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

To: JohnM who wrote (253191)	6/18/2014 1:30:13 AM
From: Steve Lokness	Read Replies (2) \| Respond to of 541542

I suggest you read the Krugman analysis of Geitners book. I found it interesting and thank you for posting it. I've always felt the Stress Test (the name of the book too) was a bit gimmicky. So in that respect I'm in partial agreement with Krugman. I'm not a fan of Geitner. (Goolsbee was my pick) I also was pleasantly surprised that Krugman takes on the issue of debt - or more specifically debt relief. I've never seen him give this issue this much ink. Is this new thinking by Krugman? If so I applaud the new direction - or at a very least a new emphasis. ........Unfortunately neither man - Krugman nor Geitner - address the real issue of how we amassed such a level of debt - that needed to be given relief. I'm fine with debt relief even as I think the easiest way to handle that is just through bankruptcy. Maybe that is Krugmans way too although he doesn't go into what his plan is/was. I'm guessing he would be more in favor of a government program to grant debt relief? I might have been in favor of any idea Krugman had for that debt relief - as long as it wasn't just moving the debt from the wreckless borrower to the tax payer. Since this is about Geitners book - he must be faulted for the shortcoming of not addressing how that huge debt overhand happened. (I'm assuming since there was no mention of it in the Krugman thinking that it was just not there). Without understand that we overbuilt, over borrowed against housing industry - any fix whether stimulus or debt relief or something else will be minimally effective. This time the panic was different - because housing - the tool that has always gotten us out of downturns in a recession just wasn't going to work. Inventory, inventory, inventory. Quoting from the piece; <<< The point, however, is that even if the panic can be contained, the problem of excessive debt remains. And that, arguably, is why the bank bailouts of 2008–2009 didn’t lead to a satisfactory economic recovery.What would it have taken to do better? Unlike a financial panic, a balance sheet recession can’t be cured simply by restoring confidence: no matter how confident they may be feeling, debtors can’t spend more if their creditors insist they cut back.>>> I agree with that last sentence, but.... Missed here is that borrowers DIDN'T want to spend more - NOT, that lenders wouldn't lend them more. More lending and more lending and more lending is what got us into the mess. The consumer was in a panic, they wanted to cut back and of course that is exactly what happened. How soon we forget! People were using their homes as an ATM machine recklessly buying stuff like yachts and new additions and trips to Europe and second and third homes that they couldn't afford unless prices - think Ponzi Scheme - kept rocketing skyward. Does anyone really think these consumers should have kept on borrowing at these levels? At higher levels?

To: JohnM who wrote (253191)	6/18/2014 2:40:06 AM
From: koan	Respond to of 541542

Geithner is a sleezeball (my opinion). Krugman on Geithner: The best guess is that Geithner was in fact unenthusiastic about stimulus and more or less hostile to mortgage debt relief. But did this matter? You can argue that a bigger stimulus plan would have failed to pass Congress; you can argue that mortgage refinancing would either have proved impossible to implement or have provoked a huge political backlash. The truth is that we’ll never know, because the Obama administration never really tried to push the envelope on either fiscal policy or debt relief. And Geithner’s influence was probably an important reason for this caution. Geithner saw the economic crisis as more or less entirely a matter of lost confidence; he believed that restoring that confidence by saving the banks was enough, that once financial stability was back the rest of the economy would take care of itself. And he was very wrong. " The only way you can consider this record a success story is by comparing it with the Great Depression. And that’s a pretty low bar—after all, aren’t we supposed to know more about economic management than our grandfathers did? In fact, we did have both the knowledge and the tools to fight this disaster. We know a lot about how fiscal policy works, and the United States clearly had the borrowing capacity to spend more on fighting unemployment. Whatever Geithner may say, it’s clear that a lot more could also have been done to reduce the burden of mortgage debt. Yet we didn’t do what needed to be done. I like Geithner’s metaphor of a stress test—and his book is very much worth reading, especially for its account of the crisis. But he’s wrong about the outcome of that test. We can argue about how much of the blame rests with the Obama team, how much with the crazies in Congress who met every administration initiative, no matter how reasonable, with scorched-earth opposition. But the overall grade seems clear. We didn’t pass the test—we failed, badly.