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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (872018)	7/17/2015 5:21:58 AM
From: combjelly	1 Recommendation Recommended By Alighieri Read Replies (1) \| Respond to of 1577033

It is called "getting past the crisis". Austerity measures in a crisis makes it worse. Every time. Turning an recession into a depression does nothing but harm in the long term. However, what I'm talking about is how to create a sustainable prosperity for the American people. Austrian economics doesn't do that. What it attempts to do is roll things back to laissez-faire capitalism that dominated prior to the end of the 19th century. The government was mostly hands off of the economy and there was little or no regulation. The result was far from sustainable prosperity, it was a series of booms followed by busts. It kept a middle class from developing too much because they tended to lose everything in the busts. Those who didn't quite lose everything were able to buy things up at pennies on the dollar and wealth flowed up. You and many on the Right like to pretend that what happened in the Great Belly flop was a normal recession. In a normal recession, accumulated inefficiencies finally start to choke off growth. Things slow down, the inefficient go under, we build on the survivors and things improve. That isn't what happened. We had a failure in the financial markets. Major financial institutions became criminal enterprises. Many in those markets believed, and still do, that to get ahead meant they sometimes had to engage in unethical, if not outright criminal, behavior. Financial instruments with at least theoretical valid uses, like credit default swaps, were used to gamble with other people's money. You could buy a CDS against anything, even securities you didn't own or had a financial stake in. At its peak, the value of all CDS out there exceeded $60 trillion. CDS and all of the other similar derivatives were valued at over $680 trillion. The total gross world production was less than $50 trillion at the time. As a result, when things went sideways, value that was on the books vanished. And quickly. Massive amounts of value to the tune of several times the GWP. To make it even better, corners were cut. There were insufficient reserves to cover losses, how can you do that when you are operating on multiples of the GWP? Regulations were skirted. Lot of things could not be accounted for. Like who is the owner of a given loan. Loans were bundled, chopped up, distributed and few records were kept. So when the loans got defaulted on, no one knew who owned them. Net result, liquidity totally vanished from the market. No one knew if anyone could actually pay for anything. Because lines of credit couldn't be trusted to be backed by anything, international trade ground almost to a halt. Who is going to risk a load of, say iron ore, in a Capesize ship is actually going to be paid for? Much less a freighter load of big screen TVs from China. In some cases, countries resorted to barter, something that hasn't been done in international trade for centuries. International trade dropped to levels lower than during the Great Depression. Bottom line, yes we have not fully recovered from the Great Bellyflop after 6 years. Typically this kind of thing takes a decade or two. Just ask the Japanese. They are in their 3rd decade of economic woes. What happened in 2007-2008 is similar to what happened in Europe during the Long Depression. That took Europe over 20 years to recover from. But things have improved greatly. Despite only tangentially addressing the issues that caused it in the first place. So we are likely going back to the dance again.