening economic turmoil in Europe.
    In a statement of support for Europe, the eight leaders of the world's major economies said the global economic recovery shows promising signs but "significant headwinds persist".
    "Against this backdrop, we commit to take all necessary steps to strengthen and reinvigorate our economies and combat financial stresses, recognising that the right measures are not the same for each of us," they said in a communique.
    The leaders said they welcomed discussions in Europe to balance debt reduction with measures to support growth.
    They stressed the importance of a "strong and cohesive" eurozone and reaffirmed their interest in Greece remaining a member while honouring its commitments to tackle its deficit.
    "We all have an interest in the success of specific measures to strengthen the resilience of the eurozone and growth in Europe," they said.
    "We support euro area leaders' resolve to address the strains in the eurozone in a credible and timely manner and in a manner that fosters confidence, stability and growth."
    The leaders are meeting at US President Barack Obama 's Camp David retreat to seek ways to restore confidence in global financial markets after the risk of Greece leaving the eurozone and Spain's banking problems sent world stocks to their lowest levels this year.
    Earlier, Mr Obama opened the summit promising to try to find ways to restore healthy growth and jobs, and address concerns in Europe.
    "All of us are absolutely committed to making sure that both growth and stability, and fiscal consolidation, are part of an overall package in order to achieve the kind of prosperity for our citizens we all are looking for," he said.
    After an early morning treadmill workout with Mr Obama at the gym, Prime Minister David Cameron said he detected a "growing sense of urgency that action needs to be taken" on the crisis.
    "What is required is a sense of urgency and then clear actions for strong banks, strong deficit reduction plans, strong governance and strong contingency plans for whatever might happen," he said.
    "On all those things I think there's a good sense of talks taking place and a good sense that action needs to follow."

  9. #19
    Havakasha is offline
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    Chinese Stimulus? Seems like a # of countries are talking up growth as opposed to austerity.
    Wen Growth Pledge Spurs Speculation Of China Stimulus
    By Bloomberg News - May 20, 2012 11:35 PM ET

    http://www.bloomberg.com/news/2012-0...-stimulus.html

    Chinese Premier Wen Jiabao’s pledge to focus more on bolstering growth spurred speculation the government will step up efforts to combat a slowdown in the world’s second-largest economy.
    Wen called for “putting stabilizing growth in a more important position” and didn’t mention inflation in remarks published yesterday by the official Xinhua News Agency. China may announce stimulus actions in the near term, according to a front-page commentary today in the China Securities Journal, which is published by Xinhua.

    The shift in language suggests authorities are “seriously concerned about growth” and “ready to introduce further measures,” Bank of America Corp. said in a research note today. The government on May 12 cut banks’ required reserves for the third time in six months following data showing trade, industrial production and lending were below forecasts in April.
    “Joint efforts of monetary, fiscal and industrial policies are needed to stabilize growth before the leadership transition this fall,” Citigroup Inc. economists including Shen Minggao in Hong Kong said in a research note late yesterday.

  10. #20
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    http://www.washingtonpost.com/busine...PeU_story.html

    Austerity-only cure for crisis out of fashion, but growth rhetoric covers difficult realities

    By Associated Press, Updated: Monday, May 21, 12:07 AM

    WASHINGTON — On paper at least, European leaders agree: They need stronger growth measures to help their economies expand out of their 2½-year-old government debt crisis. Figuring out exactly what those new steps might be will be the hard part.

    Persistent political divisions — neatly bridged by a Group of Eight summit statement that advocates a mix of austerity and growth promotion — and lack of money stand in the way of a comprehensive European growth strategy. Analysts said markets were likely to look past the verbal deal, with news about Greece’s struggle to stay in the eurozone and an informal European Union summit Thursday in Brussels more likely to set the tone.


    At Saturday’s G-8 summit, German Chancellor Angela Merkel — under urging from U.S. President Barack Obama and French President Francois Hollande — signed onto a statement that called for mixing painful cutbacks with growth-promoting measures to deal with a crisis that threatens the global economy.

    The leaders warned that budget deficits have to come down. But they also acknowledged that an approach that’s based mostly on austerity and longer-term reforms can’t help countries out of recessions this year or next. That’s the approach that has dominated the continent’s German-led attack on the crisis since it erupted in late 2009, when Greece admitted its finances were broken.

    “Our imperative is to promote growth and jobs,” leaders said in their final declaration after Saturday’s summit. While they “commit to fiscal responsibility,” the leaders also supported spending on education and public works. They also said heavily indebted countries should have the chance to fix their budgets in ways that take into account how well their economies are doing at the moment and support “confidence and economic recovery.”

    They said little about specific steps and left exactly what to do up to individual countries, saying they recognize “the right measures are not the same for all of us.”

    The statement comes as markets look ahead to an informal European summit meeting Thursday, and to a June 17 election in Greece. An indecisive poll May 6 left no Greek party with enough votes to govern. A new government that rejects the austerity required under bankrupt Greece’s €130 billion bailout from other eurozone countries could lead to it leaving the euro and spreading financial chaos.

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