Yes, but a lot more millions would have lost them than the small millions who did. The process stayed orderly this way, and the economic system was preserved. Instead of criticizing the band-aids, would you like to describe the streets as they would now be if the President had done it your way? The streets would be impassable with the homeless, middle class until months ago, throwing rocks through your windshield. To your side are stores without customers, boarded up. More jobless. It's a ripple effect. And of course, the construction industry is dead, with many millions of empty houses. Not to mention the banks having no money, since their investements are mainly local mortgages. So I hope you're not driving to your bank, because it's boarded up too. I hope you bought gold before the President did it your way.
If the president would have done it my way, the TARP bailout money would have been used to pay down peoples' mortgages. A $100k mortgage paid down to $50K so the people wouldn't be upside down in them and could better afford the payments. And guess what? The banks still get that $50K to keep them afloat. Additionally, what is $800B / $25M? 32,000. $25M is prime VC type investment in an early startup company like a Google was back when. That "stimulus" spending was enough to fund 32,000 NEW companies, each with 100 to 200 employees and guarantee that most will survive at least 5 years without $.01 in sales. Do the math. What's 100-200 employees x 32,000 companies? So how about you describing the streets if the president did it my way. 3.2M to 6.4M more people employed at good paying jobs with mortgages they can afford and homes that can be sold without putting the seller into bankruptcy. The way it is now, there are a lot of storefronts up and down the main drag in town here that are for rent or boarded up. Hopey changy thing is really working out.
The Republican Party wouldn't have gone for it. I don't know what they're saying, but I know how they would vote. This is all for show. They wouldn't allow that to get to the floor. They want to protect big companies even more than Democrats do. Since when have Republicans gone for a little guy-plan like yours? What they say they want is often not what they would really vote for. They find ways to make it not come up for a vote, like immigration, abortion, etc.
The Government is trying to stop the market from reaching its natural bottom. The Government is big, but is dwarfed by the size of the market. Attempts to falsely prop up the market will only delay the inevitable and increase the pain experienced by the population as a whole. Money is standing on the sidelines because of uncertaintly. Uncertainty in real estate values, uncertainty in tax policy, uncertainty in this Administration's targeting of industries to remake the heirarchy of corporate ownership. Remove the uncertainty, and you'll see this economy start to click.
So, if the government had done nothing (no TARP, no stimulus, no bailouts, etc), where would the bottom have been, and how would we know when we'd gotten there? barfo
I was actually in favor of much of TARP, because it was a failure of regulation and government policies that put us in that position. GM should have been allowed to enter Chapter 11. The stimulus was a waste of money that has put us in worse condition. And yes, markets understand bottoms. It's not one decision, it's hundreds of millions or billions of individual decisions that characterize it. They don't think they've seen it yet, which is why money is on the sideline.
I wasn't asking the market where the bottom would have been. I was asking you. And markets understand bottoms amounts to saying markets go up, and markets go down. And the lowest point is the bottom. Deep. barfo
Even I'm not arrogant enough to believe I know the answer for where the bottom is; the market decides it. Sadly, members of the Obama Administration don't have even that limitation. As for whether or not the concept of markets is deep or not, something doesn't have to be deep to be correct.
Sure, we all agree that the lowest point is the bottom. It's correct, but it's hardly worth posting. So if you don't know where the bottom would have been, how can you say the administration was wrong to try to prevent it from falling all the way to the bottom? What if the bottom was a long, long, long way down? barfo
Democrats had a filibuster proof senate and easy control of the house. The republicans weren't relevant.
My point is the government can't stop the market from finding bottom, no matter where it is. And prolonging that decline only increases the eventual pain. What part about letting markets clear don't you understand?
So, government actions can have no influence on where the bottom is, just the timing of when the bottom is hit? I find that difficult to understand, and I eagerly await an explanation of the economic principles behind that surprising assertion. barfo
OH YOU ARE GONNA GIT AN XSPLANATION! STRAIGHT U of C BBB FORUM STYLE! YEAH! SNAP INTO A SLIM JIM! That said, Maxi is the greatest economist I've ever heard of, I know this because he is constantly posting on message boards about his knowledge, which is what I would expect a really successful and knowledgable (and employed) person to do. He wins!
Silly Barfo. You don't care how you as an individual are doing. It's about about everybody having the same. Silly Barfo.
I didn't say "no influence". Timing is an influence. The slope of decline is an influence. I said the government couldn't prop up a market indefinitely, like they're trying to do with the real estate market (which is the subject here), and it's delaying and increasing the pain. There are markets the government can distort, but the residential real estate market is just too massive. I'm sorry you find it difficult to understand, but markets are like plumbing. For them to operate effectively, they have to be able to clear. The government is trying to manage the flow, but it's not going to be able to hold back the forces of decline forever. It's not complicated. One doesn't need to have much education to understand this simple fact: Size of government < Size of the housing market.
Ok. But are you saying that the depth of the well is not something government can influence? Yes, that makes sense, assuming that you use your definition of "operating effectively", i.e. completely freely. Some might argue that wild market swings aren't a feature of "operating effectively", because the effects of those wild swings, while they might be perfectly healthy from the market's point of view, aren't so great from the point of view of humans. But I know that we will agree to disagree about that. barfo
They can have a minimal influence, as we've seen with the $8,000 tax credit for first-time homebuyers, but most of it is shifting demand (like cash for clunkers) rather than creating it. It's invariably more expensive to do so and when you factor in the money spent, it actually makes the bottom deeper. Residential real estate experienced these wild swings when banks were strongarmed into making subprime loans. Before that period, real estate grew a bit more than inflation. Government policy helped to create the bubble, and a bubble is mostly hot air. If the lending fundamentals would have stayed constant--a significant down payment, a fully amortized loan, varified income with a specified debt coverage ratio, etc.--we would likely have seen a straight-line moderate increase rather than a bubble and a crash.
We are probably talking about two different things, then. By bottom I meant the bottom of the recession, e.g. on a graph of GDP growth (or lack thereof). Spending money doesn't make that bottom deeper, it makes it shallower. I certainly agree with you that there are longer term consequences, but I don't see how it makes the bottom of the recession deeper. That could well be hypothetically right, we have no way to know. But are you suggesting that all prior wild swings in markets are caused by governmental interference? Or just this one? barfo
