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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Katelew who wrote (129311)	1/26/2010 1:02:46 PM
From: Dale Baker	Read Replies (1) \| Respond to of 541900

Actually these were relatively separate events. So the collapse of consumer and business credit availability from the banks had nothing to do with the recession, it just magically occurred on its own lunar cycle or some such? That view is not supported by the facts I have seen. Can you explain in more detail how and why the consumer economy came to a halt and began to contract?

To: Katelew who wrote (129311)	1/26/2010 4:22:41 PM
From: JohnM	Read Replies (1) \| Respond to of 541900

Kate, I've got so many disagreements with that post, it's probably not wise to post them all. Here's a sample. 1. It's not possible to separate the consequences of the potential banking system collapse from a consumer collapse. The two were tightly intertwined. The credit crisis was a serious part. 2. You note that Barney Frank and Nancy Pelosi were willing to give the banks handouts without any strings attached. It was Hank Paulson who advocated that and Frank and Pelosi who insisted on rewriting the few pages he gave them so there would be monitoring of both the Treasury and the banks. 3. As for the orderly end of the mortgage crisis, it was anything but orderly and could have been much more devastating had not the two administrations taken the action they did.

To: Katelew who wrote (129311)	1/26/2010 8:25:16 PM
From: Cogito	Read Replies (2) \| Respond to of 541900

>>As you say, the most important consideration is how a recession should be handled. I'm firmly in the group that is basically non-interventionist, that believes the economy should be left to readjust and correct the excesses on its own. Let the weak go under and the strong companies will pick up the slack and rehire laid off workers. This is better than keeping all of them limping along not working at full capacity, imo.<< The problem in economic contractions is that when companies start laying off workers, demand for products and services weakens, leading to further layoffs. When whole companies give up the ghost, this disruption is intensified, as more and more people find themselves without jobs. It becomes a vicious cycle. So there are no strong companies around rehiring the laid off workers. The companies that are left standing go into a defensive posture and freeze or reduce hiring, since they are seeing reduced demand. That puts a big hole in the "let the chips fall where they may" argument. I'm not suggesting that no company should ever be allowed to go under. I'm only saying that under some circumstances, we can mitigate the consequences of a minor recession before it becomes a major one.